UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)                           |                                                                                         
|------------------------------------ | ----------------------------------------------------------------------------------------
|ý                                    | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the Year Ended December 31, 2003
|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 number 000-30135

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VALUECLICK, INC.(Exact name of registrant as specified in its charter)

|Delaware(State or Other Jurisdiction of
Incorporation or Organization) |  | 77-0495335(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------- |  | ----------------------------------------------

4353 Park Terrace Drive,
Westlake Village, California 91361(Address of principal executive offices, including zip code)

Registrant's Telephone Number, Including Area Code: (818) 575-4500

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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

| |  | Common Stock, $0.001 par value
Series A Preferred Stock Purchase Rights(Title of each class) |  | 
| |  | -------------------------------------------------------------------------------------------- |  | 

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 ý No o

Indicate by a 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 an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes ý No o

As of June 30, 2003, which was the last business day of the registrant's most recently completed second fiscal quarter, the approximate aggregate market
value of voting stock held by non-affiliates of the registrant was $449.4 million (based upon the closing price for shares of the Registrant's Common Stock as reported by The
National Market System of the National Association of Securities Dealers Automated Quotation System as of that date). As of February 29, 2004, there were approximately 78,113,000 shares of
Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Registrant's Proxy Statement for the 2004 Annual Meeting of Stockholders, to be held June 3, 2004, are incorporated by reference
in Part III of this Form 10-K to the extent described therein. The Exhibit Index begins on page 45.



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VALUECLICK, INC.  FORM 10-K ANNUAL REPORT  TABLE OF CONTENTS

|         |  |          |  |                                                                                                    |  | Page
|-------- |  | -------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|PART I   |  | 1       
|         |  | ITEM 1.  |  | BUSINESS                                                                                           |  | 1   
|         |  | ITEM 2.  |  | PROPERTIES                                                                                         |  | 25  
|         |  | ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                  |  | 25  
|         |  | ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                |  | 26  
|PART II  |  | 27      
|         |  | ITEM 5.  |  | MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS                           |  | 27  
|         |  | ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                            |  | 27  
|         |  | ITEM 7.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 31  
|         |  | ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                         |  | 42  
|         |  | ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                        |  | 43  
|         |  | ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE               |  | 43  
|         |  | ITEM 9A. |  | CONTROLS AND PROCEDURES                                                                            |  | 43  
|PART III |  | 44      
|         |  | ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                 |  | 44  
|         |  | ITEM 11. |  | EXECUTIVE COMPENSATION                                                                             |  | 44  
|         |  | ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS     |  | 44  
|         |  | ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                     |  | 44  
|         |  | ITEM 14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                             |  | 44  
|PART IV  |  | 45      
|         |  | ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                                    |  | 45  
|         |  |          |  | SIGNATURES                                                                                         |  |     
|         |  |          |  | CERTIFICATION OF CEOSarbanes-Oxley Act Section 302                                                |  |     
|         |  |          |  | CERTIFICATION OF CFOSarbanes-Oxley Act Section 302                                                |  |     
|         |  |          |  | CERTIFICATION OF CEOSarbanes-Oxley Act Section 906                                                |  |     
|         |  |          |  | CERTIFICATION OF CFOSarbanes-Oxley Act Section 906                                                |  |     

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This Annual Report on Form 10-K, including information incorporated herein by reference, contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to expectations concerning matters that are not historical
facts. Words such as "projects," "believes," "anticipates," "will," "estimate," "plans," "expects," "intends," and similar words and expressions are intended to identify forward-looking statements.
Although we believe that such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. Important language regarding factors which could cause
actual results to differ materially from such expectations are disclosed in this Report, including without limitation under the caption "Risk Factors" beginning on page 13 of this Report and in the
other documents we file, from time to time, with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K. All forward-looking statements attributable to ValueClick, Inc. are expressly qualified in their entirety by such language. We do not
undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

PART I.

ITEM 1. BUSINESS

OVERVIEW

We offer a suite of products and services that enable marketers to advertise and sell their products through all major online marketing
channelsdisplay/web advertising, search marketing, email marketing, and affiliate marketing. Additionally, we provide software that assists advertising agencies with information
management regarding their financial, workflow, and offline media buying and planning processes. The broad range of products and services that we provide enables our customers to address all aspects
of the marketing process, from strategic planning through execution, including results measurement and campaign refinements. By combining our media, affiliate marketing
and technology offerings with our experience in both online and offline marketing, we help our customers around the world optimize their marketing campaigns both on the Internet and through offline
media.

Our
customers are predominantly advertisers and direct marketers, as well as the agencies that service these groups. Our value proposition to these groups is our ability to provide
distinctive expertise, flexible product customization, superior service, and a diligent focus on the performance of their marketing investments. This approach has enabled us to build relationships
with over 4,000 advertisers and agencies, assisting them in their use of the Internet to create awareness, attract visitors, generate qualified leads and drive sales, and to do so with both
acquisition and retention programs.

Another
key component in our value proposition is the base of relationships we have developed with quality website publishers. To fulfill our clients' marketing programs, we rely on our
relationships with websites of all sizesfrom many of the largest portals on the web, to heavily-trafficked and well-known content and shopping sites, to
high-quality niche content properties. Our relationships with these partners span from representation of most of their advertising space, to monetization of their unsold advertising
inventory, to regular spot buys of media and email for specific client needs. Our ability to offer these partners a wide variety of ways to generate revenue has enabled us to now reach over
60 million unique Internet users in the U.S. each month, and over 130 million worldwide. ValueClick believes that the effectiveness of our advertising solutions is dependent on the
quality of the partner relationships, and therefore we have established stringent quality standards that include rejection on the basis of inappropriate content, illegal activity and fraudulent
clicking activity, among other criteria. We enforce these quality standards using a combination of manual and automated auditing processes that continually monitor and review both Web site content and
adherence to advertiser campaign specifications.

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We
derive our revenue from three business segments, based on the types of products and services provided. These business segments are Media, Affiliate Marketing and Technology, which are
described in more detail below. For information regarding the revenues, gross profits, and total assets of these segments, see Item 7 below.

MEDIA

ValueClick's Media segment provides a comprehensive suite of online media services and tailored programs that help marketers create awareness, attract visitors
and generate leads and sales through the Internet. Our Media segment has grown through the acquisition of complementary firms, such as Search123.com, completed on May 30, 2003, and
Hi-Speed Media, completed on December 17, 2003. Our strategic expansion and subsequent integration within the Media segment has
increased our presence in interactive marketing with powerful offerings that are offered to advertiser and agency clients in the following product categories:



Through partnerships with online publishers that span more than 7,500 online media properties in the U.S. and more than 11,000 worldwide, we provide advertisers
and agencies with access to one of the largest and most reputable online advertising networks. With a single buy, advertisers can reach their target online audience using a variety of online display
ad units and any of 17 standard channels of online content.

We
offer our marketing clients a variety of display ad units that can be delivered onto the Web pages of our online advertising network, and tracked to evaluate success against the goals
of the program. With traditional banner ads, rich media, interstitials, text links and other online ad units, we attempt to maximize the impact of marketing campaigns by using the most effective
placement for each type of campaign. Within these placements, we also offer clients the ability to execute a wide variety of rich media applications, providing even greater visual and auditory impact.

The
Company began as a performance-based marketing network, and we continue to offer flexible pricing arrangements, designed around maximizing our clients' return on investment. Our Web
advertising placements are offered on both cost-per-thousand (CPM) pricing, whereby our clients pay based on the number of times the target audience is exposed to the
advertisement, and cost-per-click (CPC), where payment is triggered only when an interested individual visits the client's website.

The
benefits that our clients enjoy in Web advertising include our flexible pricing models, the ability to reach new and larger audience segments through our Website property partners,
the ability to have a single source for media negotiation, and the ability to improve campaigns in a variety of ways while the campaign is still running, by optimizing at site, placement and creative
levels, based on both response and conversion.



Our Media E-mail Marketing services allow marketers to target qualified prospective customers on a large scale with opt-in
e-mail lists from a select group of e-mail list partners who meet our stringent criteria for data integrity, as well as who
comply with all aspects of federal email legislation. Through ValueClick Media's relationships with quality business and consumer opt-in e-mail list owners and managers,
E-mail Marketing clients can target audiences within specific selection criteria.

Through
our acquisition of Hi-Speed Media, we now possess a database of more than 40 million opt-in email profiles that comply with recently enacted U.S.
federal e-mail legislation. Through this business, we provide marketers with the ability to advertise their products and services to the members of this email database.

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Our Lead Generation Marketing services enable marketers to develop their own proprietary permission-based lists of leads for re-marketing. Creating
lists of consumers who have expressed interest in a specific company or offer gives marketers the ability to generate immediate sales while building on-going relationships with prospective
customers.

ValueClick's
proprietary UltraLeads product is an email marketing solution whereby we develop customized and permissioned databases of individuals who have voluntarily expressed interest
in learning more about a specific client's product or service. Using a technique called co-registration, we place opt-in offers on registration areas of publisher partners'
sites, providing the visitors to those sites the ability to get more information, or to receive special offers from a specific advertiser. If consumers voluntarily opt-in to a given offer,
they first receive a verification message to ensure their permission, followed by the requested information via an e-mail from us to the address they provided. UltraLeads is priced on a
cost-per-lead (CPL) basis.

An
additional email marketing offering is our onResponse product. This offering is priced on a cost-per-action (CPA) basis, whereby clients only pay
usand we only pay our publisher partnerswhen Internet users perform specific actions, such as completing requests for more information, website registrations, product sample
requests, trial subscriptions, etc. These marketing messages are delivered by our publisher partners via solo email messages and e-newsletters to their base of registered visitors. When
one of the recipients of these messages responds, they are directed toward the client's website to complete the desired action.



Search Marketing allows marketers to find prospective customers who are actively engaged in researching and buying products and services online. At the core of
ValueClick Media's Search Marketing offerings is Search123, a pay-per-click search engine, in which marketers bid for placement within search results and pay only when targeted
leads are delivered to their site.

ValueClick
Media's Search Marketing acts as an affordable complement to other pay-per-click engines, enabling marketers to realize additional qualified sales
leads from search results at a competitive price. Search123 has a network of hundreds of online publisher partner Web sites, which collectively generate hundreds of millions of searches per month.



Our automated online application process is supported by a team of network development and customer service professionals across all ValueClick properties. Their
responsibilities include screening and approving, or declining prospective Web publishers, monitoring network quality, maintaining relationships, consulting with publishers on additional revenue
opportunities, and the trafficking and optimization of client advertising campaigns.

AFFILIATE MARKETING

Affiliate marketing is a technique whereby online properties agree to display advertising messages in a variety of locations and configurations in return for
either compensation for every lead developed, or based on a share of any revenue that is generated when their website visitors respond to the advertisement by purchasing products or services from the
advertiser. We provide comprehensive marketing systems that enable online marketers to use this technique to attract, convert and retain customers easily and cost effectively.

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ValueClick
Affiliate Marketing products and services, outlined below, are offered through our wholly-owned subsidiaries Be Free, Inc., acquired on May 23, 2002, and
Commission Junction, acquired on December 7, 2003.



Our affiliate marketing business includes technology and services that enable advertisers to manage, track and analyze a variety of online marketing programs.
Specifically, our affiliate marketing services enable our advertiser clients to: build relationships with affiliate partners; manage the offers they make available to their affiliate partners; track
the online traffic, leads and sales that these offers drive to the advertiser's Website; analyze the effectiveness of the offers and affiliate partners; and track the commissions due to their
affiliates.

We
offer affiliate marketing services that address the needs of advertisers that seek to build and manage a private-labeled network of third party online publishers, as well as
advertisers that wish to conduct an affiliate marketing program through our existing network of third party online affiliate publishers. Our affiliate marketing services are offered on a hosted basis
to enable marketers to execute their own affiliate marketing programs without the expense of building and maintaining their own in-house technical infrastructure and resources.

Affiliate
Marketing revenues are driven by a combination of fixed fees and variable compensation that is based on either a cost-per-lead (CPL) scenario or on a
percentage of transaction revenue generated from the programs managed with our affiliate marketing platforms.

In
addition to the technology-related revenue streams, we also receive service fees from clients who elect to utilize our Outsourced Program Management (OPM) service and Commission
Junction Vantage offerings. With these services, we assume full responsibility for the all aspects of managing the advertiser's program including planning, publisher recruitment, review and
management, and program administration.

The
benefits of our affiliate marketing technology include professional services, a pay-for-performance model, the option of owning affiliate partner
relationships, comprehensive technology platforms, and extensive expertise.

TECHNOLOGY

Our Technology segment provides marketers, agencies, website publishers and other firms with the tools they need to manage both their business operations and
marketing programs effectively. The technology products and services outlined below are offered through our wholly-owned subsidiaries Mediaplex, Inc. and AdWare Systems, Inc., which were
acquired on October 19, 2001.

MediaplexOnline
Adserving and Email Technology Tools

Our
Mediaplex subsidiary offers technology infrastructure tools and services that enable advertisers, advertising agencies and online publishers to implement and manage their own online
display advertising (adserving) and email campaigns. Our Mediaplex products are based on its proprietary MOJO® technology platform, which has the ability to automatically configure
messages in response to real-time information from a marketer's enterprise data system and to provide ongoing campaign optimization. Mediaplex's products are priced primarily on a
cost-per-impression (CPM) or email delivered basis.

Mediaplex's
solutions provide span three primary categoriesThird Party Adserving, Publisher Ad Management and Email Campaign Management.

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Our third-party adserving product, MOJO® Adserver, allows users to configure web advertising campaigns, serve those campaigns according to time and
site placementscommonly known in the industry as traffickingand report results from such campaigns through to conversion. MOJO® Adserver operates on the same
platform as MOJO® Mail (see MediaplexEmail Campaign Management below), is web-based and is available as either a full-service or ASP offering.

The
benefits of our third-party adserving technology and service include an intuitive interface, advanced targeting options, response and conversion tracking, near real-time
reporting,
full-service or ASP, automated creative and placement optimization, the ability to handle rich media, and back-end data feeds for quantitative analysis.



MOJO® Publisher is an ad management technology solution for websites and networks, which has powered the ValueClick Media network of thousands of
publisher partners since 1999. With MOJO® Publisher, websites and networks can quickly implement, manage, sell, and traffic advertising inventory on their properties, ensuring maximum
revenue from those properties.

The
benefits of our publisher ad management technology and service include flexible configuration, effective inventory management, accurate forecasting, advanced targeting capabilities,
real-time reporting, conversion tracking, and financial system integration.



Either alone or in combination with ValueClick Media's Email Marketing solutions above, our email campaign management productMOJO®
Mailallows users to configure, traffic and report results for permission-based prospect and customer email campaigns. In addition to basic email campaign execution, MOJO® Mail
affords the user the unique ability to populate email messages with dynamic content that is updated in real-time when the recipient opens the email. The product's Web-based
interfaces, MOJO® Works (delivery configuration) and MOJO® Reports (tracking results), provide a single point of access for email messaging campaigns across all platforms,
including web advertising and wireless devices. The systemavailable in both full-service and Application Service Provider (ASP) modesprovides the ability to
target customer and prospect audience segments with tailored offers and creative message versions, and to track through to conversion activity in near-real-time.

The
benefits of our email campaign management technology include an intuitive interface, systematic list management and segmentation, advanced targeting options, unsubscribe and bounce
management, near real-time reporting, response and conversion tracking, back-end data feeds for quantitative analysis, full-service or ASP, ability to handle rich
media programs, and integration with our email marketing media programs above.

AdWareEnterprise
Management Solutions

Our
AdWare subsidiary is an ASP that delivers high-quality web-based information management systems to advertising agencies, marketing communications companies,
public relations agencies and other large corporate advertisers. The solutions that AdWare provides span three primary categoriesBusiness Management, Media Management and Content
Management, as outlined below. AdWare's revenue is generated primarily from monthly service fees paid by customers over the service periods.

The
benefits offered by our enterprise management solutions include increased productivity, improved tracking and monitoring of business processes, ease of implementation, exceptional
customer service, web-based ASP and significant scalability.

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Business ManagementOur business management systems consist of the following:



Media ManagementOur media management systems enable customersprimarily media planners in corporate marketing
departments and advertising agenciesto plan, execute, track, analyze and bill out media buys for network broadcast, spot broadcast, national cable, local cable, syndication, newspaper,
magazine, and outdoor media channels. Media planners use these systems to record the available advertising opportunities and their corresponding cost, then choosing the configuration that best meets
campaign needs. They can then generate a media plan that consists of the media placements they have selected. Different systems are available for each type of media buyingprint, network,
and spot advertisements.



Content ManagementContent Depot is a web-based digital asset management solution that stores, indexes, retrieves
and plays/views digital assets such as documents, audio files, video files, and graphics. Accessible via both Macintosh and PC, Content Depot is designed for both easy installation and use, and is
targeted at any business that needs an affordable way to manage and utilize their digital assets.

INTERNATIONAL OPERATIONS

We currently have international operations in the United Kingdom, Germany, France and Japan. All operations are wholly-owned subsidiaries, with the exception of
ValueClick Japan, in which we have a majority ownership position.

ValueClick
Japan commenced operations in November 1998. We currently own a 59.2% interest in ValueClick Japan, which has 40 employees. In May 2000, ValueClick Japan
completed its initial public offering on the Tokyo Stock Exchange for emerging growth companies. In August 1999, we commenced operations in the European market with ValueClick
Europe Ltd., a wholly-owned subsidiary of ValueClick based in the United Kingdom. In 2000, we expanded in Europe by opening wholly-owned subsidiaries in Paris, France and Munich, Germany.
Employees in our international subsidiaries, including Japan, totaled 84 as of December 31, 2003.

On
February 19, 2004, ValueClick, Inc. entered into a definitive agreement to sell its equity position in ValueClick Japan, Inc. to livedoor Co., Ltd., a
Japanese Internet and technology product and services company. ValueClick's agreement with livedoor is part of livedoor's tender offer, announced in Japan on February 19, 2004, to acquire all
of the outstanding shares of ValueClick Japan.

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As
part of its tender offer, livedoor would acquire all of ValueClick's equity interest in ValueClick Japan for approximately $24 million in cash, excluding transaction fees. The tender offer
is expected to be completed near the end of the first quarter of 2004.

For
further financial information regarding our international sales, see note 15 to our consolidated financial statements contained in this Report.

TECHNOLOGY PLATFORMS

To help ensure our success in offering quality media products, in a number of different channels, several proprietary software applications have been developed.
Each application has been developed by a qualified team of information technology professionals whose primary mission is to partner with our customers and a ValueClick product specialist to transform
functionality requirements into technology solutions.

Our
proprietary applications are constructed from established, readily available technologies. These technologies are crafted into applications whose main objective is to
out-perform offerings of our competitors within the same business segment. Some of the basic components our products are built on come from leading software providers such as Oracle, IBM,
Sun, Dell, EMC, and Cisco while some components are constructed from leading Open Source software projects such as Apache Web Server, FreeBSD, and Perl. By striking the proper balance between using
commercially available software and Open Source software, we direct our Information Technology expenditures toward developing distinguishing application functionality while minimizing third party
technology supplier costs.

We
build in high performance, availability and reliability into our product offerings. Within the particular business segment, each offering out-performs
industry-wide acceptable performance measurements. We safeguard against the potential for service interruptions at our third party technology vendors by engineering failsafe controls into
our critical components. ValueClick delivers its hosted solutions primarily from three co-location centers, geographically disbursed within the United States. ValueClick applications are monitored
24 hours a day, 365 days a year by specialized monitoring systems that aggregate alarms to a human staffed network operations center. If a problem occurs, appropriate engineers are
notified and corrective action is taken.

Our
continued investment in ValueClick's technology infrastructure helps to ensure our product offerings remain innovative, competitive, and cost-effective.

SALES, MARKETING AND CUSTOMER SERVICE

We market our products and services primarily through direct marketing, print advertising and online advertising throughout the year. We also market them through
the ValueClick properties' Web sites, trade show participation and other media events. In addition, we actively pursue public relations programs to promote our brand, products and services to
potential network Web publishers and advertisers, as well as to industry analysts.

Customers

We sell our products and services to a variety of advertisers and advertising agencies primarily through our internal sales team, consisting of approximately 135
direct sales and support personnel across all ValueClick properties. We make extensive use of telemarketing and e-marketing strategies. Each of our account executives assists the
advertisers he or she services, typically advertising, direct marketing and e-commerce companies, with all aspects of media planning and design of their advertising campaigns and their
related technology needs. These services and products include advertisement purchasing and placement, assessment of results and optimization of performance and related technology platforms

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We
derive our revenue from three business segments based on the types of products and services provided. These business segments are Media, Affiliate Marketing, and Technology. For the
year ended December 31, 2003, revenue from our technology products and services accounted for 24.3% of our revenue. Revenue generated by our technology products and services have been derived
from a limited number of advertisers and advertising agencies. Our results of operations would be materially adversely impacted by the loss of any of these clients. For the year ended
December 31, 2003, one individual company accounted for 9.9% of our overall revenue and 39.8% of revenue generated by our Technology segment. Another customer accounted for 18.9% of our
Technology segment revenue.

For
additional information regarding our business segments, see note 15 to our consolidated financial statements contained in this Report.

Competition

We face intense competition in the Internet advertising market. We expect that this competition will continue to intensify in the future as a result of industry
consolidations and the continuing maturation of the industry. We compete with a diverse and large pool of advertising, media and Internet companies.

Our
ability to compete depends upon several factors, including the following:



Additional
competitive factors include each competitor's reputation, knowledge of the advertising market, financial controls, geographical coverage, relationships with clients,
technological capability and quality and breadth of services. We expect that we will face additional competition from new entrants into the market in the future.

Seasonality and Cyclicality

We believe that our business is subject to seasonal fluctuations. Marketers generally place fewer advertisements during the first and third calendar quarters of
each year, and direct marketers generally mail substantially more marketing materials in the third calendar quarter of each year. In addition, expenditures by advertisers and direct marketers vary in
cycles and tend to reflect the overall economic conditions, as well as budgeting and buying patterns. Furthermore, user traffic on the Internet tends to decrease during the summer months which results
in fewer advertisements to sell and deliver. A further decline in the general economy or in the economic prospects of advertisers and direct marketers could adversely affect our revenue.

INTELLECTUAL PROPERTY RIGHTS

We currently rely on a combination of copyright and trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights.
Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. We also enter into
proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access

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to
and distribution of our software documentation and other proprietary information. We have registered the trademark "ValueClick" in the United States, the European Union and Japan. We currently have
four pending U.S. patent applications. We do not know if our current patent applications or any future patent application will result in a patent being issued within the scope of the claims we seek,
if at all, or whether any patents we may receive will be challenged or invalidated. Although patents are only one component of the protection of intellectual property rights, if our patent
applications are denied, it may result in increased competition and the development of products substantially similar to our own. In addition, it is difficult to monitor unauthorized use of
technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, and our competitors may independently develop technology similar
to those of our own. We will continue to assess appropriate occasions for seeking patent and other intellectual property protections for those aspects of our technology that we believe constitute
innovations providing significant competitive advantages.

On
December 30, 2002, we purchased a license from 24/7 Real Media for the '368' patent under a Patent License Agreement. In connection with the Patent License Agreement, 24/7 Real
Media also agreed to terminate their lawsuit against the Company for patent infringement. The terms of the Patent License and Settlement Agreements are confidential.

In
November 2002, in connection with our Stock Repurchase Program, we repurchased 7,878,562 shares of our common stock held by DoubleClick. In the related repurchase agreement,
both parties agreed not to sue or threaten to sue each other or any of their customers for infringement of outstanding patents for a three-year period beginning in November 2002.

CORPORATE HISTORY AND RECENT ACQUISITIONS

We commenced operations as ValueClick, LLC, a California limited liability company, on May 1, 1998. Prior to the formation of ValueClick, LLC, the
ValueClick Internet advertising business began in July 1997 as a line of business within Web-Ignite Corporation, a company wholly-owned by the founding member of ValueClick, LLC.
The reorganization and formation of ValueClick, LLC was effected by the transfer of the Internet advertising business of Web-Ignite to ValueClick, LLC. On December 31, 1998,
ValueClick, LLC reorganized as ValueClick, Inc., a Delaware corporation. On March 30, 2000, we completed our initial public offering of common stock. Our common stock is publicly traded
and is reported on the Nasdaq National Market under the symbol "VCLK."

Hi-Speed Media, Inc.On December 17, 2003, we completed the acquisition of Hi-Speed
Media, Inc., a California corporation ("Hi-Speed Media"), pursuant to an Agreement and Plan of Merger, dated as of December 7, 2003, by and among ValueClick, Inc., HS
Acquisition Corp., a wholly-owned subsidiary of ValueClick, Hi-Speed Media, the shareholders of Hi-Speed Media and Farshad Fardad, in his capacity as Shareholder Agent.
Hi-Speed Media provides e-mail marketing services. Through our acquisition of Hi-Speed Media, we now possess a database of more than 40 million
opt-in email profiles that comply with recently enacted U.S. federal e-mail legislation. Through this business, we provide marketers with the ability to advertise their
products and services to the members of this email database. We accounted for the acquisition under the purchase method. Accordingly, the results of Hi-Speed Media's operations are
included in the Company's consolidated financial statements from the beginning of the accounting period nearest to the date of acquisition. Under the terms of the agreement, ValueClick acquired all of
the outstanding capital stock of Hi-Speed Media for an aggregate purchase price of approximately $9.0 million in cash and additional contingent cash consideration of up to
$1.0 million per quarter, assuming the achievement of certain revenue and operating income milestones over the eight quarters beginning January 1, 2004. In connection with the
transaction, Hi-Speed Media's outstanding employee stock options were converted into options to purchase approximately 80,000 shares of ValueClick common stock.

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Commission Junction, Inc.On December 7, 2003, we completed the acquisition of Commission
Junction, Inc., a Delaware corporation ("Commission Junction"), pursuant to an Agreement and Plan of Merger and Reorganization, dated as of October 9, 2003, by and among ValueClick, NCJ
Acquisition Corp., a wholly-owned subsidiary of ValueClick, Commission Junction and Idealab Holdings LLC, a Delaware limited liability company, in its capacity as Stockholder Agent. Pursuant to the
terms of the merger agreement, Commission Junction was merged with and into NCJ Acquisition and became a wholly-owned subsidiary of ValueClick. Commission Junction is an affiliate marketing business,
which provides technology and services that enable advertisers to manage, track and analyze a variety of online marketing programs. We accounted for the acquisition under the purchase method.
Accordingly, the results of Commission Junction's operations are included in our consolidated financial statements from the beginning of the accounting period nearest to the date of acquisition.
Pursuant to the terms of the agreement, ValueClick acquired all the outstanding capital stock in Commission Junction for approximately 3.0 million shares of ValueClick common stock, valued at
approximately $29.5 million, and approximately $26.1 million in cash. The cash portion of the purchase price was derived from existing working capital. Additionally, outstanding options
to acquire common stock of Commission Junction were converted into an aggregate of 1.2 million options to acquire ValueClick common stock.

Search123.com Inc.On May 30, 2003, we completed the acquisition of Search123.com Inc. ("Search123").
Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Search123, with Search123 surviving as a wholly-owned subsidiary of ValueClick. Search123 is a
search marketing company that allows marketers to find prospective customers who are actively engaged in researching and buying products and services online. We accounted for the acquisition under the
purchase method. Accordingly, the results of Search123's operations are included in our consolidated financial statements from the beginning of the accounting period nearest to the date of
acquisition. The aggregate consideration, constituting the purchase price of approximately $4.9 million, included a cash payment of $3.2 million, the assumption of a net working capital
deficit of $1.5 million and transaction costs of approximately $200,000.

Be Free, Inc.On May 23, 2002, we completed our acquisition of Be Free, Inc. Under the terms of the
merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Be Free and Be Free survived as a wholly-owned subsidiary of the Company. Under the terms of the merger agreement, Be
Free stockholders received 0.65882 shares of ValueClick common stock for each share of Be Free common stock. The Company issued a total of approximately 43.4 million shares of its common stock,
valued at approximately $122.3 million, for all the outstanding stock of Be Free. In addition, the Company issued options to purchase approximately 4.2 million additional shares of
ValueClick common stock in exchange for outstanding options to acquire Be Free common stock. The acquisition of Be Free expanded our online and offline marketing and advertising technology
capabilities.

Mediaplex, Inc.On October 19, 2001, we completed our acquisition of Mediaplex, Inc., a provider of
technology software tools used in both online and offline advertising campaigns. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Mediaplex,
and Mediaplex survived as a wholly-owned subsidiary of ValueClick. Under the terms of the merger agreement, Mediaplex stockholders received 0.4113 shares of ValueClick common stock for each share of
Mediaplex common stock. We issued approximately 15.1 million shares of our common stock, valued at approximately $42.7 million, for all the outstanding stock of Mediaplex. In addition,
we issued options to purchase approximately 2.8 million additional shares of ValueClick common stock in exchange for outstanding options to acquire Mediaplex common stock.

Z Media, Inc.On January 31, 2001, we completed our acquisition of Z Media, Inc., a leading
co-registration company. ValueClick accounted for the merger as a pooling-of-interests, and as such, the consolidated financial statements were restated to include
Z Media's financial data as if the Z Media

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had
always been a part of ValueClick. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Z Media, and Z Media survived as a wholly-owned
subsidiary of ValueClick. In connection with the merger, we issued a total of approximately 2.7 million shares of our common stock in exchange for all outstanding shares of Z Media. In
addition, we issued options to purchase approximately 420,000 additional shares of ValueClick common stock in exchange for outstanding options to acquire Z Media common stock. With the acquisition of
Z Media, we added co-registration to our product line.

PRIVACY

We may collect personally identifiable data on a permitted basis. We store this data securely and do not use the data without the explicit, knowing permission of
the user when we collect the data on behalf of our clients. We rely on our clients to treat such data with the appropriate precaution and responsibility as stated in their privacy policies. In
addition, we use non-personally identifiable information provided by Web sites, pursuant to their privacy policies, about their viewers' general demographics and interests in order to
target appropriate advertising to the sites.

Moreover,
if our clients have databases of their customers, we can use this data on behalf of those clients, again pursuant to their privacy policies. The premise is that both the site
providing the ad space and the advertiser (1) have a relationship with the customer, or opt-in, (2) have an opportunity to share their privacy policy with their customers,
and (3) provide an opportunity to opt-out.

Our
clients retain the right to use data, which they have obtained through explicit permission from an Internet user; for example, if a customer of our client provides an email address
to receive information and updates. We rely on our clients' consumer privacy policies, as well as the privacy practices of the publisher sites included in each campaign.

We
collect certain technical data (such as type of browser, operating system, domain type, date and time of viewer's response) when serving Internet advertisements. This type of
information is defined by the Network Advertising Initiative as Non-personally Identifiable Information ("Ad Delivery and Reporting Data".) We may retain this Ad Delivery and Reporting
Data indefinitely.

We
use "cookies," among other techniques, to measure and report non-personalized information to advertisers, such as the number of people who see their ads or emails and the number of
times people see the advertisement. A cookie is a small file that is stored in a web user's hard drive. Cookies cannot read information from the user's hard drive; rather they allow sites and
advertisers to track advertising effectiveness and to ensure that viewers do not receive the same ads repeatedly. Cookies, by themselves, cannot be used to identify any user if the user does not
provide any personally identifiable information. They can be used to allow personalization features such as stock portfolio tracking and targeted news stories.

We
are compliant with the Platform for Privacy Protection Project, or P3P, compliance criteria. P3P is the most current privacy standard effort in the industry, providing simple and
automated privacy controls for users.

EMPLOYEES

As of December 31, 2003, we had 492 employees in the U.S., 40 employees in Japan and 44 employees in our other international locations. None of these
employees are covered by collective bargaining agreements. Management believes that our relations with our employees are good.

WEB SITE ACCESS TO OUR PERIODIC SEC REPORTS

Our primary Internet address is www.valueclick.com. We make our periodic SEC reports (Forms 10-Q and Forms 10-K) and current reports
(Form 8-K), and amendments to these reports, available

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free
of charge through our Web site as soon as reasonably practicable after they are filed electronically with the SEC. We may from time to time provide important disclosures to investors by posting
them in the investor relations section of our Web site, as allowed by SEC rules.

Materials
we file with the SEC may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet Web site at www.sec.gov that contains reports, proxy and
information statements, and other information regarding our company that we file electronically with the SEC.

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RISK FACTORS

You should carefully consider the following risks before you decide to buy shares of our common stock. The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties, including those risks set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" below, may also adversely impact and
impair our business. If any of the following risks actually occur, our business, results of operations or financial condition would likely suffer. In such case, the trading price of our common stock
could decline, and you may lose all or part of the money you paid to buy our stock.

This Report contains forward-looking statements based on the current expectations, assumptions, estimates and projections about us and our industry. These forward-looking
statements involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements as a result of certain factors, as more fully described
in this section and elsewhere in this Report. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in
the future.

INTEGRATING OUR ACQUIRED OPERATIONS MAY DIVERT MANAGEMENT'S ATTENTION AWAY FROM OUR DAY-TO-DAY OPERATIONS.

We
have grown in part because of business combinations with other companies, and we expect to continue to evaluate and consider future acquisitions. Acquisitions generally involve
significant risks, including difficulties in the assimilation of operations, services, technologies and corporate culture of the acquired companies, diversion of management's attention from other
business concerns, overvaluation of the acquired companies, and the acceptance of the acquired companies' products and services by our customers. The integration of our acquired operations, products
and personnel may place a significant burden on management and our internal resources. The diversion of management attention and any difficulties encountered in the transition and integration process
could harm our business. Moreover, we consummated the acquisitions of Search123, Commission Junction and Hi-Speed Media on May 30, 2003, December 7, 2003 and
December 17, 2003, respectively. Because of the number of acquisitions we performed in 2003, the differences in the customer base and
functionality of Search123, Commission Junction and Hi-Speed Media and our products, these acquisitions may present a materially higher product, marketing, research and development,
facilities, information systems, accounting, personnel, and other integration challenges than those we have faced in connection with our prior acquisitions and may delay or jeopardize the complete
integration of certain businesses we had acquired previously.

If
we finance future acquisitions by using equity securities, this would dilute our existing stockholders. Any amortization of intangible assets, or other charges resulting from the
costs of these acquisitions could have an adverse effect on the results of our operations. In addition, we may pay more for an acquisition than the acquired products, services, technology or business
are ultimately worth.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR EXPENSES COULD INCREASE AND OUR MANAGEMENT'S TIME AND ATTENTION COULD BE DIVERTED.

As
we continue to increase the scope of our operations, we will need an effective planning and management process to implement our business plan successfully in the rapidly evolving
Internet advertising market. Our business, results of operations and financial condition will be substantially harmed if we are unable to manage our expanding operations effectively. We plan to
continue to expand our sales and marketing, customer support and research and development organizations. Past growth has placed, and any future growth will continue to place, a significant strain on
our management systems and resources. We will likely need to continue to improve our financial and managerial controls and our reporting systems and procedures. In addition, we will need to expand,

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train
and manage our work force. Our failure to manage our growth effectively could increase our expenses and divert management's time and attention.

WE HAVE AN ACCUMULATED DEFICIT AND MIGHT NOT REMAIN PROFITABLE.

At
December 31, 2003 we had an accumulated deficit of approximately $64.4 million. Though we have achieved operational profitability in 2003, events could arise that
prevent us from achieving net income in future periods.

Because
we have a relatively limited operating history, it may be difficult to evaluate our business and prospects. You should consider our prospects in light of the risks, expenses and
difficulties frequently
encountered by early-stage companies in the rapidly-changing Internet market. These risks include, but are not limited to, our ability to:



If
we are unsuccessful in addressing these risks and uncertainties, our business, results of operations and financial condition could be materially and adversely affected.

IF ADVERTISING ON THE INTERNET LOSES ITS APPEAL TO DIRECT MARKETING COMPANIES, OUR REVENUE COULD DECLINE.

Our
Media segment accounted for 49.5% of our revenue for the year ended December 31, 2003 by delivering advertisements that generate impressions, click-throughs and other actions
to our advertisers' Web sites. This business model may not continue to be effective in the future for a number of reasons, including the following: click rates have always been low and may decline as
the number of banner advertisements on the Web increases; Internet users can install "filter" software programs which allow them to prevent advertisements from appearing on their computer screens or
email boxes; Internet advertisements are, by their nature, limited in content relative to other media; direct marketing companies may be reluctant or slow to adopt online advertising that replaces,
limits or competes with their existing direct marketing efforts; and direct marketing companies may prefer other forms of Internet advertising we do not offer, including certain forms of search engine
placements. If the number of direct marketing companies who purchase online advertising from us does not continue to grow, we may experience difficulty in attracting publishers, and our revenue could
decline.

IF OUR BUSINESS MODEL IS NOT ACCEPTED BY INTERNET ADVERTISERS OR WEB PUBLISHERS, OUR REVENUE COULD DECLINE.

Traditionally,
most of our revenue has been derived from our Media segment. Although we intend to grow our Affiliate Marketing and Technology segments, we expect that our Media segment
will continue to generate a substantial amount of our revenue in the future. For the year ended December 31, 2003, our Media segment accounted for 49.5% of our revenue. In addition, our Media

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segment
includes products and services that are based on a cost-per-click ("CPC"), cost-per-action ("CPA") or cost-per-lead
("CPL") pricing model. These business models differ from the cost-per-thousand impressions ("CPM") pricing model, which many other Internet advertising companies
use. Our ability to generate significant revenue from advertisers will depend, in part, on our ability to demonstrate the effectiveness of our various pricing models to advertisers, many of which may
be more accustomed to the CPM pricing model, and to Web publishers; and on our ability to attract and retain advertisers and Web publishers by differentiating our technology and services from those of
our competitors. One component of our strategy is to enhance advertisers' ability to measure their return on investment and track the performance and effectiveness of their advertising campaigns. To
date, not all advertisers have taken advantage of the most sophisticated tool we offer for tracking Internet users' activities after they have reached advertisers' Web sites. We will not be able to
assure you that our strategy will succeed.

Intense
competition among Web sites, search services and Internet advertising services has led to the proliferation of a number of alternative pricing models for Internet advertising.
These alternatives, and the likelihood that additional pricing alternatives will be introduced, make it difficult for us to project the levels of advertising revenue or the margins that we, or the
Internet advertising industry in general, will realize in the future. Moreover, an increase in the amount of advertising on the Web may result in a decline in click rates. Since we rely on
performance-based pricing models to generate revenue, any decline in click rates may make our pricing models less viable or less attractive solutions for Web publishers and advertisers.

OUR REVENUE COULD DECLINE IF WE FAIL TO EFFECTIVELY MANAGE OUR EXISTING ADVERTISING SPACE AND OUR GROWTH COULD BE IMPEDED IF WE FAIL TO ACQUIRE NEW ADVERTISING
SPACE.

Our
success depends in part on our ability to effectively manage our existing advertising space. The Web publishers and list owners that list their unsold advertising space with us are
not bound by long-term contracts that ensure us a consistent supply of advertising space, which we refer to as inventory. In addition, Web sites can change the amount of inventory they
make available to us at any time. If a Web publisher or email list owner decides not to make advertising space from its Web sites, newsletters or lists available to us, we may not be able to replace
this advertising space with advertising space from other Web sites or list owners that have comparable traffic patterns and user demographics quickly enough to fulfill our advertisers' requests. This
would result in lost revenue. We expect that our customers' requirements will become more sophisticated as the Web matures as an advertising medium. If we fail to manage our existing advertising space
effectively to meet our customers' changing requirements, our revenue could decline. Our growth depends on our ability to expand our advertising inventory. To attract new customers, we must maintain a
consistent supply of attractive advertising space. We intend to expand our advertising inventory by selectively adding to our network new Web publishers and list owners that offer attractive
demographics, innovative and quality content and growing Web user traffic and email volume. Our ability to attract new Web publishers and list owners to our network and to retain Web publishers and
list owners currently in our network will depend on various factors, some of which are beyond our control. These factors include our ability to introduce new and innovative product lines and services,
our ability to efficiently manage our existing advertising inventory, our pricing policies and the cost-efficiency to Web publishers and list owners of outsourcing their advertising sales.
In addition, the number of competing intermediaries that purchase advertising inventory from Web publishers and list owners continues to increase. We will not be able to assure you that the size of
our inventory will increase or even remain constant in the future.

Our
pay-per-click search service is dependent upon a limited number of sources to direct Internet users to our search service. Our sources for users conducting
searches are members of our affiliate network, including portals, browsers, or other affiliates and our own website. Revenues are generated when users conducting searches are directed to advertisers
through a paid search link in our search

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results.
The more traffic our sources direct to our advertisers through our search technology, the more revenue we will generate. Unfavorable changes in our relationship with these sources or loss of
these relationships would adversely affect our revenue and results of operations.

WE MAY FACE INTELLECTUAL PROPERTY ACTIONS THAT ARE COSTLY OR COULD HINDER OR PREVENT OUR ABILITY TO DELIVER OUR PRODUCTS AND SERVICES.

We
may be subject to legal actions alleging intellectual property infringement (including patent infringement), unfair competition or similar claims against us. Companies may apply for
or be awarded patents or have other intellectual property rights covering aspects of our technology or business. One of the primary competitors of our Search123 subsidiary, Overture
Services, Inc., purports to be the owner of U.S. Patent No. 6,269,361, which was issued on July 31, 2001 and is entitled "System and method for influencing a position on a search
result list generated by a computer network search engine." Overture has aggressively pursued its alleged patent rights by filing lawsuits against other pay-per-click search
engine companies such as FindWhat.com and Google. FindWhat.com and Google have asserted counter-claims against Overture including, but not limited to, invalidity, unenforceability and
non-infringement.

IF THE TECHNOLOGY THAT WE CURRENTLY USE TO TARGET THE DELIVERY OF ONLINE ADVERTISEMENTS AND TO PREVENT FRAUD ON OUR NETWORK IS RESTRICTED OR BECOMES SUBJECT TO REGULATION, OUR
EXPENSES COULD INCREASE AND WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY.

Web
sites typically place small files of non-personalized (or "anonymous") information, commonly known as cookies, on an Internet user's hard drive, generally without the user's
knowledge or consent. Cookies generally collect information about users on a non-personalized basis to enable Web sites to provide users with a more customized experience. Cookie information is passed
to the Web site through an Internet user's browser software. We currently use cookies to track an Internet user's movement through the advertiser's Web site and to monitor and prevent potentially
fraudulent activity on our network. Most currently available Internet browsers allow Internet users to modify their browser settings to prevent cookies from being stored on their hard drive, and some
users currently do so. Internet users can also delete cookies from their hard drives at any time. Some Internet commentators
and privacy advocates have suggested limiting or eliminating the use of cookies, and legislation has been introduced in some jurisdictions to regulate the use of cookie technology. The effectiveness
of our technology could be limited by any reduction or limitation in the use of cookies. If the use or effectiveness of cookies were limited, we would have to switch to other technologies to gather
demographic and behavioral information. While such technologies currently exist, they are substantially less effective than cookies. We would also have to develop or acquire other technology to
prevent fraud. Replacement of cookies could require significant reengineering time and resources, might not be completed in time to avoid losing customers or advertising inventory, and might not be
commercially feasible. Our use of cookie technology or any other technologies designed to collect Internet usage information may subject us to litigation or investigations in the future. Any
litigation or government action against us could be costly and time-consuming, could require us to change our business practices and could divert management's attention.

WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY IF WE FAIL TO MEASURE IMPRESSIONS, CLICKS AND ACTIONS ON ADVERTISEMENTS IN A MANNER THAT IS ACCEPTABLE TO OUR ADVERTISERS AND
WEB PUBLISHERS.

We
earn advertising revenue and make payments to Web publishers based on the number of impressions, clicks and actions from advertisements delivered on our network of Web sites and email
lists. Advertisers' and Web publishers' willingness to use our services and join our network will depend on the extent to which they perceive our measurements of clicks to be accurate and reliable.
Advertisers and Web publishers often maintain their own technologies and methodologies for counting

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clicks,
and from time to time we have had to resolve differences between our measurements and theirs. Any significant dispute over the proper measurement of clicks or other user responses to
advertisements could cause us to lose customers or advertising inventory.

IF WE FAIL TO COMPETE EFFECTIVELY AGAINST OTHER INTERNET ADVERTISING COMPANIES, WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY AND OUR REVENUE COULD
DECLINE.

The
Internet advertising markets are characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing client
demands. The introduction of new services embodying new technologies and the emergence of new industry standards and practices could render our existing services obsolete and unmarketable or require
unanticipated investments in research and development. Our failure to adapt successfully to these changes could harm our business, results of operations and financial condition.

The
market for Internet advertising and related services is intensely competitive. We expect this competition to continue to increase because there are no significant barriers to entry.
Increased competition may result in price reductions for advertising space, reduced margins and loss of our market share. Our principal competitors include other companies that provide advertisers
with Internet advertising solutions, such as CPM, CPC, CPL or CPA, and companies that offer pay-per-click search services. We directly compete with a number of competitors in
the CPC market segment, such as Advertising.com. We compete in the performance-based marketing segment with CPL and CPA performance-based companies such as Direct Response and Linkshare, and we
compete with other Internet advertising networks that focus on the traditional CPM model, including 24/7 Real Media. We also compete with pay-per-click search companies such as
Overture, recently acquired by Yahoo, Google and FindWhat. Large Web sites with brand recognition, such as Yahoo, AOL and MSN, have direct sales personnel and substantial proprietary inventory that
provide significant competitive advantage compared to our networks and have significant impact on pricing for online advertising. These companies have longer operating histories, greater name
recognition and have greater financial and marketing resources than we have.

Competition
for advertising placements among current and future suppliers of Internet navigational and informational services, high-traffic Web sites and ISPs, as well as
competition with other media for advertising placements, could result in significant price competition, declining margins and/or reductions in advertising revenue. In addition, as we continue to
expand the scope of our Web services, we may compete with a greater number of Web publishers and other media companies across an increasing range of different Web services, including in vertical
markets where competitors may have advantages in expertise, brand recognition and other areas. If existing or future competitors develop or offer services that provide significant performance, price,
creative or other advantages over those offered by us, our business, results of operations and financial condition would be negatively affected. We will also compete with traditional advertising
media, such as direct mail, television, radio, cable and print, for a share of advertisers' total advertising budgets. Many current and potential competitors enjoy competitive advantages over us, such
as longer operating histories, greater name recognition, larger customer bases, greater access to advertising space on high-traffic Web sites, and significantly greater financial,
technical and marketing resources. As a result, we may not be able to compete successfully. If we fail to compete successfully, we could lose customers or advertising inventory and our revenue could
decline.

OUR REVENUE GROWTH COULD BE NEGATIVELY IMPACTED IF INTERNET USAGE AND THE DEVELOPMENT OF INTERNET INFRASTRUCTURE DO NOT CONTINUE TO GROW.

Our
business and financial results will depend on continued growth in the use of the Internet. Internet usage may be inhibited for a number of reasons, such as: inadequate network
infrastructure; security concerns; inconsistent quality of service; and unavailability of cost-effective, high-speed service.

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If
Internet usage grows, our infrastructure may not be able to support the demands placed on it and our performance and reliability may decline. In addition, Web sites have experienced interruptions
in their service as a result of outages and other delays occurring throughout the Internet network infrastructure, and as a result of sabotage, such as electronic attacks designed to interrupt service
on many Web sites. The Internet could lose its viability as a commercial medium due to delays in the development or adoption of new technology required to accommodate increased levels of Internet
activity. If use of the Internet does not continue to grow, or if the Internet infrastructure does not effectively support our growth, our revenue could be materially and adversely affected.

OUR LONG-TERM SUCCESS MAY BE MATERIALLY ADVERSELY AFFECTED IF THE MARKET FOR E-COMMERCE DOES NOT GROW OR GROWS SLOWER THAN
EXPECTED.

Because
many of our customers' advertisements encourage online purchasing, our long-term success may depend in part on the growth and market acceptance of
e-commerce. Our business will be adversely affected if the market for e-commerce does not continue to grow or grows slower than now expected. A number of factors outside of our
control could hinder the future growth of e-commerce, including the following:



In
particular, any well-publicized compromise of security involving Web-based transactions could deter people from purchasing items on the Internet, clicking on
advertisements, or using the Internet generally, any of which could cause us to lose customers and advertising inventory and could materially, adversely affect our revenue.

WE WILL DEPEND ON KEY PERSONNEL, THE LOSS OF WHOM COULD HARM OUR BUSINESS.

The
successful integration of the companies we have acquired will depend in part on the retention of personnel critical to our combined business and operations due to, for example,
unique technical skills or management expertise. We may be unable to retain existing management, technical, sales and customer support personnel that are critical to the success of the integrated
company, resulting in disruption of operations, loss of key information, expertise or know-how and unanticipated additional recruitment and training costs and otherwise diminishing
anticipated benefits of these acquisitions.

Our
future success is substantially dependent on the continued service of our key senior management. Our employment agreements with our key personnel are short-term and on an
at-will basis. We do not have key-person insurance on any of our employees. The loss of the services of any member of our management team, or of any other key employees, could
divert management's time and attention, increase our expenses and adversely affect our ability to conduct our business efficiently. Our future success also depends on our continuing ability to
attract, retain and motivate highly skilled employees. We may be unable to retain our key employees or attract, assimilate or retain other highly qualified employees in the future. We have experienced
difficulty from time to time in attracting the personnel necessary to support the growth of our business, and may experience similar difficulties in the future.

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DELAWARE LAW AND OUR STOCKHOLDER RIGHTS PLAN CONTAIN ANTI-TAKEOVER PROVISIONS THAT COULD DETER TAKEOVER ATTEMPTS THAT COULD BE BENEFICIAL TO OUR
STOCKHOLDERS.

Provisions
of Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. Section 203 of the Delaware
General Corporation Law may make the acquisition of the Company and the removal of incumbent officers and directors more difficult by prohibiting stockholders holding 15% or more of our outstanding
voting stock from acquiring the Company without the board of director's consent for at least three years from the date they first hold 15% or more of the voting stock. In addition, our Stockholder
Rights Plan has significant anti-takeover effects by causing substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors.

SYSTEM FAILURES COULD SIGNIFICANTLY DISRUPT OUR OPERATIONS, WHICH COULD CAUSE US TO LOSE CUSTOMERS OR ADVERTISING INVENTORY.

Our
success depends on the continuing and uninterrupted performance of our systems. Sustained or repeated system failures that interrupt our ability to provide services to customers,
including failures affecting our ability to deliver advertisements quickly and accurately and to process users' responses to advertisements, would reduce significantly the attractiveness of our
solutions to advertisers and Web publishers. Our business, results of operations and financial condition could be materially and adversely affected by any damage or failure that interrupts or delays
our operations. Our computer systems will be vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious human acts and natural disasters. We lease
server space in Los Angeles and Sunnyvale, California; Louisville, Kentucky; Pittsburgh, Pennsylvania and Tokyo, Japan. Therefore, any of the above factors affecting the Los Angeles, Sunnyvale,
Louisville, Pittsburgh or Tokyo areas would substantially harm our business. Moreover, despite network security measures, our servers are potentially vulnerable to physical or electronic
break-ins, computer viruses and similar disruptive problems in part because we cannot control the maintenance and operation of our third-party data centers. Despite the precautions taken,
unanticipated problems affecting our systems could cause interruptions in the delivery of our solutions in the future. Our data storage centers incorporate redundant systems, consisting of additional
servers, but our primary system does not switch over to our backup system automatically. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures in
our systems.

WE MAY EXPERIENCE CAPACITY CONSTRAINTS THAT COULD REDUCE OUR REVENUE.

Our
future success depends in part on the efficient performance of our software and technology, as well as the efficient performance of the systems of third parties. As the numbers of
Web pages and Internet users increase, our services and infrastructure may not be able to grow to meet the demand. A sudden and unexpected increase in the volume of advertising delivered through our
servers or in click rates could strain the capacity of the software or hardware that we have deployed. Any capacity constraints we experience could lead to slower response times or system failures and
adversely affect the availability of advertisements, the number of advertising views delivered and the level of user responses received, which would harm our revenue. To the extent that we do not
effectively address capacity constraints or system failures, our business, results of operations and financial condition could be harmed substantially. We also depend on the Internet service
providers, or ISPs, that provide consumers with access to the Web sites on which our customers' advertisements appear. Internet users have occasionally experienced difficulties connecting to the Web
due to failures of their ISPs' systems. Any disruption in Internet access provided by ISPs or failures by ISPs to handle the higher volumes of traffic expected in the future could materially and
adversely affect our revenue.

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IT MAY BE DIFFICULT TO PREDICT OUR FINANCIAL PERFORMANCE BECAUSE OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.

Our
revenue and operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on
period-to-period comparisons of our results of operations as an indication of our future performance. Our results of operations may fall below the expectations of market
analysts and investors or our own forecasts in some future periods. If this happens, the market price of our common stock may fall. The factors that may affect our quarterly operating results include:



Expenditures
by advertisers also tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. Any decline in the economic prospects of
advertisers or the economy generally may alter current or prospective advertisers' spending priorities, or may increase the time it takes us to close sales with advertisers, and could materially and
adversely affect our business, results of operations and financial condition.

IF WE DO NOT SUCCESSFULLY DEVELOP OUR INTERNATIONAL STRATEGY, OUR REVENUE AND CASH FLOWS AND THE GROWTH OF OUR BUSINESS COULD BE HARMED.

We
initiated operations, through joint ventures and wholly-owned subsidiaries or divisions, in Japan in 1998, in the United Kingdom in 1999, and France and Germany in 2000. Our foreign
operations subject us to foreign currency exchange risks. We currently do not utilize hedging instruments to mitigate foreign exchange risks.

Our
international expansion will subject us to additional foreign currency exchange risks and will require management's attention and resources. We expect to pursue expansion through a
number of international alliances and to rely extensively on these business partners initially to conduct operations, establish local networks, register Web sites as affiliates and coordinate sales
and marketing efforts. Our success in these markets will depend on the success of our business partners and their willingness to dedicate sufficient resources to the relationships. We cannot assure
you that we will be successful in our efforts overseas. International operations are subject to other inherent risks, including:



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Our
failure to address these risks adequately could materially and adversely affect our business, results of operations and financial condition.

WE MAY BE LIABLE FOR CONTENT DISPLAYED ON OUR NETWORKS OF PUBLISHERS WHICH COULD INCREASE OUR EXPENSES.

We
may be liable to third parties for content in the advertising we deliver if the artwork, text or other content involved violates copyright, trademark, or other intellectual property
rights of third parties or if the content is defamatory. Any claims or counterclaims could be time-consuming, could result in costly litigation and could divert management's attention.

REVENUE GENERATED BY OUR TECHNOLOGY PRODUCTS AND SERVICES DEPEND UPON A LIMITED NUMBER OF CLIENTS, AND IF WE LOSE A MAJOR CLIENT FOR THESE PRODUCTS OR SERVICES, OUR REVENUE MAY
BE SIGNIFICANTLY REDUCED.

For
the year ended December 31, 2003, revenue from our technology products and services accounted for 24.3% of our revenue. Revenue generated by our technology products and
services have been derived from a limited number of advertisers and advertising agencies. Our results of operations would be materially adversely impacted by the loss of any of these clients. For the
year ended December 31, 2003, one individual company accounted for 9.9% of our overall revenue and 39.8% of revenue generated by our Technology segment. Another customer accounted for 18.9% of
our Technology segment revenue. We expect that these and other entities may continue to account for a significant percentage of our revenue generated by our technology products and services. Current
advertisers may not continue to purchase advertising services from us or may significantly reduce their purchases or we may not be able to successfully attract additional advertisers, all of which
would have a material adverse impact on our results of operations. If sales of our technology products and services do not grow, we will be unable to grow our Technology segment.

IF WE FAIL TO ESTABLISH, MAINTAIN AND EXPAND OUR TECHNOLOGY BUSINESS AND MARKETING ALLIANCES AND PARTNERSHIPS, OUR ABILITY TO GROW COULD BE LIMITED, WE MAY NOT ACHIEVE DESIRED
REVENUE AND OUR STOCK PRICE MAY DECLINE.

In
order to grow our technology business, we must generate, retain and strengthen successful business and marketing alliances with advertising agencies.

We
depend, and expect to continue to depend, on our business and marketing alliances, which are companies with which we have written or oral agreements to work together to provide
services to our clients and to refer business from their clients and customers to us. If companies with which we have business and marketing alliances do not refer their clients and customers to us to
perform their online campaign and message management, our revenue and results of operations would be severely harmed.

WE WILL BE DEPENDENT UPON TECHNOLOGIES, INCLUDING OUR MOJO, ADWARE, COMMISSION JUNCTION, HI-SPEED MEDIA, SEARCH123 AND BE FREE TECHNOLOGIES, FOR OUR FUTURE REVENUE,
AND IF THESE TECHNOLOGIES DO NOT GENERATE REVENUE, OUR BUSINESS MAY FAIL.

Our
future revenue is likely to be dependent on the acceptance by clients of the use of technologies, which we believe to be the cornerstone of the technology business. If these
technologies

21

---

do
not perform as anticipated or otherwise do not attract clients to use our services, our operations will suffer. In addition, we have incurred and will continue to incur significant expense
developing our technologies. If our revenue generated from the use of our technologies does not cover these development costs, our financial condition would suffer.

IF OUR TECHNOLOGIES SUFFER FROM DESIGN DEFECTS, WE MAY NEED TO EXPEND SIGNIFICANT RESOURCES TO ADDRESS RESULTING PRODUCT LIABILITY CLAIMS.

Our
business will be harmed if our technologies suffer from design or performance defects and, as a result, we could become subject to significant product liability claims. Technology as
complex as our technology may contain design and/or performance defects which are not detectable even after
extensive internal testing. Such defects may become apparent only after widespread commercial use. Our contracts with our clients currently do not contain provisions to completely limit our exposure
to liabilities resulting from product liability claims. Although we have not experienced any product liability claims to date, we cannot assure you that we will not do so in the future. A product
liability claim brought against us, which is not adequately covered by our insurance, could materially harm our business.

TECHNOLOGY SALES AND IMPLEMENTATION CYCLES ARE LENGTHY, WHICH COULD DIVERT OUR FINANCIAL AND OTHER RESOURCES, AND ARE SUBJECT TO DELAYS, WHICH COULD RESULT IN DELAYED
REVENUE.

If
the sales and implementation cycle of our technology products and services are delayed, our revenue will likewise be delayed. Our sales and implementation cycles are lengthy, causing
us to recognize revenue long after our initial contact with a client. During our sales effort, we spend significant time educating prospective clients on the use and benefit of our message management
services. As a result, the sales cycle for our products and services is long, ranging from a few weeks to several months for our larger clients. The sales cycle for our message management services and
media management applications is likely to be longer than the sales cycle for competitors because we believe that clients may require more extensive approval processes related to integrating internal
business information with their advertising campaigns. In addition, in order for a client to implement our services, the client must commit a significant amount of resources over an extended period of
time. Furthermore, even after a client purchases our services, the implementation cycle is subject to delays. These delays may be caused by factors within our control, such as possible technology
defects, as well as those outside our control, such as clients' budgetary constraints, internal acceptance reviews, functionality enhancements, lack of appropriate customer staff to implement our
media management applications and the complexity of clients' advertising needs. Also, failure to deliver service or application features consistent with delivery commitments could result in a delay or
cancellation of a client agreement.

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY FROM UNAUTHORIZED USE, WHICH COULD DIMINISH THE VALUE OF OUR SERVICES, WEAKEN OUR COMPETITIVE POSITION AND REDUCE OUR
REVENUE.

Our
success depends in large part on our proprietary technologies, including tracking management software, our affiliate marketing technologies and our MOJO platform. In addition, we
believe that our trademarks are key to identifying and differentiating our services from those of our competitors. We may be required to spend significant resources to monitor and police our
intellectual property rights. If we fail to successfully enforce our intellectual property rights, the value of our services could be diminished and our competitive position may suffer.

We
rely on a combination of copyright, trademark and trade secret laws, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. Third-party
software providers could copy or otherwise obtain and use our technology without authorization or develop

22

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similar
technology independently which may infringe upon our proprietary rights. We may not be able to detect infringement and may lose competitive position in the market before we do so. In addition,
competitors may design around our technology or develop competing technologies. Intellectual property protection may also be unavailable or limited in some foreign countries.

We
generally enter into confidentiality or license agreements with our employees, consultants, vendor clients and corporate partners, and generally control access to and distribution of
our technologies, documentation and other proprietary information. Despite these efforts, unauthorized parties may attempt to disclose, obtain or use our services or technologies. Our precautions may
not prevent misappropriation of our services or technologies, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United
States.

IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES, WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY.

The
Internet advertising market is characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing customer
demands. The introduction of new products and services embodying new technologies and the emergence of new industry standards and practices can render existing products and services obsolete and
unmarketable or require unanticipated investments in research and development. Our success will depend on our ability to adapt to rapidly changing technologies, to enhance existing solutions and to
develop and introduce a variety of new solutions to address our customers' changing demands. For example, advertisers are increasingly requiring Internet advertising networks to have the ability to
deliver advertisements utilizing new formats that surpass stationary images and incorporate rich media, such as video and audio, interactivity, and more precise consumer targeting techniques. Our
system does not support some types of advertising formats, such as certain video and audio formats, and many of the Web sites in our network have not implemented systems to allow rich media
advertisements. In addition, an increase in the bandwidth of Internet access resulting in faster data delivery may provide new products and services that will take advantage of this expansion in
delivery capability. If we fail to adapt successfully to such developments, we could lose customers or advertising inventory. We purchase most of the software used in our business from third parties.
We intend to continue to acquire technology necessary for us to conduct our business from third parties. We cannot assure you that, in the future, these technologies will be available on commercially
reasonable terms, or at all. We may also experience difficulties that could delay or prevent the successful design, development, introduction or marketing of new solutions. Any new solution or
enhancement that we develop will need to meet the requirements of our current and prospective customers and may not achieve significant market acceptance. If we fail to keep pace with technological
developments and the introduction of new
industry and technology standards on a cost-effective basis, our expenses could increase, and we could lose customers or advertising inventory.

CHANGES IN GOVERNMENT REGULATION AND INDUSTRY STANDARDS COULD DECREASE DEMAND FOR OUR SERVICES AND INCREASE OUR COSTS OF DOING BUSINESS.

Laws
and regulations that apply to Internet communications, commerce and advertising are becoming more prevalent. These regulations could affect the costs of communicating on the Web and
adversely affect the demand for our advertising solutions or otherwise harm our business, results of operations and financial condition. The United States Congress has enacted Internet legislation
regarding children's privacy, copyrights, sending of unsolicited commercial email (e.g., the Federal CAN-Spam Act of 2003) and taxation. Other laws and regulations have been adopted and
may be adopted in the future, and may address issues such as user privacy, Spyware, pricing, intellectual property ownership and infringement, copyright, trademark, trade secret, export of encryption
technology, acceptable content, taxation and quality of products and services. This legislation could

23

---

hinder
growth in the use of the Web generally and decrease the acceptance of the Web as a communications, commercial and advertising medium.

Due
to the global nature of the Web, it is possible that, although our transmissions originate in California, Kentucky, Pennsylvania and Japan, the governments of other states or foreign
countries might attempt to regulate our transmissions or levy sales or other taxes relating to our activities. In addition, the growth and development of the market for Internet commerce may prompt
calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business over the Internet. The laws governing the
Internet remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine how existing laws, including those governing intellectual property,
privacy, libel and taxation, apply to the Internet and Internet advertising. Our business, results of operations and financial condition could be materially and adversely affected by the adoption or
modification of laws or regulations relating to the Internet, or the application of existing laws to the Internet or Internet-based advertising.

WE COULD BE HELD LIABLE FOR OUR OR OUR CLIENTS' FAILURE TO COMPLY WITH FEDERAL, STATE AND FOREIGN LAWS GOVERNING CONSUMER PRIVACY.

Recent
growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to increased federal, state and foreign scrutiny and
legislative and regulatory activity concerning data collection and use practices. Any failure by us to comply with applicable foreign, federal and state laws and regulatory requirements of regulatory
authorities may result in, among other things, indemnification liability to our clients and the advertising agencies we work with, administrative enforcement actions and fines, class action lawsuits,
cease and desist orders, and civil and criminal liability. Recently, class action lawsuits have been filed alleging violations of privacy laws by Internet service providers. The European Union's
directive addressing data privacy limits our ability to collect and use information regarding Internet users. These restrictions may limit our ability to target advertising in most European countries.
Our failure to comply with these or other federal, state or foreign laws could result in liability and materially harm our business.

In
addition to government activity, privacy advocacy groups and the high-technology and direct marketing industries are considering various new, additional or different
self-regulatory standards. This focus, and any legislation, regulations or standards promulgated, may impact us adversely. Governments, trade associations and industry
self-regulatory groups may enact more burdensome laws, regulations and guidelines, including consumer privacy laws, affecting our clients and us. Since many of the proposed laws or
regulations are just being developed, and a consensus on privacy and data usage has not been reached, we cannot yet determine the impact these regulations may have on our business. However, if the
gathering of profiling information were to be curtailed, Internet advertising would be less effective, which would reduce demand for Internet advertising and harm our business.

Our
customers are also subject to various federal and state regulations concerning the collection and use of information regarding individuals. These laws include the Children's Online
Privacy Protection Act, the Federal Drivers Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-Bliley Act, the CAN SPAM Act of 2003, as well as other laws that govern the
collection and use of consumer credit information. We cannot assure you that our clients are currently in compliance, or will remain in compliance, with these laws and their own privacy policies. We
may be held liable if our clients use our technology in a manner that is not in compliance with these laws or their own stated privacy standards.

OUR STOCK PRICE IS LIKELY TO BE VOLATILE AND COULD DROP UNEXPECTEDLY.

Our
common stock has been publicly traded only since March 30, 2000. The market price of our common stock has been subject to significant fluctuations since the date of our
initial public offering.

24

---

The
stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities, particularly securities of technology companies. As a
result, the market price of our common stock may materially decline, regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation of this type is often expensive
and diverts management's attention and resources.

IF REQUIREMENTS RELATING TO ACCOUNTING TREATMENT FOR EMPLOYEE STOCK OPTIONS ARE CHANGED, WE MIGHT DECIDE TO CHANGE OUR COMPENSATION PRACTICES, WHICH MIGHT INCREASE OUR CASH
COMPENSATION EXPENSE.

We
currently account for the issuance of stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." If proposals currently under
consideration by administrative and governmental authorities are adopted, we may be required to treat the value of the stock options granted to employees as compensation expense. Such a change would
likely have a negative effect on our earnings. In response to a requirement to expense the value of stock options, we might decide to decrease the number of employee stock options granted to our
employees. Such a reduction could affect our ability to retain existing employees and attract qualified candidates, and increase the cash compensation we would have to pay to them. An increase in
employee wages and salaries would decrease our cash available for marketing, product development and other uses.

ITEM 2. PROPERTIES

We lease a number of properties in both domestic and foreign locations.

Our
principal executive offices are located in Westlake Village, California, where we lease a property with approximately 14,300 square feet of space. This facility is also used by our
Media segment's operations. Other leased facilities used in our Media segment operations include a 3,200 square foot facility in Sherman Oaks, California, and a 21,700 square foot facility in
San Francisco and 7,500 square foot facility in New York, New York, shared with our Technology Segment.

Leased
facilities used by our Affiliate Marketing segment include an approximate 35,700 square foot facility in Marlborough, Massachusetts and an approximate 24,000 square foot facility
in Pittsburgh, Pennsylvania, both used by our Be Free operations, and an approximate 17,700 square foot facility used by our Commission Junction operations in Santa Barbara, California.

Our
Technology segment occupies an approximate 21,700 square foot facility in San Francisco, California, and 7,700 square foot facility in New York, New York, both shared by our
Mediaplex operations and our Media Segment, and an approximate 20,800 square feet of office space for our AdWare Systems enterprise solutions organization in Louisville, Kentucky.

We
also lease small office space and facilities in Agoura Hills, California; Tarzana, California; London, England; Paris, France; Munich, Germany and Tokyo, Japan. In addition, we use
third-party co-location facilities that house our web servers in Sunnyvale, California; Pittsburgh, Pennsylvania and El Segundo, California. Our existing office space is adequate for our
current operations. For additional information regarding our obligations under leases, see note 13 to our consolidated financial statements included in this Report.

ITEM 3. LEGAL PROCEEDINGS



On September 27, 2000, Joseph Lorenc, a former employee of Be Free, Inc. filed a lawsuit against Be Free and two officers of Be Free, Steven Joseph
and Gordon Hoffstein, in the United States

25

---

District
Court, District of Massachusetts. The complaint alleges, among other things, breach of contract. Lorenc seeks, among other things, compensatory damages, punitive damages and attorney's fees
to the greatest extent allowed by law. The case is now pending before the state court in Massachusetts. The case is set for trial in May of 2004. ValueClick believes that the plaintiffs' allegations
are without merit and intends to vigorously defend itself. ValueClick has not recorded an accrual related to damages, if any, resulting from this case, as an unfavorable outcome is, in management's
opinion, not probable.



This case was filed on September 5, 2003 and brought against ValueClick and Company executives Sam Paisley, Jim Zarley and Scott Barlow, by Gurbaksh Chahal
and Tajinder Chahal for, among other things, fraud. The Chahals are former employees of the Company's Click Agents Inc. subsidiary and the case arises out of the Company's repurchase of the
Chahals' ValueClick stock. The case is pending before the Los Angeles County Superior Court. The Chahals seek, among other things, general, special and punitive damages according to proof as well as
the imposition of a constructive trust. The Company believes this case to be wholly without merit and intends to vigorously defend itself. ValueClick has not recorded an accrual related to damages, if
any, resulting from this case, as an unfavorable outcome is, in management's opinion not probable.

Other
than the matters discussed above, we are not a party to any other material legal proceedings, nor are we aware of any pending or threatened litigation that would have a material
adverse effect on our business, operating results, cash flows or financial condition. From time to time, we may become subject to additional legal proceedings, claims, and litigation arising in the
ordinary course of business. In addition, we may receive letters alleging infringement of patent or other intellectual property rights. Our management believes that these letters are without merit and
intends to contest them vigorously.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

26

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PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock has traded on The NASDAQ National Market under the symbol "VCLK" since our initial public offering on March 30, 2000. The following table
sets forth, for the periods indicated, the high and low sales prices per share of the common stock as reported on the Nasdaq National Market. On December 31, 2003, the last sale price of our
common stock reported by The NASDAQ National Market was $9.07 per share.

Price Range of
Common StockHigh

LowFiscal Year Ended December 31, 2003Fourth Quarter

$
10.75

$
7.35Third Quarter


9.96


6.10Second Quarter


6.38


3.18First Quarter


3.21


2.65


Price Range of
Common StockHigh

LowFiscal Year Ended December 31, 2002Fourth Quarter

$
2.87

$
2.00Third Quarter


3.10


2.11Second Quarter


3.24


2.55First Quarter


3.11


2.35


Price Range of
Common StockHigh

LowFiscal Year Ended December 31, 2001Fourth Quarter

$
2.93

$
1.87Third Quarter


3.03


1.95Second Quarter


3.74


2.58First Quarter


5.88


3.03


Holders

As of February 29, 2004, there were 700 stockholders of record who held shares of our common stock.

Dividend Policy

We have not declared or paid any cash dividends on our capital stock since our inception and we intend to retain future earnings, if any, for use in the operation
and expansion of our business and do not anticipate paying cash dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below with respect to our consolidated statement of operations for each of the years ended December 31,
2003, 2002 and 2001 and with respect to our consolidated balance sheet as of December 31, 2003 and 2002 have been derived from the audited

27

---

financial
statements of ValueClick which are included elsewhere herein. The consolidated statement of operations data for the years ended 2000 and 1999 and the consolidated balance sheet data as of
December 31, 2001, 2000 and 1999 have been derived from our audited consolidated financial statements not included herein. The selected consolidated financial data set forth below is qualified
in our entirety by, and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the
notes to those statements included elsewhere herein.

CONSOLIDATED STATEMENT OF OPERATIONS DATA

|                                                                                                              |                                                                     | For the Years ended December 31, |       
|------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | -------------------------------- | ------
|
|
|Consolidated Statement of Operations Data:                                                                    |                                                                     |                                  |       
|Revenue                                                                                                       |                                                                     | $                                | 92,516
|Cost of revenue                                                                                               |                                                                     |                                  | 32,024
|                                                                                                              |                                                                     |                                  |       
|                                                                                                              | Gross profit                                                        |                                  |       
|Operating expenses:                                                                                           |                                                                     |                                  |       
|                                                                                                              | Sales and marketing (1)                                             |                                  |       
|                                                                                                              | General and administrative (1)                                      |                                  |       
|                                                                                                              | Product development (1)                                             |                                  |       
|                                                                                                              | Stock-based compensation                                            |                                  |       
|                                                                                                              | Amortization of intangible assets and acquired software             |                                  |       
|                                                                                                              | Merger-related costs                                                |                                  |       
|                                                                                                              | Restructuring charges                                               |                                  |       
|                                                                                                              |                                                                     |                                  |       
|                                                                                                              |                                                                     | Total operating expenses         |       
|                                                                                                              |                                                                     |                                  |       
|Income (loss) from operations                                                                                 |                                                                     |                                  | 7,205 
|                                                                                                              | Equity in loss of investee                                          |                                  |       
|                                                                                                              | Interest income, net                                                |                                  |       
|                                                                                                              | Gain (loss) on sale of marketable securities                        |                                  |       
|                                                                                                              | Impairment write-down of marketable securities                      |                                  |       
|                                                                                                              | Gain from consolidated subsidiary stock issuance                    |                                  |       
|                                                                                                              | Gain on the sale of consolidated subsidiary stock                   |                                  |       
|                                                                                                              | Other income (expense)                                              |                                  |       
|                                                                                                              |                                                                     |                                  |       
|Income (loss) before income taxes, minority interests and cumulative effect of change in accounting principle |                                                                     |                                  | 10,569
|                                                                                                              | Provision for income taxes                                          |                                  |       
|                                                                                                              |                                                                     |                                  |       
|Income (loss) before minority interest and cumulative effect of change in accounting principle                |                                                                     |                                  | 9,739 
|                                                                                                              | Minority share of (income) loss in consolidated subsidiary          |                                  |       
|                                                                                                              |                                                                     |                                  |       
|Income (loss) before cumulative effect of change in accounting principle                                      |                                                                     |                                  | 9,823 
|                                                                                                              | Cumulative effect of change in accounting principle (2)             |                                  |       
|                                                                                                              |                                                                     |                                  |       
|                                                                                                              |                                                                     | Net income (loss)                |       
|                                                                                                              |                                                                     |                                  |       
|Basic net income (loss) per common share:                                                                     |                                                                     | $                                | 0.13  
|                                                                                                              |                                                                     |                                  |       
|                                                                                                              | Shares used to calculate basic net income (loss) per common share   |                                  |       
|                                                                                                              |                                                                     |                                  |       
|Diluted net income (loss) per common share:                                                                   |                                                                     | $                                | 0.13  
|                                                                                                              |                                                                     |                                  |       
|                                                                                                              | Shares used to calculate diluted net income (loss) per common share |                                  |       
|                                                                                                              |                                                                     |                                  |       

28

---

---



Year ended2003

2002

2001

2000

1999Sales and Marketing

$
113

$
488

$
864

$
1,610

$
1,122General and Administrative


181


779


1,376


2,718


1,893Product Development


58


260


459


730


491$
352

$
1,527

$
2,699

$
5,058

$
3,506




Consolidated Balance Sheet Data:

|                                                 |  | December 31,
|------------------------------------------------ |  | ------------
|
|
|Cash, cash equivalents and marketable securities |  | $           
|Working capital                                  |  |             
|Total assets                                     |  |             
|Total stockholders' equity                       |  |             

Quarterly Results (Unaudited)

The following table sets forth some of our selected financial information for our eight most recent fiscal quarters in dollar terms. In the opinion of our
management, this unaudited financial information has been prepared on the same basis as the audited financial information, and includes all adjustments, consisting only of normal recurring
adjustments, necessary to present this information fairly when read in conjunction with our financial statements and the related notes contained elsewhere herein. These operating results are not
necessarily indicative of results of any future period.

29

---

|                                                                                                             |                                                            | Three-Month Period Ended |       
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------- | ------------------------ | ------
|
|Revenue                                                                                                      |                                                            | $                        | 30,273
|Cost of revenue                                                                                              |                                                            |                          | 10,044
|                                                                                                             |                                                            |                          |       
|                                                                                                             | Gross profit                                               |                          |       
|Operating expenses:                                                                                          |                                                            |                          |       
|                                                                                                             | Sales and marketing (1)                                    |                          |       
|                                                                                                             | General and administrative (1)                             |                          |       
|                                                                                                             | Product development (1)                                    |                          |       
|                                                                                                             | Stock-based compensation                                   |                          |       
|                                                                                                             | Amortization of intangible assets                          |                          |       
|                                                                                                             | Merger-related costs                                       |                          |       
|                                                                                                             | Restructuring charges                                      |                          |       
|                                                                                                             |                                                            |                          |       
|                                                                                                             |                                                            | Total operating expenses |       
|                                                                                                             |                                                            |                          |       
|Income (loss) from operations                                                                                |                                                            |                          | 4,611 
|                                                                                                             | Interest income, net                                       |                          |       
|                                                                                                             | Gain on sale of marketable securities                      |                          |       
|                                                                                                             | Other income (expense)                                     |                          |       
|                                                                                                             |                                                            |                          |       
|Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle |                                                            |                          | 5,286 
|                                                                                                             | Provision for (benefit from) income taxes                  |                          |       
|                                                                                                             |                                                            |                          |       
|Income (loss) before minority interest and cumulative effect of change in accounting principle               |                                                            |                          | 5,270 
|                                                                                                             | Minority share of (income) loss in consolidated subsidiary |                          |       
|                                                                                                             |                                                            |                          |       
|Income (loss) before cumulative effect of change in accounting principle                                     |                                                            |                          | 5,346 
|                                                                                                             | Cumulative effect of change in accounting principle (2)    |                          |       
|                                                                                                             |                                                            |                          |       
|Net income (loss)                                                                                            |                                                            | $                        | 5,346 
|                                                                                                             |                                                            |                          |       
|Basic net income (loss) per share                                                                            |                                                            | $                        | 0.07  
|Diluted net income (loss) per share                                                                          |                                                            | $                        | 0.07  
|                                                                                                             |                                                            |                          |       

---

Three-Month Period EndedDec. 31,
2003

Sept. 30,
2003

Jun. 30,
2003

Mar. 31,
2003

Dec. 31,
2002

Sept. 30,
2002

Jun. 30,
2002

Mar. 31,
2002Sales and marketing

$
28

$
23

$
31

$
31

$
44

$
130

$
140

$
174General and administrative


44


37


50


50


54


212


228


285Product development


14


12


16


16


23


70


76


91


30

---



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the
related notes thereto included elsewhere in this Report on Form 10-K beginning on page F-1. The following discussion contains forward-looking statements that involve
risks and uncertainties including anticipated financial performance, business prospects, anticipated capital expenditures and other similar matters, which reflect managements best judgment based on
factors currently known. Actual results could differ materially from those discussed herein. Factors that could cause or contribute to the differences are discussed in "BusinessRisk
Factors" and elsewhere in this Report.

Overview

We offer a suite of products and services that enable marketers to advertise and sell their products through all major online marketing
channelsdisplay/web advertising, search marketing, email marketing, and affiliate marketing. Additionally, we provide software that assists advertising agencies with information
management regarding their financial, workflow, and offline media buying and planning processes. The broad range of products and services that we provide enables our customers to address all aspects
of the marketing process, from strategic planning through execution, including results measurement and campaign refinements. By combining our media, affiliate marketing and technology offerings with
our experience in both online and offline marketing, we help our customers around the world optimize their marketing campaigns both on the Internet and through offline media.

In
prior periods, we operated in two reportable operating segments: Media and Technology. With the acquisition of Commission Junction, Inc. ("Commission Junction") in December 2003, we
reassessed our reportable operating segments and determined that we now have an additional reportable operating segment, Affiliate Marketing, which combines the operations of Be Free, Inc. ("Be Free")
and Commission Junction. For prior periods, Be Free was included in the technology reporting segment. Accordingly, our prior period operating segment information has been reclassified to conform to
2003 presentation.

We
derive our revenue from three business segments based on the types of products and services provided. These business segments are Media, Affiliate Marketing and Technology.

MEDIAOur Media segment provides a comprehensive suite of online media services and tailored programs that help marketers
create awareness, attract visitors and generate leads and sales through the Internet. Our Media segment has grown both organically and through the acquisition of complementary firms such as
Search123.com, completed in May 2003, and Hi-Speed Media, completed in December 2003.

We
offer advertisers and agencies a range of online media solutions in the categories of Web/Display Advertising, Email Marketing, Lead Generation Marketing, and Search Marketing that
are described in detail in Item 1 of this document. To accomplish this, we have partnered with thousands of online publishers to provide advertisers and agencies with access to one of the largest and
most reputable online advertising networks, and we have employed rigorous network quality control and advanced proprietary targeting technology.

Our
Media services are sold on a variety of pricing models, including cost-per-impression (CPM), cost-per-click (CPC),
cost-per-lead (CPL), and cost-per-action (CPA).

AFFILIATE MARKETINGOur Affiliate Marketing segment operates through our wholly-owned subsidiaries Be Free acquired on
May 23, 2002, and Commission Junction, acquired on December 7, 2003.

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Our
affiliate marketing business includes technology and services that enable advertisers to manage, track and analyze a variety of online marketing programs. Specifically, our affiliate
marketing services enable our advertiser clients to: build relationships with affiliate partners; manage the offers they make available to their affiliate partners; track the online traffic, leads and
sales that these offers drive to the advertiser's Website; analyze the effectiveness of the offers and affiliate partners; and track the commissions due to their affiliates.

We
offer affiliate marketing services that address the needs of advertisers that seek to build and manage a private-labeled network of third party online publishers, as well as
advertisers that wish to conduct an affiliate marketing program through our existing network of third party online affiliate publishers. Affiliate Marketing revenues are driven by a combination of
fixed fees and variable
compensation that is based on either a cost-per-lead (CPL) scenario or on a percentage of transaction revenue generated from the programs managed with our affiliate marketing
platforms.

TECHNOLOGYOur Technology segment operates through our wholly-owned subsidiaries Mediaplex, Inc. (Mediaplex) and AdWare
Systems, Inc. (AdWare), which were acquired on October 19, 2001.

Our
Mediaplex subsidiary offers technology infrastructure tools and services that enable advertisers, advertising agencies and online publishers to implement and manage their own online
display advertising and email campaigns. Our Mediaplex products are based on its proprietary MOJO® technology platform, which has the ability to automatically configure messages in
response to real-time information from a marketer's enterprise data system and to provide ongoing campaign optimization. Mediaplex's revenues are primarily derived from software access and
use charges paid by our software clients. These fees vary based on the client's use of the technology.

AdWare
is an applications service provider ("ASP") delivering high-quality information management systems to advertising agencies, marketing communications companies, and
public relations agencies. AdWare's revenue is generated primarily from monthly service fees paid by customers over the service periods.

Revenue,
gross profit and total assets by segment are listed in the following table (in thousands). Media Segment revenue includes sales of certain Affiliate Marketing and Technology
products made by Media operations outside the United States, amounting to $749,000 and $3,072,000, and $0 and $748,000, for the years ended 2003 and 2002, respectively.

|                          |  | Revenue |        | Gross Profit |   | Total Assets
|------------------------- |  | ------- | ------ | ------------ | - | ------------
|
|Media                     |  | $       | 45,761 |              | $ | 30,252      
|Affiliate Marketing       |  |         | 24,302 |              |   | 11,848      
|Technology                |  |         | 23,559 |              |   | 20,934      
|Intercompany eliminations |  |         | (1,106 | )            |   | (480        
|                          |  |         |        |              |   |             
|Total                     |  | $       | 92,516 |              | $ | 62,554      
|                          |  |         |        |              |   |             

RESULTS OF OPERATIONSFiscal Years Ended December 31, 2003 and 2002

Revenue.Net revenue from our Media, Affiliate Marketing and Technology segments accounted for $45.8 million,
$24.3 million, and $22.4 million, respectively, resulting in net revenue for the year ended December 31, 2003 of $92.5 million compared to $62.6 million for 2002, an
increase of $29.9 million or 47.9%. The increase in net revenue was a result of the inclusion of a full year of Be Free operations (versus seven months in the prior year), seven months of
Search123 operations and one month of Commission Junction operations in the 2003 period, in addition to core growth in all three segments.

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Cost of Revenue.Cost of revenue for the Media segment consists primarily of amounts that we pay to Web site publishers on
the ValueClick consolidated networks. We pay these publishers on either a CPC, CPA, CPL or CPM basis. Cost of revenue for both the Media and Technology segments also includes depreciation on revenue
producing technologies and Internet access costs. Cost of revenue was $32.0 million for the year ended December 31, 2003 compared to $21.7 million for 2002, an increase of
$10.3 million or 47.4%. Cost of revenue decreased as a percentage of net revenue over the 2002 period. This decrease, as well as the corresponding increase in the gross profit margin to 65.4%
for the year ended December 31, 2003 from 65.3% for the 2002 fiscal year, was primarily attributable to higher margins in our Technology segment and the inclusion of one full year of results
from Be Free at a higher margin, partially offset by a decline in margins for our Japan operations.

Sales and Marketing.Sales and marketing expense consist primarily of compensation, sales commissions, travel, advertising,
trade show costs and costs of marketing materials. Sales and marketing expenses for the year ended December 31, 2003 were $21.2 million compared to $17.0 million for 2002, an
increase of $4.2 million or 24.5%. The increase in sales and marketing expenses was due primarily to the inclusion of sales and marketing expense for Be Free for a full year and the addition of
Search123 and Commission Junction for seven months and one month, respectively. Our sales and marketing costs as a percentage of revenue decreased to 22.9% for the year ended December 31, 2003
from 27.2% for 2002 due primarily to the productivity of our sales teams.

General and Administrative.General and administrative expense consists primarily of facilities costs, executive and
administrative compensation and professional services and other administrative costs. General and administrative expense increased to $19.7 million for the year ended December 31, 2003
from $17.8 million in 2002, an increase of $1.9 million or 10.8%. Our general and administrative costs as a percentage of revenue decreased to 21.3% for the year ended
December 31, 2003 from 28.4% for 2002. General and administrative cost increases due to the inclusion of Be Free for a full year and the addition of Search123 and Commission Junction for seven
months and one month, respectively, were offset partially by on-going cost reduction activities. The decrease in general and administrative expense as a percent of revenue resulted from
improved operating leverage and the on-going cost reduction efforts.

Product Development.Product development costs include expenses for the development of new technologies designed to enhance
the performance of our service, including the salaries and related
expenses for our software engineering department, as well as costs for contracted services and supplies. With the exception of certain internal use software qualifying for capitalization, all product
development costs have been expensed as incurred. Product development costs were $10.5 million for the years ended December 31, 2003 and 2002. Product development cost increases
resulting from the inclusion of Be Free for a full year and the addition of Search123 and Commission Junction for seven months and one month, respectively, were offset by continuing efforts to reduce
the number of our co-location facilities and consolidate technology teams.

Stock-Based Compensation.Stock-based compensation included in the accompanying consolidated statements of operations
reflects the amortization of the difference between the deemed fair value of our common stock for financial accounting purposes and the exercise price of options on the date of the options were
granted. Stock-based compensation expense for the year ended December 31, 2003 amounted to $352,000, which relates primarily to the amortization of existing deferred compensation recorded in
prior periods for stock options and restricted shares. The decrease in stock-based compensation from $1.5 million for the year ended December 31, 2002 relates to our amortization method
that charges to expense a higher portion of the deferred stock-based compensation in the earlier years of the option vesting period. We anticipate higher stock-based compensation expense in 2004 due
to deferred compensation recorded for options assumed in the Hi-Speed and Commission Junction acquisitions, which closed in December 2003.

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Amortization of Intangible Assets.Amortization of intangible assets for the year ended December 31, 2003 of
$1.6 million represents principally the amortization of intangible assets acquired through business combinations and purchased intellectual property. Amortization of intangible assets for the
year ended December 31, 2002 of $533,000 represents principally the amortization of intangible assets acquired through business combinations. We anticipate higher amortization of intangible
assets in 2004 due to additional intangible assets purchased in the Search 123, Hi-Speed Media and Commission Junction acquisitions, closed in 2003.

For
the year ended December 31, 2001, amortization of intangible assets also included the amortization of goodwill created as a result of the acquisitions of Bach Systems and a
majority interest in ValueClick Japan.

Merger-Related Costs.Merger-related costs represent the direct transaction costs incurred related to the merger with Z Media
in January 2001, accounted for as a pooling-of-interests.

Restructuring charge.In the second quarter of 2002 and in the fourth quarter of 2001, we recorded restructuring charges of
$2.3 million and $515,000, respectively. These restructuring charges were the result of certain redundancies as a result of our acquisitions of Be Free and Mediaplex and primarily
represent a provision for consolidating certain leased facilities, which will be paid out through 2010. As of December 31, 2003, $922,000 of the charges had been paid.

Interest Income, Net.Interest income, net principally consists of interest earned on our cash and cash equivalents and
marketable debt securities and is net of interest paid on debt obligations. Interest income was $3.4 million for the year ended December 31, 2003 compared to $5.9 million for
2002. The decrease in interest income is attributable to a lower cash balance over the period primarily due to the purchase of ValueClick common stock under the stock repurchase program and the
effects of decreasing average investment yields since 2001.

Provision for Income Taxes.For the year ended December 31, 2003, our provision for federal, state and foreign income
taxes amounted to $830,000, compared to $163,000 for 2002. The effective income tax rate reflects certain non-deductible expenses, including the stock-based compensation charges.
Additionally, income tax benefits from the available net operating losses are not fully reflected in the provision as the realization of these benefits is not deemed more likely than not.

Minority Share of Income of ValueClick Japan.For the year ended December 31, 2003, minority share of loss of
ValueClick Japan was $84,000 compared to minority share of income of $15,000 for the year ended December 31, 2002. We account for our interest in ValueClick Japan on a consolidated basis for
financial reporting purposes, resulting in a minority interest in the net income or losses incurred by ValueClick Japan.

Cumulative Effect of a Change in Accounting Principle.On January 1, 2002, we adopted the accounting standards set
forth in SFAS No. 142, "Goodwill and other Intangible Assets." Although the application of this standard did not change our evaluation of our other identifiable intangible assets, the initial
application of this statement resulted in an impairment of goodwill of $7.6 million to write down goodwill related to the Bach Systems and ValueClick Japan acquisitions. The amount of the
impairment was estimated based on a valuation process that considered both the estimated present value of future cash flows and the application of market value to revenue multiples for comparable
publicly traded companies to the projected and historical revenue of Bach Systems and ValueClick Japan. The impairment amount was reported as a cumulative effect of a change in accounting principle
during the first quarter of 2002.

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RESULTS OF OPERATIONSFiscal Years Ended December 31, 2002 and 2001

Revenue.Net revenue from our Media segment, Affiliate Marketing segment, and our Technology segment accounted for
$29.8 million, $11.9 million, and $20.9 million respectively, resulting in net revenue for the year ended December 31, 2002 of $62.6 million compared to
$44.9 million for 2001, an increase of $17.7 million or 39.4%. The increase in net revenue was a result of the inclusion of the Technology segment in the 2002 period, with a full year of
Mediaplex operations and seven months of Be Free operations. The decline in Media segment revenue reflects the continued effects of the generally weak U.S. and Japan economies and advertising markets,
offset by increased media revenue in the Europe market.

Cost of Revenue.Cost of revenue for the Media segment consists primarily of amounts that we pay to Web site publishers on
the ValueClick consolidated networks. We pay these publishers on either a CPC, CPA, CPL or CPM basis. Cost of revenue for both the Media and Technology segments also includes depreciation costs of the
revenue producing technologies and Internet access costs. Cost of revenue was $21.7 million for the year ended December 31, 2002 compared to $20.4 million for 2001, an increase of
$1.4 million or 6.7%. Cost of revenue decreased as a percentage of net revenue over the 2001 period. This decrease, as well as the corresponding increase in the gross profit margin to 65.3% for
the year ended December 31, 2002 from 54.6% for the 2001 fiscal year, was primarily attributable to the change in product mix as a result of the inclusion of the operations of our higher profit
margin Technology segment in the 2002 period.

Sales and Marketing.Sales and marketing expenses consist primarily of compensation, sales commissions, travel, advertising,
trade show costs and costs of marketing materials. Sales and marketing expenses for the year ended December 31, 2002 were $17.0 million compared to $12.0 million for 2001, an
increase of $5.0 million or 42.0%. The increase in sales and marketing expenses was due primarily to the addition of sales and marketing personnel for our Affiliate Marketing and Technology
segments. Our sales and marketing costs as a percentage of revenue increased to 27.7% for the year ended December 31, 2002 from 26.7% for 2001 due primarily to the mix of sales and marketing
personnel within our Affiliate Marketing and Technology segments.

General and Administrative.General and administrative expenses consist primarily of facilities costs, executive and
administrative compensation and professional service and other public reporting fees. General and administrative expenses increased to $17.8 million for the year ended December 31, 2002
compared to $13.3 million for the 2001 year, an increase of $4.5 million or 33.7%. General and administrative expenses increased due primarily to the addition of facilities costs
and additional executive and administrative personnel in our Affiliate Marketing and Technology segments offset by management's efforts to scale general and administrative costs in line with revenue,
as well as cost reductions associated with the merger integration activities related to Mediaplex and Be Free.

Product Development.Product development costs include expenses for the development of new technologies designed to enhance
the performance of our service, including the salaries and related expenses for our software engineering department, as well as costs for contracted services and supplies. With the exception of
certain internal use software qualifying for capitalization, all product development costs have been expensed as incurred. Product development costs for the year ended December 31, 2002 were
$10.5 million compared to $5.3 million for 2001, an increase of $5.2 million or 96.9%. The increase in product development expenses was due primarily to the addition of engineers
and support personnel in our Affiliate Marketing and Technology segments as a result of the acquisitions of Mediaplex and Be Free.

Stock-Based Compensation.Stock-based compensation included in the accompanying consolidated statements of operations
reflects the amortization of the difference between the deemed fair value of our common stock for financial accounting purposes and the exercise price of options on the date of

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the
options were granted. Stock-based compensation expense for the year ended December 31, 2002 amounted to $1.5 million, which relates primarily to the amortization of existing deferred
compensation recorded in prior periods for stock options and restricted shares. The decrease in stock-based compensation from $2.7 million for the year ended December 31, 2001 relates to
our amortization method that charges to expense a higher portion of the deferred stock-based compensation in the earlier years of the option vesting period, offset by additional deferred compensation
recorded in 2002 related to stock options granted to Be Free employees.

Amortization of Intangible Assets and Acquired Software.Amortization of intangible assets for the year ended
December 31, 2002 represents principally the amortization of software acquired through business combinations. For the year ended December 31, 2001, amortization of intangible assets also
included the amortization of goodwill created as a result of the acquisitions of Bach Systems and a majority interest in ValueClick Japan.

Merger-Related Costs.Merger-related costs represent the direct transaction costs incurred related to the mergers with
ClickAgents and Z Media in December 2000 and January 2001, respectively, accounted for as a pooling-of-interests.

Restructuring charge.In the second quarter of 2002 and in the fourth quarter of 2001, we recorded restructuring charges of
$2.3 million and $515,000, respectively. These restructuring charges were the result of certain redundancies as a result of our acquisitions of Mediaplex and Be Free and primarily represent a
provision for consolidating certain leased facilities which will be paid out through 2010. As of December 31, 2002, $484,000 of the charges had been paid.

Interest Income, Net.Interest income, net principally consists of interest earned on our cash and cash equivalents and
marketable debt securities and is net of interest paid on debt obligations. Interest income was $5.9 million for the year ended December 31, 2002 compared to $5.1 million for
2001. The increase is attributable to increased balances of cash and cash equivalents and marketable debt securities resulting from the Mediaplex and Be Free acquisitions offset by the effects of
decreasing average investment yields due to declines in interest rates since 2001. Interest income in future periods may decline in correlation with decreases in the market rates of our investment and
with the average cash and investment balances we maintain which may be reduced by funds used for items such as our Stock Repurchase Program and capital expenditures.

Provision for Income Taxes.For the year ended December 31, 2002, our provision for federal, state and foreign income
taxes amounted to $163,000, compared to $34,000 for 2001. The effective income tax rate reflects certain non-deductible expenses, including the stock-based compensation charges and
goodwill amortization and impairment charges. Additionally, income tax benefits from the available net operating losses are not fully reflected in the 2002 and 2001 provisions as the realization of
these benefits is not deemed more likely than not. The tax expense in 2002 and 2001 relate primarily to state and foreign taxes.

Minority Share of Income of ValueClick Japan.Minority share of income of ValueClick Japan was $15,000 for the year ended
December 31, 2002. We account for our interest in ValueClick Japan on a consolidated basis for financial reporting purposes, resulting in a minority interest in the net income or losses
incurred by ValueClick Japan.

Liquidity and Capital Resources

Since our inception, we have financed our operations through working capital generated from operations, equity financing and corporate development activities. At
December 31, 2003, our combined cash and cash equivalents and marketable securities balances totaled $220.1 million. Net cash provided by operating activities totaled
$15.9 million for the year ended December 31, 2003 compared to

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$1.7 million
in the prior year and net cash used in operations of $5.0 million in 2001. The increases in both 2003 compared to 2002 and 2002 compared to 2001 are attributable primarily
to increased income from operations.

The
net cash used in investing activities for the year ended December 31, 2003 of $0.5 million resulted primarily from the use of $18.5 million for acquisitions and
$3.2 million for equipment purchases, offset by the net sale of marketable securities of $22.5 million, which was used to fund acquisitions and purchases of ValueClick common stock
pursuant to the Stock Repurchase Program. For the year ended December 31, 2002, net cash provided by investing activities totaled $49.8 million, resulting primarily from the net sale of
marketable securities, which was used primarily to fund purchases of ValueClick common stock pursuant to the Stock Repurchase Program. For the year ended December 31, 2001, net cash used in
investing activities totaled $85.1 million and was due primarily from net purchases of marketable debt securities.

Net
cash used in financing activities for the year ended December 31, 2003 of $8.8 million resulted from the use of $9.2 million in market purchases of ValueClick
common stock pursuant to the Stock Repurchase Program and the repayment of $1.8 million on notes payable, offset by net proceeds
received from the exercise of stock options of $2.2 million. For the year ended December 31, 2002, net cash used in financing activities totaled $53.8 million, resulting from the
use of $56.2 million in market purchases of ValueClick common stock pursuant to the Stock Repurchase Program and the repayment of $0.8 million on notes payable, offset by proceeds
received from the exercise of stock options of $3.3 million. For the year ended December 31, 2001, net cash used in financing activities totaled $0.5 million, primarily
attributable to the use of $0.7 million for purchases of ValueClick common stock pursuant to the Stock Repurchase Program.

Stock Repurchase Program

In September 2001, the board of directors authorized a $10 million Stock Repurchase Program to purchase outstanding shares of ValueClick common
stock from time to time at prevailing market prices in the open market or through unsolicited negotiated transactions depending on market conditions. The Stock Repurchase Program was increased by the
board of directors to $30 million in February 2002, to $50 million in July 2002 and to $75 million in October 2002. Under the program, the purchases are
funded from available working capital, and the repurchased shares will be retired, held in treasury or used for ongoing stock issuances such as issuances under employee stock plans. There is no
guarantee as to the exact number of shares that will be repurchased by us and we may discontinue purchases at any time that management determines additional purchases are not warranted. As of
December 31, 2003 and since the initiation of the Stock Repurchase Program we had repurchased a total of approximately 26.3 million shares of our common stock for approximately
$71.4 million, $68.0 million of which was purchased pursuant to the Stock Repurchase Program. As a result of the October 2002 increase to the Stock Repurchase Program, up to
$7.0 million of our capital may be used to purchase shares of our outstanding common stock.

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Commitments and Contingencies

Future minimum lease payments under non-cancellable operating and capital leases and related sublease income with initial or remaining lease terms in
excess of one year as of December 31, 2003 are as follows (in thousands):

|Year Ending December 31 |                              | Capital
Leases |     | Operating
Lease
Commitments |   | Operating
Sublease
Income |       
|----------------------- | ---------------------------- | -------------- | --- | --------------------------- | - | ------------------------- | ------
|2004                    |                              | $              | 271 |                             | $ | 4,595                     |       
|2005                    |                              |                | 189 |                             |   | 2,130                     |       
|2006                    |                              |                | 14  |                             |   | 1,469                     |       
|2007                    |                              |                |    |                             |   | 1,215                     |       
|2008                    |                              |                |    |                             |   | 954                       |       
|Thereafter              |                              |                |    |                             |   | 1,485                     |       
|                        |                              |                |     |                             |   |                           |       
|                        | Total minimum lease payments |                | $   | 474                         |   | $                         | 11,848
|                        |                              |                |     |                             |   |                           |       

We
have no other off-balance sheet obligations or guarantees.

We
believe that our existing cash and cash equivalents and our marketable securities are sufficient to meet our anticipated cash needs for working capital and capital expenditures for at
least the next
twelve months. However, it is possible that we may need or elect to raise additional funds to fund our activities beyond the next year or to consummate acquisitions of other businesses, products or
technologies. We could raise such funds by selling more stock to the public or to selected investors, or by borrowing money. In addition, even though we may not need additional funds, we may still
elect to sell additional equity securities or obtain credit facilities for other reasons. We cannot assure you that we will be able to obtain additional funds on commercially favorable terms, or at
all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders would be reduced. In addition, the equity or debt
securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock.

Although
we believe we have sufficient capital to fund our activities for at least the next twelve months, our future capital requirements may vary materially from those now planned. The
amount of capital that we will need in the future will depend on many factors, including:



Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting

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principles
generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue
recognition, allowance for doubtful accounts, investments, deferred taxes, impairment of long-lived assets, and contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

We
apply the following critical accounting policies in the preparation of our consolidated financial statements:





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Recently Issued Accounting Standards

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task
Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs

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Incurred
in a Restructuring)." This Statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002, though early adoption is encouraged. The
application of SFAS No. 146 did not have a material impact on our financial position, results of operations or cash flows.

In
November 2002, the FASB issued FIN 45, "Guarantor's Accounting and Disclosures Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others." FIN 45
elaborates on the disclosures required in financial statements concerning obligations under certain guarantees. It also clarifies the requirements related to the recognition of liabilities by a
guarantor at the inception of certain guarantees. The Company adopted the disclosure requirements of this interpretation that were effective on December 31, 2002. The recognition provisions of
the interpretation adopted were effective for the Company in 2003 and are applicable only to guarantees issued or modified after December 31, 2002. Adoption of FIN 45 did not have a material
impact on our financial position, results of operations or cash flows.

In
January 2002, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables". EITF issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 applies to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Adoption of EITF Issue
No. 00-21 did not have a material impact on our financial position, results of operations or cash flows.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition Disclosurean amendment of FAS 123" (SFAS
No. 148). This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The provisions of FAS 148 are effective for
financial statements for fiscal years ending after December 15, 2002, and disclosure requirements shall be effective for interim periods beginning after December 15, 2002. We intend to
continue to account for stock-based compensation to our employees and directors using the intrinsic value method prescribed by APB Opinion No. 25, and related interpretations. We have made
certain disclosures required by SFAS No. 148 in our consolidated financial statements for the year ended December 31, 2002 and began making the additional interim disclosures required by
SFAS No. 148 in the first quarter of 2003. Accordingly, adoption of SFAS No. 148 did not have a material impact on our financial position, results of operations or cash flows.

In
April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," clarifying accounting and reporting for
derivative instruments and hedging activities. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, with some exceptions, and for hedging relationships
designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our financial position, results of operations or cash flows.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This Statement establishes
standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that
is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for

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mandatory
redeemable financial instruments of nonpublic entities. Adoption of SFAS No. 150 did not have a material impact on our financial position, results of operations or cash flows.

In
December 2003, the SEC issued SAB No. 104, "Revenue Recognition In Financial Statements". SAB No. 104 revises or rescinds portions of the interpretive guidance
included in Topic 13 of the codification of Staff Accounting Bulletins in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules
and regulations. It also rescinds the Revenue Recognition in Financial Statements Frequently Asked Questions and Answers document issued in conjunction with Topic 13. Selected portions of that
document have been incorporated into Topic 13. The adoption of SAB No. 104 in the December 2003 quarter did not have a material impact on our financial position, results of operations or
cash flows.

Inflation

Inflation was not a material factor in either revenue or operating expenses during the past three fiscal years ended December 31, 2003, 2002 and 2001.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

The primary objective of our investment activities is to preserve capital while at the same time maximizing yields without significantly increasing risk. We are
exposed to the impact of interest rate changes and changes in the market values of our investments. Our interest income is sensitive to changes in the general level of U.S. interest rates. In this
regard, changes in U.S. interest rates affect the interest earned on our cash equivalents and marketable debt securities. Our exposure to market rate risk for changes in interest rates relates
primarily to our investment portfolio. We have not used derivative financial instruments in our investment portfolio. We invest a portion of our excess cash in debt instruments of
high-quality corporate issuers and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and
reinvestment risk. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely
impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may
fall short of expectations due to changes in interest rates, or we may suffer losses in principal if forced to sell securities, which have declined in market value due to changes in interest rates.

Marketable
securities as of December 31, 2003 consist primarily of marketable debt securities in high-grade corporate and government securities with maturities of less
than two years. As of December 31, 2003, our investment in marketable securities had a weighted-average time to maturity of approximately 303 days. We classify all of our investments as
available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in a separate
component of stockholders' equity. As of December 31, 2003, unrealized losses in our investments in marketable securities aggregated $77,000.

During
the year ended December 31, 2003, our investments in marketable securities yielded an effective interest rate of 1.77%. If interest rates were to decrease 1%, the result
would be an annual decrease in our interest income related to our cash and cash equivalents of approximately $1.8 million. However, due to the uncertainty of the actions that would be taken and
their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effect of the change in the level of overall economic activity that could exist in such an
environment.

42

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FOREIGN CURRENCY RISK

We transact business in various foreign countries and are thus subject to exposure from adverse movements in other foreign currency exchange rates. This exposure
is primarily related to revenue and operating expenses for ValueClick Japan and ValueClick Europe, which denominate their transactions in Japanese Yen and primarily in U.K. pounds, respectively. The
effect of foreign exchange rate fluctuations for the year ended December 31, 2003 was not material to the consolidated results of operations. If there were an adverse change of 10% in overall
foreign currency exchange rates over an entire year, the result of translations would be a reduction of revenue of approximately $2.1 million. Historically, we have not hedged our exposure to
exchange rate fluctuations. Accordingly, we may experience economic loss and a negative impact on earnings, cash flows or equity as a result of foreign currency exchange rate fluctuations. We assess
the need to utilize financial instruments to hedge currency exposures on an ongoing basis. As of December 31, 2003, we had $24.2 million in cash and cash equivalents denominated in
foreign currencies, primarily the Japanese yen.

Our
international business is subject to risks typical of an international business, including, but not limited to, differing economic conditions, changes in political climate, differing
tax structures, other regulations and restrictions and foreign exchange rate volatility. Accordingly, our future results could be materially and adversely affected by changes in these or other
factors.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ValueClick, Inc. financial statements, schedules and supplementary data, as listed under Item 15, appear in a separate section of this Report beginning on
page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.As of the end of the period covered by this report, we carried out an
evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 ("Exchange Act")
Rules 13a-15(e) and 15d-15(e)) under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer.
Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are
effective.

Changes in our internal control over financial reporting.Additionally, our Chief Executive Officer and Chief Financial
Officer have determined that there have been no changes to our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

43

---



PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated by reference from our definitive proxy statement for the 2004 Annual Meeting of Stockholders to be held
June 3, 2004.

We
have adopted a Code of Ethics and Business Conduct (the "Code") within the meaning of Item 406(b) of Regulation S-K. The Code applies to our principal executive,
financial and accounting officers, and our directors, employees, agents and consultants. The Code is publicly available on our website at www.valueclick.com under "Corporate Info". If we make
substantive amendments to the Code or grant any waiver, including any implicit waiver, to our principal executive, financial or accounting officer, or persons performing similar functions, we will
disclose the nature of such amendment or waiver on our website or in a report on Form 8-K in accordance with applicable rules and regulations.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from our definitive proxy statement for the 2004 Annual Meeting of Stockholders to be held
June 3, 2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table provides aggregated information with respect to our compensation plans under which equity securities of ValueClick are authorized for issuance
as of December 31, 2003:

|Plan category                                                 |  | Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights |  | Weighted average
exercise price of
outstanding
options, warrants
and rights(1) |       | Number of
securities
remaining
available for
future issuance
under equity
compensation plans
|------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------ | ----- | --------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders        |  | 7,550,600                                                                                   |  | $                                                                              | 4.17  |                                                                                             
|Equity compensation plans not approved by security holders(2) |  | 3,488,358                                                                                   |  | $                                                                              | 10.42 |                                                                                             
|                                                              |  |                                                                                             |  |                                                                                |       |                                                                                             
|Total                                                         |  | 11,038,958                                                                                  |  | $                                                                              | 6.15  |                                                                                             
|                                                              |  |                                                                                             |  |                                                                                |       |                                                                                             

---

The remaining information required by this Item is incorporated by reference from our definitive proxy statement for the 2004 Annual Meeting of
Stockholders to be held June 3, 2004.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this Item is incorporated by reference from our definitive proxy statement for the 2004 Annual Meeting of Stockholders to be held
June 3, 2004.

44

---

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

| |  |                                                    |                                                                                                          | Page
| |  | -------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ----
| |  | ValueClick, Inc. Consolidated Financial Statements |                                                                                                          |     
| |  |                                                    | Report of Independent Auditors                                                                           |     
| |  |                                                    | Consolidated Balance Sheets at December 31, 2003 and 2002                                                |     
| |  |                                                    | Consolidated Statements of Operations for the years ended December 31, 2003, 2002
    and 2001           |     
| |  |                                                    | Consolidated Statements of Stockholders' Equity for the years ended December 31,
    2003, 2002 and 2001 |     
| |  |                                                    | Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002
    and 2001           |     
| |  |                                                    | Notes to Consolidated Financial Statements                                                               |     



| |  |  | Schedule IIValuation and Qualifying Accounts |  | F-33
| |  |  | --------------------------------------------- |  | ----





45

---





|Exhibit
Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                          
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1(1)         |  | Agreement and Plan of Merger, dated as of October 9, 2003, by and among ValueClick, NCJ Acquisition Corporation and Commission Junction, Inc.                                                                                                                                                                                                                                                    
|2.2(2)         |  | Agreement and Plan of Merger, dated as of May 30, 2003, by and among ValueClick, Search123.com Acquisition Corporation and Search123                                                                                                                                                                                                                                                             
|2.3(3)         |  | Agreement and Plan of Merger, dated as of March 20, 2002, by and among ValueClick, Bravo Acquisition I Corporation and Be Free, Inc.                                                                                                                                                                                                                                                             
|2.4(4)         |  | Agreement and Plan of Merger, dated as of July 1, 2001, by and among ValueClick, Mars Acquisition Corporation and Mediaplex, Inc.                                                                                                                                                                                                                                                                
|3.1.1(5)       |  | Amended and Restated Certificate of Incorporation of ValueClick                                                                                                                                                                                                                                                                                                                                  
|3.1.2(5)       |  | Certificate of Amendment to Amended and Restated Certificate of Incorporation of ValueClick                                                                                                                                                                                                                                                                                                      
|3.2(5)         |  | Amended and Restated Bylaws of ValueClick                                                                                                                                                                                                                                                                                                                                                        
|4.1            |  | See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation and Bylaws for ValueClick, Inc. defining the rights of holders of common stock of ValueClick, Inc.                                                                                                                                                                                                                   
|4.2(5)         |  | Specimen stock certificate for the ValueClick common stock                                                                                                                                                                                                                                                                                                                                       
|4.3(11)        |  | Rights Agreement, dated as of June 4, 2002, between ValueClick, Inc. and Mellon Investor Services LLC, a New Jersey limited liability company, which includes the form of Certificate of Designation for the Series A junior participating
preferred stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Series A Preferred Stock as Exhibit C.
|10.1(5)        |  | Form of Indemnification Agreement by and between ValueClick and directors and executive officers                                                                                                                                                                                                                                                                                                 
|10.2(5)        |  | Deed of Assignment, dated January 1, 1999 by and between Web-Ignite Corporation and ValueClick                                                                                                                                                                                                                                                                                                   
|10.3(5)        |  | Trademark Assignment, dated as of May 1, 1998 from Web-Ignite Corporation to ValueClick                                                                                                                                                                                                                                                                                                          
|10.4(5)        |  | Exchange Agreement, dated December 31, 1998, by and between ValueClick and ValueClick, LLC                                                                                                                                                                                                                                                                                                       
|10.5(5)        |  | Bill of Sale and Assignment and Assumption of Liabilities, dated December 31, 1998                                                                                                                                                                                                                                                                                                               
|10.6(5)        |  | License and Option Agreement, dated January 1, 1999, by and between ValueClick, LLC and ValueClick Japan, Inc. in effect from January 1, 1999 to December 17, 1999                                                                                                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                  

46

---

|10.7(5)    |  | Stock Purchase Agreement, dated August 6, 1999, by and between Jonathan Hendricksen and Timothy Williams and ValueClick                                      
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8(5)    |  | Share Purchase Agreement, dated December 31, 1999, by and between ValueClick and Todd Treusdell                                                              
|10.9(5)    |  | Share Purchase Agreement, dated December 31, 1999, by and between ValueClick and James R. Zarley                                                             
|10.10(5)   |  | Share Purchase Agreement, dated December 31, 1999, by and between ValueClick and Brian Coryat                                                                
|10.11(5)   |  | License Agreement, dated August 17, 1999, between ValueClick and ValueClick Europe, Limited                                                                  
|10.12(6)  |  | 1999 Stock Option Plan, as amended, and form of option agreement                                                                                             
|10.13(7)  |  | 2002 Stock Incentive Plan and form of option agreement                                                                                                       
|10.14(8)  |  | Key Employee Agreement between ValueClick and James R. Zarley dated January 1, 2002                                                                          
|10.15(9)  |  | Key Employee Agreement between ValueClick and Samuel J. Paisley dated January 1, 2002                                                                        
|10.16(10) |  | Key Employee Agreement between ValueClick and Peter Wolfert dated January 1, 2002                                                                            
|10.18(5)   |  | Intercompany License Agreement dated December 19, 1999, between ValueClick and ValueClick Japan, Inc.                                                        
|10.19(5)   |  | Stock Purchase Agreement, dated January 20, 2000, between Jonathan Hendriksen and Timothy Williams and ValueClick.                                           
|21.1       |  | Subsidiaries of ValueClick                                                                                                                                   
|23.1       |  | Consent of PricewaterhouseCoopers LLP                                                                                                                        
|31.1       |  | Certification of CEO Pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|31.2       |  | Certification of CFO Pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1       |  | Certification of CEO 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 CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                               

---

47

---

48

---



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                   |                                                                                                      | Page
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ----
|ValueClick, Inc. Consolidated Financial Statements |                                                                                                      |     
|                                                   | Report of Independent Auditors                                                                       |     
|                                                   | Consolidated Balance Sheets at December 31, 2003 and 2002                                            |     
|                                                   | Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001           |     
|                                                   | Consolidated Statements of Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001 |     
|                                                   | Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001           |     
|                                                   | Notes to Consolidated Financial Statements                                                           |     
|                                                   | Schedule IIValuation and Qualifying Accounts                                                        |     

F-1

---



REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
ValueClick, Inc.

In
our opinion, the accompanying consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of ValueClick, Inc. and its
consolidated subsidiaries (the "Company") at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respect, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

As
described in Note 1 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets."

/s/
PricewaterhouseCoopers LLP

Los
Angeles, California
February 19, 2004

F-2

---



VALUECLICK, INC.        CONSOLIDATED BALANCE SHEETS

|                                                |                                                                                                                                                                     | December 31,               |                                           
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------
|
|
|Assets                                          |                                                                                                                                                                     |                            |                                           
|Current assets:                                 |                                                                                                                                                                     |                            |                                           
|                                                | Cash and cash equivalents                                                                                                                                           |                            | $                                         
|                                                | Marketable securities                                                                                                                                               |                            |                                           
|                                                | Accounts receivable, net of allowance for doubtful accounts of $2,060 and $1,892 as of December 31, 2003 and 2002, respectively                                     |                            |                                           
|                                                | Prepaid expenses and other current assets                                                                                                                           |                            |                                           
|                                                | Income taxes receivable                                                                                                                                             |                            |                                           
|                                                | Deferred tax assets                                                                                                                                                 |                            |                                           
|                                                |                                                                                                                                                                     |                            |                                           
|                                                |                                                                                                                                                                     | Total current assets       |                                           
|Property and equipment, net                     |                                                                                                                                                                     |                            | 10,559                                    
|Goodwill                                        |                                                                                                                                                                     |                            | 49,375                                    
|Intangible assets, net                          |                                                                                                                                                                     |                            | 15,974                                    
|Other assets                                    |                                                                                                                                                                     |                            | 1,475                                     
|                                                |                                                                                                                                                                     |                            |                                           
|                                                |                                                                                                                                                                     | Total assets               |                                           
|                                                |                                                                                                                                                                     |                            |                                           
|Liabilities and Stockholders' Equity            |                                                                                                                                                                     |                            |                                           
|Current liabilities:                            |                                                                                                                                                                     |                            |                                           
|                                                | Accounts payable and accrued expenses                                                                                                                               |                            | $                                         
|                                                | Income taxes payable                                                                                                                                                |                            |                                           
|                                                | Deferred revenue                                                                                                                                                    |                            |                                           
|                                                | Notes payable                                                                                                                                                       |                            |                                           
|                                                | Capital lease obligations                                                                                                                                           |                            |                                           
|                                                |                                                                                                                                                                     |                            |                                           
|                                                |                                                                                                                                                                     | Total current liabilities  |                                           
|Notes payable, less current portion             |                                                                                                                                                                     |                            |                                          
|Capital lease obligations, less current portion |                                                                                                                                                                     |                            | 187                                       
|Deferred tax liabilities                        |                                                                                                                                                                     |                            | 1,996                                     
|Other non-current liabilities                   |                                                                                                                                                                     |                            | 3,493                                     
|                                                |                                                                                                                                                                     |                            |                                           
|                                                |                                                                                                                                                                     | Total liabilities          |                                           
|                                                |                                                                                                                                                                     |                            |                                           
|Minority interest in consolidated subsidiary    |                                                                                                                                                                     |                            | 11,309                                    
|Stockholders' equity:                           |                                                                                                                                                                     |                            |                                           
|                                                | Convertible preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued or outstanding at December 31, 2003 and 2002                          |                            |                                           
|                                                | Common stock, $0.001 par value; 500,000,000 shares authorized; 77,953,774 and 99,118,475 shares issued and outstanding at December 31, 2003 and 2002, respectively; |                            |                                           
|                                                | Additional paid-in capital                                                                                                                                          |                            |                                           
|                                                | Treasury stock, at cost, 0 and 22,853,073 shares at December 31, 2003 and 2002, respectively                                                                        |                            |                                           
|                                                | Deferred stock compensation                                                                                                                                         |                            |                                           
|                                                | Accumulated other comprehensive income (loss)                                                                                                                       |                            |                                           
|                                                | Accumulated deficit                                                                                                                                                 |                            |                                           
|                                                |                                                                                                                                                                     |                            |                                           
|                                                |                                                                                                                                                                     | Total stockholders' equity |                                           
|                                                |                                                                                                                                                                     |                            |                                           
|                                                |                                                                                                                                                                     |                            | Total liabilities and stockholders' equity
|                                                |                                                                                                                                                                     |                            |                                           

The
accompanying notes are an integral part of these consolidated financial statements.

F-3

---



VALUECLICK, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                                                  |                                                                                                                                | Year Ended December 31,  |       
|----------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------ | ------
|
|
|Revenue                                                                                                           |                                                                                                                                | $                        | 92,516
|Cost of revenue                                                                                                   |                                                                                                                                |                          | 32,024
|                                                                                                                  |                                                                                                                                |                          |       
|                                                                                                                  | Gross profit                                                                                                                   |                          |       
|Operating expenses:                                                                                               |                                                                                                                                |                          |       
|                                                                                                                  | Sales and marketing (excludes stock-based compensation of $113, $488, and $864 for 2003, 2002 and 2001, respectively)          |                          |       
|                                                                                                                  | General and administrative (excludes stock-based compensation of $181, $779, and $1,376 for 2003, 2002 and 2001, respectively) |                          |       
|                                                                                                                  | Product development (excludes stock-based compensation of $58, $260, and $459 for 2003, 2002 and 2001, respectively)           |                          |       
|                                                                                                                  | Stock-based compensation                                                                                                       |                          |       
|                                                                                                                  | Amortization of intangibles and acquired software                                                                              |                          |       
|                                                                                                                  | Merger-related costs                                                                                                           |                          |       
|                                                                                                                  | Restructuring charges                                                                                                          |                          |       
|                                                                                                                  |                                                                                                                                |                          |       
|                                                                                                                  |                                                                                                                                | Total operating expenses |       
|                                                                                                                  |                                                                                                                                |                          |       
|                                                                                                                  | Income (loss) from operations                                                                                                  |                          |       
|Interest income, net                                                                                              |                                                                                                                                |                          | 3,364 
|Gain on sale of marketable securities                                                                             |                                                                                                                                |                          |      
|Other income (expense)                                                                                            |                                                                                                                                |                          |      
|                                                                                                                  |                                                                                                                                |                          |       
|                                                                                                                  | Income (loss) before income taxes, minority interest and cumulative effect of a change in accounting principle                 |                          |       
|Provision for income taxes                                                                                        |                                                                                                                                |                          | 830   
|                                                                                                                  |                                                                                                                                |                          |       
|Net income (loss) before minority interest and cumulative effect of a change in accounting principle              |                                                                                                                                |                          | 9,739 
|Minority share of loss (income) in consolidated subsidiary                                                        |                                                                                                                                |                          | 84    
|                                                                                                                  |                                                                                                                                |                          |       
|Net income (loss) before cumulative effect of a change in accounting principle                                    |                                                                                                                                |                          | 9,823 
|Cumulative effect of a change in accounting principle                                                             |                                                                                                                                |                          |      
|                                                                                                                  |                                                                                                                                |                          |       
|                                                                                                                  |                                                                                                                                | Net income (loss)        |       
|                                                                                                                  |                                                                                                                                |                          |       
|Basic and diluted net income (loss) per common share before cumulative effect of a change in accounting principle |                                                                                                                                | $                        | 0.13  
|Basic and diluted per share effect of a change in accounting principle                                            |                                                                                                                                |                          |      
|                                                                                                                  |                                                                                                                                |                          |       
|Basic and diluted net income (loss) per common share                                                              |                                                                                                                                | $                        | 0.13  
|                                                                                                                  |                                                                                                                                |                          |       
|Shares used to calculate basic net income (loss) per common share                                                 |                                                                                                                                |                          | 74,300
|                                                                                                                  |                                                                                                                                |                          |       
|Shares used to calculate diluted net income (loss) per common share                                               |                                                                                                                                |                          | 78,436
|                                                                                                                  |                                                                                                                                |                          |       

The
accompanying notes are an integral part of these consolidated financial statements.

F-4

---

VALUECLICK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)

|                             |                                                                                     | Preferred Stock                                             |          | Common Stock |   |            |             |   |    | Deferred
Stock
Compensation
Loss |   |         |         |   |         |         |  
|---------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------------------------- | -------- | ------------ | - | ---------- | ----------- | - | -- | -------------------------------- | - | ------- | ------- | - | ------- | ------- | -
|
|
|
|Balance at December 31, 2000 |                                                                                     | 402,103                                                     |          |             |   | 36,029,778 |             |   | 37 |                                  |   | 190,595 |         |   | (574    | )       |  
|                             | Conversion of preferred stock upon merger                                           |                                                             | (402,103 | )            |  |            | 402,103     |   |    |                                 |   |         |        |   |         |        |  
|                             | Stock issued in the Bach Systems purchase business combination                      |                                                             |         |              |  |            | 768,439     |   |    | 1                                |   |         | 1,688   |   |         |        |  
|                             | Stock issued in the Mediaplex purchase business combination                         |                                                             |         |              |  |            | 15,084,898  |   |    | 15                               |   |         | 46,160  |   |         |        |  
|                             | Purchase of treasury shares                                                         |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         | (739    | )
|                             | Conversion of acquired company's purchased stock to treasury stock                  |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         | (1,646  | )
|                             | Deferred stock compensation                                                         |                                                             |         |              |  |            |            |   |    |                                 |   |         | 282     |   |         |        |  
|                             | Amortization of stock-based compensation                                            |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         |        |  
|                             | Deferred compensation adjustment for forfeited stock options                        |                                                             |         |              |  |            |            |   |    |                                 |   |         | (659    | ) |         |        |  
|                             | Exercise of common stock options                                                    |                                                             |         |              |  |            | 207,749     |   |    |                                 |   |         | 206     |   |         |        |  
|                             | Exercise of common stock warrants                                                   |                                                             |         |              |  |            | 205,650     |   |    |                                 |   |         | 250     |   |         |        |  
|                             | Comprehensive loss:                                                                 |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|                             |                                                                                     | Net loss                                                    |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     | Change in market value of marketable securities, net of tax |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     | Foreign currency translation                                |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|                             | Total comprehensive loss                                                            |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         |        |  
|                             |                                                                                     |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|Balance at December 31, 2001 |                                                                                     |                                                            |          |             |   | 52,698,617 |             |   | 53 |                                  |   | 238,522 |         |   | (2,959  | )       |  
|                             | Stock issued in the Be Free purchase business combination                           |                                                             |         |              |  |            | 43,361,717  |   |    | 43                               |   |         | 127,252 |   |         |        |  
|                             | Stock issued in the Bach Systems purchase business combination                      |                                                             |         |              |  |            | 259,375     |   |    | 1                                |   |         | 633     |   |         |        |  
|                             | Purchase of treasury shares                                                         |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         | (56,250 | )
|                             | Conversion of acquired company's purchased stock to treasury stock                  |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         | (1,674  | )
|                             | Deferred stock compensation                                                         |                                                             |         |              |  |            |            |   |    |                                 |   |         | 547     |   |         |        |  
|                             | Amortization of stock-based compensation                                            |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         |        |  
|                             | Exercise of common stock options                                                    |                                                             |         |              |  |            | 2,798,766   |   |    | 2                                |   |         | 3,259   |   |         |        |  
|                             | Tax benefit from the exercise of stock options                                      |                                                             |         |              |  |            |            |   |    |                                 |   |         | 225     |   |         |        |  
|                             | Comprehensive loss:                                                                 |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|                             |                                                                                     | Net loss                                                    |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     | Change in market value of marketable securities, net of tax |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     | Foreign currency translation                                |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|                             | Total comprehensive loss                                                            |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         |        |  
|                             |                                                                                     |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|Balance at December 31, 2002 |                                                                                     |                                                            |          |             |   | 99,118,475 |             | $ | 99 |                                  | $ | 370,438 |         | $ | (60,883 | )       | $
|                             | Amortization of stock-based compensation                                            |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         |        |  
|                             | Exercise of common stock options                                                    |                                                             |         |              |  |            | 2,085,969   |   |    | 2                                |   |         | 2,186   |   |         |        |  
|                             | Deferred stock compensation                                                         |                                                             |         |              |  |            |            |   |    |                                 |   |         | 1,042   |   |         |        |  
|                             | Issuance of shares in purchase transactionCommission Junction                      |                                                             |         |              |  |            | 3,018,586   |   |    | 3                                |   |         | 29,428  |   |         |        |  
|                             | Assumed options in the Commission Junction and Hi-Speed Media
business combinations |                                                             |         |              |  |            |            |   |    |                                 |   |         | 6,521   |   |         |        |  
|                             | Purchase of treasury stock                                                          |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         | (9,161  | )
|                             | Retirement of treasury stock                                                        |                                                             |         |              |  |            | (26,269,256 | ) |    | (26                              | ) |         | (70,018 | ) |         | 70,044  |  
|                             | Comprehensive income:                                                               |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|                             |                                                                                     | Net income                                                  |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     | Change in market value of marketable securities, net of tax |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     | Foreign currency translation                                |          |             |   |           |             |  |    |                                  |  |         |         |  |         |         | 
|                             |                                                                                     |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|                             | Total comprehensive income                                                          |                                                             |         |              |  |            |            |   |    |                                 |   |         |        |   |         |        |  
|                             |                                                                                     |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  
|Balance at December 31, 2003 |                                                                                     |                                                            |          |             |   | 77,953,774 |             | $ | 78 |                                  | $ | 339,597 |         |   |        |         | $
|                             |                                                                                     |                                                             |          |              |   |            |             |   |    |                                  |   |         |         |   |         |         |  

The
accompanying notes are an integral part of these consolidated financial statements.

F-5

---



VALUECLICK, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                   |                                                           | Year Ended December 31,                                                      |                                         
|-------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------
|
|
|Cash flows from operating activities:                                                              |                                                           |                                                                              |                                         
|                                                                                                   | Net income (loss)                                         |                                                                              | $                                       
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                                           |                                                                              |                                         
|                                                                                                   |                                                           | Depreciation and amortization                                                |                                         
|                                                                                                   |                                                           | Cumulative effect of change in accounting principle                          |                                         
|                                                                                                   |                                                           | Restructuring charge                                                         |                                         
|                                                                                                   |                                                           | Provision for doubtful accounts                                              |                                         
|                                                                                                   |                                                           | Stock-based compensation                                                     |                                         
|                                                                                                   |                                                           | Gain on sale of marketable securities                                        |                                         
|                                                                                                   |                                                           | Minority interest in ValueClick Japan                                        |                                         
|                                                                                                   |                                                           | Gain on the ValueClick Japan stock issuance                                  |                                         
|                                                                                                   |                                                           | Benefit from deferred taxes                                                  |                                         
|                                                                                                   |                                                           | Changes in operating assets and liabilities, net of effects of acquisitions: |                                         
|                                                                                                   |                                                           |                                                                              | Accounts receivable                     
|                                                                                                   |                                                           |                                                                              | Prepaid expenses and other assets       
|                                                                                                   |                                                           |                                                                              | Accounts payable and accrued liabilities
|                                                                                                   |                                                           |                                                                              | Income taxes receivable/payable         
|                                                                                                   |                                                           |                                                                              | Deferred revenue                        
|                                                                                                   |                                                           |                                                                              | Other non-current liabilities           
|                                                                                                   |                                                           |                                                                              |                                         
|                                                                                                   |                                                           |                                                                              |                                         
|                                                                                                   |                                                           |                                                                              |                                         
|Cash flows from investing activities:                                                              |                                                           |                                                                              |                                         
|                                                                                                   | Net proceeds from the sale of marketable securities       |                                                                              |                                         
|                                                                                                   | Purchases of marketable debt securities                   |                                                                              |                                         
|                                                                                                   | Purchases of marketable equity securities                 |                                                                              |                                         
|                                                                                                   | Net cash (paid for) acquired in business combinations     |                                                                              |                                         
|                                                                                                   | Purchases of property and equipment                       |                                                                              |                                         
|                                                                                                   | Purchases of intangible assets                            |                                                                              |                                         
|                                                                                                   | Investment in ValueClick Japan                            |                                                                              |                                         
|                                                                                                   |                                                           |                                                                              |                                         
|                                                                                                   | Net cash (used in) provided by investing activities       |                                                                              |                                         
|                                                                                                   |                                                           |                                                                              |                                         
|Cash flows from financing activities:                                                              |                                                           |                                                                              |                                         
|                                                                                                   | Purchase of treasury shares                               |                                                                              |                                         
|                                                                                                   | Repayments on debt                                        |                                                                              |                                         
|                                                                                                   | Net proceeds from exercises of stock options and warrants |                                                                              |                                         
|                                                                                                   |                                                           |                                                                              |                                         
|                                                                                                   |                                                           | Net cash (used in) financing activities                                      |                                         
|                                                                                                   |                                                           | Effect of currency translations                                              |                                         
|                                                                                                   |                                                           |                                                                              |                                         
|                                                                                                   |                                                           | Net increase (decrease) in cash and cash equivalents                         |                                         
|Cash and cash equivalents, beginning of period                                                     |                                                           |                                                                              | 27,066                                  
|                                                                                                   |                                                           |                                                                              |                                         
|Cash and cash equivalents, end of period                                                           |                                                           | $                                                                            | 36,642                                  
|                                                                                                   |                                                           |                                                                              |                                         
|                                                                                                   |                                                           |                                                                              |                                         

F-6

---

|Supplemental disclosures of cash flow information: |                                                                       |  |   |         |   |   |          |   |   |        
|-------------------------------------------------- | --------------------------------------------------------------------- |  | - | ------- | - | - | -------- | - | - | -------
|                                                   | Cash paid for interest                                                |  | $ | 52      |   | $ | 109      |   | $ | 30     
|                                                   |                                                                       |  |   |         |   |   |         
|                                                   | Cash paid for taxes                                                   |  | $ | 511     |   | $ | 670      |   | $ | 2,937  
|                                                   |                                                                       |  |   |         |   |   |         
|Non-cash investing and financing activities:       |                                                                       |  |   |         |   |   |          |   |   |        
|                                                   | Issuance of common stock in the Commission Junction, Inc. acquisition |  | $ | 29,431  |   | $ |         |   | $ |       
|                                                   |                                                                       |  |   |         |   |   |         
|                                                   | Issuance of common stock in the Be Free, Inc. acquisition             |  | $ |        |   | $ | 127,295  |   | $ |       
|                                                   |                                                                       |  |   |         |   |   |         
|                                                   | Purchase of Patent license through payables                           |  | $ |        |   | $ | 788      |   | $ |       
|                                                   |                                                                       |  |   |         |   |   |         
|                                                   | Issuance of common stock in the Mediaplex, Inc. acquisition           |  | $ |        |   | $ |         |   | $ | 46,175 
|                                                   |                                                                       |  |   |         |   |   |         
|                                                   | Issuance of common stock in the Bach Systems, Inc. acquisition        |  | $ |        |   | $ | 634      |   | $ | 1,689  
|                                                   |                                                                       |  |   |         |   |   |         
|                                                   | Conversion of acquired company's purchased stock to treasury stock    |  | $ |        |   | $ | 1,645    |   | $ | 1,646  
|                                                   |                                                                       |  |   |         |   |   |         
|                                                   | Finance of Director and Officer Insurance                             |  | $ |        |   | $ |         |   | $ | 912    
|                                                   |                                                                       |  |   |         |   |   |         
|Effect of Acquisitions:                            |                                                                       |  |   |         |   |   |          |   |   |        
|                                                   | Marketable securities                                                 |  | $ |        |   | $ | (124,948 | ) | $ | (44,357
|                                                   | Accounts receivable, net                                              |  |   | (1,310  | ) |   | (3,103   | ) |   | (1,937 
|                                                   | Prepaid expenses and other current assets                             |  |   | (535    | ) |   | (1,650   | ) |   | (456   
|                                                   | Property and equipment, net                                           |  |   | (2,789  | ) |   | (5,272   | ) |   | (3,998 
|                                                   | Goodwill                                                              |  |   | (49,375 | ) |   |         |   |   |       
|                                                   | Intangible assets, net                                                |  |   | (14,703 | ) |   | (1,013   | ) |   |       
|                                                   | Other assets                                                          |  |   | (47     | ) |   | (1,222   | ) |   | (870   
|                                                   | Accounts payable and accrued expenses                                 |  |   | 12,015  |   |   | 3,373    |   |   | 7,790  
|                                                   | Deferred revenue                                                      |  |   | 2       |   |   | 1,563    |   |   | 49     
|                                                   | Income taxes payable                                                  |  |   | 281     |   |   |         |   |   |       
|                                                   | Notes payable                                                         |  |   |        |   |   | 1,426    |   |   | 641    
|                                                   | Other non-current liabilities                                         |  |   |        |   |   | 1,377    |   |   | 33     
|                                                   | Deferred tax liabilities                                              |  |   | 1,996   |   |   |         |   |   |       
|                                                   | Additional paid-in capital                                            |  |   | 36,994  |   |   | 129,257  |   |   | 47,566 
|                                                   | Deferred stock compensation                                           |  |   | (1,042  | ) |   |         |   |   |       

The accompanying notes are an integral part of these consolidated financial statements.

F-7

---



VALUECLICK, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Organization and Basis of Presentation

ValueClick, Inc., and its subsidiaries ("ValueClick" or "the Company") offer a suite of products and services that enable marketers to advertise and sell
their products through all major online marketing channelsdisplay/web advertising, search marketing, email marketing, and affiliate marketing. Additionally, the Company provides software
that assists advertising agencies with information management regarding their financial, workflow, and offline media buying and planning processes. The broad range of products and services that the
Company provides enables its customers to address all aspects of the marketing process, from strategic planning through execution, including results measurement and campaign refinements. By combining
the Company's media, affiliate marketing and technology offerings with its experience in both online and offline marketing, the Company helps its customers optimize their marketing campaigns both on
the Internet and through offline media.

In
prior periods, the Company operated in two reportable operating segments: Media and Technology. With the acquisition of Commission Junction, Inc. ("Commission Junction") in December
2003, management reassessed the Company's reportable operating segments and determined that the Company now has an additional reportable operating segment, Affiliate Marketing, which combines the
operations of Be Free, Inc. ("Be Free") and Commission Junction. For prior periods, Be Free was included in the Technology reporting segment. Accordingly, prior period operating segment information
has been reclassified to conform to 2003 presentation.

The
Company derives its revenue from three business segments based on the types of products and services provided. These business segments are Media, Affiliate Marketing and Technology.

MEDIAValueClick's Media segment provides a comprehensive suite of online media services and tailored programs that help
marketers create awareness, attract visitors and generate leads and sales through the Internet. The Company's Media segment has grown both organically and through the acquisition of complementary
firms such as Search123.com, completed in May 2003, and Hi-Speed Media, completed in December 2003.

The
Company offers advertisers and agencies a range of online media solutions in the categories of Web/Display Advertising, Email Marketing, Lead Generation Marketing, and Search
Marketing. The Company has aggregated thousands of online publishers to provide advertisers and agencies with access to one of the largest online advertising networks.

The
Company's Media services are sold on a variety of pricing models, including cost-per-impression (CPM), cost-per-click (CPC), cost-per-lead (CPL), and cost-per-action (CPA).

AFFILIATE MARKETINGThe ValueClick Affiliate Marketing segment operates through its wholly-owned subsidiaries Be Free,
acquired on May 23, 2002, and Commission Junction, acquired on December 7, 2003.

The
Company's Affiliate Marketing segment offers technology and services that enable advertisers to manage, track and analyze a variety of online marketing programs. Specifically, the
Company's affiliate marketing services enable its advertiser clients to: build relationships with affiliate partners, manage the offers they make available to their affiliate partners, track the
online traffic, leads and sales that these offers drive to the advertiser's Website, analyze the effectiveness of the offers and affiliate partners and track the commissions due to their affiliates.

F-8

---

ValueClick's
affiliate marketing services address the needs of advertisers that seek to build and manage a private-labeled network of third party online publishers, as well as
advertisers that wish to conduct an affiliate marketing program through the Company's existing network of third party online affiliate publishers. Affiliate Marketing revenues are driven by a
combination of fixed fees and variable compensation that is based on either a cost-per-lead (CPL) basis or on a percentage of transaction revenue generated from the programs
managed with the Company's affiliate marketing platforms.

TECHNOLOGYValueClick's Technology segment operates through its wholly-owned subsidiaries Mediaplex, Inc. ("Mediaplex")
and AdWare Systems, Inc. ("AdWare"), which were acquired on October 19, 2001.

Mediaplex
offers technology infrastructure tools and services that enable advertisers, advertising agencies and online publishers to implement and manage their own online display
advertising and email campaigns. Mediaplex's products are based on its proprietary MOJO® technology platform, which has the ability to automatically configure messages in response to
real-time information from a marketer's enterprise data system and to provide ongoing campaign optimization. Mediaplex's revenues are primarily derived from software access and use charges
paid by its software clients. These fees vary based on the client's use of the technology.

AdWare
is an applications service provider ("ASP") delivering high-quality information management systems to advertising agencies, marketing communications companies, and
public relations agencies. AdWare's revenue is generated primarily from monthly service fees paid by customers over the service periods.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its majority owned subsidiary and its wholly-owned subsidiaries. All material
intercompany transactions and balances have been eliminated in consolidation.

The
consolidated financial statements include the accounts of the Company and its subsidiaries from the dates of their respective acquisitions, acquisition of majority voting control or
date of formation. For subsidiaries accounted for as a pooling of interests, all prior period financial statements have been restated to include the results of their operations.

Use of Estimates and Critical Accounting Policies

Accounting principles generally accepted in the United States require management of the Company to make estimates and assumptions in the preparation of these
consolidated financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

The
most significant areas that require management judgment are revenue recognition, allowance for doubtful accounts, deferred income taxes, impairment of long-lived assets and goodwill,
and contingencies and litigation. The accounting policies for these areas are discussed in this or other footnotes to these consolidated financial statements.

F-9

---

Cash and Cash Equivalents

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash
equivalents. At December 31, 2003 and 2002, cash equivalents consist of money market accounts.

Marketable Securities

Marketable securities are classified as available-for-sale and accordingly are recorded at fair value with unrealized gains and losses reflected as a separate
component of stockholders' equity, net of tax, until realized or until a determination is made that an other than temporary decline in market value has occurred. Factors considered by management in
assessing whether an other than temporary impairment has occurred include: fair value is significantly below cost for a significant period of time, generally six months or more; whether the decline in
fair value is attributable to specific adverse conditions affecting the investment; the financial condition of the investee; and whether the Company has both the ability and intent to hold the
investment. When it is determined that an other than temporary impairment has occurred, the investment is permanently written down to the market value at the end of the period in which it is
determined that an other than temporary decline has occurred. The cost of securities sold is based upon the specific identification method.

Marketable
securities at December 31, 2003 are comprised of investment grade corporate debt securities with an aggregate cost and estimated fair value of $183.6 million and
$183.5 million, respectively. At December 31, 2002, the aggregate cost and estimated fair value of these financial instruments totaled $205.9 million.

Property and Equipment

Property and equipment are stated at cost. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful
lives of the assets ranging from 3 to 5 years. Leasehold improvements are amortized over their estimated useful lives, or the term of the lease, whichever is shorter.

Goodwill

The Company tests goodwill for impairment in accordance with the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," adopted on January 1, 2002 (see Note 4). Accordingly, goodwill is tested at least annually at the reporting unit level or whenever events or circumstances indicate
that goodwill might be impaired. At December 31, 2003, the Company's goodwill principally resides in the Affiliate Marketing and Media reporting units as a result of the 2003 acquisitions of
Commission Junction (Affiliate Marketing), Search 123 and Hi-Speed Media (Media). The Company has elected to test for goodwill impairment annually as of December 31.

Long-lived Assets

Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets," which generally requires the assessment of these assets for recoverability when events or circumstances
indicate a potential impairment exists. Events and circumstances considered by

F-10

---

the
Company in determining whether the carrying value may not be recoverable include: significant changes in performance relative to expected historical or projected future operating results;
significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in the Company's stock price for a sustained period of time; and changes in the
Company's business strategy. In determining if an impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If an impairment is
indicated based on a comparison of the assets carrying value and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the asset exceeds the fair
market value of the asset.

Revenue Recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition in Financial Statements". Under SAB 104,
the Company recognizes revenue when the following criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed and determinable, no significant Company obligations remain
and collection of the related receivable is reasonable assured.

The
Company's Media segment revenue is principally derived from the delivery of advertising impressions, click-throughs, actions, as specifically defined, from click-throughs and
customer leads delivered from third-party Web sites, online newsletters and email lists, comprising the ValueClick Consolidated Network (the "Network"). Revenue is recognized in the period that the
advertising impressions, click-throughs or actions occur or when lead-based information is delivered, provided that no significant Company obligations remain and collection of the
resulting receivable is reasonably assured and prices are fixed and determinable. To date, the Company's agreements have not required a guaranteed minimum number of click-throughs or actions.

The
Company becomes obligated to make payments to third-party Web sites, online newsletters and email lists, which have contracted with the Company to be part of the Network, in the
period the advertising impressions, click-throughs or actions are delivered. Such expenses are classified as cost of revenue in the accompanying consolidated statements of operations.

Revenue
for the Company's Affiliate Marketing and Technology segments is generated primarily from fees for campaign management services and from application management services and
professional services. Affiliate marketing and campaign management service revenue is recognized when the related services are performed, provided that no significant Company obligations remain,
collection of the resulting receivable is reasonably assured and fees are fixed and determinable. Application management services revenue consists of monthly recurring fees for hosting services and is
recognized as the services are performed, provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured and fees are fixed and determinable. The
Company's application management services provide customers rights to access applications, hardware for the application access and customer service. The Company's customers do not have the right to
take possession of the software at any time during the hosting agreement or at its termination. Contracts for application management services that exceed designated minimum monthly or quarterly volume
usage are recognized as revenue by the Company in the month or quarter in which minimum volume is exceeded.

F-11

---

Deferred
revenue consists of fees received or billed in advance of the delivery of the services or services performed in which cash receipt is not reasonably assured. This revenue is
recognized when the services are provided and no significant Company obligations remain or when cash is received for previously performed services. To date, the Company has not had any barter
transactions.

Cost of Revenue

Cost of revenue consists of payments to third-party owners of Web sites, online newsletters and email lists, in the Company's Network, telecommunication costs and
depreciation of equipment related to the Company's ad-delivery and affiliate marketing infrastructure.

Sales and Marketing

Sales and marketing expenses include salaries, sales commissions, employee benefits, travel and related expenses for the Company's sales force, and advertising
costs.

Advertising
costs are expensed as incurred and totaled approximately $235,000, $129,000 and $979,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

General and Administrative

General and administrative expenses include facility costs, professional service fees, salaries, related benefits and expenses for the executive, finance, legal
and human resources personnel, and other general overhead costs.

Product Development

Product development costs include expenses for the development of new technologies designed to enhance the performance of the Company's service, including the
salaries and related expenses for its software engineering department, as well as costs for contracted services and supplies. With the exception of certain internal use software qualifying for
capitalization, all product development costs have been expensed as incurred. The Company follows the guidance of Statement of Position
98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." As of December 31, 2003, capitalized software development costs aggregated $473,000 net
of related accumulated amortization of $1,085,000, compared to capitalized software development costs aggregated $841,000 net of related accumulated amortization of $233,000 as of December 31,
2002. Capitalized software costs are being amortized over 18 months. There were no capitalized software development costs as of December 31, 2001.

Stock-based Compensation

At December 31, 2003, the Company has six stock-based employee compensation plans which are described more fully in Note 9. The Company accounts for
its employee stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and the related
interpretations of FASB Interpretation (FIN) No. 44, "Accounting for Certain Transactions involving Stock Compensation." Accordingly, compensation expense related to employee stock options is
recorded only if, on the date of the grant, the fair value of the underlying stock exceeds the exercise price.

F-12

---

Certain
options have been granted or assumed with exercise prices below the market value of the underlying common stock on the grant date or assumption date in business combinations. The
following table illustrates the effect on stock-based compensation, net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123,
"Accounting for Stock-Based Compensation," using the Black-Scholes option pricing model, to stock-based employee compensation (in thousands, except per share data).

Year Ended December 31,2003

2002

2001Stock-based compensation:As reported

$
352

$
1,527

$
2,699Additional stock-based compensation expense determined under the fair value method


5,298


2,172


3,803Pro forma

$
5,650

$
3,699

$
6,502Net income (loss):As reported

$
9,823

$
(10,572
)
$
(7,218
)Additional stock-based compensation expense determined under the fair value method


5,298


2,172


3,803Pro forma

$
4,525

$
(12,744
)
$
(11,021
)Net income (loss) per sharebasic and diluted:As reported

$
0.13

$
(0.14
)
$
(0.20
)Per share effect of additional stock-based compensation expense determined under the fair value method

$
0.07

$
(0.03
)
$
(0.10
)Pro forma

$
0.06

$
(0.17
)
$
(0.30
)


Foreign Currency Translation

The Company's foreign subsidiaries measure their operations in the local currency and translate these operations into U.S. dollars for purposes of consolidation.

Assets
and liabilities of the Company's foreign subsidiaries are translated at the period-end exchange rate while revenue and expenses are translated at the average rates in
effect for the period. The effects of these translation adjustments are reported in a separate component of stockholders' equity. Transaction gains and losses are included in the statement of
operations and were not significant for the years ended December 31, 2003, 2002 and 2001.

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents, marketable securities and
accounts receivable. Cash and cash equivalents are deposited in local currency with major financial institutions in the United States, Europe and Japan; at most times, such balances with any one
financial institution may be in excess of FDIC insurance limits. Credit is extended to customers based on an evaluation of their financial condition.

F-13

---

The
Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for
potential bad debts. To date such losses, if any, have been within management's expectations. At December 31, 2003 and 2002, no customer comprised more than 10% of accounts receivable. For the
years ended December 31, 2003 and 2001, no customer comprised more than 10% of total revenue. For the year ended December 31, 2002, one customer accounted for 14.5% of total revenue.

Fair Value of Financial Instruments

The Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, are carried at historical
basis. At December 31, 2003 and 2002, the fair values of these instruments approximated their financial statement carrying amounts because of the short-term maturity of these
instruments. The historical basis of the Company's notes payable approximates the fair value based on quoted market prices for the same or similar issues offered to the Company or its subsidiaries for
debt with the same or similar remaining maturities.

Income taxes

ValueClick uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and to 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 results of operations in the
period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available evidence, it is more likely than not some
portion or all of the deferred tax assets will not be realized.

Basic and Diluted Net Income (Loss) Per Share

The Company has adopted the provisions of SFAS No. 128, "Earnings Per Share". Basic and diluted net income (loss) per share is computed by dividing the net
income (loss) by the weighted average shares of common stock outstanding for the period.

Comprehensive Income (Loss)

The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive income, as defined, includes all changes in equity (net assets) during a period from non-owner sources. The
elements of comprehensive income, other than net income (loss), relate to foreign currency translation adjustments for all periods presented and unrealized gains on marketable securities for the years
ended December 31, 2003 and 2002.

As
of December 31, 2003, the Company has $77,000 in unrealized losses on marketable securities and has reported such losses, net of tax, in comprehensive income.

F-14

---

Reclassifications

Certain reclassifications have been made to 2002 amounts to conform to 2003 presentation.

Business Segments

The Company uses the "management approach" defined in SFAS No. 131 "Disclosures About Segments at an Enterprise and Related Information", to identify its
reportable business segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the
Company's reportable segments.

Recently Issued Accounting Standards

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task
Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)."
This Statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002, though early adoption is encouraged. The application of SFAS No. 146 did
not have a material impact on the Company's financial position, results of operations or cash flows.

In
November 2002, the FASB issued FIN 45, "Guarantor's Accounting and Disclosures Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others." FIN 45
elaborates on the disclosures required in financial statements concerning obligations under certain guarantees. It also clarifies the requirements related to the recognition of liabilities by a
guarantor at the inception of certain guarantees. The Company adopted the disclosure requirements of this interpretation that were effective on December 31, 2002. The recognition provisions of
the interpretation adopted were effective for the Company in 2003 and are applicable only to guarantees issued or modified after December 31, 2002. Adoption of FIN 45 did not have a material
impact on the Company's financial position, results of operations or cash flows.

In
January 2002, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables". EITF issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 applies to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Adoption of EITF Issue
No. 00-21 did not have a material impact on the Company's financial position, results of operations or cash flows.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition Disclosurean amendment of FAS 123" (SFAS
No. 148). This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported

F-15

---

results.
The provisions of FAS 148 are effective for financial statements for fiscal years ending after December 15, 2002, and disclosure requirements shall be effective for interim
periods beginning after December 15, 2002. The Company intends to continue to account for stock-based compensation to its employees and directors using the intrinsic value method prescribed by
APB Opinion No. 25, and related interpretations. The Company has made certain disclosures required by SFAS No. 148 in its consolidated financial statements for the year ended
December 31, 2002 and began making the additional interim disclosures required by SFAS No. 148 in the first quarter of 2003. Accordingly, adoption of SFAS No. 148 did not have a
material impact the Company's financial position, results of operations or cash flows.

In
April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," clarifying accounting and reporting for
derivative instruments and hedging activities. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, with some exceptions, and for hedging relationships
designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on the Company's financial position, results of operations or cash flows.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This Statement establishes
standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that
is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial
instruments of nonpublic entities. Adoption of SFAS No. 150 did not have a material impact on the Company's financial position, results of operations or cash flows.

In
December 2003, the SEC issued SAB No. 104, "Revenue Recognition In Financial Statements". SAB No. 104 revises or rescinds portions of the interpretive guidance
included in Topic 13 of the codification of Staff Accounting Bulletins in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules
and regulations. It also rescinds the Revenue Recognition in Financial Statements Frequently Asked Questions and Answers document issued in conjunction with Topic 13. Selected portions of that
document have been incorporated into Topic 13. The adoption of SAB No. 104 in the December 2003 quarter did not have a material impact on the Company's financial position, results of
operations or cash flows.

2. Recent Business Combinations and Investments

Purchases

Hi-Speed Media, Inc.On December 17, 2003, the Company completed its
acquisition of Hi-Speed Media, Inc., a California corporation ("Hi-Speed Media"), pursuant to an Agreement and Plan of Merger, dated as of December 7, 2003, by
and among ValueClick, Inc., HS Acquisition Corp., a wholly-owned subsidiary of ValueClick, Hi-Speed Media, the shareholders of Hi-Speed Media and Farshad Fardad, in his
capacity as Shareholder Agent. Hi-Speed Media provides e-mail marketing services.

ValueClick
accounted for the acquisition under the purchase method. Accordingly, the results of Hi-Speed Media's operations are included in the Company's consolidated
financial statements from the

F-16

---

beginning
of the period closest to the acquisition date. Under the terms of the agreement, ValueClick acquired all of the outstanding capital stock of Hi-Speed Media for an aggregate
purchase price of approximately $9.0 million in cash and additional contingent cash consideration of up to $1.0 million per quarter, assuming the achievement of certain revenue and
operating income milestones over the eight quarters beginning January 1, 2004. In connection with the transaction, Hi-Speed Media's outstanding employee stock options were converted
into options to purchase approximately 80,000 shares of ValueClick common stock valued at $0.4 million using the Black-Scholes option pricing model. Identifiable intangible assets and goodwill
of approximately $3.8 million and $7.9 million, respectively, have been recorded related to this acquisition.

Commission Junction, Inc.On December 7, 2003, the Company completed its acquisition of
Commission Junction, Inc., a Delaware corporation ("Commission Junction"), pursuant to an Agreement and Plan of Merger and Reorganization, dated as of October 9, 2003, by and among
ValueClick, NCJ Acquisition Corp., a wholly-owned subsidiary of ValueClick, Commission Junction and Idealab Holdings LLC, a Delaware limited liability company, in its capacity as Stockholder Agent.
Pursuant to the terms of the merger agreement, Commission Junction was merged with and into NCJ Acquisition and became a wholly-owned subsidiary of ValueClick. Commission Junction is an affiliate
marketing business, which
provides technology and services that enable advertisers to manage, track and analyze a variety of online marketing programs.

ValueClick
accounted for the acquisition under the purchase method. Accordingly, the results of Commission Junction's operations are included in the Company's consolidated financial
statements from the beginning of the period closest to the acquisition date. Pursuant to the terms of the agreement, ValueClick acquired all the outstanding capital stock in Commission Junction for
approximately 3.0 million shares of ValueClick common stock valued at approximately $29.5 million, approximately $26.1 million in cash and transaction costs of
$0.4 million. Additionally, outstanding options to acquire common stock of Commission Junction were converted into an aggregate of 1.2 million options to acquire ValueClick common stock
valued at approximately $6.1 million using the Black-Scholes option pricing model. Identifiable intangible assets and goodwill of approximately $9.7 million and $37.5 million,
respectively, have been recorded related to this acquisition.

Search123.com Inc.On May 30, 2003, the Company completed its acquisition of
Search123.com Inc. ("Search123"). Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Search123, with Search123 surviving as a wholly-owned
subsidiary of ValueClick. Search123 is a search marketing company that allows marketers to find prospective customers who are actively engaged in researching and buying products and services online.

ValueClick
accounted for the acquisition under the purchase method. Accordingly, the results of Search123's operations are included in the Company's consolidated financial statements
from the beginning of the accounting period closest to the acquisition date. The aggregate consideration, constituting the purchase price of approximately $4.9 million, included a cash payment
of $3.2 million, the assumption of a net working capital deficit of $1.5 million and transaction costs of approximately $200,000. Identifiable intangible assets and goodwill of
approximately $1.4 million and $4.0 million, respectively, have been recorded related to this acquisition.

Be Free, Inc.On May 23, 2002, the Company completed its acquisition of Be
Free, Inc. Under the terms of the merger agreement, a wholly-owned subsidiary of the Company was merged with and into

F-17

---

Be
Free and Be Free survived as a wholly-owned subsidiary of the Company. Be Free is a provider of performance-based marketing technology and services.

Under
the terms of the merger agreement, Be Free stockholders received 0.65882 shares of the Company common stock for each share of Be Free common stock. The Company issued a total of
approximately 43.4 million shares of its common stock for all the outstanding stock of Be Free. In addition, the Company assumed options to purchase approximately 4.2 million additional
shares of ValueClick common stock.

The
Company accounted for the acquisition under the purchase method. Accordingly, the results of Be Free's operations are included in the Company's consolidated financial statements from
the beginning of the accounting period closest to the acquisition date. The aggregate consideration constituting the purchase price of approximately $129.3 million, includes the issuance of
43,361,717 shares of common stock valued at approximately $122.3 million (based on the average common stock price for the public announcement date and the day before, the day of and after that
date), the assumption of options and warrants to purchase an aggregate of 4,164,918 shares of common stock valued at $5.0 million using the Black-Scholes option pricing model and transaction
costs of approximately $2.0 million, which include legal fees, accounting fees, and fees for other related professional services.

Mediaplex, Inc.On October 19, 2001, ValueClick completed its acquisition of
Mediaplex, Inc. and its wholly-owned subsidiary AdWare Systems, Inc. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Mediaplex
and Mediaplex survived as a wholly-owned subsidiary of ValueClick. Mediaplex serves the marketing communications industry with technology solutions for digital messaging, support services that enhance
campaign return, and infrastructure tools to ensure effective program implementation.

Under
the terms of the merger agreement, Mediaplex stockholders received .4113 shares of ValueClick common stock for each share of Mediaplex common stock. ValueClick issued a total of
approximately 15.1 million shares of its common stock for all the outstanding stock of Mediaplex. In addition, based on shares of Mediaplex common stock underlying its outstanding stock options
as of the record date and the exchange ratio, options to purchase approximately 3.0 million additional shares of ValueClick common stock were assumed by ValueClick.

ValueClick
accounted for the acquisition under the purchase method. Accordingly, the results of Mediaplex's operations are included in the Company's consolidated financial statements
from the beginning of the accounting period closest to the acquisition date. The aggregate consideration constituting the purchase price of approximately $47.6 million at closing, includes the
issuance of 15,084,898 shares of common stock valued at approximately $42.7 million (based on the average ValueClick common stock price for the public announcement date and the five trading
before and after that date), the assumption options and warrants to purchase an aggregate of 2,968,562 shares of common stock valued at $3.4 million and transaction costs of approximately
$1.5 million, which include legal fees, accounting fees, and fees for other related professional services.

The
purchase price approximated the fair value of the tangible net assets acquired.

The
historical operating results of Hi-Speed Media, Commission Junction, Search123, and Be Free prior to the beginning of the accounting period closest to the acquisition
date have not been included

F-18

---

in
the Company's historical operating results. Pro forma data (unaudited) for the years ended December 31, 2003 and 2002 as if these acquisitions had been effective as of January 1, 2002
is as follows (in thousands, except per share data):

2003

2002Revenue

$
116,588

$
89,941Net income (loss) before cumulative effect of a change in accounting principle

$
10,271

$
(7,929
)Net income (loss) attributable to its common shareholders

$
10,271

$
(15,578
)Basic net income (loss) per share

$
0.14

$
(0.17
)Diluted net income (loss) per share

$
0.13

$
(0.17
)


Pooling-of-interest

Z Media, Inc.On December 18, 2000, ValueClick, Z Media and Z Media Acquisition Corp.,
a wholly-owned subsidiary of ValueClick, entered into an Agreement and Plan of Merger, under which
ValueClick agreed to acquire Z Media. The merger was completed on January 31, 2001. On that date, Z Media was merged with and into Z Media Acquisition Corp., which became the surviving
corporation and a wholly-owned subsidiary of ValueClick. ValueClick accounted for the merger as a pooling-of-interests, and as such, the consolidated financial statements were
restated to include Z Media's financial data as if the Z Media had always been a part of ValueClick.

Z
Media is a co-registration company that provides highly qualified email subscribers to advertisers and direct marketers.

In
connection with the merger, ValueClick issued an aggregate of 2,727,678 shares of its common stock in exchange for all outstanding shares of Z Media and reserved 419,366 additional
shares of Common Stock for issuance upon exercise of outstanding employee stock options of Z Media.

Merger-related
costs of $17,000 included in the consolidated statements of operations for the year ended December 31, 2002 was comprised of direct transaction and other costs
related to the Z Media merger.

3. DoubleClick Investment

On February 28, 2000, the Company consummated an investment by DoubleClick, Inc. ("DoubleClick") under a common stock and warrant purchase agreement
entered into on January 11, 2000 whereby DoubleClick acquired 7,878,562 shares of the Company's common stock for an estimated purchase price of $12.16 per share to be paid in cash of
$10.0 million and 732,860 shares of DoubleClick common stock. The shares of DoubleClick common stock were valued at approximately $85.8 million for accounting purposes based on an
average price of $117.07 per share for the public announcement date of January 13, 2000 and the 5 trading days before and 5 trading days thereafter. Under the Agreement, the Company also issued
a warrant to DoubleClick to acquire additional shares of the Company's common stock at $21.76 per share payable in DoubleClick common stock which is exercisable for that number of shares that would
result in DoubleClick owning 45% of the Company's outstanding common stock on a fully diluted basis. The warrant was exercisable for the 15-month period commencing on February 28,
2000. The warrant expired unexercised in May 2001.

F-19

---

During
2000, the Company sold 165,000 shares of its DoubleClick common stock for cash proceeds of $10.3 million. The sale of these shares resulted in a realized
non-cash loss of $9.0 million. In December 2000, the Company's management made an assessment that the decline in market value of
the remaining DoubleClick stock was other than temporary. Accordingly, for the year ended December 31, 2000 the Company recorded a non-cash charge to operations of
$60.2 million representing the unrealized holding losses previously accounted for a separate component of stockholders' equity. In April 2001, the Company sold its remaining 567,860
shares of its DoubleClick common stock for cash proceeds of $6.9 million. The sale of these shares resulted in a realized gain of $701,000. In November 2002, in connection with the Stock
Repurchase Program, the Company repurchased the remaining 7,878,562 shares of its common stock held by DoubleClick for an aggregate purchase price of $21.3 million.

4. Goodwill and Intangibles

On January 1, 2002, the Company adopted the accounting standards set forth in Statement of Financial Accounting Standards No. 142, "Goodwill and
other Intangible Assets." SFAS No. 142 changed the methodology for assessing goodwill impairments and ceased the continued amortization of goodwill. Although the application of this standard
did not change management's evaluation of the Company's other identifiable intangible assets, the initial application of this statement resulted in an impairment of goodwill of $7.6 million to
write down goodwill related to the Bach Systems and ValueClick Japan acquisitions. The amount of the impairment was estimated based on a valuation process that combined estimating the present value of
the future cash flows of Bach Systems and ValueClick Japan with obtaining the market value to revenue multiples of comparable publicly traded companies and applying these multiples to the projected
and historical revenue of Bach Systems and ValueClick Japan and was reported as a cumulative effect of a change in accounting principle during the first quarter of 2002.

With
the adoption of SFAS No. 142, amortization of goodwill ceased on January 1, 2002. Pro forma net loss and basic and diluted net loss per common share for the year ended
December 31, 2001, excluding amortization of goodwill is as follows (in thousands, except per share data):

Year Ended
December 31, 2001Reported net loss

$
(7,218
)Add back: Goodwill amortization


1,722Pro forma net loss

$
(5,496
)Reported basic and diluted net loss per common share

$
(0.20
)Add back: Goodwill amortization


0.05Pro forma basic and diluted net loss per common share

$
(1.69
)


F-20

---



As of December 31, 2003 and 2002, all other intangible assets were subject to amortization. A summary of goodwill and other intangible assets as of
December 31, 2003 and 2002 is set forth below (in thousands):

Gross
Balance

Accumulated
Amortization

Amount
CarryingDecember 31, 2003:Goodwill

$
49,375

$


$
49,375Customer relationships


11,092


(189
)

10,903Other


7,367


(2,296
)

5,071Total intangible assets

$
67,834


(2,485
)
$
65,349December 31, 2002:Patent license

$
1,841




$
1,841Other


1,892


(914
)

978Total goodwill and intangible assets

$
3,733

$
(914
)
$
2,819


Intangible
assets created as a result of acquisitions during 2003 include customer relationships, acquired technology and tradename intangibles that are being amortized
using the straight-line method over the periods benefited, ranging from 2 to 7 years.

In
2003, $49.4 million and $14.8 million were added to the goodwill and intangible asset balances, respectively, related to the purchases of Search123, Commission Junction
and Hi-Speed Media. In 2002, $1.0 million was added to the intangible asset balance as part of the purchase of Be Free, Inc. attributable to acquired technology and $1.8 million
related to a patent license acquisition. Amortization expense for all intangible assets was $1,570,000 and $533,000 for the years ended December 31, 2003 and 2002, respectively. Estimated
intangible asset amortization expense remaining for the next five years ending December 31 is as follows (amounts in thousands):

2004

$
3,4552005

$
3,4022006

$
3,2572007

$
2,4032008

$
1,658


F-21

---

5. Property and Equipment

Property and equipment consisted of the following (in thousands):

December 31,2003

2002Computer equipment and purchased software

$
22,321

$
17,282Furniture and equipment


3,124


2,770Vehicles


35


41Leasehold improvements


558


44526,038


20,538Less: accumulated depreciation and amortization


(15,479
)

(11,301
)$
10,559

$
9,237


6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following (in thousands):

December 31,2003

2002Accounts payable

$
3,154

$
1,714Accrued payments to third-party web sites


11,286


3,940Other accrued liabilities


15,127


8,000$
29,567

$
13,654


7. Income Taxes

The provision for income taxes for the years ended December 31, 2003, 2002 and 2001 is comprised of the following (in thousands):

Year Ended December 31,2003

2002

2001Current:Federal

$
566

$
(413
)
$
(280
)State


321


406


21Foreign


55


131


330$
942

$
124

$
71Deferred:Federal


(30
)
$
(144
)
$
(32
)State





(42
)

(5
)Foreign


(82
)




(112
)

(186
)

(37
)Equity:





225


Provision for income taxes

$
830

$
163

$
34


F-22

---

The
components of the deferred tax assets at December 31, 2003 and 2002 are as follows (in thousands):

December 31,2003

2002Deferred tax assets:Net operating losses

$
65,932

$
52,227Capital loss carry-forward


26,438


26,438Depreciation and amortization


7,891


9,231Other


4,594


2,557Gross deferred tax assets


104,855


90,453Valuation allowance


(93,907
)

(83,412
)Net deferred tax assets


10,948


7,041Deferred tax liabilities:Capital gains on issuance of ValueClick Japan Stock


5,454


5,454Acquired intangibles


5,876


Other


168


335Total deferred tax liabilities


11,498


5,789Net deferred tax assets (liabilities)

$
(550
)
$
1,252Current portion of net deferred tax assets

$
1,446

$
1,252Long-term portion of net deferred tax liabilities

$
1,996

$



Consistent
with prior periods, in evaluating the need for a valuation allowance at December 31, 2003, the Company evaluated both positive and negative evidence in accordance with
the requirements of SFAS No. 109. The key factors evaluated included: significant cumulative losses with only a recent trend towards profitability; annual limitations on utilization of acquired
net operating losses pursuant to Internal Revenue Code Section 382 and related expiration dates; limitations on the utilization of capital loss carryforwards and related expiration dates;
potential for future stock option deductions to significantly reduce taxable income thus limiting the ability to utilize net operating loss carryforwards prior to expiration; and future income
projections and tax planning strategies with the need to generate significant amounts of taxable income in future periods on a consistent and prolonged basis. Based upon an evaluation of these
factors, the Company concluded that, with the exception of short-term net deferred tax asset temporary differences that will reverse in the next year, it is not more likely than not that the remaining
deferred tax assets will be realized. In future periods the Company will reassess the available evidence and if the Company continues to meet its financial projections, generates improved and
sustained taxable income and develops additional tax planning strategies, it is possible that the Company may develop enough positive evidence to release a portion or all its valuation allowance in
future periods.

The
increase in gross deferred tax assets during 2003 is primarily attributable to acquired net operating loss-carryforwards and other tax assets of Commission Junction. At
December 31, 2003, the Company had net operating loss carry-forwards for federal and state purposes of $180.6 million and $76.2 million, respectively, and had capital loss
carry-forwards for federal and state purposes of

F-23

---

$66.2 million.
The federal and state net operating losses begin to expire in 2011 and 2004, respectively, and the capital loss carryforwards expire in 2005 and 2006.

The
overall effective tax rate differs from the statutory Federal tax rate for the years ended December 31, 2003, 2002 and 2001 as follows:

Year Ended December 31,2003

2002

2001Tax provision (benefit) based on the federal statutory rate

34.0
%
(34.0
)%
(34.0
)%State income taxes, net of federal benefit

3.0

6.6

(6.1
)Stock based compensation

2.2



11.6Non-deductible amortization / impairment



1.0

4.2Non-deductible merger-related costs





3.0Effects of foreign income

(0.3
)


6.9Federal effect of state rate change



2.5

6.9Deferred tax recognition for prior acquisition





8.6Adjustment to valuation allowance, net of purchase accounting adjustments

(34.0
)
28.8

Other, net

2.9

1.0

(0.6
)7.8
%
5.9
%
0.5
%


8. Capitalization

Warrants

In connection with the Mediaplex acquisition, the Company assumed a fully vested warrant to purchase 205,650 shares of common stock at $1.22 per share. The
warrant was exercised during 2001.

Treasury Stock

In September 2001, the Board of Directors authorized a $10 million Stock Repurchase Program to purchase outstanding shares of ValueClick common
stock from time to time at prevailing market prices in the open market or through unsolicited negotiated transactions depending on market conditions. The Stock Repurchase Program was increased by the
board of directors to $30 million in February 2002, to $50 million in July 2002 and to $75 million in November 2002. Under the program, the purchases are
funded from available working capital, and the repurchased shares will be retired, held in treasury or used for ongoing stock issuances such as issuances under employee stock plans. There is no
guarantee as to the exact number of shares that will be repurchased by the Company and the Company may discontinue purchases at any time that management determines additional purchases are not
warranted. As of December 31, 2003, and since the initiation of the Stock Repurchase Program, the Company has repurchased approximately 26.3 million shares of the Company's common stock
for approximately $71.4 million, $68.0 million of which was purchased pursuant to the Stock Repurchase Program. All purchases of treasury stock have been retired. As December 31,
2003 up to an additional $7.0 million of the Company's capital may be used to purchase shares of the Company's outstanding common stock under the Stock Repurchase Program.

F-24

---

Stockholder Rights Plan

On June 4, 2002, the board of directors of ValueClick, Inc. declared a dividend of one preferred share purchase right for each outstanding share of
the Company's common stock. The dividend was payable on June 14, 2002 to the stockholders of record at the close of business on that date. Each right entitles the registered holder to purchase
from the Company one unit consisting of one-thousandth of a share of Series A junior participating preferred stock of the Company at a price of $25.00 per unit. The description and
terms of the rights are set forth in a rights agreement, dated as of June 4, 2002, by and between the Company and Mellon Investor Services LLC, a New Jersey limited liability Company, as Rights
Agent.

Until
the earlier to occur of (i) the close of business on the tenth day after a public announcement that a person or group of affiliated or associated persons has acquired
beneficial ownership of 15% or more of the outstanding common stock or (ii) ten business days (or such later date as may be determined by action of the Company's board of directors prior to
such time as any person becomes an acquiring person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in
the bidder's beneficial ownership of 15% or more of the outstanding common stock (the earlier of such dates being called the distribution date), the rights will be evidenced by the Company's common
stock certificates.

The
rights are not exercisable until the distribution date. The rights will expire at the close of business on June 4, 2012 unless the final expiration date is extended or the
rights are earlier redeemed or exchanged by the Company.

The
Series A preferred stock purchasable upon exercise of the rights will not be redeemable. Each share of Series A preferred stock will be entitled to a dividend of 1,000
times the dividend declared per share of common stock. In the event of liquidation, the holders of the shares of Series A preferred stock will be entitled to a payment of 1,000 times the
payment made per share of common stock. Each share of Series A preferred stock will have 1,000 votes, voting together with the common stock. Finally, in the event of any merger, consolidation
or other transaction in which shares of common stock are exchanged, each share of Series A preferred stock will be entitled to receive 1,000 times the amount received per share of common stock.
These rights are protected by customary anti-dilution provisions.

The
terms of the rights may be amended by the board of directors of the Company without the consent of the holders of the rights except that from and after such time that there is an
acquiring person no amendment may adversely affect the interests of the holders of the rights.

Until
a right is exercised, the holder of a right will have no rights by virtue of ownership as a stockholder of the Company, including, without limitation, the right to vote or to
receive dividends.

9. Stock Options

2002 Stock Option Plan

On May 23, 2002, the Board of Directors adopted and the stockholders approved, the 2002 Stock incentive Plan (the "2002 Stock Plan") replacing the 1999
Stock Option Plan. A total of 10,000,000 shares of common stock have been reserved for issuance under the 2002 Stock Plan, of which 4,577,022 shares were available for future grant at
December 31, 2003.

F-25

---

The
2002 Stock Plan provides for the granting of non-statutory and incentive stock options to employees, officers, directors and consultants of the Company. Options granted
generally begin vesting on the employee's date of employment, and vest over a four-year period, with one-fourth vesting on the first anniversary date and the remainder vesting pro rata
monthly over the remaining three years and generally expire ten years from the date of grant.

1999 Stock Option Plan

On May 13, 1999, the Board of Directors adopted and the stockholders approved, the 1999 Stock Option Plan (the "1999 Stock Plan"). A total of 5,000,000
shares of common stock had been reserved for issuance under the 1999 Stock Plan, of which 1,123,901 shares were available for future grant at December 31, 2003.

The
1999 Stock Option Plan provided for the granting of non-statutory and incentive stock options to employees, officers, directors and consultants of the Company. Options
granted generally begin vesting on the employee's date of employment, and vest pro rata monthly over periods ranging from 12 to 42 months or annually over 4 years and generally expire
ten years from the date of grant.

Assumed Stock Option Plans

Pursuant to the Company's business combinations with Hi-Speed Media, Commission Junction, Be Free, Mediaplex, Z Media and ClickAgents, the Company
assumed the following Stock Option Plans:

Name of Plan

Incentive Stock
Options

Exercise Prices

Maximum
Exercise Term

Vesting PeriodsHi-Speed Media2001 Stock Incentive Plan

80,710

$1.99

10 years

Up to 4 yearsCommission Junction2001 Stock Incentive Plan and 1999 Stock Option Plan

1,217,693

$3.45 to $8.62

10 years

Up to 4 yearsBe Free1998 Stock Incentive Plan

4,164,875

$0.23 to $68.59

10 years

Up to 4 yearsMediaplex1997 Stock Option Plan

2,762,912

$1.22 to $247.99

10 years

Up to 4 yearsZ MediaStock Option Plan

419,366

$0.26 to $7.91

10 years

Up to 4 yearsClickAgentsStock Option Plan

427,269

$0.07 to $3.95

10 years

Up to 4 years


F-26

---

The
following table summarizes activity under the all stock option plans for the years ended December 31, 2003, 2002 and 2001:

Number of
Shares

Price Per
Share

Weighted Average
Exercise PriceOptions outstanding at December 31, 2000

3,800,948

$0.07 to $11.00

$
1.20Granted

1,708,366

2.03 to 5.69


4.03Assumed from Mediaplex

2,762,912

1.22 to 247.99


10.52Exercised

(207,749
)
0.07 to 2.00


2.49Forfeited/expired

(1,755,853
)
0.07 to 190.86


4.01Options outstanding at December 31, 2001

6,308,624

$0.07 to $247.99

$
5.65Granted

4,025,100

2.30 to 2.90


2.46Assumed from Be Free

4,164,875

0.23 to 68.59


6.27Exercised

(2,801,394
)
0.07 to 2.85


1.17Forfeited/expired

(1,598,917
)
0.07 to 190.86


9.87Options outstanding at December 31, 2002

10,098,288

$0.07 to $247.99

$
5.24Granted

2,512,501

2.83 to 9.20


7.27Assumed from Commission Junction and Hi-Speed Media

1,298,403

1.99 to 8.62


3.47Exercised

(2,083,341
)
0.23 to 7.90


1.68Forfeited/expired

(786,893
)
0.07 to 79.02


5.31Options outstanding at December 31, 2003

11,038,958

$0.07 to $247.99

$
6.15


Options
acquired in business combinations or granted during the years ended December 31, 2003, 2002 and 2001, net of cancellations, resulted in a total deferred compensation
amount of approximately $1,042,000, $547,000, and $282,000, respectively, which was included in deferred stock compensation in stockholders' equity. Deferred compensation expense is recognized over
the service period by using the aggregate percentage of compensation accrued by the end of each year of service (the vesting period). During the years ended December 31, 2003, 2002 and 2001,
such compensation expense included in stock-based compensation in the statement of operations amounted to approximately $352,000, $1,527,000, and $2,699,000 respectively.

Additional
information with respect to the outstanding options as of December 31, 2003 is as follows:

Options ExercisableOptions Outstanding
Average Remaining
Contractual Life
(In Years)Number of
Shares

Average
Exercise
Prices

Number of
Shares

Average
Exercise
Price1,596,670

5.98

$
1.04

1,540,174

$
1.012,854,272

8.43


2.39

1,111,804


2.363,247,188

6.74


3.26

2,073,052


3.332,424,942

9.15


8.08

447,242


6.86531,789

4,82


13.10

498,490


13.23384,097

6.27


57.83

364,227


57.8811,038,958

7.49

$
6.15

6,034,989

$
6.96


F-27

---

The
options exercisable and the weighted average exercise price per share at December 31, 2002 and 2001 were 5,641,804 at $6.26 and 4,342,261 at $3.86, respectively.

During
the years ended December 31, 2003, 2002 and 2001, the exercise price for all options granted under the 2002 and 1999 stock plans equaled the market price at the dates of grants.
The weighted average estimated fair value of stock options assumed during the years ended December 31, 2003, 2002 and 2001 were $6.47, $1.33, and $1.77 per share, respectively.

The
Company calculated the fair value of each option grant on the date of grant using the option-pricing models as prescribed by Statement No. 123 using the following assumptions:

Year Ended
December 31,2003

2002

2001Risk-free interest rates

2
%
3
%
5
%Expected lives (in years)

3

4

4Dividend yield

0
%
0
%
0
%Expected volatility

57
%
45
%
145
%


10. Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated (in thousands, except per share data):

Year Ended
December 31,2003

2002

2001Basic:Numerator:Net income (loss)

$
9,823

$
(10,572
)
$
(7,218
)Denominator:Weighted average common shares


74,300


73,744


37,058Basic net income (loss) per common share

$
0.13

$
(0.14
)
$
(0.20
)Diluted:Numerator:Net income (loss)

$
9,823

$
(10,572
)
$
(7,218
)Denominator:Weighted average common shares


78,436


73,744


37,058Diluted net income (loss) per common share

$
0.13

$
(0.14
)
$
(0.20
)


The
diluted per share computations exclude common stock options which were antidilutive. The numbers of shares excluded from the diluted net loss per common share computation were
2,457,729, and 4,023,977 for the years ended December 31, 2002 and 2001, respectively.

F-28

---

11. Debt

The Company's debt obligations are summarized as follows (in thousands):

December 31,
2002Short Term Borrowing, ValueClick Japan

$
45Note payable bank, 3.25%, $14 principal and interest paid monthly, due December 2007


760Note payable shareholder, non-interest bearing, $100 due in March 2002 and $110 due in March 2003


110Total


915Less current portion


307$
608


12. Defined Contribution Plan

The Company has a Savings Plan (the "Savings Plan") that qualifies as a defined contribution plan under Section 401(k) of the Internal Revenue Code. Under
the Savings Plan, participating employees may defer a percentage (not to exceed 20%) of their eligible pretax earnings up to the Internal Revenue Service's annual contribution limit. All full time
employees on the payroll of the Company are eligible to participate in the plan. The Savings Plan does not invest participant contributions in the Company's common stock. Company matching and profit
sharing contributions are discretionary. Company contributions to the Plan amounted to $152,000, $75,000, and $135,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

13. Commitments and Contingencies

Leases

Future minimum lease payments under noncancellable operating and capital leases and related sublease income, with initial or remaining lease terms in excess of
one year as of December 31, 2003 are as follows (in thousands):

Operating LeaseYear Ending December 31:

Operating
Sublease
Income

Capital
LeasesCommitments2004

$
4,595

$
(557
)
$
2712005


2,130


(259
)

1892006


1,469


(259
)

142007


1,215


(301
)

2008


954


(253
)

Thereafter


1,485





Total minimum lease payments

$
11,848

$
(1,629
)
$
474Less amount representing interest








(22
)Present value of minimum lease payments








452Less current portion








(265
)$
187


F-29

---

Total
rent expense under operating leases, net of sublease income, was $2.6 million, $2.2 million, and $2.2 million, for the years ended December 31, 2003,
2002 and 2001, respectively.

Legal Action



On September 27, 2000, Joseph Lorenc, a former employee of Be Free, Inc. filed a lawsuit against Be Free and two officers of Be Free, Steven Joseph
and Gordon Hoffstein, in the United States District Court, District of Massachusetts. The complaint alleges, among other things, breach of contract. Lorenc seeks, among other things, compensatory
damages, punitive damages and attorney's fees to the greatest extent allowed by law. The case is now pending before the state court in Massachusetts. The case is set for trial in May of 2004.
ValueClick believes that the plaintiffs' allegations are without merit and intends to vigorously defend itself. ValueClick has not recorded an accrual related to damages, if any, resulting from this
case, as an unfavorable outcome is, in management's opinion, not probable.



This case was filed on September 5, 2003 and brought against ValueClick and Company executives Sam Paisley, Jim Zarley and Scott Barlow, by Gurbaksh Chahal
and Tajinder Chahal for, among other things, fraud. The Chahals are former employees of the Company's Click Agents Inc. subsidiary and the case arises out of the Company's repurchase of the
Chahals' ValueClick stock. The case is pending before the Los Angeles County Superior Court. The Chahals seek, among other things, general, special and punitive damages according to proof as well as
the imposition of a constructive trust. The Company believes this case to be wholly without merit and intends to vigorously defend itself. ValueClick has not recorded an accrual related to damages, if
any, resulting from this case, as an unfavorable outcome is, in management's opinion not probable.

Other
than the matters discussed above, the Company is not a party to any other material legal proceedings, nor is it aware of any pending or threatened litigation that would have a
material adverse effect on its business, operating results, cash flows or financial condition. From time to time, the Company may become subject to additional legal proceedings, claims, and litigation
arising in the ordinary course of business. In addition, the Company may receive letters alleging infringement of patent or other intellectual property rights. The Company's management believes that
these letters are without merit and intend to contest them vigorously.

14. Restructuring Charges

In the second quarter of 2002 and in the fourth quarter of 2001, the Company recorded restructuring charges of $2.3 million and $515,000, respectively.
These restructuring charges were the result of certain redundancies as a result of ValueClick's acquisitions of Mediaplex and Be Free and primarily represent a provision for consolidating certain
leased facilities which will be paid out through

F-30

---

2010.
As a result of this process, four existing ValueClick employee positions were eliminated. As of December 31, 2003, $922,000 of the charges has been paid.

Employee
Related

Lease
Exit Costs

Total(in thousands,
except per share data)Restructuring accruals

$
9

$
2,827

$
2,836Cash payments


(9
)

(475
)

(484
)Accrual at December 31, 2002

$


$
2,352

$
2,352Cash payments





(438
)

(438
)Accrual at December 31, 2003

$


$
1,914

$
1,914


15. Segments and Geographic Information

As discussed in Note 1, in the prior year the Company operated in two reportable segments: Media and Technology. With acquisition of Commission Junction in
December 2003, the reportable segments were reassessed and as a result a third reportable segment was established, the Affiliate Marketing segment which combines the operations of Commission Junction
and Be Free, previously included in the Technology segment. Accordingly, the prior year results of Be Free have been reclassified out of the Technology segment and included in Affiliate Marketing to
conform the 2003 presentation.

ValueClick
derives its revenue from three business segments based on the types of products and services provided. These business segments are ValueClick Media, ValueClick Affiliate
Marketing and ValueClick Technology. Media Segment revenue includes sales of certain Affiliate Marketing and Technology products made by Media operations outside the United States, amounting to
$749,000 and $3,072,000, and $0 and $748,000, for the years ended 2003 and 2002, respectively.

Revenue,
gross profit and total assets by segment are as follows (in thousands):

Revenue

Gross Profit

Total Assets2003

2002

2001

2003

2002

2001

2003

2002

2001Media

$
45,761

$
30,252

$
41,446

$
23,212

$
15,824

$
22,026

$
214,574

$
129,895

$
136,375Affiliate Marketing


24,302


11,848





18,829


9,076





95,160


76,938


Technology


23,559


20,934


3,427


18,451


15,921


2,477


13,365


57,017


54,251Intercompany eliminations


(1,106
)

(480
)



















Total

$
92,516

$
62,554

$
44,873

$
60,492

$
40,821

$
24,503

$
323,099

$
263,850

$
190,626


The
Company's operations are domiciled in the United States with operations in Japan through its majority owned subsidiary, ValueClick Japan and with operations in Europe through its
wholly-owned subsidiaries, ValueClick Europe, ValueClick France and ValueClick Germany. Other international subsidiaries included ValueClick Canada and ValueClick Brazil, which were closed during
2001.

F-31

---

The
Company's geographic information is as follows (in thousands):

Year Ended
December 31, 2003Long-lived
Assets at
December 31,
2003Revenue

Income
(Loss) from
OperationsUnited States

$
71,782

$
10,047

$
75,335Japan


7,574


(122
)

1,487Europe


13,160


(102
)

561Total Foreign


20,734


(224
)

2,048Total

$
92,516

$
9,823

$
77,383


Year Ended
December 31, 2002Long-lived
Assets at
December 31,
2002Revenue

Loss from
OperationsUnited States

$
48,048

$
(6,811
)
$
12,731Japan


7,476


(230
)

851Europe


7,030


(1,779
)

208Total Foreign


14,506


(2,009
)

1,059Total

$
62,554

$
(8,820
)
$
13,790


Year Ended
December 31, 2001Long-lived
Assets at
December 31,
2001Revenue

Loss from
OperationsUnited States

$
29,513

$
(11,233
)
$
13,389Japan


10,199


(179
)

1,101Europe


5,094


(1,283
)

111Other International


67


(268
)

24Total Foreign


15,360


(1,730
)

1,236Total

$
44,873

$
(12,963
)
$
14,625


16. Subsequent Event

On February 19, 2004, ValueClick, Inc. entered into a definitive agreement to sell its equity position in ValueClick Japan, Inc. to livedoor
Co., Ltd., a Japanese Internet and technology product and services company. ValueClick's agreement with livedoor is part of livedoor's tender offer, announced in Japan on February 19,
2004, to acquire all of the outstanding shares of ValueClick Japan. As part of its tender offer, livedoor would acquire ValueClick's equity interest of approximately 59 percent in ValueClick
Japan for approximately $24 million in cash, excluding transaction fees. The tender offer is expected to be completed near the end of the first quarter of 2004.

F-32

---



SCHEDULE II

VALUECLICK, INC.

VALUATION AND QUALIFYING ACCOUNTS

Balance at
Beginning of
Period

Additions Charged
to Costs and
Expenses

Other Adjustments(1)

Deductions

Balance at End
of Period2003:Allowance for doubtful accounts

$
1,892

$
1,213

$
206

$
(1,251
)
$
2,0602002:Allowance for doubtful accounts

$
1,546

$
1,409

$
573

$
(1,636
)
$
1,8922001:Allowance for doubtful accounts

$
1,759

$
1,751

$
349

$
(2,313
)
$
1,546


---

F-33

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Westlake Village, State of California, on the 15th day of March,
2004.

| |  | VALUECLICK, INC.
| |  | ----------------
| |  |                 
| |  | By:             

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and appoint each of James R. Zarley and Samuel J. Paisley their true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities, to sign any and all
amendments to this Report, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith, as fully to all
intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his respective substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

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 and in the capacities and on
the dates indicated:

|Signature                               |  | Title                                                                                                   |  | Date          
|--------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | --------------
|                                        |  |                                                                                                         |  |               
|/s/JAMES R. ZARLEYJames R. Zarley       |  | Chairman of the Board of Directors,
Chief Executive Officer and President
(Principal Executive Officer) |  | March 15, 2004
|/s/SAMUEL J. PAISLEYSamuel J. Paisley   |  | Chief Financial Officer and
Chief Operating Officer of Media                                            |  | March 15, 2004
|/s/DAVID S. BUZBYDavid S. Buzby         |  | Director                                                                                                |  | March 15, 2004
|/s/MARTIN T. HARTMartin T. Hart         |  | Director                                                                                                |  | March 15, 2004
|/s/TOM A. VADNAISTom A. Vadnais         |  | Director                                                                                                |  | March 15, 2004
|/s/SAMUEL P. GERACESamuel P. Gerace     |  | Director                                                                                                |  | March 15, 2004
|/s/JEFFREY F. RAYPORTJeffrey F. Rayport |  | Director                                                                                                |  | March 15, 2004

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