**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D. C. 20549**





**FORM
      10-K**





**x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE**


**ACT
      OF 1934**





**For
      The Fiscal Year Ended December 31, 2006**


or


**** **o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**





**For
      The Transition Period From______ to ______**





**Commission
      File No. 0-25681**








**(exact
      name of registrant specified in its charter)**




**Florida**
            
            **65-0423422****(State
                or other jurisdiction of**
            
            **(I.R.S.
                Employer Identification No.)****incorporation
                or
                organization)**





**11760
      U.S. Highway One, Suite 200**


**North
      Palm Beach, Florida 33408**


**(Address
      of principal executive offices) (zip code)**





**Registrant's
      telephone number, including area code: (561) 630-2400**




Securities
        registered pursuant to Section
        12(b) of the Act:
  **Title
                  of Each Class**
              
              **Name
                  of Each Exchange on Which
                  Registered**Common
                  Stock, $0.01 par Value
              
              The
                  NASDAQ Stock Market LLC
 **Securities
        registered pursuant to Section 12(g) of the Act:** **None**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes
o
      No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes
o
      No x





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes
x
      No o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large
      accelerated filer o Accelerated
      filer x Non-accelerated filer o




Indicate
      by checkmark whether the registrant is a shell company (as defined in Rule
      12b-2
      of the Act) oYes x
      No




The
      aggregate market value of the voting common equity
      held by non-affiliates of the registrant, based on the average of the closing
      bid and ask quotations for the Common Stock on June 30, 2006 as reported by
      the
      Nasdaq National Market was approximately $311,862,000.As
      of
      February 28, 2007, the registrant had outstanding 18,269,924 shares of Common
      Stock.





**Documents
      Incorporated By Reference**





Portions
      of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be
      held on June 20, 2007, are incorporated by reference in Part III.









**TABLE
      OF CONTENTS**





PAGE**Part
                I**Item
                1.****
            
            Business
            
            5Item
                1A.
            
            Risk
                Factors
            
            11Item
                1B.
            
            Unresolved
                Staff Comments
            
            15Item
                2.
            
            Properties
            
            15Item
                3.
            
            Legal
                Proceedings
            
            16Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            16**Part
                II**Item
                5.
            
            Market
                forRegistrant’s
                Common Equity, Related Stockholder Matters and Issuer Purchase
                ofEquity
                Securities
            
            16Item
                6.
            
            Selected
                Financial Data
            
            17Item
                7.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            34Item
                7A.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            35Item
                8.
            
            Financial
                Statements and Supplementary Data
            
            57Item
                9.
            
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            
            57Item
                9A.
            
            Controls
                and Procedures
            
            57Item
                9B.
            
            Other
                Information
            
            59**Part
                III**Item
                10.
            
            Directors,
                Executive Officers and Corporate Governance
            
            59Item
                11.
            
            Executive
                Compensation
            
            59Item
                12.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            59Item
                13.
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            59Item
                14.
            
            Principal
                Accounting Fees and Services
            
            59**Part
                IV**Item
                15.
            
            Exhibits,
                Financial Statement Schedules
            
            59Signatures
            
            
            
            62Exhibits
            
            
            
            63




3




**Introductory
      Note**





**CAUTION
      CONCERNING FORWARD-LOOKING STATEMENTS**





This
      Annual Report on Form 10-K contains “forward-looking statements,” within the
      meaning of the Private Securities Litigation Reform Act of 1995. These
      forward-looking statements include, among others, statements about our beliefs,
      plans, objectives, goals, expectations, estimates and intentions that are
      subject to significant risks and uncertainties and are subject to change based
      on various factors, many of which are beyond our control. The words “may,”
“could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,”
“intend,” “plan,” “target,” “goal,” and similar expressions are intended to
      identify forward-looking statements. All forward-looking statements, by their
      nature, are subject to risks and uncertainties. Our actual future results may
      differ materially from those set forth in our forward-looking statements. Our
      ability to achieve our financial objectives could be adversely affected by
      the
      factors discussed in detail in Part I, Item 1A. “Risk Factors” and Part II, Item
      7, “Management's Discussion and Analysis of Financial Condition and Results of
      Operations” in this Annual Report on Form 10-K, as well as:




·
            the
                willingness of our advertisers to advertise on our web
                sites;·
            interest
                rate volatility;·
            our
                ability to establish and maintain distribution
                arrangements;·
            our
                ability to integrate the business and operations of companies that
                we have
                acquired, and those we may acquire in the future;·
            our
              ability to realize expected benefits, including synergies, of companies
              that we have acquired, and those that we may acquire in the
              future;·
            our
              ability to maintain the confidence of our advertisers by detecting
              click-through fraud and unscrupulous advertisers;·
            our
                need and our ability to incur additional debt or equity
                financing;·
            the
                effect of unexpected liabilities we assume from our
                acquisitions;·
            the
                impact of resolution of lawsuits to which we are a
                party;·
            the
                willingness of consumers to accept the Internet as a medium for obtaining
                financial product information;·
            the
              ability of consumers to access our websites through non-PC
              devices;·
            increased
                competition and its effect on our web site traffic, advertising rates,
                margins, and market share;·
            our
                ability to manage traffic on our web sites and service
                interruptions;·
            our
                ability to protect our intellectual property;·
            the
                effects of facing liability for content on our web
                sites;·
            legislative
                or regulatory changes;·
            the
                concentration of ownership of our common stock;·
            the
                fluctuations of our results of operations from period to
                period;·
            the
                strength of the United States economy in general;·
            the
                accuracy of our financial statement estimates and
                assumptions;·
            effect
                of changes in the stock market and other capital
                markets;·
            technological
                changes;·
            changes
                in monetary and fiscal policies of the U.S. Government;·
            changes
                in consumer spending and saving habits;·
            changes
                in accounting principles, policies, practices or
                guidelines;·
            the
              effect of provisions in our Articles of Incorporation, Bylaws, and
              certain
              laws on change-in-control transactions;·
            other
                risks described from time to time in our filings with the Securities
                and
                Exchange Commission; and·
            our
                ability to manage the risks involved in the
                foregoing.




However,
      other factors besides those referenced could adversely affect our results,
      and
      you should not consider any such list of factors to be a complete set of all
      potential risks or uncertainties. Any forward-looking statements made by us
      herein speak as of the date of this Annual Report. We do not undertake to update
      any forward-looking statement, except as required by law.





4




**PART
      I**





**Item
      1. Business**




**Overview**
 
 Bankrate,
        Inc. and subsidiaries (the "Company", "Bankrate", "we", "us", "our") own
        and
        operate an Internet-based consumer banking marketplace. Our flagship web
        site,
        Bankrate.com, is one of the web's leading aggregators of information on more
        than 300 financial products and fees, including mortgages, credit cards,
        automobile loans, money market accounts, certificates of deposit, checking
        and
        ATM fees, home equity loans and online banking fees. We also own and operate
        Interest.com, a smaller, yet similar site, FastFind.com, an Internet-based
        lead
        aggregation firm, and Bankrate Print, which produces newspaper-based advertising
        and editorial products. Additionally, we provide financial applications and
        information to a network of distribution partners and national, regional,
        and
        local publications. We provide the tools and information that can help consumers
        make better financial decisions. We regularly survey more than 4,800 financial
        institutions in more than 575 markets in all 50 states in order to provide
        the
        most current objective, unbiased information. Hundreds of print and online
        partner publications depend on us as their trusted source for financial rates
        and information.
 
 Bankrate
        was founded approximately 30 years ago as a print publisher of the newsletter *Bank
        Rate Monitor.* From
        1976
        through 1996, our principal business was the publication of print newsletters,
        the syndication of unbiased editorial bank and credit product research to
        newspapers and magazines and advertising sales of the *Mortgage
        and Deposit Guide* ,
        a
        newspaper-advertising table consisting of product and rate information from
        local mortgage companies and financial institutions. The company that we
        operate
        today was incorporated in the State of Florida in 1993.
 
 In
        1996,
        we began our online operations by placing our editorially unbiased research
        on
        our web site, Bankrate.com. By offering our information online, we created
        new
        revenue opportunities through the sale of graphical and hyperlink advertising
        associated with our rate and yield tables. In fiscal 1997, we implemented
        a
        strategy to concentrate on building these online operations.
 
 Today,
        we
        operate in two reportable business segments: online publishing and print
        publishing and licensing. The online publishing segment generally includes
        the
        online operations of the Bankrate Network, which includes Bankrate.com,
        Interest.com, Mortgage-calc.com, and Bankrate *Select,* the
        new
        partnership involving our FastFind operations and Lending Tree. Our rate
        tables
        provide, at no cost to the consumer, a detailed list of lenders by market
        and
        include relevant details to help consumers compare loan products. We continue
        to
        enhance our offerings in order to provide Bankrate.com users with the most
        complete experience. Features such as financial calculators and e-mail
        newsletters allow users to interact with our site. Our *Rate
        Trend Index* is a
        weekly poll of industry insiders designed to help consumers forecast interest
        rate trends. In addition, our offerings include channels on investing, taxes,
        college finances, financial advice and insurance. Each channel offers a unique
        look at its particular topic. For example. Bankrate.com users can read advice
        and tips from the Tax channel, obtain business ideas from the Small Business
        channel and ask a financial expert a question in the Advice channel.
 
 We
        operate a traditional media business on the Internet. We have a high quality,
        poised-to-transact audience that we educate and is ready to do business with
        our
        advertisers. Bankrate.com is one of the leading web sites for financial
        information and advice according to comScore Media Metrix.
 
 Our
        print
        publishing and licensing segment includes our traditional print publications
        and
        syndicated editorial content in more than 150 newspapers and three national
        magazines. Today, the *Mortgage
        and Deposit Guide.* The *Mortgage
        and Deposit Guide* is a
        weekly newspaper-advertising table consisting of product and rate information
        from local mortgage companies and financial institutions. The *Mortgage
        and Deposit Guide* appears
        weekly in approximately 500 U.S. metropolitan newspapers with combined single
        day circulation in excess of 40 million copies, and a television version.
        In
        addition to serving as a revenue source, our print publications also increase
        our exposure, serve as branding opportunities for our web site, and absorb
        part
        of the costs of producing our research and original editorial
        content.
  For
        further discussion of our two reportable business segments, see Management's
        Discussion and Analysis of Financial Condition and Results of Operations
        -
        Results of Operations and Critical Accounting Policies, and Note 8 to the
        Financial Statements elsewhere in this Form 10-K.
 
 We
        believe that the recognition of our research as a leading source of independent,
        objective information on banking and credit products is essential to our
        success. As a result, we have sought to maximize distribution of our research
        to
        gain brand recognition as a research authority. We are seeking to build greater
        brand awareness of our web site and to reach a greater number of online users.
 
 Our
        efforts during the past several years have been focused on developing
        Bankrate.com into the leading destination site for consumer banking and personal
        finance information. The key drivers of our business are the number of
        advertisers on our online network, the number of "page views," and the number
        of
        consumers visiting our web sites. Since 2001 the number of advertisers on
        our
        web sites has grown from approximately 320 to over 390 and annual page views
        have grown from 237 million to 487 million.
 
 Additionally,
        we have broadened the focus of our financial products research from 100
        financial products in 155 markets in 2001 to more than 300 financial products
        in
        approximately 575 markets today. Our marketing efforts to generate traffic
        have
        evolved from primarily non-cash intensive programs such as sweepstakes and
        promotions into today's key word search engine advertising campaigns. In
        2001 we
        syndicated our editorial content and research to 97 newspapers compared to
        today's 153 newspapers.
 
 As
        a
        result of these efforts we were able to take advantage of several acquisition
        opportunities in 2005 and 2006. On November 30, 2005, we acquired Wescoco,
        LLC
        (“ FastFind”)
        and on December 1, 2005, we acquired Mortgage Market Information Services,
        Inc.
        and Interest.com (collectively, “MMIS/Interest.com”). FastFind, an Internet lead
        aggregator based in San Francisco, California was purchased for $10.1 million
        in
        cash. MMIS/Interest.com, which publishes Mortgage and Deposit Guides in over
        300
        newspapers and operates Interest.com, a web site which publishes financial
        rates
        and information connecting consumers with lenders, was acquired for $30 million
        in cash, subject to post-closing adjustments.
  5
 In
        August
        2006, we completed the acquisition of a group of assets that consists of
        three
        web sites (Mortgage-calc.com, Mortgagecalc.com, and Mortgagemath.com) owned
        and
        operated by East West Mortgage, Inc. for $4.4 million in cash. The operations
        of
        the three web sites were integrated into our online publishing
        segment.
 
 In
        2007,
        we are focusing on:
 
 ·
            Optimizing
                our cost per thousand impressions (“CPMs”) and cost per clicks (“CPCs”) on
                the Bankrate Network - Bankrate.com, Interest.com, Mortgage-calc.com,
                and
                FastFind. ·
            Enhancing
                search engine marketing and keyword buying to drive targeted impressions
                into the Bankrate Network. ·
            Re-launching
                FastFind with the new name “Bankrate Select” through a partnership with
                Lending Tree to gain access to a well-established lender network,
                which we
                anticipate will better monetize the leads we
                generate. ·
            Expanding
                our co-brand and affiliate footprint. ·
            Selling
                advertising for our Deposit rate tables to be placed in our 500+
                newspaper
                network.




**Our
      Opportunity**





We
      believe m any
      financial services customers are relatively uninformed with respect to financial
      products and services and often rely upon personal relationships when choosing
      such products and services. It is our belief that m any
      of
      these products and services are not well explained, and viable, equivalent
      alternatives typically are not presented when marketed to consumers through
      traditional media. As the sale of many of these products and services moves
      to
      the Internet, consumers seek new sources of independent objective information
      such as Bankrate.com to facilitate and support their buying decisions. The
      interactive nature of the Internet allows us to display extensive research
      on
      financial products and services that was previously unavailable to consumers.





According
      to a 2004 survey conducted by the Board of Governors of the U.S. Federal
      Reserve, the percentage of U.S. families that own certain financial instruments
      was as follows:





Transaction
                Accounts
            
            CDs
            
            Stocks
            
            Loan
                secured by primary residence
            
            Installment
                loans
            
            Credit
                card balances
            
            Any
                debt91.3
            
            
            12.7
            
            
            20.7
            
            
            47.9
            
            
            46.0
            
            
            46.2
            
            
            76.4




We
      believe the majority of financial information available on the Internet is
      oriented toward investment advice and providing business news and stock market
      information, rather than personal and consumer finance information, advice
      and
      interest rate data. Our efforts are targeted to fulfill the slightly less
      competitive, but equally important niches of consumer banking and personal
      finance information. As a result, we believe we can maintain a loyal base of
      users comprised of targeted audiences that are attractive to advertisers.





We
      have
      seen steady interest in our primary niches - mortgages, automobile loans, home
      equity loans and CD/savings products. Our ability to
      provide a platform for frictionless communication between consumers and
      businesses has not changed. We believe that
      we
      are well-positioned to benefit from growth in the Internet personal finance
      advertising market.





**Strategy**




We
      believe that the consumer banking and personal finance sectors hold significant
      opportunities for growth and expansion. As we grow, we are seeking to
      consolidate our position as the industry leader in the gathering of rate data
      and to expand our brand recognition with consumers and partners. Elements of
      our
      strategy include:





·
            Continuing
                to provide advertisers with high-quality, ready-to-transact
                consumers:
                By advertising on ouronline
                network,
                either through purchasing graphic ads or hyperlinks banks, brokers
                and
                other advertisers are tapping into our strongest resource, consumers
                on
                the verge of engaging in a high-value transaction. By allowing advertisers
                to efficiently access these “in-market” consumers, we are helping
                advertisers lower their own costs of acquiring new customers, and
                ultimately creating a transaction that is beneficial for the advertiser,
                the consumer and us.




6




·
            Remaining
                the dominant brand in consumer personal finance data and
                content:
                We are continuing our strong push to remain the dominant player in
                our
                market. We believethatwe
                are theleaderin
                our marketusingbased
                ona
                number of metrics, including revenue, the number offinancial
                institutionssurveyed,
                the number of pages viewed by consumers and the number of unique
                visitorseach month.





·
            Continuing
                growth through partnering with top web sites:
                Our partner network providesour
                online networkwith a steady stream of visitors, with little to no up-front payment
                risk
                to us.
                Asthe
                bulksubstantially
                allof
                these agreements are revenue-sharing, we only payour
                partnersa
                percentage ofthe
                revenue earned.
                We will also explore initiatives to expand the breadth and depth
                of our
                product offerings and services by partnering in the real estate,insurance,auto
                finance, sub-prime lending and college lending
                areas.





**Distribution
      Arrangements**





Our
      distribution (or syndication) arrangements with other web site operators fall
      into two categories: (1) co-branding, in which we establish a "co-branded"
      site
      with another web site operator, and (2) licensing, in which we provide content
      to the other operator's web site together with a hyperlink to Bankrate.com. Historically,
      co-branding has
      been
      more effective in driving traffic to our online network than
      licensing





Co-branded
      sites are created pursuant to agreements with other web site operators.
      Generally, agreements relating to co-branded sites provide for us to host the
      co-branded web pages, sell and serve the graphic advertising, and collect
      advertising revenues, which are shared with the third party web site.





Under
      licensing arrangements, we provide limited content to other web sites in
      exchange for a fee. The content identifies Bankrate.com as its source and
      typically includes a hyperlink to the Bankrate.com web site.





Our
      largest partners in terms of driving traffic to our online
      network, as
      of
      December 31, 2006, included America Online, Yahoo!, CNN, MSN, Internet
      Broadcasting System, Dollar Stretcher and USA Today. During 2006, approximately
      12% of the traffic to Bankrate.com was attributable to the distribution partners
      compared to 14% in 2005 and 20% in 2004. The decline results primarily from
      the
      heightened consumer awareness of our site, resulting in more traffic coming
      directly to Bankrate.com. We expect traffic from distribution partners to
      continue to be approximately 10% to 15% of total site traffic in
      2007.





**Financial
      Product Research**





Our
      research staff tracks comparative information on more than 300 financial
      products and services, including checking accounts, consumer loans, lines of
      credit, mortgages, certificates of deposit, savings accounts, credit cards,
      money market accounts and online accounts. We estimate that over 3,000,000
      items
      of data are gathered each week for approximately 575 markets across the United
      States from over 4,800 financial institutions. The information obtained includes
      not only interest rates and yields, but also related data such as lock periods,
      fees, points, and loan sizes for mortgages, and grace periods, late penalties,
      cash advance fees, cash advance annual percentage rates, annual percentage
      yields, minimum payments, and terms and conditions of credit cards.





We
      adhere
      to a strict methodology in developing our markets and our institutional survey
      group. The market survey includes the 100 largest
      U.S. markets, as defined by the U.S. Census Bureau's Metropolitan Statistical
      Area categories and FDIC Market Report. Along with the largest markets, the
      surveys include s econdary markets
      and other selected communities that represent areas of high growth.





In
      most
      instances, institutions in the survey group include the largest banks and
      thrifts within each market area based on total deposits. The number of
      institutions tracked within a given market is based on the types of financial
      products available and number of institutions in the market area. In each of
      the
      largest 25 markets, we track at least 10 institutions. In each of the smaller
      markets, we track three or more institutions. We verify and adjust, if
      necessary, the institutions included in the survey group on an annual basis
      using FDIC deposit data from year-end call reports. We do not include credit
      unions in the market survey group because product availability is based upon
      membership. However, we track the 50 largest U.S. credit unions as a separate
      survey group for comparison purposes.





All
      products included in our database have narrowly defined criteria so that
      information provided by institutions is comparable. The quality control process
      then includes several visual checks and proofing by different staff members
      to e nsure
      that the data inputs are accurate. Our quality control staff reviews each
      listing in relation to regional and national trends and for overall accuracy
      and
      consistency fees and related information prior to disclosure of the information
      to consumers. The staff also reviews the comparability of products,
      institutional accuracy and survey accuracy. In addition, the quality control
      team performs anonymous shopping on a daily basis, whereby we place calls to
      institutions in order to validate the data in a consumer setting. Institutions
      providing invalid data are contacted by our quality control staff to ensure
      that
      future information will be accurate.





The
      criteria for product listings consist of specific attributes, such as loan
      size
      and term that are used to define each type of financial instrument in order
      to
      ensure uniformity in the products that are compared. Institutions listed in
      our
      Bankrate.com online tables that purchase hyperlinks to their own sites or
      purchase other advertising must comply with the same criteria for product
      listings that apply to other institutions or the advertisements will be
      removed.




7




We
      are
      aware of the potential conflict of interest resulting from the sale of
      advertising to financial institutions while providing independent and objective
      research. However, we believe that no potential conflicts of interest have
      ever
      compromised our ability to provide independent and objective research, and
      we
      are committed to continue to provide such research in the future.





**Editorial
      Content**





In
      addition to our research dep artment,
      as of December 31, 2006 ,
      we
      mai ntained
      an editorial staff of 19 editors,
      writers, researchers, technical producers and designers who create original content,
      research studies and decision tools for our online
      network .
      We also
      have relationships with more than 30 freelance journalists. The reporters and
      editors of our
      online network have extensive combined media experience in newspaper, magazine,
      new media and or broadcast with a combined average of 18 years' experience
      in
      journalism. We believe the quality of our original content plays a critical
      role
      in attracting visitors to our Web
      site online
      network and to ou r
      co-branded partners’ w eb
      sites.




Most
      of
      the content within our online
      network is original and produced internally. There is a very limited amount
      of
      third-party content, acquired under advertising revenue-sharing agreements
      or
      licenses, which allows us to incorporate relevant information on our Bankrate
      Network that would otherwise require additional resources to produce. An example
      of this type of arrangement is the incorporation in Bankrate.com of currency
      conversion functionality from OANDA.com, a comprehensive provider of foreign
      exchange and currency trading information services.





**Print
      Publications**





We
      continue to produce traditional print publications to absorb part of the cost
      of
      producing research and original editorial content. Additionally, we believe
      that
      print publishing activities contribute to greater exposure and branding
      opportunities for our web site. Our print publications activities include the
      following:





·
            *Mortgage
                Guide*:
                We generate revenue through the sale of mortgage rate and product
                listings
                inover
                500newspapers across the United States with combineddailycirculation
                of more than 40 million copies. We enter into agreements with the
                newspapers for blocks of print space, which is in turn sold tomortgage
                lenders and we share the revenue with the newspapers on a percentage
                basis.





·
            *Deposit
                Guide*:
                We generate revenue through the sale of Deposit rate and product
                listings
                in 13 newspapers across the United States with combineddailycirculation
                of more than 2 million copies. We enter into agreements with the
                newspapers for blocks of print space, which is in turn sold tofinancial
                institutions and we share the revenue with the newspapers on a percentage
                basis.





·
            Syndication
                of Editorial Content and Research:
                We syndicate editorial research to 153 newspapers, which have a combined
                Sunday circulation of more than 29 million copies, and three national
                magazines with combined monthly circulation in excess of 3 million
                copies.





·
            Newsletters:
                We publish three newsletters:*100
                Highest Yields*and*Jumbo
                Flash Report*,
                which target individual consumers, and*Bank
                Rate Monitor*,
                which targets an institutional audience. These newsletters provide
                bank
                deposit, loan and mortgage interest rate information with minimal
                editorial content.




In
        2006,
        we launched a new product, our Free Standing Insert program. We create a
        free
        standing publication with our original editorial content that is inserted
        into a
        newspaper. We then sell sponsorship of the free standing publication to an
        advertiser. Although this product is expensive to produce, we expect this
        product to increase net income slightly. We believe our Free Standing Insert
        program is beneficial to us because it further increases our visibility in
        the
        marketplace.
 
 For
        the
        fiscal years ended December 31, 2006, 2005 and 2004, the percentage of total
        revenue generated by *Mortgage
        and Deposit Guide* advertising was 18%, 10% and 11%, respectively.


**Consumer
      Marketing**





Our primary
      marketing expenditures are for key word cost-per-click advertising campaigns
      on
      Internet search engines. Through the end of 2005, we also entered into barter
      transactions ( our exchange of
      advertising space on our
      online network for
      reciprocal advertising space on other web sites) to promote our brand and
      generate traffic to our online
      network .
      We
      actively conduct earned media public relations campaigns to promote our
      editorial content and personnel to the consumer and trade media. Bankrate
      spokespersons are routinely featured in newspapers, magazines and in broadcast
      media, and are promoted to and are featured as expert commentators on,
      major broadcast and cable news programs and talk radio. In
      2006 ,
      Bankrate experts were quoted or we
      were
      referenced in over 1,100 media exposures. Our spokespersons were featured in
      112
      television interviews, including The Today Show, CBS’ The Early Show, The Fox
      Cable Network, MSNBC, CNBC, and CNN; 772 print articles, including *The
      New York Times* , *The
      Wall Street Journal* and *USA*  *Today* ;
      and
      about 225 interviews on numerous talk radio broadcasts. Finally,
      we produce “The
      Bankrate.com Personal Finance Minute” which is distributed to XM radio and
      selected terrestrial radio stations throughout the U.S.




8




Bankrate.com’s
      home page and other key pages of our
      online network routinely rank at or near the top of major search engines' natural (unpaid)
      listings for highly coveted key words and phrases related to banking products,
      and we generate significant traffic and revenue from such placements. The high
      rankings are largely a result of our success at creating highly relevant, widely
      read content, and because our personnel stay abreast of and use various search
      engine optimization techniques.




**Bankrate
        Select**
 
 In
        early
        2007 we will re-launch the FastFind lead generation business as Bankrate *Select* through
        a
        partnership with Lending Tree. We will gain access to a well established
        lender
        network, which we believe will better and more fully monetize the leads we
        generate. We believe visitors to our online network value and trust the Bankrate
        brand and we expect that the click and conversion rates should improve
        with the implementation ofBankrate*Select*.




**Advertising
      Sales**





The
      sales
      team focuses on selling online and offline advertising to national, regional
      and
      local advertisers. The sales staff focuses on three segments of the financial
      industry: lending (mortgage, home equity and auto loans), banking (CDs, MMAs
      and
      credit cards) and general personal finance (college loans, taxes and IRAs).
      We
      have three sales regions with offices in each region: East (New York City),
      Midwest (Chicago), and West (San Francisco and Orange County). Each salesperson
      is responsible for a designated geographic region of the United States. They
      are
      paid based on their individual performance within their territory.





The
      sales
      team is responsible for selling all of our products including graphic
      advertising on Bankrate.com, Mortgage-calc.com and Interest.com, hyperlink
      listings on the Bankrate rate tables, rate table listings in the *Mortgage
      and Deposit Guides* and
      mortgage leads from Bankrate Select. We believe this approach enhances
      the value for  advertisers
      and direct marketers by (1) alleviating the need to purchase advertising from
      numerous vendo rs,
      (2)
      providing advertisers and direct marketers the opportunity to optimize their
      marketing dollars between four different products, (3) offering integrated
      marketing packages that meet the strategic needs of our customers, and (4)
      providing access to in-market consumers who are ready to act. Advertisers and
      direct marketers can enhance the effectiveness of their campaigns by customizing
      advertising delivery on our networks within a particular content channel,
      geographically or across an entire network.




For
        the
        fiscal years ended December 31, 2006, 2005 and 2004, the percentage of total
        revenue generated by graphic advertising was 47%, 56% and 50%, respectively.
        For
        the fiscal years ended December 31, 2006, 2005 and 2004, the percentage of
        total
        revenue generated by hyperlink advertising was 34%, 32% and 37%, respectively.


Our
      advertisers can target prospective customers using several different approaches:





·
            Focusing
                on consumers in specific situations, such as those who are first-time
                home
                buyers, or those actively shopping for home equity
                loans.





·
            Targeting
                specific geographic and product areas; for example, CD shoppers in
                Georgia; or just one of these - all consumers interested in CDs,
                or all
                consumers from Georgia.





·
            General
                rotation throughout our network.




**Graphic
      Advertising**




Our
      most
      common graphic advertisement sizes are leader boards (728 x 90 pixels) and
      banners (486 x 60 pixels), which are prominently displayed at the top or bottom
      of a page, skyscrapers (160x600 or 120x600 pixels) posters (330 x 275 pixels),
      and islands (250 x 250 pixels). We offer these advertisements which can be
      targeted to specific areas of our network, or on a general rotation basis.
      Advertising rates may vary depending upon the product areas targeted (home
      equity has a higher CPM than auto), geo-targeting (a 15% premium for targeting
      advertisements to a specific state), the quantity of advertisements purchased
      by
      an advertiser, and the length of time an advertiser runs an advertisement on
      our
      network. Discounts may be available based upon the volume of advertisements
      purchased.





Posters
      are oversized advertisements that contain more information than traditional
      banner advertisements. We position posters on certain pages so that they
      dominate the page. In addition, we offer product special issues that are
      available for single sponsorships. Rates for product special issues are based
      on
      expected impression levels and additional content requirements.





Providing
      effective tools for managing advertising campaigns is essential to maintaining
      advertising relationships. We use a state-of-the-art program under license
      from
      a third-party that allows our advertisers to monitor their spending on our
      web
      sites in real-time for impressions received and click-through ratios generated.
      We also allow third-parties to serve our customers’ advertisements, such as
      DoubleClick.





***Hyperlinks***





Financial
      institutions that are listed in our rate tables have the opportunity to
      hyperlink their listings. By clicking on the hyperlink, users are taken to
      the
      institution's web site. Prior to October 1, 2005, hyperlinks were sold under
      a
      flat dollar fee per month contracts that ranged primarily between three and
      twelve months.





Our
      hyperlinks were converted to a “cost-per-click” or CPC pricing model on October
      1, 2005. Under this arrangement, advertisers pay Bankrate a specific,
      pre-determined cost each time a consumer clicks on that advertiser’s hyperlink
      or phone icon (usually found under the advertiser’s name in the rate table
      listings). All clicks are screened for fraudulent characteristics by an
      independent thirdparty vendor and then charged to the advertiser’s account.




9




We
      also
      sell text links on our rate pages to advertisers on a CPC basis.
      Advertisers enter an auction bidding process on a thirdparty web site for
      placement of their text link based on the amount they are willing to pay for
      each click through to their web site. We recognize revenue monthly for each
      text
      link based on the number of clicks at the CPC contracted for during the auction
      bidding process.


***Behavioral
        Targeting***
 
 In
        the
        fourth quarter of 2006, we launched a behavioral targeting initiative with
        two
        partners who manage two distinct advertising networks. Behavioral targeting
        allows us to identify consumers who come to the Bankrate Network, track them
        on
        an anonymous basis, and then serve them targeted ads when they are on websites
        on one of the two partner’s networks. We believe that this initiative can
        increase the number of advertisements that we serve, however, this initiative
        is
        too new to determine its impact on our operations.




**Advertisers**


We
      market
      to local advertisers targeting a specific audience in a city or state and also
      to national advertisers targeting the entire country. As of December 31, 2006,
      we had 61 graphic advertisers and 349 hyperlink advertisers, some of which
      are
      both graphic and hyperlink advertisers. Among our larger advertisers are E-Loan,
      Inc., Citibank, Amerisave Mortgage, ING Direct, Bank of America and HSBC. No
      sales to any one customer in
      either
      our online publishing or print publishing and licensing segmentexceeded
      10% of total revenue for the periods presented.




**Competition**





We
      compete for advertising revenues across the broad category of personal finance
      information, both in traditional media such as newspapers, magazines, radio,
      and
      television, and in the developing market for online financial information.
      There
      are many competitors that have substantially greater resources than we do.
      Our
      online and print competition includes the following:





·
            Personal
                finance sections of general interest web sites such as Yahoo! Finance,
                AOL
                Money & Finance and MSN Money;





·
            Personal
                finance destination sites such as The Motley Fool, MarketWatch,
                SmartMoney.com, Kiplinger.com and
                CNNMoney.com;





·
            E-commerce
                oriented sites that include banking and credit products such as
                LendingTree;





·
            Lead
                aggregators such as LowerMyBills, iHomeowners and
                NexTag;





·
            Print
                mortgage table sellers like National Financial News Service;





·
            Rate
                listing web sites, such as Realtor.com/Move.com, Informa Research
                Services
                and Loans.com/CarsDirect; and





·
            Key
                wordCPCadvertising
                sites/networks such as Google, Yahoo! Search Marketing, and
                Ask.com.





Competition
      in the online publishing segment is generally directed at growing users and
      revenue using marketing and promotion to increase traffic to web sites. We
      believe that our original content, focus and objective product information
      differentiate us from our competitors. We
      believe that the market for our print publishing and licensing segment is
      highly concentrated, and following our acquisition of MMIS, we believe that
      we
      are the dominant player in this market.


**Seasonality**
 
 We
        believe our online publishingsegment in terms of page views is not generally susceptible to
        seasonality. As brand awareness continues to strengthen for the Bankrate
        Network, we believe our quarterly page views will become more consistent
        with a
        possible decline in the fourth quarter due to the holiday season. However,
        in
        2006, page views in the fourth quarter were 120.6 million, 17.3 million,
        or 17%,
        higher than the third quarter in 2006, and 22.9 million, or 24%, higher than
        the
        fourth quarter of 2005. See Item 7 Management’s Discussion and Analysis of
        Financial Condition and Results of Operations for a further discussion of
        our
        traffic and page views.





**Operations**





We
      currently operate our online network and supporting systems on
      servers at a secure third-party co-location facility in Atlanta, Georgia.
      This third-party facility is manned, and our infrastructure and
      network connectivity are monitored continuously, on a 24 hours a day,
      365 days a year basis. In March 2006, we also added a presence at a similar
      data center in Denver, Colorado. The additional data center primarily operates
      systems related to our web sites other than Bankrate.com. The additional data
      center is also key to our business continuity strategy, providing additional
      recovery options if either data center should suffer a major outage. These
      facilities are powered continuously from multiple sources, including
      uninterruptible power supplies and emergency power generators. The
      facilities are connected to the Internet with redundant high-speed data
      lines. The systems at each data center are protected by a
      multi-layered security system including multiple firewalls at each data center.
      To provide maximum scalability, many of our high-traffic web pages are
      served from an independent content distribution network. Multi-node clusters
      or
      multiple load shared systems are used for most key functions, including web
      serving, ad serving, and SQL databases. The vast majority of the
      information presented on our web sites, including backend databases that provide
      the raw information, is stored and delivered via such
      multi-node or multi-system configurations from one of the co-location
      facilities.




All
      of
      our systems are controlled and updated remotely via encrypted virtual
      private network (“VPN”) links to our operating locations. The technical
      services team, based in North Palm Beach, Florida has established extensive
      monitoring of all key systems, originating from multiple locations and
      methodologies, to provide continuous real-time response capability should key
      systems or network connections fail. Much of the content on our various web
      sites is prepared on systems located in the secure server room in our
      North Palm Beach location, then transferred at scheduled intervals via the
      VPN
      to the systems at the co-location facilities. The North Palm Beach facility
      systems are also powered redundantly by uninterruptible power supply units.
      In
      the event that North Palm Beach or any other location is temporarily
      unavailable, temporary access is established from alternative locations to
      provide continuity for key operations and content updates.





10




**Proprietary
      Rights**





Our
      proprietary intellectual property includes our unique research and editorial
      content, our web sites, our URL’s, and our print publications. We rely
      primarily on a combination of copyrights, trademarks, trade secret laws, our
      user policy and restrictions on disclosure to protect this content. In
      addition, we license some of our data and content from other parties. Our
      copyrights, trademarks and licenses expire at various dates, and none is
      individually significant. Because of the nature of our business, we believe
      that
      both of our operating segments rely equally on our proprietary intellectual
      property.





**Employees**





As
      of
      December 31, 2006, we had 163 full-time employees. We have never had a work
      stoppage and none of our employees are represented under collective bargaining
      agreements. We consider our employee relations to be favorable.




**Financial
        Information About Geographic Areas**
 
 The
        advertising customers that we contract with to generate our revenue are located
        within the United States.





**Available
      Information**





For
      further discussion concerning our business, see the information included in
      Items 7 (Management’s Discussion and Analysis of Financial Condition and results
      of Operations) and 8 (Financial Statements and Supplementary Data) of this
      report.





We
      make
      available, free of charge through our web site at www.bankrate.com, our
      annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
      on
      Form 8-K and all amendments to those reports, if applicable, filed or furnished
      pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934,
      as
      amended, as soon as reasonably practicable after the material is electronically
      filed with or furnished to the Securities and Exchange Commission (“SEC”). The
      information posted on our web site is not incorporated into this Annual Report
      on Form 10-K.





**Item
      1A. Risk Factors**





*You
      should consider carefully the following risk factors before deciding whether
      to
      invest in our common stock. Our business, including our operating results and
      financial condition, could be harmed by any of these risks. Additional risks
      and
      uncertainties not currently known to us or that we currently deem to be
      immaterial also may materially and adversely affect our business. The trading
      price of our common stock could decline due to any of these risks, and you
      may
      lose all or part of your investment. In assessing these risks you should also
      refer to the other information contained in our filings with the SEC, including
      our financial statements and related notes.*





**Risks
      Related to Our Business**





***Our
      Success Depends on Internet Advertising Revenue***




We
      expect
      to derive approximately 83% of our revenue in the foreseeable future through
      the
      sale of advertising space and hyperlinks on our Internet web pages. Any factors
      that limit the amount advertisers are willing to spend on advertising on our
      web
      sites could have a material adverse effect on our business. These factors may
      include:





·
            a
                lack of standards for measuring web site traffic or effectiveness
                of web
                site advertising;





·
            a
                lack of established pricing models for Internet
                advertising;





·
            the
                failure of traditional media advertisers to adopt Internet
                advertising;





·
            the
                introduction of alternative advertising sources; and





·
            a
                lack of significant growth in web site traffic.




Continuing
      to demonstrate the effectiveness of advertising on our web sites is critical
      to
      our ability to generate advertising revenue. Currently, there are no widely
      accepted standards to measure the effectiveness of Internet advertising, and
      we
      cannot be certain that such standards will develop sufficiently to support
      our
      growth through Internet advertising.





A
      number
      of different pricing models are used to sell advertising on the Internet.
      Pricing models are typically either CPM-based (cost per thousand impressions)
      or
      performance-based. We utilize the CPM-based model, which is based upon the
      number of advertisement impressions, and the performance-based, or
      cost-per-click (“CPC”), model, which generates revenue based on each individual
      click on a particular advertisement. We cannot predict which pricing model,
      if
      any, will emerge as the industry standard. Therefore, it is difficult for us
      to
      project our future advertising rates and revenues. For instance, banner
      advertising, which is one of our primary sources of online revenue, may not
      be
      an effective advertising method in the future. If we are unable to adapt to
      new
      forms of Internet advertising and pricing models, our business could be
      adversely affected.




11




Financial
      services companies account for a majority of our advertising revenues. We will
      need to sell advertising to customers outside of the financial services industry
      in order to significantly increase our revenues. If we do not attract
      advertisers from other industries, revenue growth could be adversely
      affected.





***Our
      Success Depends on Interest Rate Volatility***




We
      provide interest rate information for mortgages and other loans, credit cards
      and savings accounts. Visitor traffic to our web sites tends to increase with
      interest rate movements and decrease with interest rate stability. Factors
      that
      have caused significant visitor fluctuations in the past have been Federal
      Reserve Board actions and general market conditions affecting home mortgage
      interest rates. Additionally, the level of traffic to our web sites can be
      dependent on interest rate levels as well as mortgage re-financing activity.
      Accordingly, a slowdown in mortgage production volumes could have a material
      adverse effect on our business.





We
      believe that as we continue to develop our web sites with broader personal
      finance topics, the percentage of overall traffic seeking mortgage information
      will remain stabilized at current levels. To accelerate the growth of traffic
      to
      our web sites, we are working with our syndication partners to program more
      intensively, and we are aggressively promoting products not related to mortgage
      activity. If we are otherwise unable to increase or maintain traffic to areas
      of
      our web sites other than mortgage information, we will be more dependant on
      interest rate levels and mortgage refinancing activity.





***We
      May Expand our Operations Through Acquisitions, Which Could Divert Management’s
      Attention and Expose Us to Unanticipated Costs and Liabilities and We May
      Experience Difficulties Integrating the Acquired Operations, and We May Incur
      Costs Relating to Potential Acquisitions that are Never
      Consummated***





Our
      business plan could include growth through future acquisitions. For example,
      in
      late 2005, we acquired FastFind and MMIS/Interest.com, and in 2006 we acquired
      Mortgagecalc.com. However, our ability to consummate any future acquisitions
      on
      terms that are favorable to us may be limited by the number of attractive
      acquisition targets, internal demands on our resources and our ability to obtain
      financing. Our success in integrating newly acquired businesses will depend
      upon
      our ability to retain key personnel, avoid diversion of management’s attention
      from operational matters, and integrate the technical operations and personnel
      of the acquired company. In addition, future acquisitions could result in the
      incurrence of additional debt, costs and contingent liabilities or the dilution
      of our stockholders’ ownership through issuance of additional stock. Integration
      of acquired operations may take longer, or be more costly or disruptive to
      our
      business, than originally anticipated. It is also possible that expected
      synergies from future acquisitions may not materialize. We may also incur costs
      and divert management attention as regards potential acquisitions that are
      never
      consummated.





Although
      we undertake a due diligence investigation of each business that we acquire,
      there may be liabilities of the acquired companies that we fail to or are unable
      to discover during the due diligence investigation and for which we, as a
      successor owner, may be responsible. In connection with acquisitions, we
      generally seek to minimize the impact of these types of potential liabilities
      through indemnities and warranties from the seller, which may in some instances
      be supported by deferring payment of a portion of the purchase price. However,
      these indemnities and warranties, if obtained, may not fully cover the
      liabilities due to limitations in scope, amount or duration, financial
      limitations of the indemnitor or warrantor or other reasons.





***The
      Expected Benefits of Our Recent Acquisition of FastFind, Including Expected
      Synergies, May Not Be Realized***





Our
      FastFind operations, which we acquired in November 2005, have not performed
      as
      originally expected and we have been unable to monetize the FastFind assets
      as
      we had planned. Although we have developed a strategy to develop FastFind into
      a
      successful lead generation business, there is no assurance that we will be
      able
      to realize the revenue opportunities available in the lead aggregator business.
      Furthermore, our strategy for FastFind requires us to continue to incur costs
      and expenses to, among other things, increase traffic for FastFind and develop
      more significant relationships with key financial institutions. However, there
      can be no assurance that sufficient revenue will ever be derived from FastFind
      to substantiate these costs or that we will ever receive an acceptable return
      on
      our investment in FastFind.





***If
      We Fail to Detect Click-through Fraud or Unscrupulous Advertisers, We Could
      Lose
      the Confidence of our Advertisers, Thereby Causing our Business to
      Suffer***





We
      are
      exposed to the risk of fraudulent clicks on our ads by persons seeking to
      increase the advertising fees paid to us. Clickthrough fraud occurs when a
      person clicks on an ad displayed on our Web site in order to generate revenue
      to
      us and to increase the cost for the advertiser. If we were unable to detect
      this
      fraudulent activity and find new evidence of past fraudulent clicks, we may
      have
      to issue refunds retroactively of amounts previously paid to us. In addition,
      if
      fraudulent clicks are not detected, the affected advertisers may experience
      a
      reduced return on their investment in our advertising programs because the
      fraudulent clicks would not lead to potential revenue for the
      advertisers.




12




We
      are
      also exposed to the risk that advertisers who advertise on our Web site will
      advertise interest rates on a variety of financial products that they do not
      intend to honor. Such “bait and switch” activity encourages consumers to contact
      fraudulent advertisers over legitimate advertisers because the fraudulent
      advertisers claim to offer a better interest rate.





Both
      “bait and switch” and click-through fraud would negatively affect our
      profitability, and could hurt our reputation and our brand. This could lead
      the
      advertisers to become dissatisfied with our advertising programs, which could
      lead to loss of advertisers and revenue.




***More
        Individuals are Utilizing Non-PC Devices to Access the Internet, and our
        Online
        Network May Not be Accepted by Such Users.***
  The
        number of individuals who access the Internet through devices other than
        a
        personal computer, such as personal digital assistants and mobile telephones,
        has increased dramatically. Our online network was designed for rich, graphic
        environments such as those available on desktop and laptop computers. The
        lower
        resolution, functionality and memory associated with alternative devices
        currently available may make access of our online network through such devices
        difficult. If consumers find our online network difficult to access through
        alternative devices, we may fail to capture a sufficient share of an
        increasingly important portion of the market for online services and may
        fail to
        attract both advertisers and web traffic.




***Adverse
      Resolution of Litigation May Harm Our Operating Results or Financial
      Condition***




We
      are
      party to lawsuits in the normal course of business. Litigation can be expensive,
      lengthy and disruptive to normal business operations. Moreover, the results
      of
      complex legal proceedings are difficult to predict. An unfavorable resolution
      of
      a particular lawsuit could have a material adverse effect on our business,
      operating results, or financial condition. For additional information regarding
      certain of the lawsuits in which we are involved, see Item 3, "Legal
      Proceedings."





***Our
      Success Depends on Establishing and Maintaining Distribution Arrangements***




Our
      business strategy includes the distribution of our content through the
      establishment of co-branded web pages with hightraffic business and personal
      finance sections of online services and web sites. A co-branded site is
      typically a custom version of our web site with the graphical look, feel, and
      navigation, of the co-branded partner’s web site. Providing access to these
      co-branded web pages is a significant part of the value we offer to our
      advertisers. We compete with other Internet content providers to maintain our
      current relationships with other web site operators and establish new
      relationships. In addition, as we expand our personal finance content, some
      of
      these web site operators may perceive us as a competitor. As a result, they
      may
      be unwilling to promote distribution of our banking and credit content. If
      our
      distribution arrangements do not attract a sufficient number of users to support
      our current advertising model, or if we do not establish and maintain
      distribution arrangements on favorable economic terms, our business could be
      adversely affected.





**Risks
      Related to Our Industry, the Internet and Our Technology
      Infrastructure**




***Our
      Future Success is Dependent Upon Increased Acceptance of the Internet by
      Consumers as a Medium for Obtaining Financial Product Information***




Our
      success will depend in large part on continued and expanded widespread consumer
      acceptance of obtaining rate information regarding financial products such
      as
      mortgages, credit cards, money market accounts, certificates of deposit,
      checking and ATM fees, home equity loans, online banking fees and new and used
      auto loans online. The level of consumer use of the Internet to provide for
      their personal finance needs is subject to uncertainty. The development of
      an
      online market for obtaining rate information regarding the above listed
      financial products is rapidly evolving and likely will be characterized by
      an
      increasing number of market entrants. If consumer acceptance of the Internet
      as
      a source for such information does not increase, we may not be able to compete
      effectively with traditional methods of obtaining such rate information and
      our
      business, results of operations and financial condition will be adversely
      affected.





***Our
      Markets Are Highly Competitive***




We
      compete for Internet advertising revenues with the personal finance sections
      of
      general interest sites such as Yahoo! Finance, AOL Money & Finance, and MSN
      Money; personal finance destination sites such as The Motley Fool, MarketWatch,
      SmartMoney.com, Kiplinger.com and CNNMoney.com; e-commerce oriented sites that
      include banking and credit products such as LendingTree; lead aggregators such
      as LowerMyBills, iHomeowners and NexTag; print mortgage table sellers like
      National Financial News Service; rate listing sites such as
      Realtor.com/Move.com, Informa Research Services and Loan.com/CarsDirect; and
      key
      word cost-per-click advertising sites/networks such as Google, Yahoo! Search
      Marketing and Ask.com.  In
      addition, new competitors may enter this market as there are few barriers to
      entry. Many of our existing competitors, as well as a number of potential new
      competitors, have longer operating histories, greater name recognition, larger
      customer bases and significantly greater financial, technical and marketing
      resources than us. Many competitors have complementary products or services
      that
      drive traffic to their web sites. Increased competition could result in lower
      web site traffic, advertising rate reductions, reduced margins or loss of market
      share, any of which would adversely affect our business. We cannot be certain
      that we will be able to compete successfully against current or future
      competitors.





***Our
      Web Sites May Encounter Technical Problems and Service Interruptions***




In
      the
      past, our web sites have experienced significant increases in traffic in
      response to interest rate movements and other business or financial news events.
      The number of our users has continued to increase over time, and we are seeking
      to further increase our user base. As a result, our Internet servers must
      accommodate spikes in demand for our web pages in addition to potential
      significant growth in traffic.




13




Our
      web
      sites have in the past, and may in the future, experience slower response times
      or interruptions as a result of increased traffic or other reasons. These delays
      and interruptions resulting from failure to maintain Internet service
      connections to our site could frustrate users and reduce our future web site
      traffic, which could have a material adverse effect on our business.




All
      of
      our communications and network equipment is located at our corporate
      headquarters in North Palm Beach, Florida and/or at secure third-party
      co-locations facilities in Atlanta, Georgia and Denver, Colorado. Multiple
      system failures involving these locations could lead to interruptions or
      delays in service for our web sites, which could have a material adverse effect
      on our business. Our operations are dependent upon our ability to protect our
      systems against damage from fires, hurricanes, earthquakes, power losses,
      telecommunications failures, break-ins, computer viruses, hacker attacks and
      other events beyond our control.





***We
      Rely on the Protection of Our Intellectual Property***




Our
      intellectual property includes our unique research and editorial content of
      our
      web sites, our URL's, and print publications. We rely on a combination of
      copyrights, trademarks, trade secret laws and our user policy and restrictions
      on disclosure to protect our intellectual property. We also enter into
      confidentiality agreements with our employees and consultants and seek to
      control access to and distribution of our proprietary information. Despite
      these
      precautions, it may be possible for other parties to copy or otherwise obtain
      and use the content of our web sites or print publications without
      authorization. A failure to protect our intellectual property in a meaningful
      manner could have a material adverse effect on our business.





Because
      we license some of our data and content from other parties, we may be exposed
      to
      infringement actions, if such parties do not possess the necessary proprietary
      rights. Generally, we obtain representations as to the origin and ownership
      of
      licensed content and obtain indemnification to cover any breach of any these
      representations. However, these representations may not be accurate and the
      indemnification may not be sufficient to provide adequate compensation for
      any
      breach of these representations.





Any
      future infringement or other claims or prosecutions related to our intellectual
      property could have a material adverse effect on our business. Defending against
      any of these claims, with or without merit, could be time-consuming, result
      in
      costly litigation and diversion of technical and management personnel or require
      us to introduce new content or trademarks, develop new technology or enter
      into
      royalty or licensing agreements. These royalty or licensing agreements, if
      required, may not be available on acceptable terms, if at all.





***We
      May Face Liability for Information on Our Web Sites***




Much
      of
      the information published on our web sites relates to the competitiveness of
      financial institutions’ rates, products and services. We may be subjected to
      claims for defamation, negligence, copyright or trademark infringement or other
      theories relating to the information we publish on our web sites. These types
      of
      claims have been brought, sometimes successfully, against providers of online
      services as well as print publications. Our insurance may not adequately protect
      us against these types of claims.





***We
      May Face Liability for, and may be Subject to Claims Related to, Inaccurate
      Advertising Content Provided to Us***




Much
      of
      the information on our web sites that is provided by advertisers and collected
      from third parties relates to the rates, costs and features for various loan,
      depositary, personal credit and investment products offered by financial
      institutions, mortgage companies, investment companies, insurance companies
      and
      others participating in the consumer financial marketplace. We are exposed
      to
      the risk that some advertisers may provide us, or directly post on our web
      sites, (i) inaccurate information about their product rates, costs and features,
      or (ii) rates, costs and features that are not available to all consumers.
      This
      could cause consumers to lose confidence in the information provided by
      advertisers on our web sites, cause certain advertisers to become dissatisfied
      with our web sites, and result in lawsuits being filed against us. Our insurance
      may not adequately protect us against these types of lawsuits.





***Future
      Government Regulation of the Internet is Uncertain and Subject to Change***




As
      Internet commerce continues to evolve, increasing regulation by federal or
      state
      agencies or foreign governments may occur. Such regulation is likely in the
      areas of user privacy, pricing, content and quality of products and services.
      Additionally, taxation of Internet use or electronic commerce transactions
      may
      be imposed. Any regulation imposing fees for Internet use or electronic commerce
      transactions could result in a decline in the use of the Internet and the
      viability of Internet commerce, which could have a material adverse effect
      on
      our business.




***We
          May Be Limited or Restricted in the Way We Establish and Maintain Our Online
          Relationships by Laws Generally Applicable to Our Business, or We may be
          Required to Obtain Certain Licenses***
  State
          and
          federal lending laws and regulations generally require the accurate disclosure
          of the critical components of credit costs so that consumers can readily
          compare
          credit terms from various lenders. In addition, these laws and regulations
          impose certain restrictions on the advertisement of these credit terms.
          Because
          we are an aggregator of rate and other information regarding many financial
          products online, we may be subject to some of these laws and regulations.
          We
          believe that we have structured our web sites to comply with these laws
          and
          regulations. However, if these laws and regulations are changed, or if
          new laws
          or regulations are enacted, these events could prohibit or substantially
          alter
          the content we provide on our web sites. Moreover, such events could materially
          and adversely affect our business, results of operations and financial
          condition.
 
 We
          are
          also required to obtain licenses from various states to conduct parts of
          our
          business. In the case of FastFind, many states require licenses to solicit,
          broker or make loans secured by residential mortgages and other consumer
          loans
          to residents of those states. No assurances can be given that any of the
          licenses or rights currently held by us will not be revoked prior to, or
          will be
          renewed upon, their expiration. In addition, no assurances can be given
          that we
          will be granted new licenses or rights for which we may be required to
          apply
          from time to time in the future. Furthermore, because the licensing laws
          of each
          state change frequently and are difficult to determine their applicability,
          we
          may unknowingly operate FastFind without a required license.


14




**Risks
      Related to Corporate Control and Our Stock Price**




***Our
      Ownership is Heavily Concentrated***




At
      December 31, 2006, approximately 30% of our outstanding common stock was
      beneficially owned by our officers and directors, including Peter C. Morse,
      a
      director and our largest shareholder, who beneficially owned approximately
      26%
      of our outstanding common stock. As a result, our officers and directors, if
      acting together, may be able to exercise significant influence over matters
      requiring shareholder approval, including the election of our directors
      significant corporate transactions. This influence could be used to prevent
      or
      significantly delay another company or person from acquiring or merging with
      us,
      and could inhibit our liquidity and affect trading in our common stock.




***Our
        Articles Of Incorporation, Bylaws, and Certain Laws And Regulations May Prevent
        or Delay Transactions You Might Favor, Including a Sale or Merger of
        Us.***
  Provisions
        of our Articles of Incorporation, Bylaws, certain laws and regulations and
        various other factors may make it more difficult and expensive for companies
        or
        persons to acquire control of us without the consent of our Board of Directors.
        It is possible, however, that you would want a takeover attempt to succeed
        because, for example, a potential buyer could offer a premium over the then
        prevailing price of our common stock.
 
 For
        example, our Articles of Incorporation permit our Board of Directors to issue
        preferred stock without stockholder action. The ability to issue preferred
        stock
        could discourage a company from attempting to obtain control of us by means
        of a
        tender offer, merger, proxy contest or otherwise. Additionally, our Articles
        of
        Incorporation and Bylaws divide our Board of Directors into three classes,
        as
        nearly equal in size as possible, with staggered three-year terms. One class
        is
        elected each year. The classification of our Board of Directors could make
        it
        more difficult for a company to acquire control of us. We are also subject
        to
        certain provisions of the Florida Business Corporation Act and our Articles
        of
        Incorporation that relate to business combinations with interested stockholders.
        Other provisions in our Articles of Incorporation or Bylaws that may discourage
        takeover attempts or make them more difficult include:
 
 §
            Supermajority
                voting requirements to remove a director from
                office; §
            Provisions
                regarding the timing and content of stockholder proposals and
                nominations; §
            Supermajority
                voting requirements to amend Articles of Incorporation;
                and §
            Absence
                of cumulative voting.





***Our
      Results of Operations May Fluctuate Significantly***




Our
      results of operations are difficult to predict and may fluctuate significantly
      in the future as a result of several factors, many of which are beyond our
      control. These factors include:





·
            changes
                in fees paid by advertisers;





·
            traffic
                levels on our web sites, which can fluctuate
                significantly;





·
            changes
                in the demand for Internet products and
                services;





·
            changes
                in fee or revenue-sharing arrangements with our distribution
                partners;





·
            our
                ability to enter into or renew key distribution
                agreements;





·
            the
                introduction of new Internet advertising services by us or our
                competitors;





·
            changes
                in our capital or operating
                expenses;





·
            changes
                in interest rates;





·
            general
                economic conditions; and





·
            changes
                in banking or other laws that could limit or eliminate content on
                our web
                sites.




Our
      future revenue and results of operations are difficult to forecast due to these
      factors. As a result, we believe that period-to-period comparisons of our
      results of operations may not be meaningful, and you should not rely on past
      periods as indicators of future performance.





In
      future
      periods, our results of operations may fall below the expectations of securities
      analysts and investors, which could adversely affect the trading price of our
      common stock.





***Our
      Stock Price May Continue to be Volatile***





Our
      common stock has experienced substantial price volatility, particularly as
      a
      result of variations between our actual financial results and the published
      expectations of analysts. Furthermore, speculation in the press or investment
      community about our strategic position, financial condition, results of
      operations, business, or significant transactions can cause changes in our
      stock
      price. These factors, as well as general economic and political conditions,
      may
      materially adversely affect the market price of our common stock in the future.





**Item
      1B.**  **Unresolved Staff Comments**





We
      have
      received no written comments regarding our periodic or current reports from
      the
      staff of the Securities and Exchange Commission that were issued 180 days or
      more preceding the end of our 2006 fiscal year and that remain
      unresolved.





**Item
      2.**  **Properties**





Our
      principal administrative, sales, web operations, marketing and research
      functions are located in one leased facility in North Palm Beach, Florida.
      The
      lease is for approximately 20,935 square feet of office and expires on December
      31, 2016. We entered into this lease on November 3, 2005. The initial lease
      term
      is for 10 years with an option to renew for one additional 5-year term.





We
      lease
      approximately 8,800 square feet in New York, New York, that is principally
      used
      for administration, sales and business development. The New York office lease
      expires on September 30, 2016. We also lease approximately 6,000 square feet
      in
      San Francisco, California, that is also used for administration, sales and
      business development. The San Francisco lease expires on February 28, 2009.
      We
      also lease approximately 4,872 square feet in Chicago, Illinois that is used
      for
      sales and business development, and a small  facility
      in Sherman Oaks, California that is used as a sales office. The Chicago lease
      expires on November 30, 2008 and the Sherman Oaks lease is on a month-to month
      basis.




15




We
      believe that all of our facilities are adequate and suitable for operations
      in
      the foreseeable future. However, we may undertake the expansion of certain
      facilities from time to time in the ordinary course of business .





See
      Note
      7 to the financial statements in Item 8 below for more information about our
      leased facilities.





**Item
      3.**  **Legal
      Proceedings**





On
      October 9, 2006, we entered into a Confidential Final Settlement Agreement
      and
      Mutual Release with American Interbanc Mortgage, LLC (“AI”) in settlement of the
      claims pending against us in the lawsuit filed in the Superior Court of
      California in March 2002. AI had originally filed suit against several of its
      competitors (but not us) who advertised on Bankrate.com alleging false
      advertising under the Lanham Act, common law unfair competition, and violations
      of certain sections of the California Business and Professional Code. AI later
      amended its complaint to include us as a defendant, alleging, in short, that
      we
      conspired with the co-defendants to allow the co-defendants to engage in false
      advertising on Bankrate.com while prohibiting AI to advertise on Bankrate.com.
      AI sought damages of at least $16.5 million, to have those damages tripled,
      and
“reasonable attorneys fees pursuant to 15 U.S.C. Section 1117(b) and California
      Business and Professional Code Section 16750(a),” and costs.





Under
      the
      terms of the Settlement Agreement, we agreed to make a one-time cash payment
      of
      $3.0 million to AI and AI agreed to dismiss the lawsuit with no ability to
      reassert its claims against us. We have also agreed to certain terms and
      conditions that permit AI to advertise on Bankrate.com. We believe that all
      of
      AI’s claims against us were factually and legally without merit and did not
      admit to any wrongdoing as part of the settlement. The $3.0 million cash payment
      is included in the accompanying consolidated statement of income as legal
      settlement.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





None.





**PART
      II**





**Item
      5.**  **Market
      For Registrant’s Common Equity, Related Stockholder**  **Matters**  **and
      Issuer Purchases of Equity Securities**





Our
      common stock is traded on the NASDAQ Global Select Market under the stock symbol
      “RATE”.





The
      prices per share reflected in the table below represent, for the periods
      indicated, the range of highest and lowest closing prices for our common stock
      on the NASDAQ Global Select Market.





HIGH
            
            LOWYear
              ended December 31, 2005First
                quarter
            
            $
            20.16
            
            $
            13.10Second
                quarter
            
            
            20.14
            
            
            12.41Third
                quarter
            
            
            28.56
            
            
            20.17Fourth
                quarter
            
            
            34.01
            
            
            23.95Year
                ended December 31, 2006First
                quarter
            
            $
            43.56
            
            $
            28.91Second
                quarter
            
            
            51.87
            
            
            31.82Third
                quarter
            
            
            38.39
            
            
            26.45Fourth
                quarter
            
            
            41.36
            
            
            25.60





The
      closing sale price of our common stock as reported by the NASDAQ Global Select
      Market on February 28, 2007 was $40.59 per share.





The
      number of shareholders of record of our common stock as of February 28, 2007,
      was 4,801.





We
      have
      never paid cash dividends on our capital stock. We currently intend to retain
      any earnings for use in our business and do not anticipate paying any cash
      dividends in the foreseeable future.


16


**Stock
      Performance Graph**





The
      following graph provides a comparison of the cumulative total stockholder return
      on our Common Stock for the period from December 31, 2001 through December
      31,
      2006, against the cumulative stockholder return during such period achieved
      by
      the NASDAQ Global Select Market Index for U.S. Companies (“Nasdaq Market Index”)
      and the Hemscott Internet Information Providers Index (“Hemscott Group Index”).
      The graph assumes that $100 was invested on December 31, 2001 in our Common
      Stock and in each of the comparison indices, and assumes reinvestment of
      dividends.







December
                  31,
              
              Bankrate,
                  Inc.
              
              NASDAQ
                  Market Index
              
              Hemscott
                  Group Index2001
              
              $
              100
              
              $
              100
              
              $
              1002002
              
              
              592
              
              
              70
              
              
              842003
              
              
              1,905
              
              
              105
              
              
              2332004
              
              
              2,131
              
              
              114
              
              
              3402005
              
              
              4,542
              
              
              116
              
              
              5172006
              
              
              5,838
              
              
              128
              
              
              505




**Item
      6. Selected Financial Data**





The
      selected financial data set forth below should be read in conjunction with
      the
      financial statements and notes thereto, and "Management's Discussion and
      Analysis of Financial Condition and Results of Operations" included elsewhere
      in
      this Form 10-K. The statement of income data for the years ended December 31,
      2006, 2005 and 2004, and the balance sheet data as of December 31, 2006 and
      2005, are derived from, and are qualified by reference to, the financial
      statements of Bankrate, Inc. included elsewhere in this Form 10-K, which
      financial statements have been audited by KPMG LLP, independent registered
      public accounting firm. The audit report is included elsewhere in this Form
      10-K. The statement of income data for years ended December 31, 2003 and 2002,
      and the balance sheet data as of December 31, 2004, 2003 and 2002, have been
      derived from audited financial statements not included in this Form 10-K.
      Historical results are not necessarily indicative of results to be expected
      in
      the future.





17


**Year
                  Ended December 31,****2006**
              
              **2005
                  (A)**
              
              **2004**
              
              **2003**
              
              **2002**Statement
                  of Income Data:(In
                  thousands, except share and per share data)Revenue:Online
                  publishing
              
              $
              63,971
              
              $
              43,296
              
              $
              33,942
              
              $
              31,368
              
              $
              22,651Print
                  publishing and licensing
              
              
              15,679
              
              
              5,753
              
              
              5,262
              
              
              5,253
              
              
              3,920Total
                  revenue
              
              
              79,650
              
              
              49,049
              
              
              39,204
              
              
              36,621
              
              
              26,571Cost
                  of revenue:Online
                  publishing
              
              
              11,101
              
              
              7,389
              
              
              5,535
              
              
              4,514
              
              
              3,813Print
                  publishing and licensing
              
              
              13,846
              
              
              5,346
              
              
              4,359
              
              
              4,044
              
              
              2,862Total
                  cost of revenue
              
              
              24,947
              
              
              12,735
              
              
              9,894
              
              
              8,558
              
              
              6,675Gross
                  margin
              
              
              54,703
              
              
              36,314
              
              
              29,310
              
              
              28,063
              
              
              19,896Operating
                  expenses:Sales
              
              
              5,055
              
              
              3,683
              
              
              4,187
              
              
              5,040
              
              
              4,276Marketing
              
              
              4,836
              
              
              5,923
              
              
              6,357
              
              
              5,496
              
              
              3,477Product
                  development
              
              
              3,621
              
              
              2,457
              
              
              2,406
              
              
              2,271
              
              
              1,422General
                  and administrative
              
              
              21,835
              (B)
              
              9,035
              
              
              6,667
              
              
              5,813
              
              
              5,537Legal
                  settlements
              
              
              3,000
              
              
              -
              
              
              510
              
              
              -
              
              
              -Severance
                  charge
              
              
              -
              
              
              -
              
              
              260
              
              
              -
              
              
              -Depreciation
                  and amortization
              
              
              2,402
              
              
              895
              
              
              743
              
              
              681
              
              
              62240,749
              
              
              21,993
              
              
              21,130
              
              
              19,301
              
              
              15,334Income
                  from operations
              
              
              13,954
              
              
              14,321
              
              
              8,180
              
              
              8,762
              
              
              4,562Other
                  income (expense), net
              
              
              2,961
              
              
              933
              
              
              410
              
              
              243
              
              
              83Gain
                  on insurance proceeds
              
              
              -
              
              
              220
              
              
              -
              
              
              -
              
              
              -Gain
                  on early extinguishment of debt
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,022Income
                  before income taxes
              
              
              16,915
              
              
              15,474
              
              
              8,590
              
              
              9,005
              
              
              6,667Income
                  tax (provision) benefit
              
              
              (6,911
              )
              
              (5,800
              )
              
              4,766
              
              
              3,100
              
              
              -Net
                  income
              
              $
              10,004
              
              $
              9,674
              
              $
              13,356
              
              $
              12,105
              
              $
              6,667Basic
                  and diluted net income per share:Basic
              
              $
              0.58
              
              $
              0.61
              
              $
              0.87
              
              $
              0.84
              
              $
              0.48Diluted
              
              $
              0.56
              
              $
              0.57
              
              $
              0.84
              
              $
              0.79
              
              $
              0.46Weighted
                  average common shares outstanding:Basic
              
              
              17,332,632
              
              
              15,809,259
              
              
              15,438,097
              
              
              14,473,151
              
              
              13,997,168Diluted
              
              
              17,845,754
              
              
              16,922,218
              
              
              15,975,382
              
              
              15,299,734
              
              
              14,609,359




**Year
                  Ended December 31,****2006**
              
              **2005
                  (A)**
              
              **2004**
              
              **2003**
              
              **2002**Balance
                  Sheet Data:(In
                  thousands)Cash
                  and cash equivalents
              
              $
              109,925
              
              $
              3,480
              
              $
              27,735
              
              $
              20,874
              
              $
              11,001Working
                  capital
              
              
              122,157
              
              
              9,809
              
              
              33,628
              
              
              23,898
              
              
              9,369Intangible
                  assets, net
              
              
              14,441
              
              
              11,652
              
              
              -
              
              
              -
              
              
              -Goodwill
              
              
              30,039
              
              
              30,035
              
              
              -
              
              
              -
              
              
              -Total
                  assets
              
              
              176,684
              
              
              62,553
              
              
              46,007
              
              
              28,983
              
              
              15,173Total
                  stockholders' equity
              
              
              170,155
              
              
              52,853
              
              
              42,334
              
              
              24,925
              
              
              10,650
  (A)
          Includes the acquired operations of Wescoco LLC, and Mortgage Market Information
          Services, Inc. and Interest.com as of and for the period from December
          1, 2005
          to December 31, 2005.
  (B)
          Includes $6,363 of stock compensation expence in
          accordance with SFAS No. 123R.


18




**Items
      7.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**





**Introduction**





Management's
      discussion and analysis (“MD&A”) provides supplemental information, which
      sets forth the major factors that have affected our financial condition and
      results of operation and should be read in conjunction with our consolidated
      financial statements and notes thereto included in this Annual Report.  The
      MD&A is divided into subsections entitled "Overview," "Critical Accounting
      Estimates," "Significant Developments," "Results of Operations," "Liquidity
      and
      Capital Resources," and "Recent Accounting Pronouncements."





This
      Annual Report, including this MD&A section, contains “forward-looking
      statements” within the meaning of the Private Securities Litigation Reform Act
      of 1995. These forward-looking statements include, among others, statements
      about our beliefs, plans, objectives, goals, expectations, estimates and
      intentions that are subject to significant risks and uncertainties and are
      subject to change based on various factors, many of which are beyond our
      control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,”
“estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar
      expressions are intended to identify forward-looking statements.





All
      forward-looking statements, by their nature, are subject to risks and
      uncertainties. Our actual future results may differ materially from those set
      forth in our forward-looking statements. Please see the Introductory Note and
      Item 1A Risk Factors of this Annual Report for a discussion of factors that
      could cause our actual results to differ materially from those in the
      forward-looking statements. However, other factors besides those listed in
      Item
      1A Risk Factors or discussed in this Annual Report also could adversely affect
      our results, and you should not consider any such list of factors to be a
      complete set of all potential risks or uncertainties. Any forward-looking
      statements made by us or on our behalf speak only as of the date they are made.
      We do not undertake to update any forward-looking statement, except as required
      by applicable law.





**Overview**





Bankrate,
      Inc. and subsidiaries (the "Company", “Bankrate”, “we”, “us”, or “our”) own and
      operate an Internet-based consumer banking marketplace. Our flagship site,
      Bankrate.com, is one of the web’s leading aggregators of information on more
      than 300 financial products and fees, including mortgages, credit cards, new
      and
      used automobile loans, money market accounts, certificates of deposit, checking
      and ATM fees, home equity loans and online banking fees.  Additionally,
      we provide financial applications and information to a network of online
      distribution partners and
      national, regional and local publications. Through our online network
      which includes Bankrate.com, Interest.com, Mortgage-calc.com and Bankrate *Select* ,
      we
      provide the tools and information that can help consumers make better financial
      decisions.





We
      also
      produce traditional print publications, including the *Mortgage Guide*
      and the *Deposit Guide*, as well as three newsletters. We also
      syndicate our original editorial content.





We
      have a
      high quality, poised-to-transact audience that is ready to do business with
      our
      advertisers. Bankrate.com is one of the top sites for financial information
      and
      advice according to comScore Media Metrix. We sell graphic advertisements and
      hyperlinks on our web site, we publish rates and sell advertisements in
      metropolitan newspapers, and we license our rates and editorial content.





We
      regularly survey approximately 4,800 financial institutions in more than 575
      markets in all 50 states in order to provide the most current objective,
      unbiased information. Hundreds of print and online partner publications depend
      on us as the trusted source for financial rates and information.





We
      believe that the recognition of our research as a leading source of independent,
      objective information on banking and credit products is essential to our
      success. As a result, we have sought to maximize distribution of our research
      to
      gain brand recognition as a research authority. We are seeking to build greater
      brand awareness of our web site and to reach a greater number of online users.
      Bankrate.com had over 53 million unique visitors in 2006, according to Omniture,
      a web analytics tool.




We
      believe our potential market is enormous and is still in the early growth stages
      of consumer awareness of the Internet as a personal finance tool. Financial
      institutions are still in the early stages of adopting the Internet for
      advertising products and customer acquisition. Their online advertising spending
      is still a very small percentage of their overall advertising budgets.




19




The
      key
      drivers of our business are the number of advertisers on our online network,
      the
      number of page views, andthe number of consumers visiting our web sites.
      We added over 60 new graphic advertisers and over 180 new hyperlink advertisers
      in 2006. The number of advertisers has grown from approximately 320 in 2001
      to
      over 390 in 2006. Annual page views have grown from 237 million in 2001 to
      487
      million in 2006.




On
      November 30, 2005, we completed the acquisition of
      Wescoco LLC, a Delaware limited liability company d/b/a FastFind (“FastFind”).
      On December 1, 2005, we completed the acquisition of Mortgage Market Information
      Services, Inc., an Illinois corporation (“MMIS”) and Interest.com, an Illinois
      corporation (“Interest.com”). These two acquisitions affect the comparability of
      our results of operations for the years ended December 31, 2006 and
      2005.




Our
      gross
      margin has averaged 75% from 2002 to 2005. Our gross margin for the year ended
      December 31, 2006 was 69% due to the inclusion of the results of FastFind,
      MMIS
      and Interest.com, which we acquired in the fourth quarter of 2005. We expect
      our
      gross margin to remain at approximately this level for the foreseeable future.
      MMIS contributes to our print publishing business where our margins have
      historically been lower than our online publishing margins. The newspaper rate
      table business has typically generated margins in the 12% to 16% range and
      we
      expect margins for this business to remain within that range for fiscal
      2007.  We
      have
      reduced operating expenses as a percentage of total revenue from 58% in 2002
      to
      51% in 2006.  Operating
      expenses in 2006 includes a legal settlement charge and related fees of
      $3,675,000, and share-based compensation expense of $7,502,000.  Our
      cash
      and cash equivalents have increased approximately $100.2 million since December
      31, 2001 after spending approximately $39.0 million on two acquisitions in
      2005,
      and closing a public offering of our common stock with net proceeds of
      approximately $92.4 million in May 2006.


**Operating
        Expenses as a Percentage of Total Revenue**


2006
              
              2005
              
              2004
              
              2003
              
              2002Total
                  revenue
              
              $
              79,650
              
              $
              49,049
              
              $
              39,204
              
              $
              36,621
              
              $
              26,571Other
                  operating expenses
              
              
              40,749
              
              
              21,993
              
              
              21,130
              
              
              19,301
              
              
              15,334Other
                  operating expenses as a percentage of total revenue
              
              
              51
              %
              
              45
              %
              
              54
              %
              
              53
              %
              
              58
              %




**Critical
      Accounting Estimates**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles in the United States requires management to make
      judgments, estimates and assumptions that affect the reported amounts of assets
      and liabilities, and disclosure of contingent gains and losses at the date
      of
      the financial statements and the reported amounts of revenue and expenses during
      the period. We base our judgments, estimates and assumptions on historical
      experience and various other factors that we believe to be reasonable under
      the
      circumstances. Actual results could differ materially from these estimates
      under
      different assumptions or conditions. We evaluate our judgments, estimates and
      assumptions on a regular basis and make changes accordingly. We believe that
      the
      judgments, estimates and assumptions involved in the accounting for income
      taxes, the allowance for doubtful accounts receivable, stock-based compensation
      and legal contingencies have the greatest potential impact on our financial
      statements, so we consider these to be our critical accounting policies. Below
      we discuss the critical accounting estimates associated with these policies. For
      further information on our critical accounting policies, see the discussion
      in
      the section titled “Results of Operations and Critical Accounting Policies”
below, and Note 2 of our Notes to Consolidated Financial Statements.





***Income
      Taxes***





As
      required by SFAS No. 109, *Accounting for Income Taxes* ,
      we use
      the asset and liability method of accounting for income taxes. Under this
      method, income tax expense is recognized for the amount of taxes payable or
      refundable for the current year. Tax laws are complex and subject to different
      interpretations by the taxpayer and the respective governmental taxing
      authorities. Significant judgment is required in determining our tax expense.
      Deferred tax assets and liabilities are recognized for the expected future
      tax
      consequences of temporary differences between the financial reporting and the
      tax bases of assets and liabilities, and for operating losses and tax credit
      carryforwards. Management must make assumptions, judgments and estimates to
      determine our current provision for income taxes and our deferred tax assets
      and
      liabilities, and any valuation allowance to be recorded against a deferred
      tax
      asset. Our assumptions, judgments and estimates relative to the current
      provision for income taxes take into account current tax laws and our
      interpretation of current tax laws. Although we believe our assumptions,
      judgments and estimates are reasonable, changes in tax laws or our
      interpretation of tax laws could significantly impact the amounts provided
      for
      income taxes in our consolidated financial statements. Our assumptions,
      judgments and estimates relative to the value of deferred tax assets take into
      account predictions of the amount and category of future taxable income. Actual
      operating results and the underlying amount and category of income in future
      years could render our current assumptions, judgments and estimates relative
      to
      the value of recoverable deferred tax assets inaccurate. Any of the assumptions,
      judgments and estimates could cause our actual income tax obligations to differ
      from our estimates and could materially impact our financial position and
      results of operations.




20






***Allowance
      for Doubtful Accounts Receivable***





We
      maintain an allowance for doubtful accounts for estimated losses resulting
      from
      the inability or unwillingness of our customers to make required payments.
      We
      look at historical write-offs and sales growth when determining the adequacy
      of
      the allowance. This estimate is inherently subjective because our estimates
      may
      be revised as more information becomes available. Should the financial condition
      of our customers deteriorate, resulting in an impairment of their ability to
      make payments, or if the level of accounts receivable increases, the need for
      possible additional allowances may be necessary. Any additions to the allowance
      for doubtful accounts are recorded as bad debt expense and included in general
      and administrative expenses. During the years ended December 31, 2006, 2005
      and
      2004, we charged approximately $1,226,000, $200,000 and $555,000, respectively,
      to bad debt expense, and wrote off approximately $702,000, $241,000 and
      $396,000, respectively, of accounts deemed uncollectible.





***Share-Based
      Compensation***





We
      adopted the provisions of, and account for stock-based compensation in
      accordance with, SFAS 123R effective January 1, 2006. We elected the
      modified-prospective method, pursuant to which prior periods are not revised
      for
      comparative purposes. Under the fair value recognition provisions of this
      statement, stock-based compensation is measured at the grant date based on
      the
      fair value of the award and is recognized as expense on a straight-line basis
      over the requisite service period, which is the vesting period.





We
      currently use the Black-Scholes option pricing model to determine the fair
      value
      of our stock options. As discussed in the notes to our consolidated financial
      statements, the determination of the fair value of the awards on the date of
      grant using an option-pricing model is affected by the price of our common
      stock
      as well as assumptions regarding a number of complex and subjective variables.
      These variables include our expected stock price volatility over the term of
      the
      awards, actual and projected employee stock option exercise behaviors, risk-free
      interest rate and expected dividends.




If
      factors change and we employ different assumptions for estimating stock-based
      compensation expense in future periods or if we decide to use a different
      valuation model, the future periods may differ significantly from what we have
      recorded in the current period and could materially affect our operating income,
      net income and net income per share.





The
      Black-Scholes option-pricing model was developed for use in estimating the
      fair
      value of traded options that have no vesting restrictions and are fully
      transferable; characteristics not present in our option grants. Existing
      valuation models, including the Black-Scholes and lattice binomial models,
      may
      not provide reliable measures of the fair values of our stock-based
      compensation. Consequently, there is a risk that our estimates of the fair
      values of our share-based compensation awards on the grant dates may bear little
      resemblance to the actual values realized upon the exercise, expiration, early
      termination or forfeiture of those share-based payments in the future. Certain
      stock-based payments, such as employee stock options, may expire worthless
      or
      otherwise result in zero intrinsic value as compared to the fair values
      originally estimated on the grant date and reported in our financial statements.
      Alternatively, value may be realized from these instruments that are
      significantly higher than the fair values originally estimated on the grant
      date
      and reported in our financial statements. There currently is no market-based
      mechanism or other practical application to verify the reliability and accuracy
      of the estimates stemming from these valuation models, nor is there a means
      to
      compare and adjust the estimates to actual values.




21







***Goodwill
      Impairment***





We
      perform goodwill impairment tests on an annual basis during the fourth quarter
      of our fiscal year, or more frequently, if facts and circumstances warrant
      a
      review. We make judgments about goodwill whenever events or changes in
      circumstances indicate that an impairment in the value of goodwill recorded
      on
      our balance sheet may exist. The timing of an impairment test may result in
      charges to our statement of income in our current reporting period that could
      not have reasonably been foreseen in prior periods. In order to estimate the
      fair value of goodwill, we typically make various assumptions about the future
      prospects the asset relates to, consider market factors and estimate our future
      cash flows. Based on these assumptions and estimates, we determine whether
      we
      need to record an impairment charge to reduce the value of the asset carried
      on
      our balance sheet to its estimated fair value. Assumptions and estimates about
      future values are complex and often subjective. They can be affected by a
      variety of factors, including external factors such as industry and economic
      trends, and internal factors such as changes in our business strategy and our
      internal forecasts. Although we believe the assumptions and estimates we have
      made in the past have been reasonable and appropriate, different assumptions
      and
      estimates could materially affect our reported financial results. More
      conservative assumptions of the anticipated future benefits could result in
      impairment charges, which would decrease net income and result in lower asset
      values on our balance sheet. Conversely, less conservative assumptions could
      result in smaller or no impairment charges, higher net income and higher asset
      values.





**Significant
      Developments**




The
      following significant developments and
      transactions have affected our results of operations and our financial condition
      during the periods covered by the financial statements in Item 8 of this Annual
      Report.




On
        October 9, 2006, we entered into a Confidential Final Settlement Agreement
        and
        Mutual Release with American Interbanc Mortgage, LLC (“AI”) in settlement of the
        claims pending against us in the lawsuit filed in the Superior Court of
        California in March 2002. AI had originally filed suit against several of
        its
        competitors (but not us) who advertised on Bankrate.com alleging false
        advertising under the Lanham Act, common law unfair competition, and violations
        of certain sections of the California Business and Professional Code. AI
        later
        amended its complaint to include us as a defendant, alleging, in short, that
        we
        conspired with the co-defendants to allow the co-defendants to engage in
        false
        advertising on Bankrate.com while prohibiting AI to advertise on Bankrate.com.
        AI sought damages of at least $16.5 million, to have those damages tripled,
        and
“reasonable attorneys fees pursuant to 15 U.S.C. Section 1117(b) and California
        Business and Professional Code Section 16750(a),” and costs.
 
 Under
        the
        terms of the Settlement Agreement, we agreed to make a one-time cash payment
        of
        $3.0 million to AI and AI agreed to dismiss the lawsuit with no ability to
        reassert its claims against us. We have also agreed to certain terms and
        conditions that permit AI to advertise on Bankrate.com. We believe that all
        of
        AI’s claims against us were factually and legally without merit and did not
        admit to any wrongdoing as part of the settlement. The $3.0 million cash
        payment
        is included in the accompanying consolidated statement of income as legal
        settlement.




On
      August 4, 2006, the Company completed the
      acquisition of a group of assets that consists of three web sites
      (Mortgagecalc.com, Mortgagecalc.com and Mortgagemath.com, collectively
“Mortgagecalc.com”) owned and operated by East West Mortgage, Inc. for $4.4
      million in cash. The Company paid $4,350,000 on August 7, 2006, and $50,000
      was
      placed in escrow to satisfy certain indemnification obligations of the seller.
      The acquisition was made using cash on hand. As a result of the acquisition,
      approximately $4,411,000 in intangible
      assetswas
      recorded by the Company, which reflects the adjustments necessary to allocate
      the purchase price to the fair value of the assets acquired. The operations
      of
      these web sites were integrated into the online publishing
      segment.




On
      December 1, 2005, we completed the acquisition of
      Mortgage Market Information Services, Inc., an Illinois corporation, and
      Interest.com, Inc., an Illinois corporation (“Interest.com” and collectively
      with Mortgage Market Information Services, Inc., “MMIS”), for $30 million in
      cash***,***subject
      to final Closing Date Equity adjustments under section 3.03 of the Agreement
      and
      Plan of Merger dated November 20, 2005.******We
      paid
      $26 million on December 8, 2005, $1 million on January 5, 2006, and $3 million
      was placed in escrow to satisfy certain indemnification obligations of MMIS's
      shareholder. The acquisition was made utilizing cash on hand. The acquisition
      was accounted for as a purchase and the results of operations of MMIS are
      included in our consolidated results from the acquisition date. As a result
      of
      the acquisition, approximately $23.3 million in goodwill was recorded, which
      reflects the adjustments necessary to allocate the purchase price to the fair
      value of assets acquired, liabilities assumed and additional purchase
      liabilities recorded.




On
      November 30, 2005, we completed the acquisition of Wescoco LLC, a Delaware
      limited liability company d/b/a “FastFind” (“FastFind”) for $10 million in cash,
      plus a net working capital adjustment of $149,000 in the quarter ended June
      30,
      2006, in accordance with the Agreement and Plan of Merger dated November 20,
      2005.We
      paid
      $7 million in cash to the FastFind members and $3 million was placed in escrow
      to satisfy certain indemnification obligations of the FastFind members. The
      acquisition was made utilizing cash on hand. The acquisition was accounted
      for
      as a purchase and the results of operations of FastFind are included in our
      consolidated results from the acquisition date. As a result of the acquisition,
      approximately $6.7 million in goodwill was recorded, which reflects the
      adjustments necessary to allocate the purchase price to the fair value of assets
      acquired and liabilities assumed.





On
      October 1, 2005, we launched a new pay-for-performance pricing structure for
      our
      interest rate table (hyperlink) advertising business. The new pricing structure
      is a cost-per-click (“CPC”) model whereby advertisers will now pay us each time
      a visitor to our web site clicks on a rate table listing. Prior to this launch,
      advertisers paid a flat monthly fee for their hyperlink. Beginning in the
      quarter ending December 31, 2005, we saw an increase in hyperlink revenue of
      35%
      from the same quarter in 2004.




22




On
      April
      20, 2005, we added 174 new local markets. The expanded research offerings
      increased our market position in terms of the number of local markets covered
      and financial products researched for the benefit of consumers.





On
      April
      1, 2005, we previewed a redesigned web site and added two channels. The new
      web
      site included a new user interface and navigation architecture intended to
      provide a better experience for consumers and advertisers and an enhanced rate
      search process with the ability to sort and compare mortgage lenders and rates.
      The redesigned web site also increased the number of Internet Advertising Bureau
      (IAB) compliant ad formats, which allowed us greater flexibility and opportunity
      of advertisers. In connection with the redesigned web site, we added two new
      channels: a College Finance editorial channel and a Debt Management
      (sub-prime/problem credit). On May 2, 2005, we fully launched the redesigned
      web
      site.







**Results
      of Operations and Critical Accounting Policies**





The
      following is our analysis of the results of operations for the periods covered
      by our financial statements that we believe are critical to an understanding
      of
      our results of operations and to making the estimates and judgments underlying
      our financial statements, including a discussion of the accounting policies
      and
      practices (revenue recognition, allowance for doubtful accounts and valuation
      of
      deferred tax assets) that we believe are critical to an understanding of our
      results of operations and to making the estimates and judgments underlying
      our
      financial statements. This analysis should be read in conjunction with our
      financial statements, including the related notes to the financial statements.
      Other accounting policies are contained in Note 2 to the financial statements
      in
      Item 8. A detailed discussion of our accounting policies and procedures is
      set
      forth in the applicable sections of this analysis.


23


The
      following table displays our results for the respective periods expressed as
      a
      percentage of total revenue.




**Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Statement
                  of Income DataRevenue:Online
                  publishing
              
              
              80
              %
              
              88
              %
              
              87
              %Print
                  publishing and licensing
              
              
              20
              
              
              12
              
              
              13Total
                  revenue
              
              
              100
              
              
              100
              
              
              100Cost
                  of revenue:Online
                  publishing
              
              
              14
              
              
              15
              
              
              14Print
                  publishing and licensing
              
              
              17
              
              
              11
              
              
              11Total
                  cost of revenue
              
              
              31
              
              
              26
              
              
              25Gross
                  margin
              
              
              69
              
              
              74
              
              
              75Operating
                  expenses:Sales
              
              
              6
              
              
              8
              
              
              11Marketing
              
              
              6
              
              
              12
              
              
              16Product
                  development
              
              
              5
              
              
              5
              
              
              6General
                  and administrative
              
              
              27
              
              
              18
              
              
              17Legal
                  settlements
              
              
              4
              
              
              -
              
              
              1Severance
                  charge
              
              
              -
              
              
              -
              
              
              1Depreciation
                  and amortization
              
              
              3
              
              
              2
              
              
              251
              
              
              45
              
              
              54Income
                  from operations
              
              
              18
              
              
              29
              
              
              21Other
                  income (expense), net
              
              
              4
              
              
              2
              
              
              1Gain
                  on insurance proceeds
              
              
              -
              
              
              1
              
              
              -Income
                  before income taxes
              
              
              22
              
              
              32
              
              
              22Income
                  tax (expense) benefit
              
              
              (9
              )
              
              (12
              )
              
              12Net
                  income
              
              
              13
              %
              
              20
              %
              
              34
              %




**Revenue**


**Total
                  Revenue****Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Online
                  publishing
              
              $
              63,970,860
              
              $
              43,296,384
              
              $
              33,942,241Print
                  publishing and licensing
              
              
              15,679,115
              
              
              5,752,647
              
              
              5,262,020$
              79,649,975
              
              $
              49,049,031
              
              $
              39,204,261




***Online
      Publishing Revenue***





We
      sell
      graphic advertisements on our web sites (including co-branded sites) consisting
      of banner, badge, billboard, poster and skyscraper advertisements. These
      advertisements are sold to advertisers according to the cost-per-thousand
      impressions (“CPM”) the advertiser receives. The amount of advertising we sell
      is a function of (1) the number of visitors to our web site, (2) the number
      of
      ad pages we serve to those visitors, (3) the number of advertisements per page,
      and (4) the capacity of our sales force. Advertising sales are invoiced monthly
      at amounts based on specific contract terms. When the number of impressions
      over
      the contract term is guaranteed, the monthly invoiced amount is based on the
      monthly contractual number of impressions to be delivered at the contractual
      price or CPM. Revenue is recognized monthly based on the actual number of
      impressions delivered, and the revenue corresponding to any under-delivery
      is
      deferred as unearned income on the balance sheet and is recognized later when
      the underdelivery is served. When the number of impressions over the contract
      term is not guaranteed, the monthly invoiced amount is determined and revenue
      is
      recognized based on the actual number of impressions delivered at the
      contractual price or CPM. Additionally, we generate revenue on a “per action”
basis (i.e., a purchase or completion of an application) when a visitor to
      our
      web site transacts with one of our advertisers after viewing an advertisement.
      Revenue is recognized monthly based on the number of actions reported by the
      advertiser, subject to our verification. We are also involved in revenue sharing
      arrangements with our online partners where the consumer uses co-branded sites
      hosted by us. Revenue is effectively allocated to each partner based on the
      percentage of advertisement views at each site. The allocated revenue is shared
      according to distribution agreements. Revenue is recorded at gross amounts
      and
      partnership payments are recorded in cost of revenue, pursuant to the provisions
      of Emerging Issues Task Force (“EITF”) 99-19, *Reporting Revenue Gross as a Principal versus Net as an Agent.* We also
      sell hyperlinks (interest rate table listings) to various third-party Internet
      sites on a CPC basis.  Advertisers
      pay us each time a visitor to our web sites clicks on a rate table listing.
      Prior to October 1, 2005, advertisers paid a flat monthly fee for their
      hyperlink. We also sell text links on its rate pages to advertisers on a
      cost-per-click (“CPC”) basis. Advertisers enter an auction bidding process on a
      third-party web site for placement of their text link based on the amount they
      are willing to pay for each click though to their web site. We recognize revenue
      monthly for each text link based on the number of clicks at the CPC contracted
      for during the auction bidding process.




24




Online
      publishing revenue, prior to the first quarter of 2006, included barter revenue,
      which represents the exchange of advertising space on our web site for
      reciprocal advertising space or traffic on other web sites. Barter revenues
      and
      expenses were recorded at the fair market value of the advertisements delivered
      or received, whichever is more determinable in the circumstances. We followed
      the accounting literature provided by EITF 99-17, *Accounting for Advertising Barter Transactions* .
      In
      accordance with EITF 99-17, barter transactions were valued based on similar
      cash transactions which occurred within six months prior to the date of the
      barter transaction. Revenue from barter transactions was recognized as income
      when advertisements were delivered on our web site. Barter expense was
      recognized when our advertisements ran on the other companies’ web sites, which
      was typically in the same period barter revenue was recognized.  If
      the
      advertising impressions were received from the customer prior to our delivering
      the advertising impressions, a liability was recorded. If we delivered
      advertising impressions to the other companies' web sites prior to receiving
      the
      advertising impressions, a prepaid expense was recorded. No prepaid expense
      or
      liability was recorded at December 31, 2005. Barter revenue was approximately
      $2,254,000 and $3,088,000, and represented approximately 5% and 8% of total
      revenue, respectively, for the years ended December 31, 2005 and 2004. Barter
      revenue was intentionally eliminated as of January 1, 2006, as we focused more
      on monetizing our available views through paid advertising.


**Online
                  Publishing Revenue****Year
                  Ended December 31,****2006**
              
              
              
              **2005**
              
              
              
              **2004****YTY**
              
              
              
              **YTY****Change**
              
              
              
              **Change**Graphic
                  ads
              
              $
              37,256,169
              
              
              48%
              
              $
              25,177,728
              
              
              54%
              
              $
              16,368,024Hyperlinks
              
              
              26,714,691
              
              
              68%
              
              
              15,864,968
              
              
              10%
              
              
              14,486,226Barter
              
              
              -
              
              
              -
              
              
              2,253,688
              
              
              -27%
              
              
              3,087,991$
              63,970,860
              
              
              48%
              
              $
              43,296,384
              
              
              28%
              
              $
              33,942,241




Online
      publishing revenue was $63,971,000, $43,296,000 and $33,942,000 in 2006, 2005
      and 2004, respectively, representing annual growth rates of 48% and 28% for
      2006
      and 2005, respectively. Excluding barter revenue, online publishing revenue
      was
      $63,971,000, $41,043,000 and $30,854,000 in 2006, 2005 and 2004, respectively,
      representing annual growth rates of 56% and 33% for 2006 and 2005, respectively.





Graphic
      ad revenue for the year ended December 31, 2006 of $37,256,000 was $12,078,000,
      or 48%, higher than the $25,178,000 reported in the same period of 2005. Page
      views were 487.4 million, up 57.2 million, or 13%, from the 430.2 million
      reported in the same period in 2005. Approximately $6,268,000 of the increase
      in
      graphic ad revenue was due to the revenue from FastFind and Interest.com, both
      of which were acquired in the fourth quarter of 2005, and Mortgage-calc.com,
      acquired in August 2006. While CPMs and our sell-through rate were relatively
      flat in 2006 compared to 2005, we sold 415.1 million, or 28%, more
      advertisements in 2006. During 2006, graphic advertisements were purchased
      by an
      average of 51 monthly graphic advertisers compared to 48 in 2005.





Graphic
      ad revenue was $8,810,000, or 54%, higher in 2005 due to higher CPM’s and an
      increase in page views of 37.1 million, or 9%, compared to 2004. We also sold
      48.3 million, or 3%, more ads during 2005 compared to 2004. During 2005, graphic
      advertisements were purchased by an average of 48 monthly graphic advertisers
      compared to 73 in 2004.





Hyperlink
      revenue was up $ 10,850,000, or 68%, in the year ended December 31, 2006
      compared to 2005. Approximately $2,000,000 of this increase was due to revenue
      from Interest.com which was acquired in the fourth quarter of 2005. We primarily
      benefited from favorable product pricing as the number of hyperlink advertisers
      remained relatively constant between the periods.





Hyperlink
      revenue was $1,379,000, or 10%, higher in 2005 than in 2004 due to higher
      pricing during the first nine months 2005 and a conversion to a new
      pay-for-performance pricing structure during the last three months of 2005
      even
      though the average number of monthly advertisers dropped by approximately 130
      during 2005. During 2005, there were approximately 355 advertisers on average
      each month compared to 485 during 2004.





A
      majority of our advertising customers purchase advertising under short-term
      contracts. Customers have the ability to stop, and have on occasion stopped,
      advertising on relatively short notice. Online publishing revenue would be
      adversely impacted if we experienced contract terminations, or if we were not
      able to renew contracts with existing customers or obtain new customers. The
      market for Internet advertising is intensely competitive and has, in the past,
      experienced significant downturns in demand that could impact advertising rates.
      Future revenue could be adversely affected if we were forced to reduce our
      advertising rates or if we were to experience lower CPM’s.





25




Historically,
      in terms of page views, we have typically experienced a slowdown in traffic
      during our fourth quarter. During 2002, certain traffic initiatives and expanded
      commitments from our distribution partners, as well as the activity in mortgage
      lending caused increases in traffic inconsistent with our historical trends
      that
      continued through the third quarter of 2004. As brand awareness continues to
      strengthen for Bankrate.com, we believe our quarterly page views will become
      more consistent with a possible decline in the fourth quarter due to the holiday
      season.


**Page
                  Views****(Millions)****2006**
              
              **2005**
              
              **2004**
              
              **2003**
              
              **2002****Q1**
              
              
              124.2
              
              
              111.0
              
              
              117.2
              
              
              106.7
              
              
              58.4**Q2**
              
              
              116.0
              
              
              113.8
              
              
              92.6
              
              
              121.8
              
              
              48.0**Q3**
              
              
              126.6
              
              
              107.8
              
              
              92.0
              
              
              100.3
              
              
              82.1**Q4**
              
              
              120.6
              
              
              97.6
              
              
              91.3
              
              
              75.8
              
              
              79.3**Year**
              
              
              487.4
              
              
              430.2
              
              
              393.1
              
              
              404.6
              
              
              267.8




***Print
      Publishing and Licensing Revenue***





Print
      publishing and licensing revenue represents advertising revenue from the sale
      of
      advertising in the *Mortgage
      and Deposit*  *Guides* (formerly called *Consumer
      Mortgage Guide* ) rate
      tables, newsletter subscriptions, and licensing of research information. We
      charge a commission for placement of the *Mortgage
      and Deposit Guide* in a
      print publication. Advertising revenue and commission income is recognized
      when
      the *Mortgage
      and Deposit Guides* runs
      in
      the publication. Revenue from our newsletters is recognized ratably over the
      period of the subscription, which is generally up to one year. Revenue from
      the
      sale of research information is recognized ratably over the contract period.





We
      also
      earn fees from distributing editorial rate tables that are published in
      newspapers and magazines across the United States, from paid subscriptions
      to
      three newsletters, and from providing rate surveys to institutions and
      government agencies. In addition, we license research data under agreements
      that
      permit the use of rate information we develop to advertise the licensee’s
      products in print, radio, television and web site promotions. Revenue for these
      products is recognized ratably over the contract/subscription
      periods.




**Print
                  Publishing & Licensing Revenue****Year
                  Ended December 31,****2006**
              
              
              
              **2005**
              
              
              
              **2004****YTY**
              
              
              
              **YTY****Change**
              
              
              
              **Change**Mortgage
                  and Deposit Guide
              
              $
              14,713,245
              
              
              201%
              
              $
              4,882,574
              
              
              11%
              
              $
              4,405,629Editorial
              
              
              965,870
              
              
              11%
              
              
              870,073
              
              
              2%
              
              
              856,391$
              15,679,115
              
              
              173%
              
              $
              5,752,647
              
              
              9%
              
              $
              5,262,020





Print
      publishing and licensing revenue for the year ended December 31, 2006 was up
      $9,926,000, or 173%, compared to the comparable period in 2005 primarily due
      to
      an increase in *Mortgage 
      and Deposit Guide* revenue
      related to the contracts acquired in the MMIS acquisition in the fourth quarter
      of 2005. Editorial sales were up $96,000, or 11%, due to the third quarter
      2006
      launch of our first editorial free-standing insert in *USA
      Today* which
      contributed approximately $200,000 to revenue.





Print
      publishing and licensing revenue for the year ended December 31, 2005 increased
      $477,000, or 11%, from 2004. We ended 2005 with 163 *Mortgage
      and Deposit Guide* contracts, an increase of 135 from 2004, 107 of the contracts were the direct
      result of the acquisition of MMIS. Editorial sales were up 2% over 2004
      reflecting the newspapers continuing efforts to cut costs and reduce their
      editorial advertising content spending.





**Cost
      of Revenue**





***Online
      Publishing Costs***





Online
      publishing costs represent expenses directly associated with the creation of
      online publishing revenue. These costs include contractual revenue sharing
      obligations resulting from our distribution arrangements (distribution
      payments), editorial costs, market analysis and research costs, and allocated
      overhead. Distribution payments are made to web site operators for visitors
      directed to our online network; these costs increase proportionately with gains
      in traffic to our online network. Editorial costs relate to writers and editors
      who create original content for our online publications and associates who
      build
      web pages; these costs have increased as we have added online publications
      and
      co-branded versions of Bankrate.com under distribution arrangements. These
      sites
      must be maintained on a daily basis. Research costs include expenses related
      to
      gathering data on banking and credit products and consist primarily of
      compensation and benefits and allocated overhead.





26


**Online
        Publishing Gross Margin**


**2006**
              
              **2005**
              
              **2004**Online
                  publishing revenue
              
              $
              63,970,860
              
              $
              43,296,384
              
              $
              33,942,241Cost
                  of online publishing revenue
              
              
              11,101,425
              
              
              7,389,089
              
              
              5,534,456Gross
                  margin
              
              $
              52,869,435
              
              $
              35,907,295
              
              $
              28,407,785Gross
                  margin as a percentage of revenue
              
              
              83
              %
              
              83
              %
              
              84
              %





Online
      publishing costs for the year ended December 31, 2006 were $3,712,000, or 50%,
      higher than the same period in 2005.  The
      increase is due primarily to share-based compensation expense in 2006 of
      $1,077,000; higher human resource costs of $290,000; higher revenue sharing
      payments of $840,000; higher freelance writer’s expense of $75,000; and
      approximately $1,449 ,000
      of
      costs associated with the acquisitions in the fourth quarter of
      2005.





Online
      publishing costs for the year ended December 31, 2005 increased $1,855,000,
      or
      34%, over 2004. The increase in direct costs was due primarily to higher revenue
      sharing payments ($988,000, or 43%) to our distribution partners reflecting
      higher associated revenue and traffic; and higher human resource costs
      ($637,000, or 48%) due to the addition of seven full-time equivalent employees
      during 2005 and merit increases.





***Print
      Publishing and Licensing Costs***





Print
      publishing and licensing ** costs
      represent expenses associated with print publishing revenue. These costs include
      contractual revenue sharing obligations with newspapers related to the *Mortgage
      Guide* ,
      compensation and benefits, printing and allocated overhead. These costs
      typically vary proportionately with the related revenues.


**Print
                  Publishing & Licensing Gross Margin****Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Print
                  publishing & licensing revenue
              
              $
              15,679,115
              
              $
              5,752,647
              
              $
              5,262,020Cost
                  of print publishing & licensing revenue
              
              
              13,845,594
              
              
              5,346,017
              
              
              4,359,444Gross
                  margin
              
              $
              1,833,521
              
              $
              406,630
              
              $
              902,57612
              %
              
              7
              %
              
              17
              %




For
      the
      year ended December 31, 2006, print publishing and licensing costs increased
      $8,500,000, or 159%, from the same period in 2005 due to the acquisition of
      the
      newspaper rate table business of MMIS in the fourth quarter of 2005. Revenue
      sharing payments in 2006 were up $897,000, or 27% over the comparable period
      in
      2005, and we incurred $177,000 in advertising and printing costs related to
      the
      third quarter 2006 launch of our first editorial free-standing insert in *USA
      Today* .





Print
      publishing and licensing costs increased $987,000, or 23%, in 2005 due primarily
      to revenue sharing payments which were $578,000, or 16%, higher in 2005.





**Operating
      Expenses**





***Sales***





Sales
      costs represent direct selling expenses, principally for online advertising,
      and
      include compensation and benefits, sales commissions, and allocated overhead.





Sales
      costs for the year ended December 31, 2006 were $1,372,000, or 37%, higher
      than
      the same period in 2005. The increase is due primarily to share-based
      compensation expense of $662,000; higher human resource costs of $344,000;
      higher training and travel costs of $172,000; and higher commission expense
      of
      $119,000.




27




Sales
      costs for the year ended December 31, 2005 decreased $503,000, or 12%, from
      2004
      due to $258,000, or 19%, as a result of lower sales commissions following our
      restructuring of the online sales compensation plans and $185,000, or 9%, as
      a
      result of lower human resource costs due to the restructuring of the advertising
      sales team.





***Marketing***





Marketing
      costs represent expenses associated with expanding brand awareness of our
      products and services to consumers and include key word (pay-per-performance)
      campaigns on Internet search engines, print and Internet advertising, marketing
      and promotion costs.  Prior
      to
      January 1, 2006, marketing costs also included barter expense, which represented
      the cost of our advertisements that were run on other companies’ web sites in
      our barter transactions. Barter expense was $2,254,000 and $3,088,000 for the
      years ended December 31, 2005 and 2004, respectively.  Excluding
      barter expense, marketing expenses would have been $3,669,000 and $3,269,000
      for
      the years ended December 31, 2005 and 2004, respectively. Excluding barter
      expense, marketing costs for the periods presented increased as traffic
      acquisition continues to become more competitive. We believe that we will
      continue to spend at comparable levels in the foreseeable future to maintain
      traffic levels.


**Marketing
                  Expenses****Year
                  Ended December 31,****2006**
              
              
              
              **2005**
              
              
              
              **2004****YTY**
              
              
              
              **YTY****Change**
              
              
              
              **Change**Marketing
                  expenses
              
              $
              4,835,941
              
              
              32%
              
              $
              3,669,276
              
              
              12%
              
              $
              3,269,433Barter
              
              
              -
              
              
              -100%
              
              
              2,253,688
              
              
              -27%
              
              
              3,087,991$
              4,835,941
              
              
              -18%
              
              $
              5,922,964
              
              
              -7%
              
              $
              6,357,424





***Product
      Development***





Product
      development costs represent compensation and benefits related to site
      development, network systems and telecommunications infrastructure support,
      programming, new product design and development, and other technology costs.
      Product development costs for the year ended December 31, 2006 were $1,164,000,
      or 47%, higher than the same period in 2005, due primarily to share-based
      compensation expense of $474,000; $593,000 higher human resource and contract
      labor costs supporting growth of our business; and $98,000 higher
      hardwar e /software-related
      infrastructure support costs. Product development expense for 2005 were $51,000,
      or 2%, higher than 2004.





***General
      and Administrative***





General
      and administrative expenses represent compensation and benefits for executive,
      finance and administrative personnel, professional fees, non-allocated overhead
      and other general corporate expenses. General and administrative expenses for
      the year ended December 31, 2006 increased $12,800,000, or 142%, over the
      comparable period in 2005. This increase is primarily due to $6,363,000 in
      share-based compensation expense; approximately $2, 298 ,000
      related to general and administrative costs for FastFind, MMIS and Interest.com
      acquired in the fourth quarter of 2005; $1,640,000 higher legal and accounting
      fees; $8 37 ,000
      higher human resource costs; $847,000 higher bad debt expense; $403,000 higher
      rent; and $199,000 higher travel expenses.





For
      the
      year ended December 31, 2005, general and administrative expenses were
      $2,368,000, or 36%, higher than the same period in 2004 due primarily to the
      following: $809,000 higher consulting and outside professional service fees,
      $105,000 higher rent costs and $1,704,000 higher incentive plan accruals based
      on measurements to plan.





We
      maintain an allowance for doubtful accounts for estimated losses resulting
      from
      the inability or unwillingness of our customers to make required payments.
      We
      look at historical write-offs and sales growth when determining the adequacy
      of
      the allowance. As of December 31, 2006, our allowance increased as the customer
      base associated with the acquisitions made during 2005 are different than our
      traditional customers. Should the financial condition of our customers
      deteriorate, resulting in an impairment of their ability to make payments,
      or if
      the level of accounts receivable increases, the need for possible additional
      allowances may be necessary. Any additions to the allowance for doubtful
      accounts are recorded as bad debt expense and included in general and
      administrative expenses.





***Severance
      and Legal Settlement Charges***





On
      August
      10, 2004, we entered into a Separation and General Release Agreement (the
“Agreement”) with our former President and CEO (“former CEO”) pursuant to the
      terms of an Executive Employment Agreement dated April 27, 2002 (the “Executive
      Employment Agreement”). The Agreement provided, among other things, that the
      former CEO (i) resign as a director of the Company as of August 10, 2004; (ii)
      release and forever discharge the Company from any and all claims the former
      CEO
      had or may have against the Company; (iii) the former CEO’s last day as an
      employee of the Company was extended until October 21, 2004; (iv) on August
      19,
      2004, the Company paid the former CEO $125,000, subject to standard withholdings
      and deductions for the payment of certain of the former CEO’s legal fees; (v) on
      August 19, 2004, the Company paid $54,207, subject to standard withholdings,
      for
      accrued vacation pay; (vi) on August 19, 2004, the Company paid $10,000 to
      a
      third party for outplacement and transitional counseling services; (vii) on
      August 19, 2004, the Company paid for the former CEO’s unpaid and reasonably
      approved business expenses; (viii) the Company will provide the former CEO
      with
      certain health insurance benefits through June 21, 2005 in accordance with
      the
      terms of the Executive Employment Agreement, and (ix) on October 21, 2004,
      the
      Company paid the former CEO $125,000, subject to standard withholdings. The
      Company recorded $260,000 as a severance charge in the quarter ended June 30,
      2004.




28




In
      July
      2000, we sold our former wholly owned subsidiary, Pivot, for $4,350,000 in
      cash.
      In connection with the sale, we agreed to indemnify the buyer for liability
      of
      up to $1,000,000 in connection with a litigation matter between Pivot and its
      co-founders and former owner. In March 2001, the case was dismissed based on
      a
      technical deficiency. In August 2001, the plaintiff re-filed the complaint.
      On
      October 8, 2004, we were notified that the buyer settled the litigation matter,
      effective October 1, 2004, and we reimbursed the buyer $390,000 under the
      indemnity. The $390,000 was recorded in the quarter ended September 30, 2004
      as
      a legal settlement charge.





In
      February 2005, we settled a contractual dispute with a former Internet and
      co-location facility provider for $120,000. This amount is included in legal
      settlements in the accompanying statement of operations for the year ended
      December 31, 2004.





On
      October 9, 2006, we entered into a Confidential Final Settlement Agreement
      and
      Mutual Release (the “Agreement”) with American Interbanc Mortgage, LLC ("AI") in
      settlement of the claims pending against us in the lawsuit filed in the Superior
      Court of California in March 2002. AI had originally filed suit against several
      of its competitors (but not us) who advertised on the web site alleging false
      advertising under the Lanham Act, common law unfair competition, and violations
      of certain sections of the California Business and Professional Code. AI later
      amended its complaint to include us as a defendant, alleging, in short, that
      we
      conspired with the co-defendants to allow the co-defendants to engage in false
      advertising on the web site while prohibiting AI to advertise on the web site.
      AI sought damages of no less than $16.5 million, to have those damages trebled,
      and “reasonable attorney’s fees pursuant to 15 U.S.C. Section 1117(b) and
      California Business and Professions Code Section 16750(a),” and
      costs.





Under
      the
      terms of the Agreement, we agreed to make a one-time cash payment of $3.0
      million to AI and AI agreed to dismiss the lawsuit with no ability to reassert
      its claims against us. We agreed to certain terms and conditions that permit
      AI
      to advertise on Bankrate.com. We believe that all of AI’s claims against us were
      factually and legally without merit and did not admit to any wrongdoing as
      part
      of the settlement. The $3.0 million cash payment is included in the accompanying
      consolidated statement of income as legal settlement.




***Depreciation
      and Amortization***





Depreciation
      and amortization represents the cost of capital asset acquisitions spread over
      their expected useful lives. These expenses are spread over three to seven
      years
      and are calculated on a straight-line basis.  Depreciation
      and amortization also includes the amortization of intangible
      assets,  consisting
      primarily of trademarks and URLs, software licenses, customer relationships,
      developed technologies and non-compete agreements. Intangible assets are being
      amortized over their estimated useful lives ranging from 2 years to 20 years,
      on
      a straight-line basis.





Depreciation
      and amortization increased $1,506,000, or 168%, for the year ended December
      31,
      2006 compared to the same period in 2005. Intangibles amortization accounted
      for
      $1,413,000 of the increase since 2006 included a full year of amortization
      related to the fourth quarter 2005 acquisitions, and included $93,000 related
      to
      the August 2006 Mortgage-calc.com asset acquisition. Depreciation expense was
      $94,000 higher in 2006 due to infrastructure and facilities-related assets
      acquired during 2006.





During
      2005, we purchased approximately $244,000 of depreciable assets and depreciation
      and amortization increased $153,000, or 21%, over 2004, of which, $122,000
      related to the amortization expense incurred from the fourth quarter
      acquisitions.




***Other
      Income***





Other
      income consists primarily of interest income on invested cash and cash
      equivalents and a gain from insurance proceeds. Other income for the year ended
      December 31, 2006 was $1,808,000 higher than the same period in 2005 due to
      the
      interest earned on the $92.4 million in net proceeds received in May 2006 from
      our secondary offering of common stock.





Other
      income for the year ended December 31, 2005 was $743,000, or 181%, higher than
      the comparable amount in 2004, due to higher cash balances and a gain on
      insurance proceeds.




29




***Income
      Taxes***





The
      change in our effective tax rate in year ended December 31, 2006 compared to
      2005 was primarily due to the net effect of the adoption of SFAS 123R as of
      January 1, 2006, given that we generally grant incentive stock options for
      which
      a benefit is not realized until there is a disqualifing disposition, and
      expansion of our operations into certain higher state tax
      jurisdictions.


**Year
                  Ended****December
                  31,****2006**
              
              **Change**
              
              **2005**Provision
                  for income taxes
              
              $
              6,911,383
              
              
              19%
              
              $
              5,800,153Effective
                  tax rate
              
              
              41
              %
              
              -
              
              
              37
              %




As
      required by Statement of Financial Accounting Standards (“SFAS”) No. 109, we
      recognize tax assets on the balance sheet if it is more likely than not that
      they will be realized on future tax returns. Up to the third quarter of 2003,
      we
      had provided a full valuation allowance against accumulated deferred tax assets,
      reflecting the uncertainty associated with our future profitability. In the
      fourth quarter of 2003, we reassessed the valuation allowance previously
      established against deferred tax assets. Factors considered included: historical
      results of operations, volatility of the economic and interest rate environment
      and projected earnings based on current operations. Based on this evidence,
      we
      concluded that it was more likely than not that a portion of the deferred tax
      assets would be realized and, accordingly, released $3,400,000 of the valuation
      allowance, which resulted in an income tax benefit of approximately
      $3,100,000.





During
      the quarters ended March 31, June 30, and Sept 30, 2004, we continued to
      evaluate the need for a valuation allowance against the deferred tax asset.
      We
      completed our business planning process during the fourth quarter of 2004,
      which
      included the following strategic initiatives for 2005: the enhancement of its
      quality control process and procedures; the re-design of its web site; the
      execution of exclusive advertising contracts with two mortgage lead aggregators;
      broadening the breadth and depth of its products and services; a reorganization
      of its advertising sales force; and the migration to a cost-per-click revenue
      model on its rate tables. Considering these strategic initiatives and their
      impact on future earnings potential, we concluded that it was more likely than
      not that we would generate sufficient taxable income in future periods to
      realize the entire deferred tax asset. At December 31, 2004, we reversed the
      remaining $9,400,000 valuation allowance resulting in an income tax benefit
      of
      $4,800,000 and a net deferred tax asset of $11,400,000. If we determine that
      we
      will not be able to realize all or a portion of the deferred tax asset in the
      future, an adjustment to the deferred tax asset will be charged against earnings
      in the period such determination is made. Approximately $1,200,000 million
      of
      the valuation allowance was attributable to the tax benefit of stock options
      exercised in a prior year. The income tax benefit relating to stock option
      exercised during 2004 was approximately $2,000,000, for a total 2004 benefit
      of
      approximately $3,200,000 which was allocated to stockholders’
equity.





At
      December 31, 2006, we had fully utilized our net operating loss carryforwards
      for federal income tax purposes.





***Goodwill
      and Other Intangibles***





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No.
      142, *Goodwill and Other Intangible Assets* ,
      we
      reviews our goodwill for impairment annually, or more frequently, if facts
      and
      circumstances warrant a review, at the reporting unit level. We have determined
      that it has two reporting units, online publishing and print publishing and
      licensing, under SFAS No. 142, as these are the components of the business
      for
      which discrete financial information is available and for which segment
      management regularly reviews the operating results. The provisions of SFAS
      No.
      142 require that a two-step test be performed to assess goodwill for impairment.
      First, the fair value of the reporting unit is compared to its carrying value.
      If the fair value exceeds the carrying value, goodwill is not impaired and
      no
      further testing is performed. The second step is performed if the carrying
      value
      exceeds the fair value. The implied fair value of the reporting unit’s goodwill
      must be determined and compared to the carrying value of the goodwill. If the
      carrying value of a reporting unit’s goodwill exceeds its implied value, an
      impairment loss equal to the difference will be recorded. In determining the
      fair value of our reporting units, we relied on the Income Approach and the
      Market Approach. Under the Income Approach, the fair value of a business unit
      is
      based on the cash flows it can be expected to generate over its remaining life.
      The estimated cash flows are converted to their present value equivalent using
      an appropriate rate of return. The Market Approach utilizes a market comparable
      method whereby similar publicly traded companies are valued using Market Values
      of Invested Capital (“MVIC”) multiples (i.e., MVIC to revenue, MVIC to earnings
      before interest and taxes, MVIC to cash flow, etc.) and then these MVIC
      multiples are applied to a companies operating results to arrive at an estimate
      of value.





We
      completed our annual goodwill impairment test during the fourth quarter of
      2006
      and determined that the carrying amount of goodwill was not impaired, nor did
      we
      recognize any goodwill impairment charges in 2005 and 2004.





SFAS
      No.
      142 also requires that intangible assets with definite lives be amortized over
      their estimated useful life and reviewed for impairment in accordance with
      SFAS
      No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets* .
      We
      continually monitor events and changes in circumstances that could indicate
      carrying amounts of its intangible assets may not be recoverable. When such
      events or changes in circumstances occur, we assess the recoverability of
      intangible assets by determining whether the carrying value of such assets
      will
      be recovered through the undiscounted expected future cash flows. If the future
      undiscounted cash flows are less than the carrying amount of the intangible
      assets, we recognize an impairment loss based on the excess of the carrying
      amount over the fair value of the assets. We did not recognize intangible asset
      impairment charges in 2006, 2005 or 2004.





30




***Related
      Party Transactions***





We
      leased
      office space in North Palm Beach, Florida from Bombay Holdings, Inc., which
      is
      wholly-owned by Peter C. Morse, a director and 26% stockholder. Total rent
      paid
      to Bombay for the year ended December 31, 2004 was approximately $244,000.
      That
      lease was terminated effective December 31, 2004.





During
      2004, we paid an outside director consulting fees of approximately $17,000.
      There were no such fees in 2006 and 2005 as the consulting arrangement was
      terminated in 2004.





**Quarterly
      Results of Operations**





The
      following table presents certain unaudited quarterly statement of income data
      for each of the last 8 quarters through the year ended December 31, 2006. The
      information has been derived from our unaudited condensed consolidated financial
      statements. In the opinion of our management, the unaudited condensed
      consolidated financial statements have been prepared on a basis consistent
      with
      the financial statements which appear elsewhere in this Form 10-K and include
      all adjustments, consisting only of normal recurring adjustments, necessary
      for
      a fair statement of the financial position and results of operations for such
      unaudited periods. Historical results are not necessarily indicative of results
      to be expected in the future.


Year
                  Ended December 31, 2006(A)
              
              (B)
              
              Year
                  Ended December 31, 2005(In
                  thousands, except share and per share data)Revenue:
              
              December
                31
              
              September
                  30
              
              June
                  30
              
              March
                  31
              
              December
                31
              
              September
                  30
              
              June
                  30
              
              March
                  31Online
                  publishing
              
              $
              17,113
              
              $
              15,777
              
              $
              15,465
              
              $
              15,616
              
              $
              11,611
              
              $
              11,214
              
              $
              11,204
              
              $
              9,267Print
                  publishing and licensing
              
              
              3,596
              
              
              3,709
              
              
              4,201
              
              
              4,172
              
              
              2,279
              
              
              1,158
              
              
              1,161
              
              
              1,155Total
                  revenue
              
              
              20,709
              
              
              19,486
              
              
              19,666
              
              
              19,788
              
              
              13,890
              
              
              12,372
              
              
              12,365
              
              
              10,422Cost
                  of revenue:Online
                  publishing
              
              
              2,745
              
              
              2,649
              
              
              2,807
              
              
              2,900
              
              
              2,024
              
              
              1,902
              
              
              1,823
              
              
              1,640Print
                  publishing and licensing
              
              
              3,172
              
              
              3,358
              
              
              3,773
              
              
              3,542
              
              
              2,051
              
              
              1,117
              
              
              1,075
              
              
              1,103Total
                  cost of revenue
              
              
              5,917
              
              
              6,007
              
              
              6,580
              
              
              6,442
              
              
              4,075
              
              
              3,019
              
              
              2,898
              
              
              2,743Gross
                  margin
              
              
              14,792
              
              
              13,479
              
              
              13,086
              
              
              13,346
              
              
              9,815
              
              
              9,353
              
              
              9,467
              
              
              7,679Operating
                  expenses:Sales
              
              
              1,326
              
              
              1,392
              
              
              1,248
              
              
              1,088
              
              
              926
              
              
              944
              
              
              971
              
              
              842Marketing
              
              
              1,398
              
              
              1,397
              
              
              1,189
              
              
              851
              
              
              1,313
              
              
              1,377
              
              
              1,713
              
              
              1,520Product
                  development
              
              
              855
              
              
              937
              
              
              805
              
              
              1,025
              
              
              745
              
              
              697
              
              
              511
              
              
              504General
                  and administrative
              
              
              5,100
              
              
              5,300
              
              
              5,897
              
              
              5,538
              
              
              2,738
              
              
              2,161
              
              
              2,222
              
              
              1,914Legal
                  settlements
              
              
              -
              
              
              3,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Depreciation
                  and amortization
              
              
              648
              
              
              632
              
              
              564
              
              
              558
              
              
              317
              
              
              181
              
              
              208
              
              
              1899,327
              
              
              12,658
              
              
              9,703
              
              
              9,060
              
              
              6,039
              
              
              5,360
              
              
              5,625
              
              
              4,969Income
                  from operations
              
              
              5,465
              
              
              821
              
              
              3,383
              
              
              4,286
              
              
              3,776
              
              
              3,993
              
              
              3,842
              
              
              2,710Other
                  income, net
              
              
              1,240
              
              
              1,075
              
              
              625
              
              
              20
              
              
              277
              
              
              302
              
              
              212
              
              
              362Income
                  before income taxes
              
              
              6,705
              
              
              1,896
              
              
              4,008
              
              
              4,306
              
              
              4,053
              
              
              4,295
              
              
              4,054
              
              
              3,072Income
                  tax expense
              
              
              (2,809
              )
              
              (656
              )
              
              (1,482
              )
              
              (1,964
              )
              
              (1,461
              )
              
              (1,632
              )
              
              (1,540
              )
              
              (1,167
              )Net
                  income
              
              $
              3,896
              
              $
              1,240
              
              $
              2,526
              
              $
              2,342
              
              $
              2,592
              
              $
              2,663
              
              $
              2,514
              
              $
              1,905Basic
                  and diluted net income per share:Net
                  income-Basic
              
              $
              0.21
              
              $
              0.07
              
              $
              0.15
              
              $
              0.15
              
              $
              0.16
              
              $
              0.17
              
              $
              0.16
              
              $
              0.12Diluted
              
              
              0.21
              
              
              0.07
              
              
              0.14
              
              
              0.14
              
              
              0.15
              
              
              0.16
              
              
              0.15
              
              
              0.12Weighted
                  average common shares outstanding:Basic
              
              
              18,170,816
              
              
              18,112,909
              
              
              17,138,053
              
              
              15,874,946
              
              
              15,829,601
              
              
              15,815,057
              
              
              15,804,045
              
              
              15,787,264Diluted
              
              
              18,498,656
              
              
              18,238,675
              
              
              17,876,380
              
              
              16,771,044
              
              
              17,262,632
              
              
              17,109,385
              
              
              16,590,763
              
              
              16,561,802
 (A)
          Includes stock compensation expense of $1,778 in the first quarter; $3,185
          in
          the second quarter; $1,743 in the third quarter; and $2,018 in the fourth
          quarter.
  (B)
          Includes the acquired operations of Wescoco LLC and Mortgage Market Information
          Services, Inc. and Interest.com as of and
          for
          the period from December 1, to December 31, 2005.
  31


**Liquidity
      and Capital Resources**




**December
                  31,**
              
              **December
                  31,****2006**
              
              **2005**
              
              **Change**Cash
                  and cash equivalents
              
              $
              109,925,360
              
              $
              3,479,609
              
              $
              106,445,751Working
                  capital
              
              
              122,156,776
              
              
              9,809,238
              
              
              112,347,538Stockholders'
                  equity
              
              
              170,154,519
              
              
              52,852,952
              
              
              117,301,567


Our
      principal source of liquidity is the cash generated by our product revenue.
      Another source of cash is the proceeds from the exercise of director and
      employee stock options.





In
      May
      2006, we closed a public offering of 2,697,776 shares of our common stock,
      of
      which 2,005,991 shares were sold by the Company and 691,785 shares were sold
      by
      certain of our existing stockholders, at a price of $48.25 per share resulting
      in net proceeds to us of approximately $92.4 million.


We
        assess
        acquisition opportunities as they arise. Financing in excess of the $92.4
        million proceeds from our May 2006 offering may be required if we decide
        to make
        additional acquisitions. There can be no assurance, however, that any such
        opportunities will arise, that any such acquisitions will be consummated,
        or
        that any needed additional financing will be available on satisfactory terms
        when required.


As
        of
        December 31, 2006, we had working capital of $122,157,000, and our primary
        commitments were approximately  $10,065,000
        in operating lease payments over the next ten years, and capital expenditures
        and recurring payables and accruals arising during the course of operating
        our
        business, estimated at approximately $6,563,000 through December 31, 2007.
        We
        generally establish payment terms with our vendors that extend beyond the
        amount
        of time required to collect from our customers.


***Contractual
      Obligations***





The
      following table represents the amounts due under the specified types of
      contractual obligations as of December 31, 2006.


**Total**
              
              **Payments
                  Due**
                **Less
                  than**
                **One
                  Year**
              
              ****One
                  to** Three**
                **Years**
              
              ****Three
                  to** Five Years**
              
              ****More
                  than** Five Years**Long-term
                  debt obligations
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Capital
                  lease obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Operating
                  lease obligations (1)
              
              
              10,065,476
              
              
              1,215,857
              
              
              2,171,864
              
              
              1,920,910
              
              
              4,756,845Purchase
                  obligations (2)
              
              
              596,743
              
              
              546,262
              
              
              50,481
              
              
              -
              
              
              -Other
                  long-term obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -$
              10,662,219
              
              $
              1,762,119
              
              $
              2,222,345
              
              $
              1,920,910
              
              $
              4,756,845
 (1)
          Includes our obligations under existing operating leases. See Note 7 to
          our
          consolidated financial statements in Item 8 for  further
          details related to our lease obligations.
 
 (2)
          Represents base contract amounts for Internet hosting, co-location, content
          distribution and other infrastructure costs.


During
      the year ended December 31, 2006, we generated $14,216 , 000
      of
      net cash from operating activities. Our net income of $10,004,000 was adjusted
      for the impact of share -based
      compensation expense of
      $8,724 , 000;
      the
      deferred income tax provision of $3,508,000; depreciation and amortization
      of
      $2,402,000; bad debt expense of $1,226,000; and a net negative change in the
      components of operating assets and liabilities of $11,648,000. Of this negative
      change, $7,954,000 resulted from an increase in accounts receivable; $2,903,000
      resulted from a decrease in accounts payable; $444,000 resulted from an increase
      in prepaid expenses and other assets; and $347,000 resulted from a net decrease
      in accrued expenses and other liabilities.  Accounts
      receivable balances were higher at December 31, 2006 supporting higher sales
      levels, larger customers buying advertising through agencies that typically
      extend payments beyond 60 days, and slower collections from the acquired MMIS
      newspaper rate table business. Our average monthly collections on accounts
      were
      $5,449,000, or 37%, and $3,604,000, or 57%, of the average monthly account
      balances, for the years ended December 31, 2006 and 2005, respectively. The
      monthly average accounts receivable balance grew from $6.4 million in 2005
      to
      $14.9 million in 2006 due to our sales growth and the addition of the MMIS
      newspaper rate table business. Our accounts receivable turnover and days sales
      outstanding also declined slightly to 5.35 and 68 in 2006 compared to 7.13
      and
      51, respectively, in 2005. The decrease in accounts payable was due to scheduled
      payments to trade vendors. We also paid $3,000,000 in the fourth quarter of
      2006
      to settle the American Interbanc, LLC legal matter.





During
      the year ended December 31, 2006, net cash of $1,543,000 was used to purchase
      furniture, fixtures & equipment; $297,000 was used for lease security
      deposits for the new Chicago and New York offices; $4,423 ,000
      was
      used to purchase Mortgage-calc.com on August 4, 2006 and an additional $149,000
      was paid as a working capital adjustment to the sellers of FastFind under the
      terms of Agreement and Plan of Merger dated November 30, 2005.




32




In
      May
      2006, we closed a public offering of 2,697,776 shares of our common stock,
      of
      which 2,005,991 shares were sold by the Company and 691,785 shares were sold
      by
      certain of our existing stockholders, including those acquired upon exercise
      of
      stock options, at a price of $48.25 per share resulting in net proceeds to
      us of
      approximately $92.4 million.





Cash
      flows from financing activities include the net proceeds from the sale of common
      stock of $90,688,000, the proceeds from the exercise of the selling
      stockholders’ and other stock options of $4,852,000, and $3,033 ,000
      of
      tax benefits related to the adoption of FAS 123R as of January 1, 2006.





Our
      existing cash and cash equivalents may decline in the event of weakening of
      the
      economy or changes in our planned cash outlay. However, based on our current
      business plan and revenue prospects, we believe that our existing balances
      together with our anticipated cash flows from operations will be sufficient
      to
      meet our working capital and operating resource expenditure requirements for
      the
      next twelve months. Also, while we currently have no committed lines of credit,
      we believe that our banking relationships and good credit should afford us
      the
      opportunity to raise sufficient debt in the banking or public markets, if
      required.





During
      the year ended December 31, 2005, we generated $14,548,000 of net cash from
      operating activities. Our net income of $9,674,000 was adjusted for depreciation
      and amortization of $895,000; and bad debt expense of $200,000; the tax benefit
      of incentive stock options exercised during 2005 of $446,000; a deferred tax
      benefit of $4,932,000; and a net negative change in the components of operating
      assets and liabilities of $1,599,000.  Of
      this
      negative change, $3,337,000 resulted from an increase in accounts receivable
      and
      $125,000 resulted from a decrease in prepaid expenses and other assets.
      Exclusive of the acquisitions, accounts receivable balances were higher at
      December 31, 2005 as a result of higher sales levels.  Our
      average monthly collections on accounts were $3,604,000, or 57%, of the average
      monthly account balances, down on a percentage basis from 63% in 2004. Our
      accounts receivable turnover declined and days sales outstanding increased
      to
      7.13 and 51, respectively, compared to 7.86 and 46, respectively, in 2004. Exclusive
      of the acquisitions, the decrease in other assets was primarily due to a
      decrease in our insurance claim receivable from damages sustained during
      Hurricane Wilma in October 2005 compared to the two hurricanes in September
      2004. During 2005, net cash of $39,203,000 was used for investing activities,
      of
      which $38,970,000 was related to our two acquisitions and related costs and
      $244,000 was to purchase equipment and other fixed assets. Net cash provided
      by
      financing activities consisted of the proceeds from 77,066 stock options
      exercised at strike prices between $0.85 and $13.00.




**Off-Balance
        Sheet Arrangements**
  Off-balance
        sheet arrangements include the following four categories: obligations under
        certain guarantees or contracts; retained or contingent interests in assets
        transferred to an unconsolidated entity or similar arrangements; obligations
        under certain derivative arrangements; and obligations under material variable
        interests.
  We
        have
        not entered into any material arrangements which would fall under any of
        these
        four categories and which would be reasonably likely to have a current or
        future
        material effect on our results of operations, liquidity or financial
        condition.





**Recent
      Accounting Pronouncements**





In
      February 2006, the FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments,* which
      amends SFAS No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      and
      SFAS No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* .
      SFAS
      No. 155 simplifies the accounting for certain derivatives embedded in other
      financial instruments by allowing them to be accounted for as a whole if the
      holder elects to account for the whole instrument on a fair value basis. SFAS
      No. 155 also clarifies and amends certain other provisions of SFAS No. 133
      and
      SFAS No. 140. SFAS No. 155 is effective for all financial instruments acquired,
      issued or subject to a remeasurement event occurring in fiscal years beginning
      after September 15, 2006. The Company does not expect the adoption of SFAS
      No.
      155 to have a material impact on its consolidated financial position, results
      of
      operations or cash flows, as we currently have no financial instruments within
      the scope of SFAS No. 155.





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 157, *Fair
      Value Measurements* ,
      which
      defines fair value, establishes guidelines for measuring fair value and expands
      disclosures regarding fair value measurements. SFAS No. 157 does not require
      any
      new fair value measurements but rather eliminates inconsistencies in guidance
      found in various prior accounting pronouncements. SFAS No. 157 is effective
      for
      fiscal years beginning after November 15, 2007. Management is currently
      evaluating the impact of SFAS No. 157 but does not expect the adoption of SFAS
      No. 157 to have a material impact on our consolidated financial position,
      results of operations or cash flows.





In
      September 2006, the FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other*  *Postretirement
      Plans* (an
      amendment of FASB Statements No. 87, 88, 106, and 132R). SFAS No. 158 requires
      an employer to recognize the funded status of its defined benefit pension and
      postretirement plans on its balance sheet and to recognize as a component of
      other comprehensive income, net of taxes, the gains or losses and prior service
      credits that arise during the period but are not recognized as components of
      net
      periodic benefit costs. Upon initial adoption, SFAS No. 158 requires the
      recognition of previously unrecognized actuarial gains and losses, prior service
      costs or credits and net transition amounts within accumulated other
      comprehensive income, net of tax. The provisions of SFAS No. 158 are effective
      as of the end of fiscal year 2006. The adoption of SFAS No. 158 did not have
      a
      material impact on our consolidated financial position, results of operations
      or
      cash flows, as we currently have no plans within the scope of SFAS No.
      158.





In
      September 2006, the Securities and Exchange Commission (“SEC”) staff issued
      Staff Accounting Bulletin (“SAB”) No. 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements* (“SAB
      108”). The SEC staff is providing guidance on how prior year misstatements
      should be taken into consideration when quantifying misstatements in current
      year financial statements for purposes of determining whether the current year’s
      financial statements are materially misstated. SAB 108 provides that once a
      current year misstatement has been quantified, the guidance in SAB No. 99, *Materiality* (“SAB
      99”) should be applied to determine whether the misstatement is material and
      should result in an adjustment to the financial statements. If correcting a
      misstatement in the current year would materially misstate the current year’s
      income statement, the SEC staff indicates that the prior year financial
      statements should be adjusted. In making these adjustments, previously filed
      reports do not need to be amended. Instead, the adjustments should be reflected
      the next time the registrant would otherwise be filing those prior year
      financial statements. If in the current year, however, the registrant identifies
      a misstatement that is material to those prior year financial statements, the
      registrant would be required to restate for the material misstatement in
      accordance with FASB Statement No. 154, *Accounting
      Changes and Error Corrections* .
      SAB No.
      108 is effective for our fiscal year ended December 31, 2006. The adoption
      of
      SAB No. 108 did not have an impact on our consolidated financial position,
      results of operations or cash flows.




33




In
      June
      2006, the FASB issued FASB Interpretation No. (“FIN”) 48, *Accounting
      for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
      Accounting for Income Taxes* .
      FIN 48
      prescribes a recognition and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      recognition. The evaluation of a tax position in accordance with FIN 48 is
      a
      two-step process. The first step is recognition: management must determine
      whether it is more likely than not that a tax position will be sustained upon
      examination, including resolution of any related appeals or litigation
      processes, based on the technical merits of the position. The second step is
      measurement: A tax position that meets the more-likely-than-not recognition
      threshold is measured at the largest amount of benefit that has a greater than
      50 percent likelihood of being realized upon settlement. FIN 48 is effective
      for
      fiscal years beginning after December 15, 2006. The provisions of FIN 48 must
      be
      applied to all tax positions upon initial adoption. The cumulative effect of
      applying the provisions of FIN 48 must be reported as an adjustment to the
      opening balance of retained earnings for that fiscal year. Management has
      determined that the adoption of FIN 48 will not have a material impact on our
      financial statements.





**Item
      7A. Quantitative And Qualitative Disclosures About Market
      Risk**





**Interest
      Rate Risk**





The
      primary objective of our investment strategy is to preserve principal while
      maximizing the income we receive from investments without significantly
      increasing risk. To minimize this risk, to date we have maintained our portfolio
      of cash equivalents in short-term and overnight investments that are not subject
      to market risk, as the interest paid on such investments fluctuates with the
      prevailing interest rates. As of December 31, 2006, all of our cash equivalents
      mature in less than three months.





**Exchange
      Rate Sensitivity**





Our
      exposure to foreign currency exchange rate fluctuations is minimal to none
      as we
      do not have any revenues denominated in foreign currencies. Additionally, we
      have not engaged in any derivative or hedging transactions to date.


34


**ITEM
      8. Financial Statements and Supplementary Data**





**INDEX
      TO FINANCIAL STATEMENTS**


PAGEReport
                  of Independent Registered Public Accounting Firm
              
              36Consolidated
                  Balance Sheets as of December 31, 2006 and 2005
              
              37Consolidated
                  Statements of Income for the Years Ended December 31, 2006, 2005
                  and
                  2004
              
              38Consolidated
                  Statements of Stockholders' Equity for the Years Ended December
                  31, 2006,
                  2005 and 2004
              
              39Consolidated
                  Statements of Cash Flows for the Years Ended December 31, 2006,
                  2005 and
                  2004
              
              40Notes
                  to Consolidated Financial Statements
              
              41


35


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and Stockholders


Bankrate,
      Inc.:




We
      have
      audited the consolidated balance sheets of Bankrate, Inc. and subsidiaries
      (the
      Company or Bankrate) as listed in the Index at Item 8. These consolidated
      financial statements and the financial statement schedule are the responsibility
      of the Company’s management. Our responsibility is to express an opinion on
      these consolidated financial statements and the financial statement schedule
      based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Bankrate, Inc. and
      subsidiaries as of December 31, 2006 and 2005, and the results of their
      operations and their cash flows for each of the years in the three-year period
      ended December 31, 2006, in conformity with U.S. generally accepted accounting
      principles. Also in our opinion, the related financial statement schedule,
      when
      considered in relation to the basic consolidated financial statements taken
      as a
      whole, present fairly, in all material respects, the information set forth
      therein.





As
      discussed in Note 2 to the consolidated financial statements, effective January
      1, 2006, the Company changed its method of accounting for share-based
      compensation by adopting Statement of Financial Accounting Standards No. 123
      (R), *Share-Based
      Payment* .





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Bankrate, Inc.’s internal
      control over financial reporting as of December 31, 2006, based on criteria
      established in *Internal
      Control—Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
      and
      our report dated March 16, 2007 expressed an unqualified opinion on management’s
      assessment of, and the effective operation of, internal control over financial
      reporting.








/s/
      KPMG
      LLP





March
      16,
      2007


Ft.
      Lauderdale, Florida


Certified
      Public Accountants


36




**Bankrate,
        Inc.** Consolidated
          Balance Sheets
  **December
                  31,**
              
              **December
                  31,****2006**
              
              **2005**AssetsCash
                  and cash equivalents
              
              $
              109,925,360
              
              $
              3,479,609Accounts
                  receivable, net of allowance for doubtful accounts of
                  approximately$2,155,000
                  and $1,630,000 at December 31, 2006 and 2005, respectively
              
              
              15,801,403
              
              
              8,838,879Deferred
                  income taxes, current portion
              
              
              1,703,747
              
              
              6,445,636Insurance
                  claim receivable
              
              
              -
              
              
              85,575Prepaid
                  expenses and other current assets
              
              
              1,032,423
              
              
              481,677Total
                  current assets
              
              
              128,462,933
              
              
              19,331,376Furniture,
                  fixtures and equipment, net of accumulated depreciation and amortization
                  of$3,826,000
                  and $3,160,000 at December 31, 2006 and 2005, respectively
              
              
              1,703,680
              
              
              1,063,307Deferred
                  income taxes
              
              
              1,262,279
              
              
              28,769Intangible
                  assets, net of accumulated amortization of $2,355,000 and$697,000
                  at December 31, 2006 and 2005, respectively
              
              
              14,441,162
              
              
              11,652,161Goodwill
              
              
              30,039,425
              
              
              30,035,399Other
                  assets
              
              
              774,117
              
              
              442,211Total
                  assets
              
              $
              176,683,596
              
              $
              62,553,223Liabilities
                  and Stockholders' EquityLiabilities:Accounts
                  payable
              
              $
              312,489
              
              $
              3,215,645Accrued
                  expenses
              
              
              5,237,222
              
              
              5,093,187Deferred
                  revenue
              
              
              729,019
              
              
              1,176,119Other
                  current liabilities
              
              
              27,427
              
              
              37,187Total
                  current liabilities
              
              
              6,306,157
              
              
              9,522,138Other
                  liabilities
              
              
              222,920
              
              
              178,133Total
                  liabilities
              
              
              6,529,077
              
              
              9,700,271Stockholders'
                  equity:Preferred
                  stock, 10,000,000 shares authorized and undesignated
              
              
              -
              
              
              -Common
                  stock, par value $.01 per share-- 100,000,000 shares authorized;
                  18,224,620 and15,857,877
                  shares issued and outstanding at December 31, 2006 and 2005,
                  respectively
              
              
              182,246
              
              
              158,579Additional
                  paid in capital
              
              
              178,255,314
              
              
              70,981,544Accumulated
                  deficit
              
              
              (8,283,041
              )
              
              (18,287,171
              )Total
                  stockholders' equity
              
              
              170,154,519
              
              
              52,852,952Total
                  liabilities and stockholders' equity
              
              $
              176,683,596
              
              $
              62,553,223
  *See
        accompanying notes to consolidated financial statements.*
  37
  **Bankrate, Inc.**
 Consolidated
        Statements of Income


**Year
                  Ended December 31,**Revenue:
              
              **2006**
              
              **2005**
              
              **2004**Online
                  publishing
              
              $
              63,970,860
              
              $
              43,296,384
              
              $
              33,942,241Print
                  publishing and licensing
              
              
              15,679,115
              
              
              5,752,647
              
              
              5,262,020Total
                  revenue
              
              
              79,649,975
              
              
              49,049,031
              
              
              39,204,261Cost
                  of revenue:Online
                  publishing
              
              
              11,101,425
              
              
              7,389,089
              
              
              5,534,456Print
                  publishing and licensing
              
              
              13,845,594
              
              
              5,346,017
              
              
              4,359,444Total
                  cost of revenue
              
              
              24,947,019
              
              
              12,735,106
              
              
              9,893,900Gross
                  margin
              
              
              54,702,956
              
              
              36,313,925
              
              
              29,310,361Operating
                  expenses:Sales
              
              
              5,055,076
              
              
              3,683,482
              
              
              4,186,799Marketing
              
              
              4,835,941
              
              
              5,922,964
              
              
              6,357,424Product
                  development
              
              
              3,620,750
              
              
              2,456,628
              
              
              2,405,676General
                  and administrative
              
              
              21,835,046
              
              
              9,034,964
              
              
              6,667,448Legal
                  settlements
              
              
              3,000,000
              
              
              -
              
              
              510,000Severance
                  charge
              
              
              -
              
              
              -
              
              
              260,000Depreciation
                  and amortization
              
              
              2,401,710
              
              
              895,369
              
              
              742,65940,748,523
              
              
              21,993,407
              
              
              21,130,006Income
                  from operations
              
              
              13,954,433
              
              
              14,320,518
              
              
              8,180,355Other
                  income:Interest
                  income
              
              
              2,961,080
              
              
              932,831
              
              
              410,107Gain
                  on insurance proceeds
              
              
              -
              
              
              220,705
              
              
              -Total
                  other income
              
              
              2,961,080
              
              
              1,153,536
              
              
              410,107Income
                  before income taxes
              
              
              16,915,513
              
              
              15,474,054
              
              
              8,590,462Income
                  tax (expense) benefit
              
              
              (6,911,383
              )
              
              (5,800,153
              )
              
              4,765,660Net
                  income
              
              $
              10,004,130
              
              $
              9,673,901
              
              $
              13,356,122Basic
                  and diluted net income per share:Basic
              
              $
              0.58
              
              $
              0.61
              
              $
              0.87Diluted
              
              $
              0.56
              
              $
              0.57
              
              $
              0.84Weighted
                  average common shares outstanding:Basic
              
              
              17,332,632
              
              
              15,809,259
              
              
              15,438,097Diluted
              
              
              17,845,754
              
              
              16,922,218
              
              
              15,975,382


*See
        accompanying notes to consolidated financial statements.*
  38
 **Bankrate,
          Inc.**
 Consolidated
          Statements of Stockholders' Equity


**Additional****Common
                  Stock**
              
              **Paid-in**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Total**Balances,
                  December 31, 2003
              
              
              15,114,371
              
              $
              151,144
              
              $
              66,091,014
              
              $
              (41,317,194
              )
              $
              24,924,964Stock
                  options exercised
              
              
              666,440
              
              
              6,664
              
              
              875,949
              
              
              -
              
              
              882,613Tax
                  benefit-stock options
              
              
              -
              
              
              -
              
              
              3,170,499
              
              
              -
              
              
              3,170,499Net
                  income for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              13,356,122
              
              
              13,356,122Balances,
                  December 31, 2004
              
              
              15,780,811
              
              
              157,808
              
              
              70,137,462
              
              
              (27,961,072
              )
              
              42,334,198Stock
                  options exercised
              
              
              77,066
              
              
              771
              
              
              398,266
              
              
              -
              
              
              399,037Tax
                  benefit-stock options
              
              
              -
              
              
              -
              
              
              445,816
              
              
              -
              
              
              445,816Net
                  income for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              9,673,901
              
              
              9,673,901Balances,
                  December 31, 2005
              
              
              15,857,877
              
              
              158,579
              
              
              70,981,544
              
              
              (18,287,171
              )
              
              52,852,952Proceeds
                  from sale of common stock, netof
                  offering costs of $6,101,000
              
              
              2,005,991
              
              
              20,060
              
              
              90,667,948
              
              
              -
              
              
              90,688,008Stock
                  options exercised
              
              
              360,752
              
              
              3,607
              
              
              4,848,791
              
              
              -
              
              
              4,852,398Tax
                  benefit-stock options
              
              
              -
              
              
              -
              
              
              3,033,498
              
              
              -
              
              
              3,033,498Share-based
                  compensation
              
              
              -
              
              
              -
              
              
              8,723,533
              
              
              -
              
              
              8,723,533Net
                  income for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              10,004,130
              
              
              10,004,130Balances,
                  December 31, 2006
              
              
              18,224,620
              
              $
              182,246
              
              $
              178,255,314
              
              $
              (8,283,041
              )
              $
              170,154,519


*See
        accompanying notes to consolidated financial statements.*
  39
 **Bankrate,
          Inc.**
 Consolidated
          Statements of Cash Flows


**Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Cash
                  flows from operating activities:Net
                  income
              
              $
              10,004,130
              
              $
              9,673,901
              
              $
              13,356,122Adjustments
                  to reconcile net income to net cash provided byoperating
                  activities:Depreciation
                  and amortization
              
              
              2,401,710
              
              
              895,369
              
              
              742,659Provision
                  for doubtful accounts receivable
              
              
              1,226,231
              
              
              199,883
              
              
              554,935Share-based
                  compensation
              
              
              8,723,533
              
              
              -
              
              
              -Excess
                  tax benefit - stock options
              
              
              -
              
              
              445,816
              
              
              3,170,499Deferred
                  income taxes
              
              
              3,508,379
              
              
              4,932,174
              
              
              (8,006,579
              )Changes
                  in operating assets and liabilities, net of effects frombusiness
                  acquisitions:Increase
                  in accounts receivable
              
              
              (7,953,666
              )
              
              (3,336,795
              )
              
              (1,866,800
              )Decrease
                  (increase) in prepaid expenses and other assets
              
              
              (444,304
              )
              
              125,498
              
              
              (521,161
              )(Decrease)
                  increase in accounts payable
              
              
              (2,903,156
              )
              
              (394,337
              )
              
              158,701Increase
                  (decrease) in accrued expenses
              
              
              144,035
              
              
              1,821,796
              
              
              (477,847
              )(Decrease)
                  increase in other liabilities
              
              
              35,027
              
              
              (779,196
              )
              
              (78,082
              )Increase
                  (decrease) in deferred revenue
              
              
              (525,586
              )
              
              983,762
              
              
              11,247Net
                  cash provided by operating activities
              
              
              14,216,333
              
              
              14,547,871
              
              
              7,043,694Cash
                  flows from investing activities:Purchases
                  of furniture, fixtures and equipment
              
              
              (1,543,368
              )
              
              (244,434
              )
              
              (1,065,522
              )Cash
                  used in business acquisitions, net of cash acquired
              
              
              (4,571,629
              )
              
              (38,970,481
              )
              
              -Proceeds
                  from sale of assets
              
              
              68,000
              
              
              12,349
              
              
              -Restricted
                  cash
              
              
              (297,489
              )
              
              -
              
              
              -Net
                  cash used in investing activities
              
              
              (6,344,486
              )
              
              (39,202,566
              )
              
              (1,065,522
              )Cash
                  flows from financing activities:Proceeds
                  from the sale of common stock
              
              
              90,688,008
              
              
              -
              
              
              -Proceeds
                  from the exercise of stock options
              
              
              4,852,398
              
              
              399,037
              
              
              882,613Excess
                  tax benefit-stock options
              
              
              3,033,498
              
              
              -
              
              
              -Net
                  cash provided by financing activities
              
              
              98,573,904
              
              
              399,037
              
              
              882,613Net
                  (decrease) increase in cash and cash equivalents
              
              
              106,445,751
              
              
              (24,255,658
              )
              
              6,860,785Cash
                  and equivalents, beginning of period
              
              
              3,479,609
              
              
              27,735,267
              
              
              20,874,482Cash
                  and equivalents, end of period
              
              $
              109,925,360
              
              $
              3,479,609
              
              $
              27,735,267Supplemental
                  disclosures of cash flow information:Cash
                  paid during the period for taxes
              
              $
              1,285,672
              
              $
              33,870
              
              $
              128,500


*See
        accompanying notes to consolidated financial statements.*


40




**BANKRATE,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1 - Organization and Basis of Presentation**





**The
      Company**





Bankrate,
      Inc. and subsidiaries (the "Company") owns and operates an Internet-based
      consumer banking marketplace. The Company’s flagship site, Bankrate.com (the
“web site”), is the one of the web’s leading aggregators of information on more
      than 300 financial products including mortgages, credit cards, new and used
      automobile loans, money market accounts, certificates of deposit, checking
      and
      ATM fees, home equity loans and online banking fees.  Additionally,
      the Company provides financial applications and information to a network of
      distribution partners and through national and state publications. The Company
      is organized under the laws of the state of Florida.





**Acquisitions**





On
      November 30, 2005, the Company completed the acquisition of Wescoco LLC, a
      Delaware limited liability company d/b/a “FastFind” (“FastFind”) for $10 million
      in cash, plus a net working capital adjustment of $149,000 in the quarter ended
      June 30, 2006, in accordance with the Agreement and Plan of Merger dated
      November 20, 2005.





On
      December 1, 2005, the Company completed the acquisition of Mortgage Market
      Information Services, Inc., an Illinois corporation (“MMIS”), and Interest.com,
      Inc., an Illinois corporation (“Interest.com”) for $30 million in
      cash ***,*** subject
      to final Closing Date Equity adjustments under section 3.03 of the Agreement
      and
      Plan of Merger dated November 20, 2005.





On
      August
      4, 2006, the Company completed the acquisition of a group of assets that
      consists of three web sites (Mortgagecalc.com, Mortgagecalc.com and
      Mortgagemath.com, collectively “Mortgage-calc.com”) owned and operated by East
      West Mortgage, Inc. for $4.4 million in cash. The operations of these web sites
      were integrated into the online publishing segment.





**Stock
      Offering**





In
      May
      2006, the Company closed a public offering of 2,697,776 shares of its common
      stock, of which 2,005,991 shares were sold by the Company and 691,785 were
      sold
      by certain of the Company’s existing stockholders and employees, at a price of
      $48.25 per share. The resulting $92.4 million in net proceeds included
      $1.7 million in proceeds from the exercise of stock options by existing
      stockholders and employees.




**Note
      2 - Summary of Significant Accounting Policies**





**Basis
      of Presentation**





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries, Wescoco LLC, Mortgage Market Information Services,
      Inc., and Interest.com. All material intercompany accounts and transactions
      have
      been eliminated.  See
      Note
      9.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent gains and losses at the date of the
      financial statements and the reported amounts of revenue and expenses during
      the
      reporting period. Actual results could differ from those estimates.





**Cash
      Equivalents**





The
      Company considers all highly liquid debt investments purchased with an original
      maturity of less than three months to be cash equivalents. The carrying value
      of
      these investments approximates fair value.





**Allowance
      for Doubtful Accounts Receivable**





The
      Company maintains an allowance for doubtful accounts receivable for estimated
      losses resulting from the inability or unwillingness of its customers to make
      required payments.  The
      Company looks at historical write-offs and sales growth when determining the
      adequacy of the allowance. Should the financial condition of the Company’s
      customers deteriorate, resulting in an impairment of their ability to make
      payments, or if the level of accounts receivable increases, the need for
      possible additional allowances may be necessary. Any additions to the allowance
      are recorded as bad debt expense and included in general and administrative
      expenses.





41




**Furniture,
      Fixtures and Equipment**





Furniture,
      fixtures and equipment are stated at cost less accumulated depreciation and
      amortization, and are depreciated on a straight-line basis over the estimated
      useful lives of the assets which range from three to seven years. Leasehold
      improvements are amortized on a straight-line basis over the shorter of the
      lease term or the estimated useful lives of the improvements.





**Intangible
      Assets**





Intangible
      assets consist primarily of trademarks and URLs, software licenses, customer
      relationships, developed technologies and non-compete agreements. Intangible
      assets are being amortized over their estimated useful lives on a straight-line
      basis. The asset categories and their estimated useful lives are as follows:


YearsTrademarks
                  and URLs
              
              
              5-20Software
                  licenses
              
              
              2-3Customer
                  relationships
              
              
              7-14Developed
                  technologies
              
              
              5Non-compete
                  agreements
              
              
              3-5


The
      Company reviews its intangible assets for impairment whenever events or changes
      in circumstances indicate the carrying amount of the assets may not be
      recoverable. Recoverability of assets to be held and used is measured by a
      comparison of the carrying amount of the assets to future undiscounted net
      cash
      flows expected to be generated by the assets. If such assets are considered
      to
      be impaired, the impairment to be recognized is measured by the amount by which
      the carrying amount of the assets exceeds the fair value of the assets. Assets
      to be disposed of are reported at the lower of the carrying amount or fair
      value
      less costs to sell.





**Goodwill**





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No.
      142, *Goodwill and Other Intangible Assets* ,
      the
      Company reviews its goodwill for impairment annually, or more frequently, if
      facts and circumstances warrant a review, at the reporting unit level. The
      Company has determined that it has two reporting units, online publishing and
      print publishing and licensing, under SFAS No. 142, as these are the components
      of the business for which discrete financial information is available and for
      which segment management regularly reviews the operating results. The provisions
      of SFAS No. 142 require that a two-step test be performed to assess goodwill
      for
      impairment. First, the fair value of the reporting unit is compared to its
      carrying value. If the fair value exceeds the carrying value, goodwill is not
      impaired and no further testing is performed. The second step is performed
      if
      the carrying value exceeds the fair value. The implied fair value of the
      reporting unit’s goodwill must be determined and compared to the carrying value
      of the goodwill. If the carrying value of a reporting unit’s goodwill exceeds
      its implied value, an impairment loss equal to the difference will be recorded.
      In determining the fair value of our reporting units, we relied on the Income
      Approach and the Market Approach. Under the Income Approach, the fair value
      of a
      business unit is based on the cash flows it can be expected to generate over
      its
      remaining life. The estimated cash flows are converted to their present value
      equivalent using an appropriate rate of return. The Market Approach utilizes
      a
      market comparable method whereby similar publicly traded companies are valued
      using Market Values of Invested Capital (“MVIC”) multiples (i.e., MVIC to
      revenue, MVIC to earnings before interest and taxes, MVIC to cash flow, etc.)
      and then these MVIC multiples are applied to a companies operating results
      to
      arrive at an estimate of value.





The
      Company completed its annual goodwill impairment test during the fourth quarter
      of 2006 and determined that the carrying amount of goodwill was not impaired,
      nor did it recognize any goodwill impairment charges in 2005 and
      2004.




The
      Agreement and Plan of Merger for the acquisition of MMIS and Interest.com dated
      December 1, 2005 contains a provision in Section 3.03 for the potential
      adjustment to Closing Date Equity, as defined. To date, no such adjustment
      has
      been agreed upon .





42





**Impairment
      of Long-Lived Assets**





The
      Company evaluates long-lived assets and intangible assets subject to
      amortization for impairment whenever events or changes in circumstances indicate
      that the carrying amount of an asset may not be recoverable. Recoverability
      of
      assets to be held and used is measured by a comparison of the carrying amount
      of
      the asset to future cash flows expected to be generated by the asset. If the
      carrying amount of the asset exceeds its estimated future cash flows, an
      impairment charge is recorded in the amount by which the carrying amount of
      the
      asset exceeds the fair value of the asset.




SFAS
        No.
        142 also requires that intangible assets with definite lives be amortized
        over
        their estimated useful life and reviewed for impairment in accordance with
        SFAS
        No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets* .
        The
        Company continually monitors events and changes in circumstances that could
        indicate carrying amounts of its intangible assets may not be recoverable.
        When
        such events or changes in circumstances occur, the Company assesses the
        recoverability of intangible assets by determining whether the carrying value
        of
        such assets will be recovered through the undiscounted expected future cash
        flows. If the future undiscounted cash flows are less than the carrying amount
        of the intangible assets, the Company recognizes an impairment loss based
        on the
        excess of the carrying amount over the fair value of the assets. The Company
        did
        not recognize intangible asset impairment charges in 2006, 2005 or
        2004.





**Basic
      and Diluted Earnings Per Share**





The
      Company computes basic earnings per share by dividing net income for the year
      by
      the weighted average number of shares outstanding for the year, excluding
      outstanding stock options. Diluted earnings per share includes the effects
      of
      common stock equivalents, consisting of outstanding stock options and
      unrecognized compensation expense and tax benefits in accordance with SFAS
      No.
      123R, *Share-Based
      Payment* ,
      to the
      extent the effect is not antidilutive, using the treasury stock
      method.





The
      following table presents the computation of basic and diluted earnings per
      share:


**Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Net
                  income
              
              $
              10,004,130
              
              $
              9,673,901
              
              $
              13,356,122Weighted
                  average common shares outstandings
              
              
              17,332,632
              
              
              15,809,259
              
              
              15,438,097Additional
                  dilutive shares related to stock options
              
              
              513,122
              
              
              1,112,959
              
              
              537,284Total
                  weighted average common shares and equivalentsoutstanding
                  for diluted earnings per share calculation
              
              
              17,845,754
              
              
              16,922,218
              
              
              15,975,382Basic
                  and diluted earnings per share:Basic
              
              $
              0.58
              
              $
              0.61
              
              $
              0.87Diluted
              
              $
              0.56
              
              $
              0.57
              
              $
              0.84





The
      weighted average number of common shares outstanding used in computing diluted
      net income per share for the years ended December 31, 2006, 2005 and 2004
      includes the shares resulting from the dilutive effect of outstanding stock
      options. For the years ended December 31, 2006, 2005 and 2004, 176,000, 227,500
      and 389,775 shares, respectively, attributable to the assumed exercise of
      outstanding stock options were excluded from the calculation of diluted net
      income per share because the effect was anti-dilutive.





**Share-Based
      Compensation**





During
      the first quarter of fiscal 2006, the Company adopted the provisions of, and
      accounts for share-based compensation in accordance with, SFAS No. 123R, *Share-Based
      Payment* ,
      which r eplaced
      SFAS No. 123, *Accounting
      for Stock-Based Compensation* and
      supersedes Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      Under
      the fair value recognition provisions of SFAS No. 123R, share-based compensation
      cost is measured at the grant date based on the fair value of the award and
      is
      recognized as an expense on a straight-line basis over the requisite service
      period, which is generally the vesting period.  The
      Company elected the modified prospective method, pursuant to which prior periods
      are not revised for comparative purposes. The valuation provisions of SFAS
      No.
      123R apply to new grants and to grants that were outstanding as of the effective
      date of SFAS No. 123R and are subsequently modified. Estimated compensation
      for
      grants that were outstanding as of the effective date will be recognized over
      the remaining service period using the compensation cost estimated for the SFAS
      No. 123 pro forma disclosures. The adoption of SFAS No. 123R had a material
      impact on the Company’s consolidated financial position, results of operations
      and cash flows. See Note 3 for further information regarding the Company’s
      share-based compensation assumptions and expense, including pro forma
      disclosures for prior periods, as if the Company had recorded share-based
      compensation expense.





**Deferred
      Compensation Plan**





During
      2002, the Company established a non-qualified deferred compensation plan that
      permits eligible employees to defer a portion of their compensation. The
      deferred compensation liability (other non-current liabilities) was $222,920
      and
      $178,133 at December 31, 2006 and 2005, respectively. The Company has
      established a grantor trust (Rabbi Trust) to provide funding for benefits
      payable under its non-qualified deferred compensation plan. The assets held
      in
      the trust at December 31, 2006 and 2005 amounted to $222,920 and $178,133,
      respectively. The Rabbi Trust’s assets consist of short-term cash investments
      and a managed portfolio of equity securities. These assets are included in
      other
      assets in the accompanying balance sheets.





43





**Fair
      Value of Financial Instruments**





The
      Company does not currently use derivative financial instruments in the normal
      course of its business. The carrying values of cash and cash equivalents,
      accounts receivable and accounts payable and accrued liabilities approximate
      fair value due to the short-term maturities of these assets and liabilities.





**Income
      Taxes**





Income
      taxes are accounted for under the asset and liability method. Deferred tax
      assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax bases and operating
      loss and tax credit carryforwards. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in the
      years in which those temporary differences are expected to be recovered or
      settled. The effect on deferred tax assets and liabilities of a change in tax
      rates is recognized in income in the period that includes the enactment date.
      If
      it is more likely than not that some portion or all of a deferred tax asset
      will
      not be realized, a valuation allowance is recorded. The valuation allowance
      is
      based on management’s judgment as to future taxable income in light of
      historical results, the current environment, forecasted performance and other
      factors.





**Revenue
      Recognition**





The
      Company generates revenue from two primary sources: online publishing and print
      publishing and licensing.





***Online
      Publishing Revenue***





The
      Company sells graphic advertisements on its web site (including co-branded
      sites) consisting of banner, badge, billboard, poster and skyscraper
      advertisements. These advertisements are sold to advertisers according to the
      cost-per-thousand impressions (“CPM”) the advertiser receives.  The
      amount of advertising the Company sells is a function of (1) the number of
      visitors to its web sites, (2) the number of ad pages the Company serves to
      those visitors, (3) the number of advertisements per page, and (4) the capacity
      of the Company’s sales force.  Advertising
      sales are invoiced monthly at amounts based on specific contract terms. When
      the
      number of impressions over the contract term is guaranteed, the monthly invoiced
      amount is based on the monthly contractual number of impressions to be delivered
      at the contractual price or CPM. Revenue is recognized monthly based on the
      actual number of impressions delivered, and the revenue corresponding to any
      under-delivery is deferred as unearned income on the balance sheet and is
      recognized later when the under-delivery is served.  When
      the
      number of impressions over the contract term is not guaranteed, the monthly
      invoiced amount is determined and revenue is recognized based on the actual
      number of impressions delivered at the contractual price or CPM. Additionally,
      the Company generates revenue on a “per action” basis (i.e., a purchase or
      completion of an application) when a visitor to the Company’s web site transacts
      with one of its advertisers after viewing an advertisement. Revenue is
      recognized monthly based on the number of actions reported by the advertiser,
      subject to the Company’s verification. The Company is also involved in revenue
      sharing arrangements with its online partners where the consumer uses co-branded
      sites hosted by the Company. Revenue is effectively allocated to each partner
      based on the percentage of advertisement views at each site. The allocated
      revenue is shared according to distribution agreements. Revenue is recorded
      at
      gross amounts and partnership payments are recorded in cost of revenue, pursuant
      to the provisions of Emerging Issues Task Force (“EITF”) 99-19, *Reporting Revenue Gross as a Principal versus Net as an Agent.* The
      Company also sells hyperlinks (interest rate table listings) to various
      third-party Internet sites on a CPC basis.  Advertisers
      pay the Company each time a visitor to its web sites clicks on a rate table
      listing. Prior to October 1, 2005, advertisers paid a flat monthly fee for
      their
      hyperlink. The Company also sells text links on its rate pages to advertisers
      on
      a CPC basis. Advertisers enter an auction bidding process on a third-party
      web
      site for placement of their text link based on the amount they are willing
      to
      pay for each click though to their web site. The Company recognizes revenue
      monthly for each text link based on the number of clicks at the CPC contracted
      for during the auction bidding process.





Online
      publishing revenue, prior to the first quarter of 2006, included barter revenue,
      which represents the exchange of advertising space on the Company’s web site for
      reciprocal advertising space or traffic on other web sites. Barter revenues
      and
      expenses were recorded at the fair market value of the advertisements delivered
      or received, whichever is more determinable in the circumstances. The Company
      followed the accounting literature provided by EITF 99-17, *Accounting for Advertising Barter Transactions* .
      In
      accordance with EITF 99-17, barter transactions were valued based on similar
      cash transactions which occurred within six months prior to the date of the
      barter transaction. Revenue from barter transactions was recognized as income
      when advertisements were delivered on the Company’s web site. Barter expense was
      recognized when the Company’s advertisements ran on the other companies’ web
      sites, which was typically in the same period barter revenue was
      recognized.  If
      the
      advertising impressions were received from the customer prior to the Company
      delivering the advertising impressions, a liability was recorded. If the Company
      delivered advertising impressions to the other companies' web sites prior to
      receiving the advertising impressions, a prepaid expense was recorded. No
      prepaid expense or liability was recorded at December 31, 2005. Barter revenue
      was approximately $2,254,000 and $3,088,000, and represented approximately
      5%
      and 8% of total revenue, respectively, for the years ended December 31, 2005
      and
      2004.




44




***Print
      Publishing and Licensing Revenue-***





Print
      publishing and licensing revenue represents advertising revenue from the sale
      of
      advertising in the *Mortgage*  *Guide* (formerly called *Consumer
      Mortgage Guide* )
      and *Deposit
      and CD Guide* rate
      tables, newsletter subscriptions, and licensing of research information. The
      Company charges a commission for placement of the *Mortgage
      Guide* and *Deposit
      and CD Guide* in a
      print publication. Advertising revenue and commission income is recognized
      when
      the *Mortgage
      Guide* and *Deposit
      and CD Guide* runs in
      the publication. Revenue from the Company’s newsletters is recognized ratably
      over the period of the subscription, which is generally up to one year. Revenue
      from the sale of research information is recognized ratably over the contract
      period.





The
      Company also earns fees from distributing editorial rate tables that are
      published in newspapers and magazines across the United States, from paid
      subscriptions to three newsletters, and from providing rate surveys to
      institutions and government agencies. In addition, the Company licenses research
      data under agreements that permit the use of rate information it develops to
      advertise the licensee’s products in print, radio, television and web site
      promotions. Revenue for these products is recognized ratably over the
      contract/subscription periods.





**Marketing
      Expenses**





Marketing
      costs represent expenses associated with expanding brand awareness of the
      Company’s products and services to consumers and include key word
      (pay-per-performance) campaigns on Internet search engines, print and Internet
      advertising, marketing and promotion costs.  Marketing
      costs also included barter expense prior to January 1, 2006, which represented
      the non-cash cost of our advertisements that were run on other companies’ web
      sites in the Company’s barter transactions. Barter expense of approximately
      $2,254,000 and $3,088,000 was recorded for the years ended December 31, 2005
      and
      2004, respectively.





**Comprehensive
      Income**





Comprehensive
      income is the same as net income for the years ended December 31, 2006, 2005
      and
      2004 .





**Note
      3 - Share-Based Compensation**





**Stock
      Options**





The
      Company’s stock option program is a long-term retention program that is intended
      to attract, retain and provide incentives for directors, officers and employees
      in the form of incentive and non-qualified stock options and restricted stock.
      Currently, the Company grants stock options from the 1999 Equity Compensation
      Plan, as amended, contingent on stockholder approval of the Board of Director’s
      recommendation to increase the number of shares authorized to be issued pursuant
      to such plan. The Board of Directors has the sole authority to determine who
      receives such grants, the type, size and timing of such grants, and to specify
      the terms of any noncompetition agreements relating to the grants.





**1997
      Equity Compensation Plan**





During
      1997, the Company adopted the 1997 Equity Compensation Plan (the "1997 Plan")
      to
      provide directors, officers, nonemployee members of the Board of Directors
      of
      the Company and certain consultants and advisors with the opportunity to receive
      grants of incentive stock options, non-qualified stock options and restricted
      stock. The Board of Directors has the sole authority to determine who receives
      such grants, the type, size and timing of such grants, and to specify the terms
      of any non-competition or other agreements relating to the grants. The aggregate
      number of common shares that may be issued under the 1997 Plan was initially
      900,000. In January 1999, the Company amended the 1997 Plan to increase the
      number of shares authorized to 1,500,000 shares.  As
      of
      December 31, 2006, 76,349 shares were available for grant under the 1997 Plan.





The
      exercise price of any option grant shall be determined by the Board of Directors
      and may be equal to, greater than, or less than the fair market value of the
      stock on the grant date. An incentive stock option may not be granted to an
      employee who at the time of the grant owns more than 10% of the total combined
      voting power of all classes of stock of the Company, unless the exercise price
      is not less than 110% of the fair market value of the stock on the date of
      the
      grant. Options granted vest over various periods ranging from 1 to 5 years
      and
      expire between 7 and 10 years after the date of grant.





Stock
      options exercisable into 820,500 shares were granted to directors and employees
      during 2004. No stock options were granted under the 1997 Plan during the years
      ended December 31, 2006 and 2005.





**1999
      Equity Compensation Plan**





In
      March
      1999, the Company's stockholders approved the 1999 Equity Compensation Plan
      (the
      "1999 Plan"), to provide designated employees of the Company, certain
      consultants and non-employee members of the Board of Directors with the
      opportunity to receive grants of incentive stock options, nonqualified stock
      options and restricted stock. The 1999 Plan was originally authorized to grant
      options for up to 1,500,000 shares. In April 2000, the Company amended the
      1999
      Plan to increase the number of shares authorized to 3,500,000. This amendment
      was approved by the Company’s stockholders. Options granted generally vest over
      four years, 25% after the first year and monthly thereafter over the remaining
      three years, and expire between 5 and 10 years after the date of
      grant.  As
      of
      December 31, 2006, no shares were available for grant under the 1999 Plan.
      Stock
      options exercisable into 732,000, 690,000 and 977,500 shares, respectively,
      were
      granted under the 1999 Plan to outside directors and employees during 2006,
      2005
      and 2004.




45




Beginning
      with the first quarter of fiscal 2006, the Company adopted SFAS No. 123R. See
      Note 2 for a description of the Company’s adoption of SFAS No. 123R. The Company
      currently uses the Black-Scholes option pricing model to determine the fair
      value of its stock options. The determination of the fair value of the awards
      on
      the date of grant using an option-pricing model is affected by the price of
      the
      Company’s common stock, as well as assumptions regarding a number of complex and
      subjective variables. These variables include expected stock price volatility
      over the term of the awards, actual and projected employee stock option exercise
      behaviors, riskfree interest rates and expected dividends.





The
      Company estimates the expected term of outstanding stock options by taking
      the
      average of the vesting term and the contractual term of the option, as
      illustrated in the Staff Accounting Bulletin (“SAB”) 107. The Company estimated
      the volatility of its common stock by using a weighted average of historical
      stock price volatility and implied volatility in market traded options in
      accordance with SAB 107. The decision to use a weighted average volatility
      factor was based upon the relatively short period of availability of data on
      actively traded options on its common stock, and its assessment that implied
      volatility is more representative of future stock price trends than historical
      volatility. The Company based the risk-free interest rate that it uses in the
      option pricing model on U.S. Treasury constant maturity issues having remaining
      terms similar to the expected terms on the options. The Company does not
      anticipate paying any cash dividends in the foreseeable future and therefore
      used an expected dividend yield of zero in the option pricing model. The Company
      is required to estimate forfeitures at the time of grant and revise those
      estimates in subsequent periods if actual forfeitures differ from those
      estimates. The Company uses historical data to estimate pre-vesting option
      forfeitures and records stockbased compensation expense only for those awards
      that are expected to vest. All share-based payment awards are amortized on
      a
      straightline basis over the requisite service periods, which is generally the
      vesting period.





If
      factors change and the Company employs different assumptions for estimating
      stock-based compensation expense in future periods or if it decides to use
      a
      different valuation model, the future periods may differ significantly from
      what
      it has recorded in the current period and could materially affect its operating
      income, net income and net income per share.





Prior
      to
      the adoption of SFAS No. 123R on January 1, 2006, the Company applied the
      intrinsic value-based method of accounting prescribed by APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related interpretations including FIN 44, *Accounting
      for Certain Transactions involving Stock Compensation, an interpretation of
      APB
      Opinion No. 25* ,
      issued
      in March 2000, to account for its fixed plan options. Under this method,
      compensation was recognized over the grant’s vesting period only if the current
      market price of the underlying stock on the date of grant exceeds the exercise
      price. SFAS No. 123, as amended by SFAS No. 148, *Accounting
      for Stock-Based Compensation - Transition and Disclosure - an amendment to
      FASB
      Statement No. 123* ,
      established accounting and disclosure requirements using a fair value-based
      method of accounting for stock-based employee compensation plans. The Company
      had elected to apply the intrinsic value-based method of accounting described
      above, and adopted the disclosure requirements of SFAS No. 148.




The
      following table provides the fair value of the stock options granted during
      the
      years ended December 31, 2006, 2005 and 2004 using the Black-Scholes option
      pricing model together with a description of the assumptions used to calculate
      the fair value.


**Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Weighted
                  average fair value
              
              
              $34.66
              
              
              $22.39
              
              
              $7.70Expected
                  volatility
              
              
              70%
              
              
              116%
              
              
              100%Risk
                  free rate
              
              
              4.7%
              
              
              3.5%
              
              
              3.7%Expected
                  lives
              
              
              4.75
                  years
              
              
              5
                  years
              
              
              5
                  yearsExpected
                  dividend yield
              
              
              0%
              
              
              0%
              
              
              0%





The
      stock-based compensation expense recognized on the Company’s consolidated
      statements of income for the year ended December 31, 2006 is as
      follows:





46


**Income
                  Statement Classifications****Cost
                  of revenue:**Online
                  publishing
              
              $
              1,076,828Print
                  publishing and licensing
              
              
              147,453**Other
                  expenses:**Sales
              
              
              662,089Product
                  development
              
              
              473,956General
                  and administrative
              
              
              6,363,207Total
              
              $
              8,723,533




The
      following table sets forth the pro forma net income
      and net income per share for the years ended December 31, 2005 and 2004 that
      would have resulted if the Company had accounted for its stock options under
      the
      fair value recognition provisions of SFAS No. 123R.


**Year
                    Ended December 31,****2005**
                
                **2004**Net
                    income:As
                    reported
                
                $
                9,673,901
                
                $
                13,356,122Less
                    total stock-based employee compensationdetermined
                    under fair value-based method for allawards,
                    net of related tax effect
                
                
                (3,336,648
                )
                
                (2,206,033
                )Pro
                    forma
                
                $
                6,337,253
                
                $
                11,150,089Basic
                    and diluted earnings per common share as reported:Basic
                
                $
                0.61
                
                $
                0.87Diluted
                
                
                0.57
                
                
                0.84Basic
                    and diluted earnings per common share pro forma:Basic
                
                
                0.40
                
                
                0.72Diluted
                
                
                0.40
                
                
                0.72Weighted
                    average common shares outstanding-reported:Basic
                
                
                15,809,259
                
                
                15,438,097Diluted
                
                
                16,922,218
                
                
                15,975,382Weighted
                    average common shares outstanding-pro forma:Basic
                    and diluted
                
                
                15,809,259
                
                
                15,438,097


Prior
      to
      the adoption of SFAS No. 123R, the Company presented all tax benefits for
      deductions resulting from the exercise of stock options and disqualifying
      dispositions as operating cash flows on its consolidated statement of cash
      flows. SFAS No. 123R requires the benefits of tax deductions in excess of
      recognized compensation expense to be reported as a financing cash flow, rather
      than as an operating cash flow. This requirement reduces net operating cash
      flow
      and increases net financing cash flow in periods after adoption on January
      1,
      2006. Total cash flow remains unchanged from what would have been reported
      under
      prior accounting rules.





Pursuant
      to the income tax provisions of SFAS 123R, the Company follows the “long-haul
      method” of computing its hypothetical additional paid-in capital, or APIC pool.
      As of December 31, 2006, there was approximately $18.1 million of unrecognized
      compensation costs, adjusted for estimated forfeitures, related to non-vested
      stock options, which will be recognized over a weighted average period of
      approximately  2.92
      years.  Total
      unrecognized compensation cost will be adjusted for future changes in estimated
      forfeitures.


47




Stock
      option activity during the years ended December 31, 2006, 2005, and 2004 was
      as
      follows:




**Number
                  of**
              
              **Price
                  Per**
              
              **Weighted
                  Average****Shares**
              
              **Share**
              
              **Exercise
                  Price**Balance,
                  December 31, 2003
              
              
              970,263
              
              $
              0.85
                  to $13.00
              
              $
              1.20Granted
              
              
              1,798,000
              
              $
              8.11
                  to $15.40
              
              $
              10.14Exercised
              
              
              (666,440
              )
              $
              0.85
                  to $13.00
              
              $
              1.32Forfeited
              
              
              (63,579
              )
              $
              12.43
                  to $12.63
              
              $
              12.61Expired
              
              
              -
              
              
              -
              
              
              -Balance,
                  December 31, 2004
              
              
              2,038,244
              
              $
              0.85
                  to $15.40
              
              $
              9.15Granted
              
              
              690,000
              
              $
              13.32
                  to $32.25
              
              $
              22.39Exercised
              
              
              (77,066
              )
              $
              0.85
                  to $13.00
              
              $
              5.18Forfeited
              
              
              (19,223
              )
              $
              0.85
                  to $18.44
              
              $
              12.94Expired
              
              
              -
              
              
              -
              
              
              -Balance,
                  December 31, 2005
              
              
              2,631,955
              
              $
              0.85
                  to $32.25
              
              $
              12.69Granted
              
              
              732,000
              
              $
              28.91
                  - $47.47
              
              $
              34.66Exercised
              
              
              (360,668
              )
              $
              0.85
                  - $32.25
              
              $
              13.45Forfeited
              
              
              (253,697
              )
              $
              0.85
                  - $35.75
              
              $
              39.98Expired
              
              
              -
              
              
              -
              
              
              -Balance,
                  December 31, 2006
              
              
              2,749,590
              
              $
              0.85
                  - $47.47
              
              $
              17.08




The
      total
      intrinsic value of options exercised during 2006 was approximately $11.1
      million. The intrinsic value is calculated as the difference between the market
      value on the date of exercise and the exercise price of the stock
      options.




Additional
      information with respect to outstanding options as of December 31, 2006 was
      as
      follows:


**Options
                  Outstanding**
              
              **Options
                  Exercisable****Weighted
                  Average**
                  **Remaining**
              
              
              
              **Average****Number**
              
              **Contractual**
              
              **Number**
              
              **Exercise****Prices**
              
              **of
                  Shares**
              
              **Life
                  (Years)**
              
              **of
                  Shares**
              
              **Price**$
              0.85
              
              
              42,084
              
              
              2.92
              
              
              42,084
              
              $
              0.85$
              1.75
                  to $8.46
              
              
              830,584
              
              
              4.66
              
              
              654,543
              
              
              7.49$
              10.01
                  to $12.63
              
              
              703,975
              
              
              4.68
              
              
              535,225
              
              
              10.41$
              13.00
                  to $18.44
              
              
              406,290
              
              
              4.75
              
              
              204,061
              
              
              15.47$
              26.98
                  to $32.75
              
              
              405,157
              
              
              6.45
              
              
              56,667
              
              
              29.30$
              35.75
                  to $47.47
              
              
              361,500
              
              
              6.17
              
              
              -
              
              
              -2,749,590
              
              
              6.65
              
              
              1,492,580
              
              $
              10.27




The
      aggregate intrinsic value of options outstanding and options exercisable as
      of
      December 31, 2006 was $58.1 million and $41.3 million, respectively. The
      intrinsic value is calculated as the difference between the market value as
      of
      December 31, 2006 and the exercise price of the stock options. The market value
      as of December 31, 2006 was $37.95 as reported by the NASDAQ Global Select
      Market.




48





**Note
      4 - Financial Statement Details**


**Allowance
        for doubtful accounts-**
 
 **For
                  year ended December 31,****2006**
              
              **2005**
              
              **2004**Balance,
                  beginning of year
              
              $
              1,630,349
              
              $
              400,000
              
              $
              230,000Provision
              
              
              1,226,231
              
              
              199,883
              
              
              554,935Write-offs
              
              
              (701,504
              )
              
              (240,836
              )
              
              (395,677
              )Recoveries
              
              
              -
              
              
              19,967
              
              
              10,742Acquisitions
              
              
              -
              
              
              1,251,335
              
              
              -Balance,
                  end of year
              
              $
              2,155,076
              
              $
              1,630,349
              
              $
              400,000
  **Fixed
        Assets-**
 
 Fixed
                  assets consisted of the following:
              
              **December
                  31,****2006**
              
              **2005**Furniture
                  and fixtures
              
              $
              639,236
              
              $
              288,494Computers
                  and software
              
              
              4,208,646
              
              
              3,448,690Equipment
              
              
              139,671
              
              
              82,158Leasehold
                  improvements
              
              
              541,813
              
              
              403,8375,529,366
              
              
              4,223,179Less
                  accumulated depreciation and amortization
              
              
              (3,825,686
              )
              
              (3,159,872
              )$
              1,703,680
              
              $
              1,063,307




Depreciation
        expense was $743,824, $650,163 and $613,866 for the years ended December
        31,
        2006, 2005 and 2004, respectively.




49


**Intangible
      Assets-**




Intangible
      assets consisted of the following at December 31, 2006:




**Cost**
              
              **Accumulated
                  Amortization**
              
              **Net**Trademarks
                  and URL's
              
              $
              5,146,366
              
              $
              (265,029
              )
              $
              4,881,337Software
                  licenses
              
              
              569,067
              
              
              (539,134
              )
              
              29,933Customer
                  relationships
              
              
              10,000,000
              
              
              (1,279,362
              )
              
              8,720,638Developed
                  technology
              
              
              800,000
              
              
              (173,329
              )
              
              626,671Non-compete
                  agreements
              
              
              281,000
              
              
              (98,417
              )
              
              182,583$
              16,796,433
              
              $
              (2,355,271
              )
              $
              14,441,162




Intangible
      assets consisted of the following at December 31, 2005:




**Cost**
            
            **Accumulated**
                **Amortization**
            
            **Net**Trademarks
                and URL's
            
            $
            746,366
            
            $
            (154,049
            )
            $
            592,317Software
                licenses
            
            
            533,180
            
            
            (424,090
            )
            
            109,090Customer
                relationships
            
            
            10,000,000
            
            
            (98,413
            )
            
            9,901,587Developed
                technology
            
            
            800,000
            
            
            (13,333
            )
            
            786,667Non-compete
                agreements
            
            
            270,000
            
            
            (7,500
            )
            
            262,500$
            12,349,546
            
            $
            (697,385
            )
            $
            11,652,161




Amortization
      expense was $1,657,886, $245,206 and $128,793 for the years ended December
      31,
      2006, 2005 and 2004, respectively. Amortization expense as of December 31,
      2006
      is expected to be:




**Year
                Ending December 31,**
            
            **Amortization**
                  **Expense**2007
            
            $
            1,705,5692008
            
            
            1,686,2572009
            
            
            1,595,5322010
            
            
            1,579,8092011
            
            
            1,432,229Thereafter
            
            
            6,441,766Total
                expected amortization expense of intangible assets
            
            $
            14,441,162





50


**Other
        Assets-**


Other
                  assets consisted of the following:
              
              **December
                  31,****2006**
              
              **2005**Computer
                  and software deposits
              
              $
              26,804
              
              $
              48,146Deferred
                  compensation plan assets
              
              
              222,920
              
              
              178,133Other
              
              
              524,393
              
              
              215,932$
              774,117
              
              $
              442,211
 **Accrued
          Expenses-**
 Accrued
                  expenses consisted of the following:
              
              **December
                  31,****2006**
              
              
              **2005**Accrued
                  payroll and related benefits
              
              $
              1,963,297
              
              $
              1,896,997Vacation
              
              
              381,063
              
              
              424,228Sales
                  commissions
              
              
              405,334
              
              
              333,805Marketing
              
              
              394,905
              
              
              263,433Due
                  to distribution partners
              
              
              1,348,786
              
              
              333,751Purchase
                  obligations
              
              
              -
              
              
              1,185,616Professional
                  fees
              
              
              266,745
              
              
              143,181Income
                  taxes
              
              
              -
              
              
              380,754Legal
                  fees and other
              
              
              185,347
              
              
              65,176Other
              
              
              291,745
              
              
              66,246$
              5,237,222
              
              $
              5,093,187




**Note
      5 - Income Taxes**





The
      components of the income tax expense (benefit) are as follows:




**Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Current:Federal
              
              $
              2,849,927
              
              $
              476,307
              
              $
              2,761,525State
              
              
              553,077
              
              
              391,672
              
              
              479,394Total
                  current
              
              
              3,403,004
              
              
              867,979
              
              
              3,240,919Deferred:Federal
              
              
              2,757,586
              
              
              4,498,356
              
              
              (6,692,153
              )State
              
              
              750,793
              
              
              433,818
              
              
              (1,314,426
              )Total
                  deferred
              
              
              3,508,379
              
              
              4,932,174
              
              
              (8,006,579
              )Total
                  income tax expense (benefit)
              
              $
              6,911,383
              
              $
              5,800,153
              
              $
              (4,765,660
              )





The
      difference between income tax expense (benefit) computed at the statutory rate
      and the reported income tax benefit is as follows:


**Year
                  Ended December 31,****2006**
              
              **2005**
              
              **2004**Income
                  taxes at statutory rate
              
              $
              5,751,274
              
              $
              5,261,178
              
              $
              2,920,757State
                  income taxes, net of federal benefit
              
              
              860,555
              
              
              544,823
              
              
              332,200Nondeductible
                  items and other
              
              
              39,384
              
              
              17,816
              
              
              138,370Change
                  in deferred asset effective rate and other
              
              
              260,170
              
              
              (23,664
              )
              
              -Stock
                    option benefit included in prior year valuation
                    allowance
              
              
              -
              
              
              -
              
              
              1,212,198Change
                  in valuation allowance
              
              
              -
              
              
              -
              
              
              (9,369,185
              )Total
                  income tax expense (benefit)
              
              $
              6,911,383
              
              $
              5,800,153
              
              $
              (4,765,660
              )
 51




The
      Company’s effective rate in 2006 and 2005 differs from the statutory federal
      income tax rate, primarily due to state income taxes. The Company’s effective
      rate in 2004 differs from the statutory Federal income tax rate, primarily
      as a
      result of the changes in the valuation allowance on deferred tax assets.




The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets and liabilities consisted of the following:


**December
                  31,****2006**
              
              **2005**Deferred
                  Tax Assets:Net
                  operating loss carryforwards
              
              $
              345,911
              
              $
              5,631,037Tax
                  credit carryforwards
              
              
              603,896
              
              
              462,091Share-based
                  compensation
              
              
              2,108,524
              
              
              -Accrued
                  expenses
              
              
              123,428
              
              
              157,852Allowance
                  for doubtful accounts
              
              
              630,512
              
              
              194,656Total
                  gross deferred tax assets
              
              
              3,812,271
              
              
              6,445,636Deferred
                  Tax Liabilities:Depreciation
                  and amortization
              
              
              (846,245
              )
              
              28,769Net
                  deferred tax assets
              
              $
              2,966,026
              
              $
              6,474,405




As
      required by Statement of Financial Accounting Standards (“SFAS”) No. 109, the
      Company recognizes tax assets on the balance sheet if it is more likely than
      not
      that they will be realized on future tax returns. Up to the third quarter of
      2003, the Company had provided a full valuation allowance against accumulated
      deferred tax assets, reflecting the uncertainty associated with its future
      profitability. In the fourth quarter of 2003, the Company reassessed the
      valuation allowance previously established against deferred tax assets. Factors
      considered included: historical results of operations, volatility of the
      economic and interest rate environment and projected earnings based on current
      operations. Based on this evidence, the Company concluded that it was more
      likely than not that a portion of the deferred tax assets would be realized
      and,
      accordingly, released $3,400,000 of the valuation allowance, which resulted
      in
      an income tax benefit of approximately $3,100,000.





During
      the quarters ended March 31, June 30, and Sept 30, 2004, the Company evaluated
      the need for a valuation allowance against the deferred tax asset. The Company
      completed its business planning process during the fourth quarter of 2004,
      which
      included the following strategic initiatives for 2005: the enhancement of its
      quality control process and procedures; the re-design of its Web site; the
      execution of exclusive advertising contracts with two mortgage lead aggregators;
      broadening the breadth and depth of its products and services; a reorganization
      of its advertising sales force; and the migration to a cost-per-click revenue
      model on its rate tables. Considering these strategic initiatives and their
      impact on future earnings potential, the Company concluded that it is more
      likely than not that it will generate sufficient taxable income in future
      periods to realize the entire deferred tax asset. At December 31, 2004, the
      Company reversed the remaining $9,400,000 valuation allowance resulting in
      an
      income tax benefit of $4,800,000. The income tax benefit relating to stock
      option exercised during 2004 was approximately $2,000,000, for a total 2004
      benefit of approximately $3,200,000 which was allocated to stockholders’
equity.





At
      December 31, 2006, the Company had fully utilized its net operating loss
      carryforwards for federal income tax purposes.





**Note
      6 - Related Party Transactions**





The
      Company leased office space in North Palm Beach, Florida from Bombay Holdings,
      Inc. ("Bombay"), which at the time was wholly-owned by Peter C. Morse ("Morse"),
      a director and 26% stockholder. Total rent paid to Bombay for the year ended
      December 31, 2004 was approximately $244,000. In November 2004, the Company
      entered into a sublease for new space and the Bombay lease was terminated
      effective December 31, 2004.





During
      2004, the Company paid an outside director consulting fees of approximately
      $17,000. No such fees were paid during 2006 or 2005.





**Note
      7 - Commitments and Contingencies**





**Leases**





On
      November 3, 2005, the Company entered into a lease for approximately 21,000
      square feet of office space in North Palm Beach. The initial lease term is
      for
      10 years with an option to renew for one additional 5-year term.




52





On
      January 20, 2006, the Company entered into a lease for approximately 8,800
      square feet of office space on Madison Avenue, New York, New York. The initial
      lease term is for 10 years and six months. The Company initially paid a $210,000
      refundable security deposit which was replaced with an irrevocable letter of
      credit secured by the cash deposit.





On
      February 15, 2006, the Company entered into a lease for approximately 4,900
      square feet of office space in Chicago, Illinois. The initial lease term expires
      on November 30, 2008. The Company initially paid a $79,000 refundable security
      deposit which was replaced with an irrevocable letter of credit secured by
      the
      cash deposit.





In
      connection with the acquisition of FastFind, the Company assumed an office
      space
      lease in San Francisco, California, expiring February 28, 2009. The Company
      also
      leases office space in Sherman Oaks, California on a month-to-month
      basis.





Total
      rent expense for the years ended December 31, 2006, 2005 and 2004 amounted
      to
      approximately $1,101,000, $620,000 and $498,000, respectively.  During
      2004, the Company also recorded sublease rental income of approximately $28,000
      under the terms of a sublease agreement that expired on June 21,
      2004.




The
      Company recognizes rent expense for operating leases with periods of free rent
      (including construction periods), step rent provisions and escalation clauses
      on
      a straight-line basis over the applicable lease term. The Company considers
      lease renewals in the useful life of its leasehold improvements when such
      renewals are reasonably assured. The Company takes these provisions into account
      when calculating minimum aggregate rental commitments under non-cancelable
      operating leases. Future minimum lease payments under non-cancelable operating
      leases having lease terms in excess of one year as of December 31, 2006 were:


**Operating****Year
                    Ending December 31,**
              
              **Leases**2007
              
              $
              1,215,8572008
              
              
              1,186,3722009
              
              
              985,4922010
              
              
              951,6272011
              
              
              969,283Thereafter
              
              
              4,756,845Total
                  minimum lease payments
              
              $
              10,065,476




**Distribution
      Agreements**





The
      Company has various agreements with advertisers, content providers and other
      web
      sites that require it to feature such parties exclusively in certain sections
      of
      its web site.





**Legal
      Proceedings**





In
      July
      2000, the Company sold its former wholly owned subsidiary, Pivot, for $4,350,000
      in cash. In connection with the sale, the Company agreed to indemnify the buyer
      for liability of up to $1,000,000 in connection with a litigation matter between
      Pivot and its  co-founders
      and former owner. In March 2001, the case was dismissed based on a technical
      deficiency. In August 2001, the plaintiff refiled the complaint. On October
      8,
      2004, the Company was notified that the buyer settled the litigation matter,
      effective October 1, 2004, and the Company reimbursed the buyer $390,000 under
      the indemnity. The $390,000 was recorded in the quarter ended September 30,
      2004
      as a legal settlement charge.





In
      February 2005, the Company settled a contractual dispute with a former Internet
      and co-location facility provider for $120,000. This amount is included in
      legal
      settlements in the accompanying statement of operations for the year ended
      December 31, 2004.





On
      October 9, 2006, the Company entered into a Confidential Final Settlement
      Agreement and Mutual Release with American Interbanc Mortgage, LLC (“AI”) in
      settlement of the claims pending against it in the lawsuit filed in the Superior
      Court of California in March 2002. AI had originally filed suit against several
      of its competitors (but not the Company) who advertised on Bankrate.com alleging
      false advertising under the Lanham Act, common law unfair competition, and
      violations of certain sections of the California Business and Professional
      Code.
      AI later amended its complaint to include the Company as a defendant, alleging,
      in short, that the Company conspired with the co-defendants to allow the
      co-defendants to engage in false advertising on Bankrate.com while prohibiting
      AI to advertise on Bankrate.com. AI sought damages of at least $16.5 million,
      to
      have those damages tripled, and “reasonable attorneys fees pursuant to 15 U.S.C.
      Section 1117(b) and California Business and Professional Code Section 16750(a),”
and costs.




53





Under
      the
      terms of the Settlement Agreement, the Company agreed to make a one-time cash
      payment of $3.0 million to AI and AI agreed to dismiss the lawsuit with no
      ability to reassert its claims against the Company. The Company has also agreed
      to certain terms and conditions that permit AI to advertise on Bankrate.com.
      The
      Company believes that all of AI’s claims against it were factually and legally
      without merit and did not admit to any wrongdoing as part of the settlement.
      The
      $3.0 million cash payment is included in the accompanying consolidated statement
      of income as legal settlement.





From
      time to time, in addition to those identified above, the Company is subject
      to
      legal proceedings, claims, investigations and proceedings in the ordinary course
      of business. In accordance with U.S. generally accepted accounting principles,
      the Company makes a provision for a liability when it is both probable that
      a
      liability has been incurred and the amount of the loss can be reasonably
      estimated. These provisions are reviewed at least quarterly and adjusted to
      reflect the impacts of negotiations, settlements, rulings, advice of legal
      counsel, and other information and events pertaining to a particular case.
      Litigation is inherently unpredictable. However, the Company believes that
      it
      has valid defenses with respect to the legal matters pending against it. It
      is
      possible, nevertheless, that the Company’s consolidated financial position, cash
      flows or results of operations could be affected by the resolution of one or
      more of such contingencies.





**Other
      Commitments**





The
      Company has executed employment agreements with nine key executives, including
      the Company’s President and Chief Executive Officer, between January 2004 and
      September 2006. Each employment agreement provides for a minimum annual base
      salary, an annual bonus contingent on the Company achieving certain performance
      criteria, and severance provisions ranging from six months to one year’s annual
      base salary. Under the terms of the employment agreements, the executives are
      entitled to receive minimum annual base salaries of $2.3 million in the
      aggregate.





**Other
      Contingencies**





On
      October 24, 2005, a major hurricane passed through the North Palm Beach, Florida
      area resulting in a power outage and minor damage to the Company’s office
      facility. The Company’s contingency and disaster recovers plans were activated
      which allowed for the continued, uninterrupted operation of Bankrate.com during
      the recovery period. A portion of the losses and additional expenses incurred
      were covered by insurance for which a claim was filed and, as a result, a
      $86,000 insurance claim receivable was recorded as of December 31, 2005.





In
      September 2004, the Company’s North Palm Beach, Florida corporate office
      building sustained severe damage from the two major hurricanes that hit the
      South Florida coast. The Company submitted insurance claims for the furniture
      and equipment lost, and the replacement cost reimbursement was greater than
      the
      book value of the assets destroyed. Accordingly, in the first quarter of 2005,
      a
      $221,000 gain was recorded in other income in the accompanying consolidated
      statement of income.





**Note
      8 - Segment Information**





The
      Company currently operates in two reportable business segments: online
      publishing, and print publishing and licensing. The online publishing segment
      is
      primarily engaged in the sale of advertising, sponsorships, and hyperlinks
      in
      connection with the Company’s web sites, Bankrate.com, Interest.com,
      FastFind.com and Mortgage-calc.com. The print publishing and licensing segment
      is primarily engaged in the sale of advertising in the *Mortgage
      Guide* and *Deposit
      and CD Guide* rate
      tables, newsletter subscriptions, and licensing of research information. The
      acquired operations of FastFind, Interest.com, and Mortgage-calc.com are
      included in the online publishing segment. The acquired operations of Mortgage
      Market Information Services, Inc. are included in the print publishing and
      licensing segment. The Company evaluates the performance of its operating
      segments based on segment profit (loss).





54




No
      single
      customer accounted for more than 10% of total revenue for the periods presented.
      No material revenues were generated outside of the United States.





Summarized
      segment information as of December 31, 2006, 2005 and 2004, and for the years
      ended December 31, 2006, 2005 and 2004, respectively, is presented below.


**Print****Online**
              
              **Publishing****Publishing**
              
              **and
                  Licensing**
              
              **Other**
              
              **Total****Year
                  Ended December 31, 2006**Revenue
              
              $
              63,970,860
              
              $
              15,679,115
              
              $
              -
              
              $
              79,649,975Cost
                  of revenue
              
              
              11,101,425
              
              
              13,845,594
              
              
              -
              
              
              24,947,019Gross
                  margin
              
              
              52,869,435
              
              
              1,833,521
              
              
              -
              
              
              54,702,956Operating
                  expenses:Sales
              
              
              5,055,076
              
              
              -
              
              
              -
              
              
              5,055,076Marketing
              
              
              4,835,941
              
              
              -
              
              
              -
              
              
              4,835,941Product
                  development
              
              
              2,908,005
              
              
              712,745
              
              
              -
              
              
              3,620,750General
                  and administrative
              
              
              17,515,475
              
              
              4,319,570
              
              
              -
              
              
              21,835,406Legal
                  settlement
              
              
              3,000,000
              
              
              -
              
              
              -
              
              
              3,000,000Depreciation
                  and amortization
              
              
              2,019,365
              
              
              382,345
              
              
              -
              
              
              2,401,710Other
                  income
              
              
              -
              
              
              -
              
              
              2,961,080
              
              
              2,961,080Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              (6,911,383
              )
              
              (6,911,383
              )Segment
                  profit (loss)
              
              $
              17,535,572
              
              $
              (3,581,139
              )
              $
              (3,950,303
              )
              $
              10,003,770Goodwill
              
              $
              26,129,688
              
              $
              3,909,737
              
              $
              -
              
              $
              30,039,425Total
                  assets
              
              $
              52,876,678
              
              $
              9,108,992
              
              $
              114,697,926
              
              $
              176,683,596
  **Print****Online**
              
              
              **Publishing****Publishing**
              
              
              **and
                  Licensing**
              
              
              **Other**
              
              
              **Total****Year
                  Ended December 31, 2005**Revenue
              
              $
              43,296,384
              
              $
              5,752,647
              
              $
              -
              
              $
              49,049,031Cost
                  of revenue
              
              
              7,389,089
              
              
              5,346,017
              
              
              -
              
              
              12,735,106Gross
                  margin
              
              
              35,907,295
              
              
              406,630
              
              
              -
              
              
              36,313,925Sales
              
              
              3,683,482
              
              
              -
              
              
              -
              
              
              3,683,482Marketing
              
              
              5,922,964
              
              
              -
              
              
              -
              
              
              5,922,964Product
                  development
              
              
              2,168,506
              
              
              288,122
              
              
              -
              
              
              2,456,628General
                  and administrative expenses
              
              
              7,975,314
              
              
              1,059,653
              
              
              -
              
              
              9,034,967Depreciation
                  and amortization
              
              
              790,354
              
              
              105,012
              
              
              -
              
              
              895,366Other
                  income, net
              
              
              -
              
              
              -
              
              
              1,153,536
              
              
              1,153,536Income
                  tax expense
              
              
              -
              
              
              -
              
              
              (5,800,153
              )
              
              (5,800,153
              )Segment
                  profit (loss)
              
              $
              15,366,675
              
              $
              (1,046,157
              )
              $
              (4,646,617
              )
              $
              9,673,901Goodwill
              
              $
              26,093,877
              
              $
              3,941,522
              
              $
              -
              
              $
              30,035,399Total
                  assets
              
              $
              43,108,491
              
              $
              8,481,255
              
              $
              10,963,477
              
              $
              62,553,223
  **Print****Online**
              
              
              **Publishing****Publishing**
              
              
              **and
                  Licensing**
              
              
              **Other**
              
              
              **Total****Year
                  Ended December 31, 2004**Revenue
              
              $
              33,942,241
              
              $
              5,262,020
              
              $
              -
              
              $
              39,204,261Cost
                  of revenue
              
              
              5,534,456
              
              
              4,359,444
              
              
              -
              
              
              9,893,900Gross
                  margin
              
              
              28,407,785
              
              
              902,576
              
              
              -
              
              
              29,310,361Sales
              
              
              4,186,799
              
              
              -
              
              
              -
              
              
              4,186,799Marketing
              
              
              6,357,424
              
              
              -
              
              
              -
              
              
              6,357,424Product
                  development
              
              
              2,082,785
              
              
              322,891
              
              
              -
              
              
              2,405,676General
                  and administrative expenses
              
              
              5,772,539
              
              
              894,909
              
              
              -
              
              
              6,667,448Legal
                  settlements
              
              
              -
              
              
              -
              
              
              510,000
              
              
              510,000Severance
                  charge
              
              
              -
              
              
              -
              
              
              260,000
              
              
              260,000Depreciation
                  and amortization
              
              
              642,979
              
              
              99,680
              
              
              -
              
              
              742,659Other
                  income, net
              
              
              -
              
              
              -
              
              
              410,107
              
              
              410,107Income
                  tax benefit
              
              
              -
              
              
              -
              
              
              4,765,660
              
              
              4,765,660Segment
                  profit (loss)
              
              $
              9,365,259
              
              $
              (414,904
              )
              $
              4,405,767
              
              $
              13,356,122Total
                  assets
              
              $
              16,153,152
              
              $
              2,118,101
              
              $
              27,735,267
              
              $
              46,006,520
 
 55


**Note
      9 - Acquisitions**





On
      November 30, 2005, the Company completed the acquisition of Wescoco LLC, a
      Delaware limited liability company d/b/a “FastFind” (“FastFind”) for $10 million
      in cash, plus a net working capital adjustment of $149,000 in the quarter ended
      June 30, 2006, in accordance with the Agreement and Plan of Merger dated
      November 20, 2005.  The
      acquisition was made utilizing cash on hand. The acquisition was accounted
      for
      as a purchase and the results of operations of FastFind are included in the
      consolidated results of the Company from the acquisition date. As a result
      of
      the acquisition, approximately $6.7 million in goodwill was recorded by the
      Company, which reflects the adjustments necessary to allocate the purchase
      price
      to the fair value of assets acquired and liabilities assumed.





In
      connection with the acquisition of FastFind on November 30, 2005, the Company
      made a final payment of approximately $149,000 based on an adjustment to Closing
      Date Net Working Capital as defined under Section 3.03 of the Agreement and
      Plan
      of Merger dated November 20, 2005. Accordingly, goodwill was increased by this
      amount during the quarter ended June 30, 2006.





On
      December 1, 2005, the Company completed the acquisition of Mortgage Market
      Information Services, Inc., an Illinois corporation, and Interest.com, Inc.,
      an
      Illinois corporation (“Interest.com” and collectively with Mortgage Market
      Information Services, Inc., “MMIS”), for $30 million in cash ***,*** subject
      to final Closing Date Equity adjustments under section 3.03 of the Agreement
      and
      Plan of Merger dated November 20, 2005. ****** The
      Company paid $26 million on December 8, 2005, $1 million on January 5, 2006,
      and
      $3 million was placed in escrow to satisfy certain indemnification obligations
      of MMIS's shareholder. The acquisition was made utilizing cash on hand. The
      acquisition was accounted for as a purchase and the results of operations of
      MMIS are included in the consolidated results of the Company from the
      acquisition date. As a result of the acquisition, approximately $23.3 million
      in
      goodwill was recorded by the Company, which reflects the adjustments necessary
      to allocate the purchase price to the fair value of assets acquired, liabilities
      assumed and additional purchase liabilities recorded.




The
      following unaudited pro forma data summarize the results of operations for
      the
      periods indicated as if these acquisitions had been completed on January 1,
      2004. The pro forma data give effect to the actual operating results prior
      to
      the acquisitions and adjustments to interest expense, goodwill amortization
      and
      income taxes. These pro forma amounts do not purport to be indicative of the
      results that would have been actually obtained if the acquisitions had occurred
      on January 1, 2004 or that may be obtained in the future.


**Year
                  Ended December 31,****2005**
              
              **2004**Total
                  revenue
              
              $
              69,816,030
              
              $
              58,133,515Income
                  from operations
              
              $
              12,638,785
              
              $
              5,702,295Net
                  income
              
              $
              8,052,959
              
              $
              11,612,982Basic
                  and diluted earnings per share:Basic
              
              $
              0.51
              
              $
              0.75Diluted
              
              $
              0.48
              
              $
              0.73Weighted
                  average common shares outstanding:Basic
              
              
              15,809,259
              
              
              15,438,097Diluted
              
              
              16,922,218
              
              
              15,975,382


The
      Company determined the fair value of the intangibles and the resulting goodwill
      in our purchase price allocations for our acquisitions. These valuations
      principally use the discounted cash flow methodology and were made concurrent
      with the effective acquisition.  Purchase
      price allocations for business combinations accounted for under the purchase
      method of accounting related to 2005 were as follows:


Property
                  and equipment
              
              $
              227,491Goodwill
              
              
              30,035,399Working
                  capital
              
              
              (2,015,794
              )Customer
                  relationships
              
              
              10,000,000Developed
                  technology
              
              
              800,000Internet
                  domain names
              
              
              600,000Non-compete
                  agreement
              
              
              270,000Other
                  assets
              
              
              53,385Other
                  liabilities
              
              
              (1,000,000
              )Cash
                  used in business acquisitions, net of cash acquired
              
              $
              38,970,481
  56


On
      August
      4, 2006, the Company completed the acquisition of a group of assets that
      consists of three web sites (Mortgage-calc.com, Mortgagecalc.com and
      Mortgagemath.com, collectively “Mortgagecalc.com”) owned and operated by East
      West Mortgage, Inc. for $4.4 million in cash. The Company paid $4,350,000 on
      August 7, 2006, and $50,000 was placed in escrow to satisfy certain
      indemnification obligations of the seller. The acquisition was made using cash
      on hand. As a result of the acquisition, approximately $4,411,000 in intangible
      assets was recorded by the Company. The operations of these web sites were
      integrated into the online publishing segment.





**Note
      10. Employee Benefit Plans**





The
      Company sponsors a 401(k) plan for certain employees over the age of 21 who
      have
      completed a minimum of 12 months of employment. The Company makes safe-harbor
      contributions of 3.0% of an employee’s salary. Company contributions
      totaled  approximately
      $400,000,  $215,000
      and $227,000 in 2006, 2005 and 2004, respectively.





**Item
      9.**  **Changes
      in and Disagreements With Accountants on Accounting and**  **Financial
      Disclosure**





None.





**Item
      9A. Controls and Procedures**





**Disclosure
      Controls and Procedures**





As
      of
      December 31, 2006, the Company’s management, including its Chief Executive
      Officer and Chief Financial Officer, evaluated the effectiveness of the
      Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under
      the Securities Exchange Act of 1934). Based on that evaluation, the Company’s
      management, including its Chief Executive Officer and Chief Financial Officer,
      have concluded that the Company’s disclosure controls and procedures were
      effective.





Management,
      including the Company’s Chief Executive Officer and Chief Financial Officer,
      does not expect that the Company’s disclosure controls and procedures will
      prevent all errors and all fraud. A control system, no matter how well conceived
      and operated, can provide only reasonable, not absolute, assurance that the
      objectives of the control system are met. Further, the design of a control
      system must reflect the fact that there are resource constraints, and the
      benefits of controls must be considered relative to their costs. Because of
      the
      inherent limitations in all control systems, no evaluation of controls can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within the Company have been detected.





**Management’s
      Report on Internal Control over Financial Reporting**





The
      Company’s management (“management”) is responsible for establishing and
      maintaining effective internal control over financial reporting (as defined
      in
      Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).
      Management assessed the effectiveness of its internal control over financial
      reporting as of December 31, 2006. In making this assessment, management used
      the criteria set forth by the Committee of Sponsoring Organizations of the
      Treadway Commission (“COSO”) in *Internal
      Control-Integrated*  *Framework* .
      Management has concluded that, as of December 31, 2006, the Company maintained
      effective internal control over financial reporting, as such term is defined
      in
      Securities Exchange Act of 1934 Rule 13a-15(f), as amended. The Company’s
      independent registered public accounting firm, KPMG LLP, has issued an audit
      report on the Company’s assessment of its internal control over financial
      reporting, which is included herein.





**Changes
      in Internal Control over Financial Reporting**





The
      Company’s management, including its Chief Executive Officer and Chief Financial
      Officer, has reviewed our internal control. There has been no significant
      changes in the Company’s internal control over financial reporting during the
      quarter ended December 31, 2006, nor subsequent to the date of their evaluation,
      that have materially affected, or are reasonably likely to materially affect
      its
      internal control over financial reporting.





57




**Report
      of Independent Registered Public Accounting Firm**





The
      Board
      of Directors and Stockholders


Bankrate,
      Inc.:




We
      have
      audited management’s assessment, included in the accompanying Management’s
      Report on Internal Control over Financial Reporting appearing under Item 9A,
      that Bankrate, Inc. and subsidiaries (the Company or Bankrate) maintained
      effective internal control over financial reporting as of December 31,
      2006, based on criteria established in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      The Company’s Management is responsible for maintaining effective internal
      control over financial reporting and for its assessment of the effectiveness
      of
      internal control over financial reporting. Our responsibility is to express
      an
      opinion on management’s assessment and an opinion on the effectiveness of the
      Company’s internal control over financial reporting based on our
      audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





In
      our
      opinion, management’s assessment that the Company maintained effective internal
      control over financial reporting as of December 31, 2006, is fairly stated,
      in
      all material respects, based on criteria established in *Internal
      Control—Integrated Framework* issued
      by the COSO. Also, in our opinion, the Company maintained, in all material
      respects, effective internal control over financial reporting as of December
      31,
      2006, based on criteria established in *Internal
      Control—Integrated Framework* issued
      by the COSO.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of the Company
      as of December 31, 2006 and 2005, and the related consolidated statements of
      operations, stockholder’s equity and comprehensive income (loss) cash flows for
      each of the years in the three-year period ended December 31, 2006, and our
      report dated March 16, 2007 expressed an unqualified opinion on those
      consolidated financial statements.




/s/
      KPMG
      LLP




March
      16,
      2007


Ft.
      Lauderdale, Florida


Certified
      Public Accountants





58




**Item
      9B. Other Information**





None .




**PART
      III**





**Item
      10. Directors, Executive Officers and Corporate Governance**





The
      information required by this Item is incorporated by reference to the
      registrant’s proxy Statement for its 2007 Annual Meeting of Stockholders to be
      filed with the Securities and Exchange Commission within 120 days after the
      end
      of the fiscal year ended December 31, 2006.





**Item
      11. Executive Compensation**





The
      information required by this Item is incorporated by reference to the
      registrant’s proxy Statement for its 2007 Annual Meeting of Stockholders to be
      filed with the Securities and Exchange Commission within 120 days after the
      end
      of the fiscal year ended December 31, 2006.





**Item
      12. Security Ownership of Certain Beneficial Owners and management and Related
      Stockholder Matters**





The
      information required by this Item is incorporated by reference to the
      registrant’s proxy Statement for its 2007 Annual Meeting of Stockholders to be
      filed with the Securities and Exchange Commission within 120 days after the
      end
      of the fiscal year ended December 31, 2006.





**Item
      13. Certain Relationships and Related Transactions, and Director
      Independence**





The
      information required by this Item is incorporated by reference to the
      registrant’s proxy Statement for its 2007 Annual Meeting of Stockholders to be
      filed with the Securities and Exchange Commission within 120 days after the
      end
      of the fiscal year ended December 31, 2006.





**Item
      14. Principal Accounting Fees and Services**





The
      information required by this Item is incorporated by reference to the
      registrant’s proxy Statement for its 2007 Annual Meeting of Stockholders to be
      filed with the Securities and Exchange Commission within 120 days after the
      end
      of the fiscal year ended December 31, 2006.





**Item
      15. Exhibits, Financial Statement Schedules**





**Documents
      Filed as Part of This Report:**





(1)
            Financial
                Statements.





See
      Index
      to Financial Statements under Item 8.





(2)
            Financial
                Statement Schedule.





All
      financial statement schedules have been omitted since the required information
      is not material or is included in the consolidated financial statements or
      notes
      thereto.





(3)
            Exhibits.





The
      exhibits to this report are listed below. Other than exhibits that are filed
      herewith, all exhibits listed below are incorporated by reference. Exhibits
      indicated by an asterisk (*) are the management contracts and compensatory
      plans, contracts or arrangements required to be filed as exhibits to this
      Report.





59




Exhibits
            Description 2.1
            Agreement
                and Plan of Reorganization dated November 20, 2005, by and among
                Bankrate,
                Inc., FastFind, LLC, and Wescoco LLC - incorporated herein by reference
                to
                Exhibit 2.1 of the Registrant's Form 8-K (filed 12/6/05) (No.
                0-25681).


2.2
            Agreement
                and Plan of Merger dated November 20, 2005, by and among Bankrate,
                Inc.,
                Sub 1, Sub 2, Mortgage Market Information Services, Inc. and Interest.com,
                Inc., Scarlett Enterprises, Ltd., and James R. De Both - incorporated
                herein by reference to Exhibit 2.2 of the Registrant's Form 8-K (filed
                12/6/05) (No. 0-25681).


2.3
            Asset
                Purchase Agreement by and among Bankrate, Inc., East West Mortgage,
                Inc.,
                The Doug Bui Family Trust (2006), and Doug Bui, dated August 4, 2006
                (the
                schedules and exhibits were omitted pursuant to Item 601(b)(2) of
                regulation S-K). - incorporated herein by reference to Exhibit 2.1
                of the
                Registrant's Form 10-Q (filed 8/9/06) (No.
                0-25681).


3.1
            Amended
                and Restated Articles of Incorporation - incorporated herein by reference
                to Exhibit 3.1 of the Registrant's Form S-1/A (filed 4/16/99) (No.
                333-74291).


3.2
            Articles
                of Amendment to Amended and Restated Articles of Incorporation -
                incorporated herein by reference to Exhibit 2.2 of the Registrant's
                Form
                10-Q (filed 11/13/00) (No.
                0-25681).


3.3
            Amended
                and Restated Bylaws- incorporated herein by reference to Exhibit
                3.2 of
                the Registrant's Form S-1/A (filed 4/16/99) (No.
                333-74291).


10.1
            Executive
                Employment Agreement effective June 21, 2004, between Thomas R. Evans
                and
                the Company - incorporated herein by reference to Exhibit 10.1 of
                the
                Registrant's Form 10-Q (filed 6/30/04) (No. 0-25681).
                *


10.2
            Executive
                Employment Agreement effective July 15, 2004, between Bruce J. Zanca
                and
                the Company - incorporated herein by reference to Exhibit 10.2 of
                the
                Registrant's Form 10-K (filed 3/16/05) (No. 0-25681).
                *


10.3
            Executive
                Employment Agreement effective October 4, 2004, between Steve Horowitz
                and
                the Company - incorporated herein by reference to Exhibit 10.3 of
                the
                Registrant's Form 10-K (filed 3/16/05) (No. 0-25681).
                *


10.4
            Sublease
                Agreement dated November 18, 2004, between the Company and New Cingular
                Wireless Services, Inc. f/k/a AT&T Wireless Services, Inc. -
                incorporated herein by reference to Exhibit 10.4 of the Registrant's
                Form
                10-K (filed 3/16/05) (No. 0-25681).


10.5
            Aggregator
                Agreement effective January 1, 2005 between the Company and iHomeowners,
                Inc. - incorporated herein by reference to Exhibit 10.5 of the
                Registrant's Form 10-K (filed 3/16/05) (No. 0-25681).
                #


10.6
            Marketing
                Agreement effective January 21, 2005 between the Company and LowerMyBills,
                Inc. - incorporated herein by reference to Exhibit 10.6 of the
                Registrant's Form 10-K (filed 3/16/05) (No. 0-25681).
                #


10.7
            Bankrate,
                Inc. 1997 Equity Compensation Plan - incorporated herein by reference
                to
                Exhibit 10.5 of the Registrant's Form S-1 (filed 2/11/99) (No. 333-74291).
                *


10.8
            Bankrate,
                Inc. Amended and Restated 1999 Equity Compensation Plan. *
                +


10.9
            Form
                of Stock Option Agreement under the 1997 Equity Compensation Plan
                and 1999
                Compensation Plan - incorporated herein by reference to Exhibit 10.7
                of
                the Registrant's Form S-1 (filed 2/11/99) (No. 333-74291).
                *


10.10
            Executive
                Employment Agreement dated January 1, 2004 between G. Cotter Cunningham
                and Bankrate, Inc. - incorporated herein by reference to Exhibit
                10.14 on
                Registrant's Form 10-K (filed 3/15/04) (No. 0-25681).
                *


10.11
            Executive
                Employment Agreement dated January 1, 2004 between Robert J. DeFranco
                and
                Bankrate, Inc. - incorporated herein by reference to Exhibit 10.15
                on
                Registrant's Form 10-K (filed 3/15/04) (No. 0-25681). *


10.12
            Executive
                Employment Agreement effective May 23, 2005 between Lynn E. Varsell
                and
                Bankrate, Inc. - incorporated herein by reference to Exhibit 10.12
                on
                Registrant's Form 10-K (filed 3/16/06) (No. 0-25681). *


10.13
            Executive
                Employment Agreement dated May 31, 2005 between Daniel P. Hoogterp
                and
                Bankrate, Inc. - incorporated herein by reference to Exhibit 10.1
                on
                Registrant's Form 10-Q (filed 8/9/05) (No. 0-25681).
                *




60




10.14
            Lease
                Agreement dated November 3, 2005 between Gardens Plaza Investors,
                LLC and
                Bankrate, Inc. - incorporated herein by reference to Exhibit 10.14
                on
                Registrant's Form 10-K (filed 3/16/06) (No.
                0-25681).  10.15
            Lease
              Agreement dated January 20, 2006 between J.A.B. Madison Holdings, LLC
              and
              Bankrate, Inc. +


10.16
            Executive
                Agreement effective April 3, 2006 between Edward J. DiMaria and Bankrate,
                Inc. - incorporated herein by reference to Exhibit 10.1 on Registrant's
                Form 10-Q (filed 5/2/06) (No. 0-25681).
                *


10.17
            Executive
                Agreement effective September 11, 2006 between Donaldson Ross and
                Bankrate, Inc. - incorporated herein by reference to Exhibit 10.1
                on
                Registrant's Form 10-Q (filed 11/9/06) (No. 0-25681).
                *


10.18
            Confidential
                Final Settlement Agreement dated October 9, 2006, between American
                Interbanc Mortgage, LLC and Bankrate, Inc.
                +


11.1
            Statement
                re: Computation of Per Share Earnings
                **


21.1
            Subsidiaries
                of the Registrant +


23.1
            Consent
                of KPMG LLP. +


31.1
            Certification
                of Chief Executive Officer Pursuant to Securities Exchange Act Rules
                13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 +


31.2
            Certification
                of Chief Financial Officer Pursuant to Securities Exchange Act Rules
                13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 +


32.1
            Certification
                of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                +


32.2
            Certification
                of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                +


+
            Filed
                herewith.


#
            Confidential
                treatment has been granted with respect to certain information in
                this
                exhibit pursuant to a confidential treatment
                request.


**
            Information
                required to be presented in Exhibit 11 is provided in Note 2 to the
                consolidated financial statements under Part II, Item 8 of this Form
                10-K
                in accordance with the provisions of FASB Statement of Financial
                Accounting Standards No. 128,*Earnings
                Per Share*.




61




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized as of the  16th
      day
      of March, 2007.








By:
            /s/ Thomas
              R. EvansThomas
                R. Evans
              President
                and Chief
              Executive
                Officer
              (Principal
                Executive Officer)




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant in the
      capacities and on the dates indicated.








Signature
            
            Title
            
            DateBy: 
                /s/ Thomas R. Evans
            
            President
            
            March
                16, 2007Thomas
                R. Evans
            
            Chief
                Executive Officer
              (Principal
                Executive Officer)By:
                 /s/ Edward J. DiMaria
            
            Senior
                Vice President
            
            March
                16, 2007Edward
                J. DiMaria
            
            Chief
                Financial Officer
                (Principal
                  Financial and Accounting Officer)By: 
                /s/ G. Cotter Cunningham
            
            Senior
                Vice President
            
            March
                16, 2007G.
                Cotter Cunningham
            
            Chief
                Operating OfficerBy: 
                /s/ William C. Martin
            
            Director
            
            March
                16, 2007William
                C. MartinBy: 
                /s/ Peter C. Morse
            
            Director
            
            March
                16, 2007Peter
                C. MorseBy: 
                /s/ Robert P. O’Block
            
            Director
            
            March
                16, 2007Robert
                P. O'BlockBy:
                 /s/ Richard J. Pinola
            
            Director
            
            March
                16, 2007Richard
                J. PinolaBy: 
                /s/ Randall E. Poliner
            
            Director
            
            March
                16, 2007Randall
                E. Poliner




62