<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

  For the Year Ended December 31, 2000

                       Commission File Number: 000-27601

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

                                MEDIAPLEX, INC.
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                            <C>                            <C>
          DELAWARE                          7379                        94-3295822
  (State of Incorporation)      (Primary Standard Industrial         (I.R.S. Employer
                                    Classification Code)           Identification No.)
</TABLE>

        177 STEUART STREET, SUITE 200, SAN FRANCISCO, CALIFORNIA 94105,
                                 (415) 808-1900
              (Address, Including Zip Code, and Telephone Number,
       Including Area Code, of Registrant's Principal Executive Offices)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                        COMMON STOCK, $0.0001 PAR VALUE

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

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

   The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 23, 2001 was $18,404,509 (based on the last reported
sale price on the Nasdaq Stock Market's National Market on that date). For
purpose of this disclosure, shares of Common Stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
officers and directors of the Registrant have been excluded as such persons may
be deemed to be affiliates. This determination is not necessarily conclusive.
The number of shares outstanding of the Registrant's Common Stock as of March
23, 2001 was 35,961,330.

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

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the Registrant's Proxy Statement for the 2001 Annual Meeting of
Stockholders, which is to be filed on or about April 30, 2001, are incorporated
by reference into Part III.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                MEDIAPLEX, INC.

                          2000 FORM 10-K ANNUAL REPORT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                    Page
                                                                                                    ----
                                     PART I
<S>         <C>                                                                                     <C>
Item 1.     Business...............................................................................   3
Item 2.     Properties.............................................................................   6
Item 3.     Legal Proceedings......................................................................   7
Item 4.     Submissions of Matters to a Vote of Security Holders...................................   7

                                    PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters..................   8
Item 6.     Selected Financial Data................................................................  10
Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations..  12
Item 7A.    Quantitative and Qualitative Disclosures about Market Risks............................  32
Item 8.     Financial Statements and Supplementary Data............................................  33
Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...  57

                                    PART III

Item 10.    Directors and Executive Officers of the Registrant.....................................  57
Item 11.    Executive Compensation.................................................................  57
Item 12.    Security Ownership of Certain Beneficial Owners and Management.........................  57
Item 13.    Certain Relationships and Related Transactions.........................................  57

                                    PART IV

Item 14.    Exhibits, Financial Statements Schedules and Reports on Form 8-K.......................  58
Signatures  .......................................................................................  60
</TABLE>

                                       2
<PAGE>

                                     PART 1

   THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS (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) BASED ON OUR CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT MEDIAPLEX AND OUR
INDUSTRY. WE USE WORDS SUCH AS "ANTICIPATES," "BELIEVES," "PLANS," "EXPECTS,"
"FUTURE," "INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THIS ANNUAL REPORT ALSO CONTAINS FORWARD-LOOKING STATEMENTS
ATTRIBUTED TO CERTAIN THIRD-PARTIES RELATING TO THEIR ESTIMATES REGARDING THE
GROWTH OF ONLINE SPENDING, ONLINE USE AND ONLINE ADVERTISING SPENDING.
PROSPECTIVE INVESTORS SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS ANNUAL REPORT. THESE
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. MEDIAPLEX'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, AS MORE FULLY DESCRIBED IN THE "RISK
FACTORS" SECTION ON PAGE 19 AND ELSEWHERE IN THIS ANNUAL REPORT. MEDIAPLEX
UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR
ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN
THE FUTURE.

ITEM 1. BUSINESS

   We provide technology solutions for both online and traditional, or offline,
marketers. Mediaplex, Inc., along with our wholly owned subsidiary, AdWare
Systems, Inc., acquired in July, 2000, addresses the advertising technology
needs of marketing and advertising agencies and large corporate marketing
departments, or direct clients. Our core products, media planning systems,
campaign management systems, and cost management systems are driven by our
patent pending technologies.

   In 2000, we expanded our proprietary technology, MOJO, from online adserving
and reporting system for digital messaging, or online advertising, and
electronic mail, or email, to include technology systems for traditional
advertising. The addition of AdWare's products into those of Mediaplex's
technology is a key differentiator for us, as it drives our vision of a
complete technology solution for marketers. We now have the potential to meet
both the online and offline marketing needs for advertising agencies and direct
clients.

The Products and Services

 Media Planning Systems

   AdWare(R) PRINT

   AdWare(R) PRINT provides the technology required to estimate the placement
cost of the advertisement, track the contract information, purchase the
advertisement placement, invoice the client and pay for print advertisements.
This includes print advertisements in publications and outdoor billboards.

   AdWare(R) NETWORK

   AdWare(R) NETWORK provides the technology required to track and analyze the
flight schedule of network radio and television commercials, invoice clients
and pay for the commercial schedule. This includes national cable and broadcast
syndication buys.

   AdWare(R) SPOT

   AdWare(R) SPOT provides the technology required to track and analyze the
radio and television commercial spot buys, invoice clients and pay for spot
placement. This includes commercials on syndicated programming, local cable,
local broadcast and one-time-only spots.

                                       3
<PAGE>

 Campaign Management Systems

   AdWare(R) PRODUCTION 6

   AdWare(R) PRODUCTION 6 provides for the estimating of any advertising
production costs, budgeting such costs and monitoring of the components of
traditional advertisements. The modules in the product include WORKFLOW
(tracking labor), ESTIMATING (proposed production cost), BUDGETING (actual
production cost), ADCLOCK(R) (time management system), PURCHASING (purchase
order reconciliation), JOB COSTING (budget vs. actual), BILLING (invoicing) and
CLIENT PROFITABILITY (tracks profitability).

   MOJO(R) Adserver

   MOJO(R) Adserver allows users to configure digital messaging campaigns,
serve digital messages according to time and site placements, or commonly known
in the industry as trafficking, and report results from such campaigns. The
product's web-based interfaces, MOJO(R) Works ( trafficking configuration) and
MOJO(R) Reports (tracking results), provide a single point of access for
digital messaging campaigns across all digital platforms, including online and
wireless devices.

   MOJO(R) Mail

   MOJO(R) Mail is a Customer Relationship Management (CRM) technology product
that allows users to configure, traffic and report results for permission-based
email campaigns. The recipient has the option of receiving an email, or "opt-
in," or not receiving the email, or "opt-out." Our opt-in email product,
MOJO(R) Mail has the potential to configure real-time emails with dynamic
content that is updated upon viewing the email. The product's web-based
interfaces, MOJO(R) Works (delivery configuration) and MOJO(R) Reports
(tracking results), provide a single point of access for email messaging
campaigns across all platforms, including online and wireless devices.

   AdVISUAL(R)

   AdVISUAL(R) is a content management system for the storage of traditional
advertising, such as print, radio commercials and television commercials. This
includes the storage of the complete advertisement along with the associated
business documents such as graphics, talent, production companies, budgeting,
and related production contracts.

 Cost Management Systems

   AdWare(R) FINANCIAL 6

   AdWare(R) FINANCIAL 6 provides for the managing of accounts receivable,
accounts payable, general ledger, budgeting and cost accounting functions. This
product is integrated with AdWare(R) PRINT, AdWare(R) NETWORK, AdWare(R) SPOT
and AdWare(R) PRODUCTION 6 providing an integrated technology system for
traditional advertisers.

 Services

   Our services provide the support and resources that meet the varying needs
of our clients. Services include campaign management of online media services,
trafficking services, technology consulting, customer support, training, and a
help desk.

The Technology

   Our proprietary technology enables companies to integrate their internal
business information, such as inventory and client data, into their digital
messaging campaigns. The technology allows for the adserving and

                                       4
<PAGE>

reporting of digital messaging campaigns across all digital platforms, online
and wireless, into one integrated, seamless system. Also, our technology
utilizes business rules to provide dynamic, real-time content changes to all
digital messages.

   We also have a proprietary technology that seamlessly integrates all of our
traditional advertising products. A campaign's budget, production and schedule
information need only be input once. This technology allows the user to see
their advertising and marketing campaigns from inception to completion in one
report.

   adXML was developed by us in 1999, as part of the infrastructure to automate
the online advertising market. adXML is a computer language that was designed
to streamline the buying, placement and procurement of inventory information by
using an industry specific version of XML, or extensible mark-up language. We
sponsored and transferred adXML to adXML.org, an nonprofit organization, which
was created to mobilize industry support and encourage implementation of the
open standard.

Competitive Environment

   The competitive environment in 2000 was vigorous. We expect the competitive
environment to continue as the economic climate resolves itself and competitors
consolidate.

   We may be distinguished from our online and offline competitors through our
technology solutions:

  . Our technology allows creative content to be changed in real-time, or
    virtually instantaneously, without human intervention;

  . Clients have the ability to define and use an unlimited number of
    business rules that provide for the adjustment of a campaign to
    accomplish a company's business goals and objectives;

  . Our eBusiness Messaging enables an advertiser to update digital messages
    and emails, with real-time business data from the client's customer
    database and inventory system;

  . Our ability to establish a datafeed with our clients, provides them with
    the information from our reports for further analysis and integration
    into their system;

  . Our retargeting technology enables our clients to virtually
    instantaneously adjust their digital message based on a prospective
    customer's reaction to their promotion. Our retargeting technology is not
    session-based, limited to a network or grouped together with other non-
    related changes, or "batched";

  . Our reporting technology has the ability to generate return on investment
    ("ROI") data in near real-time, within two hours. We also have the
    capacity to customize a campaign's reports based on creative, schedule
    performance and conversion lag-time, or the time from the initial view of
    an advertisement to a viewer's action. Our pacing reports compare planned
    campaign run impressions against the impressions actually delivered;

  . Our technology is web-enabled, providing users with a worldwide,
    continuous and secured access to their traditional advertising campaign
    information;

  . Offline campaign information need only be input into the system once. Our
    technology integrates the information, including campaign budget,
    production, and schedule information, across all of our traditional
    advertising product. This makes reports such as financial analysis and
    client profitability easy to generate and accurate;

  . With our technology, marketers are able to view their offline campaigns
    from inception through to completion with a click-of-the-mouse; and,

  . Our content management technology allows for the complete viewing of
    print, audio and video advertisements including budgeting, production,
    expense, and talent information.


                                       5
<PAGE>

   Our competitors for adserving products include Avenue A, L90, DoubleClick,
Engage Technologies including AdForce and AdKnowledge, and 24/7 Media. Our
competitors for email products include Net Incentives, DoubleClick, 24/7 Media,
Message Media, Click Action, Radical Mail, and Digital Impact. Our competitors
in offline advertising technology include Donovan Data Systems and Encoda
Systems, previously known as Columbine CJDS, which acquired DSI Datatrack
Systems, Inc., and Professional Software Systems (PSS).

Privacy

   Our technology was designed in anticipation of privacy concerns. For this
reason, we do not maintain, share or sell any personally identifiable data or
anonymous user profile information. We use non-personally identifiable
information provided by the websites, pursuant to their privacy policies, about
their viewers' general demographics and interests in order to target
appropriate advertising to the sites.

   In addition, if our clients have databases of their customers, we can use
this data on behalf of those clients, again pursuant to their privacy policies.
The premise is that both the site providing the ad space and the advertiser (1)
have a relationship with the customer, or opt-in, (2) have an opportunity to
share their privacy policy with their customers, and (3) provide an opportunity
to opt-out. As a third-party adserver, we do not always have a relationship
with the user, and therefore it would be inappropriate to build user profile
information when such a relationship does not exist.

   We do not know or maintain the names, telephone numbers, home addresses or
email addresses of Internet users to whom we deliver advertisements or email on
behalf of our clients. We collect data for reports on clients' campaign
performance to enable analysis and optimization of digital messaging campaigns.
For general reporting purposes on our overall adserving performance and
capacity, we may report the total number of message delivered, or impressions,
on behalf of all clients for a specific time period, with no reference to
individual clients or campaigns.

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

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

Employees

   As of December 31, 2000, we had 236 full-time employees. Of these employees,
98 were engaged in research and development, 95 were engaged in sales and
marketing and 43 were engaged in finance and administration. None of our
employees are represented by a labor union or a collective bargaining
agreement. We have not experienced any work stoppages and consider our
relations with our employees to be good.

ITEM 2. PROPERTIES

   We currently lease approximately 33,200 square feet of office space for our
headquarters in two buildings, located in San Francisco, California. We lease
approximately 36,900 square feet of office space for our enterprise solutions
organization in Louisville, Kentucky. We also lease approximately 13,200 square
feet of a

                                       6
<PAGE>

facility in San Jose, California that houses our research and development
organization and approximately 7,700 square feet in New York City for a sales
office. In addition, we use third-party co-location facilities that house our
web servers in San Jose and Santa Clara, California, McLean, Virginia and
Hamburg, Germany.

ITEM 3. LEGAL PROCEEDINGS

   From time to time, we may become involved in litigation relating to claims
arising from the ordinary course of our business. We believe that there are no
claims or actions pending or threatened against us, the ultimate disposition of
which would have a material adverse effect on us.

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

   No matter was submitted to a vote of the security holders during the fourth
quarter of 2000.

                                       7
<PAGE>

                                    PART II

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

                          PRICE RANGE OF COMMON STOCK

   Our common stock has been quoted on the Nasdaq Stock Market's National
Market under the symbol MPLX since our initial public offering on November 19,
1999. The following table sets forth, for the periods indicated, the high and
low sales prices per share of our common stock as reported on the Nasdaq Stock
Market's National Market:

<TABLE>
<CAPTION>
                                                                  High    Low
                                                                 ------- ------
   <S>                                                           <C>     <C>
   Fourth Quarter 1999 (from November 19, 1999)................. $ 78.13 $20.75
   First Quarter 2000........................................... $104.12 $38.62
   Second Quarter 2000.......................................... $ 57.50 $12.00
   Third Quarter 2000........................................... $ 22.25 $ 6.12
   Fourth Quarter 2000.......................................... $ 15.00 $ 0.75
</TABLE>

   On December 29, 2000, the last reported sale price of our common stock on
the Nasdaq Stock Market's National Market was $0.81. On March 23, 2001 the last
reported sale price of our common stock on the Nasdaq Stock Market's National
Market was $0.66.

                                    HOLDERS

   As of March 23, 2000, there were approximately 361 holders of record of our
common stock and a substantially greater number of beneficial owners, whose
stock is in nominee or "street name" accounts through brokers.

                                DIVIDEND POLICY

   We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business and do not expect to pay any cash dividends in the foreseeable
future.

                        SALE OF UNREGISTERED SECURITIES

   During 2000, we issued unregistered securities in the following
transactions:

     (1) During 2000, we issued to certain of our employees, officers,
  directors and consultants options to purchase an aggregate of 4,399,416
  shares of our common stock, at exercise prices ranging from $0.50 per share
  to $102.00 per share, pursuant to our Amended and Restated 1999 Stock Plan.

     (2) During 2000, we issued an aggregate of 2,554,348 shares of common
  stock to our employees, directors and consultants upon the exercise of
  options at exercise prices ranging from $0.05 to $6.50 per share.

     (3) During 2000, we issued an aggregate of 114,414 shares of common
  stock to our employees upon the exercise of options granted under the
  Employee Stock Purchase Plan at exercise prices ranging from $1.83 to
  $10.20 per share.

                                       8
<PAGE>

     (4) During 2000, we issued an aggregate of 368,135 shares of common
  stock to consultants upon the exercise of warrants at exercise prices
  ranging from $0.50 to $2.00 per share.

     (5) On July 21, 2000, we issued 1,211,921 shares of common stock valued
  at approximately $23.8 million for the acquisition of AdWare Systems, Inc.
  to MacCann-Erickson USA, Inc. the sole shareholder of AdWare. The issuance
  was exempt from registration pursuant to Section 4(2) of the Securities Act
  of 1933, as amended, because of the limited number of investors, the
  sophistication and accreditation of the investor, and the manner in which
  the transactions were conducted.

   The insuances of securities described in paragraphs 1 through 3 above were
deemed to be exempt from the registration requirements of the Securities Act in
reliance on Rule 701 promulgated under Section 3(b) of the Securities Act as
transactions by an issuer pursuant to compensatory benefit plans and contracts
relating to compensation as provided under such Rule 701. The issuances
described in paragraphs 4 and 5 above were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving a public offering.
The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and other instruments issued in such
transactions. All recipients either received adequate information about our
company or had access, through employment or other relationships, to
information about our company.

           USE OF PROCEEDS OF SHARES SOLD IN INITIAL PUBLIC OFFERING

   On November 19, 1999, we commenced the initial public offering of 6,900,000
shares of our common stock, including 900,000 shares of subject to an
overallotment option, pursuant to a registration statement on Form S-1
(Commission File No. 333-86459) declared effective November 19, 1999. The
managing underwriters of the public offering were Lehman Brothers Inc., SG
Cowen Securities Corporation and U.S. Bancorp Piper Jaffray Inc. The 6,900,000
shares sold on our behalf were sold at a price per share of $12.00. The
aggregate offering price of the shares offered by us was $82.8 million, less
underwriting discounts and commissions of $5.8 million and expenses of
approximately $1.6 million. Approximately $21.1 million of the net proceeds has
been used to fund current operations for the year ended December 31, 2000, and
$3.6 million was used for the acquisition of AdWare Systems, Inc.

                                       9
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

   The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere
in this annual report. The balance sheet data as of December 31, 2000 and 1999
and the statement of operations data for the years ended December 31, 2000,
1999 and 1998 have been derived from our audited financial statements and
related notes included elsewhere in this annual report. The balance sheet data
as of December 31, 1998, 1997 and 1996 and the statement of operations data for
the year ended December 31, 1997 and the period from September 10, 1996
(inception) to December 31, 1996 are derived from audited financial statements
which have not been included in this annual report. Historical results are not
necessarily indicative of the results to be expected in the future.

<TABLE>
<CAPTION>
                                                                   September 10,
                                                                       1996
                                 Years Ended December 31,           (inception)
                             ------------------------------------   to December
                               2000      1999     1998     1997      31, 1996
                             --------  --------  -------  -------  -------------
                                  (in thousands, except per share data)
<S>                          <C>       <C>       <C>      <C>      <C>
Statement of Operations
 Data:
Revenues...................  $ 63,636  $ 26,405  $ 3,588  $   426     $  --
Cost of revenues...........    43,799    20,418    2,770      445        --
                             --------  --------  -------  -------     ------
Gross profit (loss)........    19,837     5,987      818      (19)       --
Operating expenses:
  Sales and marketing......    22,786    12,007    1,398      481         23
  Research and
   development.............    10,307     5,733      556      347         49
  General and
   administrative..........    22,181    10,221      636      267        183
  Restructuring expense....     1,929       --       --       --         --
  Amortization of goodwill
   and intangibles.........     4,700       753      --       --         --
                             --------  --------  -------  -------     ------
    Total operating
     expenses..............    61,903    28,714    2,590    1,095        255
                             --------  --------  -------  -------     ------
Loss from operations.......   (42,066)  (22,727)  (1,772)  (1,115)      (255)
Interest income (expense),
 net.......................     4,587       912     (247)      (2)       --
                             --------  --------  -------  -------     ------
Net loss...................   (37,479)  (21,815)  (2,019)  (1,117)      (255)
Beneficial conversion
 feature of Series C
 convertible preferred
 stock.....................       --     14,360      --       --         --
                             --------  --------  -------  -------     ------
Net loss attributable to
 common stockholders.......  $(37,479) $(36,175) $(2,019) $(1,117)    $ (255)
                             ========  ========  =======  =======     ======
Net loss per share
 attributable to common
 stockholders--basic and
 diluted...................  $  (1.11) $  (2.34) $ (0.25) $ (0.13)    $(0.07)
                             ========  ========  =======  =======     ======
Weighted average shares
 used to compute net loss
 per share--basic and
 diluted...................    33,756    15,427    8,186    8,457      3,796
                             ========  ========  =======  =======     ======

<CAPTION>
                                        Years Ended December 31,
                             ---------------------------------------------------
                               2000      1999     1998     1997        1996
                             --------  --------  -------  -------  -------------
                                             (in thousands)
<S>                          <C>       <C>       <C>      <C>      <C>
Balance Sheet Data:
Cash and cash equivalents..  $ 34,894  $ 78,052  $   375  $   142     $   27
Working capital............    57,138    84,085   (1,863)    (586)       (46)
Total assets...............   107,843   103,442    1,444      262         52
Long-term debt less current
 portion...................       458       280      232       65        --
Accumulated deficit........   (77,045)  (39,566)  (3,392)  (1,373)      (255)
Total stockholders' equity
 (deficit).................    90,472    90,713   (1,962)    (558)       (22)
</TABLE>

                                       10
<PAGE>

Quarterly Results of Operations

   The following table sets forth certain unaudited consolidated quarterly
financial data for the eight quarters ended December 31, 2000. This information
is unaudited, but in the opinion of management, has been prepared substantially
on the same basis as the audited consolidated financial statements appearing
elsewhere in this report, and all necessary adjustments, consisting only of
normal recurring adjustments, have been included in the amounts stated below to
present fairly the unaudited consolidated quarterly results of operations. The
consolidated quarterly data should be read in conjunction with our audited
consolidated financial statements and the notes to such statements appearing
elsewhere in this report. The results of operations for any quarter are not
necessarily indicative of the results of operations for any future period.

<TABLE>
<CAPTION>
                                                      Net loss    Net loss
                                                    attributable per share-     Weighted
                                  Gross  Loss from   to common   basic and   average shares-
     Quarter Ended       Revenues profit operations stockholders  diluted   basic and diluted
     -------------       -------- ------ ---------- ------------ ---------- -----------------
                                        (in thousands, except per share data)
<S>                      <C>      <C>    <C>        <C>          <C>        <C>
2000
  March 31.............. $16,227  $4,378  $(16,637)   $(15,386)    $(0.48)       31,771
  June 30...............  18,604   5,230    (6,867)     (5,682)     (0.17)       33,064
  September 30..........  13,483   4,566    (8,331)     (7,210)     (0.21)       34,578
  December 31...........  15,323   5,663   (10,230)     (9,201)     (0.25)       35,561
1999
  March 31..............   1,634     294    (2,966)     (2,965)     (0.32)        9,280
  June 30...............   5,689   1,268    (2,558)     (2,546)     (0.17)       14,976
  September 30..........   6,618   1,431    (7,302)    (21,489)     (0.85)       33,149
  December 31...........  12,464   2,995    (9,900)     (9,175)     (0.41)       22,536
</TABLE>

   In the quarter ended December 31, 2000, we adjusted our purchase price and
goodwill resulting from the purchase of AdWare Systems, Inc. from McCann
Erikson Worldwide, a subsidiary of The Interpublic Group of Companies, Inc.
("IPG"), to reduce the intercompany payable between AdWare and IPG. Our
goodwill, before accumulated amortization, and our accounts payable were
overstated by $2.9 million at September 30, 2000. Due to this adjustment of the
purchase price and our goodwill, our amortization of goodwill and intangibles
and our net loss was reduced by $199,000 in the quarter ended December 31,
2000. This reduced our net loss per share, both basic and diluted, by $0.01 per
share.

                                       11
<PAGE>

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

   You should read the following discussion of our financial condition and
results of operations together with our consolidated financial statements and
the notes to such statements included elsewhere in this annual report. This
discussion contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, that involve risks and uncertainties. These forward-looking
statements are typically denoted in this annual report by words such as
"anticipates," "believes," "plans," "expects," "future," "intends" and similar
expressions. This annual report also contains forward-looking statements
attributed to certain third-parties relating to their estimates regarding the
growth of online spending, online use and online advertising spending.
Prospective investors should not place undue reliance on these forward-looking
statements, which apply only as of the date of this annual report. These
forward-looking statements involve risks and uncertainties. Mediaplex's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, as more fully described in the "Risk
Factors" section on page 19 and elsewhere in this annual report. We undertake
no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.

Overview

   We provide technology solutions for both online and traditional, or offline,
marketers. In the second quarter of 1998, we began generating revenues from our
advertising campaign management services. Our campaign management services
include online media planning and buying, and tracking, analyzing and reporting
the results of the media campaign. In the second quarter of 1999, we began
utilizing our proprietary technology, MOJO(R), to enhance our service offerings
and expand our business. We plan to continue to broaden our revenue sources by
leveraging the capabilities of our MOJO(R) technology to offer message
management services, which enable advertisers to integrate their internal
business information into an online advertising campaign and to tailor their
advertising messages or offers in real-time. With our recent acquisition of
AdWare Systems, Inc., we also offer a suite of capabilities ranging from agency
accounting to digital asset management.

   We currently provide advertising campaign management services for a fixed
fee, which varies from client to client. This fee is principally based on the
extent of services provided and the direct cost of media placement. This cost
of purchasing advertising space on an Internet site is typically determined by
the cost per thousand impressions, or times that an advertisement appears in
pages viewed by users of our online products. Revenues from advertising
campaign management services are recognized in the period that advertising
impressions are delivered, or placed on an Internet site, provided that no
significant obligations on our part remain at the end of the period and the
collection of the resulting receivable is probable. Our obligations often
include, for instance, guarantees of a minimum number of impressions. To the
extent that significant obligations remain, we defer recognition of the
corresponding portion of the revenues until these obligations are met.

   We also generate revenue from application management services and
professional services. Application management services revenue consists of
monthly recurring fees for processing transactions on Internet sites and
hosting the related services and is recognized as the services are performed.
Our application management services provide customers rights to access
applications, hardware and network for the application access, customer
service, and rights to enhancements and updates. Our customers do not have the
right to take possession of the software at any time during the hosting
agreement. Contracts for application management services that exceed designated
minimum monthly or quarterly volume usage are recognized as revenue in the
month or quarter in which minimum volume is exceeded.

   In addition, we may generate revenues from clients obtained through or
referred to us by an advertising agency. If an ad agency is used, we will
usually bill the ad agency for work done on behalf of the agency's

                                       12
<PAGE>

clients, and the ad agency will then be responsible for obtaining full payment
from the client. We expect the percentage of our total revenues that we obtain
from clients referred to us by ad agencies to increase in future periods.

   We also realize revenue by providing a global media management planning,
production and financial system for advertising agencies and advertisers. Based
upon the system modules selected by the client, a monthly recurring fee is
charged for usage of the module. This fee varies by client. Our applications
are provided via hosting services and are accessed by our clients via network
connections. These services are provided under multi-year contracts. Revenue is
recognized based upon actual monthly usage.

   Cost of revenues consists primarily of the cost of procuring advertising
space on third-party Internet sites, the costs and expenses associated with
maintaining the systems for our application management services, and, to a
lesser extent, of the communications and other costs related to maintaining our
ad servers at third-party locations. These costs are recorded in the period
that the advertising impressions are delivered and the related revenues are
recorded. Currently, we purchase advertising space on Internet sites for a
particular media campaign.

   Until December 31, 1999, we expensed all of our research and development
costs in the period in which we incurred these costs. For the year ended
December 31, 2000, we have incurred substantial costs associated with enhancing
our products. As such, we capitalized $472,000 in software development costs
which are being amortized over a three-year period.

   In March 1999, we acquired Netranscend Software, Inc., a Java-based business
automation solutions software company, for a note payable of $430,000, due in
four annual installments beginning in March 2000, and 1,979,000 shares of our
common stock, with an estimated fair value of $1.29 per share. This acquisition
was accounted for under the purchase method of accounting. We recorded $3.0
million of goodwill and other identifiable intangible assets in connection with
this acquisition, which are being amortized over a three-year period.

   In July 2000, we acquired AdWare Systems, Inc., a global media management
applications service provider, for 1,211,921 shares of our common stock with an
estimated fair value of $23.8 million and $4 million in cash, from McCann-
Erickson Worldwide, a subsidiary of The Interpublic Group of Companies, Inc.
The acquisition has been accounted for by the purchase method of accounting. We
recorded $23.2 million of goodwill and other identifiable intangible assets in
connection with this acquisition, which are being amortized over a three-year
period.

   We have a limited operating history upon which you may evaluate our business
and prospects. We incurred net losses of $2.0 million in 1998, $21.8 million in
1999, and $37.5 million for the year ended December 31, 2000. At December 31,
2000, our accumulated deficit was $77.0 million, which includes a non-cash
charge of $14.4 million related to the beneficial conversion feature incurred
for the issuance of our Series C preferred stock. We anticipate that we will
incur additional operating losses but that these losses will decline.


                                       13
<PAGE>

Results of Operations

   The following table sets forth our statement of operations data expressed as
a percentage of revenues:

<TABLE>
<CAPTION>
                                                         Years Ended
                                                         December 31,
                                                      ----------------------
                                                      2000     1999    1998
                                                      -----   ------   -----
   <S>                                                <C>     <C>      <C>
   Revenues.......................................... 100.0 %  100.0 % 100.0 %
   Cost of revenues..................................  68.8     77.3    77.2
                                                      -----   ------   -----
   Gross profit (loss)...............................  31.2     22.7    22.8
   Operating expenses:
     Sales and marketing.............................  35.8     45.5    39.0
     Research and development........................  16.2     21.7    15.5
     General and administrative......................  34.9     38.7    17.7
     Restructuring expense...........................   3.0      --      --
     Amortization of goodwill and intangibles........   7.4      2.9     --
                                                      -----   ------   -----
       Total operating expenses......................  97.3    108.8    72.2
                                                      -----   ------   -----
   Loss from operations.............................. (66.1)   (86.1)  (49.4)
   Interest income (expense), net....................   7.2      3.5    (6.9)
                                                      -----   ------   -----
   Net loss.......................................... (58.9)   (82.6)  (56.3)
   Beneficial conversion feature of Series C
    convertible preferred stock......................   --     (54.4)    --
                                                      -----   ------   -----
   Net loss attributable to common stockholders...... (58.9)% (137.0)% (56.3)%
                                                      =====   ======   =====
</TABLE>

Year ended December 31, 2000 compared to year ended December 31, 1999

   Revenues. Revenues increased to $63.6 million for the year ended December
31, 2000 from $26.4 million for the year ended December 31, 1999. The period-
to-period increase was primarily due to the growth of our selling advertising
campaign management services to a broad set of advertisers, primarily focused
on advertising agencies and their respective clientele. Additionally, in July
2000, we acquired AdWare Systems, Inc. which contributed revenues for media
management application services. Our revenue also included advertising serving
fees for clients utilizing our MOJO technology to run their online campaigns.
In 1999, substantially all of our revenues consisted of advertising fees
received for providing advertising campaign management services.

   Cost of Revenues. Cost of revenues increased to $43.8 million, or 68.8% of
revenues, for the year ended December 31, 2000 from $20.4 million, or 77.3% of
revenues, for the year ended December 31, 1999. The increase in cost of
revenues in 2000 was primarily due to the increase in our revenues. The cost of
revenues comprised primarily media placement costs, including the
communications and other costs related to maintaining our ad servers at third-
party sites. With our acquisition of AdWare, our cost of revenues also includes
operational expenses related to the maintenance of our enterprise solutions
systems.

   Gross Profit. Gross profits increased to $19.8 million, or 31.2% of
revenues, for the year ended December 31, 2000 from $6.0 million, or 22.7% of
revenues, for the year ended December 31, 1999. Since the revenue generated by
AdWare does not have the media placement costs, we realized a higher gross
margin for the year ended December 31, 2000 compared to the year ended December
31, 1999. We also experienced a shift in types of services offered during 2000,
from almost completely campaign management services at the end of 1999 to a mix
that included technology services, which have lower direct associated costs.

   Sales and Marketing. Sales and marketing expenses consist primarily of
compensation expenses, including salaries, commissions and related payroll
expenses, recruiting costs, and marketing expenses, including those expenses
associated with customer service and support. Sales and marketing expenses
increased to $22.8 million, or 35.8% of revenues, for the year ended December
31, 2000, from $12.0 million, or 45.5%

                                       14
<PAGE>

of revenues, for the year ended December 31, 1999. The dollar increase in sales
and marketing expenses during 2000 was primarily due to the significant growth
of our sales, marketing, account management, media procurement and management
organization in 2000 as we focused on selling advertising campaign management
services. The increase in our revenues also contributed to an increase in the
commissions we paid to our sales staff. The number of sales and marketing
personnel increased from 71 as of December 31, 1999 to 95 as of December 31,
2000. We expect that sales and marketing expenses will continue to increase.

   Research and Development. Research and development expenses consist
primarily of compensation and related expenses for our internal development
staff, network operations staff and fees for outside contractor services.
Research and development expenses increased to $10.3 million, or 16.2% of
revenues, for the year ended December 31, 2000, from $5.7 million, or 21.7% of
revenues, for the year ended December 31, 1999. This dollar increase in
research and development expenses was due primarily to an increase in the
number of development engineers in our research and development organization.
The number of development engineers increased from 43 as of December 31, 1999
to 98 as of December 31, 2000. We expect to continue to spend significant
amounts on research and development as we continue to develop and enhance our
technology. Accordingly, we expect that research and development expenses will
continue to increase.

   General and Administrative. General and administrative expenses consist
primarily of compensation and related expenses and fees for contractor
services. General and administrative expenses increased to $22.2 million, or
34.9% of revenues, for the year ended December 31, 2000, from $10.2 million, or
38.7% of revenues, for the year ended December 31, 1999. Included in the
general and administrative expense for the year ended December 31, 2000, were
stock-based compensation of $10.2 million. The dollar increase in general and
administrative expenses, excluding the stock-based compensation, was due
primarily to the hiring of additional general and administrative personnel. We
had 26 general and administrative personnel as of December 31, 1999 and 43
persons as of December 31, 2000. We expect that general and administrative
expenses will continue to increase.

   For accounting purposes, we recognize stock-based compensation in connection
with the issuance of shares of our common stock and the granting of options or
warrants to purchase our common stock to employees and consultants with
purchase or exercise prices that are less than the deemed fair market value at
the grant date. Stock-based compensation related to the issuance of shares of
common stock has been expensed in the period in which the common stock was
issued. Stock-based compensation related to the issuance of options and
warrants to purchase common stock is being amortized over the vesting period of
the stock options. Total deferred stock compensation as of December 31, 2000
was $792,000.

   Restructuring Expense. In December 2000, management took certain actions to
reduce employee headcount in order to better align its sales, development and
administrative organization and to position Mediaplex for profitable growth in
the future consistent with management's long term objectives. This involved the
involuntary terminations of approximately 70 employees. As a consequence, we
recorded a $1.9 million expense, or 3.0% of revenues, during the fourth quarter
of 2000 related to payments for severance and pending lease cancellations being
executed under the restructuring plan.

   Amortization of Goodwill and Intangible Assets. Amortization expense
increased to $4.7 million, or 7.4% of revenue, for the year ended December 31,
2000, from $753,000, or 2.9% of revenues, for the year ended December 31, 1999.
This increase is mainly due to the amortization of goodwill and intangible
assets recorded in connection with our acquisition of AdWare Systems, Inc. in
July 2000. The amortization of goodwill and intangible assets recorded in 1999
related solely to our acquisition of Netranscend Software, Inc. in March 1999.

   Interest Income (Expense), Net. Interest income, net increased to $4.6
million, or 7.2% of revenues, for the year ended December 31, 2000, from
$912,000, or 3.5% of revenues, for the year ended December 31, 1999,
representing primarily interest earned on the cash, cash equivalents, and
short-term investments we generated in 1999 from our initial public offering.

                                       15
<PAGE>

   Net Loss. Net loss was $37.5 million for the year ended December 31, 2000,
and $21.8 million for the year ended December 31, 1999. The increase in net
loss of $15.7 million from 1999 to 2000 was primarily due to the increase in
operating expenses of $33.2 million.

Year ended December 31, 1999 compared to year ended December 31, 1998

   Revenues. Revenues increased to $26.4 million for the year ended December
31, 1999 from $3.6 million for the year ended December 31, 1998. The period-to-
period increase was primarily due to the growth of our of selling advertising
campaign management services to a broad set of advertisers, including
advertising agencies, which we began in April 1998. In 1999, substantially all
of our revenues consisted of advertising fees received for providing
advertising campaign management services. In 1998, our revenues were primarily
derived from the sale of advertising on our Internet content sites.

   Cost of Revenues. Cost of revenues increased to $20.4 million, or 77.3% of
revenues, for the year ended December 31, 1999 from $2.8 million, or 77.2% of
revenues, for the year ended December 31, 1998. The increase in cost of
revenues in 1999 was primarily due to the increase in our revenues. The cost of
revenues for the year ended December 31, 1999 comprised primarily media
placement costs, including the communications and other costs related to
maintaining our ad servers at third-party sites, while the cost of revenues for
the year ended December 31, 1998 consisted primarily of the cost of maintaining
our Internet content sites.

   Gross Profit. Gross profits increased to $6.0 million, or 22.7% of revenues,
for the year ended December 31, 1999 from $818,000, or 22.2% of revenues, for
the year ended December 31, 1998. The slight increase on our gross profit as a
percentage of revenue is reflective of the economies of scale associated with
providing more campaign management services in 1999.

   Sales and Marketing. Sales and marketing expenses increased to $12.0
million, or 45.5% of revenues, for the year ended December 31, 1999 from $1.4
million, or 39.0% of revenues, for the year ended December 31, 1998. The
increase in sales and marketing expenses in both dollars and as a percentage of
revenue during 1999 was primarily due to the significant growth of our sales
and marketing organization in 1999 as we focused on selling advertising
campaign management services. The number of sales and marketing personnel
increased from 13 as of December 31, 1998 to 71 as of December 31, 1999.

   Research and Development. Research and development expenses increased to
$5.7 million, or 21.7% of revenues, for the year ended December 31, 1999 from
$556,000, or 15.5% of revenues, for the year ended December 31, 1998. This
dollar increase in research and development expenses in both dollars and as a
percentage of revenue was due primarily to an increase in the number of
development engineers in our research and development organization. The number
of development engineers increased from 2 as of December 31, 1998 to 43 as of
December 31, 1999.

   General and Administrative. General and administrative expenses increased to
$10.2 million, or 38.7% of revenues, for the year ended December 31, 1999 from
$636,000, or 17.7% of revenues, for the year ended December 31, 1998. The
dollar increase in general and administrative expenses was due primarily to the
hiring of additional general and administrative personnel. We had 4 general and
administrative personnel as of December 31, 1998 and 26 persons as of December
31, 1999.

   Amortization of Goodwill and Intangible Assets. Amortization expense was
$753,000, or 2.9% of revenues, for the year ended December 31, 1999, due to the
amortization of goodwill and intangible assets recorded in connection with our
acquisition of Netranscend Software, Inc. in March 1999. We recorded no
goodwill amortization expense in 1998.

   Interest Income (Expense), Net. Interest income, net was $912,000 for the
year ended December 31, 1999, representing primarily interest earned on the
cash and cash equivalents we generated in 1999 from private placements of
convertible preferred stock and the initial public offering. The net interest
expense of

                                       16
<PAGE>

$247,000 for the year ended December 31, 1998 was primarily due to the
beneficial conversion feature of a note payable to stockholders.

   Net Loss. Net loss was $21.8 million for the year ended December 31, 1999,
and $2.0 million for the year ended December 31, 1998. The increase in net loss
of $19.8 million from 1998 to 1999 was primarily due to the increase in
operating expenses of $26.1 million, which includes a $10.8 million increase in
non-cash stock-based compensation expense, from 1998 to 1999.

   Beneficial Conversion Feature of the Series C Convertible Preferred
Stock. In August 1999, Mediaplex issued 4,000,000 shares of Series C
convertible preferred stock at a purchase price of $3.59 per share. These
shares were convertible into shares of common stock on a one-for-one basis.
Because the conversion price was less than the low end of the price range for
the anticipated initial public offering, the Series C preferred stock was
deemed to have an embedded beneficial conversion feature. This feature allows
the holders to acquire common stock at a purchase price below its deemed fair
value. The amount of the discount assigned to the beneficial conversion feature
is limited to the amount of the proceeds. Consequently, the issuance and sale
of the Series C preferred stock resulted in a beneficial conversion feature of
$14.4 million, which has been reflected as a preferred dividend in our 1999
statement of operations.

Liquidity and Capital Resources

   From our inception in September 1996 through August 1999, we financed our
operations primarily through the private placement of preferred stock, which
has generated net proceeds of $23.9 million. In November 1999, we completed an
initial public offering of our common stock, which generated net proceeds of
$75.4 million. As of December 31, 2000, we had $34.9 million in cash and cash
equivalents, $22.2 million in short-term investments and $1.1 million in
restricted cash.

   Net cash used in operating activities for the year ended December 31, 2000,
1999, and 1998 was $21.1 million, $9.1 million and $240,000, respectively. Net
cash used in operating activities in each of these periods was primarily the
result of net losses before non-cash charges of depreciation and amortization
and stock-based compensation. The net cash used was also influenced by a net
increases in accounts receivable and a significant payoff of outstanding
payables, both of which were partially offset by increases in accrued
liabilities. Additionally, in December 2000, we incurred approximately $1.9
million in restructuring expense.

   Net cash used in investing activities for the year ended December 31, 2000,
1999, and 1998 was $23.7 million, $12.7 million and $79,000, respectively. Net
cash used in investing activities 2000 was primarily due to the purchase of
short-term investments. In connection with our acquisition of Adware, a payment
to McCann-Erickson of $4 million was made in July 2000. For all periods, we
invested significantly in computer equipment and software to host our various
technology product offerings.

   Net cash provided by financing for the year ended December 31, 2000, 1999,
and 1998 was $1.6 million, $99.5 million and $551,000, respectively. In 2000,
the principal source of funds provided by financing was from the issuance of
common stock through the exercise of stock options, warrants and the employee
purchase plan. These funds were primarily offset by the purchase of treasury
stock. In 1999, net cash provided by financing activities was primarily due to
issuance of shares of our common stock and our preferred stock. In 1999 and
1998 the funds borrowed from stockholders under notes payable bore interest at
6% per annum. These notes payable were paid off in 1999, and we currently have
no other borrowings.

   We have no material commitments for capital expenditures anticipated;
however, we will incur capital expenditures consistent with our anticipated
growth in operations, infrastructure and personnel. We believe that our current
level of cash and cash equivalents will be sufficient to meet our anticipated
liquidity needs for working capital and capital expenditures until at least
March 31, 2002. Our forecast of the period of time through which our financial
resources will be adequate to support operations is a forward-looking statement
that involves risks and uncertainties, and actual results could vary materially
as a result of the risk factors described in the following section of this
annual report. If we require additional capital resources to grow our

                                       17
<PAGE>

business internally or to acquire complementary technologies and businesses, we
may seek to sell additional equity or debt securities or secure a bank line of
credit. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders. We cannot assure you that
any financing arrangements will be available in amounts or on terms acceptable
to us.

   Our stock is currently trading at prices less than $1 per share. If our
stock continues to trade at this level, our stock could be delisted from the
NASDAQ, thus adversely affecting or limiting or restricting our ability to
raise funds through stock issuances.

                                       18
<PAGE>

                                  RISK FACTORS

   Set forth below and elsewhere in this annual report and in the other
documents we file with the Securities and Exchange Commission are risks and
uncertainties that could cause actual results to differ materially from the
results contemplated by the forward-looking statements contained in this annual
report.

Risks Related to Our Company

Our limited operating history makes financial forecasting and evaluation of our
business difficult.

   We were founded in 1996 and only began selling our advertising campaign
management services in April 1998. In mid-1999, we began deploying our MOJO
technology in client advertising campaigns. In the year ended December 31,
2000, we employed portions of our MOJO technology in 61 clients' campaigns.
Although our subsidiary, AdWare, has an extensive operating history, we have
less than one year of relevant integrated operations upon which you may
evaluate our operations and financial prospects. Our limited integrated
operating history makes it difficult to forecast our future operating results,
and for you to evaluate our future revenue and income potential, as well as
your investment in our common stock. In particular, our limited operating
history makes it difficult to evaluate our ability to:

  . continue to develop and enhance our MOJO platform and other technology to
    keep pace with the growth of the Internet advertising industry and
    changes in technology;

  . attract and maintain current client relationships;

  . achieve effective results for our clients;

  . develop new relationships and maintain existing relationships with
    advertising agencies, our marketing alliance partners and other third
    parties; and

  . continue to expand the type of services we offer.

We have a history of losses, expect future losses and may never become
profitable.

   We have not achieved profitability in any period to date and given the level
of planned operating expenditures, we expect to continue to incur losses and
negative cash flows for the foreseeable future. Our accumulated deficit as of
December 31, 2000 was approximately $77.0 million. We incurred losses of
$37.5 million, $21.8 million and $2.0 million for the years ended December 31,
2000, 1999 and 1998, respectively. If our revenues decrease or grow more slowly
than we anticipate, or if our operating expenses exceed our expectations and
cannot be adjusted accordingly, our business will be harmed. Furthermore, if we
are unable to generate a long-term profit, we will eventually have to cease
operations.

We may need additional capital in the future to support our growth and
additional financing may not be available to us.

   Although we believe that our working capital will provide adequate liquidity
to fund our operations and meet our other cash requirements until at least the
end of 2001, unanticipated developments in the short term, such as the entry
into agreements which require large cash payments, further deterioration of the
online advertising market or the acquisition of businesses with negative cash
flows, may necessitate additional financing. In any case, we may seek to raise
additional funds through public or private debt or equity financings in order
to:

  . fund our operations and capital expenditures;

  . take advantage of favorable business opportunities, including geographic;

  . expansion or acquisitions of complementary businesses or technologies;

  . develop and upgrade our technology infrastructure;

                                       19
<PAGE>

  . reduce outstanding debt;

  . develop new product and service offerings;

  . take advantage of favorable conditions in capital markets; or

  . respond to competitive pressures.

   The capital markets, and in particular the public equity market for Internet
companies, have traditionally been volatile. It is difficult to predict when,
if at all, it will be possible for Internet companies to raise capital through
these markets. We cannot assure you that the additional financing will be
available on terms favorable to us, or at all.

Variations in quarterly operating results, due to factors such as changes in
demand and the mix of services we provide, may cause our stock price to
decline.

   It is possible that in future periods our results of operations will be
below the expectations of securities analysts. If so, the market price of your
shares would likely decline. Our quarterly operating results have fluctuated in
the past and are likely to continue to do so in the future. We believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance and should not be relied upon to predict
our future performance or our stock price.

   Our quarterly revenues, expenses and operating results could vary
significantly from quarter-to-quarter for several other reasons, many of which
are beyond our control. These factors include:

  . demand for our advertising services and mix of services we provide;

  . addition of new or loss of current advertisers and advertising agencies;

  . decisions by advertisers or advertising agencies to implement or delay
    campaigns;

  . amount of advertising spending by current advertisers and advertising
    agencies;

  . deployment of new services we may offer;

  . changes in availability and pricing of advertising space;

  . changes in our pricing policies or the pricing policies of our
    competitors; and

  . costs related to acquisitions of technology or businesses.

   Our current and future expense estimates are based, in large part, on
estimates of future revenues, which are difficult to predict, and on our
investment plans. In particular, we plan to increase our operating expenses in
order to expand our sales and marketing operations, to enhance our proprietary
software and to expand internationally. We may be unable to, or may elect not
to, adjust spending quickly enough to offset any unexpected revenues shortfall.
If these expenses are not accompanied by increased revenues, our results of
operations and financial condition would be harmed.

   Further, we are subject to employer payroll taxes when an employee exercises
non-qualified stock options. The employer payroll taxes are assessed on each
employee's gain, which is the difference between the price of our common stock
on the date of exercise and the exercise price. These employer payroll taxes
will be recorded as operating expenses in the period those options are
exercised based on the aggregate gains realized by employees. Since we are
unable to predict our future stock price and the number of optionees who may
exercise during any particular period, we cannot predict what, if any, expense
will be recorded in a future period and the impact on our future financial
results.

                                       20
<PAGE>

Our revenues depend upon a few key clients, and if we lose a major client, our
revenues may be significantly reduced.

   Our revenues have been derived from a limited number of advertisers and
advertising agencies that use our services. Our quarterly and annual results of
operations would be harmed by the loss of any of these clients. In 1999,
ShopNow.com and DATEK Online accounted for approximately 12% and 10% of our
annual revenues, respectively. In 2000, no individual client accounted for more
than 10% of our revenues. In addition, one customer accounted for 12% of our
outstanding accounts receivable at December 31, 1999. At December 31, 2000, one
ad agency through which we perform services for advertisers, accounted for 22%
of our outstanding accounts receivable. We expect that some of these entities
may continue to account for a significant percentage of our revenues for the
foreseeable future. Advertisers typically purchase advertising that runs for a
limited time under short-term arrangements ranging from 30 days to one year.
Currently only a limited number of our clients purchase our advertising
services under a long-term contract. Current advertisers may not continue to
purchase advertising from us or we may not be able to successfully attract
additional advertisers. In addition, the non-payment or late payment of amounts
due to us from a significant advertiser or ad agency could harm our financial
condition. Further, our advertising agency customers may develop online message
management capabilities in-house, thus eliminating their need for this aspect
of our services.

We could be held liable for failing to comply with current federal, state and
foreign laws governing consumer privacy or our own stated privacy policies.

   Failure to comply with applicable foreign, federal and state laws and
regulatory requirements of regulatory authorities may result in, among other
things, indemnification liability to our clients and the advertising agencies
we work with, administrative enforcement actions and fines, class action
lawsuits, cease and desist orders, and civil and criminal liability. Our stated
privacy policy is to not maintain, share, or sell any personally identifiable
data or anonymous user profile information, and our clients retain the sole and
exclusive right to use any data that they have obtained through explicit
permission from an Internet user. Our failure to comply with this stated policy
could result in similar consequences under federal and state fair trade acts.

   The Federal Trade Commission and state attorneys general have been
investigating Internet service providers regarding their use of personal
information. Recently, class action lawsuits have been filed alleging
violations of privacy laws by Internet service providers. In October 1998, the
European Union adopted a directive addressing data privacy that may result in
limitations on our ability to collect and use information regarding Internet
users. These restrictions may limit our ability to target advertising in most
European countries. Our failure to comply with these or other federal, state or
foreign laws could result in liability and materially harm our business.

Future governmental or industry restrictions or regulations related to privacy
on the Internet could limit the effectiveness and reduce the demand for
Internet advertising.

   Federal and state legislatures have recently proposed limitations on the
collection and use of information regarding Internet users. For instance, one
proposed restriction would require websites to obtain the permission of their
web visitors before aggregating, sharing or selling any information related to
those web visitors. Similarly, the high-technology and direct marketing
industries are considering various new, additional or different self-regulatory
standards. If the gathering of profiling information were to be curtailed,
Internet advertising would be less effective, which would reduce demand for
Internet advertising and harm our business.

We may be held liable for our clients' non-compliance with privacy regulations
or their own stated privacy policies.

   Our customers are also subject to various federal and state regulations
concerning the collection and use of information regarding individuals. These
laws include the Children's Online Privacy Protection Act, the Federal Drivers
Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-
Bliley Act, as well as other laws that govern the collection and use of
consumer credit information. We cannot assure you that our

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clients are currently in compliance, or will remain in compliance, with these
laws and their own privacy policies. We may be held liable if our clients use
our technology in a manner that is not in compliance with these laws or their
own stated privacy standards.

If we fail to establish, maintain and expand our business and marketing
alliances and partnerships, our ability to grow could be limited, we may not
achieve desired revenues and our stock price may decline.

   In order to grow our business, we must generate, retain and strengthen
successful business and marketing alliances with companies in industries
including:

  . Internet and traditional media advertising;

  . business software;

  . enterprise resource planning;

  . website development and consulting; and

  . information technology consultants.

   We depend, and expect to continue to depend, on our business and marketing
alliances, which are companies with which we have written or oral agreements to
work together to provide services to our clients, to refer business from their
clients and customers to us. If companies with which we have business and
marketing alliances do not refer their clients and customers to us to perform
their online campaign and message management, our revenues and results of
operations would be severely harmed. We currently expect that a significant
amount of our future revenues will need to be generated through these
relationships. In addition, if companies with which we have business and
marketing alliances do not provide high quality products and services to our
mutual clients, our sales could suffer. We have little control over the amount
of resources these companies will devote to online advertising or referring
their clients to our services. We may not be able to generate and maintain
adequate relationships to offset the significant resources that are necessary
to develop marketing efforts to reach clients of our business and marketing
alliances.

   In additions, AdWare has two primary business partnerships that have an
impact on our ability to deliver needed functionality to our customers. The
first is with Strata, the company whose radio pre-buy product is integrated
with AdWare SPOT. Radio pre-buy is an integral part of broadcast media buying
functionality. A loss of that partnership would necessitate the development of
an entirely new product that would require resources and time. The second is
with IBM; loss of this partnership might damage our reputation and negatively
impact our ability to drive revenues in the digital asset management arena.

We are substantially dependent upon our technologies, including both our MOJO
and AdWare technologies, for our future revenues, and if our technologies do
not generate revenues, our business may fail.

   We believe that our future revenues are substantially dependent on the
acceptance by clients of the use of our technologies, which we believe to be
the cornerstone of our business. If our technologies do not perform as
anticipated or otherwise do not attract clients to use our services, our
operations will suffer. We began using our MOJO technology to provide
advertising and direct marketing services in April 1999, and have only used
portions of it in 61 clients' campaigns as of December 31, 2000. We have only
recently introduced message management services using our MOJO technology and
these services have not generated substantial revenue as of December 31, 2000.
In addition, we have incurred and will continue to incur significant expense
developing our technologies. If our revenues generated from the use of our
technologies do not cover these development costs, our financial condition
would suffer.

Our MOJO technology is relatively new; if our MOJO technology does not continue
to perform as anticipated, we would need to devote significant resources to
address defects, and our reputation could be damaged.

   Our MOJO technology is complex and although it has had few performance
problems to date, it may have errors, defects or performance problems in the
future. In particular, we may encounter problems when it is

                                       22
<PAGE>

updated to expand and enhance its capabilities. Although we have internally
tested our MOJO technology extensively, we have only used it in 61 clients'
campaigns as of December 31, 2000. Consequently, our technology may still
malfunction or suffer from design defects. If our technology malfunctions or
contains such defects, our services may not be reliable or compatible in
certain online environments used by our clients. In such instances, we would
need to devote significant resources to address these defects, and any problems
could result in lost revenues and damage to our reputation.

If our technologies suffer from design defects, we may need to expend
significant resources to address resulting product liability claims.

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

If we fail to effectively manage our growth, our management and resources could
be strained and our ability to capture new business could suffer.

   We have grown significantly since our inception. Future expansion could
strain our management and other resources. As we continue to increase the scope
of our operations, we will need an effective planning and management process to
implement our business plan successfully in the rapidly evolving advertising
market. Our failure to manage new growth could seriously harm our business. We
have increased our number of employees from 140 at December 31, 1999 to 236 at
December 31, 2000. In addition, we anticipate that we may expand international
operations in the future.

The loss of our key personnel, or any inability to attract and retain
additional personnel, could affect our ability to grow our business.

   Our future success depends to a significant extent on the service of our key
senior management, product engineering and development and professional service
and support personnel. Any of these individuals could terminate their
employment with us at anytime. All of our employees are at-will. Due to the
substantial competition for qualified personnel, we could suffer attrition and
could lose key members of our management or product engineering staff. We would
also be harmed if one or more of our officers or key employees decided to join
a competitor or otherwise compete with us. In addition, because many of our
executives have only recently joined us, our management team has only worked
together for a short time and may not work effectively together.

   Our future success also depends on our continuing ability to attract, retain
and motivate highly skilled employees. Competition for qualified personnel in
the high technology industry is intense, particularly in the San Francisco Bay
area of Northern California, where two of our principal offices are located. If
we fail to hire and retain a sufficient number of sales, marketing, technical,
service and support personnel, we will not be able to maintain or expand our
business.

Our sales and implementation cycle is lengthy, which could divert our financial
and other resources, and is subject to delays, which could result in delayed
revenues.

   If the sales and implementation cycle of our services is delayed, our
revenues will likewise be delayed. Our sales and implementation cycle is
lengthy, causing us to recognize revenues long after our initial contact with a
client. During our sales effort, we spend significant time educating
prospective clients on the use and benefit of our campaign and message
management services. As a result, the sales cycle for our products and

                                       23
<PAGE>

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

Sustained or repeated system failures could significantly disrupt our
operations, cause client dissatisfaction and reduce our revenues.

   The continuing and uninterrupted performance of our computer systems is
critical to our success. Our operations depend on our ability to protect our
computer systems against damage from fire, power loss, water damage,
communications failures, viruses, vandalism and other malicious acts, and
similar unexpected adverse events, including earthquakes. Although we maintain
system backup and auxiliary systems to mitigate the damage from the occurrence
of any of these events, we may not have taken adequate steps to guard against
every difficulty that could occur. In the event of a sustained data center
outage, our ability to recover is predicated on the execution of disaster
recovery plans with third parties. Clients may become dissatisfied by any
system failure that interrupts our ability to provide our services to them,
including failures affecting the ability to deliver advertisements quickly and
accurately to the targeted audiences. Sustained or repeated system failures
would reduce significantly the attractiveness of our solutions to advertisers.

   In addition, interruptions in our services could result from the failure of
our communications providers to provide the necessary data communications
capacity in the time frame required. Our ad network operations and computer
hardware is primarily housed with third-party providers of Internet
communication services located in Santa Clara and San Jose, California, McLean,
Virginia and Hamburg, Germany. In addition, the failure of any advertising
server system such as ours, including failures that delay the delivery of
advertisements to Internet sites, could reduce client satisfaction and severely
harm our business, results of operations and financial condition.

   In the past, users have occasionally experienced difficulties due to
software incompatibility or system failures unrelated to our systems. Although
these disruptions have not had a material effect on our business, any further
disruption in the Internet access provided by third-party providers or any
failure of third-party providers to handle higher volumes of user traffic could
seriously harm our business, results of operations and financial condition.

Our technology has not yet been fully tested at higher capacities, and capacity
constraints could reduce our revenues.

   The volume of transactions delivered through our servers has increased from
1 million impressions per day in January 1999 to up to a high of 95 million
impressions per day as of December 31, 2000, representing approximately 33% of
our capacity at that date. Although to date we have not had difficulties in
meeting demand for our services, further increases in the volume of
transactions delivered through our servers could strain the capacity of our
MOJO technology platform, which could lead to slower response times or system
failures. This would adversely affect the availability of advertisements, the
number of impressions received by advertisers and our revenues. If we do not
effectively address capacity constraints or system failures, our business,
results of operations and financial condition would be harmed.


                                       24
<PAGE>

The expected benefits of our recent acquisition of AdWare may not be realized,
and we may have difficulties in integrating the personnel, operations and
technology of AdWare.

   In July 2000, we acquired AdWare Systems, Inc., a global media management
applications service provider. We anticipate that as a result of this
acquisition, we will be able to offer agencies, advertisers and other partners
a more complete online-to-offline media-management solution. However, achieving
this may depend in part on the integration of our and AdWare's personnel,
operations and technology. The integration of Mediaplex and AdWare will be a
complex, time consuming and expensive process and may disrupt both businesses
if not completed in a timely and efficient manner. We have no experience in
integrating operations on the scale presented by the acquisition. The
integration process will be complicated by the need to integrate different
operations, multiple executive offices and different corporate cultures. It is
uncertain whether we can successfully integrate AdWare in a timely manner, or
that any of the anticipated benefits will be realized. Failure to do so could
materially harm our business and operations.

Should we choose to substantially increase our presence in the digital asset
management arena, we need to acquire complete ownership of the AdVISUAL
intellectual property that is now partially owned by our development partner,
ImageSoft.

   Currently, AdWare shares ownership of the AdVISUAL code with ImageSoft.
AdWare and ImageSoft hold joint copyrights in AdVisual, AdVisual Capture, and
AdVisual 2.0. Should ImageSoft choose not to focus on and invest in AdVISUAL in
the future, the current customer base will be negatively impacted and our
reputation may be damaged. Gaining full control of AdVISUAL would require
purchasing ImageSoft's share of the intellectual property.

Acquisitions or strategic investments may divert our management's attention and
consume resources necessary to sustain our business.

   We intend to continue pursuing selective acquisitions of businesses and
technologies to complement our current business. Any future acquisition or
investment may result in the use of significant amounts of cash, potentially
dilutive issuances of equity securities, the incurrence of debt, and
amortization expenses related to goodwill and other intangible assets. In
addition, acquisitions involve numerous risks, any of which could harm our
business, operating results or financial condition including:

  . difficulties in the integration and assimilation of the operations,
    technologies, services and personnel of an acquired business;

  . diversion of management's attention from other business concerns;

  . unavailability of favorable financing for future acquisitions; and

  . potential loss of key employees in any acquired business.

The carrying value of our goodwill arising from acquisitions could be subject
to impairment write-downs.

   The net book value of goodwill as of December 31, 2000 was $20.8 million. It
is our policy to assess the impairment of long-lived assets, such as goodwill,
when events or changes in circumstances indicate that the carrying value of an
asset may not be recoverable. If our market capitalization is consistently
lower than the carrying value of our assets, this may trigger an impairment
analysis. Additionally, if the projected future discounted cash flows of our
enterprise-wide assets were determined to be less than the carrying value of
those assets, we would recognize an impairment loss.

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<PAGE>

If we fail to develop new technology-based services or improve our existing
technology-based services to adapt to the changing needs and standards of the
Internet and traditional advertising industry, sales of our services will
decline.

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

   Our future success will depend on our ability to adapt to rapidly changing
technologies, to enhance existing technologies and to partner or develop and
introduce a variety of new technology-based services to address our clients'
changing demands. Advertisers may require the ability to deliver advertisements
utilizing new rich media formats and more precise consumer targeting
techniques. Further, increased availability of broadband Internet access is
expected to enable the development of new services that take advantage of this
expansion in delivery capability. We may also experience difficulties that
could delay or prevent the successful design, development, introduction or
marketing of our technology-based services. In addition, any new technologies
or enhancements that we develop must meet the requirements of our current and
prospective clients and must achieve significant market acceptance. Material
delays in introducing new technology-based services and enhancements may cause
clients to forego purchases of our services and purchase those of our
competitors.

We may expand our international sales efforts but do not have substantial
experience in international markets.

   We intend to expand our international sales efforts in the future. We expect
to initiate operations in selected international markets in the future. As of
December 31, 2000, we had not generated any significant revenues from
international operations. We have limited experience in marketing, selling and
supporting our services abroad, and we consequently may not be successful in
these international markets. Expansion into international markets will require
extensive management attention and resources.

   We also may enter into a number of international alliances as part of our
international strategy and rely on these prospective business alliances to
conduct operations, establish local networks, aggregate Internet sites and
coordinate sales and marketing efforts. Our success in international markets
will depend on the success of our business alliances and their willingness to
dedicate sufficient resources to our relationships. In the future, any
international operations we commence will be subject to other risks, including:

  . difficulties and costs of staffing and managing foreign operations;

  . seasonal reductions in business activity;

  . the impact of recessions in economies outside the United States;

  . privacy laws and regulations outside the United States;

  . changes in regulatory requirements;

  . export restrictions, including export controls relating to encryption
    technology;

  . reduced protection for intellectual property rights in some countries;

  . potentially adverse tax consequences;

  . political and economic instability;

  . tariffs and other trade barriers; and

  . fluctuations in currency exchange rates.

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<PAGE>

   Our failure to address these risks adequately may severely harm our ability
to expand our operations internationally.

If others claim that we are infringing their intellectual property, we could
incur significant expenses or be prevented from selling our services.

   Third parties may claim that we are infringing their intellectual property
rights. In particular, third parties may claim that our MOJO technology, on
which our success depends in large part, infringes their intellectual property
rights. The intellectual property rights of others may cover some of our
technology. Claims of intellectual property infringement might require us to
enter into royalty or license agreements; however, we may not be able to obtain
royalty or license agreements on terms acceptable to us, or at all. We also may
be subject to significant damages or an injunction against the use of our
services.

   If any claims of infringement are brought against us, we could incur
significant expenses defending against those claims, and suffer additional
damages if our defense is not successful. Any litigation regarding our
intellectual property could be costly and time-consuming and divert the
attention of our management and key personnel from our business operations. The
complexity of the technology involved and the uncertainty of intellectual
property litigation increase these risks. A successful claim of patent or other
intellectual property infringement against us would immediately harm our
business and financial condition.

We may not be able to protect our technology from unauthorized use, which could
diminish the value of our services, weaken our competitive position and reduce
our revenues.

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

   We rely on a combination of patent, copyright, trademark and trade secret
laws, confidentiality procedures and licensing arrangements to establish and
protect our proprietary rights. Third-party software providers could copy or
otherwise obtain and use our technology without authorization or develop
similar technology independently which may infringe our proprietary rights. We
may not be able to detect infringement and may lose competitive position in the
market before we do so. In addition, competitors may design around our
technology or develop competing technologies. Intellectual property protection
may also be unavailable or limited in some foreign countries.

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

Risks Related to Our Industry

Inadequate security on the Internet could limit the effectiveness of and reduce
the demand for our services and technology.

   The failure of the Internet to continue to develop as a medium for the
purchase of goods and services would decrease the demand for online
advertising. Concerns over the security of transactions conducted over the
Internet and the privacy of consumers may inhibit the growth of the Internet
and online advertisers. Our clients generally have implemented security
features to protect the privacy and integrity of the data collected from their
users. However, this information may be susceptible to hacker interception,
break-ins and disruption. If any of these were to occur, or if a well-
publicized compromise of security were to occur, Internet usage may

                                       27
<PAGE>

not increase at the rate we expect and, consequently, our services would be
perceived as less effective or desirable by our clients.

Increased usage of filtering software could limit the effectiveness of and
reduce the demand for our services and technology.

   Visitors to websites on which our advertising messages are placed may not be
aware that information regarding them is being collected by third-party data
profiling companies. There currently exists software that can limit the
effectiveness of data profiling technology in capturing information for a
particular visitor to a website. Widespread use of this limiting or inhibiting
technology would decrease the effectiveness of our services for our clients
that are dependent upon the reliability of the information we obtain from
profiling companies, which would decrease the attractiveness of those services
to our clients. If this occurs, our business would be significantly harmed.

Our business model and ability to generate significant revenues depend upon
broad market acceptance of Internet advertising.

   Our business model relies on revenues generated primarily by providing
Internet advertising services to response-oriented advertisers. The Internet as
an advertising medium has not been in existence for a sufficient period of time
to demonstrate its effectiveness. Internet advertising, as well as technology-
based methods for targeting advertising and tracking, measuring and reporting
the results of Internet advertising may not achieve broad market acceptance.
Our ability to generate significant revenues from advertisers will depend, in
part, on our ability to:

  . demonstrate to advertisers that advertising on the Internet will add
    value and increase marketing effectiveness;

  . attract and retain advertisers and advertising agencies by
    differentiating the services and technology we offer; and

  . obtain adequate available advertising inventory from a large base of
    Internet sites.

Intense competition in the Internet advertising industry could reduce our
ability to gain clients and might require us to reduce prices, which could
reduce our revenues.

   We face intense competition in the Internet advertising services industry.
The following categories represent current and potential competition:

  . ad serving product companies, such as Avenue A, L90, DoubleClick, Engage
    Technologies, including AdForce and AdKnowledge, and 24/7 Media;

  . email product providers, such as Net Incentives, DoubleClick, 24/7 Media,
    Message Media, Click Action, Radical Mail, and Digital Impact; and,

  . offline advertising technology providers, such as Donovan Data Systems
    and Encoda Systems, previously known as Columbine CJDS, which acquired
    DSI Datatrack Systems, Inc., and Professional Software Systems (PSS).

   We believe that our ability to compete depends upon many factors both within
and outside of our control, including:

  . the effectiveness, ease of use, performance and features of our
    technology;

  . client perceptions of the effectiveness of our services and technology;

  . the price of our services;

  . our ability to service our clients effectively over a broad geographic
    basis; and

  . the timing and acceptance of new services and enhancements to existing
    solutions developed by us or our competitors.

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<PAGE>

   The intense competition among Internet sites has led to the creation of a
number of pricing alternatives for Internet advertising. These alternatives
make it difficult for us to project future levels of advertising revenues and
applicable gross margins that can be sustained either by us or the advertising
industry in general. In addition, overall industry spending will be adversely
affected by economic downturns and consumer confidence.

   We expect competition to continue to increase in our industry because there
are no substantial barriers to entry. In particular, advertising agencies
without in-house online media management capabilities, including those with
which we currently work, may develop these capabilities in the future. We
believe that, in addition, competition will continue to increase as a result of
industry mergers, partnerships and consolidations. For example, AdForce and
Flycast have been acquired by CMGI, AdKnowledge has been acquired by Engage
Technologies, a subsidiary of CMGI, and NetGravity has been acquired by
DoubleClick. As we expand internationally, we expect to face competition from
internationally-based competitors such as Mindshare Digital and Publicis
Technology, as well as our domestic competitors with international operations,
such as BBDO Interactive, Leo Burnett and The Interpublic Group. Companies
doing business on the Internet, including ours, must also compete with
television, radio, cable and print media for a share of advertisers' total
advertising budgets. Advertisers may be reluctant to devote a significant
portion of their advertising budget to Internet advertising if they perceive
the Internet to be a limited or ineffective advertising medium. In addition, as
we expand the scope of our Internet advertising and direct marketing services,
we may compete with a greater number of Internet sites and other media
companies across a wide range of different Internet services. Competitive
pressures could prevent us from growing, reduce our market share or require us
to reduce prices on our services, any of which could harm our business.

   Many of our existing competitors have significantly greater financial,
technical, marketing, service and other resources, have a larger installed base
of users, have been in business longer or have greater name recognition than we
do. Some of our competitors' services may be more effective than our services
at performing particular functions or be more customized for particular needs.
Some large companies may attempt to build functions into their services that
are similar to functions of our services. Even if these functions are more
limited than those provided by our services, those services could discourage
potential clients from purchasing our services, as well as lead to price
reductions that could harm our revenues.

Seasonality and cyclical spending may cause fluctuations in our quarterly
revenue, which may cause us to miss our revenue projections and result in a
decline in our stock price.

   We believe that our revenues will be subject to seasonal fluctuations
because advertisers generally place fewer advertisements during the first and
third calendar quarters of each year. In addition, expenditures by advertisers
tend to be cyclical, reflecting overall economic conditions as well as
budgeting and buying patterns. A decline in the economic prospects of
advertisers or the economy generally could cause companies to discontinue,
delay or reduce online advertising spending. These events could reduce the
demand for our services and cause a decline in our stock price.

Potential clients in specific industries may require us to refuse business from
their competitors, limiting our business opportunities and reducing our revenue
growth.

   To use our services most effectively, advertisers must integrate their
internal business data into their advertising campaigns to deliver a targeted
message. This type of integration may raise concerns about our clients'
confidential information and prompt our clients to require us to contract with
them exclusively within their specific industry. If our clients impose these
restrictions on us, our potential client base and revenue growth would be
limited.

   To fully utilize our MOJO-based services, we must have access to our
clients' proprietary business data. Many companies are wary of third parties
having access to their business information, because access by third parties
increases the risk that confidential business data may become known, even if
unintentionally, to

                                       29
<PAGE>

outsiders who are not the intended recipients of the data. These
confidentiality concerns may be so great as to prompt our clients to attempt to
contractually prohibit us from managing the online advertising campaigns of
their competitors. If our potential client base in a particular industry was
limited in this way, our business and future revenues could be harmed. To date,
a few clients have requested that we do not service their competitors; however,
we have not agreed to these requests. To address our clients' concerns, we have
established procedures to ensure the protection of our clients' data, such as
the use of separate teams to work with each client and the use of separate,
secure servers for clients' advertising and message campaigns where a conflict
may exist.

Government regulation and legal uncertainties of doing business on the Internet
may inhibit the commercial acceptance of the Internet and result in decreased
demand for our services.

   Laws and regulations that apply to Internet communications, commerce and
advertising are becoming more prevalent. These regulations could affect the
costs of communicating on the Internet and adversely affect the growth in use
of the Internet. In turn, these regulations could result in decreased demand
for our services or otherwise harm our business.

   Recently, the United States Congress enacted Internet legislation regarding
children's privacy, copyrights and taxation. A number of other laws and
regulations may be adopted covering issues such as user privacy, pricing,
acceptable content, taxation and quality of products and services. This
legislation could hinder growth in the use of the Internet generally and
decrease the acceptance of the Internet as a communications, commercial and
advertising medium. In addition, the growing use of the Internet has burdened
existing communications infrastructure and has caused interruptions in
telephone service. Certain telephone carriers have petitioned the government to
regulate and impose fees on Internet service providers and online service
providers in a manner similar to long distance carriers.

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

Additional Risks That May Cause Your Investment in Our Stock to Decline

Because our directors and executive officers together own a large percentage of
our voting stock, your voting power may be limited, which may prevent an
acquisition of our company or depress our stock price.

   As of December 31, 2000, our executive officers and directors beneficially
owned or controlled, directly or indirectly, 17,261,515 shares of common stock,
which in the aggregate represents approximately 42.6% of the outstanding shares
of common stock. As a result, if these persons act together, they will have the
ability to control all matters submitted to our stockholders for approval,
including the election and removal of directors and the approval of any
business combination. This may delay or prevent an acquisition or affect the
market price of our stock.

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<PAGE>

We have adopted anti-takeover provisions in our charter documents that could
delay or prevent an acquisition of our company.

   Our certificate of incorporation and bylaws contain provisions, such as
undesignated preferred stock, a staggered board and the restriction on the
persons that can call special board or stockholder meetings, which could make
it more difficult for a third-party to acquire us without the consent of our
board of directors. While we believe these provisions provide for an
opportunity to receive a higher bid by requiring potential acquirers to
negotiate with our board of directors, these provisions may apply even if the
offer may be considered beneficial by some stockholders.

Our stock price, has been and may continue to be extremely volatile, and we may
be delisted from the Nasdaq National Marketing System.

   The market price of our common stock has declined significantly in recent
months, and we expect that it will continue to be subject to significant
fluctuations as a result of variations in our quarterly operating results.
These fluctuations have been, and may continue to be, exaggerated because an
active trading market has not developed for our stock. Thus, investors may have
difficulty selling shares of our stock at a desirable price, or at all. Our
stock is currently trading below the $1 per share requirement for continued
listing on the Nasdaq National Market.

NEW ACCOUNTING PRONOUNCEMENTS

   Mediaplex continually assesses the effects of recently issued accounting
standards. The impact of all recently adopted and issued accounting standards
has been disclosed in the financial statements to this annual report.

                                       31
<PAGE>

ITEM 7A. 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
investments in marketable securities in a variety of securities, including
commercial papers and money market funds.

   The following table presents the amounts of our financial instruments that
are subject to interest rate risk by year of expected maturity and average
interest rates as of December 31, 2000:

<TABLE>
<CAPTION>
                                                                      Fair Value
                                                                      ----------
                                                                       (Dollars
                                                                          in
                                                                      thousands)
     <S>                                                              <C>
     Cash and cash equivalents.......................................  $34,894
     Average interest rate...........................................     6.60%


     Short-term investments in marketable securities.................  $22,244
     Average interest rate...........................................     6.63%
</TABLE>

   We did not hold derivative financial instruments as of December 31, 2000,
and have never held these instruments in the past.

Foreign Currency Risk

   As of December 31, 2000, we have had limited transactions in Germany.
Accordingly, we are subject to exposure from adverse movements in foreign
currency exchange rates. This exposure is primarily related to revenues and
operating expenses in Germany. The effect of foreign exchange rate fluctuations
for 2000 was not material. We do not use financial instruments to hedge
operating activities denominated in the local currency. We assess the need to
utilize financial instruments to hedge currency exposures on an ongoing basis.
As of December 31, 2000 we had $133,000 in cash and cash equivalents
denominated in foreign functional currencies.

   The introduction of the Euro has not had a material impact on how we conduct
business and we do not anticipate any changes in how we conduct business as a
result of increased price transparency.

   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.

                                       32
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                    Page(s)
                                                                 -------------
<S>                                                              <C>
Report of Independent Accountants............................... 34
Consolidated Balance Sheets as of December 31, 2000 and 1999.... 35
Consolidated Statements of Operations for the years ended
 December 31, 2000, 1999, and 1998.............................. 36
Consolidated Statements of Stockholders' Equity (Deficit) for
 the years ended December 31, 2000, 1999 and 1998............... 37
Consolidated Statements of Cash Flows for the years ended
 December 31, 2000, 1999 and 1998............................... 38 through 39
Notes to Consolidated Financial Statements...................... 40 through 55
</TABLE>

                                       33
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

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

   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
Mediaplex Inc., and its subsidiary, at December 31, 2000 and 1999, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These consolidated
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits of these consolidated
financial statements in accordance with auditing standards generally accepted
in the United States of America which require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

/s/ Pricewaterhousecoopers LLP

San Francisco, California
February 13, 2001


                                       34
<PAGE>

                                MEDIAPLEX, INC.

                          CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
Cash and cash equivalents.................................. $ 34,894  $ 78,052
Short-term investments.....................................   22,244     9,913
Restricted cash............................................    1,106       --
                                                            --------  --------
    Total cash, cash equivalents, short-term investments
     and restricted cash...................................   58,244    87,965
Accounts receivable, net...................................   14,151     7,629
Other current assets.......................................    1,604       940
                                                            --------  --------
    Total current assets...................................   73,999    96,534
Property and equipment, net................................   11,890     4,039
Goodwill and intangible assets, net........................   20,810     2,257
Other assets...............................................    1,144       612
                                                            --------  --------
    Total assets........................................... $107,843  $103,442
                                                            ========  ========

           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable......................................... $    923  $  3,343
  Accrued liabilities......................................   14,344     7,909
  Deferred revenue, current portion........................      450     1,087
  Capital lease obligation, current portion................      334       --
  Notes payable to stockholders, current portion...........      110       110
                                                            --------  --------
    Total current liabilities..............................   16,161    12,449
Deferred revenue...........................................      700       --
Capital lease obligation...................................      268       --
Notes payable to stockholders..............................      190       280
Other liabilities..........................................       52       --
                                                            --------  --------
    Total liabilities......................................   17,371    12,729
                                                            --------  --------
Commitments (Note 7)
Stockholders' Equity:
  Preferred stock, $0.0001 par value; authorized 10,000
   shares..................................................      --        --
  Common stock, $0.0001 par value; authorized 150,000
   shares; 35,941 and 31,691 shares issued as of December
   31, 2000 and 1999, respectively.........................        4         3
  Additional paid-in capital...............................  166,959   134,325
  Warrants.................................................    2,040     2,472
  Deferred stock compensation..............................     (792)   (6,521)
  Accumulated other comprehensive gain.....................        9       --
  Treasury stock, at cost; 859 shares......................     (703)      --
  Accumulated deficit......................................  (77,045)  (39,566)
                                                            --------  --------
    Total stockholders' equity.............................   90,472    90,713
                                                            --------  --------
    Total liabilities and stockholders' equity............. $107,843  $103,442
                                                            ========  ========
</TABLE>

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

                                       35
<PAGE>

                                MEDIAPLEX, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands except per share data)

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                   ---------------------------
                                                     2000      1999     1998
                                                   --------  --------  -------
<S>                                                <C>       <C>       <C>
Revenues.......................................... $ 63,636  $ 26,405  $ 3,588
Cost of revenues..................................   43,799    20,418    2,770
                                                   --------  --------  -------
  Gross profit....................................   19,837     5,987      818
                                                   --------  --------  -------
Operating expenses:
  Sales and marketing (includes stock-based
   compensation of $973, $4,608 and $578 for the
   years ended December 31, 2000, 1999 and 1998,
   respectively)..................................   22,786    12,007    1,398
  Research and development (includes stock-based
   compensation of $433, $1,598 and $0 for the
   years ended December 31, 2000, 1999 and 1998,
   respectively)..................................   10,307     5,733      556
  General and administrative (includes stock-based
   compensation of $10,168, $5,154, and $0 for the
   years ended December 31, 2000, 1999 and 1998,
   respectively)..................................   22,181    10,221      636
  Restructuring expense...........................    1,929       --       --
  Amortization of goodwill and intangibles........    4,700       753      --
                                                   --------  --------  -------
    Total operating expenses......................   61,903    28,714    2,590
                                                   --------  --------  -------
    Loss from operations..........................  (42,066)  (22,727)  (1,772)
Interest income (expense), net....................    4,587       912     (247)
                                                   --------  --------  -------
Net loss.......................................... $(37,479) $(21,815) $(2,019)
Beneficial conversion feature of Series C
 preferred stock..................................      --     14,360      --
                                                   --------  --------  -------
Net loss attributable to common stockholders...... $(37,479) $(36,175) $(2,019)
                                                   ========  ========  =======
Net loss per share attributable to common
 stockholders--basic and diluted.................. $  (1.11) $  (2.34) $ (0.25)
                                                   ========  ========  =======
Weighted average shares used to compute net loss
 per share Attributable to common stockholders--
 basic and diluted................................   33,756    15,427    8,186
                                                   ========  ========  =======
</TABLE>


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

                                       36
<PAGE>

                                MEDIAPLEX, INC.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                (in thousands)

<TABLE>
<CAPTION>
                   Convertible
                    Preferred                                                                     Treasury
                      Stock       Common Stock   Additional            Deferred       Other         Stock
                  --------------  --------------  Paid-In               Stock     Comprehensive -------------
                  Shares  Amount  Shares  Amount  Capital   Warrants Compensation  Gain/(Loss)  Shares Amount  Deficit    Total
                  ------  ------  ------  ------ ---------- -------- ------------ ------------- ------ ------  --------  -------
<S>               <C>     <C>     <C>     <C>    <C>        <C>      <C>          <C>           <C>    <C>     <C>       <C>
Balance,
December 31,
1997............     --   $ --    11,319   $  1   $    813   $  --     $    --       $  --        --   $  --   $ (1,372) $  (558)
Repurchase of
common stock for
convertible note
payable.........                  (4,643)   --        (232)                                                                 (232)
Beneficial
conversion
feature of note
payable to
stockholder.....                                       232                                                                   232
Issuance of
common stock....                      76    --          38                                                                    38
Issuance of
common stock for
services........                     232    --         151                                                                   151
Options granted
to former
employees for
services
rendered........                                       286                                                                   286
Deferred stock
compensation....                                       193                 (193)                                             --
Amortization of
deferred stock
compensation....                                                            140                                              140
Net loss........                                                                                                 (2,019)  (2,019)
                  ------  -----   ------   ----   --------   ------    --------      ------      ----  ------  --------  -------
Balance,
December 31,
1998............     --     --     6,984      1      1,481      --          (53)        --        --      --     (3,391)  (1,962)
Issuance of
common stock for
services........                      93    --         417                                                                   417
Issuance of
common stock
upon acquisition
of Netranscend..                   1,979    --       2,569                                                                 2,569
Issuance of
common stock
upon exercise of
options.........                     239    --         361                                                                   361
Issuance of
Series A
convertible
preferred stock,
net of issuance
costs of $47....   1,206    --                       1,461                                                                 1,461
Conversion of
note payable to
stockholder for
common stock....                     947    --          71                                                                    71
Issuance of
Series B
convertible
preferred stock,
net of issuance
costs of $742...   4,500    --                       8,259      432                                                        8,691
Conversion of
note payable for
common stock....                   4,643    --         232                                                                   232
Issuance of
Series C
convertible
preferred stock,
net of issuance
costs of $238...   4,000      1                     14,121                                                                14,122
Dividend
relative to
beneficial
conversion
feature related
to issuance of
Series C
convertible
preferred
stock...........                                    14,360                                                      (14,360)     --
Issuance of
common stock
upon exercise of
options in
connection with
waiver of
payable to
stockholder.....                     200    --          13                                                                    13
Issuance of
warrant for
services........                                              2,040                                                        2,040
Sale of common
stock, net of
issuance costs
of $7,355.......                   6,900      1     75,444                                                                75,445
Conversion of
convertible
preferred
stock...........  (9,706)    (1)   9,706      1                                                                              --
Deferred stock
compensation....                                    15,536              (15,536)                                             --
Amortization of
deferred stock
compensation....                                                          9,068                                            9,068
Net loss........                                                                                                (21,815) (21,815)
                  ------  -----   ------   ----   --------   ------    --------      ------      ----  ------  --------  -------
Balance,
December 31,
1999............      --     --   31,691      3    134,325    2,472      (6,521)        --        --      --    (39,566)  90,713
Issuance of
common stock for
acquisition of
AdWare..........                   1,212    --      23,769                                                                23,769
Issuance of
common stock
upon exercise of
stock options...                   2,555      1      1,780                                                                 1,781
Issuance of
common stock
upon exercise of
warrants........                     368    --         682     (432)                                                         250
Issuance of
common stock
under the
employee stock
purchase plan...                     114    --         570                                                                   570
Purchase of
treasury stock..                                       626                                       (859)   (703)               (77)
Issuance of
common stock
options to
employees at
below fair
value...........                                    11,346                                                                11,346
Adjustment for
variable stock
options.........                                    (2,416)                 731                                           (1,685)
Cancelled stock
options.........                                    (3,723)               1,520                                           (2,203)
Amortization of
deferred stock
compensation....                                                          3,478                                            3,478
Net change in
unrealized gain
on commercial
paper...........                                                                          9                                    9
Net loss........                                                                                                (37,479) (37,479)
                  ------  -----   ------   ----   --------   ------    --------      ------      ----  ------  --------  -------
Balance,
December 31,
2000............     --   $ --    35,941   $  4   $166,959   $2,040    $   (792)     $    9      (859) $ (703) $(77,045) $90,472
                  ======  =====   ======   ====   ========   ======    ========      ======      ====  ======  ========  =======
</TABLE>

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

                                       37
<PAGE>

                                MEDIAPLEX, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                    ---------------------------
                                                      2000      1999     1998
                                                    --------  --------  -------
<S>                                                 <C>       <C>       <C>
Cash flows from operating activities:
 Net loss.........................................  $(37,479) $(21,815) $(2,019)
Adjustments to reconcile net loss to net cash used
 in operating activities:
  Depreciation and amortization...................     8,143     1,211       55
  Allowance for sales credits and doubtful
   accounts.......................................       446     3,475      109
  Stock-based compensation expense................    11,574    11,360      578
  Non-cash portion of restructuring charge........       200       --       --
  Accretion of short-term investments.............      (881)     (184)     --
  Write-off of property and equipment.............       546        17       19
  Amortization of debt discount...................        23        18      --
  Interest expense related to beneficial
   conversion feature of note payable.............       --        --       232
  Changes in assets and liabilities:
   Accounts receivable............................    (5,918)  (10,168)  (1,042)
   Other assets...................................    (1,080)   (1,525)     (22)
   Accounts payable...............................    (2,888)      387    1,149
   Restructuring reserve..........................       683       --       --
   Payables to stockholders.......................       --        (77)      91
   Accrued liabilities............................     5,490     7,568      273
   Deferred revenue...............................        63       607      337
                                                    --------  --------  -------
    Net cash used in operating activities.........   (21,078)   (9,126)    (240)
                                                    --------  --------  -------
Cash flows from investing activities:
  Purchase of property and equipment..............    (7,782)   (2,990)     (79)
  Purchase of short-term investments..............   (44,524)   (9,728)     --
  Sale of short-term investments..................    33,081       --       --
  Acquisition, net of cash acquired...............    (3,357)      --       --
  Restricted cash.................................    (1,090)      --       --
  Unrealized gain on commercial paper.............         9       --       --
                                                    --------  --------  -------
    Net cash used in investing activities.........   (23,663)  (12,718)     (79)
                                                    --------  --------  -------
Cash flows from financing activities:
  Net proceeds from issuance of common stock......       --     75,445       38
  Net proceeds from issuance of preferred stock...       --     23,941      --
  Proceeds from exercise of stock options.........     2,600       361      --
  Purchase of treasury stock, at cost.............      (703)      --       --
  Payments of capital lease obligations...........      (204)      --       (25)
  Proceeds from notes payables--stockholders......       --        --       275
  Payment of notes payable--stockholders..........      (110)     (225)     --
  Advance from stockholder........................       --        --       263
                                                    --------  --------  -------
    Net cash provided by financing activities.....     1,583    99,522      551
                                                    --------  --------  -------
    Net increase in cash and cash equivalents.....   (43,158)   77,678      232
Cash and cash equivalents at beginning of period..    78,052       374      142
                                                    --------  --------  -------
Cash and cash equivalents at end of period........  $ 34,894  $ 78,052  $   374
                                                    ========  ========  =======
</TABLE>

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

                                       38
<PAGE>

                                MEDIAPLEX, INC.

                     SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                     ---------------------------
                                                       2000      1999     1998
                                                     ---------  -------  -------
<S>                                                  <C>        <C>      <C>
Cash paid for interest.............................  $      45  $    13  $     2
                                                     ---------  -------  -------
Noncash financing and investing activities:
 Estimated fair value of:
  Assets acquired..................................  $   7,479  $   --   $   --
  Liabilities assumed..............................     (2,318)     (16)     --
  Goodwill and intangibles.........................     23,218    3,010      --
                                                     ---------  -------  -------
    Total purchase price...........................     28,379    2,994      --
  Less: cash acquired..............................       (643)      --      --
  Less: acquisition costs..........................       (610)     (11)     --
  Less: issuance of note payable for acquisition...         --     (430)     --
  Less: issuance of common stock...................    (23,769)  (2,553)     --
                                                     ---------  -------  -------
    Net cash paid for acquisition..................  $   3,357  $   --   $   --
                                                     =========  =======  =======
 Equipment acquired under capital lease............  $      30  $   --   $     3
                                                     =========  =======  =======
 Conversion of stockholder's notes payable to
  common stock.....................................  $     --   $   303  $   --
                                                     =========  =======  =======
 Repurchase of common stock in exchange for a note
  payable..........................................  $     --   $   --   $   232
                                                     =========  =======  =======
Issuance of warrant to purchase common and
 preferred stock in connection with Series B
 preferred stock financing.........................  $     --   $   597  $   --
                                                     ---------  -------  -------
Conversion of advance from stockholder to Series A
 preferred stock...................................  $     --   $   263  $   --
                                                     =========  =======  =======
Conversion of note payable and accrued interest to
 Series C convertible preferred stock..............  $     --   $    70  $   --
                                                     =========  =======  =======
Beneficial conversion feature of Series C
 convertible preferred stock.......................  $     --   $14,360  $   --
                                                     =========  =======  =======
Beneficial conversion feature of notes payable.....  $     --   $   --   $   232
                                                     =========  =======  =======
Conversion of convertible preferred stock to
 common............................................  $     --   $24,273  $   --
                                                     =========  =======  =======
Exercise of common stock options in connection with
 waiver of payable to stockholder..................  $     --   $    12  $   --
                                                     =========  =======  =======
Deferred stock compensation from issuance of
 options...........................................  $     --   $15,535  $   193
                                                     =========  =======  =======
Cancelled stock options............................  $   2,203  $   --   $   --
                                                     =========  =======  =======
Adjustment for variable stock options..............  $   1,685  $   --   $   --
                                                     =========  =======  =======
</TABLE>

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

                                       39
<PAGE>

                                MEDIAPLEX, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business Activities and Summary of Significant Accounting Policies

 Nature of Business

   Mediaplex, Inc. ("Mediaplex"), together with its subsidiary, AdWare Systems,
Inc. (the "Company") provides technology-based advertising and marketing
services and offline media-management solutions for companies and advertising
agencies that seek to optimize their marketing campaigns. Our service offerings
include planning and execution of online media and marketing campaigns,
proprietary third-party ad serving to advertisers, tracking and reporting of an
advertiser's return on investment ("ROI"), including evaluation of online
transactions, and media management applications. Our technology-based services
enable companies to deliver customized online advertising messages in response
to changes in their underlying business variables, such as inventory levels,
product pricing and customer data.

 Acquisitions

   In July 2000, Mediaplex acquired AdWare Systems, Inc., and its wholly owned
subsidiary AdWare Systems Canada, Inc. ("AdWare"), a global media management
applications service provider, for approximately $23.8 million in stock and $4
million in cash, from McCann-Erickson Worldwide ("McCann"), a subsidiary of The
Interpublic Group of Companies, Inc. The purchase agreement requires the
Company to issue up to an additional 156,000 shares of its common stock to
McCann in 2001, contingent on the performance of AdWare. The acquisition has
been accounted for by the purchase method of accounting, and accordingly the
purchase price was allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the acquisition date. Mediaplex
recorded approximately $23.2 million of goodwill and intangible assets. The
results of AdWare are included with those of Mediaplex subsequent to the
acquisition date.

   The acquisition was accounted for using the purchase method of accounting.
The aggregate purchase price of $27.8 million, together with $539,000 of net
liabilities assumed and $610,000 in acquisition costs, has been allocated based
on the fair value of the assets acquired. Property and equipment valued at $5.7
million are being depreciated over their remaining useful lives. Goodwill and
intangible assets, consisting of proprietary technology, workforce, licensing
agreements, and trade names, totaling $23.2 million are being amortized over
three years.

   The following unaudited pro forma results of operations reflect the combined
results of Mediaplex and AdWare for the years ended December 31, 2000 and 1999
and have been prepared as though the entities had been combined as of January
1, 2000 and 1999, respectively. The unaudited pro forma results do not reflect
any nonrecurring charges that resulted directly from the transaction.

<TABLE>
<CAPTION>
                                                              Years Ended
                                                             December 31,
                                                           ------------------
                                                             2000      1999
                                                           --------  --------
                                                              (unaudited)
   <S>                                                     <C>       <C>
   Revenues............................................... $ 68,918  $ 34,878
   Net loss............................................... $(41,762) $(30,589)
   Net loss per share--basic and diluted.................. $  (1.21) $  (1.84)
   Shares used to compute net loss per share--basic and
    diluted...............................................   34,428    16,639
</TABLE>

   On March 25, 1999, the Company acquired Netranscend Software, Inc., a Java-
based business automation solutions software company, for a non-interest note
payable of $430,000, due in four annual installments (Note 6) beginning on the
first anniversary of the acquisition, and 1,979,000 shares of the Company's
common stock with an estimated fair value of $1.29 per share. The Company
incurred transaction costs of $68,000.

                                       40
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The acquisition was accounted for using the purchase method of accounting.
Immediately after the acquisition, Netranscend was liquidated into the Company.
The aggregate purchase price of $3.0 million, together with $16,000 of net
liabilities assumed, has been allocated based on the fair value of the assets
acquired. Goodwill and intangible assets, consisting of proprietary technology,
totaling $3.0 million are being amortized over three years.

 Use of Estimates

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

 Concentration of Credit Risk

   Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company has cash equivalents and short-term investment policies that
require placement of these funds in financial institutions evaluated as highly
credit-worthy. The Company's credit risk is mitigated by the Company's ongoing
credit evaluation of its customers' financial condition. The Company does not
require collateral or other security to support accounts receivable and
maintains an allowance for doubtful accounts. At December 31, 2000, one agency
represented 22% of outstanding accounts receivable. One agency accounted for
12% of the outstanding accounts receivable at December 31, 1999. No one
customer accounted for more than 10% of revenue for the year ended December 31,
2000. Two customers accounted for 22% and 77% of revenues for the years ended
December 31, 1999 and 1998.

 Risks and Uncertainties

   The Company is subject to all of the risks inherent in an early stage
company in the Internet advertising industry. These risks include, but are not
limited to, a limited operating history, its ability to raise capital, limited
management resources, dependence upon consumer acceptance of the Internet,
Internet-related security risks and the changing nature of the electronic
commerce industry. The Company's operating results may be materially affected
by the foregoing factors.

   The Company has incurred substantial losses and negative cash flow from
operations since inception. As of December 31, 2000 the Company has an
accumulated deficit of $77,045,000. The Company believes that their working
capital will provide adequate liquidity to fund their operations and meet their
other cash requirements until at least March 31, 2002. The Company is however
subject to unanticipated developments in the short term, such as the entry into
agreements which may require large cash payments, further deterioration of the
online advertising market or the acquisition of businesses with negative cash
flows, these may necessitate additional financing. The Company may seek to
raise additional funds through public or private debt or equity financings in
order to:

  .  fund their operations and capital expenditures;

  .  take advantage of favorable business opportunities, including
     geographic;

  .  expansion or acquisitions of complementary businesses or technologies;

  .  develop and upgrade their technology infrastructure;

                                       41
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  .  reduce outstanding debt;

  .  develop new product and service offerings;

  .  take advantage of favorable conditions in capital markets; or

  .  respond to competitive pressures.

   The capital markets, and in particular the public equity market for Internet
companies, have traditionally been volatile. It is difficult to predict when,
if at all, it will be possible for Internet companies to raise capital through
these markets. The Company cannot assure that additional financing will be
available on favorable terms, or at all.


 Cash, Cash Equivalents and Investments in Marketable Securities

   All highly liquid instruments purchased with an original maturity of three
months or less are considered to be cash equivalents.

   The Company's financial instruments include cash and cash equivalents,
borrowings and accounts payable, and are carried at cost, which approximates
their fair value due to their short-term maturities.

   The Company classifies its investments in marketable securities as
available-for-sale. Accordingly, these investments are carried at fair value,
with the unrealized gains and losses, net of estimated tax, reported as a
separate component of stockholders' equity. Unrealized gains at December 31,
2000 were $9,000. The Company recognizes gains and losses when securities are
sold using the specific identification method. For the years ended December 31,
2000, 1999, and 1998, the Company did not recognize any material gains or
losses upon the sale of securities.



                                       42
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   At December 31, 2000, cash and cash equivalents and short-term investments
consist of the following:

<TABLE>
<CAPTION>
                                                                     Estimated
                                               Unrealized Unrealized   Fair
                                        Cost     Losses     Gains      Value
                                       ------- ---------- ---------- ---------
   <S>                                 <C>     <C>        <C>        <C>
   Cash and cash equivalents:
     Cash............................. $ 2,153   $ --       $ --      $ 2,153
     Money market funds...............  22,741     --         --       22,741
     Municipal and government
      securities......................   5,000     --         --        5,000
     Commercial paper.................   5,000     --         --        5,000
                                       -------   -----      -----     -------
                                       $34,894   $ --       $ --      $34,894
                                       =======   =====      =====     =======
   Short-term investments:
     Municipal and government
      securities...................... $15,900   $ --       $ --      $15,900
     Corporate bonds..................   2,392     --           5       2,397
     Commercial paper.................   3,947     --           4       3,947
                                       -------   -----      -----     -------
                                       $22,239   $ --       $   9     $22,244
                                       =======   =====      =====     =======
</TABLE>

   At December 31, 1999, cash and cash equivalents and short-term investments
consist of the following:

<TABLE>
<CAPTION>
                                                                       Cost
                                                                      -------
   <S>                                                                <C>
   Cash and cash equivalents:
     Cash............................................................ $(1,766)
     Money market funds..............................................   2,335
     Commercial paper................................................  77,483
                                                                      -------
                                                                      $78,052
                                                                      =======
   Short-term investments:
     Commercial paper................................................ $ 9,913
                                                                      -------
                                                                      $ 9,913
                                                                      =======
</TABLE>

 Property and Equipment

   Property and equipment are stated at cost less accumulated depreciation and
amortization. Maintenance and repairs are charged to operations as incurred.
Depreciation and amortization are based on the straight-line method over the
estimated useful lives of the related assets, which range from three to five
years. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation and amortization are removed from the accounts, and
any resulting gain or loss is reflected in operations in the period realized.

 Goodwill and Intangible Assets

   Goodwill and intangible assets consist of the excess of the purchase price
paid over the value of identified intangible and tangible net assets resulting
from the acquisition of AdWare Systems, Inc. and Netranscend Software, Inc. Due
to the rapid technological changes occurring in the Internet industry, the
goodwill and intangible assets are amortized using the straight-line method
over three years, the period of expected benefit. Valuation of goodwill and
intangible assets is based on forecasted discounted cash flows and is
reassessed periodically. Cash flow forecasts are based on trends of historical
performance and management's estimate of future performance, giving
consideration to existing and anticipated competitive and economic conditions.

                                       43
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Impairment of Long-Lived Assets

   The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. During the year
ended December 31, 2000, the Company recorded a loss of $946,000 due to the
impairment of assets, of which $200,000 related to the restructuring of the
Company in December 2000.

 Revenue Recognition

   Revenues are generated primarily from fixed fees for campaign management
services. Advertising revenues are recognized ratably as impressions are
delivered over the period in which the advertisement is displayed, provided
that no significant Company obligations remain at the end of a period and
collection of the resulting receivable is probable. Company obligations
typically includes guarantees of minimum number of "impressions," or times that
an advertisement appears in pages viewed by users of the Company's online
properties. To the extent minimum guaranteed impressions are not met, the
Company defers recognition of a pro rata portion of the corresponding revenues
until the remaining guaranteed impression levels are achieved.

   Amounts payable to third-party websites for providing advertising space are
recorded as cost of revenues in the period the advertising impressions are
delivered.

   The Company also generates revenue from application management services and
professional services. Application management services revenue consists of
monthly recurring fees for hosting services and is recognized as the services
are performed. The Company's application management services provide customers
rights to access applications, hardware for the application access, customer
service, and rights to enhancements and updates. The Company's customers do not
have the right to take possession of the software at any time during the
hosting agreement. Contracts for application management services that exceed
designated minimum monthly or quarterly volume usage are recognized as revenues
by the Company in the month or quarter in which minimum volume is exceeded.

 Deferred Revenues

   Deferred revenues consist of fees received or billed in advance of the
delivery of the services. These revenues are recognized when the services are
provided.

 Research and Development Expenses

   Research and development expenses and enhancements to existing products are
charged to operations as incurred. Software development costs are required to
be capitalized once a working model has been established and ending when a
product is available for general release to customers. For the year ended
December 31, 2000, we have incurred substantial cost associated with enhancing
our products. As such, we capitalized $472,000 in software development costs,
which are being amortized over a three-year period. During the year ended
December 1999, completion of a working model of the Company's products and
general release substantially coincided. As a result, the Company did not
capitalize any software development costs for the year ended December 1999.

 Advertising Expenses

   The Company expenses the cost of advertising and promoting its services as
incurred. These costs are included in sales and marketing on the statements of
operations. For the year ended December 31, 2000, the

                                       44
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

company incurred approximately $1.9 million in advertising expenses. The
Company did not incur any advertising and promoting expense during the years
ending December 31, 1999 and 1998.

 Stock-based Compensation

   The Company accounts for stock-based employee compensation arrangements
under the intrinsic value method and complies with the disclosure provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." Under the intrinsic value method, compensation cost
is recognized based on the difference, if any, on the measurement date between
the fair value of the Company's stock and the amount an employee must pay to
acquire the stock.

   The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
("EITF") No. 96-18, "Accounting for Equity Instruments that are Issued to
Employees for Acquiring, or in Conjunction with Selling, Goods or Services."

   The Company amortizes stock-based compensation recorded in connection with
certain stock option grants over the vesting periods of the related options,
generally four years, consistent with the method described in Financial
Accounting Standards Board Interpretation ("FIN") No. 28.

 Income Taxes

   Deferred income taxes are recognized for the differences between the tax
bases of assets and liabilities and their financial reporting amounts based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. A valuation allowance is
recognized for deferred tax assets when it is more likely than not, based on
available evidence, that some portion or all of the deferred tax asset will not
be realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in
deferred tax assets and liabilities.

 Net Loss Per Share

   Basic net loss per share is computed by dividing the net loss attributable
to common stockholders for the period by the weighted average number of shares
of common stock outstanding during the period. The calculation of diluted net
loss per share gives effect to common stock equivalents; however, potential
common shares are excluded if their effect is antidilutive. Potential common
shares are composed of common stock subject to repurchase rights and
incremental shares of common stock issuable upon the exercise of stock options
and warrants.

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

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                                  ---------------------------
                                                    2000      1999     1998
                                                  --------  --------  -------
   <S>                                            <C>       <C>       <C>
   Numerator:
     Net loss attributable to common
      stockholders............................... $(37,479) $(21,815) $(2,019)
                                                  --------  --------  -------
   Denominator:
     Weighted average common shares..............   33,837    15,527    8,186
     Weighted average unvested common shares
      subject to repurchase......................      (81)     (100)     --
                                                  --------  --------  -------
     Denominator for basic and diluted
      calculation................................   33,756    15,427    8,186
                                                  ========  ========  =======
   Net loss per share-
     basic and diluted........................... $  (1.11) $  (2.34) $ (0.25)
                                                  --------  --------  -------
</TABLE>

                                       45
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following table sets forth common stock equivalents (potential common
stock) that are not included in the diluted net loss per share calculation
above because to do so would be antidilutive for the periods indicated (in
thousands):

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                    --------------------------
                                                     2000      1999     1998
                                                    -------- --------- -------
   <S>                                              <C>      <C>       <C>
   Weighted average effect of common stock
    equivalents:
     Stock options.................................    7,538     8,121    410
     Warrants......................................      484       825    --
     Unvested common stock subject to repurchase...       81       100    --
     Convertible preferred stock...................      --      3,965    --
                                                    -------- --------- ------
                                                       8,103    13,011    410
                                                    ======== ========= ======
</TABLE>

 Comprehensive Income

   Comprehensive income, as defined, includes all changes in equity (net
assets) during a period from non-owner sources. As of December 2000, the
Company has $9,000 in unrealized gains on short-term investments and has
reported such gains in comprehensive income.

 Segment Information

   The Company complies with the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company operates in a
single business segment providing a range of advertising technology services in
the United States.

 Reclassifications

   Certain reclassifications have been made to the prior year's financial
statements to conform with the current year presentation.

2. Recently Issued Accounting Standards

   In March 2000, the Financial Accounting Standards Board ("FASB") issued FIN
No. 44, "Accounting for Certain Transactions Involving Stock Compensation--an
Interpretation of Accounting Principles Board ("APB") Opinion No. 25." FIN No.
44 clarifies the application of APB Opinion No. 25 regarding the definition of
employee for purposes of applying APB Opinion No. 25, the criteria for
determining whether a plan qualifies as a noncompensatory plan, the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and the accounting for an exchange of stock compensation
awards in a business combination. This interpretation was effective July 1,
2000. To the extent that this interpretation covers events occurring during the
period after December 15, 1998 or January 12, 2000, but before the effective
date of July 1, 2000, the effects of applying this interpretation have been
applied prospectively. The adoption of this interpretation did not have a
material impact on our financial position, results of operations or cash flows.

   In November 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 100, "Restructuring and Impairment
Charges." In December 1999, the SEC issued SAB No. 101, "Revenue Recognition in
Financial Statements." SAB No. 100 expresses the views of the SEC staff
regarding the accounting for and disclosure of certain expenses not commonly
reported in connection with exit activities and business combinations. This
includes the accrual of exit and employee termination costs and the

                                       46
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

recognition of impairment charges. SAB No. 101 expresses the views of the SEC
staff in applying accounting principles generally accepted in the United
States of America to certain revenue recognition issues. The adoption of these
SABs did not have a material impact on our financial position, results of
operations or cash flows.

   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes new standards of
accounting and reporting for derivative instruments and hedging activities.
SFAS No. 133 requires that all derivatives be recognized at fair value in the
statement of financial position, and that the corresponding gains or losses be
reported either in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that
exists. SFAS No. 133, as amended, is effective for fiscal years beginning
after June 15, 2000. There was no significant impact from the adoption of this
pronouncement on January 1, 2001.

3. Balance Sheet Data

   Accounts receivable as of December 31, 2000, 1999 and 1998 are summarized
as follows (in thousands):

<TABLE>
<CAPTION>
                                                           December 31,
                                                      ------------------------
                                                       2000     1999     1998
                                                      -------  -------  ------
   <S>                                                <C>      <C>      <C>
   Accounts receivable............................... $18,202  $11,233  $1,066
   Beginning balance: Allowance for sales credits....  (2,577)     (92)    --
     Additions charged against revenue...............  (7,165)  (3,327)   (126)
     Deductions......................................   8,128      842      34
                                                      -------  -------  ------
       Ending balance: Allowance for sales credits...  (1,614)  (2,577)    (92)
   Beginning balance: Allowance for bad debts........  (1,027)     (37)    (20)
     Additions charged to expenses...................  (1,583)  (1,038)    (17)
     Deductions......................................     173       48     --
                                                      -------  -------  ------
       Ending balance: Allowance for bad debts.......  (2,437)  (1,027)    (37)
                                                      -------  -------  ------
         Accounts receivable, net:................... $14,151  $ 7,629  $  937
                                                      =======  =======  ======
</TABLE>

   Property and equipment as of December 31, 2000 and 1999 are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                    Estimated  ----------------
                                                   Useful Life   2000     1999
                                                   ----------- --------  ------
   <S>                                             <C>         <C>       <C>
   Property and equipment, net:
   Computer equipment and software...............     3 years  $ 14,216  $4,005
   Furniture.....................................     3 years       952     461
   Other.........................................   3-5 years       325      16
     Less: Accumulated depreciation..............                (3,603)   (443)
                                                               --------  ------
                                                               $ 11,890  $4,039
                                                               ========  ======
</TABLE>

   Depreciation and amortization expense related to property and equipment was
$3.5 million, $457,000 and $55,000 for the years ended December 31, 2000, 1999
and 1998, respectively.

                                      47
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Goodwill and intangible assets as of December 31, 2000 and 1999 are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                              -----------------
                                                                2000     1999
                                                              --------  -------
   <S>                                                        <C>       <C>
   Goodwill and intangible assets, net:
   Goodwill and intangible assets............................ $ 26,228  $ 3,010
     Less: Accumulated amortization..........................   (5,418)    (753)
                                                              --------  -------
                                                              $ 20,810  $ 2,257
                                                              ========  =======

   Amortization of goodwill and intangible assets was $4.7 million and $753,000
for the years ended December 31, 2000 and 1999, respectively.

   Accrued liabilities as of December 31, 2000 and 1999 are summarized as
follows (in thousands):

<CAPTION>
                                                                December 31,
                                                              -----------------
                                                                2000     1999
                                                              --------  -------
   <S>                                                        <C>       <C>
   Accrued liabilities:
     Accrued cost of revenues................................ $ 10,943  $ 6,102
     Accrued payroll-related costs...........................    1,084      725
     Other accrued liabilities...............................    2,317    1,082
                                                              --------  -------
                                                               $14,344  $ 7,909
                                                              ========  =======

4. Income Taxes

   The Company has incurred losses from inception through December 31, 2000.
Management believes that, based on its history of losses and other factors, the
weight of available evidence indicates it is more likely than not that the
Company will not be able to realize its deferred tax assets. Thus, a full
valuation reserve has been recorded at December 31, 2000 and 1999. The
Company's net deferred tax asset is comprised as follows (in thousands):

<CAPTION>
                                                                December 31,
                                                              -----------------
                                                                2000     1999
                                                              --------  -------
   <S>                                                        <C>       <C>
   Net operating loss carryforwards.......................... $ 14,212  $ 2,900
   Deferred stock compensation...............................    1,655    2,509
   Accrued liabilities.......................................    2,106    2,010
   Intangible basis difference...............................    1,010      --
   Capitalized research and development......................      480      --
   Other.....................................................      583      165
                                                              --------  -------
                                                                20,046    7,584
   Less valuation allowance..................................  (20,046)  (7,584)
                                                              --------  -------
   Net deferred tax asset.................................... $    --   $   --
                                                              ========  =======
</TABLE>

   As of December 31, 2000, the Company has net operating loss carryforwards of
approximately $38.7 million and $18.3 million for federal and state income tax
purposes, respectively. The carryforwards will begin to expire in 2011 and 2004
for federal and state income tax purposes, respectively. For federal and state
income tax purposes, a portion of the Company's net operating loss may be
subject to certain limitations on annual utilization due to changes in
ownership, as defined by federal and state tax laws. The amount of such
limitations, if any, has not yet been determined.

                                       48
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The components of income tax provision are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                              -----------------
                                                                2000     1999
                                                              --------  -------
   <S>                                                        <C>       <C>
   Deferred:
     Federal................................................. $ 11,790  $ 5,058
     State...................................................      672    1,469
                                                              --------  -------
       Total deferred........................................   12,462    6,527
   Change in valuation allowance.............................  (12,462)  (6,527)
                                                              --------  -------
       Total................................................. $    --   $   --
                                                              ========  =======
</TABLE>

   The principal items accounting for the difference between income taxes
computed at the U.S. statutory rate and the provision for income taxes are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                              December 31,
                                                            -------------------
                                                            2000   1999   1998
                                                            -----  -----  -----
   <S>                                                      <C>    <C>    <C>
   U.S. statutory rate.....................................  34.0%  34.0%  34.0%
   State taxes.............................................   3.8    4.2    --
   Permanent difference....................................  (6.1)  (9.6)  (9.8)
   Adjustment to increase valuation allowance..............   0.4    0.6  (24.2)
   Research and development credits........................ (33.3) (29.9) (24.2)
   Other...................................................   1.2    0.7    --
                                                            -----  -----  -----
                                                              --     --     --
                                                            =====  =====  =====
</TABLE>

5. Restructuring expense

   In December 2000, the Company announced a restructuring program intended to
respond to market changes by reducing the overall cost structure. In connection
with this program, the Company recorded a restructuring charge of $1.9 million,
in accordance with EITF No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)" and SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.".
Of the total, approximately $1.6 million related to employee termination costs
covering approximately 70 positions from its sales, development and
administrative organization. The remaining charges related to the write-down of
excess and obsolete computer equipment and a provision for closing certain
facilities. As of December 31, 2000, all terminations were completed and $1.2
million of the charges were paid. As of December 31, 2000, a restructuring
charge of $700,000 remained accrued, primarily relating to ongoing scheduled
severance payments and pending lease cancellations being executed under the
restructuring plan. The Company anticipates that it will complete its
restructuring by the end of the first quarter in 2001.

                                       49
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


6. Notes Payable to Stockholders

   The Company's notes payable to stockholders consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                 --------------
                                                                  2000    1999
                                                                 ------  ------
   <S>                                                           <C>     <C>
   Note payable to stockholder.................................. $  300  $  390
   Less current portion.........................................   (110)   (110)
                                                                 ------  ------
                                                                  $ 190  $  280
                                                                 ======  ======
</TABLE>

   In connection with the Netranscend Software, Inc. acquisition in March 1999,
the Company agreed to pay $430,000 as a part of the purchase consideration.
This note is payable over four years, the first payment of $110,000 was paid
during March 2000, $110,000 is due in March 2001, $100,000 is due in March 2002
and $110,000 is due in March 2003. The note payable has been recorded at
$373,000, net of a discount. The discount will be amortized as interest expense
over the four-year term of the note.

   The Company incurred interest expense of $21,000, $18,000 and $17,000 for
the years ended December 31, 2000, 1999 and 1998, respectively, in connection
with the notes payable to stockholders.

7. Commitments and Contingencies

 Lease Agreements

   The Company leases office space under noncancelable operating lease
agreements that expire in 2005. The terms of the leases provide for rental
payments on a graduated scale. The Company recognizes rent expense on a
straight-line basis over the lease period, and has accrued for rent expense
incurred but not paid.

   Future minimum lease payments under noncancelable operating leases as of
December 31, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                               Operating
   Year Ended December 31,                                      Leases   Capital
   -----------------------                                     --------- -------
   <S>                                                         <C>       <C>
   2001......................................................   $2,846    $ 353
   2002......................................................    2,600      208
   2003......................................................    2,135       53
   2004......................................................    1,666       33
   2005 and thereafter.......................................      153      --
                                                                ------    -----
   Total minimum lease payments..............................   $9,400      647
                                                                ======
     Less amount representing interest.......................               (45)
                                                                          -----
   Present value of minimum capital lease obligations........               602
     Less current portion....................................              (334)
                                                                          -----
                                                                          $ 268
                                                                          =====
</TABLE>

   Rent expense was $2.5 million, $630,000, and $93,000 for the years ended
December 31, 2000, 1999, and 1998, respectively.

                                       50
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Severance Payments

   As of December 31, 2000, the Company has employment agreements under which
the employees would be entitled to receive severance payments totaling $460,000
if their employment were terminated under certain conditions. The Company paid
a total of $1.3 million in severance for the year ended December 31, 2000.

 Legal Proceedings

   From time to time, the Company is subject to legal proceedings and claims in
the ordinary course of business. The Company is not currently aware of any
legal proceedings or claims that it believes will have, individually or in the
aggregate, a material adverse effect on its business, financial condition or
operating results.

8. Stockholders' Equity (Deficit)

 Common Stock

   The Company is authorized to issue 40,000,000 shares of common stock. In
August 1999, the Company amended its certificate of incorporation to increase
the number of authorized shares of common stock to 150,000,000 shares.

   In November 1999, the Company completed a public offering of 6,900,000
shares of common stock generating proceeds of $75.4 million, net of issuance
costs of $7.4 million.

   The Company recognizes stock-based compensation upon the issuance of common
stock for less than the deemed fair market value, upon the issuance of common
stock in exchange for services, and upon the acceleration of unvested shares.
Accordingly, the Company recorded stock-based compensation of $11.3 million,
$252,000 and $151,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

 Convertible Preferred Stock

   The Company is authorized to issue 10,000,000 shares of preferred stock. In
1999, the Company issued 1,206,000 shares as Series A preferred stock,
4,775,000 shares as Series B preferred stock and 4,000,000 shares as Series C
preferred stock. All outstanding preferred stock was converted into the
Company's common stock on November 19, 1999, upon the completion of its initial
public offering.

   In August 1999, the Company recorded a preferred dividend of $14.4 million
which represents the difference between the deemed fair value of the Company's
common stock and the purchase price of $3.59 per share of the Series C
convertible preferred stock.

 Treasury Stock

   In December 2000, the board of directors authorized the Company to
repurchase 858,542 shares of common stock from former employees to rescind the
stock option exercises performed by such former employees earlier in 2000. The
Company purchased the shares at the exercise price of the options for a total
of approximately $703,000. These treasury shares will be used for future stock
option exercises. Any excess of acquisition cost of the shares over the
proceeds from reissuance will be charged to additional paid in capital. The
Company recorded a non-cash stock-based compensation charge of $626,000 in
relation to the repurchase. This charge is due to repurchasing shares at a
price that was less than the fair market value at the date of repurchase and
for the remeasurement of options that continued to be exercisable.

                                       51
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Warrrants

   In January 1999, the Company issued a warrant to an employee to purchase
500,000 shares of common stock at $0.50 per share. The warrant became
exercisable only upon completion of certain milestones that were primarily
related to achievement of certain levels of earned revenues.

   As of December 31, 1999, all milestones were completed and the warrant to
purchase 500,000 shares became exercisable. Accordingly, the Company recorded
compensation expense in the amount of $2,040,000 based on the difference
between the exercise price and the fair value of the Company's common stock on
the date the milestones were met. As of December 31, 2000 this warrant remains
unexercised.

   In June 1999, in connection with services provided related to the issuance
of Series B preferred stock, the Company granted warrants to two non-employees,
exercisable for 275,000 and 100,000 shares of common stock at exercise prices
of $2.00 per share and $0.50 per share, respectively. These warrants are
exercisable by the holder at any time until June 2002. These warrants could be
exercised either with cash or on a net issuance basis, where the number of
shares to be issued is determined by the fair market value of the corresponding
stock on the date of exercise. The holder of the warrant is not entitled to any
voting rights. The fair value of the warrants calculated using Black-Scholes
model was $432,000 and has been included in the offering costs of the Series B
convertible preferred stock. These warrants were exercised during the year
ended December 31, 2000. Under the net issuance method, 243,135 shares were
exercised using 6,865 shares with a fair value of $50.98 per share in April
2000. An additional 125,000 were issued in exchange for cash at $2.00 per share
in June 2000.

 1997 Stock Plan

   The Company's 1997 Stock Plan provides for the granting to employees of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code and for the granting to employees and consultants of nonstatutory
stock options and stock purchase rights.

   In November 1998, the Company granted options to purchase 506,000 shares of
common stock with exercise prices ranging from $0.05 to $0.50 to both former
and current employees for services previously rendered under the 1997 Stock
Plan. The options granted to former employees were immediately exercisable
until February 1999. At December 31, 2000, 180,000 shares granted to employees
were exercisable. For those options granted to current employees, the Company
recorded $193,390 in deferred stock compensation for the difference between the
exercise price and the assumed fair value of the common stock at the
measurement date. For the years ended December 31, 2000, 1999 and 1998, the
Company recorded stock compensation expense of $16,000, $35,000 and $140,000,
respectively.

   The Company recorded $286,000 for the fair value for the options granted to
former employees as stock-based compensation expense during 1998. The fair
value of the options granted to the former employees was determined using a
Black-Scholes option-pricing model using a weighted average risk-free rate of
4.65%, weighted average expected life of three months and price volatility of
103%. No dividend yield was assumed as the Company has not paid dividends and
has no plans to do so.

   Options generally become exercisable in equal increments over a four-year
vesting period and expire at the end of ten years from the date of the grant,
or sooner if terminated by the Board of Directors.

 The Amended and Restated 1999 Stock Plan

   In February 1999, the Company adopted the 1999 Stock Plan (the "1999 Plan").
Options granted under the 1999 Plan may be either incentive stock options
("ISOs") or nonstatutory stock options ("NSOs"). ISOs

                                       52
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

may be granted only to Company employees. NSOs may be granted to Company
employees, directors and consultants. The Company originally reserved 9,000,000
shares of common stock for issuance under the 1999 Plan. The 1999 Plan was
amended in August 1999, raising the number of shares reserved for issuance to
12,000,000. In June 2000, the stockholders approved an increase in the number
of shares reserved for issuance to 13,000,000. Commencing January 1, 2001, the
number of shares reserved for issuance under the 1999 Plan will be increased by
an amount equal to the least of (a) 2,500,000 shares, (b) 5% of the outstanding
shares or (c) an amount determined by our board of directors.

   In the case of ISOs granted to an employee who, at the time of the option
was granted, owns stock representing more than 10% of the voting power of all
classes of stock, the term of the option cannot exceed five years. The exercise
price of an ISO or NSO may not be less than 100% or 85%, respectively, of the
estimated fair value of the underlying stock on the date of grant and the
exercise price of an ISO or NSO granted to a 10% shareholder may not be less
than 100% of the estimated fair value of the underlying stock on the date of
grant. Options generally become exercisable in equal increments over a four-
year vesting period and expire at the end of ten years from the date of grant,
or sooner if terminated by the Board of Directors. If an employee's employment
with the Company is terminated prior to full vesting of the stock, the Company
reverses any previously recorded stock-based compensation on the cancellation
of unvested shares. For the year ended December 31, 2000, the Company reversed
$2.2 million of such charges.

   For the year ended December 31, 1999, the Company recorded deferred stock
compensation of $9.7 million in connection with stock option grants to
employees and $5.8 million related to options granted to non-employees. The
deferred stock compensation charge of $15.5 million is being amortized over the
vesting periods of the related stock options through 2003. The fair value of
the options granted to the non-employees was determined using Black-Scholes
option-pricing model using a weighted average risk-free rate of 4.60%, a
weighted average expected life of 1.5 years and price volatility of 77%. No
dividend yield was assumed as the Company had not paid dividends and had no
plans to do so. The stock options issued to non-employees require the Company
to account for them as variable awards which requires remeasurement of the
deferred expense for the unvested portion of the options each interim period
based on the then fair value of the Company's common stock until they vest.

                                       53
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following table summarizes option activity through December 31, 2000 (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                 Options Outstanding
                                    ----------------------------------------------
                                                                          Weighted
                           Shares                                         Average
                         Available   Number                    Aggregate  Exercise
                         For Grants of Shares  Exercise Price    Price     Price
                         ---------- --------- ---------------- ---------  --------
<S>                      <C>        <C>       <C>              <C>        <C>
Shares authorized under
 the 1997 plan..........      506        --
Granted.................     (506)       506  $0.05 -- $  0.50 $     36    $ 0.07
                          -------    -------                   --------
Balance, December 31,
 1998...................      --         506  $0.05 -- $  0.50       36    $ 0.07
Shares authorized under
 the 1999 plan..........   12,000        --
Granted.................   (9,664)     9,664  $0.50 -- $ 67.88   11,028    $ 1.14
Cancelled...............      254       (254) $0.50 -- $  8.00     (594)   $ 2.34
Exercised...............      --        (439) $0.05 -- $  3.25     (374)   $ 0.84
                          -------    -------                   --------
Balance, December 31,
 1999...................    2,590      9,477  $0.05 -- $ 67.88   10,096    $ 1.07
Shares authorized under
 the 1999 plan..........    1,000        --
Granted.................   (4,399)     4,399  $0.50 -- $102.00  111,398    $25.32
Cancelled...............    3,271     (3,271) $0.05 -- $ 92.72  (50,237)   $15.36
Exercised...............      --      (2,555) $0.05 -- $  6.50   (1,781)   $ 0.70
Repurchased.............      --         859  $0.05 -- $  3.25      703    $ 0.82
                          -------    -------                   --------
Balance, December 31,
 2000...................    2,462      8,909  $0.05 -- $102.00   70,179    $ 7.88
                          =======    =======                   ========
</TABLE>

   The following table summarizes information for stock options outstanding at
December 31, 2000 (in thousands, except per share data and contractual life
data):

<TABLE>
<CAPTION>
                                       Options Outstanding          Options Exercisable
                              ------------------------------------- --------------------
                                          Weighted Average Weighted             Weighted
                                             Remaining     Average              Average
                                Number    Contractual Life Exercise   Number    Exercise
   Range of Exercise Prices   Outstanding     (Years)       Price   Exercisable  Price
   ------------------------   ----------- ---------------- -------- ----------- --------
   <S>                        <C>         <C>              <C>      <C>         <C>
      $0.05-$0.50..........      5,428          8.1         $ 0.49     4,718     $ 0.48
      $1.25-$3.00..........      1,055          9.7         $ 2.58        81     $ 2.27
      $3.25-$6.50..........        548          9.3         $ 3.74       126     $ 3.32
     $7.19-$12.50..........        563          9.3         $ 9.92        67     $ 8.48
    $13.44-$22.69..........        732          9.4         $20.24       --         --
    $31.94-$55.75..........        100          9.3         $43.79         1     $48.83
   $61.00-$102.00..........        483          9.2         $78.61        29     $78.44
                                 -----                                 -----
                                 8,909                                 5,022
                                 =====                                 =====
</TABLE>

   The Company did not grant any options under the 1997 Stock Plan during the
years ended December 31, 2000 or 1999. In connection with stock option grants
made under the Amended and Restated 1999 Stock Plan, the Company recorded total
stock compensation of $3.5 million and $9.0 million for the years ended
December 31, 2000 and 1999, respectively. In connection with variable stock
options requiring remeasurement during the year ended December 31, 2000, the
Company reduced its stock-based compensation by $1.7 million due to the decline
in the fair value of the Company's common stock.

   Under SFAS No. 123, the Company is required to calculate the pro forma fair
market value of options granted to employees and report the impact that would
result from recording the compensation expense. The

                                       54
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

fair value of option grants has been estimated on the measurement date using
the Black-Scholes option-pricing model. The weighted average expected life was
calculated based on the vesting period and the expected life at the date of
grant. The risk-free interest rate was calculated based on rates prevailing
during the grant periods and expected lives of options at the date of grants.
No dividend yield was assumed as the Company has not paid dividends and has no
plans to do so.

   The weighted average fair values of options granted for the years ended
December 31, 2000 and 1999 was $27.81 and $1.80, respectively, on the grant
date with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                                                December 31,
                                                               ----------------
                                                                2000     1999
                                                               -------  -------
   <S>                                                         <C>      <C>
   Expected dividend yield....................................       0%       0%
   Risk-free interest rate....................................    6.23%    5.14%
   Expected life.............................................. 3 years  3 years
   Volatility.................................................     158%     118%
</TABLE>

   Had compensation expenses for option grants to employees been determined
under SFAS No. 123 the Company's net loss would have been as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                   ---------------------------
                                                     2000      1999     1998
                                                   --------  --------  -------
   <S>                                             <C>       <C>       <C>
   Net loss attributable to common stockholders--
    as reported................................... $(37,479) $(36,175) $(2,019)
   Net loss attributable to common stockholders--
    SFAS No. 123 adjusted......................... $(62,586) $(38,365) $(2,019)
   Net loss per share attributable to common
    stockholders--basic and diluted as reported... $  (1.11) $  (2.34) $ (0.25)
   Net loss per share attributable to common
    stockholders--basic and diluted SFAS No. 123
    adjusted...................................... $  (1.85) $  (2.49) $ (0.25)
</TABLE>

   The pro forma net loss disclosures made above are not necessarily
representative of the effects on pro forma net income (loss) for future years
as options typically vest over several years and additional option grants are
expected to be made in future years.

9. Related Party Transactions

   In June 1999, the Company entered into an agreement with a former employee
and stockholder, under which the stockholder will receive commissions on the
net proceeds (defined as gross revenue minus associated costs) generated from
certain customers. The agreement was renewed in July 2000 for the period
through December 2000. The Company expensed $303,000 and $680,000 for the years
ended December 31, 2000 and 1999 related to this agreement.

   In January 1999, the Company converted $12,000 of the payables to founders
into 200,000 shares of common stock in connection with the founder's exercise
of stock options.

   In May 1998, the Company entered into a sublease agreement, on a month-to-
month basis, for office space with a stockholder, who was the original tenant
of the office space. The Company paid $80,000 and $41,000 during the years
ended December 31, 1999 and 1998, respectively, to the stockholder.

   During 1998, $12,000 was paid to the founders for expenses incurred on
behalf of the Company. In 1998, a founder advanced the Company $50,000, which
the Company repaid in full in 1999.

                                       55
<PAGE>

                                MEDIAPLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Company incurred expenses of $197,000 for the year ended December 31,
1998 in connection with legal and consulting services performed by a law firm
affiliated with a stockholder.

10. Employee Benefit Plan

   The Company maintains a retirement and deferred savings plan for its
employees (the "401(k) Plan") that is intended to qualify as a tax-qualified
plan under the Internal Revenue Code. The 401(k) Plan provides that each
participant may contribute up to 15% of his or her pre-tax gross compensation
up to a statutory limit. All amounts contributed by participants and earnings
on these contributions are fully vested at all times. To date, the Company has
not made discretionary contributions to the 401(k) Plan.

11. Employee Stock Purchase Plan

   In August 1999, the Board of Directors adopted the 1999 Employee Stock
Purchase Plan (the "Purchase Plan") effective on the date of the Company's
initial public offering. As of December 31, 2000, the Company had reserved
400,000 shares for issuance under the Purchase Plan. In February 2001, the
Company reserved an additional 400,000 shares for issuance.. Employees
generally will be eligible to participate in the Purchase Plan if they are
customarily employed by the Company for more than 20 hours per week and more
than five months in a calendar year and are not a 5% or greater stockholders.
Under the Purchase Plan, eligible employees may select a rate of payroll
deduction of up to 10% of their compensation subject to certain maximum
purchase limitations. The Purchase Plan will be implemented in a series of
overlapping twenty-four month offering periods beginning on the effective date
of the Company's initial public offering. Subsequent offering periods will
begin on the first trading day on or after May 1 and November 1 of each year.
Purchases will occur on each April 30 and October 31 (the "purchase dates")
during each participation period. Under the Purchase Plan, eligible employees
will be granted an option to purchase shares of common stock at a purchase
price equal to 85% of the fair market value per share of common stock on either
the start date of the offering period or the end date of the offering period,
whichever is less. If the fair market value of the common stock at the end of
the purchase period is lower than the fair market value on the start date of
that offering period, then all participants in that offering period will be
automatically withdrawn from such offering period and re-enrolled in the
offering period immediately following.

   For the year ended December 31, 2000, the company issued a total of 114,414
shares under the Purchase Plan at purchase prices ranging from $1.83 to $10.20
per share. The shares were issued at an average price of $4.98 per share for a
total of $570,000.

12. Subsequent Events

   In January 2000, the Company entered into employment agreements whereby it
granted options to purchase 776,000 shares of the Company's common stock to two
officers of the Company. Of these shares, 225,000 are contingent and vest upon
the completion of certain milestones.

                                       56
<PAGE>

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

   Not applicable.

                                    PART III

   Certain information required by Part III is omitted from this annual report
in that Mediaplex will file a definitive proxy statement pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this
annual report, and certain information included in that proxy statement is
incorporated in this annual report by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Reference is made to the information appearing under the captions "Election
of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
contained in Mediaplex's proxy statement to be mailed to stockholders on or
about April 30, 2001, which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

   Reference is made to the information appearing under the caption "Executive
Compensation" contained in Mediaplex's proxy statement to be mailed to
stockholders on or about April 30, 2001, which information is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   Reference is made to the information appearing under the caption "Security
Ownership" contained in Mediaplex's proxy statement to be mailed to
stockholders on or about April 30, 2001, which information is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   Reference is made to the information appearing under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Related Party Transactions" contained in Mediaplex's proxy statement to be
mailed to stockholders on or about April 30, 2001, which information is
incorporated herein by reference.

                                       57
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

   (A) 1. FINANCIAL STATEMENTS

     See Item 8, above.

     2. FINANCIAL STATEMENT SCHEDULES

     See Item 8, above.

     3. EXHIBITS

<TABLE>
<CAPTION>
 Number                               Description
 ------                               -----------
 <C>    <S>
  1.1*  Form of Underwriting Agreement

  2.1*  Agreement and Plan of Reorganization between Registrant, Netranscend
        Software, Inc. and Ruiqing "Barclay" Jiang, dated March 8, 1999.

  3.1*  Form of the Amended and Restated Certificate of Incorporation of the
        Registrant to be in effect after the closing of the offering made under
        this Registration Statement.

  3.2*  Form of the Amended and Restated Bylaws of the Registrant to be in
        effect after the closing of the offering made under this Registration
        Statement.

  4.1*  Warrant to purchase 500,000 shares of Common Stock of the Registrant,
        dated January 11, 1999, held by Timothy Favia.

  4.2*  Warrant to purchase 100,000 shares of Common Stock of the Registrant,
        dated June 15, 1999, held by Retail Ventures International, Inc.

  4.3*  Warrant to purchase 150,000 shares of Series B Preferred Stock of the
        Registrant, dated June 15, 1999, held by Retail Ventures International,
        Inc.

  4.4*  Warrant to purchase 125,000 shares of Series B Preferred Stock of the
        Registrant, dated June 15, 1999, held by Zeron Capital, Inc.

  4.5*  Specimen Common Stock Certificate.

  5.1*  Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.

 10.1*  Form of Indemnification Agreement between the Registrant and each of
        its directors and officers.

 10.2*  Amended and Restated 1999 Stock Plan and form of agreements thereunder.

 10.3*  1999 Employee Stock Purchase Plan and form of agreements thereunder.

 10.4*  1997 Stock Plan and form of agreements thereunder.

 10.5*  Basic Lease Agreement, First Amendment and Basic Lease Information
        thereto, between R&E Holdings, LLC and Persis Corporation and BidCom,
        Inc., dated September 24, 1999, February 1, 1997 and July 31, 1998,
        respectively.

 10.6*  Sublease, dated July 9, 1999, with Telocity, Inc.

 10.7*  Employment Agreement with Gregory R. Raifman, dated February 19, 1999.

 10.8*  Employment Agreement with Jon L. Edwards, dated February 19, 1999.

 10.9*  Employment Agreement with Walter Haefeker, dated February 19, 1999.

 10.10* Employment Agreement with Ruiqing "Barclay" Jiang, dated March 24,
        1999.

</TABLE>

                                       58
<PAGE>

<TABLE>
<CAPTION>
 Number                                Description
 ------                                -----------
 <C>     <S>
 10.11*  Employment Agreement with Sandra L. Abbott, dated August 6, 1999.

 10.12+  Employment Agreement with Michael E. Stanek, dated March 7, 2000.

 10.13+  Employment Agreement with Brian Powley, dated September 21, 1999.

 10.14+* Technology Integration and Services Agreement between the Registrant
         and DoubleClick, Inc., dated July 22, 1999, and Letter Amendment,
         dated November 17, 1999.

 10.15*  Developer Package Agreement, dated July 26, 1999, between the
         Registrant and SAP Labs, Inc.

 10.16*  Memorandum of Understanding, dated September 22, 1999, between the
         Registrant and Ariba Technologies, Inc.

 10.17*  Letter Agreement, dated September 23, 1999, between the Registrant and
         OTP Software, Inc.

 10.18*  Letter Agreement, dated May 20, 1999, between the Registrant and Icon
         Medialab Inc.

 10.19*  Letter Agreement, dated August 5, 1999, between the Registrant and
         Across Media Networks, L.L.C.

 10.20*  Shareholders' Rights Agreement, dated July 30, 1999.

 10.21*  First Amendment to Lease, dated October 18, 1999, and Lease Agreement,
         dated September 8, 1999, by and between the Registrant and 188
         Embarcadero Associates, L.P.

 23.1    Consent of PricewaterhouseCoopers LLP, independent accountants.

 24.1    Power of Attorney (See page 60)
</TABLE>
--------
*  Incorporated by reference to Mediaplex's Registration Statement on Form S-1
   (File No. 333-86459) declared effective on November 19, 1999.
+  Incorporated by reference to Mediaplex's Registration Statement of Form S-1
   (File No. 333-32754).
+  Certain portions of this exhibit have been granted confidential treatment by
   the Commission. The omitted portions have been separately filed with the
   Commission.

   (B) REPORTS ON FORM 8-K

   We filed a Report on Form 8-K, Item 2, on August 2, 2000, announcing a Share
Acquisition Agreement, dated as of June 30, 2000, with The Interpublic Group of
Companies, Inc., a Delaware corporation ("IPG"), McCann-Erickson USA, Inc., a
Delaware corporation and wholly-owned subsidiary of IPG ("McCann") and AdWare
Systems, Inc., a Kentucky corporation and wholly-owned subsidiary of McCann
("AdWare"), pursuant to which, on July 21, 2000, Mediaplex acquired all of the
outstanding capital stock of AdWare. As a result of the Acquisition, AdWare
became a wholly-owned subsidiary of Mediaplex. On October 4, 2000 we filed an
amendment to this Form 8-K to amend Item 7(a) and Item 7(b) and to include
certain pro forma financial statements.

   (C) EXHIBITS

     See Item 14(a)(3), above.

   (D) FINANCIAL STATEMENT SCHEDULES

     See Item 8, above.

                                       59
<PAGE>

                                    PART IV

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, as amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: March 29, 2001                      MEDIAPLEX, INC.

                                                 /s/ Gregory R. Raifman
                                          By: _________________________________
                                                    Gregory R. Raifman
                                               Chairman and Chief Executive
                                                          Officer

                               POWER OF ATTORNEY

   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gregory R. Raifman and Francis P. Patchel, his
or her attorneys-in-fact, each with the power of substitution, for him or her
in any and all capacities, to sign any amendments to this Annual Report on Form
10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and conforming all that said attorney-in-fact, or his or her
substitute or substitutes, any do or cause to be done by virtue hereof.

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

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----


<S>                                    <C>                        <C>
      /s/ Gregory R. Raifman           Chairman, President and      March 29, 2001
______________________________________  Chief Executive Officer
          Gregory R. Raifman            (Principal Executive
                                        Officer)


      /s/ Francis P. Patchel           Chief Financial Officer      March 29, 2001
 ______________________________________  (Principal Accounting
          Francis P. Patchel            Officer)

   /s/ Lawrence D. Lenihan, Jr.        Director                     March 29, 2001
 ______________________________________
       Lawrence D. Lenihan, Jr.

        /s/ Peter S. Sealy             Director                     March 29, 2001
 ______________________________________
            Peter S. Sealy

       /s/ James DeSorrento            Director                     March 29, 2001
 ______________________________________
           James DeSorrento

      /s/ A. Brooke Seawell            Director                     March 29, 2001
 ______________________________________
          A. Brooke Seawell

          /s/ Ira Carlin               Director                     March 29, 2001
 ______________________________________
              Ira Carlin

      /s/ Phillip Guarascio            Director                     March 29, 2001
______________________________________
          Phillip Guarascio
</TABLE>

                                       60