##### Table of Contents









U.S. SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-Q

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the quarterly period ended June 30,
    2004                                            
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission file number: 000-23709



---

DoubleClick Inc.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 13-3870996                                 
|(STATE OR OTHER JURISDICTION OF
    INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER
    IDENTIFICATION NUMBER)

111 Eighth Avenue, 10th Floor

New York, New York 10011


(212) 683-0001


(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE
NUMBER,


INCLUDING AREA CODE OF REGISTRANTS
PRINCIPAL EXECUTIVE OFFICES)


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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     Yes þ          No o

As of August 6, 2004 there were 126,732,248
outstanding shares of the registrants Common Stock.



---






---










DOUBLECLICK INC.

INDEX TO FORM 10-Q

|                                   |  |                                                                                                         |  |   
|---------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | --
|PART I:  FINANCIAL
    INFORMATION
|Item 1:                            |  | Financial Statements
    (unaudited)                                                                    |  |   
|                                   |  | Consolidated Balance Sheets
    as of June 30, 2004 and December 31, 2003                               |  | 2 
|                                   |  | Consolidated Statements of
    Operations for the three and six months ended June 30, 2004
    and 2003 |  | 3 
|                                   |  | Consolidated Statements of
    Cash Flows for the six months ended June 30, 2004 and
    2003           |  | 4 
|                                   |  | Notes to Consolidated
    Financial Statements                                                          |  | 5 
|Item 2:                            |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations               |  | 19
|Item 3:                            |  | Quantitative and Qualitative
    Disclosures about Market Risk                                          |  | 32
|Item 4:                            |  | Controls and Procedures                                                                                 |  | 47
|                                  
|PART II:  OTHER
    INFORMATION   
|Item 1:                            |  | Legal Proceedings                                                                                       |  | 47
|Item 2:                            |  | Changes in Securities, Use of Proceeds and Issuer
    Purchases of Equity Securities                    |  | 48
|Item 4:                            |  | Submission of Matters to a Vote of Security
    Holders                                                 |  | 48
|Item 6:                            |  | Exhibits and Reports on Form 8-K                                                                        |  | 49
|AGREEMENT AND PLAN OF MERGER      
|MASTER LICENSE AGREEMENT          
|CERTIFICATION                     
|CERTIFICATION                     
|CERTIFICATION                     
|CERTIFICATION                     



1



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##### Table of Contents






PART 1:     FINANCIAL
INFORMATION






|        |                                     
|------- | ------------------------------------
|Item 1: | Financial Statements
    (Unaudited)

DOUBLECLICK INC.



CONSOLIDATED BALANCE SHEETS


|                                                                                                                               |                                            |                           |           |              |  |   |           |         | 
|------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------------------------- | --------- | ------------ |  | - | --------- | ------- | 
|                                                                                                                               |                                            | June 30,                  |           | December 31,
|                                                                                                                               |                                            | 2004                      |           | 2003        
|                                                                                                                               |                                            |                           |           |             
|                                                                                                                               |                                            |                          
|                                                                                                                               |                                            | (Unaudited, in thousands,
|                                                                                                                               |                                            | except share amounts)    
|ASSETS                                                                                                                        
|CURRENT ASSETS:                                                                                                                |                                            |                           |           |              |  |   |           |        
|Cash and cash equivalents                                                                                                      |                                            | $                         | 77,522    |              |  | $ | 183,484   |        
|Investments in marketable securities                                                                                           |                                            |                           | 183,839   |              |  |   | 151,898   |        
|Restricted cash                                                                                                                |                                            |                           | 3,728     |              |  |   | 16,328    |        
|Accounts receivable, net of allowances of $7,780
    and $7,519, respectively                                                  |                                            |                           | 66,160    |              |  |   | 51,491    |        
|Prepaid expenses and other current assets                                                                                      |                                            |                           | 19,234    |              |  |   | 17,473    |        
|                                                                                                                               |                                            |                           |           |              |  |   |           |        
|                                                                                                                               | Total current assets                       |                           |           | 350,483      |  |   |           | 420,674 | 
|Investment in marketable securities                                                                                            |                                            |                           | 264,822   |              |  |   | 312,434   |        
|Restricted cash                                                                                                                |                                            |                           | 11,668    |              |  |   | 11,668    |        
|Property and equipment, net                                                                                                    |                                            |                           | 76,933    |              |  |   | 75,786    |        
|Goodwill                                                                                                                       |                                            |                           | 68,293    |              |  |   | 18,658    |        
|Intangible assets, net                                                                                                         |                                            |                           | 33,111    |              |  |   | 10,847    |        
|Investment in affiliates                                                                                                       |                                            |                           | 15,135    |              |  |   | 13,422    |        
|Other assets                                                                                                                   |                                            |                           | 13,615    |              |  |   | 14,408    |        
|                                                                                                                               |                                            |                           |           |              |  |   |           |        
|                                                                                                                               | Total assets                               |                           | $         | 834,060      |  |   | $         | 877,897 | 
|                                                                                                                               |                                            |                           |           |              |  |   |           |        
|                                                                                                                              
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                                      
|CURRENT LIABILITIES:                                                                                                           |                                            |                           |           |              |  |   |           |        
|Accounts payable                                                                                                               |                                            | $                         | 4,897     |              |  | $ | 4,164     |        
|Accrued expenses and other current liabilities                                                                                 |                                            |                           | 60,453    |              |  |   | 62,741    |        
|Current portion of capital lease obligations and
    loans payable                                                             |                                            |                           | 3,416     |              |  |   | 411       |        
|Deferred revenue                                                                                                               |                                            |                           | 9,762     |              |  |   | 8,188     |        
|                                                                                                                               |                                            |                           |           |              |  |   |           |        
|                                                                                                                               | Total current liabilities                  |                           |           | 78,528       |  |   |           | 75,504  | 
|Convertible subordinated notes  Zero
    Coupon, due 2023                                                                     |                                            |                           | 135,000   |              |  |   | 135,000   |        
|Other long term liabilities                                                                                                    |                                            |                           | 26,503    |              |  |   | 27,046    |        
|STOCKHOLDERS EQUITY:                                                                                                          |                                            |                           |           |              |  |   |           |        
|Preferred stock, par value $0.001;
    5,000,000 shares authorized, none outstanding                                           |                                            |                           |          |              |  |   |          |        
|Common stock, par value $0.001;
    400,000,000 shares authorized, 140,209,258 and
    139,329,875 shares issued, respectively |                                            |                           | 140       |              |  |   | 139       |        
|Treasury stock, 8,442,325 and
    1,846,170 shares, respectively                                                               |                                            |                           | (70,385   | )            |  |   | (10,396   | )      
|Additional paid-in capital                                                                                                     |                                            |                           | 1,292,525 |              |  |   | 1,287,775 |        
|Accumulated deficit                                                                                                            |                                            |                           | (637,949  | )            |  |   | (649,523  | )      
|Other accumulated comprehensive income                                                                                         |                                            |                           | 9,698     |              |  |   | 12,352    |        
|                                                                                                                               |                                            |                           |           |              |  |   |           |        
|                                                                                                                               | Total stockholders equity                 |                           |           | 594,029      |  |   |           | 640,347 | 
|                                                                                                                               |                                            |                           |           |              |  |   |           |        
|                                                                                                                               | Total liabilities and stockholders equity |                           | $         | 834,060      |  |   | $         | 877,897 | 
|                                                                                                                               |                                            |                           |           |              |  |   |           |        

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

2



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##### Table of Contents



DOUBLECLICK INC.



CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |        |        |  
|---------------------------------------------------------------- | ------------------------------------ | --------------------------------------------------- | ------- | ---------------- | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------ | -
|                                                                 |                                      |                                                     |         |                 
|                                                                 |                                      | Three Months Ended                                  |         | Six Months Ended
|                                                                 |                                      | June 30,                                            |         | June 30,        
|                                                                 |                                      |                                                     |         |                 
|                                                                 |                                      | 2004                                                |         | 2003             |        | 2004 |         | 2003  
|                                                                 |                                      |                                                     |         |                  |        |      |         |       
|                                                                 |                                      |                                                    
|                                                                 |                                      | (Unaudited, in thousands, except per share amounts)
|Revenue                                                          |                                      | $                                                   | 69,153  |                  |        | $    | 63,556  |        |        | $ | 137,200 |        |        | $ | 123,610 |       
|Cost of revenue                                                  |                                      |                                                     | 21,829  |                  |        |      | 22,448  |        |        |   | 44,394  |        |        |   | 44,395  |       
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|                                                                 | Gross profit                         |                                                     |         | 47,324           |        |      |         | 41,108 |        |   |         | 92,806 |        |   |         | 79,215 |       
|Operating expenses:                                              |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|                                                                 | Sales and marketing                  |                                                     |         | 23,505           |        |      |         | 20,852 |        |   |         | 49,155 |        |   |         | 40,508 |       
|                                                                 | General and administrative           |                                                     |         | 8,860            |        |      |         | 8,360  |        |   |         | 16,934 |        |   |         | 17,226 |       
|                                                                 | Product development                  |                                                     |         | 10,993           |        |      |         | 8,528  |        |   |         | 19,484 |        |   |         | 16,573 |       
|                                                                 | Amortization of intangibles          |                                                     |         | 1,188            |        |      |         | 1,240  |        |   |         | 1,825  |        |   |         | 3,319  |       
|                                                                 | Restructuring credits, net           |                                                     |         |                 |        |      |         | (6,871 | )      |   |         |       |        |   |         | (6,871 | )     
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|                                                                 |                                      | Total operating expenses                            |         |                  | 44,546 |      |         |        | 32,109 |   |         |        | 87,398 |   |         |        | 70,755 |  
|Income from operations                                           |                                      |                                                     | 2,778   |                  |        |      | 8,999   |        |        |   | 5,408   |        |        |   | 8,460   |       
|Other income (expense)                                           |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|                                                                 | Equity in losses of affiliates       |                                                     |         | (384             | )      |      |         | (1,048 | )      |   |         | (570   | )      |   |         | (2,313 | )     
|                                                                 | Gain on distribution from affiliate  |                                                     |         |                 |        |      |         |       |        |   |         | 2,400  |        |   |         |       |       
|                                                                 | Loss on early extinguishment of debt |                                                     |         |                 |        |      |         | (4,406 | )      |   |         |       |        |   |         | (4,406 | )     
|                                                                 | Interest and other, net              |                                                     |         | 2,317            |        |      |         | 2,589  |        |   |         | 5,791  |        |   |         | 5,632  |       
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|                                                                 |                                      | Total other income (expense)                        |         |                  | 1,933  |      |         |        | (2,865 | ) |         |        | 7,621  |   |         |        | (1,087 | )
|Income before income taxes                                       |                                      |                                                     | 4,711   |                  |        |      | 6,134   |        |        |   | 13,029  |        |        |   | 7,373   |       
|Provision for income taxes                                       |                                      |                                                     | (830    | )                |        |      | (303    | )      |        |   | (1,455  | )      |        |   | (636    | )     
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|Net income                                                       |                                      | $                                                   | 3,881   |                  |        | $    | 5,831   |        |        | $ | 11,574  |        |        | $ | 6,737   |       
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|Basic net income per share                                       |                                      | $                                                   | 0.03    |                  |        | $    | 0.04    |        |        | $ | 0.09    |        |        | $ | 0.05    |       
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|Weighted average shares used in basic net income
    per share   |                                      |                                                     | 134,824 |                  |        |      | 136,922 |        |        |   | 135,961 |        |        |   | 136,679 |       
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|Diluted net income per share                                     |                                      | $                                                   | 0.03    |                  |        | $    | 0.04    |        |        | $ | 0.08    |        |        | $ | 0.05    |       
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       
|Weighted average shares used in diluted net
    income per share |                                      |                                                     | 137,636 |                  |        |      | 140,434 |        |        |   | 139,360 |        |        |   | 139,597 |       
|                                                                 |                                      |                                                     |         |                  |        |      |         |        |        |   |         |        |        |   |         |       

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

3



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##### Table of Contents



DOUBLECLICK INC.



CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                         |                                                                                       |                                                                                     |                                        |         |         |         |         |          |         |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------- | ------- | ------- | ------- | ------- | -------- | ------- | ------- | -
|                                                         |                                                                                       |                                                                                    
|                                                         |                                                                                       | Six Months Ended June 30,                                                          
|                                                         |                                                                                       |                                                                                    
|                                                         |                                                                                       | 2004                                                                                |                                        | 2003   
|                                                         |                                                                                       |                                                                                     |                                        |        
|                                                         |                                                                                       |                                                                                    
|                                                         |                                                                                       | (Unaudited, in thousands)                                                          
|OPERATING ACTIVITIES                                     |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|                                                         | Net income                                                                            |                                                                                     | $                                      | 11,574  |         |         | $       | 6,737    |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                     |                                        |         |         |         |         |          |        
|                                                         |                                                                                       | Depreciation and leasehold amortization                                             |                                        |         | 13,797  |         |         |          | 20,353  |        
|                                                         |                                                                                       | Amortization of intangible assets                                                   |                                        |         | 3,609   |         |         |          | 4,980   |        
|                                                         |                                                                                       | Equity in losses of affiliates                                                      |                                        |         | 570     |         |         |          | 2,313   |        
|                                                         |                                                                                       | Gain on distribution from affiliate                                                 |                                        |         | (2,400  | )       |         |          |        |        
|                                                         |                                                                                       | Loss on early extinguishment of debt                                                |                                        |         |        |         |         |          | 4,406   |        
|                                                         |                                                                                       | Other non-cash items                                                                |                                        |         | 1,397   |         |         |          | 1,202   |        
|                                                         |                                                                                       | Provisions for bad debts and advertiser discounts                                   |                                        |         | 5,958   |         |         |          | 3,258   |        
|                                                         |                                                                                       | Changes in operating assets and liabilities, net
    of the effect of acquisitions: |                                        |         |         |         |         |          |         |        
|                                                         |                                                                                       |                                                                                     | Accounts receivable                    |         |         | (3,186  | )       |          |         | (71     | )
|                                                         |                                                                                       |                                                                                     | Prepaid expenses and other assets      |         |         | 317     |         |          |         | 3,892   |  
|                                                         |                                                                                       |                                                                                     | Accounts payable                       |         |         | 732     |         |          |         | (3,677  | )
|                                                         |                                                                                       |                                                                                     | Lease termination and related payments |         |         | (7,625  | )       |          |         | (14,400 | )
|                                                         |                                                                                       |                                                                                     | Accrued expenses and other liabilities |         |         | (16,191 | )       |          |         | (28,829 | )
|                                                         |                                                                                       |                                                                                     | Deferred revenue                       |         |         | (928    | )       |          |         | 4,184   |  
|                                                         |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|                                                         |                                                                                       | Net cash provided by operating activities                                           |                                        |         | 7,624   |         |         |          | 4,348   |        
|INVESTING ACTIVITIES                                     |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|                                                         | Purchases of investments in marketable securities                                     |                                                                                     |                                        | (95,084 | )       |         |         | (236,195 | )      
|                                                         | Maturities of investments in marketable securities                                    |                                                                                     |                                        | 106,592 |         |         |         | 335,139  |        
|                                                         | Restricted cash                                                                       |                                                                                     |                                        | 12,600  |         |         |         | (30,811  | )      
|                                                         | Purchases of property and equipment                                                   |                                                                                     |                                        | (12,123 | )       |         |         | (11,227  | )      
|                                                         | Proceeds from distribution from affiliate                                             |                                                                                     |                                        | 2,400   |         |         |         |         |        
|                                                         | Investment in Abacus Deutschland                                                      |                                                                                     |                                        | (471    | )       |         |         |         |        
|                                                         | Acquisition of businesses, net of cash acquired                                       |                                                                                     |                                        | (72,002 | )       |         |         | (2,757   | )      
|                                                         | Proceeds from sale of investment in affiliates                                        |                                                                                     |                                        |        |         |         |         | 656      |        
|                                                         | Proceeds from sale of intangible asset, net                                           |                                                                                     |                                        |        |         |         |         | 900      |        
|                                                         |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|                                                         |                                                                                       | Net cash (used in) provided by investing
    activities                             |                                        |         | (58,088 | )       |         |          | 55,705  |        
|FINANCING ACTIVITIES                                     |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|                                                         | Proceeds from the issuance of common stock and
    the exercise of stock options, net |                                                                                     |                                        | 3,354   |         |         |         | 2,266    |        
|                                                         | Proceeds from issuance of convertible
    subordinated notes, net                     |                                                                                     |                                        |        |         |         |         | 131,963  |        
|                                                         | Purchases of treasury stock                                                           |                                                                                     |                                        | (58,423 | )       |         |         |         |        
|                                                         | Payments under capital lease obligations and
    notes payable                        |                                                                                     |                                        | (285    | )       |         |         | (3,681   | )      
|                                                         |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|                                                         |                                                                                       | Net cash (used in) provided by financing
    activities                             |                                        |         | (55,354 | )       |         |          | 130,548 |        
|Effect of exchange rate changes on cash                  |                                                                                       |                                                                                     | (144                                   | )       |         |         | 2,693   |         
|                                                         |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|Net (decrease) increase in cash and cash
    equivalents |                                                                                       |                                                                                     | (105,962                               | )       |         |         | 193,294 |         
|Cash and cash equivalents at beginning of period         |                                                                                       | $                                                                                   | 183,484                                |         |         | $       | 123,671 |         
|                                                         |                                                                                       |                                                                                     |                                        |         |         |         |         |         
|Cash and cash equivalents at end of period               |                                                                                       | $                                                                                   | 77,522                                 |         |         | $       | 316,965 |         
|                                                         |                                                                                       |                                                                                     |                                        |         |         |         |         |         

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

4



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##### Table of Contents



DOUBLECLICK INC.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


June 30, 2004


(Unaudited)


Note 1  Description of
Business and Significant Accounting Policies



| |                        
| | -----------------------
| | Description of Business

DoubleClick is a leading provider of technology
and data products used by direct marketers, Web publishers and
advertisers to plan, execute and analyze their marketing
programs. Combining technology and data expertise,
DoubleClicks solutions help its customers to optimize
their advertising and marketing campaigns online and through
direct mail. DoubleClick offers a broad array of technology and
data products and services to its customers to allow them to
address a full range of the marketing processes, from
pre-campaign planning and testing, to execution, measurement and
campaign refinements.

DoubleClick derives its revenues from two
business segments: TechSolutions and Data. DoubleClick
TechSolutions includes its Ad Management and Marketing
Automation divisions. DoubleClicks Ad Management division
primarily consists of the DART for Publishers Service, the DART
for Advertisers Service and the DART Enterprise ad serving
software product. DoubleClicks Marketing Automation
division consists of email products based on DoubleClicks
DARTmail Service as well as campaign management and analytics
products and services. As a result of its acquisition of
SmartPath, Inc. (SmartPath), a marketing resource
management software company, in March 2004, DoubleClick offers
marketing planning and operational management solutions as part
of its Marketing Automation suite of products and services. With
the acquisition of Performics Inc. (Performics) in
June 2004, DoubleClick created a third division within
TechSolutions that offers search engine marketing and affiliate
marketing solutions.

DoubleClick Data includes its Abacus and Data
Management divisions. Abacus utilizes the information
contributed to the proprietary Abacus database by Abacus
Alliance members to make direct marketing more effective for
Abacus Alliance members and other clients. Data Management was
formed as a result of DoubleClicks acquisition of Computer
Strategy Coordinators, Inc. (CSC), which was
completed in June 2003. Data Management offers direct marketers
solutions for building and managing customer marketing
databases, tools to plan, execute and measure multi-channel
marketing campaigns, as well as list processing and data hygiene
products and services.



| |                      
| | ---------------------
| | Basis of Presentation

The accompanying consolidated financial
statements include the accounts of DoubleClick, its wholly owned
subsidiaries, and subsidiaries over which it exercises a
controlling financial interest. All significant intercompany
transactions and balances have been eliminated. Investments in
entities in which DoubleClick does not have a controlling
financial interest, but over which it has significant influence
are accounted for using the equity method. Investments in which
DoubleClick does not have the ability to exercise significant
influence are accounted for using the cost method.

The accompanying interim consolidated financial
statements have been prepared in accordance with the rules and
regulations of Securities and Exchange Commission. The
accompanying interim consolidated financial statements are
unaudited, but in the opinion of management, contain all the
normal, recurring adjustments considered necessary to present
fairly the financial position, the results of operations and
cash flows for the periods presented in conformity with
generally accepted accounting principles applicable to interim
periods. Results of operations are not necessarily indicative of
the results expected for the full fiscal year or for any future
period.

The Consolidated Balance Sheet at
December 31, 2003 has been derived from, but does not
include all the disclosures contained in, the audited
Consolidated Financial Statements for the year ended
December 31, 2003. The accompanying Consolidated Financial
Statements should be read in conjunction with the audited
Consolidated Financial Statements of DoubleClick for the year
ended December 31, 2003.

5



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)




| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Cash and Cash Equivalents, Investments in
    Marketable Securities and Restricted Cash

Cash and cash equivalents represent cash and
highly liquid investments with a remaining contractual maturity
at the date of purchase of three months or less.

Marketable securities consist of government and
corporate debt securities and are classified as current or
non-current assets depending on their dates of maturity. As of
June 30, 2004, all marketable securities included in
non-current assets have maturities greater than one year.

DoubleClick classifies its investments in
marketable securities as available-for-sale. Accordingly, these
investments are carried at fair value, with unrealized gains and
losses reported as a separate component of stockholders
equity. DoubleClick recognizes gains and losses when these
securities are sold using the specific identification method.
DoubleClick has not recognized any material gains or losses from
the sale of its investments in marketable securities.

Restricted cash primarily represents amounts
placed in escrow relating to funds used to cover office lease
security deposits and DoubleClicks automated clearinghouse
payment function.



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment is recorded at cost and
depreciated using the straight-line method over the shorter of
the estimated life of the asset or the lease term. As required
by SOP 98-1, Accounting for Costs of Computer
Software Developed or Obtained for Internal Use,
DoubleClick capitalizes certain computer software developed or
obtained for internal use. Capitalized software is depreciated
using the straight-line method over the estimated life of the
software, generally three to five years.



| |                                   
| | ----------------------------------
| | Goodwill and Intangible
    Assets

DoubleClick records as goodwill the excess of
purchase price over the fair value of the identifiable net
assets acquired. SFAS No. 142, Goodwill and
Other Intangible Assets, prescribes a two-step process for
impairment testing of goodwill, which is performed annually, as
well as when an event triggering impairment may have occurred.
The first step tests for impairment, while the second step, if
necessary, measures the impairment. DoubleClick has elected to
perform its annual analysis during the fourth quarter of each
fiscal year as of October 1st. No indicators of impairment were
identified during the first half of 2004.

Intangible assets include patents, trademarks,
customer relationships, purchased technology and a covenant not
to compete. Such intangible assets are amortized on a
straight-line basis over their estimated useful lives, which are
generally two to five years.



| |                                    
| | -----------------------------------
| | Impairment of Long-Lived
    Assets

DoubleClick assesses the recoverability of
long-lived assets, including intangible assets, held and used
whenever events or changes in circumstances indicate that future
cash flows, undiscounted and without interest charges, expected
to be generated by an assets disposition or use may not be
sufficient to support its carrying amount. If such undiscounted
cash flows are not sufficient to support the recorded value of
assets, an impairment loss is recognized to reduce the carrying
value of long-lived assets to their estimated fair value.



| |                    
| | -------------------
| | Revenue Recognition

DoubleClicks revenues are presented net of
a provision for advertiser credits, which is estimated and
established in the period in which services are provided. These
credits are generally issued in the event that solutions do not
meet contractual specifications. Actual results could differ
from these estimates.

6



---



##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


TechSolutions.Revenues include fees earned from the use of DoubleClicks
Ad Management and Marketing Automation products and services.
Revenues derived from DoubleClicks hosted, or Web-based,
applications, including the DART for Publishers Service, the
DART for Advertisers Service, and DARTmail, are recognized in
the period the advertising impressions or emails are delivered,
provided collection of the resulting receivable is reasonably
assured. DART Service activation fees are deferred and
recognized ratably over the expected term of the customer
relationship.

For DoubleClicks licensed ad serving,
campaign management and marketing resource management software
solutions, revenues are recognized when product installation is
complete, which generally occurs when customers begin utilizing
the product, there is pervasive evidence of an arrangement,
collection is reasonably assured, the fee is fixed or
determinable and vendor-specific objective evidence exists to
allocate the total fees to all elements of the arrangement. A
portion of the initial ad serving software license fee is
attributed to the customers right to receive, at no
additional charge, software upgrades released during the
subsequent twelve months. Revenues attributable to software
upgrades are deferred and recognized ratably over the period
covered by the software license agreement, which is generally
one year.

Revenues from consulting services are recognized
as the services are performed and customer-support revenues are
deferred and recognized ratably over the period covered by the
customer support agreement, which is generally one year.

Data.Abacus
provides services to its clients that result in a deliverable
product in the form of consumer and business prospect lists.
Revenues are recognized when the product is shipped to the
client, provided collection of the resulting receivable is
reasonably assured. Data Management provides list processing,
database development and database management services. List
processing and database development revenues are recognized in
the period that the product is completed and delivered, provided
that collection is reasonably assured. Database management
revenues are recognized as the services are provided.



| |                    
| | -------------------
| | Product Development

Product development expenses consist primarily of
compensation and related benefits, consulting fees and other
operating expenses associated with product development
departments. The product development departments perform
research and development, enhance and maintain existing products
and provide quality assurance. Software development costs are
required to be capitalized when a products technological
feasibility has been established by completion of a working
model of the product and ending when a product is available for
general release to customers. To date, completion of a working
model of DoubleClicks products and general release have
substantially coincided. As a result, DoubleClick has not
capitalized any software development costs.



| |                                    
| | -----------------------------------
| | Issuance of Stock by
    Affiliates

Changes in DoubleClicks interest in its
affiliates arising as the result of their issuance of common
stock are recorded as gains and losses in the Consolidated
Statement of Operations, except for any transactions that must
be recorded directly to equity in accordance with the provisions
of SAB No. 51, Accounting for Sales of Stock of a
Subsidiary.



| |             
| | ------------
| | Income Taxes

DoubleClick uses the asset and liability method
of accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to the differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax

7



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


bases and to operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in results of
operations in the period that includes the enactment date. A
valuation allowance is provided to reduce the deferred tax
assets reported if, based on the weight of the available
evidence, it is not more likely than not that some portion or
all of the deferred tax assets will be realized.



| |                 
| | ----------------
| | Foreign Currency

The functional currencies of DoubleClicks
foreign subsidiaries are their respective local currencies. The
financial statements maintained in local currencies are
translated to United States dollars using period-end rates of
exchange for assets and liabilities and average rates during the
period for revenues, cost of revenues and expenses. Translation
gains and losses are accumulated as a separate component of
stockholders equity. Net gains and losses from foreign
currency transactions are included in the Consolidated
Statements of Operations and were not significant during the
periods presented.



| |                          
| | -------------------------
| | Equity-based Compensation

DoubleClick accounts for its employee stock
option plans under the intrinsic value method, in accordance
with the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for
Stock Issued to Employees and related interpretations.
Under APB No. 25, generally no compensation expense is
recorded when the terms of the award are fixed and the exercise
price of the employee stock option equals or exceeds the fair
value of the underlying stock on the date of the grant.
DoubleClick has adopted the disclosure-only requirements of
SFAS No. 123, Accounting for Stock-Based
Compensation, (SFAS 123), which allows
entities to continue to apply the provisions of APB No. 25
for transactions with employees and provide pro forma net income
and pro forma earnings per share disclosures for employee stock
grants made as if the fair value based method of accounting in
SFAS No. 123 had been applied to these transactions.

In December 2002, the Financial Accounting
Standards Board (the FASB) issued
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure which
amends SFAS No. 123, Accounting for Stock-Based
Compensation.

Had DoubleClick determined compensation expense
of employee stock options based on the estimated fair value of
the stock options at the grant date, consistent with the
guidelines of SFAS No. 123, DoubleClicks net
income would have decreased to the pro forma amounts indicated
below:

|                                    |                        |                                          |   |                  |   |      |   |         |   |  |   |        |   |  |   |         |  
|----------------------------------- | ---------------------- | ---------------------------------------- | - | ---------------- | - | ---- | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                    |                        |                                          |   |                 
|                                    |                        | Three Months Ended                       |   | Six Months Ended
|                                    |                        | June 30,                                 |   | June 30,        
|                                    |                        |                                          |   |                 
|                                    |                        | 2004                                     |   | 2003             |   | 2004 |   | 2003   
|                                    |                        |                                          |   |                  |   |      |   |        
|                                    |                        |                                         
|                                    |                        | (In thousands, except per share amounts)
|Net income (loss)                   |                        |                                          |   |                  |   |      |   |         |   |  |   |        |   |  |   |        
|                                    | As reported            |                                          | $ | 3,881            |   |      | $ | 5,831   |   |  | $ | 11,574 |   |  | $ | 6,737   |  
|                                    | Pro forma per SFAS 123 |                                          | $ | (2,778           | ) |      | $ | (21,361 | ) |  | $ | (2,375 | ) |  | $ | (44,602 | )
|Basic net income (loss) per share   |                        |                                          |   |                  |   |      |   |         |   |  |   |        |   |  |   |        
|                                    | As reported            |                                          | $ | 0.03             |   |      | $ | 0.04    |   |  | $ | 0.09   |   |  | $ | 0.05    |  
|                                    | Pro forma per SFAS 123 |                                          | $ | (0.02            | ) |      | $ | (0.16   | ) |  | $ | (0.02  | ) |  | $ | (0.33   | )
|Diluted net income (loss) per share |                        |                                          |   |                  |   |      |   |         |   |  |   |        |   |  |   |        
|                                    | As reported            |                                          | $ | 0.03             |   |      | $ | 0.04    |   |  | $ | 0.08   |   |  | $ | 0.05    |  
|                                    | Pro forma per SFAS 123 |                                          | $ | (0.02            | ) |      | $ | (0.16   | ) |  | $ | (0.02  | ) |  | $ | (0.33   | )

8



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


The per share weighted average fair value of
options granted for the three and six months ended June 30,
2004 was $5.63 and $5.83, respectively, and the per share
weighted average fair value of options granted for the three and
six months ended June 30, 2003 was $4.04 and $3.98,
respectively, on the grant date with the following weighted
average assumptions:

|                        |  |                    |            |                  |  |      |            |      |  |  |            |  |  |  |            | 
|----------------------- |  | ------------------ | ---------- | ---------------- |  | ---- | ---------- | ---- |  |  | ---------- |  |  |  | ---------- | 
|                        |  |                    |            |                 
|                        |  | Three Months Ended |            | Six Months Ended
|                        |  | June 30,           |            | June 30,        
|                        |  |                    |            |                 
|                        |  | 2004               |            | 2003             |  | 2004 |            | 2003
|                        |  |                    |            |                  |  |      |            |     
|Expected dividend yield |  |                    | 0%         |                  |  |      | 0%         |      |  |  | 0%         |  |  |  | 0%         | 
|Risk-free interest rate |  |                    | 3.29%      |                  |  |      | 2.53%      |      |  |  | 3.23%      |  |  |  | 2.74%      | 
|Expected life           |  |                    | 4.5  years |                  |  |      | 4.5  years |      |  |  | 4.5  years |  |  |  | 4.5  years | 
|Volatility              |  |                    | 65%        |                  |  |      | 55%        |      |  |  | 65%        |  |  |  | 58%        | 

The pro forma impact of options on net income
(loss) for the three and six months ended June 30, 2004 and
2003 is not representative of the effects on net income (loss)
for future years, as future years will include the effects of
additional years of stock option grants.



| |                                           
| | ------------------------------------------
| | Basic and Diluted Net Income Per
    Share

Basic net income per share excludes the effect of
potentially dilutive securities and is computed by dividing the
net income available to common shareholders by the
weighted-average number of common shares outstanding for the
reporting period. Diluted net income per share adjusts this
calculation to reflect the impact of outstanding convertible
securities and stock options to the extent that their inclusion
would have a dilutive effect on net income per share for the
reporting period.

|                                                   |  |                                          |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|-------------------------------------------------- |  | ---------------------------------------- | ------- | ---------------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                                   |  |                                          |         |                 
|                                                   |  | Three Months Ended                       |         | Six Months Ended
|                                                   |  | June 30,                                 |         | June 30,        
|                                                   |  |                                          |         |                 
|                                                   |  | 2004                                     |         | 2003             |  | 2004 |         | 2003
|                                                   |  |                                          |         |                  |  |      |         |     
|                                                   |  |                                         
|                                                   |  | (In thousands, except per share amounts)
|Net income                                         |  | $                                        | 3,881   |                  |  | $    | 5,831   |      |  | $ | 11,574  |  |  | $ | 6,737   | 
|                                                   |  |                                          |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|Weighted average basic common shares outstanding   |  |                                          | 134,824 |                  |  |      | 136,922 |      |  |   | 135,961 |  |  |   | 136,679 | 
|Effect of dilutive securities: stock options       |  |                                          | 2,812   |                  |  |      | 3,512   |      |  |   | 3,399   |  |  |   | 2,918   | 
|                                                   |  |                                          |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|Weighted average diluted common shares outstanding |  |                                          | 137,636 |                  |  |      | 140,434 |      |  |   | 139,360 |  |  |   | 139,597 | 
|                                                   |  |                                          |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|Net income per common share  basic                |  | $                                        | 0.03    |                  |  | $    | 0.04    |      |  | $ | 0.09    |  |  | $ | 0.05    | 
|                                                   |  |                                          |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|Net income per common share  diluted              |  | $                                        | 0.03    |                  |  | $    | 0.04    |      |  | $ | 0.08    |  |  | $ | 0.05    | 
|                                                   |  |                                          |         |                  |  |      |         |      |  |   |         |  |  |   |         | 

At June 30, 2004 and 2003, outstanding
options of approximately 9.9 million and 13.0 million,
respectively, to purchase shares of common stock were not
included in the computation of diluted net income per share
because to do so would have had an antidilutive effect for the
periods presented. Similarly, the computation of diluted net
income per share at June 30, 2004 excludes the effect of
10.3 million shares of common stock issuable upon
conversion of the Zero Coupon Convertible Subordinated Notes due
2023. In addition, at June 30, 2003, the effect of
14.0 million shares issuable upon conversion of the
4.75% Convertible Subordinated Notes due 2006 was excluded
since their inclusion would also have had an antidilutive effect.



| |                 
| | ----------------
| | Use of Estimates

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

9



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.



| |                              
| | -----------------------------
| | New Accounting Pronouncements

In January 2003, FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities (FIN 46). This interpretation of
Accounting Research Bulletin No. 51, Consolidated
Financial Statements, addresses consolidation by business
enterprises of variable interest entities that either
(1) do not have sufficient equity investment at risk to
permit the entity to finance its activities without additional
subordinated financial support, or (2) are owned by equity
investors who lack an essential characteristic of a controlling
financial interest. FIN 46 applies immediately to variable
interest entities created after January 31, 2003. With
regard to variable interest entities already in existence prior
to February 1, 2003, the implementation of FIN 46 has
been delayed and currently applies to the first fiscal year or
interim period beginning after December 15, 2003.
FIN 46 requires disclosure of variable interest entities in
financial statements issued after January 31, 2003, if it
is reasonably possible that as of the transition date
(1) an entity will be the primary beneficiary of an
existing variable interest entity that will require
consolidation, or (2) an entity will hold a significant
variable interest in, or have significant involvement with, an
existing variable interest entity. In December 2003, the FASB
issued Interpretation No. 46R (FIN 46R), a
revision to FIN 46. FIN 46R clarifies some of the
provisions of FIN 46 and exempts certain entities from its
requirements. FIN 46R is effective at the end of the first
interim period ending after December 15, 2003. DoubleClick
does not have any entities as of June 30, 2004 that
required disclosure or new consolidation as a result of adopting
the provisions of FIN 46 and FIN 46R.



|         |                      
|-------- | ---------------------
|Note 2  | Business Transactions



| |             
| | ------------
| | Acquisitions



| |     
| | ----
| | 2004



| |                
| | ---------------
| | Performics Inc.

On June 22, 2004, DoubleClick completed its
acquisition of Performics, a privately-held search engine
marketing and affiliate marketing company based in Chicago,
Illinois for approximately $58.2 million in cash. Pursuant
to the acquisition agreements, Performics has the right to
receive up to an additional $7.0 million based on the
attainment of certain 2004 revenue objectives. Performics
search engine marketing solutions are designed to help clients
automate their paid placement, paid inclusion, and comparison
shopping listings across multiple search providers and
publishers. Performics also provides the infrastructure for
affiliate marketing, through which marketers manage, track, and
report on their offers across multiple affiliate sites. This
acquisition allows DoubleClick to offer performance based
marketing products and services.

10



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


The purchase price has been preliminarily
allocated to the assets acquired and the liabilities assumed
according to their fair value at the date of acquisition as
follows (in millions):

|                          |  |   |       |  
|------------------------- |  | - | ----- | -
|Current assets            |  | $ | 24.9  |  
|Property and equipment    |  |   | 1.4   |  
|Other intangible assets   |  |   | 18.7  |  
|Goodwill                  |  |   | 35.0  |  
|                          |  |   |       |  
|Total assets acquired     |  |   | 80.0  |  
|Total liabilities assumed |  |   | (21.8 | )
|                          |  |   |       |  
|Net assets acquired       |  | $ | 58.2  |  
|                          |  |   |       |  

On the basis of estimated fair values,
approximately $11.8 million of the purchase price has been
preliminarily allocated to purchased technology and
$6.9 million to customer relationships. The purchased
technology and the customer relationships are being amortized on
a straight-line basis over three years based on each intangibles
estimated useful life.

The results of Performics operations will
be included in DoubleClicks Consolidated Statement of
Operations beginning in the third quarter of 2004. DoubleClick
has reflected this acquisition on its Consolidated Balance Sheet
as of June 30, 2004.



| |                
| | ---------------
| | SmartPath, Inc.

On March 19, 2004, DoubleClick completed its
acquisition of SmartPath, a privately-held marketing resource
management, or MRM, software company based in Raleigh, North
Carolina for approximately $24.1 million in cash. The
SmartPath MRM solution adds marketing planning and operational
management solutions to DoubleClicks existing offerings in
channel execution and data/analytics and optimization. In
addition, SmartPath provides DoubleClick with an expanded
platform to enter traditional marketing channels such as print
and television.

The purchase price has been allocated to the
assets acquired and the liabilities assumed according to their
fair value at the date of acquisition as follows (in millions):

|                          |  |   |      |  
|------------------------- |  | - | ---- | -
|Current assets            |  | $ | 3.2  |  
|Property and equipment    |  |   | 0.1  |  
|Other intangible assets   |  |   | 7.1  |  
|Goodwill                  |  |   | 15.7 |  
|                          |  |   |      |  
|Total assets acquired     |  |   | 26.1 |  
|Total liabilities assumed |  |   | (2.0 | )
|                          |  |   |      |  
|Net assets acquired       |  | $ | 24.1 |  
|                          |  |   |      |  

On the basis of estimated fair values,
approximately $3.3 million of the purchase price has been
allocated to purchased technology, $1.4 million to customer
relationships and $2.4 million to a covenant not to
compete. The purchased technology and the customer relationships
are being amortized on a straight-line basis over three years
based on each intangibles estimated useful life. The covenant
not to compete is being amortized on a straight-line basis over
15 months.

11



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


The results of SmartPaths operations were
included in DoubleClicks Consolidated Statement of
Operations beginning in the second quarter of 2004.



| |     
| | ----
| | 2003



| |                                         
| | ----------------------------------------
| | Computer Strategy Coordinators,
    Inc.

On June 30, 2003, DoubleClick completed its
acquisition of CSC, a data management company based in
Schaumburg, Illinois. This acquisition enabled DoubleClick to
strengthen the link between its email, campaign management and
Web site analytics technology businesses with its data
businesses, to create a comprehensive and bundled solution. In
the transaction, DoubleClick acquired all of the outstanding
shares of CSC in exchange for approximately $2.8 million in
cash and the assumption of certain indebtedness.

The purchase price has been allocated to the
assets acquired and the liabilities assumed according to their
fair value at the date of acquisition as follows (in millions):

|                          |  |   |      |  
|------------------------- |  | - | ---- | -
|Current assets            |  | $ | 2.2  |  
|Property and equipment    |  |   | 0.5  |  
|Other intangible assets   |  |   | 6.8  |  
|                          |  |   |      |  
|Total assets acquired     |  |   | 9.5  |  
|Total liabilities assumed |  |   | (6.7 | )
|                          |  |   |      |  
|Net assets acquired       |  | $ | 2.8  |  
|                          |  |   |      |  

On the basis of estimated fair values,
approximately $5.6 million of the purchase price has been
allocated to customer relationships and $1.2 million to
purchased technology. These intangibles are being amortized on a
straight-line basis over three years based on each
intangibles estimated useful life.

The results of operations of CSC were included in
DoubleClicks Consolidated Statement of Operations
beginning in the third quarter of 2003.

The following unaudited pro forma results of
operations have been prepared assuming that the acquisitions of
Performics, SmartPath and CSC, consummated during 2004 and 2003,
occurred at the beginning of the respective periods presented.
This pro forma financial information should not be considered
indicative of the actual results that would have been achieved
had the acquisitions been completed on the dates indicated and
does not purport to indicate results of operations as of any
future date or any future period.

|                             |  |                       |        |                           |  |      |        |      |  |   |         |  |  |   |         | 
|---------------------------- |  | --------------------- | ------ | ------------------------- |  | ---- | ------ | ---- |  | - | ------- |  |  | - | ------- | 
|                             |  |                       |        |                          
|                             |  | Three Months Ended    |        | Six Months Ended         
|                             |  | June 30,              |        | June 30,                 
|                             |  |                       |        |                          
|                             |  | 2004                  |        | 2003                      |  | 2004 |        | 2003
|                             |  |                       |        |                           |  |      |        |     
|                             |  |                       |        |                          
|                             |  | (In thousands, except |        | (In thousands, except per
|                             |  | per share data)       |        | share data)              
|Revenues                     |  | $                     | 73,919 |                           |  | $    | 70,747 |      |  | $ | 147,357 |  |  | $ | 139,108 | 
|Net income                   |  | $                     | 3,718  |                           |  | $    | 4,009  |      |  | $ | 7,594   |  |  | $ | 3,487   | 
|Net income per basic share   |  | $                     | 0.03   |                           |  | $    | 0.03   |      |  | $ | 0.06    |  |  | $ | 0.03    | 
|Net income per diluted share |  | $                     | 0.03   |                           |  | $    | 0.03   |      |  | $ | 0.05    |  |  | $ | 0.02    | 

12



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)




|         |                         
|-------- | ------------------------
|Note 3  | Investment in Affiliates

DoubleClicks investments in affiliates at
June 30, 2004 and December 31, 2003 consisted of the
following:

|                         |  |                |        |              |  |   |        | 
|------------------------ |  | -------------- | ------ | ------------ |  | - | ------ | 
|                         |  | June 30,       |        | December 31,
|                         |  | 2004           |        | 2003        
|                         |  |                |        |             
|                         |  |               
|                         |  | (In thousands)
|AdLINK Internet Media AG |  | $              | 9,395  |              |  | $ | 7,578  | 
|DoubleClick Japan        |  |                | 5,663  |              |  |   | 5,844  | 
|Abacus Deutschland       |  |                | 77     |              |  |   |       | 
|MaxWorldwide, Inc.       |  |                |       |              |  |   |       | 
|                         |  |                |        |              |  |   |        | 
|                         |  | $              | 15,135 |              |  | $ | 13,422 | 
|                         |  |                |        |              |  |   |        | 

In connection with DoubleClicks sale of its
European Media business to AdLINK Internet Media AG
(AdLINK) in January 2002, DoubleClick acquired an
option to acquire an additional 21% of AdLINK common shares from
United Internet AG, AdLINKs largest shareholder. This
option was only exercisable if AdLINK had achieved EBITDA
positive results for two out of three consecutive fiscal
quarters before December 31, 2003. AdLINK did not achieve
EBITDA positive results during these periods, therefore the
option expired unexercised.

DoubleClicks investment in AdLINK
represents an investment in a publicly traded company, the
shares of which are accounted for as available-for-sale
marketable securities. Accordingly, this investment is carried
at fair value with changes in fair value being reported as a
component of other comprehensive income. At June 30, 2004
and December 31, 2003, DoubleClicks cost basis in
this investment was approximately $1.9 million.

As of June 30, 2004 and December 31,
2003, DoubleClicks investments in MaxWorldwide, Inc.
(MaxWorldwide) and DoubleClick Japan represent
investments in publicly traded companies which are accounted
under the equity method of accounting. At June 30, 2004 and
December 31, 2003, the fair value of these investments was
as follows:

|                   |  |                |        |              |  |   |        | 
|------------------ |  | -------------- | ------ | ------------ |  | - | ------ | 
|                   |  | June 30,       |        | December 31,
|                   |  | 2004           |        | 2003        
|                   |  |                |        |             
|                   |  |               
|                   |  | (In thousands)
|MaxWorldwide, Inc. |  | $              | 1,968  |              |  | $ | 3,840  | 
|DoubleClick Japan  |  | $              | 19,340 |              |  | $ | 12,981 | 

In January 2004, DoubleClick commenced operations
of Abacus Deutschland, a joint venture with AZ Direct GmbH, a
subsidiary of Bertelsmann AG, a global media company.
DoubleClick has a 50% interest in the joint venture which
required an initial investment of approximately
$0.5 million and is expected to require additional
investments of up to $1.0 million during 2004. As of
June 30, 2004 DoubleClick recognized losses of
approximately $0.4 million. Abacus Deutschland is based in
Düsseldorf, Germany and offers German catalog companies
modeling tools designed to improve their direct marketing
initiatives.

In the first quarter of 2004, DoubleClick
recognized a gain of $2.4 million relating to a
distribution from MaxWorldwide in connection with its plan of
liquidation and dissolution. DoubleClick still maintains a 19.8%
interest in MaxWorldwide and may receive additional
distributions in future periods based on the finalization of its
plan of liquidation and dissolution.

13



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)




|         |         
|-------- | --------
|Note 4  | Goodwill

The changes in the carrying amount of goodwill
for the six months ended June 30, 2004 are as follows (in
thousands):

|                                                              |  |   |        |  
|------------------------------------------------------------- |  | - | ------ | -
|Balance at December 31, 2003                                  |  | $ | 18,658 |  
|Recognition of Canadian deferred tax assets                   |  |   | (903   | )
|Acquisition of SmartPath                                      |  |   | 15,719 |  
|Acquisition of Performics                                     |  |   | 35,053 |  
|Tax adjustment related to the acquisition of
    MessageMedia |  |   | (234   | )
|                                                              |  |   |        |  
|Balance at June 30, 2004                                      |  | $ | 68,293 |  
|                                                              |  |   |        |  

Goodwill at June 30, 2004 and
December 31, 2003 relates solely to DoubleClicks
TechSolutions segment.



|         |                  
|-------- | -----------------
|Note 5  | Intangible Assets

Intangible assets consist of the following:

|                   |                                |              |           |                |  |              |        |        |  |     |         |         |   |   |        |        |  |   |        |       | 
|------------------ | ------------------------------ | ------------ | --------- | -------------- |  | ------------ | ------ | ------ |  | --- | ------- | ------- | - | - | ------ | ------ |  | - | ------ | ----- | 
|                   |                                |              |           |                |  |             
|                   |                                |              |           | June 30, 2004  |  |             
|                   |                                | Weighted     |           |                |  | December 31,
|                   |                                | Average      |           | Gross          |  |              |        | 2003  
|                   |                                | Amortization |           | Carrying       |  | Accumulated  |        |        |  |    
|                   |                                | Period       |           | Amount         |  | Amortization |        | Net    |  | Net
|                   |                                |              |           |                |  |              |        |        |  |    
|                   |                                |              |           |               
|                   |                                |              |           | (In thousands)
|Intangible assets: |                                |              |           |                |  |              |        |        |  |     |         |         |   |   |        |        |  |   |        |      
|                   | Patents and trademarks         |              |           | 33 months      |  |              | $      | 2,084  |  |     | $       | (2,084  | ) |   | $      |       |  |   | $      |      | 
|                   | Customer relationships         |              |           | 33 months      |  |              |        | 35,618 |  |     |         | (22,598 | ) |   |        | 13,020 |  |   |        | 6,105 | 
|                   | Purchased technology and other |              |           | 39 months      |  |              |        | 27,131 |  |     |         | (8,960  | ) |   |        | 18,171 |  |   |        | 4,742 | 
|                   | Covenant not to compete        |              |           | 15 months      |  |              |        | 2,400  |  |     |         | (480    | ) |   |        | 1,920  |  |   |        |      | 
|                   |                                |              |           |                |  |              |        |        |  |     |         |         |   |   |        |        |  |   |        |      
|                   |                                |              | 36 months |                |  | $            | 67,233 |        |  | $   | (34,122 | )       |   | $ | 33,111 |        |  | $ | 10,847 |      
|                   |                                |              |           |                |  |              |        |        |  |     |         |         |   |   |        |        |  |   |        |      

Amortization expense was $2.1 million and
$3.6 million for the three and six months ended
June 30, 2004, respectively, and $2.0 million and
$5.0 million for the three and six months ended
June 30, 2003, respectively. For the three and six months
ended June 30, 2004, $0.9 million and
$1.8 million of amortization expense relating to purchased
technology has been included as a component of cost of revenue
in the Consolidated Statements of Operations. For the three and
six months ended June 30, 2003, $0.8 million and
$1.7 million of amortization expense relating to purchased
technology has been included as a component of cost of revenue
in the Consolidated Statements of Operations.

Based on the balance of intangible assets at
June 30, 2004, the annual amortization expense for each of
the succeeding three fiscal years is estimated to be
$12.6 million, $9.7 million and $3.9 million in
2005, 2006 and 2007, respectively. Amortization expense for the
remaining balance of fiscal 2004 is estimated to be
$6.9 million.



|         |                                                
|-------- | -----------------------------------------------
|Note 6  | Convertible Subordinated Debt  Zero
    Coupon

On June 23, 2003, DoubleClick issued
$135.0 million aggregate principal amount of Zero Coupon
Convertible Subordinated Notes due 2023 (the Zero Coupon
Notes) in a private offering. The Zero

14



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


Coupon Notes do not bear interest and have a zero
yield to maturity. The Zero Coupon Notes are convertible under
certain circumstances into DoubleClick common stock at a
conversion price of approximately $13.12 per share, which
would result in an aggregate of approximately 10.3 million
shares, subject to adjustment upon the occurrence of specified
events. Each $1,000 principal amount of the Zero Coupon Notes
will initially be convertible into 76.2311 shares of
DoubleClick common stock prior to July 15, 2023 if the sale
price of DoubleClicks common stock issuable upon
conversion of the Zero Coupon Notes reaches a specified
threshold for a defined period of time, if specified corporate
transactions have occurred or if DoubleClick calls the Zero
Coupon Notes for redemption. The specified thresholds for
conversion prior to the maturity date are (a) during any
calendar quarter, the last reported sale price of
DoubleClicks common stock for at least 20 trading
days in the 30 consecutive trading days ending on the last
trading day of the previous calendar quarter is greater than or
equal to 120% of the applicable conversion price on that 30th
trading day and (b) subject to certain exceptions, during
the five business day period following any five consecutive
trading day period, the trading price per $1,000 principal
amount of Zero Coupon Notes for each of the five consecutive
trading days is less than 98% of the product of the last
reported sale price of DoubleClicks common stock and the
conversion rate (initially 76.2311) on each such day. As of
June 30, 2004, these thresholds had not been met.

The Zero Coupon Notes are DoubleClicks
general unsecured obligations and are subordinated in right of
payment to all of its existing and future senior debt.
DoubleClick may not redeem the Zero Coupon Notes prior to
July 15, 2008. DoubleClick may be required to repurchase
any or all of the Zero Coupon Notes upon a change of control or
a termination of trading. DoubleClick may redeem for cash some
or all of the Zero Coupon Notes at any time on or after
July 15, 2008. Holders of the Zero Coupon Notes also have
the right to require DoubleClick to purchase some or all of
their notes for cash on July 15, 2008, July 15, 2013
and July 15, 2018, at a price equal to 100% of the
principal amount of the Zero Coupon Notes being redeemed plus
accrued and unpaid liquidated damages, if any.

DoubleClick received net proceeds of
approximately $131.5 million and incurred issuance costs of
approximately $3.5 million. The issuance costs are
amortized from the date of issuance through July 15, 2008
and are included as a component of other assets on the
Consolidated Balance Sheet.

The Zero Coupon Notes contain an embedded
derivative, the fair value of which as of June 30, 2004 has
been determined to be immaterial to our consolidated financial
position. For financial accounting purposes, the ability of the
holder to convert upon the satisfaction of a trading price
condition constitutes an embedded derivative. Any significant
changes in its value will be reflected in our future income
statements, in accordance with Statement of Financial Accounting
Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities.



|         |              
|-------- | -------------
|Note 7  | Restructuring

During the first half of 2004, no restructuring
charges or credits were recorded. Cash paid during the six
months ended June 30, 2004 with respect to previously
accrued restructuring charges was approximately
$9.6 million. In the first quarter of 2004,
$7.6 million was paid for the final lease termination
payment relating to DoubleClicks former New York
headquarters. The remaining $2.0 million of cash paid in
the first half of 2004 related to payments for lease and other
exit costs at excess and idle facilities in New York and for
DoubleClicks other facilities, primarily London, England
and Louisville, Colorado.

The restructuring accrual as of June 30,
2004 of approximately $23.6 million consists primarily of
DoubleClicks facilities in Louisville, Colorado and
London, England. The restructuring accrual associated with these
facilities represents the excess of future lease commitments
over estimated sublease income, if any. These accruals were
based on an analysis performed with the assistance of a real
estate firm and are based on

15



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


the current real estate market conditions in the
local markets where these facilities are located. Should market
conditions or other circumstances change, this information may
be updated and restructuring charges or credits may be required.

As of June 30, 2004, approximately
$3.6 million and $20.0 million remained accrued as a
component in accrued expenses and other current liabilities and
other long-term liabilities on the Consolidated Balance Sheet,
respectively, and relates wholly to future lease costs.

The following table sets forth a summary of the
costs and related charges for DoubleClicks restructuring
charges and the balance of the restructuring reserves
established (in thousands):

|                             |                                        |   |        |        |  
|---------------------------- | -------------------------------------- | - | ------ | ------ | -
|Balance at December 31, 2003 |                                        | $ | 32,977 |       
|                             | Cash expenditures                      |   |        | (9,636 | )
|                             | Effect of foreign currency translation |   |        | 260    |  
|                             |                                        |   |        |       
|Balance at June 30, 2004     |                                        | $ | 23,601 |       
|                             |                                        |   |        |       



|         |              
|-------- | -------------
|Note 8  | Contingencies

In April 2002, a consolidated amended class
action complaint alleging violation of the federal securities
laws in connection with DoubleClicks follow-on offerings
was filed in the United States District Court for the Southern
District of New York naming as defendants DoubleClick, some of
its officers and directors and certain underwriters of
DoubleClicks follow-on offerings. Approximately
300 other issuers and their underwriters have had similar
suits filed against them, all of which are included in a single
coordinated proceeding in the Southern District of New York. In
October 2002, the action was dismissed against the named
officers and directors without prejudice. However, claims
against DoubleClick remain. In July 2002, DoubleClick and
the other issuers in the consolidated cases filed motions to
dismiss the amended complaint for failure to state a claim,
which was denied as to DoubleClick in February 2003.

In June 2003, DoubleClicks Board of
Directors conditionally approved a proposed partial settlement
with the plaintiffs in this matter. In June 2004, an agreement
of settlement was submitted to the Court for preliminary
approval. The settlement would provide, among other things, a
release of DoubleClick and of the individual defendants for the
conduct alleged in the action to be wrongful in the amended
complaint. DoubleClick would agree to undertake other
responsibilities under the partial settlement, including
agreeing to assign away, not assert, or release certain
potential claims it may have against its underwriters. The Board
agreed to approve the settlement subject to a number of
conditions, including the participation of a substantial number
of other issuer defendants in the proposed settlement, the
consent of DoubleClicks insurers to the settlement, and
the completion of acceptable final settlement documentation.
Furthermore, the settlement is subject to a hearing on fairness
and approval by the Court overseeing the IPO litigations. If
this settlement is not finalized, DoubleClick intends to dispute
these allegations and defend this lawsuit vigorously.

DoubleClick is defending two class action
lawsuits, one filed in Allegheny County, Pennsylvania and the
other in San Joaquin County, California, alleging, among
other things, deceptive business practices, fraud,
misrepresentation, invasion of privacy and right of association
relating to allegedly deceptive content of online advertisement
that plaintiffs assert we delivered to consumers. The actions
seek, among other things, injunctive relief, compensatory and
punitive damages and attorneys fees and costs. In April
2004, the court in the California action entered an order
dismissing several claims against DoubleClick with leave to
amend. DoubleClick believes these claims are without merit and
intends to defend these actions vigorously.

16



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


As previously reported, in October 2003,
DoubleClick received a grand jury subpoena from the United
States Attorneys Office for the Southern District of New
York (U.S. Attorneys Office) seeking
documents regarding certain vendors that provided services to
DoubleClick, including interior construction and facilities
management, during the period from 1999 through 2001. The
services provided by these vendors are unrelated to the products
and services provided by DoubleClick to its customers. In March
2004, the U.S. Attorneys Office issued a press
release announcing an Indictment against nineteen individuals,
including a former DoubleClick employee, for racketeering and
other federal crimes. The Indictment alleges a scheme to defraud
DoubleClick through extortion of one of its vendors and through
kickbacks to the DoubleClick former employee named in the
Indictment. The press release states that these kickback
payments were made without knowledge of [the former
employees] superiors at DoubleClick and were in direct
violation of the written policies and procedures of
DoubleClick.

DoubleClick is continuing to fully cooperate with
the U.S. Attorneys Office. In addition, following
receipt of the grand jury subpoena, DoubleClick conducted an
internal investigation and has implemented remedial measures to
improve its selection, use and oversight of its vendors.
DoubleClick does not believe that any overpayments by
DoubleClick relating to the vendor named in the Indictment or
the other vendors listed in the grand jury subpoena are material
with respect to its financial statements for the periods in
question or its current financial condition.



|         |                  
|-------- | -----------------
|Note 9  | Segment Reporting

DoubleClick is organized into two segments:
TechSolutions and Data. In December 2003, DoubleClick changed
its measure of segment profit or loss from gross profit to
operating income (loss). As a result, DoubleClick has adjusted
its prior period segment disclosures to conform to this new
measurement. Adjustments to reconcile segment reporting to
consolidated results are included in corporate.
Corporate represents the results of operations of
DoubleClicks unallocated corporate overhead and
restructuring credits that are non-segment specific. The
accounting policies of DoubleClicks segments are the same
as those described in the summary of significant accounting
policies.

Revenue and operating income (loss) by segment
are as follows (in thousands):

|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |       |  |   |        |  |  |   |        |  |  |   |       |   |  |   |        |  
|------------------------------- |  | -------------------------- | ------ | -------------------------- |  | --------- | ------ | ----- |  | ------------- | ------ | ---- |  | --------- | ------ | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ----- | - |  | - | ------ | -
|                                |  |                            |        |                           
|                                |  | For the Three Months Ended |        | For the Three Months Ended
|                                |  | June 30, 2004              |        | June 30, 2003             
|                                |  |                            |        |                           
|                                |  | TechSolutions              |        | Data                       |  | Corporate |        | Total |  | TechSolutions |        | Data |  | Corporate |        | Total
|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |      
|Revenue from external customers |  | $                          | 46,365 |                            |  | $         | 22,788 |       |  | $             |       |      |  | $         | 69,153 |       |  | $ | 43,469 |  |  | $ | 20,087 |  |  | $ |      |   |  | $ | 63,556 |  
|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |       |  |   |        |  |  |   |        |  |  |   |       |   |  |   |        |  
|Depreciation and amortization   |  | $                          | 5,629  |                            |  | $         | 2,208  |       |  | $             | 612    |      |  | $         | 8,449  |       |  | $ | 9,451  |  |  | $ | 1,640  |  |  | $ | 1,104 |   |  | $ | 12,195 |  
|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |       |  |   |        |  |  |   |        |  |  |   |       |   |  |   |        |  
|Restructuring credits, net      |  | $                          |       |                            |  | $         |       |       |  | $             |       |      |  | $         |       |       |  | $ |       |  |  | $ |       |  |  | $ | 6,871 |   |  | $ | 6,871  |  
|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |       |  |   |        |  |  |   |        |  |  |   |       |   |  |   |        |  
|Operating income/(loss)         |  | $                          | 9,543  |                            |  | $         | 2,366  |       |  | $             | (9,131 | )    |  | $         | 2,778  |       |  | $ | 4,041  |  |  | $ | 5,858  |  |  | $ | (900  | ) |  | $ | 8,999  |  
|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |       |  |   |        |  |  |   |        |  |  |   |       |   |  |   |        |  
|Total other income/(loss)       |  |                            |        |                            |  |           |        |       |  |               |        |      |  | $         | 1,933  |       |  |   |        |  |  |   |        |  |  |   |       |   |  | $ | (2,865 | )
|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |       |  |   |        |  |  |   |        |  |  |   |       |   |  |   |        |  
|Income before income taxes      |  |                            |        |                            |  |           |        |       |  |               |        |      |  | $         | 4,711  |       |  |   |        |  |  |   |        |  |  |   |       |   |  | $ | 6,134  |  
|                                |  |                            |        |                            |  |           |        |       |  |               |        |      |  |           |        |       |  |   |        |  |  |   |        |  |  |   |       |   |  |   |        |  

17



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##### Table of Contents



DOUBLECLICK INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

June 30, 2004


(Unaudited)


|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |       |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         |  
|------------------------------- |  | ------------------------ | ------ | ------------------------ |  | --------- | ------ | ----- |  | ------------- | ------- | ---- |  | --------- | ------- | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  | - | ------- | -
|                                |  |                          |        |                         
|                                |  | For the Six Months Ended |        | For the Six Months Ended
|                                |  | June 30, 2004            |        | June 30, 2003           
|                                |  |                          |        |                         
|                                |  | TechSolutions            |        | Data                     |  | Corporate |        | Total |  | TechSolutions |         | Data |  | Corporate |         | Total
|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |      
|Revenue from external customers |  | $                        | 91,662 |                          |  | $         | 45,538 |       |  | $             |        |      |  | $         | 137,200 |       |  | $ | 84,997 |  |  | $ | 38,613 |  |  | $ |       |   |  | $ | 123,610 |  
|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |       |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         |  
|Depreciation and amortization   |  | $                        | 11,807 |                          |  | $         | 4,372  |       |  | $             | 1,227   |      |  | $         | 17,406  |       |  | $ | 19,883 |  |  | $ | 3,354  |  |  | $ | 2,096  |   |  | $ | 25,333  |  
|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |       |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         |  
|Restructuring credits, net      |  | $                        |       |                          |  | $         |       |       |  | $             |        |      |  | $         |        |       |  | $ |       |  |  | $ |       |  |  | $ | 6,871  |   |  | $ | 6,871   |  
|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |       |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         |  
|Operating Income/(loss)         |  | $                        | 18,039 |                          |  | $         | 4,899  |       |  | $             | (17,530 | )    |  | $         | 5,408   |       |  | $ | 6,879  |  |  | $ | 10,324 |  |  | $ | (8,743 | ) |  | $ | 8,460   |  
|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |       |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         |  
|Total other income/(loss)       |  |                          |        |                          |  |           |        |       |  |               |         |      |  | $         | 7,621   |       |  |   |        |  |  |   |        |  |  |   |        |   |  | $ | (1,087  | )
|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |       |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         |  
|Income before income taxes      |  |                          |        |                          |  |           |        |       |  |               |         |      |  | $         | 13,029  |       |  |   |        |  |  |   |        |  |  |   |        |   |  | $ | 7,373   |  
|                                |  |                          |        |                          |  |           |        |       |  |               |         |      |  |           |         |       |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         |  



|          |                            
|--------- | ---------------------------
|Note 10  | Comprehensive Income (Loss)

Comprehensive income (loss) consists of net
income, unrealized gains and losses on marketable securities and
foreign currency translation adjustments. Comprehensive loss was
$6.1 million for the three months ended June 30, 2004.
Comprehensive income was $8.9 million for the six months
ended June 30, 2004. Comprehensive income was
$10.3 million and $9.1 million for the three and six
months ended June 30, 2003.

18



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking
Statements

This report contains forward-looking
statements relating to future events and our future performance
within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Stockholders are cautioned
that such statements involve risks and uncertainties. These
forward-looking statements are based on current expectations,
estimates, forecasts and projections about the industry and
markets in which we operate and managements beliefs and
assumptions. Any statements contained herein, including without
limitation, statements to the effect that we or our management
believes, expects,
anticipates, plans or similar
expressions that are not statements of historical fact should be
considered forward-looking statements. These statements are not
guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Our
actual results and timing of certain events could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not
limited to, those set forth under Risk Factors and
elsewhere in this report and in our other public filings with
the Securities and Exchange Commission. It is routine for
internal projections and expectations to change as the year or
each quarter in the year progresses, and therefore it should be
clearly understood that the internal projections and beliefs
upon which we base our expectations are made as of the date of
this Quarterly Report on Form 10-Q and may change prior to
the end of each quarter or the year. While we may elect to
update forward-looking statements at some point in the future,
we may not update publicly any forward-looking statements
whether as a result of new information, future events or
otherwise.

Overview

We provide technology and data products and
services that direct marketers, Web publishers and advertisers
use to optimize their marketing programs and efficiently reach
their customers. We derive revenues from two business segments:
DoubleClick TechSolutions, which we refer to as our
TechSolutions segment and DoubleClick Data, which we refer to as
our Data segment.

DoubleClick
TechSolutions.TechSolutions includes
products and services from our Ad Management and our Marketing
Automation divisions. Our Ad Management products and services
primarily consist of our DART for Publishers Service, DART
Enterprise ad serving product and DART for Advertisers Service.
Our Marketing Automation products and services consist of our
email products based on our DARTmail Service, Ensemble, our
campaign management software tool, and SiteAdvance, our Web site
analytics solution. As a result of our acquisition of SmartPath,
Inc., a marketing resource management, or MRM, software company
in March 2004, we offer marketing planning and operational
management solutions as part of our Marketing Automation suite
of products and services. With the acquisition of Performics
Inc. in June 2004, DoubleClick created a third division within
TechSolutions which offers search engine marketing and affiliate
marketing solutions. We generate our TechSolutions revenue
primarily from the delivery of advertising impressions and
emails as well as the sale and the installation of our licensed
software products.

DoubleClick Data.Data, which consists of our Abacus and Data Management
divisions, provides products and services primarily to direct
marketers. Abacus maintains the Abacus Alliance database in the
United States, which is a proprietary database of consumer
transactions used for target marketing purposes, and maintains
alliances in the United Kingdom, Australia, Japan and through a
joint venture, in Germany. In the United States, we also offer a
Business-to-Business Alliance. As a result of our acquisition of
Computer Strategy Coordinators, Inc., a data management company,
in June 2003 we offer direct marketers solutions for building
and managing customer marketing databases and other related
products and services as part of our Data Management division.
We generate our Data revenue primarily from the sale of consumer
and business prospect lists, list processing, database
development and database management services.

19



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Critical Accounting Policies

Our discussion and analysis of our financial
condition and results of operations is based upon our
consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles. The
preparation of these consolidated financial statements requires
us to make estimates, judgments and assumptions, which
management believes to be reasonable, based on the information
available. These estimates and assumptions affect the reported
amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent liabilities. Variances in the
estimates or assumptions used could yield materially different
accounting results. Described below are the areas where we
believe that the estimates, judgments or assumptions that we
have made, if different, would have yielded the most significant
differences in our financial statements.



| |                        
| | -----------------------
| | Restructuring Estimates

Our restructuring reserves as of June 30,
2004 were approximately $23.6 million, and consisted
primarily of reserves for our facilities in Louisville, Colorado
and London, England. The restructuring accrual associated with
our facilities represents the excess of future lease commitments
over estimated sublease income, if any. These accruals were
based on an analysis performed with the assistance of a real
estate firm and are based on the current real estate market
conditions in the local markets where these facilities are
located. The most material estimate is associated with our
facility in London where the office space is currently sublet
for only a portion of the remaining lease term. The total
remaining obligation for this facility is approximately
$44.4 million. Our London reserve is based on our estimate
of future sublease income relative to the total remaining
obligation and was determined based on the weighted probability
of various future sublease scenarios. These scenarios resulted
in a weighted average sublease rate where for each $1.00 change
in this assumption, additional restructuring charges or credits
of approximately $0.2 million would be required. If market
conditions or other circumstances change, this information may
be updated and additional charges or credits may be required.



| |                                    
| | -----------------------------------
| | Advertiser Credits and Bad
    Debt

We record reductions to revenue for the estimated
future credits issuable to our customers in the event that
solutions do not meet contractual specifications. We follow this
method because we believe reasonably dependable estimates of
such credits can be made based on historical experience. If the
actual amounts of customer credits differ from our estimates,
revisions to the associated allowance may be required. We
maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required
payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required in subsequent
periods.



| |                                          
| | -----------------------------------------
| | Valuation of Investments and
    Goodwill

We invest in companies, technologies and
intangible assets in areas within our strategic focus, some of
which have highly volatile fair values and uncertain profit
potentials. We evaluate our investments for impairment on a
periodic basis and reduce the carrying values of such assets to
their estimated fair value when we believe an investment has
experienced a decline in value that is other than temporary.
Future adverse changes in market conditions or poor operating
results of strategic investments could indicate an inability to
recover the carrying value of the investments, thereby possibly
requiring impairment charges in the future.

We evaluate our goodwill for impairment annually,
as well as when an event triggering impairment may have
occurred. We have elected to perform our annual impairment
analysis during the fourth quarter of each fiscal year as of
October 1st. In accordance with Statements of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Assets, we utilize a two-step process for
impairment testing of goodwill. The first step tests for
impairment, while the second step, if necessary, measures the
impairment.

When it is determined that the carrying value of
goodwill may be impaired or investments may not be recoverable,
management measures impairment based on projected discounted
cash flows, recent transactions

20



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##### Table of Contents



involving similar businesses and price/revenue
multiples at which they were bought and sold, price/revenue
multiples of competitors and the closing market price for
investments that are publicly traded.


As of June 30, 2004, we held investments in
equity instruments of public companies received as a result of
certain business transactions, including shares in DoubleClick
Japan, AdLINK Internet Media AG and MaxWorldwide, Inc. Such
investments, which are in the Internet industry, are subject to
significant fluctuations in fair market value due to the
volatility of the stock market. The following sets forth the
cost basis and fair market value of these investments, which are
included in investment in affiliates on the Consolidated Balance
Sheets.

|                         |  |                     |       |             |  |   |        | 
|------------------------ |  | ------------------- | ----- | ----------- |  | - | ------ | 
|                         |  |                    
|                         |  | As of June 30, 2004
|                         |  |                    
|                         |  |                     |       | Fair Market
|                         |  | Cost Basis          |       | Value      
|                         |  |                     |       |            
|                         |  |                    
|                         |  | (In thousands)     
|DoubleClick Japan        |  | $                   | 5,663 |             |  | $ | 19,340 | 
|AdLINK Internet Media AG |  | $                   | 1,855 |             |  | $ | 9,395  | 
|MaxWorldwide, Inc.       |  | $                   |      |             |  | $ | 1,968  | 

Some of these investments have suffered a
decrease in value in the past. We will continue to evaluate our
investments in affiliates for impairment due to declines in
market value considered to be other than temporary. This
evaluation includes, in addition to persistent, declining stock
prices, general economic and company-specific assessments. In
the event of a determination that a further decline in market
value is other than temporary, a charge to earnings will be
recorded for all or a portion of the unrealized loss and a new
cost basis in the investment will be established.



| |                    
| | -------------------
| | Deferred Tax Assets

Pursuant to SFAS 109, we record a valuation
allowance to the extent realization of our deferred tax assets
is not more likely than not. As of June 30, 2004 and
December 31, 2003, we maintained a valuation allowance
against those net deferred tax assets that we believe, after
considering all the available objective evidence, both positive
and negative, historical and prospective, with greater weight
given to historical evidence, are not more likely than not
expected to be realized. If we determine that we would be able
to realize additional or all of our deferred tax assets, an
adjustment to the net deferred tax asset would increase income
and/or adjust additional paid-in capital and/or goodwill in the
period such determination was made.



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment is stated at cost and
depreciated using the straight-line method over the shorter of
the estimated life of the asset or the lease term. We
periodically review the useful lives of our assets to confirm
that such useful life determination is appropriate. If we
determine that the estimated useful life of our assets needs to
be adjusted to reflect depreciation expense over the remaining
time that the assets are expected to remain in service, future
income or losses will be impacted in the subsequent periods
after such a determination is made.



| |                                     
| | ------------------------------------
| | Recent Accounting
    Pronouncements

In January 2003, FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities, known as FIN 46. This interpretation of
Accounting Research Bulletin No. 51, Consolidated
Financial Statements, addresses consolidation by business
enterprises of variable interest entities that either
(1) do not have sufficient equity investment at risk to
permit the entity to finance its activities without additional
subordinated financial support, or (2) are owned by equity
investors who lack an essential characteristic of a controlling
financial interest. FIN 46 applies immediately to variable
interest entities created after January 31, 2003. With
regard to variable interest entities already in existence prior
to February 1, 2003, the implementation of FIN 46 has
been delayed and currently applies to the first fiscal year or
interim period beginning after December 15, 2003.
FIN 46 requires disclosure of variable interest entities in
financial statements issued after January 31, 2003, if it
is reasonably possible that as of the transition date
(1) an entity will be the primary

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beneficiary of an existing variable interest
entity that will require consolidation, or (2) an entity
will hold a significant variable interest in, or have
significant involvement with, an existing variable interest
entity. In December 2003, the FASB issued Interpretation
No. 46R, known as FIN 46R, a revision to FIN 46.
FIN 46R clarifies some of the provisions of FIN 46 and
exempts certain entities from its requirements. FIN 46R is
effective at the end of the first interim period ending after
December 15, 2003. We do not have any entities as of
June 30, 2004 that required disclosure or new consolidation
as a result of adopting the provisions of FIN 46 and
FIN 46R.


Business Transactions



| |             
| | ------------
| | Acquisitions



| |     
| | ----
| | 2004



| |                
| | ---------------
| | Performics Inc.

On June 22, 2004, we completed our
acquisition of Performics Inc., a privately-held search engine
marketing and affiliate marketing company based in Chicago,
Illinois for approximately $58.2 million in cash. Pursuant
to the merger agreement, Performics has the right to receive up
to an additional $7.0 million based on the attainment of
certain 2004 revenue objectives. Performics search engine
marketing solutions are designed to help clients automate their
paid placement, paid inclusion, and comparison shopping listings
across multiple search providers and publishers. Performics also
provides the infrastructure for affiliate marketing, through
which marketers manage, track, and report on their offers across
multiple affiliate sites.



| |                
| | ---------------
| | SmartPath, Inc.

On March 19, 2004, we completed our
acquisition of SmartPath, Inc, a privately held marketing
resource management, or MRM, software company for approximately
$24.1 million in cash.



| |     
| | ----
| | 2003



| |                                         
| | ----------------------------------------
| | Computer Strategy Coordinators,
    Inc.

On June 30, 2003, we completed our
acquisition of Computer Strategy Coordinators, Inc., or CSC, a
data management company. In the transaction, we acquired all of
the outstanding shares of CSC in exchange for approximately
$2.8 million in cash and the assumption of certain
indebtedness.

Results of Operations



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Three months ended June 30, 2004
    compared to three months ended June 30, 2003

Revenue for the three months ended June 30,
2004 was $69.2 million, an increase of $5.6 million or
8.8% compared to the prior year period. This increase was due to
the acquisitions of CSC in June 2003 and SmartPath in March 2004
as well as organic growth from within our Marketing Automation
division. These increases were offset by year-over year declines
in both our Ad Management and Abacus divisions. Gross profit
increased $6.2 million during the quarter to
$47.3 million over the prior year period while gross
margins improved by 370 basis points to 68.4%. These
increases were driven by our TechSolutions segment. Operating
income was $2.8 million compared to $9.0 million in
the prior year period. Operating income declined due to an
increase in operating expenses of $12.4 million partially
offset by the improvement in gross profit of $6.2 million.
The increase in operating expenses was the result of the
assumption of headcount associated with the CSC and SmartPath
acquisitions and the hiring of additional employees in our
TechSolutions division. These personnel-related increases
primarily occurred in our sales and marketing and product
development departments. In addition, second quarter 2003
operating expenses benefited from the inclusion of a
$6.9 million net restructuring credit associated with the
settlement of excess real estate commitments. Net income was
$3.9 million, or $0.03 per diluted share, for the
second quarter of 2004 as compared to $5.8 million, or
$0.04 per diluted share, in the prior year period. Net
income for the second

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quarter of 2003 included a $4.4 million loss
in connection with the redemption of our 4.75% Convertible
Subordinated Notes.




| |                                                                              
| | -----------------------------------------------------------------------------
| | Six months ended June 30, 2004
    compared to six months ended June 30, 2003

Revenue for the six months ending June 30,
2004 was $137.2 million, an increase of $13.6 million
or 11.0% compared to the prior year period. This increase was
primarily due to the acquisitions of CSC in June 2003 and
SmartPath in March 2004 as well as organic growth from within
our Marketing Automation division. Gross profit increased
$13.6 million during the quarter to $92.8 million over
the prior year period while gross margins improved by
360 basis points to 67.6%. These increases were driven by
our TechSolutions segment. Operating income was
$5.4 million for the first half of 2004 compared to
$8.5 million in the prior year period. Operating income
declined due to an increase in operating expenses of
$16.6 million partially offset by the improvement in gross
profit of $13.6 million. The increase in operating expenses
was primarily due to the assumption of headcount as a result of
our acquisitions of CSC and SmartPath and the hiring of
additional employees in our TechSolutions division. These
personnel-related increases primarily occurred in our sales and
marketing and product development departments. In addition,
operating expenses in 2003 benefited from the inclusion of a
$6.9 million net restructuring credit associated with the
settlement of excess real estate commitments. The increases in
operating expenses were offset by reductions in amortization of
intangible assets as certain assets reached the end of their
useful lives and a $1.5 million reserve reversal recorded
in the first quarter of 2004 relating to a prior acquisition.
Net income was $11.6 million, or $0.08 per diluted
share, for the first half of 2004 as compared to net income of
$6.7 million, or $0.05 per diluted share, in the prior
year period. Net income for the six months ended June 30,
2004 benefited from a distribution from MaxWorldwide of
approximately $2.4 million in connection with its plan of
liquidation and dissolution. Net income for the six months ended
June 30, 2003 included a $4.4 million loss in
connection with the redemption of our 4.75% Convertible
Subordinated Notes.

We expect revenue to increase throughout the
remainder of 2004 as compared to the prior year period primarily
as a result of our acquisitions of Performics and SmartPath.
Operating income is expected to increase as well due to
continued efficiency gains within our TechSolutions business
partially offset by integration costs and the amortization of
intangibles associated with our acquisitions of SmartPath and
Performics.

Revenues, gross profit and operating income
(loss) by segment are as follows (in thousands):

|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |   |  |   |         |  |  |   |         |  |  |   |        |  |  |  |      |  
|------------- |  | -------------------- | ------ | ------------- |  | ------------------ | ------ | ------------- |  | ---- | ----- | ---- |  | ------ | ---- | - |  | - | ------- |  |  | - | ------- |  |  | - | ------ |  |  |  | ---- | -
|              |  |                      |        |               |  |                    |        |               |  |      |       |     
|              |  | For the Three Months |        |               |  | For the Six Months |        |              
|              |  | Ended June 30,       |        | 2004 vs. 2003 |  | Ended June 30,     |        | 2004 vs. 2003
|              |  |                      |        |               |  |                    |        |              
|Revenue:      |  | 2004                 |        | 2003          |  | Change             |        | %             |  | 2004 |       | 2003 |  | Change |      | %
|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |  
|TechSolutions |  | $                    | 46,365 |               |  | $                  | 43,469 |               |  | $    | 2,896 |      |  |        | 6.7  | % |  | $ | 91,662  |  |  | $ | 84,997  |  |  | $ | 6,665  |  |  |  | 7.8  | %
|Data          |  |                      | 22,788 |               |  |                    | 20,087 |               |  |      | 2,701 |      |  |        | 13.4 | % |  |   | 45,538  |  |  |   | 38,613  |  |  |   | 6,925  |  |  |  | 17.9 | %
|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |   |  |   |         |  |  |   |         |  |  |   |        |  |  |  |      |  
|Total         |  | $                    | 69,153 |               |  | $                  | 63,556 |               |  | $    | 5,597 |      |  |        | 8.8  | % |  | $ | 137,200 |  |  | $ | 123,610 |  |  | $ | 13,590 |  |  |  | 11.0 | %
|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |   |  |   |         |  |  |   |         |  |  |   |        |  |  |  |      |  

|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |    |  |   |        |  |  |   |        |  |  |   |        |  |  |  |      |  
|------------- |  | -------------------- | ------ | ------------- |  | ------------------ | ------ | ------------- |  | ---- | ----- | ---- |  | ------ | ---- | -- |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  |  | ---- | -
|              |  |                      |        |               |  |                    |        |               |  |      |       |     
|              |  | For the Three Months |        |               |  | For the Six Months |        |              
|              |  | Ended June 30,       |        | 2004 vs. 2003 |  | Ended June 30,     |        | 2004 vs. 2003
|              |  |                      |        |               |  |                    |        |              
|Gross Profit: |  | 2004                 |        | 2003          |  | Change             |        | %             |  | 2004 |       | 2003 |  | Change |      | % 
|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |   
|TechSolutions |  | $                    | 33,833 |               |  | $                  | 26,906 |               |  | $    | 6,927 |      |  |        | 25.7 | %  |  | $ | 65,732 |  |  | $ | 52,349 |  |  | $ | 13,383 |  |  |  | 25.6 | %
|Data          |  |                      | 13,491 |               |  |                    | 14,202 |               |  |      | (711  | )    |  |        | (5.0 | )% |  |   | 27,074 |  |  |   | 26,866 |  |  |   | 208    |  |  |  | 0.8  | %
|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |    |  |   |        |  |  |   |        |  |  |   |        |  |  |  |      |  
|Total         |  | $                    | 47,324 |               |  | $                  | 41,108 |               |  | $    | 6,216 |      |  |        | 15.1 | %  |  | $ | 92,806 |  |  | $ | 79,215 |  |  | $ | 13,591 |  |  |  | 17.2 | %
|              |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |      |    |  |   |        |  |  |   |        |  |  |   |        |  |  |  |      |  

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##### Table of Contents



|                         |  |                      |        |               |  |                    |       |               |  |      |        |      |  |        |       |    |  |   |         |   |  |   |        |   |  |   |        |   |  |  |       |   
|------------------------ |  | -------------------- | ------ | ------------- |  | ------------------ | ----- | ------------- |  | ---- | ------ | ---- |  | ------ | ----- | -- |  | - | ------- | - |  | - | ------ | - |  | - | ------ | - |  |  | ----- | --
|                         |  |                      |        |               |  |                    |       |               |  |      |        |     
|                         |  | For the Three Months |        |               |  | For the Six Months |       |              
|                         |  | Ended June 30,       |        | 2004 vs. 2003 |  | Ended June 30,     |       | 2004 vs. 2003
|                         |  |                      |        |               |  |                    |       |              
|Operating Income/(Loss): |  | 2004                 |        | 2003          |  | Change             |       | %             |  | 2004 |        | 2003 |  | Change |       | % 
|                         |  |                      |        |               |  |                    |       |               |  |      |        |      |  |        |       |   
|TechSolutions            |  | $                    | 9,543  |               |  | $                  | 4,041 |               |  | $    | 5,502  |      |  |        | 136.2 | %  |  | $ | 18,039  |   |  | $ | 6,879  |   |  | $ | 11,160 |   |  |  | 162.2 | % 
|Data                     |  |                      | 2,366  |               |  |                    | 5,858 |               |  |      | (3,492 | )    |  |        | (59.6 | )% |  |   | 4,899   |   |  |   | 10,324 |   |  |   | (5,425 | ) |  |  | (52.5 | )%
|Corporate(1)             |  |                      | (9,131 | )             |  |                    | (900  | )             |  |      | (8,231 | )    |  |        | NMF   |    |  |   | (17,530 | ) |  |   | (8,743 | ) |  |   | (8,787 | ) |  |  | NMF   |   
|                         |  |                      |        |               |  |                    |       |               |  |      |        |      |  |        |       |    |  |   |         |   |  |   |        |   |  |   |        |   |  |  |       |   
|Total                    |  | $                    | 2,778  |               |  | $                  | 8,999 |               |  | $    | (6,221 | )    |  |        | (69.1 | )% |  | $ | 5,408   |   |  | $ | 8,460  |   |  | $ | (3,052 | ) |  |  | (36.1 | )%
|                         |  |                      |        |               |  |                    |       |               |  |      |        |      |  |        |       |    |  |   |         |   |  |   |        |   |  |   |        |   |  |  |       |   



---



|    |                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------
|(1) | Adjustments to reconcile segment reporting to
    consolidated results are included in Corporate.



| |                          
| | -------------------------
| | DoubleClick TechSolutions

TechSolutions revenue is derived from the sales
of our Ad Management and Marketing Automation products and
services. Our Ad Management products and services primarily
consist of the DART for Publishers Service, the DART Enterprise
ad serving software product and the DART for Advertisers
Service. Our Marketing Automation products and services consist
of our email products based on our DARTmail Service, our
Ensemble campaign management software tool, our SiteAdvance Web
site analytics solution and MRM, our marketing resource
management software. TechSolutions cost of revenue includes
costs associated with the delivery of advertisements and emails,
including Internet access costs, depreciation of the ad and
email delivery systems, the amortization of purchased technology
and facility- and personnel-related costs incurred to operate
and support our Ad Management and Marketing Automation products
and services.



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Three months ended June 30, 2004
    compared to three months ended June 30, 2003

TechSolutions revenue increased by 6.7% to
$46.4 million for the three months ended June 30, 2004
from $43.5 million for the three months ended June 30,
2003. The increase in TechSolutions revenue was attributable to
growth in Marketing Automation, which offset the decline in Ad
Management. Ad Management revenue decreased by approximately
$0.8 million or 2.3% to $31.8 million in the second
quarter of 2004 compared to the same period of 2003. For the
three months ended June 30, 2004, the increase in volumes
for our DART for Advertisers Service outpaced the decline in
effective price for this product. However, the increase in
revenue from our DART for Advertisers Service was outweighed by
the declines in revenue from DART for Publishers Service where
volume increases did not outpace pricing declines. The decline
in effective prices continued to be due to sustained competitive
pressure. Marketing Automation revenue increased 33.5% to
$14.6 million in the second quarter of 2004 compared to
$10.9 million in the prior year period. This increase was
attributable to the organic growth in all of our Marketing
Automation products as well as to the acquisition of SmartPath,
a marketing resource management company.

TechSolutions gross profit was $33.8 million
or 73.0% of revenue for the three months ended June 30,
2004 compared to $26.9 million or 61.9% of revenue for the
three months ended June 30, 2003. Gross profits increased
$6.9 million primarily due to the increase in Marketing
Automation revenues and decreases in depreciation and utilities
expense of approximately $2.8 million in aggregate. The
decrease in depreciation and utilities costs was due to the
relocation of our data center from New York to Colorado which
was completed in June 2003. In addition, depreciation expense
also benefited from the continued efficient use of our existing
hardware.

TechSolutions operating income was
$9.5 million for the three months ended June 30, 2004,
an increase of $5.5 million compared to the prior year
period. This improvement was a result of the increase in gross
profit partially offset by an increase in operating expenses of
approximately $1.4 million. Operating expenses included an
increase in personnel-related costs of approximately
$1.7 million resulting from the assumption of headcount as
the result of our acquisition of SmartPath and the hiring of
additional employees in our sales and marketing and product
development departments. In addition, bad debt expense increased
by approximately $0.6 million and professional fees
increased by approximately $0.7 million. These costs were
offset by a decline in depreciation expense of $1.1 million
relating to our former New York headquarters. In addition,
amortization expense decreased by $0.5 million as a result
of certain assets reaching the end of their

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amortizable lives partially offset by the
addition of acquired intangibles associated with our acquisition
of SmartPath.




| |                                                                              
| | -----------------------------------------------------------------------------
| | Six months ended June 30, 2004
    compared to six months ended June 30, 2003

TechSolutions revenue increased by 7.8% to
$91.7 million for the six months ended June 30, 2004
from $85.0 million for the six months ended June 30,
2003. The increase in TechSolutions revenue was attributable to
growth in both our Marketing Automation and Ad Management
divisions. Ad Management revenue increased by approximately
$1.4 million or 2.2% to $65.1 million in the first
half of 2004 compared to the same period of 2003. For the six
months ended June 30, 2004, the increase in volumes for our
DART for Advertisers Service outpaced the decline in effective
price for this product. However, the increase in revenue from
our DART for Advertisers Service was outweighed by the declines
in revenue from our DART for Publishers Service where volume
increases did not outpace pricing declines. The decline in
effective prices continued to be due to sustained competitive
pressure. Marketing Automation revenue increased 24.4% to
$26.5 million in the first half of 2004 compared to
$21.3 million in the prior year period. This increase was
primarily due to new customer acquisitions and from the
acquisition of SmartPath in March of 2004.

TechSolutions gross profit was $65.7 million
or 71.7% of revenue for the six months ended June 30, 2004
compared to $52.3 million or 61.6% of revenue for the six
months ended June 30, 2003. Gross profits increased
$13.4 million primarily due to the increase in revenues and
decreases in depreciation and utilities expense of approximately
$4.4 million in aggregate. The decrease in depreciation and
utilities costs was due to the relocation of our data center
from New York to Colorado which was completed in June 2003. In
addition, depreciation expense also benefited from the continued
efficient use of our existing hardware.

TechSolutions operating income was
$18.0 million for the six months ended June 30, 2004,
an increase of $11.2 million compared to the prior year
period. This improvement was a result of the increase in gross
profit partially offset by an increase in operating expenses of
approximately $2.2 million. Operating expenses included an
increase in personnel-related costs of approximately
$3.7 million resulting from the assumption of headcount as
the result of our acquisition of SmartPath and the hiring of
additional employees in our sales and marketing and product
development departments. In addition, bad debt expense increased
by approximately $1.8 million and professional fees
increased by approximately $1.2 million. The change in
personnel-related costs was net of a $1.5 million reserve
reversal recorded in the first quarter of 2004 relating to a
prior acquisition. These costs were offset by a decline in
depreciation expense of $2.3 million relating to our former
New York headquarters. In addition, amortization expense
decreased by $2.3 million as a result of certain assets
reaching the end of their amortizable lives partially offset by
the addition of acquired intangibles associated with our
acquisition of SmartPath.

In 2004, we plan to continue to invest additional
resources in our TechSolutions sales and marketing and product
development departments to help achieve future revenue growth.
As a part of this strategy, we anticipate increasing our
investments in our Ad Management businesses during the remainder
of 2004. We anticipate TechSolutions revenue and operating
income will increase as compared to the year ago periods even
with these additional investments described above partially
offset by integration costs and amortization of intangibles
related to our acquisitions of SmartPath and Performics.



| |                 
| | ----------------
| | DoubleClick Data

DoubleClick Data revenue has historically been
derived primarily from our Abacus division, which provides
products and services, such as acquisition solutions, retention
solutions and list optimization, to direct marketers in the
Abacus Alliances. As a result of our acquisition of CSC in June
2003, we offer direct marketers solutions for building and
managing customer marketing databases and other related products
and services as part of the our Data Management division. Data
cost of revenue includes expenses associated with maintaining
and updating the Abacus databases, facility- and
personnel-related expenses to operate and support our production
equipment, the amortization of purchased intangible assets and
subscriptions to third party providers of lifestyle and
demographic data that is used to supplement our transactions
based databases.

25



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##### Table of Contents





| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Three months ended June 30, 2004
    compared to three months ended June 30, 2003

Data revenue increased 13.4% to
$22.8 million for the three months ended June 30, 2004
compared to $20.1 million for the three months ended
June 30, 2003. The increase in revenue is attributable to
the acquisition of CSC, which more than offset the decline in
Abacus revenue. Abacus revenues decreased 2.4% to
$19.6 million in the second quarter of 2004 compared to
$20.1 million in second quarter of 2003. The remaining
$3.2 million of Data revenue was associated with our Data
Management division, in which we began recognizing revenue in
the third quarter of 2003. The year-over-year decrease in Abacus
revenues were driven primarily from continued softness in the
U.S. Business-to-Consumer catalogue market, which led to
fewer mailings from large Abacus customers. These declines were
partially offset by growth in our U.S. Business-to-Business
and International Alliances.

Gross profit decreased $0.7 million to
$13.5 million, or 59.2%, of revenues in the second quarter
of 2004 compared to $14.2 million or 70.7% of revenues in
the prior year period. The decrease in gross profit was
primarily associated with the decline in Abacus
Business-to-Customer revenues partially offset by revenue growth
in our International Alliances. Gross margins were impacted by
the decline in Abacus revenue as well as from the inclusion of
CSC, a lower margin business.

Data operating income decreased to
$2.4 million for the second quarter of 2004 from
$5.9 million in the prior year period. This change was due
to an increase in operating expenses of $2.8 million and
the decline in gross profit of $0.7 million. Operating
expenses included an increase in personnel-related costs of
approximately $2.3 million resulting from the assumption of
headcount as the result of our acquisition of CSC. In addition,
amortization expense included as a component of operating
expenses increased by approximately $0.5 million. These
expenses are associated with intangible assets acquired in
connection with the CSC acquisition.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Six months ended June 30, 2004
    compared to six months ended June 30, 2003

Data revenue increased 17.9% to
$45.5 million for the six months ended June 30, 2004
compared to $38.6 million for the six months ended
June 30, 2003. The increase in revenue was attributable to
the acquisition of CSC and organic growth from our Abacus
business. Abacus revenues increased 3.5% to $40.0 million
in the first half of 2004 compared to $38.6 million in
first half of 2003. The remaining $5.5 million of Data
revenue was associated with our Data Management division, in
which we began recognizing revenue in the third quarter of 2003.
The year-over-year increase in Abacus revenues was driven from
continued growth in our U.S. Business-to-Business and
International Alliances while revenues associated with our
U.S. Business-to-Consumer Alliance were flat.

Gross profit increased slightly by
$0.2 million to $27.1 million or 59.5% of revenues in
the first half of 2004 compared to $26.9 million, or 69.6%,
of revenues in the prior year period. The increase in gross
profit was primarily due to revenue growth in our International
Alliances. Gross margins also were impacted by the inclusion of
CSC, a lower margin business.

Data operating income decreased to
$4.9 million for the first half of 2004 from
$10.3 million in the prior year period. This change was due
to an increase in operating expenses of $5.6 million
partially offset by the slight increase in gross profit of
$0.2 million. Operating expenses included an increase in
personnel-related costs of approximately $4.7 million
primarily resulting from the assumption of headcount as the
result of our acquisition of CSC. In addition, amortization
expense included as a component of operating expenses increased
by approximately $0.9 million. These expenses are
associated with intangible assets acquired in connection with
the CSC acquisition.

For the remainder of 2004, we anticipate that
Data revenue will increase compared to the prior year periods
due to anticipated growth from Data Management and our
U.S. Business-to-Business and International Alliances.
Operating income is expected to be comparable to prior year
periods as we plan to continue to invest in new Data Management
products and our International Alliances.

26



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##### Table of Contents



Operating Expenses

Operating costs and expenses were as follows (in
thousands):

|                           |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |       |   |  |   |        |  |  |   |        |  |  |   |       |   |  |  |      |   
|-------------------------- |  | -------------------- | ------ | ------------- |  | ------------------ | ------ | ------------- |  | ---- | ----- | ---- |  | ------ | ----- | - |  | - | ------ |  |  | - | ------ |  |  | - | ----- | - |  |  | ---- | --
|                           |  |                      |        |               |  |                    |        |               |  |      |       |     
|                           |  | For the Three Months |        |               |  | For the Six Months |        |              
|                           |  | Ended June 30,       |        | 2004 vs. 2003 |  | Ended June 30,     |        | 2004 vs. 2003
|                           |  |                      |        |               |  |                    |        |              
|Operating Expenses:        |  | 2004                 |        | 2003          |  | Change             |        | %             |  | 2004 |       | 2003 |  | Change |       | %
|                           |  |                      |        |               |  |                    |        |               |  |      |       |      |  |        |       |  
|Sales and marketing        |  | $                    | 23,505 |               |  | $                  | 20,852 |               |  | $    | 2,653 |      |  |        | 12.7% |   |  | $ | 49,155 |  |  | $ | 40,508 |  |  | $ | 8,647 |   |  |  | 21.3 | % 
|General and administrative |  | $                    | 8,860  |               |  | $                  | 8,360  |               |  | $    | 500   |      |  |        | 6.0%  |   |  | $ | 16,934 |  |  | $ | 17,226 |  |  | $ | (292  | ) |  |  | (1.7 | )%
|Product development        |  | $                    | 10,993 |               |  | $                  | 8,528  |               |  | $    | 2,465 |      |  |        | 28.9% |   |  | $ | 19,484 |  |  | $ | 16,573 |  |  | $ | 2,911 |   |  |  | 17.6 | % 



| |                    
| | -------------------
| | Sales and Marketing

Sales and marketing expenses consist primarily of
compensation and related benefits, sales commissions, general
marketing costs, advertising, bad debt expense and other
operating expenses associated with our sales and marketing
departments. Sales and marketing expenses increased by
$2.7 million in the second quarter of 2004 compared to the
same period of 2003 and increased as a percentage of revenue to
34.0% from 32.8%. The increase was primarily attributable to
increases in personnel-related costs of $2.3 million, bad
debt expense of $0.6 million offset by decreases in
depreciation, rent and utilities costs of approximately
$0.6 million. Personnel-related costs increased due to the
assumption of headcount as a result of our acquisitions of CSC
and SmartPath and the hiring of additional employees in our
TechSolutions division. As a result, average sales and marketing
headcount increased 15% in the second quarter of 2004 compared
to 2003. The increase in bad debt expense was consistent with
our year-over-year increase in revenues. Additionally, the
decrease in depreciation, rent and utilities costs was due to
the termination of the lease for our former New York
headquarters.

Sales and marketing expenses increased by
$8.6 million in the first half of 2004 compared to the same
period of 2003 and increased as a percentage of revenue to 35.8%
from 32.8%. The increase was primarily attributable to increases
in personnel-related costs of $7.1 million, bad debt
expense of $1.5 million and marketing expenses of
$0.7 million offset by decreases in depreciation, rent and
utilities costs of approximately $1.2 million.
Personnel-related costs increased due to the assumption of
headcount as a result of our acquisitions of CSC and SmartPath
and the hiring of additional employees in our TechSolutions
division. The change in personnel-related costs was net of a
$1.5 million reserve reversal recorded in the first quarter
of 2004 relating to a prior acquisition. The increase in bad
debt expense was consistent with our year-over-year increase in
revenues. Marketing expenses increased in the first half of 2004
due to our worldwide Insight conferences held in the first
quarter of 2004. Additionally, the decrease in depreciation,
rent and utilities costs was due to the termination of the lease
for our former New York headquarters.

For the remainder of 2004, we expect the absolute
dollar amount of sales and marketing expenses to increase as
compared to the prior year period due to additional
personnel-related expenses primarily as a result of our
acquisition of Performics and additional investments expected to
be made in our Ad Management business. However, we expect these
expenses to decline as a percentage of revenues due to
anticipated increases in revenues.



| |                           
| | --------------------------
| | General and Administrative

General and administrative expenses consist
primarily of compensation and related benefits, professional
services and other operating expenses associated with our
executive, finance, human resources, legal, facilities and
administrative departments. General and administrative expenses
increased slightly by $0.5 million to 12.8% of revenue in
the second quarter of 2004 compared to 13.2% of revenue in the
same period of 2003. The increases were primarily a result of
approximately $1.3 million in professional and outside
service fees relating to strategic initiatives and the
requirements of the Sarbanes-Oxley Act. Additionally,
personnel-related costs increased by $0.4 million due to
the rise in average general and administrative headcount of
approximately 15% in the second quarter of 2004 compared to the
same period of 2003. Cost savings initiatives during the year
resulted in reductions of $0.4 million in computer-related
office expenses and decreases in depreciation,

27



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##### Table of Contents



rent and utilities costs of approximately
$0.7 million. The decrease in depreciation, rent and
utilities costs was due to the termination of the lease for our
former New York headquarters.


General and administrative expenses decreased
slightly by $0.3 million to 12.3% of revenue in the first
half of 2004 compared to 13.9% of revenue in the same period of
2003. Cost savings initiatives during the year resulted in
reductions of $0.8 million in computer-related office
expenses and decreases in depreciation and utility costs of
approximately $1.1 million. The decrease in depreciation
and utilities was due to the termination of the lease for our
former New York headquarters. These decreases were partially
offset by increases in personnel-related costs of
$1.1 million due to the increase in average general and
administrative headcount of approximately 12% in the first half
of 2004 compared to the same period of 2003. In addition,
professional and outside service fees increased by approximately
$0.5 million relating to strategic initiatives and the
requirements of the Sarbanes-Oxley Act.

For the remainder of 2004, we expect general and
administrative expenses to decline in absolute dollars and as a
percentage of revenues due to anticipated higher revenues as
compared to the prior year period.



| |                    
| | -------------------
| | Product Development

Product development expenses consist primarily of
compensation and related benefits, consulting fees and other
operating expenses associated with the product development
departments. The product development departments perform
research and development, enhance and maintain existing products
and provide quality assurance. Product development expenses
increased by $2.5 million to 15.9% of revenue in the second
quarter of 2004 compared to 13.4% of revenue in the same period
of 2003. The increase was primarily due to increases in
personnel-related costs of $2.2 million which was
attributable to additional headcount assumed from our
acquisitions of CSC and SmartPath and the impact of hiring
additional employees in our TechSolutions division. As a result,
the increase in average product development headcount was
approximately 33% in the second quarter of 2004 compared to the
same period of 2003. In addition, professional fees increased by
approximately $0.6 million relating to consulting fees for
new product initiatives. These increases were partially offset
by decreases of $0.5 million in depreciation and utilities
from the termination of the lease for our former New York
headquarters.

Product development expenses increased by
$2.9 million to 14.2% of revenue in the first half of 2004
compared to 13.4% of revenue in the same period of 2003. The
increase was primarily due to increases in personnel-related
costs of $2.6 million which was attributable to additional
headcount assumed from our acquisitions of CSC and SmartPath and
the impact of hiring additional employees in our TechSolutions
division. As a result, the increase in average product
development headcount of approximately 25% in the first half of
2004 compared to the same period of 2003. In addition,
professional fees increased by approximately $1.0 million
relating to consulting fees for new product initiatives. These
increases were partially offset by decreases of
$1.0 million in depreciation and utilities from the
termination of the lease for our former New York headquarters.

For the remainder of 2004, we expect product and
development expenses to continue to increase in absolute dollars
and as a percentage of revenue as compared to the prior year
period primarily due to the assumption of headcount as a result
of our acquisition of Performics and additional investments
expected to be made in our Ad Management business.



| |                            
| | ---------------------------
| | Amortization of Intangibles

Amortization of intangible assets consists
primarily of the amortization of customer relationships.
Amortization expense was $1.2 million for the three months
ended June 30, 2004 and 2003. Amortization expense remained
flat for the second quarter of 2004 compared to the second
quarter of 2003 primarily due to acquired intangibles assets
with respect to CSC and SmartPath offset by certain intangible
assets becoming fully amortized during the year.

Amortization expense was $1.8 million and
$3.3 millions for the six months ended June 30, 2004
and 2003, respectively. The decrease of $1.5 million in the
first half of 2004 compared to the same period of 2003 was
primarily the result of certain intangible assets becoming fully
amortized during the year.

28



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##### Table of Contents



We expect amortization of intangible assets to
increase during the remainder of 2004 due to the acquisition of
Performics in June 2004, offset slightly by other intangible
assets becoming fully amortized during the year.

Non-Operating Expenses and Income
Taxes



| |                                   
| | ----------------------------------
| | Equity in Losses of
    Affiliates

Equity in losses of affiliates was
$0.4 million and $1.0 million for the three months
ended June 30, 2004 and 2003, respectively. In the second
quarter of 2004, we recognized equity losses of approximately
$0.3 million from our equity investment in Abacus
Deutschland and approximately $0.1 million from our equity
investment in DoubleClick Japan. In the second quarter of 2003,
we recognized equity losses of $0.9 million relating to our
equity investment in MaxWorldwide and $0.1 million from our
equity investment in DoubleClick Japan.

Equity in losses of affiliates was
$0.6 million and $2.3 million for the six months ended
June 30, 2004 and 2003, respectively. In the first half of
2004, we recognized equity losses of approximately
$0.4 million from our equity investment in Abacus
Deutschland and approximately $0.2 million from our
investment in DoubleClick Japan. In the first half of 2003, we
recognized equity losses of $1.9 million relating to our
equity investment in MaxWorldwide and $0.4 million from our
equity investment in DoubleClick Japan.



| |                                        
| | ---------------------------------------
| | Gain on Distribution from
    Affiliate

In the first quarter of 2004, we recognized a
gain of $2.4 million relating to a distribution from
MaxWorldwide in connection with its plan of liquidation and
dissolution. We still maintain a 19.8% interest in MaxWorldwide
and may receive additional distributions in future periods based
on the finalization of its plan of liquidation and dissolution.

We did not recognize any gains from affiliate
distributions in the six months ended June 30, 2003.



| |                        
| | -----------------------
| | Interest and Other, Net

|                 |  |                      |       |                    |  |      |        |      |  |   |       |   |  |   |        |  
|---------------- |  | -------------------- | ----- | ------------------ |  | ---- | ------ | ---- |  | - | ----- | - |  | - | ------ | -
|                 |  |                      |       |                   
|                 |  | For the Three Months |       | For the Six Months
|                 |  | Ended June 30,       |       | Ended June 30,    
|                 |  |                      |       |                   
|                 |  | 2004                 |       | 2003               |  | 2004 |        | 2003
|                 |  |                      |       |                    |  |      |        |     
|Interest Income  |  | $                    | 2,758 |                    |  | $    | 4,084  |      |  | $ | 5,756 |   |  | $ | 9,105  |  
|Interest Expense |  |                      | (346  | )                  |  |      | (2,166 | )    |  |   | (697  | ) |  |   | (4,273 | )
|Other            |  |                      | (95   | )                  |  |      | 671    |      |  |   | 732   |   |  |   | 800    |  
|                 |  |                      |       |                    |  |      |        |      |  |   |       |   |  |   |        |  
|                 |  | $                    | 2,317 |                    |  | $    | 2,589  |      |  | $ | 5,791 |   |  | $ | 5,632  |  
|                 |  |                      |       |                    |  |      |        |      |  |   |       |   |  |   |        |  

Interest and other, net was $2.3 million and
$2.6 million for the three months ended June 30, 2004,
and 2003, respectively. In the second quarter of 2004, interest
income decreased by $1.3 million due to a decrease of
average total cash, which includes cash and cash equivalents,
investments in marketable securities and restricted cash, of
$225.7 million compared to the prior year period and a
decrease in the average interest rates. Interest expense
decreased due to the redemption of our 4.75% Convertible
Subordinated Notes due 2006 in July 2003.

Interest and other, net was $5.8 million and
$5.6 million for the six months ended June 30, 2004,
and 2003, respectively. For the six months ended June 30,
2004, interest income decreased by $3.3 million due to a
decrease of average total cash, which includes cash and cash
equivalents, investments in marketable securities and restricted
cash, of $175.1 million compared to the prior year period
and a decrease in the average interest rates. Interest expense
decreased due to the redemption of our 4.75% Convertible
Subordinated Notes due 2006 in July 2003.

Interest and other, net may fluctuate in future
periods in correlation with the cash, investment and debt
balances we maintain and as a result of changes in the market
interest rates.

29



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| |                           
| | --------------------------
| | Provision for Income Taxes

The provision for income taxes recorded for the
three months ended June 30, 2004 of $0.8 million
consists principally of income taxes of $0.7 million on the
earnings of certain of our foreign subsidiaries and federal
alternative minimum taxes of $0.1 million. The provision
for income taxes recorded for the three months ended
June 30, 2003 of $0.3 million consists principally of
income taxes of $0.6 million on the earnings of some of our
foreign subsidiaries offset by a $0.3 million benefit
related to a reduction of federal alternative minimum tax and
state taxes recorded in the period ended March 31, 2003 and
resolution of certain prior year state tax matters. Except for
certain foreign jurisdictions, the provision for income taxes
for the three months ended June 30, 2004 and 2003 does not
reflect tax benefits attributable to our net operating loss and
other tax carryforwards due to limitations and uncertainty
surrounding our prospective realization of such benefits.

The provision for income taxes recorded for the
six months ended June 30, 2004 of $1.5 million
consists principally of income taxes of $1.1 million on the
earnings of certain of our foreign subsidiaries, federal
alternative minimum taxes of $0.3 million and state and
local taxes of $0.1 million. The provision for income taxes
recorded for the six months ended June 30, 2003 of
$0.6 million consists principally of income taxes of
$1.1 million on the earnings of some of our foreign
subsidiaries offset by a $0.5 million benefit related to a
reduction of federal alternative minimum tax and state taxes
recorded in the period ended June 30, 2003 and resolution
of certain prior year state tax matters. Except for certain
foreign jurisdictions, the provision for income taxes for the
six months ended June 30, 2004 and 2003 does not reflect
tax benefits attributable to our net operating loss and other
tax carryforwards due to limitations and uncertainty surrounding
our prospective realization of such benefits.

Liquidity and Capital Resources

|                                                        |  |                    |         |      |  |   |         | 
|------------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | 
|                                                        |  |                   
|                                                        |  | For the Six Months
|                                                        |  | Ended June 30,    
|                                                        |  |                   
|                                                        |  | 2004               |         | 2003
|                                                        |  |                    |         |     
|                                                        |  |                   
|                                                        |  | (In thousands)    
|Net cash provided by operating activities               |  | $                  | 7,624   |      |  | $ | 4,348   | 
|Net cash (used in) provided by investing
    activities |  | $                  | (58,088 | )    |  | $ | 55,705  | 
|Net cash (used in) provided by financing
    activities |  | $                  | (55,354 | )    |  | $ | 130,548 | 



| |                     
| | --------------------
| | Operating Activities

For the six months ended June 30, 2004, cash
provided by operating activities was $7.6 million, an
increase of $3.3 million compared to the same period of
2003. The increase is primarily a result of the decrease in
accrued expenses and the timing of lease termination payments.
Accrued expenses decreased to $16.2 million in the six
months ended June 30, 2004 compared to $28.8 million
in the same period of the prior year. The decreases in payments
associated with accrued expenses were primarily a result of
additional restructuring activities in 2003 compared to same
period in 2004. Lease termination payments were
$7.6 million in the first half of 2004 compared to
$14.4 million in the prior year period. These payments were
slightly offset by a decrease in net income adjusted for
non-cash items and improvements in prepaid expenses and deferred
revenue.

For the remainder of 2004, we expect to generate
positive cash flow from operating activities due to the
completion of restructuring payments for our former New York
headquarters and the anticipated increase in revenues and net
income.



| |                     
| | --------------------
| | Investing Activities

For the six months ended June 30, 2004, cash
used in investing activities was $58.1 million, a decline
of $113.8 compared to the same period of 2003. The decline is
primarily due to the net cash used in the acquisitions of
Performics and SmartPath of $72.0 million and the decrease
in the net proceeds from purchases and maturities of investments
in marketable securities of $87.4 million. These cash flows
were partially offset by positive movements in restricted cash
totaling $43.4 million.

30



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##### Table of Contents



For the remainder of 2004, cash flow from
investing activities may fluctuate based upon the net proceeds
from purchases and maturities of investments in marketable
securities, purchases of equipment and possible acquisitions
compared to the prior year period.



| |                     
| | --------------------
| | Financing Activities

For the six months ended June 30, 2004, cash
used in financing activities was $55.3 million, a decline
of $185.9 compared to the same period of 2003. The decline is
due to the proceeds from the issuance of the Zero Coupon
Convertible Subordinated Notes due 2023 of $132.0 million
received in June 2003 and $58.4 million in cash used in the
purchase of 6.8 million shares of our common stock during
the first half of this year. These cash flows were offset by
reductions in payments under capital leases of $3.4 million.

For the remainder of 2004, cash flow from
financing activities may fluctuate based on possible purchases
of our common stock as compared to the prior year period.



| |                           
| | --------------------------
| | Related Party Transactions

We maintain a 15% interest in AdLINK. This
interest was acquired in January 2002 as a result of the sale of
our European Media business. We currently maintain one seat on
AdLINKs supervisory board. We recognized revenue of
approximately $0.9 million and $1.3 million during the
six months ended June 30, 2004 and 2003, respectively,
relating to services provided to AdLINK.

In addition, we hold a 19.8% interest in
MaxWorldwide. This interest was acquired in July 2002 as a
result of the sale of our North American Media business. We
recognized revenue of approximately $1.4 million during the
six months ended June 30, 2003, relating to services
provided to MaxWorldwide. In 2004, we did not provide any
services to MaxWorldwide as a result of the sale of its
MaxOnline division and its plan of liquidation and dissolution.

Additionally, we maintain a minority interest in
DoubleClick Japan. On December 26, 2002, we sold
45,049 shares of common stock in DoubleClick Japan and
reduced our ownership interest to 15.6%. As a result of this
transaction, we account for our remaining 31,271 shares in
DoubleClick Japan under the equity method of accounting. We also
have retained one seat on DoubleClick Japans board of
directors. DoubleClick Japan continues to sell our suite of DART
technology products as part of a long-term technology reseller
agreement. Revenue recognized through services provided to
DoubleClick Japan was approximately $1.7 million and
$1.6 million for the six months ended June 30, 2004
and 2003, respectively.

31



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|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

Interest
Rate Risk

The primary objective of our investment
activities is to preserve principal while at the same time
maximizing yields without significantly increasing risk. To
achieve this objective, we maintain our portfolio of cash
equivalents and marketable securities in a variety of government
and corporate debt obligations and money market funds. As of
June 30, 2004, our investments in marketable securities had
a weighted average time to maturity of 394 days.

The following table presents the amounts of our
financial instruments that are subject to interest rate risk by
expected maturity and average interest rates as of June 30,
2004:

|                                                |  |                  |         |            |  |             |         |            |  |            |         |   |  |   |   |  |  |   |         | 
|----------------------------------------------- |  | ---------------- | ------- | ---------- |  | ----------- | ------- | ---------- |  | ---------- | ------- | - |  | - | - |  |  | - | ------- | 
|                                                |  |                  |         |           
|                                                |  | Time to Maturity |         |           
|                                                |  |                  |         |           
|                                                |  | One Year         |         | One to Two |  | Two to Five |         | Five and   |  |           
|                                                |  | or Less          |         | Years      |  | Years       |         | Thereafter |  | Fair Value
|                                                |  |                  |         |            |  |             |         |            |  |           
|                                                |  |                 
|                                                |  | (In thousands)  
|Assets:                                         |  |                  |         |            |  |             |         |            |  |            |         |   |  |   |   |  |  |   |         | 
|Cash and cash equivalents                       |  | $                | 77,522  |            |  | $           |        |            |  | $          |        |   |  | $ |  |  |  | $ | 77,522  | 
|Average interest rate                           |  |                  | 1.85    | %          |  |             |         |            |  |            |         |   |  |   |   |  |  |   |         | 
|Fixed-rate investments in marketable securities |  | $                | 183,839 |            |  | $           | 264,822 |            |  | $          |        |   |  | $ |  |  |  | $ | 448,661 | 
|Average interest rate                           |  |                  | 1.83    | %          |  |             | 1.90    | %          |  |            |         |   |  |   |   |  |  |   |         | 
|Liabilities:                                    |  |                  |         |            |  |             |         |            |  |            |         |   |  |   |   |  |  |   |         | 
|Loans payable                                   |  | $                | 3,289   |            |  | $           |        |            |  | $          |        |   |  | $ |  |  |  | $ | 3,289   | 
|Average interest rate                           |  |                  | 4.47    | %          |  |             |         |            |  |            |         |   |  |   |   |  |  |   |         | 
|Convertible subordinated notes                  |  | $                |        |            |  | $           |        |            |  | $          | 135,000 |   |  | $ |  |  |  | $ | 122,006 | 
|Average interest rate                           |  |                  |         |            |  |             |         |            |  |            | 0.00    | % |  |   |   |  |  |   |         | 

As of June 30, 2004, the current portion of
restricted cash was $3.7 million and the average interest
rate associated with this cash was 0.13% and the non-current
portion of restricted cash was $11.7 million with an
average interest rate of 0.58%. Restricted cash primarily
represents amounts placed in escrow relating to funds to cover
office lease security deposits and our automated clearinghouse
payment function.

We may redeem for cash some or all of the Zero
Coupon Convertible Subordinated Notes due 2023, at any time on
or after July 15, 2008. Holders of the Zero Coupon
Convertible Subordinated Notes due 2023 also have the right to
require us to purchase some or all of their notes for cash on
July 15, 2008, July 15, 2013 and July 15, 2018,
at a price equal to 100% of the principal amount of the Zero
Coupon Convertible Subordinated Notes due 2023 being redeemed
plus accrued and unpaid liquidated damages, if any.

The Zero Coupon Convertible Subordinated Notes
due 2023 contain an embedded derivative, the value of which as
of June 30, 2004 has been determined to be immaterial to
our consolidated financial position. For financial accounting
purposes, the ability of the holder to convert upon the
satisfaction of a trading price condition constitutes an
embedded derivative. Any changes in its value will be reflected
in our future income statements, in accordance with Statement of
Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities. As of
June 30, 2004, we did not hold any other derivative
financial instruments.



| |                      
| | ---------------------
| | Foreign Currency Risk

We transact business in various foreign countries
and are thus subject to exposure from adverse movements in
foreign currency exchange rates. This exposure is primarily
related to revenue and operating expenses denominated in
European and Asian currencies, as well as cash balances held in
currencies other than our functional currency and the functional
currency of our subsidiaries. For the three and six months ended
June 30, 2004, our international revenues were
approximately $13.9 million and $28.0 million,
respectively. The revenues included beneficial foreign currency
movements of approximately $2.1 million and

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$4.2 million for the three and six months
ended June 30, 2004, respectively, primarily due to the
strength of the Euro compared to the U.S. dollar. The
effect of foreign exchange rate fluctuations on operations
resulted in gains of $0.5 million for the six months ended
June 30, 2004. This was principally as a result of the
weakening of the U.S. dollar and its impact upon our
U.S. dollar denominated deposits held by our international
subsidiaries.


To date we have not used financial instruments to
hedge operating activities denominated in foreign currencies. We
assess the need to utilize financial instruments to hedge
currency exposures on an ongoing basis. As of June 30,
2004, we had $45.4 million in cash and cash equivalents
denominated in foreign currencies.

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

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RISK FACTORS

The following important factors, among others,
could cause our actual operating results to differ materially
from those indicated or suggested by forward-looking statements
made in this Form 10-Q or presented elsewhere by management
from time to time.

RISKS RELATING TO OUR COMPANY AND OUR
BUSINESS

We have a limited operating history and our
future financial results may fluctuate, which may cause our
stock price to decline.

We have a limited operating history. An investor
in our common stock must consider the risks and difficulties
frequently encountered by companies in new and rapidly evolving
industries, including companies that provide marketing
technology and data products and services. Our risks include the
ability to:



| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | achieve anticipated revenue growth rates;                                                                                                    
|
| |  | manage our operations;                                                                                                                       
|
| |  | compete effectively in the marketplace;                                                                                                      
|
| |  | develop and introduce new products and services;                                                                                             
|
| |  | continue to develop, upgrade and integrate our
    products and services;                                                                    
|
| |  | attract, retain and motivate qualified personnel;                                                                                            
|
| |  | maintain our current, and develop new,
    relationships with direct marketers, Web publishers, advertisers
    and advertising agencies; and
|
| |  | anticipate and adapt to changing industry
    conditions.                                                                                    

We also depend on the use of the Internet and
direct mail for advertising and marketing and as communications
media, the demand for advertising and marketing services in
general, and on general economic and industry conditions. We
cannot assure you that our business strategy will be successful
or that we will successfully address these risks. If we are
unsuccessful in addressing these risks, our revenues may decline
or may not grow in accordance with our business model and may
fall short of expectations of market analysts and investors,
which could negatively affect the price of our stock.

We have a history of losses and may have
losses at times in the future.

With the exception of fiscal year 2003, we have
incurred net losses each year since inception, including net
losses of $117.9 million and $265.8 million for the
years ended December 31, 2002 and 2001, respectively. As of
June 30, 2004 our accumulated deficit was
$637.9 million. With the exception of the fiscal year ended
December 31, 2003, we have not achieved profitability on an
annual basis and may incur operating losses at times in the
future. We expect to continue to incur significant operating and
capital expenditures, which may include obligations for
facilities that currently constitute excess or idle facilities.
Periodically, we evaluate the expenses likely to be incurred for
these facilities, and where appropriate, have taken
restructuring charges with respect to these expenses. We cannot
assure you that there will not be additional restructuring
charges recognized with respect to our excess or idle
facilities, in particular with respect to our facility in
London, England where the office space is currently sublet for
only a portion of the remaining lease term. As a result of our
expenditures, we will need to generate significant revenue to
maintain profitability. Even if we do continue to achieve
profitability, we cannot assure you that we can sustain or
increase profitability on a quarterly or annual basis in the
future. If revenue does not meet our expectations, or if
operating expenses exceed what we anticipate or cannot be
reduced accordingly, our business, results of operations and
financial condition will be materially and adversely affected.

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A decrease in expenditures by direct marketers
and advertisers or a downturn in the economy could cause our
revenues to decline significantly in any given period.

We derive, and expect to continue to derive for
the foreseeable future, a large portion of our revenue from
products and services we provide to direct marketers, Web
publishers, advertisers and advertising agencies. Expenditures
by direct marketers and advertisers tend to be cyclical,
reflecting overall economic conditions as well as budgeting and
buying patterns. Specifically, the market for online advertising
has been characterized in the last few years by lower prices for
advertisements and the reduction, renegotiation or cancellation
of advertising contracts. As a result, advertising spending
across traditional media, as well as the Internet, decreased
over the past few years. In addition, at times in the past, we
have experienced an increased risk of uncollectible receivables
from customers and the reduction of marketing and advertising
budgets, especially for online advertising. We cannot assure you
that expenditures by direct marketers and advertisers will not
decline in any given period.

The number of ad impressions delivered by
DoubleClick TechSolutions has, at times in the past, declined
and may in the future decline or fail to grow, which would
adversely affect our revenues. In addition, the prices that
DoubleClick TechSolutions can charge for its services has
declined in recent years, and if these declines continue, it may
adversely affect our revenues. A decline in the economic
prospects of direct marketers or the economy in general would
also adversely impact the revenue outlook for our marketing
automation business. DoubleClick Data, which provides products
and services to direct marketers, may face similar pressures.
Some direct marketers may respond to economic downturns by
reducing the number of catalogs mailed, thereby possibly
reducing the demand for DoubleClick Datas services. If
direct marketing activities fail to grow or decline, our
revenues could be adversely affected.

We cannot assure you that reductions in marketing
spending will not occur or that marketing spending will not be
diverted to more traditional media or other online marketing
products and services. However, even if economic conditions
improve, we cannot assure you that marketing budgets and
advertising spending in general or with respect to our offerings
in particular will increase, or not decrease, from current
levels. A decline in the economic prospects of marketers or the
economy in general could alter current or prospective
marketers spending priorities or increase the time it
takes to close a sale with a customer. As a result, our revenues
from marketing and advertising services may not increase or may
decline significantly in any given period.

Disruption of our services due to
unanticipated problems or failures could harm our
business.

Some of our TechSolutions and Data technologies
reside in our data centers in multiple locations in the United
States and abroad. Continued and uninterrupted performance of
our technology is critical to our success. Customers may become
dissatisfied by any system failure that interrupts our ability
to provide our services to them, including failures affecting
our ability to deliver advertisements without significant delay
to the viewer or our ability to deliver a customers online
marketing campaign. Sustained or repeated system failures would
reduce the attractiveness of our products and services to our
customers and could result in contract terminations, fee rebates
or credits, or damages resulting from claims or litigation,
thereby reducing revenue. Slower response time or system
failures may also result from straining the capacity of our
technology due to an increase in the volume of advertising or
emails delivered through our servers. To the extent that we do
not effectively address any capacity constraints or system
failures, our business, results of operations and financial
condition could be materially and adversely affected.

Our operations are dependent on our ability to
protect our computer systems against damage from natural
disasters, fire, power loss, water damage, telecommunications
failures, vandalism, unauthorized access to, or attacks on, our
systems, and other malicious acts, and similar unexpected
adverse events. In addition, interruptions in our products or
services could result from the failure of our telecommunications
providers to provide the necessary data communications capacity
in the time frame we require. Unanticipated problems affecting
our systems have from time to time in the past caused, and in
the future could cause, interruptions in the delivery of our
products and services. Our business, results of operations and
financial condition could be materially and adversely affected
by any damage or failure that interrupts, delays or destroys our
operations.

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Some of our data centers are located at
facilities provided by third parties and if these parties are
unable to adequately protect our data centers, our business,
results of operations and financial conditions could be
materially and adversely affected.


We do not have multi-year agreements with most
of our customers and may be unable to retain customers, attract
new customers or replace departing customers with customers that
can provide comparable revenues.

Many of our contracts with our customers are
short-term. We cannot assure you that our customers will
continue to use our products and services or that we will be
able to replace, in a timely or effective manner, departing
customers with new customers that generate comparable revenues.
Further, we cannot assure you that our customers will continue
to generate consistent amounts of revenues over time. Our
failure to develop and sustain long-term relationships with our
customers would materially and adversely affect our results of
operations.

Industry shifts, continuing evolution of our
products and services and other changes may strain our
managerial, operational, financial and information system
resources.

In recent years, we have had to respond to
significant changes in our industry. As a result, we have
experienced industry shifts, continuing evolution of product and
service offerings and other changes that have increased the
complexity of our business and placed considerable demands on
our managerial, operational and financial resources. We continue
to increase and change the scope of our product and service
offerings both domestically and internationally and to deploy
our resources in accordance with changing business conditions
and opportunities. We have also grown through geographic
expansion and as a result have dispersed offices and operation
centers that make it more challenging to manage, operate and
monitor our business and operations. To continue to successfully
implement our business plan in our changing industry requires
effective planning and management processes. We expect that we
will need to continue to improve our financial and managerial
controls and information and reporting systems and procedures
and will need to continue to train and manage our workforce. Our
inability to effectively respond to these challenges could
materially and adversely affect our business, financial
condition and results of operations.

We may not be able to generate profits from
many of our products and services.

A significant part of our business model involves
generating revenue by providing marketing technology and data
products and services to direct marketers, Web publishers,
advertisers and advertising agencies. The long term profit
potential for our business model has not yet been proven. The
profitability of our business model is subject to external and
internal factors. Any single factor or combination of factors
could limit the profit potential, long-term and short-term, of
our business model. Like other businesses in the marketing and
advertising sectors, our revenue outlook is sensitive to
downturns in the economy, including declines in advertising and
marketing budgets. The profit potential of our business model is
also subject to the acceptance of our products and services by
direct marketers, Web publishers, advertisers and advertising
agencies. Intensive marketing and sales efforts may be necessary
to educate prospective customers regarding the uses and benefits
of, and to generate demand for, our products and services.
Enterprises may be reluctant or slow to adopt a new approach
that may replace existing techniques, or may feel that our
offerings fall short of their needs. If these outcomes occur, it
could have an adverse effect on the profit potential of our
business model.

Misappropriation of confidential information
could cause us to lose customers or incur liability.

We currently retain highly confidential
information on behalf of our customers in secure database
servers. Although we observe security measures throughout our
operations, we cannot assure you that we will be able to prevent
unauthorized individuals from gaining access to these database
servers. Any unauthorized access to our servers, or abuse by our
employees, could result in the theft of confidential customer
information. If confidential information is compromised, we
could lose customers or become subject to liability or
litigation and our reputation could be harmed, any of which
could materially and adversely affect our business and results
of operations.

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Direct marketing, online advertising and
related products and services are competitive markets and we may
not be able to compete successfully.

The market for marketing technology and data
products and services is very competitive. We expect this
competition to continue because there are low barriers to entry
for several of our businesses. Also, industry consolidation may
lead to stronger, better capitalized entities against which we
must compete. We expect that we will encounter additional
competition from new sources as we expand our product and
service offerings.

We believe that our ability to compete depends on
many factors both within and beyond our control, including the
following:



| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the features, performance, price and reliability
    of products and services offered either by us or our competitors;                                           
|
| |  | the launch timing and market success of products
    and services developed either by us or our competitors;                                                     
|
| |  | our ability to adapt, integrate and scale our
    products and services, and to develop and introduce new products
    and services that respond to market needs;
|
| |  | our ability to adapt to evolving technology and
    industry standards;                                                                                          
|
| |  | our customer service and support efforts;                                                                                                                        
|
| |  | our sales and marketing efforts; and                                                                                                                             
|
| |  | the relative impact of general economic and
    industry conditions on either us or our competitors.                                                             

Some of our existing and potential competitors
have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial,
technical and marketing resources than do we. These factors
could allow them to compete more effectively than we can,
including devoting greater resources to the development,
promotion and sale of their products and services, engaging in
more extensive research and development, undertaking more
far-reaching marketing campaigns, adopting more aggressive
pricing policies and making more attractive offers to existing
and potential employees, strategic partners, direct marketers,
Web publishers and advertisers. We cannot assure you that our
competitors will not develop products or services that are equal
or superior to our products and services or that achieve greater
acceptance than our products and services. In addition, current
and potential competitors have or may merge or have established
or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products or
services to address the needs of our prospective direct
marketer, Web publisher, advertising and advertising agency
customers. As a result, it is possible that new competitors may
emerge and rapidly acquire significant market share. Increased
competition may result in price reductions, reduced gross
profits and loss of market share. We cannot assure you that we
will be able to compete successfully or that competitive
pressures will not materially and adversely affect our business,
results of operations or financial condition.

Our quarterly operating results are subject to
significant fluctuations and you should not rely on them as an
indication of future operating performance.

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



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | direct marketer, Web publisher and advertiser
    demand for our products and services;                    
|
| |  | downward pricing pressures from current and
    potential customers for our products and services;         
|
| |  | Internet user traffic levels;                                                                              
|
| |  | number and size of ad units per page on our
    customers Web sites;                                      
|
| |  | the introduction of new products or services by
    us or our competitors;                                 
|
| |  | variations in the levels of capital, operating
    expenditures and other costs relating to our operations;

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| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the size and timing of significant pre-tax
    charges, including for goodwill impairment and the write-down of
    assets and restructuring charges and credits, such as those
    relating to idle or excess facilities and severance;
|
| |  | costs related to any acquisitions or dispositions
    of technologies or businesses;                                                                                                                                                    
|
| |  | general seasonal and cyclical
    fluctuations; and                                                                                                                                                                                     
|
| |  | general economic and industry conditions.                                                                                                                                                                                               

We may not be able to manage our operational
spending properly which could adversely impact our business,
results of operations and financial condition.

We may not be able to adjust spending quickly
enough to offset any unexpected revenue shortfall. Our expenses
include upgrading and enhancing our ad management and email
delivery technology, expanding our product and service
offerings, marketing and supporting our products and services
and supporting our sales and marketing operations. If we have a
shortfall in revenue in relation to our expenses, or if our
expenses exceed revenue, then our business, results of
operations and financial condition could be materially and
adversely affected.

Seasonal trends may cause our operating
results to fluctuate.

Our business is subject to seasonal fluctuations.
Advertisers generally place fewer advertisements during the
first and third calendar quarters of each year, which directly
affects our DoubleClick TechSolutions business. Further,
Internet user traffic typically drops during the summer months,
which reduces the amount of online advertising. The direct
marketing industry generally uses our data services more in the
third calendar quarter based on plans for holiday season
mailings, which directly affects our DoubleClick Data business.
The email technology business may experience seasonal patterns
similar to the traditional direct marketing industry, which
typically generates lower revenues earlier in the calendar year
and higher revenues later in the year. In addition, the demand
for performance based marketing services has, in the past,
peaked during the fourth quarter holiday season. As a result, we
believe that period-to-period comparisons of our results of
operations may not be indicators of future performance.

We may not be able to continue to grow through
acquisitions of or investments in other companies.

Our business has continued to expand rapidly in
part as a result of acquisitions or investments in other
companies, including the recent acquisitions of SmartPath and
Performics. We have recorded goodwill in connection with a
number of our acquired businesses, including MessageMedia,
FloNetwork, SmartPath and Performics. We have in the past
recognized impairment charges with respect to the goodwill of
some acquired businesses as a result of significantly
lower-than-expected revenues generated with respect to acquired
businesses and considerably reduced estimates of future
performance. If market conditions require, we may in the future
record additional impairments in the value of our acquired
businesses.

We may continue to acquire or make investments in
other complementary businesses, products, services or
technologies as a means to grow our business. From time to time
we have had discussions with other companies regarding our
acquiring, or investing in, their businesses, products, services
or technologies. We cannot assure you that we will be able to
identify other suitable acquisition or investment candidates.
Even if we do identify suitable candidates, we cannot assure you
that we will be able to make other acquisitions or investments
on commercially acceptable terms, if at all. Even if we agree to
buy a company, technology or other assets, we cannot assure you
that we will be successful in consummating the purchase. If we
are unable to continue to expand through acquisitions, our
revenue may decline or fail to grow.

We are also minority investors in a few
technology companies, including AdLINK, MaxWorldwide and
DoubleClick Japan. Our investments have decreased in value in
the past, and may decrease in the future, as a result of market
volatility, and periodically, we have recorded charges to
earnings for all or a portion of the unrealized loss due to
declines in market value considered to be other than temporary.
The market value of these investments may decline in future
periods due to the continued volatility in the stock market in
general

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or the market prices of securities of technology
companies in particular and we may be required to record further
charges to earnings as a result. Further, we cannot assure you
that we will be able to sell these securities at or above our
cost basis.


We may not manage the integration of acquired
companies successfully or achieve desired results.

As a part of our business strategy, we have in
the past entered into, and could in the future enter into, a
number of business combinations and acquisitions. Acquisitions
are accompanied by a number of risks, including:



| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the difficulty of assimilating the operations and
    personnel of the acquired companies;                                                                                                                                       
|
| |  | the potential disruption of the ongoing
    businesses and distraction of our management and the management
    of acquired companies;                                                                                           
|
| |  | the difficulty of incorporating acquired
    technology and rights into our products and services;                                                                                                                               
|
| |  | unanticipated expenses related to technology and
    other integration;                                                                                                                                                          
|
| |  | difficulties in disposing of the excess or idle
    facilities of an acquired company or business;                                                                                                                               
|
| |  | difficulties in maintaining uniform standards,
    controls, procedures and policies;                                                                                                                                            
|
| |  | the impairment of relationships with employees
    and customers as a result of the integration of new management
    personnel;                                                                                                 
|
| |  | the inability to develop new products and
    services that combine our knowledge and resources and our
    acquired businesses or the failure for a demand to develop for
    the combined companies new products and services;
|
| |  | potential failure to achieve additional sales and
    enhance our customer base through cross-marketing of the
    combined companys products to new and existing customers;                                                    
|
| |  | potential litigation resulting from our business
    combinations or acquisition activities; and                                                                                                                                 
|
| |  | potential unknown liabilities associated with the
    acquired businesses.                                                                                                                                                       

We may not succeed in addressing these risks or
other problems encountered in connection with these business
combinations and acquisitions. If so, these risks and problems
could disrupt our ongoing business, distract our management and
employees, increase our expenses and adversely affect our
results of operations. Furthermore, we may incur debt or issue
equity securities to pay for any future acquisitions. The
issuance of equity securities could be dilutive to our existing
stockholders.

We depend on third-party Internet,
telecommunications and technology providers, over whom we have
no control, to provide our products and services.

We depend heavily on several third-party
providers of Internet and related telecommunication services,
including hosting and co-location facilities, as well as
providers of technology solutions, including software developed
by third party vendors, in delivering our products and services.
These companies may not continue to provide services or software
to us without disruptions in service, at the current cost or at
all. Our Abacus division depends on data modeling software
licensed from SAS Institute Inc. We do not maintain a long term
agreement with this vendor and rely, in large measure, upon our
relationship with them.

If the products and services provided by these
third-party vendors are disrupted or not properly supported, our
ability to provide our products and services would be adversely
impacted. While we believe our business relationships with our
key vendors are good, a material adverse impact on our business
would occur if a supply or license agreement with a key vendor
is materially revised, is not renewed or is terminated, or the
supply of products or services were insufficient or interrupted.
The costs associated with any transition to a new service
provider could be substantial, require us to reengineer our
computer systems and telecommunications

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infrastructure to accommodate a new service
provider and disrupt the services we provide to our customers.
This process could be both expensive and time consuming and
could damage our relationships with customers.


In addition, failure of our Internet and related
telecommunications providers to provide the data communications
capacity in the time frame we require could cause interruptions
in the services we provide. Unanticipated problems affecting our
computer and telecommunications systems in the future could
cause interruptions in the delivery of our services, causing a
loss of revenue and potential loss of customers.

We are dependent on key personnel and on the
retention and recruiting of key personnel for our future
success.

Our future success depends to a significant
extent on the continued service of our key technical, sales and
senior management personnel. We do not have employment
agreements with these executives and do not maintain key person
life insurance on any of these executives. The loss of the
services of one or more of our key employees could significantly
delay or prevent the achievement of our product development and
other business objectives and could harm our business. Our
future success also depends on our continuing ability to
attract, retain and motivate highly skilled employees for key
positions. There is competition for qualified employees in our
industry. We may not be able to retain our key employees or
attract, assimilate or retain other highly qualified employees
in the future.

We have from time to time in the past
experienced, and we expect to continue to experience from time
to time in the future, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications for certain
positions.

We may be unable to introduce new or enhanced
products and services that meet our customers
requirements.

Our future success depends in part upon our
ability to enhance and integrate our existing products and to
introduce new, competitively priced products and solutions with
features that meet evolving customer requirements, all in a
timely and cost-effective manner. A number of factors, including
the following, could have a negative impact on the success of
our products and services:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | delays or difficulties in product acquisition,
    integration or development;                                                         
|
| |  | our competitors introduction of new
    products ahead of our new products, or their introduction of
    superior or cheaper products;
|
| |  | our customers development of in-house
    solutions that could eliminate the need for our products and
    services; and              
|
| |  | our failure to anticipate changes in
    customers requirements.                                                                      

If we are unable to introduce new and enhanced
products and services effectively, our revenues may decline or
may not grow in accordance with our business model.

If we fail to adequately protect our
intellectual property, we could lose our intellectual property
rights or be liable for damages to third parties.

Our success and ability to effectively compete
are substantially dependent on the protection of our proprietary
technologies, patents, trademarks, service marks, copyrights and
trade secrets, which we protect through a combination of patent,
trademark, copyright, trade secret, unfair competition and
contract law. We cannot assure you that any of our intellectual
property rights will be viable or of value in the future.

In September 1999, the U.S. Patent and
Trademark Office issued to us a patent that covers our DART ad
serving and ad management technology. We are currently seeking
reissue of this patent, which would limit the scope of the
existing patent, and this reissue proceeding is pending before
the U.S. Patent and Trademark Office. The patent examiner
has raised some objections to our reissue application. Although
we are contesting these objections, we cannot assure you that
this patent will be reissued. We own other patents, and have
patent

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applications pending for some of our other
technology. We cannot assure you that the patent applications
that we have filed in the United States and internationally will
be issued or that patents issued or acquired by us now or in the
future will be valid and enforceable or provide us with any
meaningful protection.


We also have rights in the trademarks and service
marks that we use to market our products and services. These
marks include DOUBLECLICK®, DART®, DARTMAIL®,
ABACUSSM, DOUBLECLICK ENSEMBLESM,
SITEADVANCE®, MEDIAVISORSM, CHANNELVIEW®
and MOTIFSM. We have applied to register some of our
trademarks and service marks in the United States and
internationally. We cannot assure you that any of these current
or future applications will be approved. Even if these marks are
registered, these marks may be invalidated or successfully
challenged by others. If our trademarks or service marks are not
registered because third parties own these marks, our use of
these marks will be restricted unless we are able to enter into
arrangements with these parties, which may not be available on
commercially reasonable terms, if at all.

We also enter into confidentiality, assignments
of proprietary rights and license agreements, as appropriate,
with our employees, consultants and business and technology
partners, and generally control access to and distribution of
our technologies, documentation and other proprietary
information. Despite these efforts, we cannot be certain that
the steps we take to prevent unauthorized use of our
intellectual property rights are sufficient to prevent
misappropriation of our products and services or technologies,
particularly in foreign countries where laws or law enforcement
practices may not protect our intellectual property rights as
fully as in the United States. In addition, we cannot assure you
that we will be able to adequately enforce the contractual
arrangements that we have entered into to protect our
proprietary technologies and intellectual property. If we lose
our intellectual property rights, this could have a material and
adverse impact on our business, financial condition and results
of operations.

If we face a claim of intellectual property
infringement, we may be liable for damages and be required to
make changes to our technology or business.

Infringement claims may be asserted against us,
which could adversely affect our reputation and the value of our
intellectual property rights. From time to time we have been,
and we expect to continue to be, subject to claims or notices in
the ordinary course of our business, including assertions of
alleged infringement of the patents, trademarks and other
intellectual property rights of third parties by us or our
customers. We do not conduct exhaustive patent searches to
determine whether our technology infringes patents held by
others. In addition, the protection of proprietary rights in
Internet-related industries is inherently uncertain due to the
rapidly evolving technological environment. As such, there may
be numerous patent applications pending, many of which are
confidential during a large part of their prosecution, that
provide for technologies similar to ours.

Third party infringement claims and any resultant
litigation against us or our technology partners or providers,
should it occur, could subject us to significant liability for
damages, restrict us from using our or their technology or
operating our business generally, or require changes to be made
to our technology. Even if we prevail, litigation is time
consuming and expensive to defend and would result in the
diversion of managements time and attention. Claims from
third parties may also result in limitations on our ability to
use the intellectual property subject to these claims unless we
are able to enter into royalty, licensing or other similar
agreements with the third parties asserting these claims.

Such agreements, if required, may not be
available on terms acceptable to us, or at all. If we are unable
to enter into these types of agreements, we would be required to
either cease using the subject product or change the technology
underlying the applicable product. If a successful claim of
infringement is brought against us and we fail to develop
non-infringing technology as an alternative or to license the
infringed or similar technology on a timely basis, it could
materially adversely affect our business, financial condition
and results of operations.

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Our business may be materially adversely
affected by lawsuits related to privacy, data protection and our
business practices.

We have been a defendant in several lawsuits and
governmental inquiries by the Federal Trade Commission and the
attorneys general of several states alleging, among other
things, that we unlawfully obtain and use Internet users
personal information and that our use of ad serving
cookies violates various laws. Cookies are small
pieces of data that are recorded on the computers of Internet
users. Although the last of these particular matters was
resolved in 2002, we may in the future be subject to additional
claims or regulatory inquiries with respect to our business
practices. Class action litigation and regulatory inquiries of
these types are often expensive and time consuming and their
outcome may be uncertain.

Any additional claims or regulatory inquiries,
whether successful or not, could require us to devote
significant amounts of monetary or human resources to defend
ourselves and could harm our reputation. We may need to spend
significant amounts on our legal defense, senior management may
be required to divert their attention from other portions of our
business, new product launches may be deferred or canceled as a
result of any proceedings, and we may be required to make
changes to our present and planned products or services, any of
which could materially and adversely affect our business,
financial condition and results of operations. If, as a result
of any proceedings, a judgment is rendered or a decree is
entered against us, it may materially and adversely affect our
business, financial condition and results of operations and harm
our reputation.

Activities of our clients could damage our
reputation or give rise to legal claims against us.

Our clients promotion of their products and
services may not comply with federal, state and local laws,
including but not limited to laws and regulations relating to
the Internet. Failure of our customers to comply with federal,
state or local laws or our policies could damage our reputation
and adversely affect our business, results of operations or
financial condition. We cannot predict whether our role in
facilitating our customers marketing activities would
expose us to liability under these laws. Any claims made against
us could be costly and time-consuming to defend. If we are
exposed to this kind of liability, we could be required to pay
substantial fines or penalties, redesign our business methods,
discontinue some of our services or otherwise expend resources
to avoid liability.

We also may be held liable to third parties for
the content in the advertising and emails we deliver on behalf
of our customers. We may be held liable to third parties for
content in the advertising we serve if the music, artwork, text
or other content involved violates the copyright, trademark or
other intellectual property rights of such third parties or if
the content is defamatory, deceptive or otherwise violates
applicable laws or regulations. Any claims or counterclaims
could be time consuming, result in costly litigation or divert
managements attention.

Our business may suffer if we are unable to
effectively manage our international operations.

We have operations in a number of countries and
have limited experience in developing localized versions of our
products and services and in marketing, selling and distributing
our products and services internationally. We sell our
technology products and services through our directly and
indirectly owned subsidiaries primarily located in Australia,
Canada, China, France, Germany, Spain, Ireland, the United
Kingdom and Hong Kong. In Japan, we sell our technology products
and services through DoubleClick Japan, of which we own
approximately 15%. In addition, we develop and provide support
for some of our technology products and services in Canada,
Europe and Asia. We also operate the DoubleClick Data business
in the United Kingdom, Australia and Japan and, through a joint
venture, in Germany.

Our international operations are subject to other
inherent risks, including:



| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | the high cost of maintaining international
    operations;          
|
| |  | uncertain demand for our products and services;                     
|
| |  | the impact of recessions in economies outside the
    United States;

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| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | changes in regulatory requirements;                                                
|
| |  | more restrictive data protection regulation,
    which may vary by country;        
|
| |  | reduced protection for intellectual property
    rights in some countries;         
|
| |  | potentially adverse tax consequences;                                              
|
| |  | difficulties and costs of staffing and managing
    foreign operations;            
|
| |  | cultural differences in the conduct of business;                                   
|
| |  | political and economic instability;                                                
|
| |  | fluctuations in currency exchange rates; and                                       
|
| |  | seasonal fluctuations in Internet usage and
    marketing and advertising spending.

These risks may have a material and adverse
impact on the business, results of operations and financial
condition of our operations in a particular country and could
result in a decision by us to reduce or discontinue operations
in that country. The combined impact of these risks in each
country may also materially and adversely affect our business,
results of operations and financial condition as a whole.

Many of our customers continue to experience
business conditions that could adversely affect our
business.

Some of our customers have experienced, and may
continue to experience, difficulty raising capital and
supporting their current operations and implementing their
business plans, or may be anticipating such difficulties and,
therefore, may elect to scale back the resources they devote to
marketing in general and our offerings in particular. These
customers may not be able to discharge their payment and other
obligations to us. The non-payment or late payment of amounts
due to us from our customers could negatively impact our
financial condition. If the current business environment for our
customers worsens, our business, results of operations and
financial condition could be materially adversely affected.

Anti-takeover provisions in our charter,
by-laws and Delaware law may make it difficult for a third party
to acquire us.

Some of the provisions of our amended and
restated certificate of incorporation, our amended and restated
by-laws and Delaware law could, together or separately:



| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | discourage potential acquisition proposals;                                                                    
|
| |  | delay or prevent a change in control; or                                                                       
|
| |  | impede the ability of our stockholders to change
    the composition of our board of directors in any one year.

As a result, it could be more difficult for third
parties to acquire us, even if doing so might be beneficial to
our stockholders. Difficulty in acquiring us could, in turn,
limit the price that investors might be willing to pay for
shares of our common stock.

Our stock price may experience price and
volume fluctuations, and this volatility could result in us
becoming subject to securities or other litigation, which is
expensive and could result in a diversion of
resources.

The market price of our common stock has
fluctuated in the past and is likely to continue to be highly
volatile and subject to wide fluctuations. In addition, the
stock market has experienced significant price and volume
fluctuations. Investors may be unable to resell their shares of
our common stock at or above their purchase price.

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Additionally, in the past, following periods of
volatility in the market price of a particular companys
securities, securities class action litigation has often been
brought against that company. Many companies in our industry
have been subject to this type of litigation in the past. We may
also become involved in this type of litigation. Litigation is
often expensive and diverts managements attention and
resources, which could materially and adversely affect our
business, financial condition and results of operations.

Future sales of our common stock may affect
the market price of our common stock.

As of June 30, 2004, we had
131,766,933 shares of common stock outstanding, excluding
17,970,632 shares subject to options outstanding as of such
date under our stock option plans that are exercisable at prices
ranging from $0.01 to $1,134.80 per share. We cannot
predict the effect, if any, that future sales of common stock or
the availability of shares of common stock for future sale will
have on the market price of our common stock prevailing from
time to time. Sales of substantial amounts of common stock,
including shares issued upon the exercise of stock options, or
the perception that such sales could occur, may materially
reduce the market value for our common stock.

Risks Related to Our Industry

Direct marketers and advertisers may be
reluctant to devote a portion of their budgets to marketing
technology and data products and services or online
advertising.

Companies doing business on the Internet,
including us, must compete with traditional advertising media,
including television, radio, cable and print, for a share of
advertisers total marketing budgets. Potential customers
may be reluctant to devote a significant portion of their
marketing budget to online advertising or marketing technology
and data products and services if they perceive the Internet or
direct marketing to be a limited or ineffective marketing
medium. Any shift in marketing budgets away from marketing
technology and data products or services or online advertising
spending, or our offerings in particular, could materially and
adversely affect our business, results of operations or
financial condition. In addition, online advertising could lose
its appeal to those direct marketers and advertisers using the
Internet as a result of its ad performance relative to other
media.

If the delivery of Internet advertising on the
Web, or the delivery of our email messages, is limited or
blocked, demand for our products and services may
decline.

Our business may be adversely affected by the
adoption by computer users of technologies that harm the
performance of our products and services. For example, computer
users may use software designed to filter or prevent the
delivery of emails or Internet advertising, including pop-up and
pop-under advertisements, or Internet browsers set to block the
use of cookies or prevent or impair the operation of other
online tracking technologies. We cannot assure you that the
number of computer users who employ these or other similar
technologies will not increase, thereby diminishing the efficacy
of our products and services. In the event that one or more of
these technologies became more widely adopted by computer users,
demand for our products and services would decline.

We also depend on our ability to deliver emails
over the Internet through Internet service providers and private
networks. Internet service providers are able to block messages
from reaching their users and we do not have agreements with any
Internet service providers to deliver emails to their customers.
As a result, we could experience temporary or permanent
blockages of our delivery of emails to their customers, which
would limit the effectiveness of email marketing. Some Internet
service providers also use proprietary technologies to handle
and deliver email. If Internet service providers or private
networks materially limit or block the delivery of our emails,
or if our technology fails to be compatible with their email
technologies, then our business, results of operations or
financial condition could be materially and adversely affected.
In addition, the effectiveness of email marketing may decrease
as a result of increased consumer resistance to email marketing
in general.

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New laws and regulations or changing
interpretations of existing laws and regulations could harm our
business.

Governments in the U.S. and other countries have
adopted laws and regulations affecting important aspects of our
business, Internet commerce, such as Internet communications,
electronic contracting, privacy and data protection, taxation,
advertising and direct marketing.

Many countries, including the countries of the
European Union, have implemented more stringent data protection
regulations than those in the U.S. Our current policies and
procedures may not meet these more restrictive standards. The
cost of such compliance could be material, and we may not be
able to comply with the applicable regulations in a timely or
cost-effective manner.

In addition, the U.S. and many foreign countries
have adopted laws that restrict the transmission of unsolicited
commercial email. U.S. law requires senders of commercial
electronic mail messages to, among other things, identify their
messages as advertisements or solicitations and provide
recipients a mechanism to decline (opt out) future commercial
email from the sender. The Federal Trade Commission is
authorized to regulate commercial email and may impose
additional measures such as labeling requirements or a national
Do Not E-Mail registry. Other countries, including
the countries of the European Union, either have or may in the
future require senders to obtain recipients direct
affirmative consent before sending commercial email messages.
Although our email delivery is consent-based, we may be
subjected to increased liabilities and may be required to change
our current email practices in ways that make email
communications less effective or more costly.

Some countries, including the countries of the
European Union, require that Internet users be allowed to refuse
to accept cookies or other online tracking technologies. In
addition, new technologies may make it easier or less
inconvenient for Internet users to reject cookies or other
online tracking technologies. If a high percentage of Internet
users refuse to accept cookies or other online tracking
technologies, or if future laws require express consent for the
use of cookies or otherwise restrict our use of related Internet
technologies, Internet advertising and direct marketing may
become more costly and less effective, and the demand for our
services may decrease.

Meanwhile, many areas of the law affecting the
Internet remain unsettled, and it can be difficult to determine
whether and how existing laws, such as those governing data
protection, privacy, intellectual property, financial services,
content standards, libel, data security and taxation, may be
applied to Internet-based businesses. Our business could be
negatively impacted by new applications or interpretations of
existing laws and regulations to direct marketing, the Internet
or our other lines of business.

Future laws and regulations could also have a
material adverse effect on our business. In particular, new
consumer protection requirements could impose significant,
unanticipated compliance costs and could make it inefficient or
infeasible to operate certain parts of our business. Governments
in the U.S. and other countries are considering new limitations
on the collection, use and disclosure of personal information
for marketing purposes. The U.S. Congress and several U.S.
states are presently considering legislation that, if enacted
into law, could impose substantial restrictions, including
consumer notice and consent requirements, on our use of ad
serving cookies and other online tracking technologies. Any
legislation enacted or regulation issued could dampen the growth
and acceptance of our industry in general and of our offerings
in particular and could have a material adverse effect on our
business, financial condition and results of operations. We are
unable to predict whether any particular proposal will pass, or
the nature of the limitations that may be imposed.

Any changes in applicable legal requirements may
cause us to change or discontinue an existing offering, business
or business model; cancel a proposed offering or new business;
or incur significant expenses or liability that materially and
adversely affect our business, financial condition and results
of operations.

We are a member of the Network Advertising
Initiative, including its Email Service Provider Coalition, the
Privacy Alliance, and the Direct Marketing Association, all
industry self-regulatory organizations. These organizations or
similar organizations might adopt additional, more burdensome
guidelines, compliance with which could materially and adversely
affect our business, financial condition and results of
operations.

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Our business may suffer if the Web experiences
unexpected interruptions or delays that may be caused by system
failures.

Our success depends, in large part, upon the
maintenance of the Web infrastructure, such as a reliable
network backbone with the necessary speed, data capacity and
security and timely development of enabling products. We cannot
assure you that the Web infrastructure will effectively support
the demands placed on it as the Web continues to experience
increased numbers of users, frequency of use or increased
bandwidth requirements of users. Furthermore, the Web has
experienced unexpected interruptions and delays caused by system
failures and computer viruses. These interruptions and delays
could impact user traffic and the direct marketers, Web
publishers and advertisers using our products and services. In
addition, a lack of security over the Internet may cause
Internet usage to decline and could adversely impact our
business, financial condition and results of operations.

The lack of appropriate advertising
measurement standards or tools may cause us to lose customers or
prevent us from charging a sufficient amount for our products
and services.

Because online marketing technology and data
products and services remain relatively new disciplines, there
are currently no generally accepted methods or tools for
measuring the efficacy of online marketing and advertising as
there are for advertising in television, radio, cable and print.
Many traditional advertisers may be reluctant to spend sizable
portions of their budget on online marketing and advertising
until there exist widely accepted methods and tools that measure
the efficacy of their campaigns.

We could lose customers or fail to gain customers
if our products and services do not utilize the measuring
methods and tools that may become generally accepted. Further,
new measurement standards and tools could require us to change
our business and the means used to charge our customers, which
could result in a loss of customer revenues and adversely impact
our business, financial condition and results of operation.

Our Data business segment is dependent on the
success of the direct marketing industry for our future
success.

The future success of DoubleClick Data is
dependent in large part on the continued demand for our services
from the direct marketing industry, including the catalog
industry, as well as the continued willingness of catalog
operators to contribute their data to us. Most of our Abacus
customers are large consumer merchandise catalog operators in
the United States, with a number of operators in the United
Kingdom. A significant downturn in the direct marketing industry
generally, including the catalog industry, or withdrawal or
diminished use of our services by a substantial number of
catalog operators from the Abacus Alliances, would have a
material adverse effect on our business, financial condition and
results of operations. If email marketing or electronic
commerce, including the purchase of merchandise and the exchange
of information via the Internet or other media, increases
significantly in the future, companies that now rely on catalogs
or other direct marketing avenues to market their products may
reallocate resources toward these new direct marketing channels
and away from catalog-related marketing or other direct
marketing avenues, which could adversely affect demand for some
DoubleClick Data services. In addition, the effectiveness of
direct mail as a marketing tool may decrease as a result of
consumer saturation and increased consumer resistance to direct
mail in general.

Increases in postal rates and paper prices
could harm our Data business segment.

The direct marketing activities of our Abacus
Alliance customers are adversely affected by postal rate
increases, especially increases that are imposed without
sufficient advance notice to allow adjustments to be made to
marketing budgets. Higher postal rates may result in fewer
mailings of direct marketing materials, with a corresponding
decline in the need for some of the direct marketing services
offered by us. Increased postal rates can also lead to pressure
from our customers to reduce our prices for our services in
order to offset any postal rate increase. Higher paper prices
may also cause catalog companies to conduct fewer or smaller
mailings which could cause a corresponding decline in the need
for our products and services. Our customers may aggressively
seek price reductions for our products and services to offset
any increased materials cost.

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|        |                         
|------- | ------------------------
|Item 4. | Controls and Procedures.

DoubleClicks management, with the
participation of DoubleClicks chief executive officer and
chief financial officer, evaluated the effectiveness of
DoubleClicks disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of June 30, 2004. Based on this evaluation,
DoubleClicks chief executive officer and chief financial
officer concluded that, as of June 30, 2004,
DoubleClicks disclosure controls and procedures were
(1) designed to ensure that material information relating
to DoubleClick, including its consolidated subsidiaries, is made
known to DoubleClicks chief executive officer and chief
financial officer by others within those entities, particularly
during the period in which this report was being prepared and
(2) effective, in that they provide reasonable assurance
that information required to be disclosed by DoubleClick in the
reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms.

No change in DoubleClicks internal control
over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended June 30, 2004 that has materially affected,
or is reasonably likely to materially affect, DoubleClicks
internal control over financial reporting.




PART II: OTHER INFORMATION






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

In April 2002, a consolidated amended class
action complaint alleging violations of the federal securities
laws in connection with our follow-on offerings was filed in the
United States District Court for the Southern District of New
York naming us, some of our officers and directors and certain
underwriters of our follow-on offerings as defendants. We and
some of our officers and directors are named in the suit
pursuant to Section 11 of the Securities Act of 1933 and
Section 10(b) of the Securities Exchange Act of 1934 on the
basis of the alleged failure to disclose the underwriters
alleged compensation and manipulative practices. This action
seeks, among other things, unspecified damages and costs,
including attorneys fees. Approximately 300 other
issuers and their underwriters have had similar suits filed
against them, all of which are included in a single coordinated
proceeding in the Southern District of New York. In October
2002, the action was dismissed against our officers and
directors without prejudice. However, claims against us remain.
In July 2002, we and the other issuers in the consolidated cases
filed motions to dismiss the amended complaint for failure to
state a claim, which was denied as to us in February 2003.

In June 2003, our Board of Directors
conditionally approved a proposed partial settlement with the
plaintiffs in this matter. In June 2004, an agreement of
settlement was submitted to the court for preliminary approval.
The settlement would provide, among other things, a release of
us and of the individual defendants for the conduct alleged in
the action to be wrongful in the amended complaint. We would
agree to undertake other responsibilities under the partial
settlement, including agreeing to assign away, not assert, or
release certain potential claims we may have against our
underwriters. Our Board of Directors agreed to approve the
settlement subject to a number of conditions, including the
participation of a substantial number of other issuer defendants
in the proposed settlement, the consent of our insurers to the
settlement and the completion of acceptable final settlement
documentation. Furthermore, the settlement is subject to a
hearing on fairness and approval by the court overseeing the IPO
litigations. We believe these claims are without merit and, if
the settlement is not finalized, we intend to defend these
actions vigorously. However, due to the inherent uncertainties
of litigation, we cannot accurately predict the ultimate outcome
of the litigation. An unfavorable outcome in litigation could
materially and adversely affect our business, financial
condition and results of operations.

We are defending two class action lawsuits, one
filed in Allegheny County, Pennsylvania and the other in
San Joaquin County, California, alleging, among other
things, deceptive business practices, fraud, misrepresentation,
invasion of privacy and right of association relating to
allegedly deceptive content of online advertisements that
plaintiffs assert we delivered to consumers. The actions seek,
among other things,

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injunctive relief, compensatory and punitive
damages and attorneys fees and costs. In April 2004, the
court in the California action entered an order dismissing
several claims against us with leave to amend. We believe these
claims are without merit and intend to defend these actions
vigorously. However, due to the inherent uncertainties of
litigation, we cannot accurately predict the ultimate outcome of
these litigations. An unfavorable outcome in litigation could
materially and adversely affect our business, financial
condition and results of operations.


As previously reported, in October 2003, we
received a grand jury subpoena from the United States
Attorneys Office for the Southern District of New York
(U.S. Attorneys Office) seeking documents
regarding certain vendors that provided services to us,
including interior construction and facilities management,
during the period from 1999 through 2001. The services provided
by these vendors are unrelated to the products and services
provided by us to our customers. In March 2004, the
U.S. Attorneys Office issued a press release
announcing an Indictment against nineteen individuals, including
one of our former employees, for racketeering and other federal
crimes. The Indictment alleges a scheme to defraud us through
extortion of one of our vendors and through kickbacks to our
former employee named in the Indictment. The press release
states that these kickback payments were made without
knowledge of [the former employees] superiors at
DoubleClick and were in direct violation of the written policies
and procedures of DoubleClick.

We are continuing to fully cooperate with the
U.S. Attorneys Office. In addition, following receipt
of the grand jury subpoena, we conducted an internal
investigation and have implemented remedial measures to improve
our selection, use and oversight of our vendors. We do not
believe that any overpayments made by us relating to the vendor
named in the Indictment or the other vendors listed in the grand
jury subpoena are material with respect to our financial
statements for the periods in question or our current financial
condition.






|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|Item 2. | Changes in Securities, Use of Proceeds and
    Issuer Purchases of Equity Securities

The following provides information with respect
to our purchases of our common stock during the second quarter
of 2004 of equity securities that are registered by us pursuant
to Section 12 of the Exchange Act:

|                               |  |                 |           |               |  |                        |      |                       |  |  |           |  |  |   |              | 
|------------------------------ |  | --------------- | --------- | ------------- |  | ---------------------- | ---- | --------------------- |  |  | --------- |  |  | - | ------------ | 
|                               |  |                 |           |               |  | Total Number of Shares |      | Approximate Dollar   
|                               |  | Total Number of |           |               |  | Repurchased as Part of |      | Value that May Yet Be
|                               |  | Shares          |           | Average Price |  | Publicly Announced     |      | Purchased under the  
|                               |  | Repurchased     |           | Per Share     |  | Program                |      | Program(1)           
|                               |  |                 |           |               |  |                        |      |                      
|April 1 through April 30, 2004 |  |                 | 700,000   |               |  | $                      | 9.30 |                       |  |  | 2,761,755 |  |  | $ | 71.6 million | 
|May 1 through May 31, 2004     |  |                 | 1,689,900 |               |  | $                      | 8.20 |                       |  |  | 4,451,655 |  |  | $ | 57.8 million | 
|June 1 through June 30, 2004   |  |                 | 2,310,000 |               |  | $                      | 8.36 |                       |  |  | 6,761,655 |  |  | $ | 38.7 million | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In November 2003, the Board of Directors approved
    a $100 million stock repurchase program (the
    Program). We did not purchase any other shares of
    our common stock outside of the Program during the quarterly
    period ended June 30, 2004. As part of our Program, we may,
    from time to time, enter into a purchase plan with a broker in
    accordance with Rule 10b5-1 of the Securities Exchange Act
    of 1934. The Rule 10b5-1 plan would authorize the broker to
    effect repurchases under the Program during times when we
    ordinarily would not be in the market because of our
    self-imposed trading blackout periods, provided that
    the terms and conditions in the plan are met.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

We held our 2004 Annual Meeting of Stockholders
on June 7, 2004. At that meeting, our stockholders
(1) approved the election of Thomas S. Murphy, Mark E.
Nunnelly and Kevin J. OConnor as Class I directors
whose term expires in 2007 and (2) approved the audit
committees selection of PricewaterhouseCoopers LLP as
our independent auditors for the fiscal year ending
December 31, 2004. In addition to the directors listed
above who were elected at our 2004 Annual Meeting of
Stockholders, the terms of the following directors continued
after our 2004 Annual Meeting: Kevin P. Ryan, Dwight A.
Merriman, David N. Strohm, W. Grant Gregory and Don Peppers.

48



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There were 116,357,763 votes cast for and
6,231,879 votes withheld in connection with the election of
Thomas S. Murphy as a director. There were
117,626,057 votes cast for and 4,963,585 votes
withheld in connection with the election of Mark E. Nunnelly as
a director. There were 111,900,562 votes cast for and
10,689,080 votes withheld in connection with the election
of Kevin J. OConnor as a director.

There were 120,595,023 votes cast for,
1,960,366 votes cast against and 34,253 abstentions in
connection with the audit committees selection of
PricewaterhouseCoopers LLP as independent auditors.






|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits

|       |       |             |  |                                                                                                                                                          
|------ | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |       | Description
|       |       |            
|       | 10.1* |             |  | Agreement and Plan of Merger, dated May 13,
    2004, by and among DoubleClick Inc., Sherlock Subsidiary, Inc.,
    Performics Inc. and James Crouthamel.
|       | 10.2* |             |  | Master License Agreement between DoubleClick Inc.
    (as successor to Abacus Direct Corporation) and SAS Institute
    Inc.                             
|       | 31.1* |             |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 31.2* |             |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 32.1* |             |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 32.2* |             |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.                                                  



---



|  |               
|- | --------------
|* | filed herewith

(b) Reports on Form 8-K

On April 15, 2004, we furnished a Current
Report on Form 8-K under Item 12, containing a copy of
our earnings release for the quarter ended March 31, 2004
(including financial statements).

49



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##### Table of Contents



SIGNATURE

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.



| |                 
| | ----------------
| | DOUBLECLICK INC.



| |     |                    
| | --- | -------------------
| | By: | /s/ CORY A. DOUGLAS

| |                                                     
| | ----------------------------------------------------
| |                                                     
| | Cory A. Douglas                                     
| | Vice President, Finance and Corporate
    Controller
| | (Chief Accounting Officer and                       
| | Duly Authorized Officer)                            

Date: August 9, 2004

50



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EXHIBIT INDEX

|       |    |             |  |                                                                                                                                                          
|------ | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    | Description
|       |    |            
|       | 10 | .1*         |  | Agreement and Plan of Merger, dated May 13,
    2004, by and among DoubleClick Inc., Sherlock Subsidiary, Inc.,
    Performics Inc. and James Crouthamel.
|       | 10 | .2*         |  | Master License Agreement between DoubleClick Inc.
    (as successor to Abacus Direct Corporation) and SAS Institute
    Inc.                             
|       | 31 | .1*         |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 31 | .2*         |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 32 | .1*         |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 32 | .2*         |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.