<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                ----------------
                                    FORM 10-Q
                                ----------------

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                        COMMISSION FILE NUMBER 000-26365

                                ----------------

                                 GOTO.COM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 DELAWARE                                    95-4652060
      (STATE OR OTHER JURISDICTION OF                     (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NUMBER)

                       74 NORTH PASADENA AVENUE 3RD FLOOR
                           PASADENA, CALIFORNIA 91103
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                            TELEPHONE: (626) 685-5600
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

        52,872,630 shares of Common Stock, $0.0001 par value, as of March 31,
2001.

================================================================================


<PAGE>   2

                                 GOTO.COM, INC.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                                    PAGE NO.
                                                                                                                    --------
<S>          <C>                                                                                                    <C>
PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements:
              Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000.........................3
              Condensed Consolidated Statements of Operations for the three months ended
                 March 31, 2001 and 2000...............................................................................4
              Condensed Consolidated Statements of Cash Flows for the three months ended
                 March 31, 2001 and 2000...............................................................................5
              Notes to Condensed Consolidated Financial Statements.....................................................6
Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations....................9
Item 3.       Quantitative and Qualitative Disclosures About Market Risks..............................................21

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings........................................................................................21
Item 2.       Changes in Securities and Use of Proceeds................................................................21
Item 6.       Exhibits and Reports on Form 8-K.........................................................................21
</TABLE>



                                       2
<PAGE>   3

                          PART I FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS


                                 GOTO.COM, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)




<TABLE>
<CAPTION>
                                                                                MARCH 31,               DECEMBER 31,
                                                                                  2001                      2000
                                                                              -----------               ------------
                                                                              (UNAUDITED)
<S>                                                                             <C>                      <C>
                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents .....................................               $   8,659                $  12,986
  Short-term investments ........................................                  43,848                   41,694
  Accounts receivable, net ......................................                   6,490                    5,365
  Prepaid expenses and other ....................................                   1,981                    1,970
  Prepaid marketing expenses ....................................                  20,467                   23,605
                                                                                ---------                ---------
Total current assets ............................................                  81,445                   85,620
Property and equipment, net .....................................                  31,789                   26,076
Intangible assets, net ..........................................                   2,917                    3,234
Restricted  investments .........................................                   5,712                    5,564
Long-term investments ...........................................                     765                      293
Other assets ....................................................                     624                      626
                                                                                ---------                ---------
Total assets ....................................................               $ 123,252                $ 121,413
                                                                                =========                =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable ..............................................               $  29,035                $  23,284
  Accrued expenses ..............................................                   4,278                    4,148
  Deferred revenue ..............................................                   6,158                    4,441
  Current portion of capital lease obligations ..................                     663                      791
                                                                                ---------                ---------
Total current liabilities .......................................                  40,134                   32,664
Other long-term liabilities .....................................                     461                      576
Long-term capital lease obligations .............................                      13                       78
STOCKHOLDERS' EQUITY:
    Common Stock, $0.0001 par value,
      200,000 shares authorized:
      Shares issued and outstanding--52,873 and 52,566
      for March 31, 2001 and December 31, 2000, respectively ....                       5                        5
    Additional paid-in capital ..................................                 592,485                  591,239
    Deferred compensation, net ..................................                  (1,394)                  (1,128)
    Accumulated deficit .........................................                (508,725)                (502,026)
    Accumulated other comprehensive income ......................                     273                      _ 5
                                                                                ---------                ---------
Total stockholders' equity ......................................                  82,644                   88,095
                                                                                ---------                ---------
Total liabilities and stockholders' equity ......................               $ 123,252                $ 121,413
                                                                                =========                =========
</TABLE>


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



                                       3
<PAGE>   4

                                 GOTO.COM, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS; UNAUDITED)




<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                                                                       MARCH 31,
                                                              -----------------------------
                                                               2001                  2000
                                                              --------             --------
<S>                                                           <C>                  <C>
Revenue ..........................................            $ 51,959             $ 17,215
Cost of revenue (A) ..............................               4,713                2,605
                                                              --------             --------
Gross profit .....................................              47,246               14,610

Operating expenses:
  Marketing, sales and service (A) ...............              41,575               16,314
  General and administrative (A) .................               9,065                6,267
  Product development (A) ........................               3,699                2,201
  Amortization of deferred compensation (A) ......                 236                  425
  Write-off of acquired in-process research
    and development ..............................                  --                7,550
  Amortization of intangible assets ..............                 317               13,954
                                                              --------             --------
                                                                54,892               46,711
                                                              --------             --------
Loss from operations .............................              (7,646)             (32,101)

Other income:
  Interest income, net ...........................                 955                1,547
  Other income (expense) .........................                  (8)                  45
                                                              --------             --------
Net loss .........................................            $ (6,699)            $(30,509)
                                                              ========             ========
Basic and diluted net loss per share .............            $  (0.13)            $  (0.67)
                                                              ========             ========
Weighted average shares used to compute
  basic and diluted net loss per share ...........              50,217               45,323
                                                              ========             ========

(A) If deferred compensation were allocated to
  expense categories, it would be allocated as
  follows:


Cost of revenue ..................................            $      1             $      2
Marketing, sales and service .....................                  54                  103
General and administrative .......................                 170                  295
Product development ..............................                  11                   25
                                                              --------             --------
  Total amortization of deferred compensation ....            $    236             $    425
                                                              ========             ========
</TABLE>


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



                                       4
<PAGE>   5

                                 GOTO.COM, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (IN THOUSANDS; UNAUDITED)



<TABLE>
<CAPTION>
                                                                                  THREE MONTHS ENDED
                                                                                      MARCH 31,
                                                                             -----------------------------
                                                                               2001                 2000
                                                                             --------             --------
<S>                                                                          <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ......................................................            $ (6,699)            $(30,509)
  Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
    Amortization of deferred stock option compensation ..........                 236                  425
    Accretion of discounts from the purchase of
      short-term and long-term investments ......................                (185)                (413)
    Write-off of acquired in-process research
      and development ...........................................                  --                7,550
    Depreciation and amortization ...............................               3,182                1,295
    Amortization of intangible assets ...........................                 317               13,954

  Changes in operating assets and liabilities:
    Accounts receivable .........................................              (1,125)                (402)
    Prepaid expenses and other ..................................                 (11)                 (27)
    Prepaid marketing expenses ..................................               3,138                 (928)
    Accounts payable and accrued expenses .......................               5,881                1,022
    Deferred revenues ...........................................               1,717                  405
                                                                             --------             --------
Net cash provided by (used in) operating activities .............               6,451               (7,628)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from (purchases of) short-term and long-term
    investments, net ............................................              (2,437)              25,737
  Capital expenditures for property and equipment ...............              (8,895)              (7,027)
  Net cash used in acquisition ..................................                  --               (1,407)
  Other assets ..................................................                (113)                (438)
                                                                             --------             --------
Net cash provided by (used in) investing activities .............             (11,445)              16,865

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the issuance of common stock ....................                 744                1,594
  Repayments under lease line ...................................                (193)                (164)
  Repayment of debt .............................................                  --                  (31)
                                                                             --------             --------
Net cash provided by financing activities .......................                 551                1,399
Effect of exchange rate changes on cash and cash
  equivalents ...................................................                 116                   --
Net increase (decrease) in cash and cash equivalents ............              (4,327)              10,636
Cash and cash equivalents at beginning of period ................              12,986               11,914
                                                                             --------             --------
Cash and cash equivalents at end of period ......................            $  8,659             $ 22,550
                                                                             ========             ========
</TABLE>


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



                                       5
<PAGE>   6

                                 GOTO.COM, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. THE COMPANY, BASIS OF PRESENTATION

        GoTo.com (the Company or GoTo) is the leader in Pay-For-Performance(TM)
search on the Internet. GoTo operates a service that provides self-qualified
leads to advertisers, who provide search listings for the products, services and
information they offer to consumers and businesses. GoTo facilitates these
consumer leads, or introductions, through our search service, which enables
advertisers to bid in an ongoing auction for priority placement in the search
results. Priority placement means that the search results appear on the page
ranked in descending order of bid price with the highest bidder's listing
appearing first. Each advertiser pays GoTo the amount of its bid whenever a
consumer clicks on the advertiser's listing in the search results. Since
advertisers pay for each clickthrough, they have an incentive to list only on
those words relevant to their offering. Since advertisers pay GoTo only for
clickthroughs, or introductions, we refer to our service as Pay-For-Performance.
Pay-For-Performance is in contrast to other forms of advertising (such as
television, radio or Internet banner advertisements), whereby a business is
charged a set amount for advertising whether or not it generates any direct
sales leads. GoTo's advertisers include retail merchants, wholesale and service
businesses and manufacturers. Consumers and business users access GoTo's
listings primarily through the Company's affiliates, a network of Web sites that
have integrated GoTo's search service into their sites or that direct usage to
the Company's site.

        GoTo operated a consumer-shopping site, GoTo(TM) Shopping, beginning in
January 2000. On April 30, 2001, GoTo closed its consumer-shopping site.

        GoTo's auction service (GoTo(TM)Auctions) operates an online resource
for merchants to place and manage their products with other auction sites or
services called "ChannelFusion(TM)." Currently GoTo is evaluating strategic
alternatives for GoTo Auctions, including an equity partner, the possibility of
a sale or closing operations.

        GoTo was incorporated on September 15, 1997 in the state of Delaware and
officially launched its service on June 1, 1998. The Company operates in one
reportable business segment. GoTo plans to change its corporate name and expects
to make such a change in the third quarter of 2001. In April 2001, GoTo entered
into an agreement with a third-party where GoTo agreed to assign its rights in
the GoTo name to such third-party, and to change its name by September 15, 2001.

        The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ materially from those
estimates.

        The accompanying unaudited condensed consolidated financial statements
have been prepared on the same basis as the annual financial statements and, in
the opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the Company's financial
position, results of operations and cash flows for the periods shown, except for
the write-off during the quarter ended March 31, 2000 of approximately $7.6
million of in-process research and development associated with GoTo's
acquisition of Cadabra Inc. (Cadabra), which GoTo operates as "GoTo Shopping."
and a charge during the fourth quarter of 2000 of approximately $309.3 million
to write down intangible assets related to the net assets resulting from the
acquisitions of Cadabra and AuctionRover.com, Inc. (which GoTo operates as GoTo
Auctions). The results of operations for such periods are not necessarily
indicative of the results expected for a full year or for any future period.

        These financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.

2. COMPREHENSIVE INCOME (LOSS)

        The Company accounts for comprehensive income (loss) in accordance with
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." SFAS 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income, as defined therein, refers to revenues, expenses, gains and losses that
are not included in net income (loss) but rather are recorded directly in
stockholders' equity. Total comprehensive loss for the quarter ended March 31,
2001 approximated net loss.



                                       6
<PAGE>   7

3. EARNINGS (LOSS) PER SHARE COMPUTATION

        Basic and diluted net loss per share is computed using the weighted
average number of shares of common stock outstanding, excluding the unvested
portion of stock that is subject to repurchase. The effect of outstanding stock
options and unvested stock are excluded from the calculation of diluted net loss
per share for the periods presented, as their inclusion would be antidilutive.

        Options to purchase approximately 6.2 million and 3.3 million shares of
common stock were outstanding as of March 31, 2001 and 2000, respectively. In
addition, as of March 31, 2001, there were approximately 2.4 million shares of
unvested common stock outstanding, which are subject to repurchase by GoTo.

4. LITIGATION

        On November 3, 2000, GoTo was served with a summons and complaint by
MercExchange, Inc., alleging patent infringement relating to GoTo's auction and
shopping services. The action is pending in the U.S. District Court in the
Eastern District of Virginia. GoTo is currently investigating the merits of this
claim.


5. RELATED PARTY TRANSACTIONS

        In January 2000, GoTo entered into an arrangement to lease approximately
58,000 square feet of office space from Bill Gross' idealab!. GoTo is obligated
to make total lease payments of approximately $7.1 million commencing on January
15, 2000 and terminating on October 31, 2004. Total payments for the lease were
approximately $528,000 and $469,000 for the quarters ended March 31, 2001 and
2000, respectively. Management believes these amounts were materially
representative of the fair value of the lease.

        During the quarters ended March 31, 2001 and 2000, GoTo recorded
approximately $54,000 and $39,000, respectively, of search listing advertising
revenue from Bill Gross' idealab!. Management believes the amounts paid by Bill
Gross' idealab! were materially representative of the fair value of advertising
services provided.

        On March 3, 2000, GoTo entered into a Stockholder Agreement with Bill
Gross' idealab!, which provides, among other things, that Bill Gross' idealab!
will not and will cause its affiliates not to, directly or indirectly, except
with the prior written consent of our Board of Directors and, without
limitation, a majority of our directors who are not, and have not been for the
previous twelve months, affiliates of Bill Gross' idealab! or any of its
affiliates or associates:

        -       become a beneficial owner of 35% or more of the outstanding
                common stock of GoTo;

        -       transfer beneficial ownership of any common stock of GoTo except
                (A) pursuant to the terms of a merger, consolidation or
                liquidation of, or tender offer or other business combination
                transaction with respect to GoTo, in each case approved by our
                Board of Directors and, without limitation, by a majority of our
                directors who are not, and have not been for the previous twelve
                months, affiliates of Bill Gross' idealab! or any of its
                affiliates or associates; (B) pro rata distributions by certain
                of the affiliated venture funds of Bill Gross' idealab! of
                shares of common stock of GoTo to their limited partners
                consistent with past practice, or (C) other transfers to third
                parties, provided that any such third party (together with any
                of its affiliates and associates) would not, to the knowledge of
                Bill Gross' idealab! after inquiry, following the completion of
                such transfer, beneficially own 15% or more of the outstanding
                common stock of GoTo; or

        -       knowingly assist or advise, or knowingly provide or arrange
                financing to facilitate, another person or entity, or group of
                persons or entities acting in concert, to become the beneficial
                owner of 15% or more of the outstanding common stock of GoTo



                                       7
<PAGE>   8



        The Stockholder Agreement also provides that, until March 3, 2002, so
long as Bill Gross' idealab! is the beneficial owner of at least 20% of the
outstanding common stock of GoTo, GoTo will not, without the prior written
consent of Bill Gross' idealab!, adopt a "shareholder rights plan" (commonly
referred to as a "poison pill"); provided, however, that if, in the good faith
judgment of GoTo's Board, after consideration of its fiduciary duties, adoption
of such a shareholder rights plan would be in the best interests of GoTo's
stockholders, GoTo may adopt such a shareholder rights plan without the consent
of Bill Gross' idealab! so long as the percentage thresholds set forth in such
plan are no more restrictive to Bill Gross' idealab! than the terms of the
Stockholder Agreement. If GoTo adopts a shareholder rights plan, the Stockholder
Agreement will terminate and be of no further force or effect.

6. RESTRICTED INVESTMENTS

        In August 2000, GoTo entered into a 19-month agreement under which
America Online, Inc. (AOL) will display GoTo's Pay-For-Performance search
listings on the search results page of AOL, AOL.com and Netscapes's Netcenter.
The agreement calls for a guaranteed payment by GoTo of $50 million over the
term of the agreement. As part of the guaranteed payment, GoTo issued to AOL a
letter of credit for the benefit of AOL, in the amount of $5 million. In order
to secure the letter of credit, GoTo holds approximately $5.7 million with a
bank, which funds are restricted until the termination of the letter of credit
in March 2002.

7. AFFILIATE COMMITMENTS

        GoTo is obligated to make guaranteed payments totaling approximately
$32.1 million, $16.7 million and $12.3 million for the remainder of 2001, and in
2002 and 2003, respectively, under contracts to provide search services to its
affiliates.

8. CONTINGENT LOSS

        Goto is in dispute over equipment purchased from MTI Technology Corp.
that did not meet Goto's technical specifications. The potential loss has not
been recorded, as any loss cannot be reasonably estimated at this time.



                                       8
<PAGE>   9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

        THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. WE USE WORDS SUCH AS "ANTICIPATES," "BELIEVES," "PLANS,"
"EXPECTS," "FUTURE" AND "INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY
FORWARD-LOOKING STATEMENTS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS DOCUMENT.
GOTO UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY OR REVISE ANY FORWARD-LOOKING
STATEMENTS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE IN OUR
FORWARD-LOOKING STATEMENTS FOR MANY REASONS, INCLUDING WITHOUT LIMITATION THE
RISKS DESCRIBED IN "RISKS THAT COULD AFFECT OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS," BELOW.

OVERVIEW

        GoTo.com (the Company or GoTo) is the leader in Pay-For-Performance
search on the Internet. GoTo operates a service that provides self-qualified
leads to advertisers, who provide search listings for the products, services and
information they offer to consumers and businesses. GoTo facilitates these
consumer leads, or introductions through our search service, which enables
advertisers to bid in an ongoing auction for priority placement in the search
results. Priority placement means that the search results appear on the page
ranked in descending order of bid price with the highest bidder's listing
appearing first. Each advertiser pays GoTo the amount of its bid whenever a
consumer clicks on the advertiser's listing in the search results. Since
advertisers pay for each clickthrough, they have an incentive to list only on
those words relevant to their offering. Since advertisers pay GoTo only for
clickthroughs, or introductions, it is referred to as Pay-For-Performance.
Pay-For-Performance is in contrast to other forms of advertising (such as
television, radio or Internet banner advertisements), whereby a business is
charged a set amount for advertising whether or not it generates any direct
sales leads. GoTo's advertisers include retail merchants, wholesale and service
businesses and manufacturers. Consumers and business users access GoTo's
listings primarily through the Company's affiliates, a network of Web sites that
have integrated GoTo's search service into their sites or that direct usage to
the Company's site.

        GoTo generates more revenue with increases in usage, through its
affiliates, and with an increase in advertisers. In addition, the Company's
business model delivers increased value to its advertisers and affiliates with
increased scale. An increase in the number of advertisers brings more search
listings, an increase in the coverage of key words, and it generates competition
for priority placement, which we believe increases bid prices. The company's
value proposition to affiliates increases with more advertisers, since we
believe the increase in competition improves relevancy and allows GoTo to
deliver more revenue to affiliates. GoTo continues to rank highly in relevancy
by independent studies from Lazard Freres and Market Facts.

        GoTo operated a consumer-shopping site, GoTo Shopping, beginning in
January 2000. On April 30, 2001, GoTo closed its consumer-shopping site.

        GoTo's auction service (GoTo Auctions) operates an online resource for
merchants to place and manage their products with other auction sites or
services called "ChannelFusion." Currently GoTo is evaluating strategic
alternatives for GoTo Auctions, including an equity partner, the possibility of
a sale or closing operations.

       GoTo was incorporated in September 1997 and has approximately a
three-year operating history. We launched a proof-of-concept version of our
search service in the fiscal year ended December 31, 1997. Our
Pay-for-Performance service was announced in February 1998, and following
further proof-of-concept testing, was officially launched in June 1998. GoTo
plans to change its corporate name and expects to make such a change in the
third quarter of 2001. In April 2001, GoTo entered into an agreement with a
third-party where GoTo agreed to assign its rights in the GoTo name to such
third-party, and to change its name by September 15, 2001. GoTo has devoted
significant resources to launching and expanding its search service, including
developing an infrastructure and building a management team. GoTo's losses for
the quarter ended March 31, 2001 and the year ended December 31, 2000 were
approximately $6.7 and $458.6 million, respectively. The losses in 2000 included
non cash amortization of goodwill and intangible assets associated with our
acquisitions of Cadabra and AuctionRover and the acquisition of the assets of
SearchUP, Inc., representing approximately $76.7 million and the impairment
write down of goodwill for Cadabra and AuctionRover of approximately $309.3
million.

        A significant component of our expenses consists of costs incurred to
attract consumers and businesses to our service through GoTo's affiliate
network. We expect to continue to rely upon these sources for a significant
proportion of searches conducted on our service. Our future success is dependent
upon increasing the revenue we derive from this traffic.



                                       9
<PAGE>   10


International Expansion

        We launched our service in the United Kingdom in November 2000 and plan
to launch our German speaking marketplace during the first half of 2002. Our
international expansion will require continued investment, and we expect to
incur losses to build internal infrastructure and grow our advertiser and
affiliate bases overseas. Therefore, in order to scale and expand more rapidly,
GoTo is exploring the possibility of aligning with a partner or partners that
may provide key distribution channels for our products as well as additional
financing. However, GoTo believes that its cash resources are adequate and the
international opportunity is attractive. Therefore, the Company is prepared to
fully finance the expansion should the Company not find an investor on
acceptable terms. At this stage, the structure of a potential partnership is not
known, but it is intended that any partner would take an equity position in
GoTo's international venture, which could potentially reduce the start-up losses
that we would record. The results of our international operations are
consolidated and, if appropriate partnerships with terms acceptable to us are
not obtained, we will continue to consolidate all of the results from our
international operations.

RESULTS OF OPERATIONS

        Revenue. Revenue is generated primarily through paid introductions that
is, the number of click-throughs that users make on advertisers' search
listings. Revenue is recognized when earned based on click through activity to
the extent that the advertiser has deposited sufficient funds with us or
collection is probable. Revenue also consists of banner advertising, which
constituted less than 5 percent of our revenue for the quarter ended March 31,
2001. GoTo has no barter transactions. Banner advertisement revenue is
recognized when earned under the terms of the contractual arrangement with the
advertiser or advertising agency, provided that collection is probable.

        The number of paid introductions for each of the last eleven fiscal
quarters is as follows:


<TABLE>
<CAPTION>
        NUMBER OF PAID INTRODUCTIONS                                             FOR THE QUARTER ENDED
        ----------------------------                                             ---------------------
<S>                                                                             <C>
                314 million ................................................     March 31, 2001
                228 million ................................................     December 31 ,2000
                114 million ................................................     September 30, 2000
                 93 million ................................................     June 30, 2000
                 88 million ................................................     March 31, 2000
                 73 million ................................................     December 31, 1999
                 54 million ................................................     September 30, 1999
                 31 million ................................................     June 30, 1999
                 15 million ................................................     March 31, 1999
                  7 million ................................................     December 31, 1998
                  2 million ................................................     September 30, 1998
</TABLE>

        The average price per paid introduction results from advertisers' online
bidding for priority placement in the search results. The average price per paid
introduction for each of the last eleven fiscal quarters is as follows:


<TABLE>
<CAPTION>
     AVERAGE PRICE PER PAID INTRODUCTION                                         FOR THE QUARTER ENDED
     -----------------------------------                                         ---------------------
<S>                                                                             <C>
                   $0.16 ...................................................     March 31, 2001
                    0.17 ...................................................     December 31, 2000
                    0.21 ...................................................     September 30, 2000
                    0.21 ...................................................     June 30, 2000
                    0.19 ...................................................     March 31, 2000
                    0.17 ...................................................     December 31, 1999
                    0.14 ...................................................     September 30, 1999
                    0.11 ...................................................     June 30, 1999
                    0.08 ...................................................     March 31, 1999
                    0.05 ...................................................     December 31, 1998
                   $0.03 ...................................................     September 30, 1998
</TABLE>

        Average price per paid introduction decreased from the quarter ended
December 31, 2000 to the quarter ended March 31, 2001. We believe this was
primarily due to the significant increase in traffic from our affiliates
beginning in the third quarter of 2000 and continuing to the first quarter of
2001. The increased traffic was primarily a result of new agreements signed
during the third and fourth quarters of 2000 with AOL, Terra Lycos, and
AltaVista Company and new agreements signed during the first quarter of 2001
with Direct Hit Technologies, Inc., NetZero, Inc., iWon and Infoseek Corp.
(operator of Go.com). The rapid increase in traffic that resulted primarily from
these agreements caused advertisers who bid on GoTo's top 3 to 5 listings to
spend their allocated budget more quickly than they had previously experienced,
thereby more quickly depleting their budgets. Because the AOL, Terra Lycos and




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AltaVista display GoTo's top 3 to 5 listings, advertisers with listings in these
positions received traffic more quickly than they had prior to GoTo entering
into these agreements. As these advertisers' budgets were depleted, the listings
with lower bids rose higher in the search results even though the advertiser in
the lower bid positions did not increase their bids. However, advertisers are
increasing their budgets with GoTo, as the average spend per advertiser in the
quarter ended December 31, 2000 rose by 38% over the previous quarter and by 14%
in the quarter ended March 31, 2001 compared to December 31, 2000. GoTo believes
that continued increase in Pay-For-Performance advertising budgets will promote
competition and allow our average price per paid introduction to grow throughout
this year. GoTo believes the increase in traffic from the full quarter effect of
its affiliate agreements signed during the first quarter of 2001 will be offset
by the anticipated downward seasonality trend of Internet usage in the second
and third quarter traffic from GoTo's affiliates. Therefore, barring any
unanticipated sudden rise in traffic volume or unforeseen events, we expected
the average price to rise in subsequent quarters.

        We believe the quarterly number of paid introductions and average price
per paid introduction listed above are not necessarily indicative of future
results. While we believe our average price per paid introduction will increase
throughout this year, it is difficult to forecast the future growth of the
average price per paid introduction, as advertisers, rather than GoTo, determine
the price paid for each introduction. We do not anticipate our historical
revenue growth rate on a percentage basis to continue. Our growth rate and
results depend on our ability to continue to increase the number of advertisers
who use our service, the amount our advertisers spend on our service and the
number of consumers and businesses who use our service. We anticipate these
variables to fluctuate, affecting our growth rate and results.

        Revenue was approximately $52.0 million for the quarter ended March 31,
2001 compared to approximately $17.2 million for the quarter ended March 31,
2000. The increase was the result of continued growth of our marketplace and the
corresponding constituents, our advertisers and the number of consumers and
businesses using our product. We do not anticipate our historical revenue growth
rate to continue as a percentage of growth as expressed on a quarter-to-quarter
basis.

        Our growth is dependent on obtaining additional traffic and increasing
the average price per paid introduction. During the quarter ended March 31,
2001, approximately 30% of GoTo's total traffic came from portals (AOL, Terra
Lycos and AltaVista), approximately 10% of the total traffic came from the
browsers (Microsoft Internet Explorer and Netscape), approximately 55% of the
total traffic came from other affiliates and the remaining 5% came from GoTo's
home page at www.goto.com. In August 2000, GoTo and AOL entered into a 19-month
distribution agreement under which AOL displays GoTo's listings on the search
results pages of AOL, AOL.com and Netscape's Netcenter. In November 2000, GoTo
and Terra Lycos entered into a three-year distribution agreement under which
GoTo's listings were added to Lycos.com and HotBot search results. In November
2000, GoTo and AltaVista entered into an 18-month distribution agreement under
which GoTo provides AltaVista's search service users with GoTo's listings on
select search results pages of AltaVista. We also extended our existing
agreement with Microsoft for an additional year, which will allow for continued
traffic from their Internet Explorer 4 and Internet Explorer 5 browsers until
January 2002. Our agreement with Netscape was renewed in July of 2000 and will
expire on June 30, 2001. In February 2001, GoTo and Direct Hit entered into a
two-year search distribution agreement under which GoTo will provide its search
results to DirectHit's users. In February 2001, GoTo and NetZero entered into a
distribution agreement under which GoTo will provide its full results set to
NetZero's users. GoTo also entered into distribution agreements with iWon and
Infoseek (operator of the Go.com), during the first quarter of 2001.We must
renew our affiliate agreements or replace any lost traffic with other sources
and grow our advertising base; otherwise, our revenue may be materially,
adversely affected.

        Cost of Revenue. Cost of revenue consists primarily of costs associated
with serving our search results, and maintaining our Web site, plus fees paid to
outside service providers that provide and manage the unpaid listings that we
distribute on our Web site and some of our affiliates. Costs associated with
serving our search results and maintaining our Web site include depreciation of
Web site equipment, co-location charges for our Web site equipment, software
license fees and salaries of related personnel. Cost of revenue was
approximately $4.7 million for the quarter ended March 31, 2001 compared to
approximately $2.6 million for the quarter ended March 31, 2000. The increase
was primarily due to increased database and hardware capacity requirements, an
increase in the number of personnel required to support our Web site and
increased fees paid to outside service providers. We anticipate cost of revenue
to continue to increase as our traffic increases.

        Marketing, Sales and Service. Marketing, sales and service expenses
consist primarily of our payments to affiliates and payroll and related expenses
for personnel engaged in marketing, customer service and sales functions.
Marketing, sales and service expenses were approximately $41.6 million for the
quarter ended March 31, 2001 compared to approximately $16.3 million for the
quarter ended March 31, 2000. The increase was primarily due to increased
distribution of our search service. We believe that continued investment in
marketing, sales and service and in the increased distribution of our search
services, which includes our recent agreements with AOL, AltaVista and Terra
Lycos, are critical to attaining our strategic objectives and, as a result,
expect these costs to



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<PAGE>   12

continue to increase in the future. In August 2000, we entered into a 19-month
distribution agreement under which AOL displays GoTo's listings on the search
results page of AOL, AOL.com and Netscape's Netcenter. The agreement calls for a
guaranteed payment by GoTo of $50 million over the term of the agreement. In
November 2000, we entered a three-year distribution agreement under which GoTo's
Pay-For-Performance search listings were added to Lycos.com and HotBot search
results. Also in November 2000, we entered into an 18-month distribution
agreement under which we provide AltaVista's search service users with GoTo's
listings on select search results pages of AltaVista. Costs associated with
payments to affiliates were approximately $34.7 million or 67% of revenue for
the quarter ended March 31, 2001, compared to approximately $8.9 million or 52%
of revenue for the quarter ended March 31, 2000. These costs have increased from
the quarter ended March 31, 2000 compared to the quarter ended March 31, 2001
due to an increased number of affiliates and increased traffic directed from
these affiliates. We anticipate these costs will increase as traffic volume
increases.

        General and Administrative. General and administrative expenses consist
primarily of payroll and related expenses for executive and administrative
personnel; facilities; professional services, including legal; and insurance and
other general corporate expenses. General and administrative expenses were
approximately $9.1 million for the quarter ended March 31, 2001 compared to
approximately $6.3 million for the quarter ended March 31, 2000. The increase
was the result of increased headcount and related expenses, including facilities
and increased personnel-related insurance costs, as well as increased
professional services. We expect general and administrative expenses to continue
to increase as we incur additional costs related to the growth of our business.

        Product Development. Product development expenses consist primarily of
payroll and related expenses for personnel responsible for development of
features and functionality for our service, as well as costs incurred in the
preliminary project and post-implementation stage of computer software developed
for internal use. Product development expenses were approximately $3.7 million
for the quarter ended March 31, 2001 compared to approximately $2.2 million for
the quarter ended March 31, 2000. The increase was a result of increased
staffing and associated costs relating to enhancing features and functionality
to our Web site and search service.

        Amortization of Deferred Compensation. Certain stock options granted
from the inception of GoTo through our initial public offering have been
considered to be compensatory for financial accounting purposes. Total
compensation resulting from these stock options amounted to approximately $7.3
million. This amount represents the difference between the exercise price of the
stock options and the deemed fair value of our common stock at the time of the
grants or issuances, adjusted for the return of unvested options or the
repurchase of restricted stock resulting from employee terminations.
Compensation associated with these stock options is amortized and expensed over
the applicable vesting periods using a graded methodology. Approximately
$236,000 and $425,000 were amortized and charged to operations for the quarters
ended March 31, 2001 and 2000, respectively.

        Acquisition-Related Charges. In January 2000, GoTo acquired a
comparison-shopping service, Cadabra. The total purchase price was approximately
$263.1 million, of which approximately $7.6 million was assigned to in-process
research and development which was expensed immediately following the
consummation of the acquisition, approximately $6.0 million was assigned to the
value of purchased technology and approximately $245.1 million was allocated to
goodwill. Both were amortized on a straight-line basis based on a three-year
life. In May 2000, GoTo acquired AuctionRover. The total purchase price was
approximately $174.2 million, of which approximately $6.7 million was assigned
to the value of purchased technology and approximately $167.0 million was
allocated to goodwill. Both were amortized on a straight-line basis based on a
three-year life. During the fourth quarter of 2000 and in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS 121), management identified certain conditions as indicators of asset
impairment on the net assets from the acquisitions of Cadabra and AuctionRover.
Accordingly, GoTo recorded a charge to operations during the fourth quarter of
2000 to write down these assets to zero. On April 30, 2001, GoTo closed its
comparison-shopping site. In October 2000, GoTo acquired substantially all the
assets of SearchUP for approximately $3.5 million. GoTo allocated the purchase
price to intangible assets acquired based on their estimated fair values as
determined by GoTo and is amortizing such amounts on a straight-line basis over
three years. Approximately $317,000 and $21.5 million were amortized and charged
to operations for the quarters ended March 31, 2001 and 2000, respectively.

LIQUIDITY AND CAPITAL RESOURCES

        Net cash provided by operating activities totaled approximately $6.5
million and net cash used in operating activities totaled approximately $7.6
million for the quarters ended March 31, 2001 and 2000, respectively. The change
was due primarily to the improved operating results, rapid growth and increased
size and scope of operations partially offset by amortization of prepaid
marketing expenses, or affiliate costs, and increase in accrued affiliate
payables. Net cash used in investing activities totaled



                                       12
<PAGE>   13

approximately $11.4 million and net cash provided by investing activities
totaled approximately $16.9 million for the quarters ended March 31, 2001 and
2000, respectively. The change resulted primarily from proceeds of short-term
and long-term investments in the quarter ended March 31, 2000. Net cash provided
by financing activities totaled approximately $551,000 and $1.4 million for the
quarters ended March 31, 2001 and 2000, respectively. The decrease was due
primarily to decrease exercises of options in 2001 compared to 2000.

        Our principal sources of liquidity consisted of unrestricted cash, cash
equivalents and short-term investments of approximately $52.5 million as of
March 31, 2001 and approximately $55.0 million as of December 31, 2000. We
believe that our cash and liquid investment reserves are sufficient to sustain
operations through the next 12 months; however, unknown factors may require us
to seek additional capital. Such unknown factors may include, among other
things, competitive pressure, higher cost of intellectual capital, higher costs
to accommodate increases in capacity, and acquisitions or higher costs for
affiliate traffic. We are obligated to make guaranteed payments totaling
approximately $32.1 million, $16.7 million and $12.3 million for the remainder
of 2001, and in 2002 and 2003, respectively, under contracts to provide search
services to our affiliates.

        We may seek additional capital through the issuance of debt or equity
depending upon the results of operations, market conditions or unforeseen
opportunities. Our future liquidity and capital requirements will depend upon
numerous factors. The pace of expansion of our operations will affect our
capital requirements. Our forecast of the period of time through which our
financial resources will be adequate to support our operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary materially as a result of the factors described above. If we
require additional capital resources, we may seek to sell additional equity or
debt securities or obtain a bank line of credit. The sale of additional equity
or convertible debt securities could result in additional dilution to our
stockholders. There can be no assurance that any financing arrangements will be
available in amounts or on terms acceptable to us, if at all.

        RISKS THAT COULD AFFECT OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

WE HAVE A LIMITED OPERATING HISTORY.

        GoTo was founded in September 1997, officially launched its service in
June 1998, and has a limited operating history. An investor in our common stock
must consider the risks and difficulties frequently encountered by companies in
new and rapidly evolving markets. These risks include our:

        -       complete dependence on online advertising and consumer search
                services with only limited market acceptance;

        -       need to develop and upgrade our infrastructure, including
                internal controls, transaction processing systems, data storage
                and retrieval systems and Web site;

        -       need to manage changing operations;

        -       dependence upon and need to hire and retain key personnel;

        -       reliance on affiliates to direct consumers to our service to
                conduct searches.

We cannot assure you that the GoTo service will retain its existing, or attract
new, advertisers, consumers and affiliates, which are Web sites that include
GoTo's Pay-For-Performance search services on their sites or that direct
consumer traffic to the GoTo Web site. We also cannot assure you that GoTo will
achieve significant additional revenues or improve operating margins in future
periods. There can be no assurance that GoTo's services will continue to achieve
commercial success and, if they do not, our business, operating results and
financial condition may be materially and adversely affected.

WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.

        We have not yet achieved profitability. We expect to be profitable
during the fourth quarter of 2001. However, we incurred a net loss of
approximately $6.7 million and $30.5 million for the quarters ended March 31,
2001 and 2000, respectively, and as of March 31, 2001, we had an accumulated
deficit of approximately $508.7 million.

        Our limited operating history makes it difficult to forecast our future
operating results. Although our revenue has grown in recent quarters, we cannot
be certain that this growth will continue. We expect to continue to increase our
marketing, sales and service and general and administrative expenses. As a
result, we will need to generate significant additional revenue to achieve
profitability and in the absence of significant additional revenue, we may need
to raise additional funds. If we do achieve profitability, we cannot be certain
that we will sustain or increase it.



                                       13
<PAGE>   14

OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS BECAUSE
OF MANY FACTORS, AND ANY OF THESE COULD ADVERSELY AFFECT OUR STOCK PRICE.

        We believe that quarter-to-quarter comparisons of our operating results
are not a good indication of our future performance. It is likely that in some
future quarter our operating results may be below the expectations of public
market analysts and investors and, as a result of these or other factors, the
price of our common stock may fall or significantly fluctuate. Our operating
results have varied widely in the past, and we expect that they will continue to
vary significantly from quarter to quarter due to a number of factors,
including:

        -       demand for our services by advertisers and consumers, including
                the number of searches performed by consumers and the rate at
                which they click through to paid search results;

        -       prices paid by advertisers using the GoTo services, which are
                not determined by GoTo;

        -       our costs of attracting consumers to use GoTo's services,
                including costs of exposure on third-party Web sites;

        -       costs related to agreements with affiliates;

        -       loss of our agreements with affiliates;

        -       the mix of paid vs. non-paid results on the GoTo services;

        -       demand for the services of affiliates that promote our service
                to their consumers;

        -       our ability to significantly increase our distribution channels;

        -       seasonality, typical of our industry, which in the past online
                traffic has been lower in the second and third quarters of our
                fiscal year;

        -       the amount and timing of operating costs and capital
                expenditures relating to expansion of our operations;

        -       costs and delays in introducing new GoTo services and
                improvements to existing services;

        -       changes in the growth rate of Internet usage and acceptance by
                consumers of e-commerce;

        -       technical difficulties, system failures or Internet downtime;

        -       government regulations related to the Internet;

        -       our ability to upgrade and develop our information technology
                systems and infrastructure;

        -       costs related to acquisitions of technologies or businesses; and

        -       general economic conditions, as well as those specific to the
                Internet and related industries.

        As a result of our limited operating history, it is difficult to
accurately forecast our revenue, and we have limited meaningful historical
financial data upon which to base planned operating expenses. We plan to
significantly increase our operating expenses to expand our marketing and sales
operations and broaden our customer support capabilities. We base our current
and future expense levels on our operating plans and estimates of future
revenue, and other than approximately half of our affiliate costs, our expenses
are relatively fixed. Revenue and operating results are difficult to forecast
because they generally depend upon the volume of the searches conducted on our
service, the amounts bid by advertisers for search listings on the service and
the number of advertisers that bid on the service, which we cannot control
directly. As a result, we may be unable to adjust our spending in a timely
manner to compensate for any unexpected revenue shortfall. We also may be unable
to increase our spending and expand our operations in a timely manner to
adequately meet user demand, to the extent such demand exceeds our expectations.

WE DEPEND ON A LIMITED NUMBER OF SOURCES TO DIRECT CONSUMERS TO OUR SERVICE TO
CONDUCT SEARCHES.

        The consumers who conduct searches on our service come from a limited
number of sources. Our sources for consumers conducting searches are members of
our affiliate network, including portals, such as AOL, Terra Lycos and
AltaVista, providers of Internet browsers such as Netscape Communicator and
Microsoft Internet Explorer, aggregators of search offerings of various
providers, Internet Service Providers (ISP's), such as Earthlink, and GoTo's Web
site. In August 2000, we entered into a 19-month distribution agreement under
which AOL will display GoTo's listings on the search results page of AOL,
AOL.com and Netscape's Netcenter. We also recently entered into a one-year
extension to an existing agreement with Microsoft Corporation for continued
traffic from their Internet Explorer 4 and Internet Explorer 5 browsers until
January 2002. This source delivered a diminishing level of traffic to us in 2000
compared to 1999, and we expect that we will eventually receive no traffic from
this source. In addition, our agreement with Netscape will expire on June 30,
2001. Although sources of consumer traffic to our service fluctuate, in any
given month we typically depend upon one or a few of these sources for a
significant majority of traffic and searches conducted on our service. For the
quarter ended March 31, 2001, approximately 95% of all of GoTo's traffic came
from our affiliates. Of GoTo's total traffic, approximately 30% came from
portals (AOL, Terra Lycos and AltaVista), approximately 10% came from the
browsers (Microsoft's Internet Explorer and Netscape), approximately 55% came
from other affiliates, and the remaining 5% came directly to



                                       14
<PAGE>   15

the GoTo Web site. GoTo's agreements with affiliates vary in duration and terms.
There can be no assurance that we will be successful in renewing any of these
agreements or entering into new distribution agreements on commercially
acceptable terms.

OUR SUCCESS DEPENDS UPON ACHIEVING A LARGE AND ACTIVE BASE OF ADVERTISERS AND
CONSUMERS.

        Our ability to increase the volume of transactions on our service and
the amounts bid by our advertisers is dependent upon achieving market acceptance
by having more advertisers and consumers using our services. Most potential
advertisers have only limited experience advertising on the Internet and have
not devoted a significant portion of their advertising expenditures to Internet
advertising. Advertising through priority placement on our services in
particular has been introduced only recently, and we cannot predict the level of
its acceptance as an advertising medium. Our services may not achieve
significant acceptance by consumers. Among other things, because our services
prioritize search results based on advertising bids associated with keywords
rather than on algorithmic or other traditional search and retrieval
technologies, consumers may perceive our results to be less objective than those
provided by traditional search methods. Failure to achieve and maintain a large
and active base of advertisers and consumers could have a material adverse
effect on our business, operating results and financial condition.

OUR SUCCESS IS DEPENDENT UPON FURTHER DEVELOPING AND ENHANCING THE AFFILIATE
NETWORK.

        We believe that our success in penetrating our target markets depends in
part on our ability to further develop and maintain relationships with
affiliates, who provide their users with GoTo services on their sites or direct
their traffic to our Web site. We believe these relationships are important to
facilitate broad market acceptance of our services and enhance our sales. Our
ability to attract consumers to our services is dependent upon the growth of our
affiliate network, which is new and unproven. Our agreements with some of our
affiliates are generally terminable at will by either party at any time. The
loss of our agreements with our existing affiliates could damage our business.
If we are unable to successfully develop and maintain relationships with
affiliates, our business, operating results and financial condition may be
materially and adversely affected.

WE CANNOT ASSURE YOU THAT OUR STOCK PRICE WILL NOT DECLINE OR WILL NOT BE
EXTREMELY VOLATILE.

        The price of our common stock may decline or may be extremely volatile.
Since our initial public offering in June 1999, the per share closing price of
our common stock has ranged from a high of $114.50 as of November 15, 1999 to a
low of $4.81 as of December 21, 2000. In addition, an active public market for
GoTo's common stock may not continue.

OUR INDUSTRY IS HIGHLY COMPETITIVE, AND WE CANNOT ASSURE YOU THAT WE WILL BE
ABLE TO COMPETE EFFECTIVELY.

        GoTo competes with online services, other Web sites and advertising
networks such as DoubleClick Inc. and 24/7 Media, Inc., as well as traditional
offline media such as television, radio and print for a share of advertisers'
total advertising budgets. We believe that the number of companies selling
Web-based advertising and the available inventory of advertising space has
recently substantially increased. Accordingly, GoTo may face increased pricing
pressure for the sale of advertisements and direct marketing opportunities,
which could have a material adverse effect on our business, operating results
and financial condition.

        GoTo also competes with providers of Web directories, search, auction
and information services, all of which offer services competitive to GoTo,
including, among others, AltaVista, Amazon.com, Inc., Ask Jeeves, Inc., CNET,
Inc., eBay, Excite@Home, Inc. (including WebCrawler and Magellan), FindWhat,
Google, Inc., Inktomi Corporation, LookSmart, Ltd., Microsoft Corporation
(LinkExchange, Inc. and msn.com), Terra Lycos, Inc. (including HotBot) and
Yahoo! Inc. In addition, PRIMEDIA, which owns About.com, offers a product called
Sprinks, which is a pay-per-click advertising service, and there are other
companies that offer directly competing services as well.

        Many of these competitors, as well as potential entrants into our
market, have longer operating histories, larger customer or user bases, greater
brand recognition and significantly greater financial, marketing and other
resources than we do. Many of these current and potential competitors can devote
substantially greater resources to promotion and Web site and systems
development than we can. In addition, as the use of the Internet and other
online services increases, larger, well-established and well-financed entities
may continue to acquire, invest in or form joint ventures with providers of Web
directories, search and information services or advertising solutions, and
existing providers of Web directories, search and information services or
advertising solutions may continue to consolidate. In addition, providers of
Internet browsers and other Internet products and services who are affiliated
with providers of Web directories and information services in competition with
the GoTo service may more tightly integrate these affiliated offerings



                                       15
<PAGE>   16

into their browsers or other products or services. Any of these trends would
increase the competition we face and could have a material adverse effect on our
business, operating results and financial condition.

WE ARE DEPENDENT UPON MAINTAINING AND EXPANDING OUR COMPUTER AND COMMUNICATIONS
SYSTEMS.

        Our failure to achieve or maintain high capacity data transmission
without system downtime and to achieve improvements to our transaction
processing systems, network infrastructure and accounting systems could have a
material adverse effect on our business, operating results and financial
condition. We believe that our current transaction-processing systems and
network infrastructure are insufficient to support our future growth. Although
we are enhancing and expanding our transaction-processing systems and network
infrastructure, we have experienced occasional systems interruptions and
infrastructure failures, which we believe will continue to occur.

A SIGNIFICANT PORTION OF OUR REVENUE IS CONCENTRATED AMONG A LIMITED NUMBER OF
ADVERTISERS.

        If our major advertisers were to substantially cut back their
advertising or stop using our services, our business would be seriously harmed.
A majority of our total revenue is derived from a small proportion of our
advertisers. We believe that a substantial amount of revenue from advertising
sales in any given future period may come from a relatively small number of
advertisers. We do not have formal contractual relationships with many of our
advertisers, and when we do have contracts, all are terminable at any time by
the advertiser. As a result, we cannot assure you that any of our advertisers
will purchase advertising from us in the future.

CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.

        The failure of the Internet to continue to develop as a commercial and
business medium could have a material adverse effect on our business, operating
results and financial condition. The widespread acceptance and adoption of the
Internet by traditional businesses for conducting business and exchanging
information is likely only if the Internet provides these businesses with
greater efficiencies and improvements.

FAILURE TO EXPAND INTERNET INFRASTRUCTURE COULD LIMIT OUR FUTURE GROWTH.

        The growth in Internet traffic has caused frequent periods of decreased
performance, and if Internet usage continues to grow rapidly, the Internet's
infrastructure may not be able to support these demands and its performance and
reliability may decline. Consequently, the emergence and growth of the market
for our services depend upon improvements being made to the entire Internet as
well as to our individual advertisers' and consumers' networking infrastructures
to alleviate overloading and congestion.

INCREASED SECURITY RISKS OF ONLINE COMMERCE MAY DETER FUTURE USE OF OUR
SERVICES.

        Concerns over the security of transactions conducted on the Internet and
the privacy of consumers may also inhibit the growth of the Internet and other
online services generally, and online commerce in particular. Our failure to
prevent security breaches could significantly harm our business and results of
operations. Anyone who is able to circumvent our security measures could
misappropriate proprietary information, cause interruptions in our operations or
damage our brand and reputation. We do not believe that our data repositories,
financial systems and other technology resources are secure from security
breaches or sabotage, and we occasionally experience attempts at "hacking" or
security breaches. We may be required to incur significant costs to protect
against security breaches or to alleviate problems caused by breaches. Any
well-publicized compromise of security could deter people from using the
Internet to conduct transactions that involve transmitting confidential
information or downloading sensitive materials, which would adversely affect the
business of our advertisers and, accordingly, our business.

WE FACE THE RISKS OF SYSTEM FAILURES.

        We currently do not have a disaster recovery plan in effect and do not
have fully redundant systems for our services at an alternate site. A disaster
such as fire, flood, earthquake, power loss, telecommunications failure,
break-in, sabotage or a similar event could severely damage our business and
results of operations because our services could be interrupted for an
indeterminate length of time. Our operations depend upon our ability to maintain
and protect our computer systems, which are located in Pasadena, California and
at four offsite locations. These offsite locations are managed by third parties.
They are managed by sites in California, Virginia and Ireland.



                                       16
<PAGE>   17

        California sites exist on or near known earthquake fault zones. The
occurrence of a natural disaster or unanticipated problems at our principal
headquarters or at a third-party facility could cause minor interruptions or
delays in our business, limited loss of data or render us unable to provide some
services. In addition, failure by the third-party facility to provide the data
communications capacity required by us, as a result of human error, natural
disaster or other operational disruptions, could cause interruptions in our
service. The occurrence of any or all of these events could adversely affect our
reputation, brand and business, which could have a material adverse effect on
our business, operating results and financial condition.

WE RELY ON A CONTINUOUS POWER SUPPLY TO CONDUCT OUR OPERATIONS, AND CALIFORNIA'S
CURRENT ENERGY CRISIS COULD DISRUPT OUR OPERATIONS AND INCREASE OUR EXPENSES.

        California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. In the event of an acute power shortage,
that is, when power reserves for the State of California fall below 1.5%,
California has on some occasions implemented, and may in the future continue to
implement, rolling blackouts throughout California. Our computer systems are
supplied primary power by the local power company. In addition, the systems are
connected to battery backup and diesel generators. These alternative sources of
power are provided by our hosting provider and are subject to their upkeep and
maintenance. Our current insurance does not provide coverage for any damages our
customers or we may suffer as a result of any interruption in our power supply.
If blackouts interrupt our third party power supply, we would be temporarily
unable to continue operations at our affected facilities. Any such interruption
in our ability to continue operations at our facilities could damage our
reputation and could result in lost revenue, which could have a material adverse
effect on our business, operating results and financial condition.

WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS, AND ANY FAILURE TO
MANAGE THIS GROWTH COULD DAMAGE OUR BUSINESS.

        Our ability to successfully offer products and services and implement
our business plan in a rapidly evolving market requires an effective planning
and management process. We have increased, and plan to continue to increase, the
scope of our operations. These expansion efforts could be expensive and put a
strain on management, and, if we do not manage growth properly, it could
adversely affect our business. We will need to expand our infrastructure, which
will include hiring certain key employees and continuing to increase our
headcount. Hiring key employees, in particular, has historically been difficult,
and we cannot assure you that we will be able to successfully attract and retain
a sufficient number of qualified personnel.

WE MAY BE UNABLE TO EXECUTE OUR BUSINESS MODEL IN INTERNATIONAL MARKETS.

        One component of our strategy is to expand our operations into selected
international markets. For example, we launched our service in the United
Kingdom in November 2000 and plan to launch our German speaking marketplace
during the first half of 2002. To date, we have only operated internationally in
the United Kingdom, and we may be unable to execute our business model in this
market or new markets. Further, foreign providers of competing online services
may have a substantial advantage over us in attracting users in their country
due to more established branding in that country, greater knowledge with respect
to the cultural differences of users residing in that country and/or their focus
on a single market. We expect to continue to experience higher costs as a
percentage of revenues in connection with the development and maintenance of
international online services. International markets we have selected may not
develop at a rate that supports our level of investment. In particular,
international markets typically have been slower than domestic markets in
adopting the Internet as an advertising and commerce medium.

In pursuing our international expansion strategy, we face several additional
risks, including:

        -       lower per capita Internet usage in many countries abroad, due to
                a variety of causes such as lower disposable incomes, lack of
                telecommunications and computer infrastructure and questions
                regarding adequate online security for e-commerce transactions;

        -       relatively small Internet markets in some countries, which may
                prevent us from aggregating sufficient traffic and advertising
                revenues and scaling our business model in those countries;

        -       our potential inability to aggregate a large amount of Internet
                traffic and find and develop relationships with international
                advertising and distribution partners;

        -       competition in international markets from a broad range of
                competitors, including Yahoo!, LookSmart, AltaVista and other
                United States and foreign search engines, content aggregators
                and portals, some of which have greater local experience than we
                do;

        -       difficulties in recruiting qualified and knowledgeable staff and
                in building locally relevant products and services, which could
                prevent us from aggregating a large advertiser base;



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<PAGE>   18

        -       higher costs of doing business in foreign countries;

        -       trade barriers and unexpected changes and differences in
                regulatory, tax and legal requirements applicable to Internet
                services; and

        -       longer payment cycles and foreign currency fluctuations.

        One or more of these factors could have a material adverse effect on our
future international operations and, consequently, on our business, operating
results and financial condition.

OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.

        Our future success depends upon the continued service of our executive
officers and other key technology, marketing, sales and support personnel. None
of our officers or key employees is bound by an employment agreement for any
specific term. If we lost the services of one or more of our key employees, or
if one or more of our executive officers or employees decided to join a
competitor or otherwise compete directly or indirectly with us, this could have
a material adverse effect on our business, operating results and financial
condition.

WE ARE EXPOSED TO RISKS ASSOCIATED WITH CREDIT CARD FRAUD.

        We have suffered losses and may continue to suffer losses as a result of
orders placed with fraudulent credit card data, even though the associated
financial institution approved payment of the orders. Under current credit card
practices, a merchant is liable for fraudulent credit card transactions when, as
is the case with the transactions we process, that merchant does not obtain a
cardholder's signature. A failure to adequately control fraudulent credit card
transactions could have a material adverse effect on our business, operating
results and financial condition.

SOME OF OUR ADVERTISERS ARE EMERGING INTERNET COMPANIES THAT REPRESENT CREDIT
RISKS.

        Some of our advertisers have limited operating histories, are operating
at a loss, have limited cash reserves or have limited access to capital. If any
significant part of our customer base experiences financial difficulties, is not
commercially successful or is unable to pay our advertising fees for any reason,
our business, operating results and financial condition will be materially and
adversely affected.

WE FACE RISKS OF CLAIMS FROM THIRD PARTIES FOR INTELLECTUAL PROPERTY
INFRINGEMENT AND OTHER MATTERS THAT COULD ADVERSELY AFFECT OUR BUSINESS.

        Our services operate in part by making Internet services and content
available to our users. This creates the potential for claims to be made against
us, either directly or through contractual indemnification provisions with third
parties. These claims might, for example, be made for defamation, negligence,
copyright, trademark or patent infringement, personal injury, invasion of
privacy or other legal theories. Allegations are made against us from time to
time concerning these types of claims. Any claims could result in costly
litigation and be time consuming to defend, divert management's attention and
resources, cause delays in releasing new or upgrading existing services or
require us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all.
There can be no assurance that our services do not infringe the intellectual
property rights of third parties. A successful claim of infringement against us
and our failure or inability to license the infringed or similar technology
could have a material adverse effect on our business, operating results and
financial condition.

        On November 3, 2000, GoTo was served with a summons and complaint by
MercExchange Inc. alleging patent infringement relating to GoTo's online auction
and shopping services. The action is pending in the U.S. District Court in the
Eastern District of Virginia. GoTo is currently investigating the merits of this
claim.

WE MAY NOT BE ABLE TO PROTECT OUR INTERNET DOMAIN NAME OR INTELLECTUAL PROPERTY
RIGHTS UPON WHICH OUR BUSINESS RELIES.

        Our success and ability to compete also are substantially dependent upon
our internally developed technology and data resources, which we protect through
a combination of copyright, trade secret and trademark law. We have no patents
issued to date on our technology. There can be no assurance that we will
adequately be able to protect our technology and data resources.



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<PAGE>   19



        We are aware that certain other companies are using or may have plans to
use the terms "GoTo," "Go," "Go2" and variations of these terms as part of a
company name, domain name, trademark or service mark. In addition, we have
received notice from companies claiming superior rights to marks such as these.
In April 2001, GoTo entered into an agreement with a third-party where GoTo
agreed to assign its rights in the GoTo name to such third-party, and to change
its name by September 15, 2001. We cannot assure you that third parties will not
claim such superior rights or that we will not be subject to infringement
claims. A successful infringement claim by the owner of a mark including "GoTo,"
"Go," "Go2" or a variation could require us to change our name or our logo
earlier than we anticipate, which would be expensive and disruptive to our
business, and could result in damages. Further, despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to copy or otherwise
obtain and use our services, technology and other intellectual property, and we
cannot be certain that the steps we have taken will prevent any misappropriation
or confusion among consumers and advertisers.

        On October 26, 2000, GoTo announced its intent to change its corporate
name and expects to make such a change during 2001. If the new name has a URL
that belongs to a third party, that URL or other rights may be difficult to
acquire and may delay our planned name change. There are also certain costs
associated with the planned name change, which may increase depending on, among
other things, the availability of the URL and other rights belonging to third
parties.

WE MAY LOSE PUBLIC RECOGNITION FROM OUR NAME CHANGE.

        GoTo plans to change its corporate name and expects to make such a
change in the third quarter of 2001. The possible loss of public recognition
with our advertisers, consumers, affiliates and investors could have a material
adverse effect on our business, operating results and financial condition.

WE MAY NEED ADDITIONAL CAPITAL, WHICH COULD DILUTE THE OWNERSHIP INTEREST OF
INVESTORS.

        We require substantial working capital to fund our business. If we raise
additional funds through the issuance of equity, equity-related or convertible
debt securities, these securities may have rights, preferences or privileges
senior to those of the rights of our common stock, and our stockholders may
experience additional dilution. We cannot be certain that additional financing
will be available to us on favorable terms when required, or at all. Since our
inception, we have experienced negative cash flow from operations and expect to
experience significant negative cash flow from operations in the future. We
currently anticipate that our available funds will be sufficient to meet our
anticipated needs for working capital and capital expenditure through at least
the next 12 months. However, we may choose to raise additional funds prior to
the expiration of this period or at a later date.

OTHER POTENTIAL ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.

        We may make investments in or acquire complementary products,
technologies and businesses. These acquisitions and investments could disrupt
our ongoing business, distract our management and employees and increase our
expenses. If we acquire a company, we could face difficulties in assimilating
that company's personnel and operations. In addition, the key personnel of the
acquired company may decide not to work for us. Acquisitions of additional
services or technologies also involve risks of incompatibility and the need for
integration into our existing services and marketing, sales and support efforts.
If we finance the acquisitions by issuing equity securities, this could dilute
our existing stockholders. Any amortization of goodwill or other assets, or
other charges resulting from the costs of these acquisitions could have a
material adverse effect on our business, operating results and financial
condition.

OUR MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE AND OUR FUTURE SUCCESS WILL
DEPEND ON OUR ABILITY TO MEET THE CHANGING NEEDS OF OUR INDUSTRY.

        If new industry standards and practices emerge in the Internet and
online advertising industry, our existing services, technology and systems may
become obsolete. Our future success will depend on our ability to:

        -       license and internally develop leading technologies useful in
                our business;

        -       enhance our existing services;

        -       develop new services and technologies that address the
                increasingly sophisticated and varied needs of prospective
                consumers; and

        -       respond to technological advances and emerging industry
                standards and practices on a cost-effective and timely basis.




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<PAGE>   20

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES MAY DAMAGE OUR BUSINESS.

        The laws and regulations applicable to the Internet and our services are
evolving and unclear and could damage our business. There are currently few laws
or regulations directly applicable to access to, or commerce on, the Internet.
Due to the increasing popularity and use of the Internet, it is possible that
laws and regulations may be adopted, covering issues such as user privacy,
defamation, database protection, pricing, taxation, content regulation, quality
of products and services, and intellectual property ownership and infringement.
Such legislation could expose GoTo to substantial liability as well as dampen
the growth in use of the Internet, decrease the acceptance of the Internet as a
communications and commercial medium, or require GoTo to incur significant
expenses in complying with any new regulations.

WE MAY INCUR LIABILITIES FOR THE ACTIVITIES OF USERS OF OUR SERVICE.

        The law relating to the liability of providers of online services for
activities of their users is currently unsettled and could damage our business.
We do not carry insurance that will indemnify us for liability for activities of
our users. We cannot assure you that GoTo will successfully avoid civil or
criminal liability for unlawful activities carried out by users of our service.
The imposition upon GoTo of potential liability for unlawful activities of users
of our service could require us to implement measures to reduce our exposure to
such liability, which may require us, among other things, to spend substantial
resources or to discontinue certain service offerings. Any costs incurred as a
result of such liability or asserted liability could have a material adverse
effect on our business, operating results and financial condition.

WE HAVE BROAD DISCRETION TO USE OUR CAPITAL AND HOW WE INVEST THESE PROCEEDS MAY
NOT YIELD A FAVORABLE RETURN.

        Our management can spend our capital in ways with which the stockholders
may not agree.

FUTURE SALES OF OUR COMMON STOCK BY OUR STOCKHOLDERS MAY DEPRESS OUR STOCK
PRICE.

        If our stockholders sell substantial amounts of common stock in the
public market, including shares issued upon the exercise of outstanding options,
the market price of our common stock could fall. Up to approximately 52.9
million shares of common stock outstanding at March 31, 2001 may be available
for sale in the public market, except for 2.4 million shares that are subject to
repurchase by GoTo and transfer restrictions as a result of vesting agreements.

OUR CHARTER DOCUMENTS AND CHANGE OF CONTROL SEVERANCE AGREEMENTS WITH OUR
MANAGEMENT WILL MAKE IT MORE DIFFICULT TO ACQUIRE US.

        Provisions of our Amended and Restated Certificate of Incorporation and
Bylaws could make it more difficult for a third party to acquire us, even if
doing so would be beneficial to our stockholders. For example, our board of
directors is divided into three classes, with one class being elected each year
by our stockholders, which generally makes it more difficult for stockholders to
replace a majority of directors and obtain control of our board. In addition,
stockholder meetings may be called only by our board of directors, the chairman
of the board and the president, advanced notice is required prior to stockholder
proposals, and stockholders may not act by written consent. Further, we have
authorized preferred stock that is undesignated, making it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
GoTo.

        Delaware law also could make it more difficult for a third party to
acquire us. Specifically, Section 203 of the Delaware General Corporation Law
may have an anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held by
our stockholders.

        We have entered into change of control severance agreements with members
of our senior management providing for certain benefits, including acceleration
of option vesting, to these members if they are terminated other than for cause
following an acquisition of GoTo. These agreements could make us less attractive
to a third party who may want to acquire us because they will make any
replacement of management more expensive.



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<PAGE>   21

        Furthermore, in March 2000, we entered into a Stockholder Agreement with
Bill Gross' idealab!, which limits Bill Gross' idealab!'s and its affiliates'
ability to beneficially own 35% or more of our outstanding common stock, to
transfer shares of our common stock or to knowingly assist or advise, or
knowingly provide or arrange financing to facilitate any other person or entity
to beneficially own 15% or more of our outstanding common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        GoTo is exposed to the impact of interest rate changes and foreign
currency fluctuations:

        GoTo's exposure to market rate risk for changes in interest rates relate
primarily to GoTo's investment portfolio. GoTo has not used derivative financial
instruments in its investment portfolio. GoTo invests its excess cash in high
quality credit instruments, which are spread over many issuers. GoTo's
investments are principally confined to cash equivalents and available-for-sale
debt securities.

        International revenues from GoTo's foreign subsidiaries were less than
1% of total revenues in the quarter ended March 31, 2001. International sales
are made from GoTo's United Kingdom operations and are denominated in the local
currency. This subsidiary and our other foreign subsidiary in Ireland also incur
most of their expenses in the local currency. Accordingly, all foreign
subsidiaries use the local currency as their functional currency.

        GoTo's 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,
the impact of changes in these or other factors could have a material adverse
effect on our business, operating results and financial condition.

        GoTo's exposure to foreign exchange rate fluctuations arises in part
from intercompany accounts in which costs incurred in the United States are
charged to GoTo's foreign sales subsidiaries. These intercompany accounts are
denominated in the functional currency of the foreign subsidiary in order to
centralize foreign exchange risk with the parent company in the United States.
GoTo is also exposed to foreign exchange rate fluctuations as the financial
results of foreign subsidiaries are translated into U.S. dollars in
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and adversely impact overall expected profitability. The
effect of foreign exchange rate fluctuations on GoTo in the quarter ended March
31, 2001 was not material.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        On November 3, 2000, GoTo was served with a summons and complaint by
MercExchange, Inc. The action is pending in the U.S. District Court in the
Eastern District of Virginia. The action alleges patent infringement and
apparently relates to online auction and online shopping. GoTo is currently
investigating the merits of this claim.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        During the quarter ended March 31, 2001, GoTo used approximately $1.7
million of the proceeds from its initial public offering to fund on-going
operations and capital expenditures for computer hardware and software.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

None

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the quarter ended March 31, 2001.



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                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date: May 15, 2001                          GOTO.COM, INC.

                                            By  /s/ Todd Tappin
                                               --------------------------------
                                                    Todd Tappin
                                                    Chief Financial Officer
                                                    (Duly Authorized Officer and
                                                    Principal Financial Officer)




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