<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-Q

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

                  For the quarterly period ended June 30, 1998

                                       OR

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

           For the transition period from_________________________ to

                         Commission file number 1-11797

                              INFOSEEK CORPORATION
             (Exact name of registrant as specified in its charter)


                   CALIFORNIA                     77-0353450
          (State or other jurisdiction of   (I.R.S. Employer
          incorporation or organization)     Identification Number)



                            1399 MOFFETT PARK DRIVE
                              SUNNYVALE, CA  94089
                    (Address of principal executive offices)


                                  408-543-6000
              (Registrant's telephone number, including area code)


Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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
                                   ----              ----
                                        
As of July 31, 1998, there were 31,454,219 shares of the registrant's common
stock outstanding.
<PAGE>
 
<TABLE>
<CAPTION>

PART I        FINANCIAL INFORMATION                                           NUMBER

<S>           <C>                                                                <C>
ITEM 1:       Financial Statements
              Condensed Consolidated Balance Sheets as of June 30, 1998
                 and December 31, 1997.........................................   3
              Condensed Consolidated Statements of Operations for the Three
                 And Six Months Ended June 30, 1998 and 1997...................   4
              Condensed Consolidated Statements of Cash Flows for the Six
                 Months Ended June 30, 1998 and 1997...........................   5
              Notes to Condensed Consolidated Financial Statements.............   6
ITEM 2:       Management's Discussion and Analysis of Financial Conditions
                 and Results of Operations.....................................  11


PART II       OTHER INFORMATION

ITEM 4:       Submission of Matters to a Vote of Security Holders..............  37

ITEM 6:       Exhibits and Reports on Form 8-K.................................  39

Signatures.....................................................................  40

</TABLE>

                                       2
<PAGE>
 
PART I:   FINANCIAL INFORMATION

ITEM 1.   Financial Statements

                              INFOSEEK CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
 
                                                    JUNE 30,    DECEMBER 31,
                                                      1998          1997
                                                   -----------  -------------
                                                   (UNAUDITED)
<S>                                                <C>          <C>
ASSETS
 
Current assets:
  Cash and cash equivalents                          $    668       $  3,323
  Short-term investments                               66,664         28,116
  Accounts receivable, net                              8,759          6,921
  Other current assets                                    730            648
                                                     --------       --------
     Total current assets                              76,821         39,008
 
Property and equipment, net                            13,987         10,488
Deposits and other assets                               3,838          1,993
                                                     --------       --------
     Total assets                                    $ 94,646       $ 51,489
                                                     ========       ========
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable                                   $  3,485       $  4,861
  Accrued payroll and related expenses                  2,024          1,630
  Accrued liabilities to service providers              5,107          4,221
  Other accrued liabilities                             3,902          2,262
  Deferred revenue                                      4,794          2,564
  Accrued restructuring and other charges                 ---          1,877
  Short-term obligations                                3,183          2,575
                                                     --------       --------
     Total current liabilities                         22,495         19,990
Long-term obligations                                   3,408          4,493
 
Shareholders' equity:
  Common stock                                        120,460         76,000
  Accumulated deficit                                 (51,097)       (48,030)
  Deferred compensation                                  (490)          (753)
  Notes receivable from shareholders                     (130)          (211)
                                                     --------       --------
     Total shareholders' equity                        68,743         27,006
                                                     --------       --------
     Total liabilities and shareholders' equity      $ 94,646       $ 51,489
                                                     ========       ========
</TABLE>
           See notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                              INFOSEEK CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
 
                                      THREE MONTHS ENDED     SIX MONTHS ENDED
                                          JUNE 30,              JUNE 30,
                                      ------------------    ------------------ 
                                       1998       1997       1998       1997
                                      -------   --------    -------   --------
<S>                                  <C>        <C>        <C>        <C>        
 
Revenues                              $17,066   $  7,786    $31,519   $ 14,026
 
Costs and expenses:
    Hosting, content and
         website costs                  2,524      1,533      4,678      2,830   
    Research and development            2,667      2,374      4,797      4,102
    Sales and marketing                11,863      7,541     22,440     14,191
    General and administrative          2,061      1,825      3,923      3,295
    Restructuring and other
         charges                          ---      7,349        ---      7,349
                                      -------   --------    -------   --------
 
    Total cost and expenses            19,115     20,622     35,838     31,767
                                      -------   --------    -------   --------
 
Operating loss                         (2,049)   (12,836)    (4,319)   (17,741)
Interest income, net                      782        379      1,252        779
                                      -------   --------    -------   --------
 
Net loss                              $(1,267)  $(12,457)   $(3,067)  $(16,962)
                                      =======   ========    =======   ========
 
Basic and diluted net                 $ (0.04)  $  (0.47)   $ (0.10)  $  (0.64)
   loss per share
 
Shares used in computing basic
   and diluted net loss per share      31,294     26,618     30,058     26,329
</TABLE>
           See notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                              INFOSEEK CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                         June 30,
                                                                   ---------------------
                                                                     1998        1997
                                                                   ---------  ----------
<S>                                                                <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                           $ (3,067)   $(16,962)
Adjustments to reconcile net loss to net cash used in operating
  activities:
  Depreciation and amortization                                       3,352       2,347
  Amortization of unearned compensation                                 193         337
Changes in assets and liabilities:
  Accounts receivable                                                (1,838)     (1,479)
  Deposits and other current assets                                  (1,927)       (443)
  Accounts payable                                                   (1,376)         42
  Accrued payroll and related expenses                                  394        (137)
  Accrued liabilities to service providers                              886       2,122
  Other accrued liabilities                                           1,640      (1,364)
  Accrued restructuring and other charges                            (1,877)      5,628
  Deferred revenue                                                    2,230       1,149
                                                                   --------    --------
  Net cash used in operating activities                              (1,390)     (8,760)
INVESTING ACTIVITIES
Purchase of available-for-sale short-term investments               (87,860)    (19,939)
Proceeds from sales and maturities of available-
  for-sale investments                                               49,312      31,396
Purchases of property and equipment                                  (6,147)     (7,441)
                                                                   --------    --------
Net cash provided by (used) in investing activities                 (44,695)      4,016
FINANCING ACTIVITIES
Proceeds from term loan                                                 133       4,202
Repayments of term loan                                              (1,314)       (573)
Proceeds from sale of common stock, net                              44,611       1,491
                                                                   --------    --------
Net cash provided by financing activities                            43,430       5,120
                                                                   --------    --------
Net increase (decrease) in cash and cash equivalents                 (2,655)        376
Cash and cash equivalents at beginning of period                      3,323       3,788
                                                                   --------    --------
Cash and cash equivalents at end of period                         $    668    $  4,164
                                                                   ========    ========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Cash paid for interest amounted to $377,000 and $261,000 for the six months
ended June 30, 1998 and 1997 respectively.


           See notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
                              INFOSEEK CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Infoseek Corporation (the "Company") provides leading Internet search and
navigation technology, products and services that use the Web to connect its
viewers' personal, work and community lives. As a "connected" media company, the
Company is able to segment viewers by interest area, providing advertisers with
focused and targeted audiences. The Infoseek Service is a comprehensive Internet
gateway that combines search and navigation with directories of relevant
information sources and content sites, offers chat and instant messaging for
communicating shared interests and facilitates the purchase of related goods and
services. The Company conducts its business within one industry segment.

The consolidated financial information as of June 30, 1998 and for the six month
periods ended June 30, 1998 and 1997 included herein is unaudited and has been
prepared by the Company in accordance with generally accepted accounting
principles and reflects all adjustments, consisting only of normal recurring
adjustments which in the opinion of management are necessary to state fairly the
Company's financial position, results of operations, and cash flows for the
periods presented. The December 31, 1997 balance sheet was derived from audited
financial statements at that date. All significant intercompany transactions and
balances have been eliminated. 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 the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenue and
expenses during the reporting period. Actual results will differ from those
estimates, and such differences may be material to the financial statements.
These consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements for the year ended December
31, 1997 included in the Company's current report Form 8-K, as filed on May 22,
1998 and as amended on August 10, 1998, with the Securities and Exchange
Commission. The results of operations for the six months ended June 30, 1998 are
not necessarily indicative of the results to be expected for any future periods.

As more fully described in Note 7, the Company merged with WebChat
Communications, Inc., ("WebChat") in April 1998 in a pooling-of-interests
transaction.  The consolidated financial statements for 1997 have been restated
to include the financial position, results of operations and cash flows of
WebChat.

Amounts shown in previous consolidated statements of operations prior to the
filing of the amended Form 8-K on August 10, 1998 which were formally titled
"Costs of Revenues" have been retitled "Hosting, Content and Website Costs".
Hosting, Content and Website Costs consist primarily of costs associated with
the enhancement, maintenance and support of the Company's Web sites, including
telecommunications costs and equipment depreciation.  Hosting, Content and
Website Costs also include costs associated with the licensing of certain third-
party technologies.

                                       6
<PAGE>
 
2. FOLLOW-ON PUBLIC OFFERING

In February 1998, the Company completed a follow-on public offering and issued
3,450,000 shares of its common stock to the public at a price of $13.44 per
share.  The Company received proceeds from the offering of approximately
$43,015,000 net of underwriting discounts, commissions and other offering costs.

3. NET LOSS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary and fully diluted earnings per share, outstanding nonvested
shares are not included in the computations of basic and diluted earnings per
share until the time-based vesting restriction has lapsed. Basic earnings per
share also excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share.

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
 
                                         THREE MONTHS ENDED      SIX MONTHS ENDED
                                              JUNE 30,               JUNE 30,
                                         -------------------    ------------------
                                          1998        1997       1998        1997
                                         -------    --------    -------    --------
<S>                                     <C>        <C>         <C>        <C>
Numerator:
  Net loss                               $(1,267)   $(12,457)   $(3,067)   $(16,962)
Numerator for basic and diluted
  loss per share                         $(1,267)   $(12,457)   $(3,067)   $(16,962)
                                         =======    ========    =======    ========
Weighted average of common
  shares                                  31,294      26,618     30,058      26,329
Denominator for basic and diluted
  loss per share                          31,294      26,618     30,058      26,329
                                         =======    ========    =======    ========
 
Basic and diluted net loss per share     $ (0.04)   $  (0.47)   $ (0.10)   $  (0.64)
                                         =======    ========    =======    ========
</TABLE>
4. NEW ACCOUNTING PRONOUNCEMENT

The Company has adopted the American Institute of Certified Public Accountants
Statement of Position, Software Revenue Recognition (SOP 97-2) effective the
first quarter of 1998. The adoption does not have a significant effect on the
Company's revenue recognition policy.

5. COMPREHENSIVE INCOME

The Company has adopted Statement of Financial Accounting Standards No. 130
(SFAS No. 130), "Reporting Comprehensive Income".  SFAS No. 130 establishes new
rules for reporting and display of comprehensive income and its components,
however, the adoption of this statement has no impact on the Company's net loss
or shareholders' equity. SFAS No. 130 requires unrealized gains or losses on the
Company's available-for-sale securities, which prior to adoption were 

                                       7
<PAGE>
 
reported separately in shareholders' equity, to be included in other
comprehensive income. During the second quarter and six month period ended June
1998, unrealized gains or losses from available-for-sale securities were not
significant.

6. RESTRUCTURING AND OTHER CHARGES

During the second quarter of 1997, the Company recorded restructuring and other
charges of approximately $7,400,000, of which approximately $6,200,000 related
to the discontinuance of certain business arrangements, which were determined to
be non-strategic, and approximately $1,200,000 related to management changes. Of
these restructuring charges, approximately $5,000,000 involved cash outflows,
all of which have been completed as of June 30, 1998. Non-cash restructuring
charges of approximately $2,400,000 relate primarily to the write-down of
certain non-strategic business assets which were written off in June 1997. There
have been no material changes to the restructuring plan or in the estimates of
the restructuring costs.

7. BUSINESS COMBINATION

On April 17, 1998, the Company acquired WebChat in a tax-free reorganization in
which a wholly owned subsidiary of the Company was merged directly into WebChat.
The Company has exchanged approximately 316,000 shares of Infoseek Corporation
common stock and has reserved approximately 11,000 shares for WebChat options
assumed by the Company.  Each share exchanged represents 0.03 shares of common
stock of the Company for each share of common and preferred stock of WebChat.
Merger related costs, which were not significant, were expensed in the second
quarter of 1998.  The merger has been accounted for under the pooling-of-
interests method.

The following information shows revenue and net loss of the separate companies
during the periods prior to the April 17, 1998 merger.  The combined amount
shows revenue and net loss subsequent to the April 17, 1998 merger (in
thousands):
<TABLE>
<CAPTION>
 
                      SIX MONTHS ENDED JUNE 30,
                     ---------------------------
                         1998          1997
                     ------------  -------------
<S>                  <C>           <C>
      Net revenue
         Infoseek        $19,731       $ 13,835
         WebChat             168            191
         Combined         11,620            ---
                         -------       --------
         Total           $31,519       $ 14,026
                         =======       ========
 
      Net loss
         Infoseek        $(1,630)      $(16,037)
         WebChat            (472)          (925)
         Combined           (965)           ---
                         -------       --------
         Total           $(3,067)      $(16,962)
                         =======       ========
</TABLE>

                                       8
<PAGE>
 
8. NETSCAPE AGREEMENT

As of March 31, 1998, the Company's agreement with Netscape provided for
payments up to an aggregate of $12,500,000 in cash and reciprocal advertising
($10,000,000 in cash and $2,500,000 in reciprocal advertising) to be one of four
non-exclusive premiere providers of navigational services (along with Excite,
Lycos, and Yahoo!).  The Netscape arrangement expired on April 30, 1998, but was
subsequently extended through May 31, 1998.  The payments to Netscape were being
recognized ratably over the term of the agreement.  During the three month
periods ended June 30, 1998 and 1997, the Company recognized $833,000 and
$1,666,000, respectively of sales and marketing expenses related to this
agreement.  During the six month periods ended June 30, 1998 and 1997, the
Company recognized $3,333,000 and $2,916,000 respectively, of sales and
marketing expenses related to this agreement.  As of June 30, 1998, the Company
has approximately $3,722,000 of cash commitment remaining in connection with
this agreement, which is included in accrued liabilities to service providers.

As of June 1, 1998, the Company entered into a one-year agreement with Netscape
with terms that provide for the Company to pay, based on impressions delivered,
up to an aggregate of $12,500,000 in cash to be one of the six non-exclusive
premier providers of navigational services (along with Excite, Netscape, Lycos,
Alta Vista, and LookSmart).  Under terms of the agreement, which expires May 31,
1999, the Company will receive 15% of premiere provider rotations -- the pages
served to visitors who have not selected a preferred provider.  The payments to
Netscape are being recognized ratably over the term of the agreement.  During
the three months ended June 30, 1998, the Company recognized $1,385,000 of sales
and marketing expense related to this agreement which is included in accrued
liabilities to service providers.  As of June 30, 1998, the Company has a cash
commitment ranging from a minimum of $4,150,000 to a maximum of $12,500,000
depending on the level of traffic delivered by Netscape in connection with this
agreement.

9. PROPOSED TRANSACTIONS

In June 1998, the Company entered into agreements with Starwave Corporation
("Starwave"), a Washington corporation, and with The Walt Disney Company, a
Delaware corporation, and certain Disney subsidiaries (collectively "Disney")
relating to an acquisition of Starwave by the Company through a merger and
exchange of shares (the "Starwave Acquisition") pursuant to an Agreement and
Plan of Reorganization (the "Reorganization Agreement") and the issuance of
common stock and warrants to purchase common stock of the Company to Disney.  As
result of the transactions, Disney will acquire an approximately 43% stake in
the Company in exchange for its ownership position in Starwave and an equity
investment in the Company of approximately $70 million in cash and a note in
principal amount of $139 million.  The warrants will enable Disney to achieve a
majority stake in the Company over time.  The shareholders of Starwave other
than Disney will also receive common stock of the Company in exchange for their
Starwave shares.  The Starwave Acquisition is to be accounted for as a purchase
transaction and the agreements are subject to customary closing conditions
including shareholder approvals and governmental regulatory approvals.

In addition, the Company and Disney have proposed to establish a strategic
relationship concerning the development, launch and promotion of a planned new
Internet portal service (the "New Portal Service") that would combine certain
content, promotion, brands and technologies of Infoseek, 

                                       9
<PAGE>
 
Starwave and its joint ventures relating to ESPN SportsZone, ABCNews.com and
certain Disney web sites. In connection with the New Portal Service, a
subsidiary of Disney has agreed to provide, and the Company has agreed to
purchase $165 million in promotional support and activities over five years.

In July 1998, the Company entered into an agreement to acquire Quando, Inc., a
Oregon corporation, in exchange for approximately $17 million, subject to
adjustment, in shares of the Company's common stock.  Quando creates and
licenses regularly-updated customized directories, including shopping guides,
event guides, content directories, audio clip libraries, review guides and data
for website rating guides.  The transaction is subject to customary closing
conditions including shareholder approval by Quando and is expected to close
after the closing of the transactions with Disney described above. The Company
expects to account for this acquisition as a purchase transaction.

                                       10
<PAGE>
 
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
        of Operations

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. Actual results could
differ materially from those projected in the forward-looking statements as a
result of a number of factors, including those, set forth in "Risk Factors"
beginning on page 22.

OVERVIEW

Infoseek was formed in August 1993 to develop and provide Internet and World
Wide Web search and navigational services. From inception to March 31, 1995, the
Company's operations were limited and consisted primarily of start-up
activities, including recruiting personnel, raising capital, research and
development, and the negotiation and execution of an agreement to license an
information retrieval search engine.

The Company introduced its first products and services in 1995. Through the
second quarter of 1997, the Company's strategic focus was on developing its
capabilities as an Internet search and navigation service. In response to rapid
growth and a change in the Internet search and navigation market, the Company's
Board of Directors, in the second quarter of 1997, hired a new Chief Executive
Officer, Harry Motro, to evolve the strategic vision of the Company while
continuing to leverage the Company's core strength in search and navigation. Mr.
Motro and Founder Steven Kirsch recruited a number of new members to the
executive management team to execute the Company's strategy of building Infoseek
brand awareness; creating a richer viewer experience; maximizing value for the
Company's advertisers; providing intranet search products; and enhancing
Infoseek's search and navigation service. In June 1997, the Company took a
restructuring charge of approximately $7,400,000 related to the discontinuance
of certain non-strategic business arrangements and management changes.

In October 1997, the Company launched an enhanced version of the Infoseek
Service, with easy to navigate "channels" (now numbering 18) that integrate
search results with relevant information, services, products and communities on
the Internet. The new Infoseek Service provides the Company with a platform for
creating content and marketing partnerships that enrich the viewer's experience
while enabling advertisers sponsors and partners to more effectively target
viewers.

The Company's second quarter 1998 revenues of approximately $17,066,000
represents a 119% increase as compared to the second quarter 1997 revenues of
approximately $7,786,000. The Company's average daily page views increased 13%
in June 1998 as compared to December 1997 and averaged 20 million during the
month of June 1998.  Compared to June 1997, the Company's average daily page
views increased 143% in June 1998.  Through June 1998, the Company derived a
substantial majority of its revenues from the sale of advertisements on its Web
pages. Advertising revenues accounted for approximately 89% of total revenues
during the second quarter of 1998 compared with 94% during the second quarter of
1997. For the six months ended June 30, 1998, advertising revenues accounted for
approximately 89% of the total revenues compared with 95% for the same period of
1997.  Most of the Company's contracts with advertising customers have terms of
three months or less, with options to cancel at any time.

                                       11
<PAGE>
 
Beginning with the October 1997 launch of the enhanced version of the Infoseek
Service, the Company began to sell channel sponsorships to advertisers, sponsors
and partners. Through the second quarter 1998, the Company entered into various
sponsor and partnership agreements covering certain topics within 12 of the
Company's 18 channels, including an exclusive relationship with Borders OnLine,
Inc. for the sale of books. The duration of the Company's sponsorship and
partnership agreements range from two months to three years and revenues are
generally recognized ratably over the term of the agreements, provided that
minimum impressions are met, and are included in advertising revenues.

Beginning in early 1997, the Company began to license its Ultraseek Server
product to corporate customers for use on their intranets and public Web sites.
Such licensing revenues represented approximately 11% of total revenues for both
the three and six month periods ended June 30, 1998.  For the three and six
month periods ended June 30, 1997, licensing revenues represented approximately
6% and 5%, respectively.

The Company's significant growth and limited operating history in a rapidly
evolving industry makes it difficult to manage operations and predict future
operating results. The Company has incurred significant net losses since
inception and expects to continue to incur significant losses on a quarterly and
annual basis in 1998 and in subsequent fiscal periods. As of June 30, 1998, the
Company had an accumulated deficit of $51,097,000. The Company and its prospects
must be considered in light of the risks, costs and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in the new and rapidly evolving Internet market. There can be no
assurance that the Company will be able to address any of these challenges.
Although the Company has experienced significant revenue growth in 1997 and in
the first half of 1998, there can be no assurance that this growth rate will be
sustained or that revenues will continue to grow or that the Company will
achieve profitability. In 1997 and in the first half of 1998, the Company
significantly increased its operating expenses as a result of a substantial
increase in its sales and marketing operation, development of new distribution
channels, broadening of its customer support capabilities and funding of greater
levels of research and development. Further increases in operating expenses are
planned during the second half of 1998. To the extent that any such expenses are
not timely followed by increased revenues, the Company's business, results of
operations, financial condition and prospects would be materially adversely
affected.

As a result of the Company's limited operating history as well as the recent
emergence of both the Internet and intranet markets addressed by the Company,
the Company has neither internal nor industry-based historical financial data
for any significant period of time upon which to project revenues or base
planned operating expenses. The Company expects that its results of operations
may also fluctuate significantly in the future as a result of a variety of
factors, including: the continued rate of growth, usage and acceptance of the
Internet and intranets as information media; the rate of acceptance of the
Internet as an advertising medium and a channel of commerce; demand for the
Company's products and services; the advertising budgeting cycles of individual
advertisers; the introduction and acceptance of new, enhanced or alternative
products or services by the Company or by its competitors; the Company's ability
to anticipate and effectively adapt to a developing market and to rapidly
changing technologies; the Company's ability to attract, retain and motivate
qualified personnel; initiation, implementation, renewal or expiration of
significant contracts with Borders OnLine, Inc., Microsoft, Netscape and others;
pricing changes by the Company or its competitors; specific economic conditions
in the Internet and intranet markets; 

                                       12
<PAGE>
 
general economic conditions; and other factors. Substantially all of the
Company's revenues have been generated from the sale of advertising, and the
Company expects to continue to derive substantially all of its revenues from
selling advertising and related products for the foreseeable future. Moreover,
most of the Company's contracts with advertising customers have terms of three
months or less. Advertising revenues are tightly related to the amount of
traffic on the Company's Web site, which is seasonal and inherently
unpredictable. Accordingly, future sales and operating results are difficult to
forecast. In addition, the Company has relied on the purchase of traffic from
Netscape, Microsoft and others as a significant portion of the Company's total
traffic. As previously discussed, the Company entered into its agreement with
Netscape in June 1998. Under the new agreement the Company is purchasing 15% of
Netscape's available search traffic, which traffic has decreased from 35% during
the previous 12 months. The decline in the Company's average daily page views
from 22 million in March 1998 to 20 million in June 1998 is due in large part to
a drop in traffic sourced from Netscape which decreased from 20% to 13% of the
Company's total traffic during the same period. While the Company believes that
it now has a better balance in the sources of its traffic, as Netscape comprises
only 13% of total traffic and Microsoft is providing 8% of total traffic in the 
month of June, 1998 if total traffic does not resume growth during the quarter
ending September 30, 1998 it could result in an immediate material adverse
impact on the Company's business, results of operations and financial condition
and prospects.

The Company's expense levels are based, in part, on its expectations as to
future revenues and, to a significant extent, are relatively fixed at least in
the short term. The Company may not be able to adjust spending in a timely
manner to compensate for any future revenue shortfall. Accordingly, any
significant shortfall in relation to the Company's expectations would have an
immediate material adverse impact on the Company's business, results of
operations, financial condition and prospects.

In addition, the Company may elect from time to time to make certain pricing,
service or marketing decisions or acquisitions that could have a short-term
material adverse effect on the Company's business, results of operations,
financial condition and prospects and which may not generate the long-term
benefits intended. From time to time, the Company has entered into and may
continue to enter into strategic relationships with companies for cross service
advertising, such as the Company's relationships with United Parcel Service of
America, Inc. ("UPS"). The Company's revenues have in the past been, and may in
the future continue to be partially dependent on its relationship with its
strategic partners. Such strategic relationships have and may continue to
include substantial one-time or up front payments from the Company's partners.
Accordingly, the Company believes that its quarterly revenues are likely to vary
significantly in the future, that period-to-period comparisons are not
necessarily meaningful and that such comparisons should not necessarily be
relied upon as an indication of the Company's future performance. Due to the
foregoing factors, it is likely that in future periods, the Company's operating
results may be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be
materially adversely affected.  See "Risk Factors--Limited Operating History;
Historical Losses; Anticipation of Continued Losses," "--Potential Fluctuations
in Future Results," "--Relationship With Netscape; Reliance on Third Party
Sources of Traffic" and "--Developing Market; Unproven Acceptance of Internet
Advertising and of the Company's Products and Services."

On April 17, 1998, the Company acquired WebChat Communications, Inc. ("WebChat")
in a tax-free reorganization in which a wholly owned subsidiary of the Company
was merged directly into 

                                       13
<PAGE>
 
WebChat. The Company has exchanged approximately 316,000 shares of Infoseek
Corporation common stock and has reserved approximately 11,000 shares of
Infoseek common stock shares for WebChat options assumed by the Company. The
exchange ratio was 0.03 shares of common stock of the Company for each share of
the common and preferred stock of WebChat. Merger related costs, which were not
significant, were expensed in the second quarter of 1998. The merger has been
accounted for under the pooling-of-interests method.

In June 1998, the Company entered into agreements with Starwave Corporation
("Starwave"), a Washington corporation, and with The Walt Disney Company, a
Delaware corporation, and certain Disney subsidiaries (collectively "Disney")
relating to an acquisition of Starwave by the Company through a merger and
exchange of shares (the "Starwave Acquisition") pursuant to an Agreement and
Plan of Reorganization (the "Reorganization Agreement") and the issuance of
common stock and warrants to purchase common stock of the Company to Disney.  As
result of the transactions, Disney will acquire an approximately 43% stake in
the Company in exchange for its ownership position in Starwave and an equity
investment in the Company of approximately $70 million in cash and a note in
principal amount of $139 million.  The warrants will enable Disney to achieve a
majority stake in the Company over time.  The shareholders of Starwave other
than Disney will also receive common stock of the Company in exchange for their
Starwave shares.  The Starwave Acquisition is to be accounted for as a purchase
transaction and the agreements are subject to customary closing conditions
including shareholder approvals and governmental regulatory approvals.

In addition, the Company and Disney have proposed to establish a strategic
relationship concerning the development, launch and promotion of a planned new
Internet portal service (the "New Portal Service") that would combine certain
content, promotion, brands and technologies of Infoseek, Starwave and its joint
ventures relating to ESPN SportsZone, ABCNews.com and certain Disney web sites.
In connection with the New Portal Service, a subsidiary of Disney has agreed to
provide, and the Company has agreed to purchase $165 million in promotional
support and activities over five years.

Following the end of the quarter, in July 1998, the Company entered into an
agreement to acquire Quando, Inc., a Oregon corporation, in exchange for
approximately $17 million, subject to adjustment, in shares of the Company's
common stock.  Quando creates and licenses regularly-updated customized
directories, including shopping guides, event guides, content directories, audio
clip libraries, review guides and data for website rating guides.  The
transaction is subject to customary closing conditions including shareholder
approval by Quando and is expected to close after the closing of the
transactions with Disney described above. The Company expects to account for
this acquisition as a purchase transaction.  These acquisitions and proposed
acquisition involve additional risks and uncertainties, including those
discussed under "Risk Factors--Risks of Acquisition Strategy" below.

                                       14
<PAGE>
 
RESULTS OF OPERATIONS

Total Revenue

For the three months ended June 30, 1998 and 1997, total revenues were
$17,066,000, and $7,786,000, respectively.  For the six months ended June 30,
1998 and 1997, total revenues were $31,519,000 and $14,026,000, respectively.

During the second quarter and through the first six months of 1998 and 1997, the
Company derived a substantial majority of its revenues from the sale of
advertisements on its Web pages. Advertising revenues in the three months ended
June 30, 1998 and 1997 were $15,269,000 and $7,325,000, respectively,
representing 89% and 94% of total revenues in such periods.  For the six months
ended June 30, 1998 and 1997, advertising revenues were $28,052,000 and
$13,334,000, respectively, representing 89% and 95% of total revenues in the
periods.  The growth in advertising revenues is attributable to the increased
use of the Internet for information publication, distribution and commerce
coupled with the development and acceptance of the Internet as an advertising
medium and increased viewer traffic on the Infoseek Service. The Company expects
to continue to derive a substantial majority of its revenues for the foreseeable
future from selling advertising space on its Web sites.  Advertising revenues
are derived principally from short-term advertising contracts in which the
Company guarantees a minimum number of impressions (displays of an advertisement
to the viewer) for a fixed fee. Advertising revenues are recognized ratably over
the term of the contract during which services are provided and are stated net
of customer discounts. To the extent minimum guaranteed impressions are not met,
the Company defers recognition of the corresponding revenue until the remaining
guaranteed impression levels are achieved. Deferred revenue is comprised of
billings in excess of recognized revenue related to advertising contracts.

Also included in advertising revenues is the exchange by the Company of
advertising space on the Company's Web sites for reciprocal advertising space or
traffic in other media publications or other Web sites or receipt of applicable
goods and services. Revenues from these exchange transactions are recorded as
advertising revenues at the estimated fair value of the goods and services
received and are recognized when both the Company's advertisements and
reciprocal advertisements are run or applicable goods or services are received.
Although such revenues have not exceeded 10% of total revenues in any period to
date, the Company believes these exchange transactions are of value,
particularly in the marketing of the Infoseek brand, and expects to continue to
engage in these transactions in the future.

In late 1997, the Company released a new version of its service which now
features 18 "channels," designed to bring together topical information,
services, products and communities on the Web. The new service provides
additional opportunities for revenue from the sale of channel sponsorships and
in some circumstances enables the Company to share in a portion of the revenue
generated by its viewers with these channel sponsors. Revenue generated by
channel sponsors is included in advertising revenues and is recognized on a
straight line basis over the terms of the agreements provided that minimum
impressions are met.

The balance of total revenues was derived from the licensing of the Ultraseek
Server product to businesses for internal use in their intranets, extranets or
public sites. This licensing revenue represented approximately 11% and 6% of
total revenue for the three months ended June 30, 1998 

                                       15
<PAGE>
 
and 1997, respectively. For the six months ended June 30, 1998 and 1997,
licensing revenue represented approximately 11% and 5%, respectively.

The Company's current business model is to generate revenues through the sale of
advertising on the Internet. There can be no assurance that current advertisers
will continue to purchase advertising space and services from the Company or
that the Company will be able to successfully attract additional advertisers.


Costs and Expenses

The Company's operating expenses have increased in absolute dollars during the
second quarter and first half of 1998 compared to the second quarter and first
half of 1997 as the Company has expanded its business and the marketing of its
services and products. The Company expects operating expenses to continue to
increase in dollar amount in the future as the Company continues to expand its
business.

The Company recorded aggregate deferred compensation of $5,666,000 in connection
with certain stock options granted through 1997. The amortization of such
deferred compensation is being charged to operations over the vesting periods of
the options, which are typically four years. For the three months ended June 30,
1998 and 1997, the Company amortized $97,000 and $61,000, respectively, related
to stock options.  For the six months ended June 30, 1998 and 1997, the Company
amortized $193,000 and $337,000, respectively. The amortization of this deferred
compensation will continue to have an adverse effect on the Company's results of
operations through 1999.

Hosting, Content and Website Costs

For the three months ended June 30, 1998 and 1997, hosting, content and website
costs were $2,524,000, and $1,533,000, respectively. For the six months ended
June 30, 1998 and 1997, hosting, content and website costs were $4,678,000 and
$2,830,000, respectively.  Hosting, content and website costs consist primarily
of costs associated with the enhancement, maintenance and support of the
Company's Web sites, including telecommunications costs and equipment
depreciation. Hosting, content and website costs also includes costs associated
with the licensing of certain third-party technologies. Hosting, content and
website costs increased in the three and six months ended June 30, 1998 and 1997
as the Company added additional equipment and personnel to support its Web sites
and as royalties due to certain third parties increased. The Company expects its
hosting, content and website costs will continue to increase in absolute dollars
and possibly as a percentage of revenues as it upgrades equipment and
maintenance and support personnel and adds content partners to meet the growing
demands for Web services.

Research and Development

For the three months ended June 30, 1998 and 1997 research and development
expenses were $2,667,000 and $2,374,000, respectively. For the six months ended
June 30, 1998 and 1997, research and development expenses were $4,797,000 and
$4,102,000, respectively.  Research and development expenses consist principally
of personnel costs, consulting and equipment 

                                       16
<PAGE>
 
depreciation. Costs related to research, design and development of products and
services have been charged to research and development expense as incurred.

The increase in research and development expenses for the three and six months
ended June 30, 1998 over the comparable periods in 1997 was primarily the result
of on-going enhancements to the Infoseek Service and the development and
implementation of new technology and products. The Company believes that a
significant level of product development expenses is required to continue to
remain competitive in its industry. Accordingly, the Company anticipates that it
will continue to devote substantial resources to product development and that
these costs are expected to continue to increase in dollar amount in future
periods.

Sales and Marketing

For the three months ended June 30, 1998 and 1997 sales and marketing expenses
were $11,863,000, and $7,541,000, respectively. For the six months ended June
30, 1998 and 1997, sales and marketing expenses were $22,440,000 and
$14,191,000, respectively.  Sales and marketing expenses consist primarily of
compensation of sales and marketing personnel, advertising and promotional
expenses.

Sales and marketing expenses for the three month and six month period ended June
30, 1998 and 1997 included payments made to Netscape pursuant to an arrangement
for the listing of the Company's service on the Netscape Web page.  As of March
31, 1998, the Company's agreement with Netscape provided for payments up to an
aggregate of $12,500,000 in cash and reciprocal advertising ($10,000,000 in cash
and $2,500,000 in reciprocal advertising) to be one of four non-exclusive
premiere providers of navigational services (along with Excite, Lycos, and
Yahoo!).  The Netscape arrangement expired on April 30, 1998, but was
subsequently extended through May 31, 1998.  The payments to Netscape were being
recognized ratably over the term of the agreement. During the three month
periods ended June 30, 1998 and 1997, the Company recognized $833,000 and
$1,666,000, respectively of sales and marketing expenses related to this
agreement.  During the six month periods ended June 30, 1998 and 1997, the
Company recognized $3,333,000 and $2,916,000 respectively, of sales and
marketing expenses related to this agreement.  As of June 30, 1998, the Company
has approximately $3,722,000 of cash commitment remaining in connection with
this agreement, which is included in accrued liabilities to service providers.

As of June 1, 1998, the Company entered into a one-year agreement with Netscape
with terms that provide for the Company to pay, based on impressions delivered,
up to an aggregate of $12,500,000 in cash to be one of the six non-exclusive
premier providers of navigational services (along with Excite, Netscape, Lycos,
Alta Vista, and LookSmart).  Under terms of the agreement, which expires May 31,
1999, the Company will receive 15% of premiere provider rotations- the pages
served to visitors who have not selected a preferred provider.  The payments to
Netscape are being recognized ratably over the term of the agreement.  During
the three month period ended June 30, 1998, the Company recognized $1,385,000 of
sales and marketing expense related to this agreement which is included in
accrued liabilities to service providers.  As of June 30, 1998, the Company has
a cash commitment ranging from a minimum of $4,150,000 to a maximum of
$12,500,000 depending on the level of traffic delivered by Netscape in
connection with this agreement.

In addition, in July 1997, the Company entered into an agreement with Netscape
whereby it was designated as a premier provider of international search and
navigational guide services for the 

                                       17
<PAGE>
 
Netscape Net Search Program, for 10 Netscape local Web sites. The Company's
agreement with Netscape provides for payments of up to a maximum aggregate of
$1,219,000 in cash and reciprocal advertising over the one-year term of the
agreement. During the three and six months ended June 30, 1998, the Company
recognized sales and marketing expenses of approximately $100,000 and $200,000,
respectively, under this agreement as a component of sales and marketing expense
(none for the three and six months ended June 30, 1997).

The Company also has an agreement with Microsoft to provide navigational
services on certain Microsoft web sites through which Infoseek also receives
traffic.  In exchange for such traffic, the Company makes available to Microsoft
advertising space on the Infoseek service free of charge.  The agreement is
currently terminable by either party on one month's notice.  The Company is
currently renegotiating the agreement with Microsoft.  Microsoft intends to
discontinue its practice of making its traffic available in exchange for
advertising space on the Infoseek service.  Should the Company reach an
agreement with Microsoft to continue its purchase of traffic, it is likely that
it would significantly increase the Company's operating expenses.

At the end of the terms of the respective agreements with Netscape and
Microsoft, there can be no assurance that these agreements with Netscape and
Microsoft or other similar agreements can or will be renewed on terms
satisfactory to the Company.  If the Company is unable to renew these or other
similar agreements on favorable terms or is otherwise unable to develop viable
alternative distribution channels to Netscape and Microsoft or is otherwise
unable to offset a reduction in traffic from these or other third party sources,
advertising revenues would be adversely affected, resulting in the Company's
business, results of operations, financial condition and prospects being
materially and adversely affected.  See "Risk Factors--Relationship with
Netscape; Reliance on Third Party Sources of Traffic" below.

The increase in sales and marketing expenses for the six months ended June 30,
1998 over 1997 was also the result of hiring additional sales and marketing
personnel and an increase in promotional and advertising activity including
advertising campaigns in both 1998 and 1997, including television. The Company
expects to increase the amount of promotional and advertising expenses and
anticipates hiring additional sales representatives in future periods.

General and Administrative

For the three months ended June 30, 1998 and 1997 general and administrative
expenses were $2,061,000, and $1,825,000, respectively.  For the six months
ended June 30, 1998 and 1997, general and administrative expenses were
$3,923,000 and $3,295,000, respectively.  General and administrative expenses
consist primarily of compensation of administrative and executive personnel,
facility costs and fees for professional services.

The increase in general and administrative expenses for the three months and six
months ended June 30, 1998 over the comparable periods in 1997 was the result of
hiring additional administrative and executive staff and adding infrastructure
to manage the expansion of the business. The Company anticipates that its
general and administrative expenses will continue to increase in dollar amount
as the Company continues to expand its administrative and executive staff.

                                       18
<PAGE>
 
As previously discussed, the Company has entered into agreements with Starwave
and with Disney relating to an acquisition of Starwave by the Company and the
issuance of common stock and warrants to purchase common stock of the Company to
Disney.  As a result, the Company has incurred direct costs related to this
transaction of approximately $1,000,000 as of June 30, 1998 and estimates that
it will incur direct transaction costs of approximately $15.0 million associated
with the proposed Starwave Acquisition, which will be accounted for as part of
the purchase price of the transactions.  The Company also expects to incur an
additional significant charge to operations, which currently cannot be
reasonably estimated, in the quarter in which the proposed Starwave Acquisition
is expected to be consummated, to reflect costs associated with integrating the
two companies.  There can be no assurance that the combined companies will not
incur additional material charges in subsequent quarters to reflect additional
costs associated with the proposed Starwave Acquisition.  See "Risk Factors--
Risks of Acquisition Strategy" below.

Restructuring and Other Charges

During the second quarter of 1997, the Company recorded restructuring and other
charges of approximately $7,400,000, of which approximately $6,200,000 related
to the discontinuance of certain business arrangements which were determined to
be non-strategic, and approximately $1,200,000 related to management changes. Of
these restructuring charges, approximately $5,000,000 involved cash outflows,
all of which have been completed as of June 30, 1998. Non-cash restructuring
charges of approximately $2,400,000 related primarily to the write-down of
certain non-strategic business assets which were written off in June 1997. There
have been no material changes to the restructuring plan or in the estimates of
the restructuring costs.

Income Taxes

Due to the Company's loss position, there was no provision for income taxes for
any of the periods presented. At December 31, 1997, the Company had federal and
state net operating loss carry forwards of approximately $42,600,000 and
$28,300,000, respectively. The federal net operating loss carry forwards will
expire beginning in 2009 through 2012, if not utilized, and the state net
operating loss carry forwards will expire in the years 1999 through 2002.
Certain future changes in the share ownership of the Company, as defined in the
Tax Reform Act of 1986 and similar state provisions, may restrict the
utilization of carry forwards. A valuation allowance has been recorded for the
entire deferred tax asset as a result of uncertainties regarding the realization
of the asset due to the lack of earnings history of the Company.

Year 2000 Compliance

The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The ``year 2000 problem''
is pervasive and complex as virtually every computer operation will be effected
in some way by the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. Management
of the Company is in the process of working with its software vendors to assure
that they are prepared for the year 2000. Management does not anticipate that
the Company will incur significant operating expenses or be required to invest
heavily in computer systems improvements to be year 2000 compliant. However,
significant uncertainty exists concerning the potential costs and effects
associated with 

                                       19
<PAGE>
 
any year 2000 compliance. The Company is currently implementing an upgrade to
each of its management information systems that it believes is year 2000
compliant. Any year 2000 compliance problem of the Company or its viewers,
customers or advertisers could materially adversely affect the Company's
business, results of operations, financial condition and prospects.

LIQUIDITY AND CAPITAL RESOURCES

From inception through May 1996, the Company financed its operations and met its
capital expenditure requirements primarily from proceeds derived from the
issuance of equity, convertible debt securities and equipment term loans.   In
February 1998, the Company completed a follow-on public offering and received
approximately $43,015,000 net of underwriting discounts, commissions and other
offering costs.  The proceeds will be used for general corporate purposes,
including expansion of its sales and marketing efforts, and capital
expenditures.

For the first six months ended June 30, 1998, operating activities used cash of
$1,390,000 due primarily to the Company's net loss offset by increases in
depreciation and amortization, deferred revenue and accrued liabilities to
service providers.  For the six month period ended June 30, 1997, operating
activities used cash of $8,760,000 due primarily to the Company's net loss
partially offset by increases in accrued restructuring and other charges,
depreciation and amortization and deferred revenue. For the six months ended
June 30, 1998, investing activities used cash of $44,695,000 primarily related
to the net purchases of short-term investments. For the six months ended June
30, 1997, investing activities provided net cash of $4,016,000, primarily
associated with the sale of short-term investments. Financing activities
generated cash of $43,430,000, and $5,120,000, in the six months ended June 30,
1998 and 1997, respectively, primarily from the Company's follow-on public
offering in February 1998 and equipment term loans in 1997.

The Company has commitments for its facilities under operating lease agreements
and expects to continue to incur significant capital expenditures to support
expansion of the Company's business. Furthermore, from time to time the Company
expects to evaluate the acquisition of products, businesses and technologies
that complement the Company's business.

The Company had $67,332,000 in cash, cash equivalents and short-term investments
at June 30, 1998. Also, in March 1997, the Company entered into a four-year,
$5,000,000 equipment term loan facility. The Company currently anticipates that
its cash, cash equivalents, short-term investments, and cash flows generated
from advertising revenues will be sufficient to meet its anticipated needs for
working capital and other cash requirements through at least September 30, 1999.
Thereafter, the Company may need to raise additional funds. The Company may need
to raise additional funds sooner, however, in order to fund more rapid
expansion, to develop new or enhance existing services or products, to respond
to competitive pressures or to acquire complementary products, businesses or
technologies. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of the shareholders of the
Company will be reduced, shareholders may experience additional dilution and
such securities may have rights, preferences or privileges senior to those of
the holders of the Company's common stock. There can be no assurance that
additional financing will be available on terms favorable to the Company, or at
all. If adequate funds are not available or are not available on acceptable
terms, the Company's ability to fund expansion, take advantage of acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures would be significantly limited. Such limitation could have a material
adverse effect on the Company's business, results of operations, financial

                                       20
<PAGE>
 
condition and prospects. The estimate of the period for which the Company
expects its available funds to be sufficient to meet its capital requirements is
a forward-looking statement that involves risks and uncertainties. There can be
no assurance that the Company will be able to meet its working capital and other
cash requirements for this period as a result of a number of factors including
but not limited to those described under "Risk Factors--Future Capital Needs;
Uncertainty of Additional Financing" below.

                                       21
<PAGE>
 
Risk Factors

In evaluating the Company's business, investors should carefully consider the
following risk factors in addition to the other information set forth herein or
incorporated herein by reference.

Limited Operating History: Historical Losses;  Anticipation of Continued Losses.
The Company's limited operating history makes it difficult to manage operations
and predict future operating results.  the Company has incurred significant net
losses since inception and expects to continue to incur significant losses on a
quarterly and annual basis in 1998 and may do so in subsequent fiscal periods.
As of June 30, 1998, the Company had an accumulated deficit of $51,097,000.  The
Company and its prospects must be considered in light of the risks, costs and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in the new and rapidly evolving Internet
market.  There can be no assurance that the Company will be able to address any
of these challenges.  Although the Company has experienced significant revenue
growth in 1997 and the first half of 1998, there can be no assurance that this
growth will be sustained or that revenues will continue to grow or that the
Company will achieve profitability.  In 1997 and the first half of 1998, the
Company significantly increased its operating expenses as a result of a
substantial increase in its sales and marketing efforts, development of new
distribution channels, expansion of its customer support capabilities and to
fund greater levels of research and development.  Further increases in operating
expenses are planned during fiscal 1998.  To the extent that any such expenses
are not timely followed by increased revenues, the Company's business, results
of operations, financial condition and prospects would be materially adversely
affected.

Relationship with Netscape; Reliance on Third Party Sources of Traffic.  The
Company relies in part on third party sources of traffic to its web site,
including Netscape and Microsoft, among others, pursuant to contractual
arrangements which generally have terms of one year or less.  For the year ended
December 31, 1997 and the six months ended June 30, 1998, approximately 46% and
31% of the aggregate page views on the Company's web site were generated by
traffic derived from third party sources.  Since March 1995, the Company has
been a featured provider of navigational services on the Web page of Netscape.
In 1996 and 1997 and during the first half of 1998, approximately 65%, 33% and
23%, respectively, of all page views served on the Infoseek  Service came from
traffic attributable to the Netscape web page.  As of June 1, 1998, the Company
entered into a one-year agreement with Netscape with terms that provide for the
Company to pay, based upon the level of impressions delivered, up to an
aggregate of $12,500,000 in cash to be one of the six non-exclusive premier
providers of navigational services (along with Excite, Netscape, Lycos, Alta
Vista, and LookSmart).  Under terms of the agreement, which expires May 31,
1999, the Company will receive 15% of premier provider rotations -- the pages
served to visitors who have not selected a preferred provider.  The payments to
Netscape are being recognized ratably over the term of the agreement.  The
Company also has an agreement with Microsoft, which is terminable by either
party on one month's notice, to provide navigational services on certain
Microsoft web sites through which the Company also receives traffic.  In
exchange for such traffic, the Company makes available to Microsoft advertising
space on the Company's web site free of charge.  The Company is currently
negotiating with Microsoft regarding a new agreement. At the end of the terms of
the respective agreements with Netscape and Microsoft, there can be no assurance
that these agreements with Netscape and Microsoft or other similar agreements
can or will be renewed on terms satisfactory to the Company.  If the Company is
unable to renew these or other similar agreements on favorable terms or is
otherwise unable to develop viable alternative 

                                       22
<PAGE>
 
distribution channels to Netscape and Microsoft or is otherwise unable to offset
a reduction in traffic from these or other third party sources, advertising
revenues would be adversely affected, resulting in the Company's business,
results of operations, financial condition and prospects being materially and
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Potential Fluctuations in Future Results.  As a result of the Company's limited
operating history as well as the recent emergence of both the Internet and
intranet markets addressed by the Company, the Company has neither internal or
industry-based historical financial data for any significant period of time upon
which to project revenues or base planned operating expenses.  The Company
expects that its results of operations may also fluctuate significantly in the
future as a result of a variety of factors, including: the continued rate of
growth, usage and acceptance of the Internet and intranets as information media;
the rate of acceptance of new, enhanced or alternative products or services by
the Company or by its competitors; the Company's ability to attract, retain and
motivate qualified personnel; initiation, implementation, amendment, renewal or
expiration of significant contracts with Borders Group, Inc. ("Borders Online"),
Microsoft, Netscape and others; pricing changes by the Company or its
competitors; specific economic condition  in the Internet and intranet markets;
general economic conditions; and other factors.  Substantially all of the
Company's revenues have been generated from the sale of advertising, and the
Company expects to continue to derive substantially all of its revenues from
selling advertising and related products for the foreseeable future.  Moreover,
most of the Company's contracts with advertising customers have terms of three
months or less.  Advertising revenues are tightly related to the amount of
traffic on the Company's web site, which is inherently unpredictable.
Accordingly, future sales and operating results are difficult to forecast.  the
Company's expense levels are based, in part, on its expectations as to future
revenues and, to a significant extent, are not expected to decrease, at least in
the short term.  Accordingly, any significant shortfall in relation to the
Company's expectations would have an immediate material adverse impact on the
Company's business, results of operations, financial condition and prospects.

In addition, the Company may elect from time to time to make certain pricing,
service or marketing decisions or acquisitions that could have a short-term
material adverse effect on the Company's business, results of operations,
financial condition and prospects and which may not generate the long-term
benefits intended.  From time to time, the Company has entered into and may
continue to enter into strategic relationships with companies for cross service
advertising, such as the Company's relationship with United Parcel Service of
America, Inc. ("UPS").  The Company's revenues have in the past been, and may in
the future continue to be, partially dependent on its relationship with its
strategic partners.  Such strategic relationships have an may continue to
include substantial one-time or up front payments from the Company's partners.
Accordingly, the Company believes that its quarterly revenues are likely to vary
significantly in the future, that period-to-period comparisons are not
necessarily meaningful and that such comparisons should not necessarily be
relied upon as an indication of  future performance.  Due to the foregoing
factors, it is likely that in future periods, the Company's operating results
may be below the expectations of public market analysts and investors.  In such
event, the price of the Company's common stock would likely be materially
adversely affected.

Developing Market; Unproven Acceptance of Internet Advertising and of the
Company's Products and Services. The Company's future success is highly
dependent upon the increased use of the Internet and intranets for information
publication, distribution and commerce. The market for the 

                                       23
<PAGE>
 
Company's products and services has only recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants with
products and services for use on the Internet and intranets. Most of the
Company's advertising customers have only limited experience with the Internet
as an advertising medium, have not yet devoted a significant portion of their
advertising expenditures to Internet-based advertising, and may not find such
advertising to be effective for promoting their products and services relative
to traditional print and broadcast media. No standards have been widely accepted
for the measurement of the effectiveness of Internet based advertising, and
there can be no assurance that such standards will develop sufficiently to
support the Internet as a significant advertising medium. The Internet industry
is young and has few proven products and services. In particular, because the
Company expects to derive substantially all of their revenues in the foreseeable
future from sales of Internet advertising, the future success of the Company is
highly dependent on the development of the Internet as an advertising medium. If
the market fails to continue to develop, develops more slowly than expected or
becomes saturated with competitors, or if the Company's products and services do
not achieve or sustain acceptance by Internet users or advertisers, the
Company's business, results of operations, financial condition and prospects
would be materially adversely affected. The Company believes that advertising
sales in traditional media, such as television, are generally lower in the first
and third calendar quarters of each year as compared with the respective
preceding quarters and that advertising expenditures fluctuate significantly
with economic cycles. Depending on the extent to which the Internet is accepted
as an advertising medium, seasonality and cyclicality in the level of
advertising expenditures generally could become more pronounced for this medium.
Seasonality and cyclicality in advertising expenditures generally, or with
respect to Internet-based advertising specifically, could have a material
adverse effect on the Company's business, financial condition and operating
results.

Risk Associated with Brand Development.  The Company believes that establishing
and maintaining the Company brand is a critical aspect of its efforts to attract
and expand its audience and that the importance of brand recognition will
increase due to the growing number of Internet sites and the relatively low
barriers to entry.  Promotion and enhancement of the Company's brand will depend
largely on the Company's success in providing high-quality products and services
and in designing and implementing effective media promotions, which success
cannot be assured.  In order to attract and retain Internet users and to promote
and maintain the Company's brand in response to competitive pressures, the
Company believes it is necessary to increase substantially its financial
commitment to creating and maintaining a distinct brand loyalty among customers.
If the Company is unable to provide high-quality products and services, design
and implement effective media promotions or otherwise fails to promote and
maintain its brand, or if the Company incurs excessive expenses in an attempt to
improve its products and services or promote and maintain its brand, the
Company's business, results of operations, financial condition and prospects
would be materially and adversely affected.

Intense Competition.  The market for Internet and intranet products and services
is highly competitive, and the Company expects that competition will continue to
intensify.  The market for Internet and intranet search and navigational
services has only recently begun to develop, and the Company cannot predict with
any certainty how competition will affect the Company, its competitors or its
customers.  The Company also believes that the Internet market increasingly will
require portal services to integrate a more robust array of multimedia content
and services.  As such, the Company believes that its future success in part
will depend upon its ability to effectively and timely integrate such content
and services, including but not limited to further advancements in 

                                       24
<PAGE>
 
search and directory and other technologies and functionality, development of 
on-line communities, implementation of electronic commerce and provisions of
rich and diverse multimedia content. There can be no assurance that the Company
will be able to compete successfully or that the competitive pressures faced by
the Company, including those listed below, will not have a material adverse
effect on the Company's business, results of operations, financial condition and
prospects. The Company believes it faces numerous competitive risks, including
the following:

     Competition from Consolidated Internet Products.  A number of companies
     offering Internet products and services, including direct competitors of
     the Company, recently have begun to integrate multiple features within the
     products and services they offer to consumers.  Integration of Internet
     products and services is occurring through development of competing
     products and through acquisitions of, or entering into joint ventures
     and/or licensing arrangements involving, competitors of the Company.  For
     example, Netscape has recently announced that it has signed a two-year
     strategic partnership with Excite to build out content based channels
     jointly for Netscape's Web site and to create co-branded search, thereby
     competing directly with the Company.  The Web browser offered by Microsoft,
     another widely-used browser and substantial source of traffic for the
     Company, may incorporate and promote information search and retrieval
     capabilities in future releases or upgrades that could make it more
     difficult for Internet viewers to find and use the Company's products and
     services.  Microsoft recently licensed products and services from Inktomi
     Corporation ("Inktomi"), a direct competitor of the Company, and has
     announced that it will feature and promote Inktomi services in the
     Microsoft Network and other Microsoft online properties.  The Company
     expects that such search services may be tightly integrated into the
     Microsoft operating system, the Internet Explorer browser and other
     software applications, and that Microsoft will promote such services within
     the Microsoft Network or through other Microsoft-affiliated end-user
     services such as MSNBC or WebTV.  In addition, entities that sponsor or
     maintain high-traffic Web sites or that provide an initial point of entry
     for Internet viewers, currently offer and can be expected to consider
     further development, acquisition or licensing of Internet search and
     navigation functions competitive with those offered by the Company, or
     could take actions that make it more difficult for viewers to find and use
     the Company's products and services.  For example, AOL is currently a
     significant shareholder of Excite and offers Excite's WebCrawler and
     NetFind as the exclusive Internet search and retrieval services for use by
     AOL's subscribers.  Continued or increased competition from such
     consolidations, integration and strategic relationships involving
     competitors of the Company could have a material adverse effect on the
     Company's business, results of operations, financial condition and
     prospects.

     Competition from existing search and navigational competitors.  Many
     companies currently offer directly competitive products or services
     addressing Web search and navigation, including DEC/Alta Vista, Excite,
     HotBot, Inktomi, Lycos, CNET and Yahoo!  In addition, the Company's
     Ultraseek Server product competes directly with intranet products and
     services offered by companies such as DEC/Alta Vista, Lycos, Open Text and
     Verity.  The Web browsers currently offered by Netscape and Microsoft,
     which are the two most widely used browsers, incorporate prominent search
     buttons and similar features, such as features based on "push"
     technologies, that direct search traffic to competing services, including
     those that may be developed or licensed by Microsoft or Netscape in
     enhancements or later versions of these or other products.  Many of the
     Company's existing competitors, as well 

                                       25
<PAGE>
 
     as a number of potential new competitors, have significantly greater
     financial, technical, marketing and distribution resources than the
     Company.
 
     Competition from Internet and other advertising media.  The Company also
     competes with online services, other Web site operators and advertising
     networks, as well as traditional media such as television, radio and print
     for a share of advertisers' total advertising budget.  Additionally, a
     large number of Web sites and online services (including, among others the
     Microsoft Network, MSNBC, AOL and other Web navigation companies such as
     Excite, Lycos and Yahoo!)  offer informational and community features, such
     as news, stock quotes, sports coverage, yellow pages and e-mail listings,
     weather news, chat services and bulletin board listings that are
     competitive with the services currently offered or proposed to be offered
     by the Company.  Moreover, the Company believes that the number of
     companies selling Web-based advertising and the available inventory of
     advertising space have recently increased substantially.  Accordingly, the
     Company may face increased pricing pressure for the sale of advertisements
     and reduction in the Company's advertising revenues.

     Low barriers to entry for new search and navigational companies.  The
     Company believes that the costs associated with developing technologies,
     products and services that compete with those offered by the Company are
     relatively low.  As a result, as the market for Internet and intranet
     search and navigational products develops, other companies may be expected
     to offer similar products and services and directly and indirectly compete
     with the Company for advertising revenues.

Reliance on Advertising Revenues.  The Company has derived a substantial
majority of its revenues to date from the sale of advertisements and expects to
continue its dependence on advertising and related products, including channel
sponsorships and, to a lesser extent, the sale of the Ultramatch advertising
management system and the Ultraseek Server intranet product.  The Company's
current business model of generating revenues through the sale of advertising on
the Internet, which is highly dependent on the amount of traffic on the
Company's web site, is relatively unproven.  The Internet as an advertising
medium has not been available for a sufficient period of time to gauge its
effectiveness as compared with traditional advertising media.  In addition, most
of the Company's current advertising customers have limited or no experience
using the Internet as an advertising medium, have not devoted a significant
portion of their advertising expenditures to such advertising and may not find
such advertising to be effective for promoting their products and services
relative to advertising in traditional media.  There can be not assurance that
current advertisers will continue to purchase advertising space and services
from the Company or that sufficient impressions will be achieved or available,
or that the Company will be able to successfully attract additional advertisers.
Furthermore, with the rapid growth of available inventory on the Internet and
the intense competition among sellers of advertising space, it is difficult to
project future levels of advertising revenues and pricing models that will be
adopted by the industry or individual companies.  In addition, the ability to
quickly develop new business models which will generate additional revenue
sources may be vital for the Company to remain competitive in its marketplace.
Accordingly, there can be no assurance that the Company will be successful in
generating significant future advertising revenues or other source of revenues;
failure to do so could have a material adverse effect on the Company's business,
results of operations, financial conditions and prospects.

                                       26
<PAGE>
 
Technological Change and New Products and Services.  The market for Internal
products and services is characterized by rapid technological change, changing
customer needs, frequent new product introductions and evolving industry
standards.  These market characteristics are exacerbated by the emerging nature
of this market and the fact that many companies are expected to introduce new
Internet products and services in the near future.  The Company's future success
will depend on its ability to continually and, on a timely basis, introduce new
products, services and technologies and to continue to improve the performance,
features and reliability of the Company's products and services in response to
both evolving demands of the marketplace and competitive product offerings.

In the fourth quarter of 1997, the Company released a new version of its service
which currently features 18 "channels," designed to bring together topical
information, services, products and communities on the Web.  The service
provides additional opportunities for revenue from the sale of channel
sponsorships as well as provides an opportunity for the Company to share in a
portion of the revenue facilitated by its viewers with these channel sponsors.
Continued market acceptance of this new version and successful conclusion of
sponsorship arrangements are integral to the Company's competitiveness and
viability.  Most of the Company's additional channel sponsorship arrangements
are dependent on an increasing level of viewer traffic.  If the Company is
unable to renew its relationship with Netscape or Microsoft, or if viewer
traffic is otherwise materially adversely affected, the Company may be unable to
retain its channel sponsorship arrangements.  In addition, there can be no
assurance that this new sponsorship service or any other new or proposed product
or service will attain market acceptance, experience technological
sustainability or be free of errors that require significant design
modifications or that the business model to generate revenues will be
successful.  Failure of the Company to successfully design, develop, test,
market and introduce other new and enhanced technologies and services, or any
enhancements of the Company's current search technology, or the failure of the
Company's recently introduced products and services to achieve market acceptance
could have a material adverse effect upon the Company's business, results of
operations, financial condition and prospects.

Due to the rapid technological change, changing customer needs, frequent new
product and service introductions and evolving industry standards, timeliness of
introduction of these new products and services is critical.  Delays in the
introduction of new products and services may result in customer dissatisfaction
and may delay or cause a loss of advertising revenue.  There can be no assurance
that the Company will be successful in developing new products or services or
improving existing products and services that respond to technological changes
or evolving industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of new or improved products and services, or that its
new products and services will adequately meet the requirements of the
marketplace and achieve market acceptance.  If the Company is unable to develop
and introduce new or improved products or services in a timely manner in
response to changing market conditions or customer requirements.  The Company's
business, results of operations, financial condition and prospects could be
materially adversely affected.

Management of Growth.  The Company has recently experienced and may continue to
experience rapid growth, which has placed, and could continue to place, a
significant strain on the Company's limited personnel and other resources.
Competition for engineering, sales and marketing personnel is intense, and there
can be no assurance that the Company will be successful in attracting and
retaining such personnel or that the Company will be able to manage such growth
effectively.  To 

                                       27
<PAGE>
 
succeed, the Company will need to continue to implement and improve its
operational, financial and management information systems and to hire, train,
motivate and manage its employees. In particular, the Company has experienced
difficulty in hiring and retaining the personnel necessary to support the growth
of the Company's business. The failure of the Company to successfully manage any
of these issues would have a material adverse effect on the Company's business,
results of operations, financial condition and prospects. The Company's ability
to manage its growth will require a significant investment in and upgrade to its
existing internal management information systems to support increased accounting
and other management related functions, and a new advertising inventory
management analysis system to provide enhanced internal reporting and customer
feedback on advertising. These system upgrades and replacements will impact
almost all phases of the Company's operations (i.e. planning, advertising
implementation and management finance and accounting). These systems are
currently scheduled to become operational by the second half of 1998. There can
be no assurance that the Company will not experience problems, delays or
unanticipated additional costs in implementing these systems or in the use of
its existing system that could have a material adverse effect on the Company's
business, results of operations, financial condition and prospects, particularly
in the period or periods on which these systems are brought online.

Risks of Acquisition Strategy. The Company believes that it may be necessary to
enter into joint ventures or other strategic relationships or to make
acquisitions of complementary products, technologies or businesses in order to
remain competitive. The failure of the Company to execute such a strategy may
lead to decreased market share, viewer traffic or brand loyalty, which may have
a material adverse effect on the Company's business, results of operations,
financial condition and prospects. In addition, acquisition transactions are
accompanied by a number of risks, including, among other things, the difficulty
of integrating the operations and personnel of the acquired companies, the
potential disruption of the Company's ongoing businesses, the inability of
management to maximize the financial and strategic position of the combined
companies through the successful incorporation of any acquired technology or
content and rights into the Company's products and media properties, expenses
associated with the transactions, additional expenses associated with
amortization of acquired intangible assets, the maintenance of uniform
standards, controls, procedures and policies, the impairment of relationships
with employees and customers as a result of any integration of new management
personnel, and the potential unknown liabilities associated with acquired
businesses. There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with such
acquisitions. In addition, the proposed Starwave Acquisition and related
transactions with Disney involve the following additional risks and 
uncertainties:

     Uncertainties Relating to Integration of Operations.  The Company and
     Starwave have entered into the Reorganization Agreement with the
     expectation that the proposed Starwave Acquisition will result in long-term
     strategic benefits.  These anticipated benefits will depend in part on
     whether the companies respective operations, including the Starwave joint
     ventures, can be integrated in an efficient and effective manner and there
     can be no assurance that this will occur.  The combination of the companies
     will require, among other things, integration of the Company's and
     Starwave's respective product and service offerings and coordination of the
     companies sales, marketing and research and development efforts.  There can
     be no assurance that the combined companies will be able to take full
     advantage of the combined sales force's efforts, the different geographic
     locations of the principal operations of each of the companies.  Starwave
     and the Starwave joint ventures 

                                       28
<PAGE>
 
     will also render such integration more difficult. Further, the combined
     companies will have a substantially expanded employee base which will
     require substantial dedication of management and other resources. Given the
     expanded operations of the combined companies, the combined companies
     businesses will be increasingly influenced by their ability to retain and
     recruit qualified management, engineering, and sales and marketing
     personnel. The failure to effectively recruit and retain sufficient and
     qualified personnel for the combined companies operations would have a
     material adverse effect on the business, results of operations, financial
     condition and prospects of the combined companies. There is no assurance
     that the foregoing will be accomplished smoothly or successfully. The
     integration of operations following the Starwave Acquisition will require
     the dedication of management resources, which may distract attention from
     the day-to-day operations of the combined companies. The inability of
     management to successfully integrate the operations of the companies could
     have a material adverse effect upon the business, operating results and
     financial condition of the combined companies.

     Risks Related to Development, Launch and Acceptance of Planned New Portal
     Service. Infoseek believes that development, launch and promotion of the
     planned New Portal Service combining certain of the content, promotion,
     brands and technologies of the Company, Starwave, ABCNews.com, ESPN
     SportsZone.com and Disney, among other things, would be  a critical aspect
     of the combined companies efforts to attract and expand their Internet
     audience and to differentiate the combined companies from their competitors
     and that the importance of this strategy will increase due to the growing
     number of Internet sites and the relatively low barriers to entry in
     providing Internet content.  While the Company currently plans to launch
     the New Portal Service by the end of calendar year 1998, subject to
     consummation of the Starwave Acquisition, there can be no assurance that
     the service can be successfully developed and launched in such time frame
     and the New Portal Service, as initially launched, may not have all of the
     functionality and services currently planned for such service.  The
     foregoing estimate of the timing of the launch of the planned New Portal
     Service is a forward-looking statement that is subject to risks and
     uncertainties.  Actual results may vary materially as a result of a number
     of factors, including but not limited to those set forth below in this
     paragraph, and under "--Uncertainties Related to Integration of Operations"
     above.  If consumers do not perceive the New Portal Service content and
     experience to be of high quality, or if the combined companies introduce
     new Internet sites or enter into new business ventures that are not
     favorably received by consumers, the combined companies will be
     unsuccessful in expanding their Internet audience.  There can be no
     assurance that the Company and Starwave will be able to successfully
     develop and launch the planned New Portal Service on a timely basis, or at
     all, and the combined companies are dependent, in part, upon Disney and the
     Starwave joint ventures for successful development and launch of the New
     Portal Service.

     Amortization of Goodwill and Increased Expenditures Will Delay
     Profitability of Combined Companies.  Because the Starwave Acquisition will
     be accounted for under the "purchase" method of accounting, the purchase
     price will be allocated to the acquired assets and liabilities of Starwave.
     The Company expects to record an in-process research and development charge
     in the quarter the Starwave Acquisition is consummated.  In addition,
     intangible assets related to goodwill, developed technology and assembled
     workforce are expected by the Company to be amortized over a period of
     years following consummation 

                                       29
<PAGE>
 
     of the proposed Starwave Acquisition. In addition, the combined companies
     expect to incur increased operating expenditures associated with the
     expanded operations of the combined companies businesses and the
     development, launch and promotion of the planned New Portal Service. As a
     result, the combined companies profitability is expected to be delayed
     beyond the time frame in which the Company may have otherwise achieved
     profitability.

     Costs of Integration; Transaction Expenses.  The Company estimates that it
     will incur direct transaction costs of approximately $15.0 million
     associated with the proposed Starwave Acquisition, which will be accounted
     for as part of the purchase price of the transactions.  The Company also
     expects to incur an additional significant charge to operations, which
     currently cannot be reasonably estimated, in the quarter in which the
     proposed Starwave Acquisition is expected to be consummated, to reflect
     costs associated with integrating the two companies.  There can be no
     assurance that the combined companies will not incur additional material
     charges in subsequent quarters to reflect additional costs associated with
     the proposed Starwave Acquisition.

Further, no assurance can be given that any other acquisitions will or will not
occur, that if an acquisition does occur it will not materially and adversely
affect the Company or that any such acquisition will be successful in enhancing
the Company's businesses.  If the Company proceeds with additional significant
acquisitions in which the consideration consists of cash, a substantial portion
of the Company's available cash could be used to consummate the acquisitions.
If the Company were to consummate one or more acquisitions in which the
consideration consisted of stock, stockholders of the Company could suffer
dilution of their interests in the Company.

In addition, in the event of consummation of the Starwave Acquisition and
related transactions with Disney, the Company may not (and, if Disney elects to
obtain control when eligible to do so, may not) be able to account for
subsequent acquisitions as pooling-of-interests and, as a result, may have to
recognize significant goodwill related to the acquisition of intangibles, the
amortization of which would adversely affect the Company's subsequent results of
operations, and may incur charges for acquired in-process technology in the
period in which the acquisition occurs that would adversely affect the Company's
results of operations in such period.


Capacity Constraints and System Failure; Advertising Management System.  A key
element of the Company's strategy is to generate a high volume of traffic to its
products and services.  Accordingly, the performance of the Company's products
and services is critical to the Company's reputation, its ability to attract
advertisers to the Company's web sites and market acceptance of these products
and services.  Any system failure that causes interruptions or that increases
response time of the Company's products and services would result in less
traffic to the Company's web sites and, if sustained or repeated, would reduce
the attractiveness of the Company's products and services to advertisers and
customers.  In addition, an increase in the volume of searches conducted through
the Company's products and services could strain the capacity of the software,
hardware or telecommunications lines deployed by the Company, which could lead
to slower response time or system failures.  If traffic to the Company's web
site continues to increase, there can be no assurance that the Company's
products, services and systems will be able to scale appropriately.  The Company
is also dependent upon web browser companies and Internet and online service
providers for access to its products and services, and viewers have experienced
and may in the future experience difficulties due to system or software failures
or incompatibilities not within the 

                                       30
<PAGE>
 
Company's control. The Company is also dependent on hardware suppliers for
prompt delivery, installation and service of servers and other equipment and
services used to provide its products and services. Any disruption in the
Internet access and service provided by the Company or its service providers
could have a material adverse effect upon the Company's business, results of
operations, financial condition and prospects.

The process of managing advertising with large, high traffic web sites such as
the Company's is an increasingly important and complex task.  The Company is in
the process of converting from an internally developed advertising inventory
management analysis system to provide enhanced internal reporting and customer
feedback on advertising to a system being developed by NetGravity.  As this
process has progressed, the Company continues to evaluate all alternatives
including other third party and internally developed applications and recently
began to evaluate Starwave's advertising delivery system which it may adopt for
its use if the proposed Starwave Acquisition occurs.  The Company currently
anticipates that a new advertising management system will be installed and
become operational in 1999.  The time period in which the Company estimates a 
new advertising management system to be operational is a forward looking 
statement that is subject to risks and uncertainties and actual results may 
differ materially. To the extent that the Company encounters material
difficulties in bringing, or is unable to bring, a new system online, the
Company will need to acquire an alternative solution from a third party vendor
or devote sufficient resources to enhance its current internally developed
system.  Any extended failure of, or material difficulties encountered in
connection with, the Company's advertising management system may expose Infoseek
to "make good" obligations with its advertising customers, which, by displacing
advertising inventory would, among other consequences, reduce revenue and would
have a material adverse effect on the Company's business, results of operations,
financial condition and prospects.

In addition, the Company's operation depends upon its ability to maintain and
protect its computer systems, all of which are located at the Company's
principal offices in Sunnyvale, California.  This system is vulnerable to damage
from fire, floods, earthquakes, power loss, telecommunications failures, break-
ins and similar events.  The Company does not currently have a disaster recovery
plan in effect and does not have redundant systems for its service at an
alternate site.  Despite the implementation of network security measures by the
Company, its servers are also vulnerable to computer viruses, break-ins and
similar disruptive problems.  Computer viruses, break-ins or other problems
caused by third parties could lead to interruptions, delays in or temporary
cessation of service to users of the Company's products and services the
occurrence of any of these event would have a material adverse effect on the
Company's business, results of operations, financial condition and prospects.

Future Capital Needs; Uncertainty of Additional Financing. The Company
anticipates that its cash, cash equivalents, short-term investments and cash
flows generated from advertising revenues will be sufficient to meet its
anticipated needs from working capital and other cash requirements through at
least September 30, 1999.  Thereafter, the Company may need to raise additional
funds.  The Company may need to raise additional funds sooner, however, in order
to fund more rapid expansion, to develop new or enhance existing services or
products, to respond to commutative pressures to acquire complementary products,
businesses or technologies.  If additional funds are raised through the issuance
of equity or convertible debt securities, the percentage ownership of the
shareholders of the Company will be reduced, shareholders may experience
additional dilution and such securities my have rights, preferences or
privileges senior to those of the holders of the Company's common stock.  There
can be no assurance that additional financing will be available on terms
favorable to the Company or at all.  If adequate funds are not available or are
not available on acceptable terms, the Company's ability to fund its expansion,
take advantage of unanticipated 

                                       31
<PAGE>
 
acquisition opportunities, develop or enhance services or products or respond to
competitive pressures would be significantly limited. Such limitations could
have a material adverse effect on the Company's business, results of operations,
financial condition and prospects. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."

Risks Associated with International Expansion.  As part of its business
strategy, the Company has begun to seek additional opportunities to expand its
products and services into international markets.  The Company believes that
such expansion is important to the Company's ability to continue tot grow and to
market its products and services.  In marketing its products and services
internationally, however, the Company faces new competitors.  In addition, the
Company's success in entering international markets is dependent upon the
Company's ability to create localized versions of its products and services.
There can be no assurance that the Company will be successful in creating
localized versions of its products and services or marketing or distributing its
products abroad or that, if the Company is successful, its international
revenues will be adequate to offset the expense of establishing and maintaining
international operations.  To date, the Company has limited experience in
marketing and distributing its products and services internationally.  In
addition to the uncertainty as to the Company's ability to establish an
international presence, there are certain difficulties and risks inherent in
doing business on an international level, such as compliance with regulatory
requirements and changes in these requirements, export restrictions, export
controls relating to technology, tariffs and other trade barriers, protection of
intellectual property rights, difficulties in staffing and managing
international operations, longer payment cycles, problems in collection accounts
receivable, political instability, fluctuations in currency exchange rates and
potentially adverse tax consequences.  There can be no assurance that one or
more of such factors would not have a material adverse effect on any
international operations established by the Company and, consequently, on the
Company's business, results of operations, financial condition and prospects.

Dependence on Key Personnel.  The Company's performance is substantially
dependent on the services of the members of its senior management team, as well
as its ability to retain and motivate its officers and key employees.  In
addition, the Company has recently hired, and plans to continue to hire, a
number of engineers to design and implement improvements to the integration of
content with its search engine technology, which the Company believes will be a
significant factor in its future ability to compete favorably with other
navigational guides.  The Company's future performance depends in significant
part upon the contributions of its senior management personnel, including its
Chairman Steve Kirsch, who is integrally involved in the Company's research and
development efforts.  Although the Company provides incentives such as salary,
benefits and option grants (which are typically subject to vesting over four
years) to attract and retain qualified employees, the loss of services of any of
the Company the Company's officers or other key employees would have a material
adverse effect on the Company the Company's business, results of operations,
financial condition and prospects.

Volatility of Stock Price.  The price of the Company the Company's common stock
has been and may continue to be subject to wide fluctuations in response to a
number of events and factors such as quarterly variations in results of
operations, announcements of new technological innovations or new products and
media properties by the Company or its competitors, changes in financial
estimates and recommendations by securities analysts, the operating and stock
price performance of other companies that investors may deem comparable to the
Company, and news relating to 

                                       32
<PAGE>
 
trends in the Company's markets. In addition, the stock market in general, and
the market prices for Internet-related companies in particular, have experienced
extreme volatility that often has been unrelated to the operating performance of
such companies. These broad market and industry fluctuations may adversely
affect the price of the Company's common stock, regardless of the Company's
operating performance.

Intellectual Property and Proprietary Rights.  The Company's success depends
significantly upon its proprietary technology.  The Company currently relies on
a combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect its proprietary rights.  The
Company seeks to protect its software, documentation and other written materials
under trade secret, patent and copyrights laws, which afford only limited
protection.  The Company holds two United States patents and currently has 10
United States patent applications pending and six foreign patent applications
pending.  There can be no assurance that the pending applications will be
approved, or that if issued, such patents will not be challenged, and if such
challenges are brought, that such patents will not be invalidated.  There can be
no assurance that the Company will develop proprietary products or technologies
that are patentable, that any issued patent will provide the Company with any
competitive advantages or will not be challenged by third parties, or that the
patents of others will not have a material adverse effect on the Company's
ability to do business.  The Company has registered and applied for registration
for certain service marks and trademarks, and will continue to evaluate the
registration of additional service marks and trademarks, as appropriate.  The
Company generally enters into confidentiality agreements with its employees and
with its consultants and customers.  Litigation may be necessary to protect the
Company's proprietary technology.  Any such litigation may be time-consuming and
costly.  Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or
services or to obtain and use information that the Company regards as
proprietary.  In addition, the laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its proprietary
right swill be adequate or that the Company's competitors will not independently
develop similar technology or duplicate the Company's products or design around
patents issued to the Company or other intellectual property rights of the
Company.

There have been substantial amounts of litigation in the computer industry
regarding intellectual property rights.  There can be no assurance that third
parties will not in the future claim infringement by the Company with respect to
current or future products, trademarks or other proprietary rights, that the
Company will counterclaim against any such parties in such actions or that if
the Company makes claims against third parties with respect thereto, that any
such party will not counterclaim against the Company in such actions.  For
example, the Company is aware of a U.S. patent recently issued to Carnegie
Mellon related to Web spider technology that has been licensed to Lycos and is
currently utilized in the Lycos search engine.  While the Company currently
believes, based on a preliminary review of such issued patent and consultation
with its patent counsel, that the technologies employed by the Company in the
Infoseek Service do not infringe the Carnegie Mellon patent, there can be no
assurance that the Company would prevail if Lycos or Carnegie Mellon claimed the
Company infringed such patent.  Any such claims or counterclaims could be time-
consuming, result in costly litigation, cause product release delays, require
the Company to redesign its products or require the Company to enter into
royalty or licensing agreements, any of which could have a material adverse
effect upon the Company's 

                                       33
<PAGE>
 
business, results of operations, financial condition and prospects. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all.

Government Regulation and Legal Uncertainties. The Company is not currently
subject to direct regulation by any government agency, other than regulations
generally applicable to businesses, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet. A
number of legislative and regulatory proposals are under consideration by
federal, state and foreign governmental organizations, and it is possible that a
number of laws or regulations may be adopted with respect to the Internet
covering issues such as user privacy, pricing and characteristics and quality of
products and services. The adoption of any such laws or regulations may decrease
the growth of the Internet, which could in turn decrease the demand for the
Company's products, increase the Company's cost of doing business, or otherwise
have an adverse effect on the Company's business, results of operations,
financial condition and prospects. Moreover, the applicability to the Internet
of existing laws governing issues such as property ownership, copyright, trade
secret, libel and personal privacy is uncertain and developing. Any such new
legislation or regulation, or application or interpretation of existing laws,
could have a material adverse effect on the Company's business, results of
operations, financial condition and prospects.

Because materials may be downloaded by the online or Internet services operated
or facilitated by the Company and may be subsequently distributed to others,
there is a potential that claims will be made against the Company for
defamation, negligence, copyright or trademark infringement, personal injury or
other theories based on the nature, content, publication and distribution of
such materials. Such claims have been brought, and sometimes successfully
pursued, against online service providers in the past. In addition, the Company
could be exposed to liability with respect to the selection of listings that may
be accessible through content and materials that may appear in chat room,
instant messaging, hosted web pages or other services offered by the Company.
Such claims might include, among others, that by hosting or providing hypertext
links to web sites operated by third parties, the Company is liable for
copyright or trademark infringement or other wrongful actions by such third
parties through such web sites. It is also possible that if any information
provided through the Company's services, such as stock quotes, analyst estimates
or other trading information, contains errors, third parties could make claims
against the Company for losses incurred in reliance on such information. The
Company expects to offer web-based e-mail services in the near future, which may
expose the Company to potential risks, such as liabilities or claims resulting
from unsolicited e-mail (spamming), lost or misdirected messages, illegal or
fraudulent use of e-mail, harassment or interruptions or delays in e-mail
service.

From time to time, the Company will enter into agreements with sponsors, content
providers, service providers and merchants under which the Company are entitled
to receive a share of revenue from the purchase of goods and services by users
of the Company's online properties. Such arrangements may expose the Company to
additional legal risks and uncertainties, including (without limitation)
potential liabilities to consumers of such products and services. Although the
Company carries general liability insurance, such insurance may not cover
potential claims of this type or may not be adequate to indemnify the Company
for all liability that may be imposed.

                                       34
<PAGE>
 
Dependence on Continued Growth in Use of the Internet. Future growth in the
Company's revenues will depend on the widespread acceptance and use of the
Internet and other interactive online platforms as a source of information and
entertainment and as a vehicle for commerce in goods and services. Rapid growth
in the use of and interest in the Internet is a recent phenomenon, and there can
be no assurance that acceptance and use of the Internet will continue to develop
or that a sufficient base of users will emerge to support the Company's
businesses. Moreover, critical issues concerning the commercial use of the
Internet (including security, reliability, cost, ease of use and access, quality
of service and acceptance of advertising) remain unresolved and may negatively
affect the growth of Internet use or the attractiveness of the Internet for
advertising and online transactions. The Internet may not be accepted as a
viable commercial medium for a number of reasons, including potentially
inadequate development of the necessary network infrastructure, failure to
develop or untimely development of critical enabling technologies, or inadequate
commercial support for Internet-based advertising. To the extent that the
Internet continues to experience an increase in users, an increase in frequency
of use or an increase in the bandwidth requirements of users, there can be no
assurance that the Internet infrastructure will be able to support the demands
placed upon it. The widespread deployment of cable modems and other higher
bandwidth enabling technologies has to date experienced delays, and continuing
delays in the development and deployment of such technologies could slow the
growth in the use of the Internet. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or as the result of increased government regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
also could result in slower response times and could adversely affect use of the
Internet generally and of the Company's Internet services in particular. In
addition, corporations and other networks providing access to the Internet may
restrict access to certain sites or hours of usage, which could limit access to
and reduce traffic on the Company's services. If use of the Internet does not
continue to grow or grows more slowly than expected, the Internet infrastructure
does not effectively support growth that may occur, or access to the Internet or
the Company's services is otherwise restricted, the Company's business,
financial condition and operating results would be materially adversely
affected.

Internet Security and Electronic Commerce Risks. Concerns over the security of
online transactions and the privacy of users may inhibit the growth of the
Internet generally, particularly as a means of conducting commercial
transactions. A party who is able to circumvent either of the Company's security
measures could misappropriate confidential or proprietary information or cause
interruptions in the Company's online operations. The Company expects to expend
significant capital and resources to protect against the threat of such security
breaches or to alleviate problems caused by such breaches, but there can be no
assurance that the Company's efforts in this regard will be successful. To the
extent that activities of the Company or third party contractors involve the
storage and transmission of confidential or proprietary information, such as
computer software or credit card numbers, security breaches could expose the
Company to a risk of loss or litigation and possible liability. There can be no
assurance that contractual provisions attempting to limit the Company's
liability in such areas will be successful or enforceable, or that other parties
will accept such contractual provisions as part of the Company's agreements.

Year 2000 Compliance. The Company is aware of the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"year 2000 problem" is pervasive and complex as virtually every computer
operation will be effected in some way by the rollover of the two digit year
value to 00. The issue is whether computer systems will properly 

                                       35
<PAGE>
 
recognize date sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
cause a system to fail. Management of the Company is in the process of working
with its software vendors to assure that they are prepared for the year 2000.
Management does not anticipate that the Company will incur significant operating
expenses or be required to invest heavily in computer systems improvements to be
year 2000 compliant. However, significant uncertainty exists concerning the
potential costs and effects associated with any year 2000 compliance. The
Company is currently implementing an upgrade to each of its management
information systems that it believes is year 2000 compliant. Any year 2000
compliance problem of the Company or its viewers, customers or advertisers could
materially adversely affect the Company's business, results of operations,
financial condition and prospects.

                                       36
<PAGE>
 
PART II:  OTHER INFORMATION

ITEM 4.  Submission of Matters to a Vote of Security Holders

         a)  The Annual Meeting of Stockholders of the Company was held on June
             19, 1998.
         b)  The following directors were elected at the meeting:
 
               Steven T. Kirsch
               Harry M. Motro
               Matthew J. Stover
               John E. Zeisler
               L. William Krause

         c)  The shareholders approved an amendment to the 1996 Stock
             Option/Stock Issuance Plan to increase the number of shares
             available for grant thereunder by 1,500,000 shares.

         d)  The shareholders approved an amendment to the 1996 Stock
             Option/Stock Issuance Plan to provide for an annual increase in the
             number of shares available for grant thereunder by the lesser of
             (i) 1,200,000 shares (ii) 4% of the outstanding shares of Common
             Stock of the Company or (iii) such lessor number of shares as
             determined by the Board of Directors.

         e)  The shareholders approved an amendment to the 1996 Stock
             Option/Stock Issuance Plan to provide for an annual increase in the
             automatic option grant program for non-employee directors from (i)
             7,500 to 15,000 upon becoming a director and (ii) 3,750 to 7,500 at
             the time of each annual meeting of shareholders thereafter.

         f)  Shareholders approved an amendment to the Company's Employee Stock
             Purchase Plan to increase the number of shares available for
             issuance and sale thereunder by 400,000 shares.

         g)  Shareholders approved an amendment to the Company's Employee Stock
             Purchase Plan to for annual increase in the number of shares
             available for issuance and sale thereunder by lesser of (i) 400,000
             share (ii) 1% of the outstanding shares of Common Stock of the
             Company or (iii) such lesser number of shares as determined by the
             Board of Directors.

         h)  The shareholders also ratified the appointment of Ernst & Young,
             L.L.P. as the independent accountants for the company for the year
             ended December 31, 1998.

                                       37
<PAGE>
 
         i)  The results of the vote on the matters voted upon at the meeting
             are:
 
                (i)    Election of Directors     For      Withheld
                       ---------------------  ----------  --------
                       Steven T. Kirsch       28,765,919    86,964
                       Harry M. Motro         28,765,429    87,454
                       Matthew J. Stover      28,764,519    88,364
                       John E. Zeisler        28,426,219   426,664
                       L. William Krause      28,761,395    91,488

                (ii)    Approval to the amendments to the Company's 1996 Stock
                        Option/Stock Issuance Plan to increase the number of
                        shares available for issuance.
<TABLE> 
<CAPTION>
                                For             Against         Abstained       Not Voted
                            ----------         ---------        ---------       ---------
                            <S>               <C>               <C>           <C>
                            12,593,294         2,716,071         101,764       13,441,754

</TABLE> 
 
                (iii)   Approval to the amendments to the Company's 1996 Stock
                        Option/Stock Issuance Plan to provide for an annual
                        increase in the number of shares reserved for issuance.

<TABLE> 
<CAPTION> 

                                For             Against         Abstained       Not Voted
                            ----------         ---------        ---------       ---------
                            <S>               <C>               <C>           <C>
                             12,679,391        2,620,366         111,372       13,441,754
</TABLE>

                (iv)    Approval to the amendments to the Company's 1996 Stock
                        Option/Stock Issuance Plan to provide for an annual
                        increase in the automatic option grant program for non-
                        employee directors.

<TABLE>
<CAPTION>
                                For             Against         Abstained       Not Voted
                            ----------         ---------        ---------       ---------
                            <S>               <C>               <C>           <C>
                            14,241,168         1,059,777         110,184       13,441,754
</TABLE>

                (v)     Approval to the amendment to the Company's Employee
                        Stock Purchase Plan to provide for an increase in the
                        number of shares available for issuance.
<TABLE>
<CAPTION>

                                For             Against         Abstained       Not Voted
                            ----------         ---------        ---------       ---------
                            <S>               <C>               <C>           <C>
                            14,344,938         963,709           102,482       13,441,754
</TABLE>

                (vi)    Approval to the amendment to the Company's Employee
                        Stock Purchase Plan to provide for an annual increase in
                        the number of shares available for issuance and sale.

<TABLE>
<CAPTION>
                                For             Against         Abstained       Not Voted
                            ----------         ---------        ---------       ---------
                            <S>               <C>               <C>           <C>
                            14,377,550         931,453           102,126       13,441,754
</TABLE> 
 
                (vii)   Ratification of Ernst & Young, L.L.P. as independent
                        auditors for the Company for fiscal year 1998:
<TABLE> 
<CAPTION> 

                                For             Against         Abstained       Not Voted
                            ----------         ---------        ---------       ---------
                            <S>               <C>               <C>           <C>
                            28,357,029         435,520           60,334             0
</TABLE>
             The foregoing matters are described in more detail in the Company's
             definitive proxy statement dated June 19, 1998.

                                       38
<PAGE>
 
ITEM 6.   Exhibits and Reports on Form 8-K

a)        Exhibit

     27.1 Financial Data Schedule

b)        Reports on Form 8-K

     The Company filed a current report on Form 8-K on May 22, 1998 which was
     amended on August 10, 1998 reporting the consolidated financial statements
     and the condensed consolidated financial statements which give retroactive
     effect to the merger of a wholly owned subsidiary of the Company with and
     into WebChat Communications, Inc. on April 17, 1998.  The transaction was
     accounted for as a pooling-of-interests.

                                       39
<PAGE>
 
                                  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.



                      INFOSEEK CORPORATION
 
                      By:   /s/ Remo Canessa
                            -----------------------------
                            Remo Canessa
                            Vice President, Chief Financial Officer
                            (Principal Accounting and Financial Officer)

                            Dated:  August 13, 1998

                                       40