DOUBLECLICK INC - 10-Q Quarterly Report

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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-23709

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DOUBLECLICK INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

450 WEST 33RD STREET, 16TH FLOOR
NEW YORK, NEW YORK 10001
(212) 683-0001
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA
CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

As of July 31, 2002 there were 135,943,108 outstanding shares of the
registrant's Common Stock, including 207,325 shares exchangeable into shares of
the registrant's common stock, which were issued in connection with the
registrant's acquisition of FloNetwork Inc.

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DOUBLECLICK INC.
INDEX TO FORM 10-Q

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 2002 and
December 31, 2001......................................... 1
Consolidated Statements of Operations for the three and six
months ended June 30, 2002 and 2001....................... 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 2002 and 2001.............................. 3
Notes to Consolidated Financial Statements.................. 4
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 15
Item 3: Quantitative and Qualitative Disclosures about Market
Risk...................................................... 27

PART II: OTHER INFORMATION

Item 1: Legal Proceedings........................................... 41
Item 4: Submission of Matters to a Vote of Security Holders......... 42
Item 5: Other Information........................................... 42
Item 6: Exhibits and Reports on Form 8-K............................ 42

ii

DOUBLECLICK INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)

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

1

DOUBLECLICK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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

2

DOUBLECLICK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)

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

3

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- DESCRIPTION OF BUSINESS AND OTHER

DESCRIPTION OF BUSINESS

DoubleClick Inc. is a leading provider of products and services that enable
direct marketers, publishers and advertisers to market to consumers in the
digital world (together with its subsidiaries, 'DoubleClick'). Combining
technology, data and media expertise, DoubleClick's products and services help
its customers optimize their advertising and marketing campaigns on the Internet
and through direct mail and other media. DoubleClick offers a broad range of
technology, data and media products and services to its customers to allow them
to address many aspects of the digital marketing process, from pre-campaign
planning and testing, to execution, measurement and campaign refinements.

DoubleClick derives its revenues from three business units: Technology (or
'TechSolutions'), Data and Media based on the types of services provided.
DoubleClick TechSolutions includes our ad management products consisting of the
DART for Publishers Service, the DART Enterprise ad serving software product,
the DART for Advertisers Service and a suite of email products based on
DoubleClick's DARTmail Service. DoubleClick Data includes its Abacus division
which utilizes the information contributed to the proprietary Abacus database by
Abacus Alliance members to make direct marketing more effective for Abacus
Alliance members and other clients. Through May 6, 2002, DoubleClick Data also
included DoubleClick's research division, which primarily consisted of the @plan
products and services. Our research division offered Web publishers
sophisticated research about online market and advanced campaign tools and
planning systems. On May 6, 2002, DoubleClick sold its @plan research product
line to NetRatings, Inc. a provider of technology-driven Internet audience
information solutions for media and commerce. DoubleClick Media consists of the
DoubleClick network, which provides fully outsourced and effective ad sales and
related services to a worldwide group of advertisers and publishers. On
July 10, 2002, DoubleClick sold its North American Media business, which
includes the DoubleClick network, to L90, Inc. Upon completion of the
transaction, L90, Inc. was renamed MaxWorldwide, Inc. (see note 15).

BASIS OF PRESENTATION

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

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

The accompanying consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of DoubleClick
for the year ended December 31, 2001. Certain reclassifications have been made
to the prior period's financial statements to conform to the current period's
presentation.

BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share excludes the effect of potentially
dilutive securities and is computed by dividing the net income (loss) available
to common shareholders by the weighted-average number of common shares
outstanding for the reporting period. Diluted net income (loss) per

4

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

share adjusts this calculation to reflect the impact of outstanding convertible
securities, stock options and other potentially dilutive financial instruments
to the extent that their inclusion would have a dilutive effect on net income
(loss) per share for the reporting period.

The following represents the calculations of the basic and diluted net
income (loss) per common share for the three and six months ended June 30, 2002
and 2001.

For the six months ended June 30, 2002, and for both the three and six
months ended June 30, 2001, outstanding options of approximately 18.0 million
and 23.3 million, respectively, to purchase shares of common stock were not
included in the computation of diluted net loss per share because to do so would
have had an antidilutive effect for the periods presented. Similarly, during the
three and six months ended June 30, 2002 and 2001, the computation of diluted
net loss per share excludes the effect of 5,326,055 and 6,060,606 shares,
respectively, issuable upon the conversion of 4.75% Convertible Subordinated
Notes due 2006, since their inclusion would also have had an antidilutive
effect.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 141, `Business Combinations' (SFAS 141) and SFAS No. 142, `Goodwill
and Other Intangible Assets' (SFAS 142). SFAS 141 established new standards for
accounting and reporting requirements for business combinations and requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method is
prohibited. SFAS 142 established new standards for goodwill acquired in a
business combination, eliminated amortization of goodwill and set forth methods
to periodically evaluate goodwill for impairment. Intangible assets with a
determinable useful life will continue to be amortized over that life. SFAS 141
and 142 are effective for business combinations completed after June 30, 2001.
DoubleClick adopted these statements on January 1, 2002; however, as noted
above, certain provisions of these new standards apply to acquisitions concluded
subsequent to June 30, 2001. DoubleClick has completed its initial impairment
testing and no changes to the carrying value of goodwill and other intangible
assets were made as a result of the adoption of SFAS 142. Subsequent impairment
testing will take place annually, as well as when a triggering event indicating
impairment may have occurred.

In August 2001, the FASB issued SFAS No. 144, `Accounting for the Impairment
or Disposal of Long-Lived Assets' (SFAS 144), which supersedes FASB Statement
No. 121, `Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of'. This new statement also supercedes certain aspects of
APB 30, `Reporting the Results of Operations-Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual, and Infrequently
Occurring Events and Transactions', with regard to reporting the effects of a
disposal of a segment of a business. SFAS 144 will require expected future
operating losses from discontinued operations to be reported in

5

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

discontinued operations in the period incurred rather than as of the measurement
date as presently required by APB 30. In addition, more dispositions may qualify
for discontinued operations treatment. The provisions of this statement are
required to be applied for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years. The adoption of SFAS 144 did not have
a material impact on DoubleClick's results of operations or financial position.

In April 2002, the FASB issued SFAS No. 145, `Rescission of FASB Statements
Nos. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections' (SFAS 145). SFAS 145, among other things, rescinds SFAS No. 4,
which required all gains and losses from the extinguishment of debt to be
classified as an extraordinary item and amends SFAS No. 13 to require that
certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
SFAS 145 is effective for fiscal years beginning after May 15, 2002 but earlier
adoption is encouraged. From time to time DoubleClick has and may in the future
continue to repurchase a portion of its convertible subordinated notes
outstanding. DoubleClick has adopted SFAS 145 effective July 1, 2002 and will no
longer record gains or losses from the retirement of its convertible
subordinated notes as extraordinary items, net of taxes but as a component of
other income/(expense) in the Consolidated Statements of Operations. As required
under SFAS 145, prior periods will be restated in future filings to conform to
the current period's presentation.

In July 2002, the FASB issued SFAS No. 146, `Accounting for Costs Associated
with Exit or Disposal Activities', (SFAS 146). SFAS 146 nullifies EITF Issue
No. 94-3, `Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity including Certain Costs Incurred in a
Restructuring', (EITF 94-3). The principal difference between SFAS 146 and EITF
94-3 relates to the recognition of a liability for a cost associated with an
exit or disposal activity. SFAS 146 requires that a liability be recognized for
those costs only when the liability is incurred, that is, when it meets the
definition of a liability in the FASB's conceptual framework. In contrast, EITF
94-3 required recognition of a liability for an exit cost when management
committed to an exit plan. SFAS 146 also establishes fair value as the objective
for initial measurement of liabilities related to exit or disposal activities.
SFAS 146 is effective for exit or disposal activities that are initiated after
December 31, 2002. The provisions of EITF 94-3 apply until adoption of
SFAS 146. The Company is in the process of evaluating the effect that adopting
SFAS 146 will have on its financial statements.

CHANGE IN ACCOUNTING ESTIMATE

Effective January 1, 2002, DoubleClick changed its estimate relating to the
useful lives of production equipment and software. The estimated useful life for
these assets was extended from three years to four years to recognize
depreciation expense over the remaining time that the assets are expected to be
in service. The change was based on an analysis performed by DoubleClick's
operations department. As a result of the change, net income increased
approximately $3.2 million or $0.02 per basic and diluted share for the three
months ended June 30, 2002 and net loss was reduced by approximately $6.1
million or $0.04 per basic and diluted share for the six months ended June 30,
2002.

6

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 2 -- GOODWILL

The changes in the carrying amount of goodwill for the six months ended
June 30, 2002 are as follows:

Due to the adoption of SFAS 142, the Company ceased amortizing goodwill. Had
SFAS 142 been in effect in the first six months of 2001, the Company would not
have recorded goodwill amortization expense of $13.2 million and $21.9 million
for the three and six months ended June 30, 2001, respectively. The following
adjusts reported net income (loss) and basic and diluted net income (loss) per
share as if the adoption of SFAS 142 occurred as of January 1, 2001.

Due to the goodwill acquired in connection with the MessageMedia transaction
during 2002, and based upon the current market conditions and operational
performance of DoubleClick's email reporting unit, DoubleClick is currently
awaiting a third party valuation of its email reporting unit to determine
whether the recorded balance of goodwill related to this reporting unit is
recoverable. The outcome of this valuation may result in an impairment charge
being recorded during the third quarter of 2002.

7

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 3 -- INTANGIBLE ASSETS

Intangible assets consists of the following:

Amortization expense for the three and six months ended June 30, 2002 was
$3.5 million and $7.0 million, respectively. Amortization expense relating to
these intangible assets is estimated to be $13.7 million, $9.7 million and $0.8
million in 2002, 2003 and 2004, respectively.

NOTE 4 -- BUSINESS TRANSACTIONS

MESSAGEMEDIA

On January 18, 2002, DoubleClick completed its acquisition of MessageMedia,
Inc. (`MessageMedia'), a provider of permission-based, email marketing and
messaging solutions. The acquisition of MessageMedia allows DoubleClick to
expand its suite of email product and service offerings as well as broaden its
client base.

DoubleClick acquired all the outstanding shares, options and warrants of
MessageMedia in exchange for approximately one million shares of DoubleClick
common stock valued at approximately $7.5 million, and stock options and
warrants to acquire DoubleClick common stock valued at approximately $0.2
million. In connection with the acquisition, DoubleClick loaned $2.0 million to
MessageMedia to satisfy MessageMedia's operating requirements. The loan was
extinguished upon the closing of the acquisition and included as a component of
the purchase price. The purchase price, inclusive of approximately $1.6 million
of direct acquisition costs, was approximately $11.3 million. The value of the
approximately one million shares of DoubleClick common stock issued was
determined based on the average market price of DoubleClick common stock, as
quoted on the Nasdaq National Market, for the day immediately prior to, the day
of, and the day immediately after the number of shares due to MessageMedia
shareholders became irrevocably fixed pursuant to the agreement under which
MessageMedia was acquired. The MessageMedia options and warrants assumed by
DoubleClick as the result of this merger converted into options and warrants to
acquire approximately 120,000 shares of DoubleClick common stock and have been
valued using the Black-Scholes option pricing model with the following
weighted-average assumptions:

Expected dividend yield..................................... 0.0%
Risk-free interest rate..................................... 3.7%
Expected life (in years).................................... 3.6
Volatility.................................................. 100%

8

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The aggregate purchase price of $11.3 million, has been allocated to the
assets acquired and the liabilities assumed according to their fair values at
the date of acquisition as follows:

Approximately $1.9 million of the purchase price has been allocated to
customer lists and is being amortized on a straight-line basis over 2 years.
DoubleClick recorded approximately $24.9 million in goodwill, which represented
the remainder of the excess of the purchase price over the fair value of net
assets acquired. This goodwill is not tax deductible and in accordance with
SFAS 142, goodwill will be periodically tested for impairment.

The results of operations for MessageMedia have been included in
DoubleClick's Consolidated Statements of Operations from the date of
acquisition.

ABACUS DIRECT EUROPE

On June 26, 2002, DoubleClick acquired the remaining 50% of the Abacus
Direct Europe B.V. joint venture that it did not previously own from VNU
Marketing Information Europe & Asia B.V., an affiliate of Claritas (UK) Limited.
The joint venture was formed in November 1998 and provides database marketing
services to the direct marketing industry, primarily in the United Kingdom. The
results of operations for Abacus Direct Europe have been included in
DoubleClick's Consolidated Statements of Operations from the date of
acquisition. DoubleClick's investment in the joint venture was previously
accounted for under the equity method of accounting. DoubleClick acquired all
the outstanding shares of Abacus Direct Europe held by VNU in exchange for
approximately $3.7 million in cash and direct acquisition costs. The purchase
price has been preliminarily allocated to the assets acquired and the
liabilities assumed according to their fair value at the date of acquisition as
follows:

Approximately $4.6 million has been preliminarily recorded to goodwill,
which represents the excess of the purchase price over the fair value of the net
assets acquired. This goodwill is not tax deductible, and in accordance with
SFAS 142, will be periodically tested for impairment. DoubleClick is still
awaiting the results of appraisals and certain information regarding certain
assets and liabilities we acquired. Any potential adjustment to goodwill,
particularly with respect to any acquired intangible assets, will be recorded
during the three months ended September 30, 2002.

9

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The following unaudited pro forma results of operations have been prepared
assuming that the acquisitions of MessageMedia and Abacus Direct Europe
described above, and the FloNetwork acquisition consummated during 2001, as well
as the dispositions of the European Media business and @plan research product
line completed during 2002, occurred at the beginning of the respective periods
presented. This pro forma financial information should not be considered
indicative of the actual results that would have been achieved had the
acquisitions and disposals been completed on the dates indicated and does not
purport to indicate results of operations as of any future date or any future
period.

NOTE 5 -- INVESTMENT IN VALUECLICK, INC.

In the first quarter of 2001, DoubleClick recorded the effects of
ValueClick's issuance of approximately 5.7 million shares to complete a purchase
acquisition of Bach Systems, Inc. (`Bach Systems') and to consummate
ValueClick's pooling of interests merger with ClickAgents.com, Inc.
(`ClickAgents'). DoubleClick has treated ValueClick's pooling with ClickAgents
as a book value purchase of ClickAgents by ValueClick. As a result of these
transactions, DoubleClick's ownership interest was reduced from 28.1% to 23.5%
and the value of its proportionate share of ValueClick's net assets decreased.
DoubleClick recorded a decrease in the value of its investment in ValueClick and
recognized a loss of approximately $3.8 million. This loss has been included in
`Loss on equity transactions of affiliate' in the Consolidated Statements of
Operations.

As a result of the cumulative dilutive effects of ValueClick's issuance of
stock in connection with the Bach Systems, ClickAgents and other business
combinations consummated during 2001, DoubleClick's ownership interest in
ValueClick was reduced to 15.2% as of December 31, 2001. DoubleClick does not
believe that it is able to exercise significant influence over its investment in
ValueClick as of December 31, 2001 and accordingly, DoubleClick no longer
records its proportionate share of ValueClick's results but instead carries this
investment at fair value, with unrealized gains and losses, net of tax, reported
as a separate component of stockholders' equity. DoubleClick's investment in
ValueClick is included in `Investments in affiliates' in the Consolidated
Balance Sheets.

As a result of ValueClick's issuance of stock in connection with a business
combination consummated during the second quarter of 2002, DoubleClick's
ownership interest in ValueClick has been reduced to approximately 8% as of
June 30, 2002.

NOTE 6 -- WRITE-DOWN OF INVESTMENT IN AFFILIATE

As a result of the significant decline in the market value of Internet-based
companies and the declining access of these companies to public and private
financing, management initiated an assessment of the carrying values of certain
of its investments in affiliates in the second quarter of 2001. In the course of
its analysis, DoubleClick determined that the carrying value of its cost-method
investee Return Path was no longer recoverable. As a consequence, DoubleClick
wrote off its entire investment in Return Path and recognized an impairment
charge of $4.5 million during the three months ended

10

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

June 30, 2001. This charge has been included in `Interest and other, net' in the
Consolidated Statements of Operations.

NOTE 7 -- INITIAL PUBLIC OFFERING OF DOUBLECLICK JAPAN

On April 25, 2001, DoubleClick's consolidated subsidiary, DoubleClick Japan,
completed its initial public offering of common stock on the Nasdaq Japan
Market, issuing 23,456 shares at approximately $1,236 per share. DoubleClick
Japan's net proceeds, after deducting underwriting discounts, commissions and
direct offering costs, were approximately $25.4 million. As a result of this
offering, DoubleClick's ownership interest in DoubleClick Japan decreased from
43.2% to 38.2%. During the three months ended June 30, 2001, DoubleClick
recorded a $16.6 million increase in minority interest, reduced the carrying
amount of the goodwill associated with its acquisition of DoubleClick Japan by
$1.6 million and recognized a gain of approximately $7.2 million, which
represented the incremental increase in consolidated net equity related to its
proportionate share of the proceeds from DoubleClick Japan's stock offering.
This gain has been included in `Gain on equity transactions of affiliates, net'
in the Consolidated Statements of Operations.

NOTE 8 -- NON-CASH COMPENSATION

Non-cash compensation primarily represents the consideration paid to certain
former shareholders of DoubleClick Scandinavia. Shares of DoubleClick common
stock were issued based upon the continued employment of the former shareholders
and the attainment of specific revenue objectives for the year ended
December 31, 2001. In May 2001, DoubleClick agreed to pay the former
shareholders the minimum consideration they were entitled to receive under the
terms of the original agreement. As a result, approximately $10.5 million was
charged to earnings during the three months ended June 30, 2001.

NOTE 9 -- SALE OF EUROPEAN MEDIA BUSINESS

On January 28, 2002, DoubleClick completed the sale of its European Media
business to AdLINK Internet Media AG, a German provider of Internet advertising
solutions, in exchange for $26.3 million and the assumption by AdLINK of
liabilities associated with DoubleClick's European Media business. Intercompany
liabilities in an amount equal to $4.3 million were settled through a cash
payment by AdLINK to DoubleClick at the closing of the transaction. Following
the closing of the transaction described above, United Internet AG, or United
Internet, AdLINK's largest shareholder, exercised its right to sell to
DoubleClick 15% of the outstanding common shares of AdLINK in exchange for $30.6
million. Pursuant to its agreement with United Internet, the exercise of this
right caused DoubleClick's option to acquire an additional 21% of AdLINK common
shares from United Internet to vest. This option is only exercisable over a
two-year period if AdLINK has achieved EBITDA-positive results for two out of
three consecutive fiscal quarters before December 2003. EBITDA, as defined in
the option agreement, is earnings before interest, taxes, depreciation,
amortization, and one-time charges such as restructuring costs, mergers and
acquisition related costs, and other extraordinary items, determined in
accordance with generally accepted accounting principles in the United States.
Should AdLINK fail to achieve these results, the option will expire
unexerciseable in December 2003. During the three months ended March 31, 2002
AdLINK did not achieve EBITDA- positive results. AdLINK's results for the three
months ended June 30, 2002 are not publicly available as of the date of this
filing.

As the result of the transactions described above, DoubleClick sold its
European Media business and received a 15% interest in AdLINK. DoubleClick's
option to acquire an additional 21% of the outstanding common shares of AdLINK
from United Internet also vested. The approximately $8.3 million value of the
15% of the outstanding common stock of AdLINK, approximately 3.9 million shares,
has been determined based on these shares' average market prices, as quoted on
the Neuer

11

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Markt, for the day before, the day of, and the day immediately after the number
of shares due to DoubleClick became irrevocably fixed pursuant to its agreements
with AdLINK and United Internet. DoubleClick was partially reimbursed $2.0
million for its cash outlays related to the acquisitions of, and payments with
respect to, the minority interests in certain of its European subsidiaries
pursuant to its agreement to sell its European Media business. DoubleClick's
investment in AdLINK is included in `Investments in affiliates' in the
Consolidated Balance Sheets.

Revenue recognized from sales to AdLINK was approximately $0.5 million and
$0.9 million during the three and six months ended June 30, 2002.

NOTE 10 -- SALE OF THE @PLAN RESEARCH PRODUCT LINE

On May 6, 2002, DoubleClick sold its @plan research product line to
NetRatings, Inc., a provider of technology-driven Internet audience information
solutions for media and commerce, in exchange for $12.0 million in cash and
505,739 shares of NetRatings common stock. The approximately $6.1 million value
of the 505,739 shares of NetRatings common stock has been determined based on
these shares' average market prices, as quoted on the Nasdaq National Market,
for the day before and the day the number of shares due to DoubleClick became
irrevocably fixed pursuant to its agreements with NetRatings. DoubleClick
recognized a gain of $12.3 million on the sale of the @plan research product
line during the three months ended June 30, 2002, which has been included in
`Gain on sale of businesses, net' in the Consolidated Statements of Operations.
DoubleClick's investment in NetRatings is included in `Investments in
affiliates' in the Consolidated Balance Sheets.

NOTE 11 -- RESTRUCTURING CHARGE

Throughout 2001, our management took certain actions to increase operational
efficiencies and bring costs in line with revenues. These measures included the
involuntary terminations of approximately 605 employees, primarily from our
Media and TechSolutions divisions, as well as the consolidation of some of our
leased office space and the closure of several of our offices.

During the six months ended June 30, 2002, management took additional steps
to realign our sales organization and reduce employee headcount to bring costs
in line with revenues. This involved the involuntary termination of
approximately 132 employees, primarily from our Media and TechSolutions
divisions, as well as the closure of several of our offices. As a consequence,
DoubleClick recorded a $1.4 million charge to operations during the first
quarter of 2002 primarily related to payments for severance, and a charge of
$7.3 million in the second quarter of 2002 primarily related to future lease
costs and other facility related charges.

In determining the restructuring charge associated with our future lease
commitments, DoubleClick engaged a third party real estate firm to provide us
with estimates of the future sublease income for our excess and idle space,
which also includes an estimate of the time period required to identify new
sublessors. This analysis was performed based on the current real estate market
conditions in the local markets where DoubleClick's facilities are located. In
addition, the real estate firm provided estimates of lease termination/buyout
fees landlords may charge us to terminate our lease rather than subleasing our
idle and excess space. Based upon our review of this information we determine
our restructuring charge related to future lease commitments. This information
may be updated should market conditions change.

As of June 30, 2002, approximately $5.7 million and $31.2 million remain
accrued in `Accrued expenses and other current liabilities' and `Other long term
liabilities', respectively.

The following table sets forth a summary of the costs and related charges
for DoubleClick's 2002 restructuring and the balance of the 2002 and 2001
restructuring reserves established:

12

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 12 -- SEGMENT REPORTING

DoubleClick is organized into three segments: Technology, Data and Media.
Revenues and gross profit by segment are as follows (in thousands):

NOTE 13 -- COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of net income (loss), unrealized gains
and losses on marketable securities and foreign currency translation
adjustments. Comprehensive income (loss) was $12.1 million and $(38.8) million
for the three months ended June 30, 2002 and 2001, respectively. For the six
months ended June 30, 2002 and 2001, comprehensive income (loss) was $8.4
million and $(98.9) million, respectively.

NOTE 14 -- CONTINGENCIES

We are a defendant in 20 lawsuits concerning Internet user privacy and data
collection and other business practices in both state and federal court. On
March 28, 2001, the federal cases against DoubleClick were dismissed by Judge
Buchwald in the Southern District of New York. In conjunction with a proposed
settlement, the plaintiffs withdrew their appeal to the Second Circuit Court of
Appeals.

13

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

In March 2002, the parties filed a settlement agreement with the federal court
that would resolve the federal lawsuits and the state lawsuits in California and
Texas, to which the court gave preliminary approval on March 29, 2002. On
March 29, 2002, the parties issued a joint press release outlining the terms of
the settlement. The court gave final approval of the settlement at a hearing
held on May 21, 2002 and the judge signed a Final Judgment and Order of
Dismissal of the actions on May 23, 2002. One person objected to the settlement
and filed a notice of appeal of the court's order on June 19, 2002. A briefing
schedule has not yet been established by the Second Circuit Court of Appeals. We
intend to defend any remaining actions vigorously.

In addition, beginning in May 2001, a number of substantially identical
class action complaints alleging violations of the federal securities laws in
connection with DoubleClick's initial public offering were filed in the United
States District Court for the Southern District of New York naming as defendants
DoubleClick, some of its officers and directors and certain underwriters of
DoubleClick's initial public offering. These actions were dismissed against us
and the other defendants without prejudice. However, the plaintiffs filed an
amended complaint against us, certain of our officers and directors and the
underwriters of the Company's follow-on offerings alleging substantially similar
disclosure violations as in the initial complaint. DoubleClick intends to
dispute these allegations and defend these lawsuits vigorously.

Separately, DoubleClick's ad serving and data collection practices are also
the subject of inquiries by the attorneys general of several states. DoubleClick
is cooperating fully with all such inquiries by the various states.

DoubleClick believes that, notwithstanding the quality of defenses
available, it is possible that our financial condition and results of operations
could be materially adversely affected by the ultimate outcome of the pending
litigation. As of June 30, 2002, DoubleClick has recorded a provision of
approximately $1.8 million relating to the settlement of the pending privacy
lawsuits.

NOTE 15 -- SUBSEQUENT EVENTS

On July 10, 2002, DoubleClick sold its North American Media business to L90,
Inc. Upon completion of the transaction, L90, Inc. was renamed MaxWorldwide,
Inc. In exchange for the North American Media business, DoubleClick received 4.8
million shares in MaxWorldwide and $5 million in cash, subject to post-closing
adjustments. DoubleClick may also receive an additional $6 million if, during
the three-year period subsequent to consummation of the transaction,
MaxWorldwide, Inc. has achieved EBITDA-positive results for two out of three
consecutive quarters. EBITDA, as defined in the merger agreement, is earnings
before interest, taxes, depreciation and amortization, excluding certain
non-recurring items. As a result of this transaction, DoubleClick anticipates
recognizing a gain on the sale during the third quarter of 2002.

During the period July 1, 2002 through August 13, 2002, DoubleClick
repurchased approximately $23.4 million aggregate principal amount of its
outstanding 4.75% Convertible Subordinated Notes for approximately $19.1 million
in cash, inclusive of accrued interest of approximately $0.4 million.
DoubleClick wrote off approximately $0.3 million in deferred issuance costs
associated with the notes and will recognize a gain of approximately $4.4
million in the third quarter of 2002 as a result of the early retirement of this
debt. On August 13, 2002 DoubleClick entered into an agreement to repurchase an
additional $41.5 million aggregate principal amount of its outstanding 4.75%
Convertible Subordinated Notes for approximately $34.4 million in cash,
inclusive of accrued interest of approximately $0.8 million. Upon settlement of
this transaction, DoubleClick will write off approximately $0.5 million in
deferred issuance costs and will recognize a gain of approximately $7.4 million.
The transaction is expected to be completed during August 2002.

14

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

THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF DOUBLECLICK CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE
EVENTS AND THE FUTURE PERFORMANCE OF DOUBLECLICK WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. STOCKHOLDERS ARE CAUTIONED THAT SUCH
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. DOUBLECLICK'S ACTUAL RESULTS AND
TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT
LIMITED TO, THOSE SET FORTH UNDER 'RISK FACTORS' AND ELSEWHERE IN THIS REPORT
AND IN DOUBLECLICK'S OTHER PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. IT IS ROUTINE FOR OUR INTERNAL PROJECTIONS AND EXPECTATIONS TO
CHANGE AS THE YEAR OR EACH QUARTER IN THE YEAR PROGRESS, AND THEREFORE IT SHOULD
BE CLEARLY UNDERSTOOD THAT THE INTERNAL PROJECTIONS AND BELIEFS UPON WHICH WE
BASE OUR EXPECTATIONS MAY CHANGE PRIOR TO THE END OF EACH QUARTER OR THE YEAR.
ALTHOUGH THESE EXPECTATIONS MAY CHANGE, WE MAY NOT INFORM YOU IF THEY DO. OUR
COMPANY POLICY IS GENERALLY TO PROVIDE OUR EXPECTATIONS ONLY ONCE PER QUARTER
AND WE MAY CHOOSE TO NOT UPDATE THAT INFORMATION UNTIL THE NEXT QUARTER EVEN IF
CIRCUMSTANCES CHANGE.

OVERVIEW

We are a leading provider of products and services that enable direct
marketers, publishers and advertisers to market to consumers in the digital
world. Combining technology, data and media expertise, our products and services
help our customers optimize their advertising and marketing campaigns on the
Internet and through direct mail and other media. We offer a broad range of
technology, data and media products and services to our customers to allow them
to address many aspects of the digital marketing process, from pre-campaign
planning and testing, to execution, measurement and campaign refinements. Our
service and product offerings are grouped into three segments:

DoubleClick Technology Solutions ('Technology' or 'TechSolutions');

DoubleClick Data ('Data'); and

DoubleClick Media ('Media').

BUSINESS TRANSACTIONS

MESSAGEMEDIA

On January 18, 2002, DoubleClick completed its acquisition of MessageMedia,
Inc. ('MessageMedia'), a provider of permission-based, email marketing and
messaging solutions. DoubleClick acquired all the outstanding shares, options
and warrants of MessageMedia in exchange for one million shares of DoubleClick
common stock valued at approximately $7.5 million, and stock options and
warrants to acquire DoubleClick common stock valued at approximately $0.2
million. In connection with the acquisition, DoubleClick loaned $2.0 million to
MessageMedia to satisfy MessageMedia's operating requirements. The loan was
extinguished upon the closing of the acquisition and included as a component of
the purchase price. The purchase price, of approximately $11.3 million inclusive
of approximately $1.6 million of direct acquisition costs, has been allocated to
the assets acquired and the liabilities assumed based on their respective fair
values at the acquisition date. Approximately $1.9 million of the purchase price
has been allocated to customer lists and is being amortized on a straight-line
basis over 2 years. DoubleClick has also recorded approximately $24.9 million in
goodwill, which represents the remainder of the excess of the purchase price
over the fair value of net assets acquired. This goodwill is not tax deductible
and in accordance with SFAS 142, goodwill will be periodically tested for
impairment.

Due to the goodwill acquired in connection with the MessageMedia transaction
during 2002, and based upon the current market conditions and operational
performance of DoubleClick's email reporting unit, DoubleClick is currently
awaiting a third party valuation of its email reporting unit to determine
whether the recorded balance of goodwill related to this reporting unit is
recoverable. The outcome of this valuation may result in an impairment charge
being recorded during the third quarter of 2002.

15

The results of operations for MessageMedia have been included in
DoubleClick's Consolidated Statements of Operations from the date of
acquisition.

EUROPEAN MEDIA BUSINESS

On January 28, 2002, DoubleClick completed the sale of its European Media
business to AdLINK Internet Media AG, a German provider of Internet advertising
solutions, in exchange for $26.3 million and the assumption by AdLINK of
liabilities associated with DoubleClick's European Media business. Intercompany
liabilities in an amount equal to $4.3 million were settled through a cash
payment by AdLINK to DoubleClick at the closing of the transaction. Following
the closing of the transaction described above, United Internet AG, or United
Internet, AdLINK's largest shareholder, exercised its right to sell to
DoubleClick 15% of the outstanding common shares of AdLINK in exchange for
$30.6 million. Pursuant to its agreement with United Internet, the exercise of
this right caused DoubleClick's option to acquire an additional 21% of AdLINK
common shares from United Internet to vest. This option is only exercisable over
a two-year period if AdLINK has achieved EBITDA-positive results for two out of
three consecutive fiscal quarters before December 2003. EBITDA, as defined in
the option agreement, is earnings before interest, taxes, depreciation,
amortization, and one-time charges such as restructuring costs, mergers and
acquisition related costs, and other extraordinary items, determined in
accordance with generally accepted accounting principles in the United States.
Should AdLINK fail to achieve these results, the option will expire
unexerciseable in December 2003. During the three months ended March 31, 2002
AdLINK did not achieve EBITDA-positive results. AdLINK's results for the three
months ended June 30, 2002 are not publicly available as of the date of this
filing.

As the result of the transactions described above, DoubleClick sold its
European Media business and received a 15% interest in AdLINK. DoubleClick's
option to acquire an additional 21% of the outstanding common shares of AdLINK
from United Internet also vested. The approximately $8.3 million value of the
15% of the outstanding common stock of AdLINK, approximately 3.9 million shares,
has been determined based on these shares' average market prices, as quoted on
the Neuer Markt, for the day before, the day of, and the day immediately after
the number of shares due to DoubleClick became irrevocably fixed pursuant to its
agreements with AdLINK and United Internet.

@PLAN

On May 6, 2002, DoubleClick sold its @plan research product line to
NetRatings, Inc., a provider of technology-driven Internet audience information
solutions for media and commerce, in exchange for $12.0 million in cash and
505,739 shares of NetRatings common stock. The approximately $6.1 million value
of the 505,739 shares of NetRatings common stock has been determined based on
these shares' average market prices, as quoted on the Nasdaq National Market,
for the day before and the day the number of shares due to DoubleClick became
irrevocably fixed pursuant to its agreements with NetRatings. DoubleClick
recognized a gain of approximately $12.3 million on the sale of the @plan
research product line during the three months ended June 30, 2002, which has
been included in `Gain on sale of businesses, net' in the Consolidated
Statements of Operations. DoubleClick's investment in NetRatings is included in
`Investments in affiliates' in the Consolidated Balance Sheets.

ABACUS DIRECT EUROPE

On June 26, 2002, DoubleClick acquired the remaining 50% of the Abacus
Direct Europe B.V. joint venture that it did not previously own from VNU
Marketing Information Europe & Asia B.V., an affiliate of Claritas (UK) Limited.
The joint venture was formed in November 1998 and provides database marketing
services to the direct marketing industry, primarily in the United Kingdom. The
results of operations for Abacus Direct Europe have been included in
DoubleClick's Consolidated Statements of Operations from the date of
acquisition. DoubleClick's investment in the joint venture was previously
accounted for under the equity method of accounting. DoubleClick acquired all
the outstanding shares of Abacus Direct Europe held by VNU in exchange for
approximately $3.7 million in cash and direct acquisition costs. The purchase
price has been preliminarily allocated to the assets acquired and the
liabilities assumed according to their fair value at the date of acquisition.
Approximately $4.6 million has been preliminarily recorded to goodwill, which
represents the excess of the purchase price over the fair value of the net
assets acquired. This goodwill is not tax deductible and

16

in accordance with SFAS 142, goodwill will be periodically tested for
impairment. DoubleClick is still awaiting the results of appraisals and certain
information regarding certain assets and liabilities we acquired. Any potential
adjustment to goodwill, particularly with respect to any acquired intangible
assets, will be recorded during the three months ended September 30, 2002.

NORTH AMERICAN MEDIA BUSINESS

On July 10, 2002, DoubleClick sold its North American Media business to L90,
Inc. Upon completion of the transaction, L90, Inc. was renamed MaxWorldwide,
Inc. In exchange for the North American Media business, DoubleClick received
4.8 million shares in MaxWorldwide and $5 million in cash, subject to
post-closing adjustments. DoubleClick may also receive an additional $6 million
if, during the three-year period subsequent to consummation of the transaction,
MaxWorldwide, Inc. has achieved EBITDA-positive results for two out of three
consecutive quarters. EBITDA, as defined in the merger agreement, is earnings
before interest, taxes, depreciation and amortization, excluding certain
non-recurring items. As a result of this transaction, DoubleClick anticipates
recognizing a gain on the sale during the third quarter of 2002.

THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2001

RESULTS OF OPERATIONS

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

DOUBLECLICK TECHSOLUTIONS

DoubleClick TechSolutions revenue is derived primarily from sales of our ad
management products and services, including our DART for Publishers Service, our
DART Enterprise ad serving software solution, our DART for Advertisers Service
and our email technology products and services. DoubleClick TechSolutions cost
of revenue includes costs associated with the delivery of our advertisements and
our email product offerings, including Internet access costs, depreciation of
the ad and email delivery systems, facility- and personnel-related costs
incurred to operate and support our ad and email delivery products.

DoubleClick TechSolutions revenue decreased 7.3% to $48.0 million for the
three months ended June 30, 2002 from $51.8 million for the three months ended
June 30, 2001. DoubleClick TechSolutions gross margin was 65.1% for the three
months ended June 30, 2002 and 63.9% for the three months ended June 30, 2001.
The decrease in DoubleClick TechSolutions revenue was primarily attributable to
increased levels of price competition, partially offset by a favorable shift in
product mix and acquisition-related growth in our email business associated with
our purchase of MessageMedia. The increase in gross margin was primarily
attributable to the reduction in depreciation expense resulting from the
extension of the useful life of our ad delivery hardware and software from three
to four years to recognize depreciation expense over the remaining time that the
assets are expected to be in service. In addition, we renegotiated many of our
contracts with our Internet service providers, which also contributed to the
increase in gross margin.

In response to general economic conditions, many companies have
significantly scaled back their advertising and marketing budgets, which has had
a correspondingly negative impact on aggregate online advertising spending and
increased the overall level of pricing pressure we face. As a result of

17

these trends we anticipate decreases in both the absolute dollar amount of
DoubleClick TechSolutions revenue and gross profit in the third quarter of 2002.

DOUBLECLICK DATA

DoubleClick Data revenue has historically been derived primarily from its
Abacus division, which provides services such as prospecting lists, housefile
scoring and list optimization to the direct marketing industries. Following the
acquisition of @plan in February 2001, we created a separate research division
within DoubleClick Data designed to offer market research analysis tools that
provide advertisers, brand marketers and e-businesses with analyses of online
advertising campaigns, consumer behavior and purchasing patterns. Research
revenue was derived primarily from the sale of annual subscriptions to its
market research systems. DoubleClick Data cost of revenue includes expenses
associated with creating, maintaining and updating the Abacus and research
databases as well as the technical infrastructure to produce our products and
services.

DoubleClick Data revenue decreased 7.5% to $17.9 million during the three
months ended June 30, 2002 from $19.3 million for the three months ended
June 30, 2001. Gross margin increased from 62.7% for the three months ended
June 30, 2001 to 71.1% for the three months ended June 30, 2002. On May 6, 2002,
DoubleClick sold its @plan research product line to NetRatings, Inc., a provider
of technology-driven Internet audience information solutions for media and
commerce, in exchange for $12.0 million in cash and 505,739 shares of NetRatings
common stock, valued at approximately $6.1 million. Revenue recognized by the
@plan research product line was approximately $0.8 million and approximately
$3.5 million for the three months ended June 30, 2002 and 2001, respectively.
Gross profits recognized by the @plan research product line was approximately
$0.5 million and $1.9 million for the three months ended June 30, 2002 and 2001,
respectively.

Overall, DoubleClick Data's results represent a slight increase in revenues
generated by our Abacus division, which was offset by the loss of revenue from
the sale of the @plan research product line. The increase in gross margin was
primarily attributable to the reduction in data costs and depreciation expense
on production equipment and a decrease in consulting and survey fees, in
addition to growing revenues from the Abacus division. DoubleClick expects third
quarter revenue and gross profit for DoubleClick Data to increase significantly
compared to the three months ended June 30, 2002 as the third quarter is
normally Abacus' busiest season as mailers commence their Fall campaigns.

On June 26, 2002, DoubleClick acquired the remaining 50% of the Abacus
Direct Europe B.V. joint venture that it did not previously own from VNU
Marketing Information Europe & Asia B.V., an affiliate of Claritas (UK) Limited.
The joint venture was formed in November 1998 and provides database marketing
services to the direct marketing industry, primarily in the United Kingdom. The
results of operations for Abacus Direct Europe have been included in
DoubleClick's Consolidated Statements of Operations from the date of
acquisition.

DOUBLECLICK MEDIA

DoubleClick Media revenue is derived primarily from the sale and delivery of
advertising impressions through third-party Web sites comprising the DoubleClick
Media network. DoubleClick Media cost of revenue consists primarily of service
fees paid to Web publishers for impressions delivered on our network, and the
costs of ad delivery and technology support provided by DoubleClick
TechSolutions.

Revenue for DoubleClick Media decreased 68.1% to $10.8 million for the three
months ended June 30, 2002 from $33.8 million for the three months ended
June 30, 2001. DoubleClick Media gross margin was 36.2% for the three months
ended June 30, 2002 and 30.5% for the three months ended June 30, 2001. The
decrease in DoubleClick Media revenue reflected in large part the decline in
overall online advertising spending mentioned above. DoubleClick Media's
revenues also decreased as a result of the sale of its European Media business.
On January 28, 2002, DoubleClick completed the sale of its European Media
business to AdLINK Internet Media AG, a German provider of Internet advertising
solutions. Revenue recognized by the European Media business prior to its sale
was $7.2 million for the three months ended June 30, 2001. Excluding its
European Media business, DoubleClick Media revenues would have been
approximately $26.6 million for the three months ended June 30, 2001.

18

On March 11, 2002, DoubleClick completed the sale of its email List Services
division to infoUSA, Inc. Revenue recognized for the email List Services
division during the three months ended June 30, 2001 was approximately $2.3
million.

DoubleClick Media revenue also decreased due to the departure of the
AltaVista Web site from the DoubleClick network. DoubleClick Media revenue for
the three months ended June 30, 2001 included approximately $2.2 million or 6.5%
of revenue for advertising impressions delivered to users of the AltaVista Web
site. No such revenue was recognized in DoubleClick Media's results during the
three months ended June 30, 2002.

DoubleClick Media gross margin increased primarily due to a reduction
in the cost of ad delivery and technology support provided by DoubleClick
TechSolutions, the recovery of technology support fees from certain
non-exclusive sites and lower average site compensation fees remitted to
publishers. Excluding DoubleClick Media's European business, DoubleClick Media's
gross profit would have been approximately $7.6 million for the three months
ended June 30, 2001.

On July 10, 2002, DoubleClick completed the sale of the North American Media
business to L90, Inc., which was renamed MaxWorldwide, Inc. As a result of the
sale of the North American Media business, DoubleClick anticipates a significant
decrease in absolute dollar amounts of both revenues and gross profits in the
third quarter of 2002 and for the foreseeable future. Revenue recognized by the
North American Media business was approximately $8.0 million and $20.7 million
for the three months ended June 30, 2002 and 2001, respectively. Gross profits
recognized by the North American Media business was approximately $3.3 million
and $6.8 million for the three months ended June 30, 2002 and 2001,
respectively.

OPERATING EXPENSES

SALES AND MARKETING

Sales and marketing expenses consist primarily of compensation and related
benefits, sales commissions, general marketing costs, advertising, bad debt
expense and other operating expenses associated with the sales and marketing
departments. Sales and marketing expenses were $25.6 million or 33.9% of revenue
for the three months ended June 30, 2002, and $52.2 million or 51.2% of revenue
for the three months ended June 30, 2001. The $26.6 million decrease in sales
and marketing expense was primarily attributable to a $10.5 million decrease in
non-cash compensation associated with the contingent consideration paid to the
former shareholders of DoubleClick Scandinavia in the three months ended
June 30, 2001, and a $9.0 million decrease in compensation and related benefits
and sales commissions due to reductions in headcount associated with our
restructuring activities. Sales and marketing expenses also decreased as a
result of an approximately $2.8 million reduction in marketing expenditures, and
an approximately $1.4 million reduction in travel and entertainment expenses
associated with the reduced headcount. In addition, professional fees decreased
$0.9 million. These decreases are commensurate with the decline in our revenues
and the level of business activity. We expect the absolute dollar amount of
sales and marketing expenses to remain relatively consistent, but to increase as
a percentage of revenues in third quarter of 2002 due to anticipated lower
revenues.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of compensation and
related benefits, professional services fees and facility-related costs. General
and administrative expenses were $12.1 million or 15.9% of revenue for the three
months ended June 30, 2002, and $16.8 million or 16.5% of revenue for the three
months ended June 30, 2001. The $4.7 million decrease in general and
administrative expense was primarily the result of overall reductions in
professional services fees of $2.5 million and decreases in personnel-related
costs of $1.6 million. Decreased professional services fees resulted from a
decrease in legal fees and a reduction in consulting fees associated with system
conversion and integration. Personnel-related costs declined commensurate with
the headcount reductions undertaken as part of our restructuring activities. We
expect the absolute dollar amount of general and administrative expenses to
remain relatively consistent but to increase as a percentage of revenues in the
third quarter of 2002 due to anticipated lower revenues.

19

PRODUCT DEVELOPMENT

Product development expenses consist primarily of compensation and related
benefits, consulting fees and other operating expenses associated with the
product development departments. Product development expenses were $10.4 million
or 13.8% of revenue for the three months ended June 30, 2002, and $14.5 million
or 14.2% of revenue for the three months ended June 30, 2001. The $4.1 million
decrease in product development expenses was primarily the result of decreases
in compensation and related benefits for product development personnel of $5.0
million, resulting from the headcount reduction in connection with our
restructuring activities, offset by an increase in computer related expenses of
$0.5 million. Although we will continue to concentrate on the efficient
allocation of our resources we believe that ongoing investment in product
development is critical to the attainment of our strategic objectives. We expect
the absolute dollar amount of product development expenses to remain relatively
consistent but to increase as a percentage of revenues during the third quarter
of 2002 due to anticipated lower revenues.

AMORTIZATION OF INTANGIBLE ASSETS

Amortization of intangible assets consists primarily of the amortization of
customer lists and patents. Amortization expense was $3.0 million for the three
months ended June 30, 2002 and $2.1 million for the three months ended June 30,
2001. The increase was primarily the result of the amortization of customer
lists acquired in various business combinations.

AMORTIZATION OF GOODWILL

In accordance with SFAS 142, goodwill is no longer amortized as of
January 1, 2002 but is periodically tested for impairment. Amortization of
goodwill was approximately $13.2 million for the three months ended June 30,
2001 and primarily related to the goodwill associated with our business
combinations with @plan, Flashbase, FloNetwork, DoubleClick Scandinavia, and
DoubleClick Japan.

PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with our acquisition of FloNetwork in April 2001, $1.3 million
of the purchase price was allocated to in-process research and development
projects and charged to operations as the projects had not reached technological
feasibility as of the date of acquisition and were determined to have no
alternative future uses.

We incurred no such charges for the three months ended June 30, 2002.

RESTRUCTURING CHARGE

During the three months ended June 30, 2002, our management took certain
actions to further increase operational efficiencies and bring costs in line
with revenues. As a result, DoubleClick recorded a restructuring charge
totaling approximately $7.3 million. This charge included estimated costs of
approximately $6.5 million for the write-off of fixed assets, accrual of future
lease costs, net of estimated sublease income and deferred rent, as well as
approximately $0.8 million in additional severance charges related to the
involuntary termination of approximately 72 employees.

In determining the restructuring charge associated with our future lease
commitments, DoubleClick engaged a third party real estate firm to provide us
with estimates of the future sublease income for our excess and idle space,
which also includes an estimate of the time period required to identify new
sublessees. This analysis was performed based on the current real estate market
conditions in the local markets where DoubleClick's facilities are located. In
addition, the real estate firm provided estimates of lease termination/buyout
fees landlords may charge us to terminate our lease rather than subleasing our
idle and excess space. Based upon our review of this information we determine
our restructuring charge related to future lease commitments. This information
may be updated should market conditions change.

DoubleClick expects to eliminate certain operating expenses totaling
approximately $6.0 million on an annualized basis, primarily relating to
personnel- and facility-related expenses, as a result of the restructuring
initiatives undertaken during the three months ended June 30, 2002. A majority
of these reductions are expected to primarily impact sales and marketing
expenses. DoubleClick will begin to recognize the full effect of these cost
savings in the third quarter of 2002.

20

We are continuing to review our operational performance and may incur
additional restructuring charges in the third quarter of 2002, principally
related to further headcount reductions and facility consolidations.

During the quarter ended June 30, 2001, DoubleClick recorded approximately
$1.6 million in restructuring provisions, including estimated costs of
approximately $0.2 million for severance costs associated with a work force
reduction of 15 employees, approximately $0.6 million in additional fixed asset
write-offs, approximately $0.4 million in consulting and professional fees
related to the restructuring activities and approximately $0.4 million in
personnel-related costs associated with the decision to move the TechSolutions
customer support department from New York to Colorado.

LOSS FROM OPERATIONS

Our operating loss was $10.7 million for the three months ended June 30,
2002 and $46.2 million for the three months ended June 30, 2001. The decrease in
our operating loss of $35.5 million is primarily attributable to the decrease in
our sales and marketing expenses of $26.6 million, a decrease in goodwill
amortization of $13.2 million, and a decrease in other operating expenses of
approximately $10.1 million as a result of our restructuring activities and
other cost cutting initiatives during 2001. This was partially offset by a
decrease in gross profits of approximately $7.8 million, an increase in
amortization of intangibles of approximately $0.9 million, and an increase in
the restructuring charge of $5.7 million. We continue to manage our operations
with a focus on productivity and manage our headcount accordingly, but we may
incur future losses from operations.

EQUITY IN INCOME (LOSSES) OF AFFILIATES

Equity in income (losses) of affiliates was approximately $0.2 million for
the three months ended June 30, 2002 and ($0.9) million for the three months
ended June 30, 2001. For the three months ended June 30, 2002, equity in income
(losses) of affiliates was attributed entirely to DoubleClick's 50% interest in
the Abacus Direct Europe joint venture. Since the June 26, 2002 acquisition of
the remaining 50% interest that DoubleClick did not previously own, the results
of operations of Abacus Direct Europe have been consolidated into DoubleClick's
operations. The increase in our equity in income of affiliates was primarily a
result of our investment in ValueClick being accounted for as a marketable
security during the three months ended June 30, 2002. As a result of the
cumulative dilutive effects of ValueClick's issuance of stock in connection with
business combinations consummated during 2001, DoubleClick's ownership interest
had been reduced to 15.2% as of December 31, 2001. Additional business
combinations consummated by ValueClick during 2002 have further reduced
DoubleClick's ownership interest to approximately 8%. DoubleClick does not
believe that it is able to exercise significant influence over its investment in
ValueClick and accordingly, DoubleClick no longer records its proportionate
share of ValueClick's results but instead carries this investment at fair value,
with unrealized gains and losses, net of tax, reported as a separate component
of stockholders' equity.

GAIN ON EQUITY TRANSACTIONS OF AFFILIATES, NET

For the three months ended June 30, 2001, we recognized a gain of
approximately $7.2 million from the initial public offering of our consolidated
subsidiary DoubleClick Japan, which was partially offset by a loss of
approximately $1.5 million related to the decrease in value of our proportionate
share of the net assets of ValueClick following its consummation of a business
combination with Z Media, Inc.

There was no such activity for the three months ended June 30, 2002.

INTEREST AND OTHER, NET

Interest and other, net was $2.8 million for the three months ended
June 30, 2002 and $3.2 million for the three months ended June 30, 2001.
Interest and other, net included $6.5 million in interest income for the three
months ended June 30, 2002, partially offset by $3.1 million of interest expense
and $0.7 million in unrealized losses on foreign exchange transactions. For the
three months ended June 30, 2001, interest and other, net included $11.5 million
of interest income, partially offset by $3.3 million of interest expense and a
$4.5 million impairment charge related to the write-off of our investment in our
cost-method investee Return Path. The decrease in interest income was primarily
attributable to

21

decreases in average investment yields due to declines in interest rates, offset
by an increase in the average quarterly balances of our investments in
marketable securities. Interest and other, net in future periods may fluctuate
in correlation with the average cash, investment and debt balances we maintain
and as a result of changes in the market rate of our investments.

During the period July 1, 2002 through August 13, 2002, DoubleClick
repurchased approximately $23.4 million aggregate principal amount of its
outstanding 4.75% Convertible Subordinated Notes for approximately $19.1 million
in cash, inclusive of accrued interest of approximately $0.4 million.
DoubleClick wrote off approximately $0.3 million in deferred issuance costs
associated with the notes and will recognize a gain of approximately
$4.4 million in the third quarter of 2002 as a result of the early retirement of
this debt. On August 13, 2002, DoubleClick entered into an agreement to
repurchase an additional $41.5 million aggregate principal amount of its
outstanding 4.75% Convertible Subordinated Notes for approximately
$34.4 million in cash, inclusive of accrued interest of approximately
$0.8 million. Upon settlement of this transaction, DoubleClick will write off
approximately $0.5 million in deferred issuance costs and will recognize a gain
of approximately $7.4 million. The transaction is expected to be completed in
August 2002.

PROVISION FOR INCOME TAXES

The provision for income taxes does not reflect the benefit of our
historical losses due to limitations and uncertainty surrounding our prospective
realization of the benefit. The provision for income taxes recorded for the
three months ended June 30, 2002 and 2001 primarily relates to corporate income
taxes on the earnings of some of our foreign subsidiaries.

SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2001

RESULTS OF OPERATIONS

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

DOUBLECLICK TECHSOLUTIONS

DoubleClick TechSolutions revenue decreased 7.8% to $98.4 million for the
six months ended June 30, 2002 from $106.7 million for the six months ended
June 30, 2001. DoubleClick TechSolutions gross margin was 66.7% for the six
months ended June 30, 2002 and 65.5% for the six months ended June 30, 2001. The
decrease in DoubleClick TechSolutions revenue was primarily attributable to
increased levels of price competition and overall decreases in the volumes of
impressions delivered to customers. This was slightly offset by a favorable
shift in product mix and acquisition-related growth in our email business
associated with our purchases of FloNetwork and MessageMedia. The decrease in
TechSolutions revenues reflected in large part the decline in overall online
advertising spending. The increase in gross margin was primarily attributable to
the reduction in depreciation expense resulting from the extension of the useful
life of our ad delivery hardware and software from three to four years to
recognize depreciation expense over the remaining time that the assets are
expected to be in service. In addition, we renegotiated many of our contracts
with our Internet service providers, which also contributed to the increase in
gross margin.

In response to general economic conditions, many companies have
significantly scaled back their advertising and marketing budgets, which has had
a correspondingly negative impact on aggregate

22

online advertising spending and increased the overall level of pricing pressure
we face. As a result of these trends, we anticipate decreases in both the
absolute dollar amount of DoubleClick TechSolutions revenues and gross profit
during the third quarter of 2002.

DOUBLECLICK DATA

DoubleClick Data revenue decreased 3.8% to $36.1 million for the six months
ended June 30, 2002 from $37.6 million for the six months ended June 30, 2001.
Gross margin increased from 62.5% for the six months ended June 30, 2001 to
70.4% for the six months ended June 30, 2002. The decrease in DoubleClick Data
revenue reflected the impact of the sale of the @plan research product line in
May 2002 offset by higher average prices in the Abacus business and continued
growth in Abacus' B2B alliance, prospecting list services and customer housefile
scoring initiatives. The increase in gross margin was due primarily to lower
costs associated with DoubleClick Data's data collection and amortization of
acquired email lists.

DOUBLECLICK MEDIA

Revenue for DoubleClick Media decreased 66.1% to $27.1 million for the six
months ended June 30, 2002 from $79.9 million for the six months ended June 30,
2001. DoubleClick Media's gross margin was 31.6% for the six months ended
June 30, 2002 and 33.4% for the six months ended June 30, 2001. The decrease in
DoubleClick Media revenue reflected the sale of its European Media business. On
January 28, 2002, DoubleClick completed the sale of the European Media business
to AdLINK Internet Media AG. Revenues also decreased due to the decline in
overall online advertising spending mentioned above. For the six months ended
June 30, 2002 and 2001, revenues derived by the European Media business were
$1.1 million and $17.4 million, respectively. Excluding the European Media
business, DoubleClick Media revenues would have been $26.0 and $62.5 million for
the six months ended June 30, 2002 and 2001, respectively.

DoubleClick Media revenue also decreased due to the departure of the
AltaVista Web site from the DoubleClick network. DoubleClick Media revenue for
the six months ended June 30, 2001 included approximately $7.9 million, or 9.9%
of revenue for advertising impressions delivered to users of the AltaVista Web
site. No such revenue was recognized in DoubleClick Media's results during the
six months ended June 30, 2002.

Gross margin decreased due to increased levels of price competition and
increases in the amount of unsold inventory, which diluted the effective price
of delivered advertising impressions. This decrease was partially offset by
lower average site fees remitted to publishers and a reduction in the cost of
technology support provided by DoubleClick TechSolutions.

On July 10, 2002, DoubleClick completed the sale of the North American Media
business to L90, Inc., which was renamed MaxWorldwide, Inc. As a result of the
sale of the North American Media business, DoubleClick anticipates a significant
decrease in absolute dollar amounts of both revenues and gross profits in the
third quarter of 2002 and for the foreseeable future. Revenue recognized by the
North American Media business was approximately $17.4 million and $49.8 million
for the six months ended June 30, 2002 and 2001, respectively. Gross profits
recognized by the North American Media business was approximately $6.4 million
and $18.4 million for the six months ended June 30, 2002 and 2001, respectively.

OPERATING EXPENSES

SALES AND MARKETING

Sales and marketing expenses consist primarily of compensation and related
benefits, sales commissions, general marketing costs, advertising, bad debt
expense and other operating expenses associated with the sales and marketing
departments. Sales and marketing expenses were $55.5 million or 34.8% of revenue
for the six months ended June 30, 2002, and $107.4 million or 49.5% of revenue
for the six months ended June 30, 2001. The decrease in the absolute dollar
amount of sales and marketing expense was primarily attributable to reductions
in personnel-related costs of $18.8 million, non-cash compensation paid to
former shareholders of DoubleClick Scandinavia of $15.2 million and marketing
expenditures of $5.1 million, as well as reductions in travel and entertainment
expenses of $3.5 million

23

and rent and utilities of $3.1 million. We expect the absolute dollar amount of
sales and marketing expenses to remain relatively consistent, but to increase as
a percentage of revenues in third quarter of 2002 due to anticipated lower
revenues.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of compensation and
related benefits, professional services fees and facility-related costs. General
and administrative expenses were $24.1 million or 15.1% of revenue for the six
months ended June 30, 2002, and $36.4 million or 16.8% of revenue for the six
months ended June 30, 2001. The decrease in general and administrative expense
was primarily the result of overall reductions in professional services fees,
personnel-related costs and rent and utilities. Decreased professional services
fees resulted in part from a reduction in legal fees as well as a reduction in
consulting fees associated with tighter cost controls in place. We expect the
absolute dollar amount of general and administrative expenses to remain
relatively consistent but to increase as a percentage of revenues in the third
quarter of 2002 due to anticipated lower revenues.

PRODUCT DEVELOPMENT

Product development expenses consist primarily of compensation and related
benefits, consulting fees and other operating expenses associated with the
product development departments. Product development expenses were $21.3 million
or 13.4% of revenue for the six months ended June 30, 2002, and $28.4 million or
13.1% of revenues for the six months ended June 30, 2001. The decrease in
product development expenses were primarily the result of reductions in
compensation and related benefits for product development personnel and
professional fees. Although we will continue to concentrate on the efficient
allocation of our resources, we believe that on-going investment in product
development is critical to the attainment of our strategic objectives. We expect
the absolute dollar amount of product development expenses to remain relatively
consistent but to increase as a percentage of revenues during the third quarter
of 2002 due to anticipated lower revenues.

AMORTIZATION OF INTANGIBLE ASSETS

Amortization of intangible assets consists primarily of customer lists and
patents. Amortization expense was $6.2 million for the six months ended
June 30, 2002 and $4.0 million for the six months ended June 30, 2001. The
increase was primarily the result of the amortization of customer lists acquired
in various business combinations.

AMORTIZATION OF GOODWILL

In accordance with SFAS 142, goodwill is no longer amortized as of
January 1, 2002 but is periodically tested for impairment. Amortization of
goodwill was approximately $21.9 million for the six months ended June 30, 2001
related to business combinations with @plan, Flashbase, FloNetwork, DoubleClick
Scandinavia, and DoubleClick Japan.

PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with our acquisition of FloNetwork in April 2001, $1.3 million
of the purchase price was allocated to in-process research and development
projects and charged to operations as the projects had not reached technological
feasibility as of the date of acquisition and were determined to have no
alternative future uses.

We recognized no such charges during the six months ended June 30, 2002.

RESTRUCTURING CHARGE

In the first half of 2002, our management took certain actions to further
increase operational efficiencies and bring costs in line with revenues. These
measures included the involuntary terminations of approximately 132 employees,
primarily from our Media and TechSolutions operations, as well as the
consolidation of some of our leased office space and the closure of several of
our offices. As a consequence, we recorded an $8.8 million charge to operations
during the first half of 2002. This charge included approximately $2.1 million
for severance-related payments to terminated employees, and

24

approximately $6.7 million for the write-off of fixed assets, the accrual of
future lease costs (net of estimated sublease income and deferred rent
liabilities previously recorded) and other exit charges.

In determining the restructuring charge associated with our future lease
commitments, DoubleClick engaged a third party real estate firm to provide us
with estimates of the future sublease income for our excess and idle space,
which also includes an estimate of the time period required to identify new
sublessees. This analysis was performed based on the current real estate market
conditions in the local markets where DoubleClick's facilities are located. In
addition, the real estate firm provided estimates of lease termination/buyout
fees landlords may charge us to terminate our lease rather than subleasing our
idle and excess space. Based upon our review of this information we determine
our restructuring charge related to future lease commitments. This information
may be updated should market conditions change.

DoubleClick expects to eliminate certain operating expenses totaling
approximately $11.0 million on an annualized basis, primarily related to
personnel- and facility-related expenses, as a result of the restructuring
initiatives undertaken during the first six months of 2002. A majority of these
reductions are expected to primarily impact sales and marketing expenses.
DoubleClick will begin to recognize the full effect of these cost savings in the
third quarter of 2002.

We are continuing to review our operational performance and may incur
additional restructuring charges in the third quarter of 2002, principally
related to further headcount reductions and facility consolidations.

During the six months ended June 30, 2001, a separate restructuring
initiative resulted in the involuntary terminations of approximately 245
employees, primarily from our Media operations, as well as the consolidation of
some of our leased office space and the closure of several of our offices. As a
consequence, we recorded a $30.7 million charge to operations during the first
half of 2001. This charge included approximately $3.8 million for
severance-related payments to terminated employees, approximately $9.3 million
for the accrual of future lease costs (net of estimated sublease income and
deferred rent liabilities previously recorded), approximately $15.8 for the
write-off of fixed assets situated in office locations that were closed or
consolidated, and approximately $1.7 million in other exit costs, which included
consulting and professional fees related to the restructuring activities and
expenses associated with the decision to move the DoubleClick TechSolutions
customer support department from New York to Colorado.

LOSS FROM OPERATIONS

Our operating loss was $16.3 million for the six months ended June 30, 2002
and $110.1 million for the six months ended June 30, 2001. The decrease in our
operating loss of $93.7 million is primarily attributable to the decrease in our
sales and marketing expenses of $51.9 million, a decrease in goodwill
amortization of $21.9 million, a decrease in restructuring charges of $21.9
million, a decrease in general and administrative expenses of $12.3 million, and
a decrease in other operating expenses of $8.4 million as a result of our
restructuring activities and other cost cutting initiatives during 2001. This
was partially offset by a decrease in gross profits of approximately $20.6
million, and an increase in amortization of intangibles of approximately $2.1
million. We continue to manage our operations with a focus on productivity and
manage our headcount accordingly, but we may incur future losses from
operations.

EQUITY IN INCOME (LOSSES) OF AFFILIATES

Equity in income (losses) of affiliates was $0.2 million for the six months
ended June 30, 2002 and ($2.0) million for the six months ended June 30, 2001.
For the six months ended June 30, 2002, equity in income (losses) of affiliates
was attributed entirely to DoubleClick's 50% interest in the Abacus Direct
Europe joint venture. Since the June 26, 2002 acquisition of the remaining 50%
interest that DoubleClick did not previously own, the results of operations of
Abacus Direct Europe have been consolidated into DoubleClick's operations. The
increase in equity in losses of affiliates was primarily the result of our
investment in ValueClick being accounted for as a marketable security during the
six months ended June 30, 2002. As a result of the cumulative dilutive effects
of ValueClick's issuance of stock in connection with business combinations
consummated during 2001, DoubleClick's ownership interest had been reduced to
15.2% as of December 31, 2001. Additional business combinations

25

consummated by ValueClick during 2002 have further reduced DoubleClick's
ownership interest to approximately 8%. DoubleClick does not believe that it is
able to exercise significant influence over its investment in ValueClick and
accordingly, DoubleClick no longer records its proportionate share of
ValueClick's results but instead carries this investment at fair value, with
unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity.

GAIN ON EQUITY TRANSACTIONS OF AFFILIATES, NET

For the six months ended June 30, 2001, we recognized a gain of
approximately $7.2 million from the initial public offering of our consolidated
subsidiary DoubleClick Japan, which was partially offset by a loss of
approximately $5.3 million related to the decrease in value of our proportionate
share of the net assets of our equity-method investee ValueClick following the
consummation of business combinations with ClickAgents.com, Inc., Bach Systems
Inc. and Z Media, Inc.

We recognized no such gains or losses during the six months ended June 30,
2002.

INTEREST AND OTHER, NET

Interest and other, net was $6.2 million for the six months ended June 30,
2002 and $11.9 million for the six months ended June 30, 2001. Interest and
other, net included $14.1 million of interest income for the six months ended
June 30, 2002, partially offset by $6.0 million in interest expense. For the six
months ended June 30, 2001, Interest and other, net included $24.5 million in
interest income, $6.5 million in interest expense, and a $4.5 million impairment
charge related to the write-off of our investment in our cost-method investee
Return Path. The decrease in interest income was primarily attributable to
decreases in average investment yields due to declines in interest rates, offset
by increases in the average quarterly balances of our investments in marketable
securities. Interest and other, net in future periods may fluctuate in
correlation with the average cash, investment and debt balances we maintain and
as a result of changes in the market rates of our investments.

During the period July 1, 2002 through August 13, 2002, DoubleClick
repurchased approximately $23.4 million aggregate principal amount of its
outstanding 4.75% Convertible Subordinated Notes for approximately $19.1 million
in cash, inclusive of accrued interest of approximately $0.4 million.
DoubleClick wrote off approximately $0.3 million in deferred issuance costs
associated with the notes and will recognize a gain of approximately
$4.4 million in the third quarter of 2002 as a result of the early retirement of
this debt. On August 13, 2002 DoubleClick entered into an agreement to
repurchase an additional $41.5 million aggregate principal amount of its
outstanding 4.75% Convertible Subordinated Notes for approximately
$34.4 million in cash, inclusive of accrued interest of approximately
$0.8 million. Upon settlement of this transaction, DoubleClick will write off
approximately $0.5 million in deferred issuance costs and will recognize a gain
of approximately $7.4 million. This transaction is expected to be completed
during August 2002.

PROVISION FOR INCOME TAXES

The provision for income taxes does not reflect the benefit of our
historical losses due to limitations and uncertainty surrounding our prospective
realization of the benefit. The provision for income taxes recorded for the six
months ended June 30, 2002 primarily relates to an approximately $1.5 million
tax provision associated with the sale of our European Media business,
approximately $1.0 million of corporate income taxes on the earnings of certain
of our foreign subsidiaries, and $0.7 million of state and local taxes. For the
six months ended June 30, 2001, the provision for income taxes primarily relates
to corporate income taxes on the earnings of certain of our foreign
subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily through private
placements of equity securities, and public offerings of our common stock and
Convertible Subordinated Notes.

Operating activities generated $17.9 million for the six months ended
June 30, 2002 and used $7.8 million for the six months ended June 30, 2001. Cash
provided by operating activities for the six months ended June 30, 2002 resulted
primarily from our net loss adjusted for non-cash items, and decreases in
accounts receivable, prepaid expenses and other assets, offset by decreases in
accounts payable, accrued expenses and other current liabilities. Cash used in
operating activities for the six

26

months ended June 30, 2001 resulted primarily from our net loss adjusted for
non-cash items, and decreases in accounts receivable, offset by increases in
prepaid expenses and other current assets and decreases in accounts payable,
accrued expenses, other liabilities, and deferred revenue.

Investing activities used $5.9 million and $15.3 million for the six months
ended June 30, 2002 and 2001, respectively. Cash used in investing activities
for the six months ended June 30, 2002 resulted primarily from the net purchases
of some of our investments in marketable securities, cash paid for the purchase
of equipment and the acquisition of businesses and intangible assets, which were
partially offset by proceeds received from the sale of the @plan research
product line and email List Services division. Cash used in investing activities
for the six months ended June 30, 2001 resulted primarily from the purchase of
equipment and the acquisition of businesses and intangible assets, which was
partially offset by the net maturity of some of our investments in marketable
securities.

Net cash used in financing activities was $9.7 million for the six months
ended June 30, 2002 and net cash provided by financing activities was $31.2
million for the six months ended June 30, 2001. Net cash used in financing
activities resulted primarily from payments of notes and capital lease
obligations offset by proceeds from the issuance of common stock in connection
with our employee stock purchase and stock option plans. Cash provided by
financing activities for the six months ended June 30, 2001 resulted primarily
from the initial public offering of common stock of our consolidated subsidiary,
DoubleClick Japan, and the proceeds from the exercise of stock options offset by
payments under capital lease obligations.

As of June 30, 2002, we had $107.1 million of cash and cash equivalents,
$641.2 million in investments in marketable securities and $19.2 million in
restricted cash. As of June 30, 2002, our principal commitments consisted of our
Convertible Subordinated Notes and our obligations under operating and capital
leases. Although we have no material commitments for capital expenditures, we
continue to anticipate that our capital expenditures and lease commitments will
be a material use of our cash resources consistent with the levels of our
operations, infrastructure and personnel.

We believe that our existing cash and cash equivalents and investments in
marketable securities will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next 12 months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

The primary objective of our investment activities is to preserve principal
while at the same time maximizing yields without significantly increasing risk.
To achieve this objective, we maintain our portfolio of cash equivalents and
marketable securities in a variety of government and corporate obligations and
money market funds. As of June 30, 2002, our investments in marketable
securities had a weighted average time to maturity of 386 days.

The following table presents the amounts of our financial instruments that
are subject to interest rate risk by expected maturity and average interest
rates as of June 30, 2002.

27

We did not hold derivative financial instruments as of June 30, 2002 and
have not held these instruments in the past.

FOREIGN CURRENCY RISK

We transact business in various foreign countries and are thus subject to
exposure from adverse movements in foreign currency exchange rates. This
exposure is primarily related to revenue and operating expenses denominated in
European and Asian currencies, as well as cash balances held in currencies other
than the functional currency of DoubleClick and its subsidiaries. The effect of
foreign exchange rate fluctuations on operations resulted in net realized and
unrealized losses of $0.9 million and $1.1 million for the three and six months
ended June 30, 2002, respectively, principally as a result of the weakening of
the U.S. dollar and its impact upon our U.S. dollar denominated deposits held by
our international subsidiaries.

To date we have not used financial instruments to hedge operating activities
denominated in foreign currencies. We assess the need to utilize financial
instruments to hedge currency exposures on an ongoing basis. As of June 30,
2002, we had $41.4 million in cash and cash equivalents denominated in foreign
currencies.

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

EQUITY RISK

The Company holds investments in equity instruments of public companies
received as a result of certain business transactions, including shares held in
ValueClick, Inc., NetRatings, Inc., and AdLINK Internet Media AG. Such
investments, which are in the Internet industry, are subject to significant
fluctuations in fair market value. The following represents the cost basis and
fair market value of these investments, which are included in `Investment in
affiliates' on the accompanying Consolidated Balance Sheets.

Certain of DoubleClick's investments have suffered a decrease in value as a
result of recent market volatility, however DoubleClick does not believe these
decreases to be other than temporary due to the short duration of the decline.
We continually evaluate our investments in marketable securities for impairment
due to declines in market value considered to be other than temporary. That
evaluation includes, in addition to persistent declining stock prices, general
economic and company-specific evaluations. In the event of a determination that
a decline in market value is other than temporary, a charge to earnings is
recorded for all or a portion of the unrealized loss, and a new cost basis in
the investment is established.

28

RISK FACTORS

An investment in our company involves a high degree of risk. You should
carefully consider the risks below, together with the other information
contained in this report, before you decide to invest in our company. If any of
the following risks actually occur, our business, results of operations and
financial condition could be harmed, the trading price of our common stock could
decline, and you could lose all or part of your investment.

RISKS RELATING TO OUR COMPANY AND OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY AND OUR FUTURE FINANCIAL RESULTS MAY
FLUCTUATE, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.

We were incorporated in January 1996 and have a limited operating history.
An investor in our common stock must consider the risks and difficulties
frequently encountered by companies in new and rapidly evolving industries,
including the digital marketing industry. Our risks include:

ability to achieve historical or anticipated revenue growth rates;

ability to manage our operations;

competition;

attracting, retaining and motivating qualified personnel;

maintaining our current and developing new, strategic relationships with
Web publishers, advertisers, advertising agencies and direct marketers;

ability to anticipate and adapt to the changing Internet advertising and
direct marketing industries; and

ability to develop and introduce new products and services, and continue to
develop and upgrade technology.

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

WE HAVE A HISTORY OF LOSSES AND ANTICIPATE CONTINUED LOSSES.

We have incurred net losses each year since inception, including net losses
of $265.8 million, $156.0 million and $55.8 million for the years ended December
31, 2001, 2000 and 1999, respectively. We incurred a net loss of approximately
$2.0 million for the six months ended June 30, 2002 and as of June 30, 2002, our
accumulated deficit was $550.5 million. We have not achieved profitability on an
annual basis and expect to incur operating losses in the future. We expect to
continue to incur significant operating and capital expenditures and, as a
result, we will need to generate significant revenue to achieve and maintain
profitability. We cannot assure you that we will generate sufficient revenue to
achieve or sustain profitability. Even if we do achieve profitability, we cannot
assure you that we can sustain or increase profitability on a quarterly or
annual basis in the future. If revenue does not meet our expectations, or if
operating expenses exceed what we anticipate or cannot be reduced accordingly,
our business, results of operations and financial condition will be materially
and adversely affected.

WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUE FROM ADVERTISEMENTS AND
ADVERTISING SERVICES, WHICH REVENUES TEND TO BE CYCLICAL AND DEPENDENT ON THE
ECONOMIC PROSPECTS OF ADVERTISERS AND DIRECT MARKETERS AND THE ECONOMY IN
GENERAL. A CONTINUED DECREASE IN EXPENDITURES BY ADVERTISERS AND DIRECT
MARKETERS OR A CONTINUED DOWNTURN IN THE ECONOMY COULD CAUSE OUR REVENUES TO
DECLINE SIGNIFICANTLY IN ANY GIVEN PERIOD.

We derive, and expect to continue to derive for the foreseeable future, a
large portion of our revenue from products and services we provide to Web
publishers, advertisers, direct marketers and

29

advertising agencies. Expenditures by advertisers tend to be cyclical,
reflecting overall economic conditions as well as budgeting and buying patterns.
The overall market for advertising, including Internet advertising, has been
characterized in the last couple of years by increasing softness of demand,
lower prices for advertisements, the reduction or cancellation of advertising
contracts, an increased risk of uncollectible receivables from customers and the
reduction of marketing and advertising budgets, especially for online
advertising. As a result of these reductions, advertising spending across
traditional media, as well as the Internet, has decreased. We cannot assure you
that further reductions will not occur.

The revenue outlook for DoubleClick TechSolutions is adversely affected by
an environment where the supply of advertising inventory exceeds advertisers'
demand. Under these circumstances, Web publishers tend to remove ad space from
their Web sites in an effort to correct the supply-demand imbalance; other
publishers may cut back on their Web presence or go out of business. Faced with
smaller budgets, advertisers and advertising agencies purchase less advertising
inventory and tend not to invest as much in Internet advertising. Consequently,
the number of ad impressions delivered by DoubleClick TechSolutions may decline
or fail to grow, which would adversely affect our revenues.

DoubleClick Data, which provides services to direct marketers, may face
similar pressures. Direct marketers may respond to economic downturns by
reducing the number of catalogs mailed, thereby possibly reducing the demand for
DoubleClick Data's services. If direct marketing activities fail to grow or
decline our revenues could be adversely affected.

We cannot assure you that further reductions in advertising spending will
not occur. We also cannot assure you that if economic conditions improve,
marketing budgets and advertising spending will increase, or not decrease, from
current levels. A continued decline in the economic prospects of advertisers or
the economy in general could alter current or prospective advertisers' spending
priorities or increase the time it takes to close a sale with a customer. As a
result, our revenues from advertisements and advertising services may decline
significantly in any given period.

WE DO NOT OFTEN MAINTAIN LONG-TERM AGREEMENTS WITH OUR CUSTOMERS AND MAY BE
UNABLE TO RETAIN CUSTOMERS, ATTRACT NEW CUSTOMERS OR REPLACE DEPARTING CUSTOMERS
WITH CUSTOMERS THAT CAN PROVIDE COMPARABLE REVENUES.

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

MANY OF OUR CUSTOMERS CONTINUE TO EXPERIENCE BUSINESS CONDITIONS THAT COULD
ADVERSELY AFFECT OUR BUSINESS.

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

INDUSTRY SHIFTS, CONTINUING EXPANSION OF OUR PRODUCTS AND SERVICES AND OTHER
CHANGES MAY STRAIN OUR MANAGERIAL, OPERATIONAL, FINANCIAL AND INFORMATION SYSTEM
RESOURCES.

In recent years, we have had to respond to significant changes in our
industry. As a result, we have experienced industry shifts, continuing expansion
of product and service offerings and other changes that have increased the
complexity of our business and placed considerable demands on our managerial,
operational and financial resources. We continue to increase the scope of our
product and service

30

offerings both domestically and internationally and to deploy our resources in
accordance with changing business conditions and opportunities. To continue to
successfully implement our business plan in our changing industry requires
effective planning and management processes. We expect that we will need to
continue to improve our financial and managerial controls and reporting systems
and procedures and will need to continue to train and manage our workforce. We
cannot assure you that management will be effective in attracting and retaining
qualified personnel, integrating acquired businesses or otherwise responding to
new business conditions. We also cannot assure you that our information systems,
procedures or policies will be adequate to support our operations or that our
management will be able to achieve the execution necessary to offer our products
and services and implement our business plan successfully. Our inability to
effectively respond to these challenges could materially and adversely affect
our business, financial condition and results of operations.

OUR BUSINESS MODEL IS UNPROVEN, AND WE MAY NOT BE ABLE TO GENERATE PROFITS FROM
MANY OF OUR PRODUCTS AND SERVICES.

A significant part of our business model is to generate revenue by providing
digital marketing products and services to advertisers, advertising agencies,
Web publishers and direct marketers. The profit potential for our business model
has not yet been proven, and we have not yet achieved full-year profitability.
The profitability of our business model is subject to external and internal
factors. Any single factor or combination of factors could limit the profit
potential, long term and short term, of our business model.

Like other businesses in the advertising and marketing sector, our revenue
outlook is sensitive to downturns in the economy, including declines in
advertisers' marketing budgets. The profit potential of our business model is
also subject to the acceptance of our products and services by marketers,
advertisers, advertising agencies and publishers. Intensive marketing and sales
efforts may be necessary to educate prospective customers regarding the uses and
benefits of, and to generate demand for, our products and services. Enterprises
may be reluctant or slow to adopt a new approach that may replace existing
techniques, or may feel that our offerings fall short of their needs. If these
outcomes occur, it would have an adverse effect on the profit potential of our
business model.

Internal factors also influence the profit potential of our business model.
In order to be profitable, our revenue must exceed the expense incurred by us to
run our technology infrastructure, research and development, sales and
marketing, and all other operations. Our failure to achieve these results would
adversely affect the profit potential of our business model.

MISAPPROPRIATION OF CONFIDENTIAL INFORMATION COULD CAUSE US TO LOSE CUSTOMERS.

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

COMPETITION IN INTERNET ADVERTISING, DIRECT MARKETING AND RELATED PRODUCTS AND
SERVICES IS INTENSE, AND WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.

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

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

the features, performance, price and reliability of products and services
offered either by us or our competitors;

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the launch timing and market success of products and services developed
either by us or our competitors;

our ability to adapt and scale our products and services, and to develop
and introduce new products and services that respond to market needs;

our ability to adapt to evolving technology and industry standards;

our customer service and support efforts;

our sales and marketing efforts; and

the relative impact of general economic and industry conditions on either
us or our competitors.

Our divisions face competition from a variety of sources. DoubleClick
TechSolutions competes with providers of software and service bureau solutions
for the delivery of Web ads and email for direct marketers, Web publishers and
advertisers as well as with inhouse solutions.

Abacus competes with data aggregation companies and providers of information
products and marketing research services to the direct marketing industry. We
also compete indirectly with others, such as providers of customer relationship
management services, companies engaged in providing analytic services and other
companies that facilitate digital marketing.

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

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND YOU
SHOULD NOT RELY ON THEM AS AN INDICATION OF FUTURE OPERATING PERFORMANCE.

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

advertiser, Web publisher and direct marketer demand for our products and
services;

Internet user traffic levels;

number and size of ad units per page on our customers' Web sites;

the introduction of new products or services by us or our competitors;

variations in the levels of capital, operating expenditures and other costs
relating to our operations;

general seasonal and cyclical fluctuations; and

general economic and industry conditions.

We may not be able to adjust spending quickly enough to offset any
unexpected revenue shortfall. Our operating expenses include upgrading and
enhancing our ad management and email delivery technology, expanding our product
and service offerings, marketing and supporting our products and services and
supporting our sales and marketing operations. If we have a shortfall in revenue
in relation

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to our expenses, or if our expenses exceed revenue, then our business, results
of operations and financial condition could be materially and adversely
affected. These results would likely affect the market price of our common stock
in a manner that may be unrelated to our long-term operating performance.

Our business is subject to seasonal fluctuations. Advertisers generally
place fewer advertisements during the first and third calendar quarters of each
year, which directly affects the DoubleClick TechSolutions business. The direct
marketing industry generally mails substantially more marketing materials in the
third calendar quarter, which directly affects the DoubleClick Data business.
The email technology business may experience seasonal patterns similar to the
traditional direct marketing industry, which typically generates lower revenues
earlier in the calendar year and higher revenues during the calendar year-end
months. Further, Internet user traffic typically drops during the summer months,
which reduces the amount of advertising to deliver.

As a result, we believe that period-to-period comparisons of our results of
operations may not be indicators of future performance. It is possible that in
some future periods our results of operations may be below the expectations of
public market analysts and investors. In this event, the price of our common
stock may fall.

WE MAY NOT BE ABLE TO CONTINUE TO GROW THROUGH ACQUISITIONS OF OR INVESTMENTS IN
OTHER COMPANIES.

Our business has expanded rapidly in part as a result of acquisitions or
investments in other companies, including the acquisitions of Abacus Direct,
NetGravity, FloNetwork and MessageMedia. We may continue to acquire or make
investments in other complementary businesses, products, services or
technologies as a means to grow our business. From time to time we have had
discussions with other companies regarding our acquiring, or investing in, their
businesses, products, services or technologies. We cannot assure you that we
will be able to identify other suitable acquisition or investment candidates.
Even if we do identify suitable candidates, we cannot assure you that we will be
able to make other acquisitions or investments on commercially acceptable terms,
if at all. Even if we agree to buy a company, we cannot assure you that we will
be successful in consummating the purchase. If we are unable to continue to
expand through acquisitions, our revenue may decline or fail to grow. We also
hold investments in securities of technology companies. Due to the recent
volatility in the stock market in general, and the market prices of securities
of technology companies in particular, the market value of these investments may
decline in future periods. Further, we cannot assure you that we will be able to
sell these securities at or above our cost basis.

WE MAY NOT MANAGE THE INTEGRATION OF ACQUIRED COMPANIES SUCCESSFULLY OR ACHIEVE
DESIRED RESULTS.

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

the difficulty of assimilating the operations and personnel of the acquired
companies;

the potential disruption of the ongoing businesses and distraction of our
management and the management of acquired companies;

the difficulty of incorporating acquired technology and rights into our
products and services;

unanticipated expenses related to technology and other integration;

difficulties in maintaining uniform standards, controls, procedures and
policies;

the impairment of relationships with employees and customers as a result of
any integration of new management personnel;

the inability to develop new products and services that combine our
knowledge and resources and our acquired businesses or the failure for a
demand to develop for the combined companies' new products and services;

potential failure to achieve additional sales and enhance our customer base
through cross-marketing of the combined company's products to new and
existing customers; and

potential unknown liabilities associated with acquired businesses.

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

DISRUPTION OF OUR SERVICES DUE TO UNANTICIPATED PROBLEMS OR FAILURES COULD HARM
OUR BUSINESS.

Our DART ad management technology resides in our data centers in multiple
locations in the United States and abroad. Continuing and uninterrupted
performance of our technology is critical to our success. Customers may become
dissatisfied by any system failure that interrupts our ability to provide our
services to them, including failures affecting our ability to deliver
advertisements without significant delay to the viewer. Sustained or repeated
system failures would reduce the attractiveness of our products and services to
our customers and result in contract terminations, fee rebates and makegoods,
thereby reducing revenue. Slower response time or system failures may also
result from straining the capacity of our technology due to an increase in the
volume of advertising delivered through our servers. To the extent that we do
not effectively address any capacity constraints or system failures, our
business, results of operations and financial condition could be materially and
adversely affected.

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

WE DEPEND ON THIRD-PARTY INTERNET AND TELECOMMUNICATIONS PROVIDERS, OVER WHOM WE
HAVE NO CONTROL, TO OPERATE OUR SERVICES. INTERRUPTIONS IN OUR SERVICES CAUSED
BY ONE OF THESE PROVIDERS COULD HAVE AN ADVERSE EFFECT ON REVENUE AND SECURING
ALTERNATE SOURCES OF THESE SERVICES COULD SIGNIFICANTLY INCREASE EXPENSES.

We depend heavily on several third-party providers of Internet and related
telecommunication services, including hosting and co-location facilities, in
delivering our products and services. These companies may not continue to
provide services to us without disruptions in service, at the current cost or at
all. The costs associated with any transition to a new service provider would be
substantial, requiring us to reengineer our computer systems and
telecommunications infrastructure to accommodate a new service provider. This
process would be both expensive and time consuming. In addition, failure of our
Internet and related telecommunications providers to provide the data
communications capacity in the time frame we require could cause interruptions
in the services we provide. Unanticipated problems affecting our computer and
telecommunications systems in the future could cause interruptions in the
delivery of our services, causing a loss of revenue and potential loss of
customers.

WE ARE DEPENDENT ON KEY PERSONNEL AND ON KEY EMPLOYEE RETENTION AND RECRUITING
FOR OUR FUTURE SUCCESS.

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

34

positions. There is competition for qualified employees in our industry. We may
not be able to retain our key employees or attract, assimilate or retain other
highly qualified employees in the future. We have from time to time in the past
experienced, and we expect to continue to experience in the future, difficulty
in hiring and retaining highly skilled employees with appropriate
qualifications.

IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, WE COULD LOSE OUR
INTELLECTUAL PROPERTY RIGHTS.

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

In September 1999, the U.S. Patent and Trademark Office issued to us a
patent that covers our DART ad management technology. We own other patents, and
have patent applications pending for our technology. We cannot assure you that
patents applied for will be issued or that patents issued or acquired by us now
or in the future will be valid and enforceable or provide us with any meaningful
protection.

We also have rights in the trademarks that we use to market our products and
services. These trademarks include DOUBLECLICK'r', DART'r', DARTMAIL'TM' and
ABACUS'TM'. We have applied to register our trademarks in the United States and
internationally. We cannot assure you that any of our current or future
trademark applications will be approved. Even if they are approved, these
trademarks may be successfully challenged by others or invalidated. If our
trademark registrations are not approved because third parties own these
trademarks, our use of these trademarks will be restricted unless we enter into
arrangements with these parties which may not be available on commercially
reasonable terms, if at all.

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

IF WE FACE A CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, WE
MAY BE LIABLE FOR DAMAGES AND BE REQUIRED TO MAKE CHANGES TO OUR TECHNOLOGY OR
BUSINESS.

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

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

35

similar agreements with the third parties asserting these claims. Such
agreements, if required, may be unavailable on terms acceptable to us, or at
all. If we are unable to enter into these types of agreements, we would be
required to either cease offering the subject product or change the technology
underlying the applicable product. If a successful claim of infringement is
brought against us and we fail to develop non-infringing technology or to
license the infringed or similar technology on a timely basis, it could
materially adversely affect our business, financial condition and results of
operations.

OUR BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED BY LAWSUITS RELATED TO PRIVACY
AND OUR BUSINESS PRACTICES.

We are a defendant in several lawsuits alleging, among other things, that we
unlawfully obtain and use Internet users' personal information and that our use
of cookies violates various laws. We are the subject of an inquiry involving the
attorneys general of several states relating to our practices in the collection,
maintenance and use of information about, and our disclosure of these
information practices to, Internet users. We may in the future receive
additional regulatory inquiries and we intend to cooperate fully. Class action
litigation and regulatory inquiries of these types are often expensive and time
consuming and their outcome is uncertain.

We cannot quantify the amount of monetary or human resources that we will be
required to use to defend ourselves in these proceedings. We may need to spend
significant amounts on our legal defense, senior management may be required to
divert their attention from other portions of our business, new product launches
may be deferred or canceled as a result of these proceedings, and we may be
required to make changes to our present and planned products or services, any of
which could materially and adversely affect our business, financial condition
and results of operations. If, as a result of any of these proceedings, a
judgment is rendered or a decree is entered against us, it may materially and
adversely affect our business, financial condition and results of operations.

OUR BUSINESS DEPENDS IN PART ON SUCCESSFUL ADAPTATION OF OUR BUSINESS TO
INTERNATIONAL MARKETS, IN WHICH WE HAVE LIMITED EXPERIENCE. FAILURE TO
SUCCESSFULLY MANAGE THE RISKS OF INTERNATIONAL OPERATIONS AND SALES AND
MARKETING EFFORTS WOULD HARM OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

We have operations in a number of countries and have limited experience in
developing localized versions of our products and services and in marketing,
selling and distributing our products and services internationally. We sell our
technology products and services through our directly and indirectly owned
subsidiaries primarily located in Australia, Canada, France, Germany, Spain,
Ireland, the United Kingdom, Hong Kong and Japan. A great deal of our success in
these markets is directly dependent on the success of our business partners and
their dedication of sufficient resources to our relationship.

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

the high cost of maintaining international operations;

uncertain demand for our products and services;

the impact of recessions in economies outside the United States;

changes in regulatory requirements;

more restrictive data protection regulation;

reduced protection for intellectual property rights in some countries;

potentially adverse tax consequences;

difficulties and costs of staffing and managing foreign operations;

political and economic instability;

fluctuations in currency exchange rates; and

seasonal fluctuations in Internet usage.

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

36

may also materially and adversely affect our business, results of operations and
financial condition as a whole.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY MAKE IT
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.

Some of the provisions of our certificate of incorporation, our bylaws and
Delaware law could, together or separately:

discourage potential acquisition proposals;

delay or prevent a change in control; or

impede the ability of our stockholders to change the composition of our
board of directors in any one year.

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

OUR STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS, AND THIS
VOLATILITY COULD RESULT IN US BECOMING SUBJECT TO SECURITIES LITIGATION, WHICH
IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF RESOURCES.

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

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

FUTURE SALES OF OUR COMMON STOCK MAY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.

As of June 30, 2002, we had 136,281,709 shares of common stock outstanding,
excluding 18,017,826 shares subject to options outstanding as of such date under
our stock option plans that are exercisable at prices ranging from $0.01 to
$1,272.35 per share. We cannot predict the effect, if any, that future sales of
common stock or the availability of shares of common stock for future sale will
have on the market price of our common stock prevailing from time to time. Sales
of substantial amounts of common stock, including shares issued upon the
exercise of stock options, or the perception that such sales could occur, may
materially reduce prevailing market prices for our common stock.

RISKS RELATED TO OUR INDUSTRY

ADVERTISERS MAY BE RELUCTANT TO DEVOTE A PORTION OF THEIR BUDGETS TO INTERNET
ADVERTISING AND DIGITAL MARKETING PRODUCTS AND SERVICES.

Companies doing business on the Internet, including DoubleClick, must
compete with traditional advertising media, including television, radio, cable
and print, for a share of advertisers' total marketing budgets. Potential
customers may be reluctant to devote a significant portion of their marketing
budget to Internet advertising or digital marketing products and services if
they perceive the Internet to be a limited or ineffective marketing medium. Any
shift in marketing budgets away from Internet advertising spending or digital
marketing products and services could materially and adversely affect our
business, results of operations or financial condition.

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THE LACK OF APPROPRIATE ADVERTISING MEASUREMENT STANDARDS OR TOOLS MAY CAUSE US
TO LOSE CUSTOMERS OR PREVENT US FROM CHARGING A SUFFICIENT AMOUNT FOR OUR
PRODUCTS AND SERVICES.

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

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

NEW LAWS IN THE UNITED STATES AND INTERNATIONALLY COULD HARM OUR BUSINESS.

Laws applicable to Internet communications, e-commerce, Internet
advertising, data protection and direct marketing are becoming more prevalent in
the United States and worldwide. For example, various U.S. state and foreign
governments may attempt to regulate our ad delivery or levy sales or other taxes
on our activities.

In addition, the laws governing the Internet remain largely unsettled, even
in areas where there has been some legislative action. It is difficult to
determine whether and how existing laws such as those governing intellectual
property, data protection, libel and taxation apply to the Internet, Internet
advertising and our business.

The growth and development of Internet commerce has prompted calls for more
stringent consumer protection laws, both in the United States and abroad. These
proposals may seek to impose additional burdens on companies conducting business
over the Internet. In particular, new limitations on the collection and use of
information relating to Internet users are being considered by legislatures and
regulatory agencies in the United States and internationally. We are unable to
predict whether any particular proposal will pass, or the nature of the
limitations in those proposals. In addition, it is possible that changes to
existing law, including both amendments to existing law and new interpretations
of existing law, could have a material and adverse impact on our business,
financial condition and results of operations.

The following are examples of proposals currently being considered in the
United States and internationally:

Legislation has been proposed in the United States and elsewhere in the
world to regulate the use of cookie technology. Our technology uses cookies
for ad targeting and reporting, among other things. It is possible that the
changes required for compliance are commercially unfeasible, or that we are
simply unable to comply and, therefore, may be required to discontinue the
relevant business practice.

Data protection officials in certain European countries have voiced the
opinion that Internet protocol addresses and cookies are intrinsically
personally-identifiable information. In those countries in which this
opinion prevails, the applicable national data protection law could be
interpreted to subject us to a more restrictive regulatory regime. We
cannot assure you that our current policies and procedures would meet more
restrictive standards. The cost of such compliance could be material and we
may not be able to comply with the applicable national regulations in a
timely or cost-effective manner.

Legislation has been proposed to prohibit the sending of `unsolicited
commercial email.' Although our email delivery is consent-based, it is
possible that legislation will be passed that impose stricter standards and
thus requires us to change our current practices or subjects us to
increased liabilities.

Any legislation enacted or regulation issued could dampen the growth and
acceptance of the digital marketing industry in general and of our offerings in
particular. In response to evolving legal requirements, we may be compelled to
change or discontinue an existing offering, business or business

38

model, or to cancel a proposed offering or new business. Any of these
circumstances could have a material and adverse impact on our business,
financial condition and results of operations. These changes could also require
us to incur significant expenses, and we may not find ourselves able to replace
the revenue lost as a consequence of the changes.

We are a member of the Network Advertising Initiative and the Direct
Marketing Association, both industry self-regulatory organizations. We cannot
assure you that these organizations will not adopt additional, more burdensome
guidelines, which could materially and adversely affect our business, financial
condition and results of operations.

DEMAND FOR OUR PRODUCTS AND SERVICES MAY DECLINE DUE TO THE PROLIFERATION OF
SOFTWARE DESIGNED TO PREVENT THE DELIVERY OF INTERNET ADVERTISING OR BLOCK THE
USE OF COOKIES.

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

OUR BUSINESS MAY SUFFER IF THE WEB INFRASTRUCTURE IS UNABLE TO EFFECTIVELY
SUPPORT THE GROWTH IN DEMAND PLACED ON US.

Our success will depend, in large part, upon the maintenance of the Web
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security and timely development of enabling products, such as
high speed modems, for providing reliable Web access and services and improved
content. We cannot assure you that the Web infrastructure will continue to
effectively support the demands placed on us as the Web continues to experience
increased numbers of users, frequency of use or increased bandwidth requirements
of users. Even if the necessary infrastructure or technologies are developed, we
may have to spend considerable amounts to adapt our products and services
accordingly. Furthermore, the Web has experienced a variety of outages and other
delays due to damage to portions of its infrastructure. These outages and delays
could impact the Web sites of Web publishers using our products and services.

DOUBLECLICK DATA IS DEPENDENT ON THE SUCCESS OF THE DIRECT MARKETING INDUSTRY
FOR OUR FUTURE SUCCESS.

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

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INCREASES IN POSTAL RATES AND PAPER PRICES COULD HARM DOUBLECLICK DATA.

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

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Beginning in May 2001, a number of substantially identical class action
complaints alleging violations of the federal securities laws were filed in the
United States District Court for the Southern District of New York naming us and
certain of our officers and directors and certain underwriters of our initial
public offering as defendants. All of the initial complaints filed against us
and our officers and directors were dismissed without prejudice. However, the
plaintiffs filed an amended complaint on April 24, 2002 against us, certain of
our officers and directors and certain underwriters of our follow-on offerings
alleging, among other things, that the underwriters violated the securities laws
by failing to disclose in the offerings' registration statements certain alleged
compensation arrangements entered into by the underwriters (such as commission
payments or stock stabilization practices) and by engaging in manipulative
practices to artificially inflate the price of our stock. We and some of our
officers and directors are named in the suit pursuant to Section 11 of the
Securities Act of 1933 and Section 10(b) of the Securities Exchange Act 1934 on
the basis of an alleged failure to disclose the underwriters' alleged
compensation and manipulative practices. These actions seek, among other things,
unspecified damages and costs, including attorneys fees.

We are a defendant in 20 lawsuits concerning Internet user privacy and our
data collection and other business practices. These lawsuits were filed
throughout 2000. Eighteen of these actions are styled as class actions, one
action is brought on behalf of the general public of the State of California and
one is brought against us and ClearStation, Inc. on behalf of the State of
Illinois by the State's Attorney of Cook County, Illinois. The actions seek,
among other things, injunctive relief, civil penalties and unspecified damages.
Five of the actions were filed in California state court, 13 in federal court,
one in Texas state court and one in Illinois state court. On March 31, 2000, the
plaintiff in one of the California state court proceedings filed a petition,
ordered by the court on May 11, 2000, to coordinate the four actions then
pending in the California state courts. The Judicial Panel on Multidistrict
Litigation granted our motions to transfer, coordinate and consolidate all
thirteen federal actions before Judge Buchwald in the Southern District of New
York. On March 28, 2001, Judge Buchwald dismissed all federal lawsuits against
us. In conjunction with a proposed settlement, the plaintiffs withdrew their
appeal to the Second Circuit Court of Appeals. In March 2002, the parties filed
a settlement agreement with the federal court that would resolve the federal
lawsuits and the state lawsuits in California and Texas, to which the court gave
preliminary approval on March 29, 2002. On March 29, 2002, the parties issued a
joint press release outlining the terms of the settlement, a copy of which was
included in our Current Report on Form 8-K filed on April 3, 2002. The court
gave final approval of the settlement at a hearing held on May 21, 2002 and the
judge signed a Final Judgment and Order of Dismissal of the actions on May 23,
2002. One person objected to the settlement and filed a notice of appeal of the
court's order on June 19, 2002. A briefing schedule has not yet been established
by the Second Circuit Court of Appeals. Our ad serving and data collection
practices are also the subject of inquiries by the attorneys general of several
states. We are cooperating fully with all such inquiries.

Following the announcement of our proposed merger with NetGravity on July
27, 1999, a complaint, styled as a class action, was filed in the San Mateo
County, California, Superior Court against NetGravity and several of its
directors. The complaint alleges that the directors of NetGravity breached their
fiduciary duties to NetGravity's stockholders in connection with the negotiation
of the proposed merger. The complaint asked the court to enjoin the consummation
of the merger, or, alternatively, sought to rescind the merger or an award of
unspecified damages from the defendants in the event the merger was consummated.
The parties have filed a settlement agreement with the court, to which the court
gave preliminary approval. Final approval by the court of the settlement
is pending. The settlement, which we believe will be covered by our insurer,
would require the payment of $270,000 into an escrow account to cover the
reasonable fees and expenses incurred by plaintiff and his counsel.

We believe that the claims asserted by these lawsuits are without merit. We
intend to defend these actions vigorously, however, due to the inherent
uncertainties of litigation, we cannot accurately predict

41

the ultimate outcome of the litigation. An unfavorable outcome in litigation
could materially and adversely affect our business, financial condition and
results of operations.

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

We held our 2002 Annual Meeting of Stockholders on May 29, 2002. At that
meeting, our stockholders (i) approved the election of Dwight A. Merriman, Kevin
P. Ryan and David N. Strohm as Class II directors whose term expires in 2005,
(ii) did not approve the Amended and Restated 1997 Stock Incentive Plan, which
would have increased the number of shares subject to awards that a person
participating in the Amended 1997 Plan may receive from 1,500,000 shares in one
calendar year to a limit of 3,000,000 shares over a two-calendar year period;
and (iii) approved the ratification of PricewaterhouseCoopers LLP as our
independent auditors for the fiscal year ending December 31, 2002.

There were 89,264,965 votes cast for and 32,250,940 votes withheld in
connection with the election of Dwight A. Merriman as a director. There were
98,073,777 votes cast for and 23,442,128 votes withheld in connection with the
election of Kevin P. Ryan as a director. There were 121,084,564 votes cast for
and 431,341 votes withheld in connection with the election of David N. Strohm as
a director. The remainder of our board of directors, W. Grant Gregory, Thomas S.
Murphy, Mark E. Nunnelly, Kevin J. O'Connor and Don Peppers, remains as
previously reported. The Amended and Restated 1997 Stock Incentive Plan was not
approved at our annual meeting. There were 58,649,343 votes cast for, 62,629,835
votes cast against and 236,727 abstentions in connection with the Amended and
Restated 1997 Stock Incentive Plan. There were 118,939,126 votes cast for,
2,505,205 votes cast against and 71,574 abstentions in connection with the
ratification of PricewaterhouseCoopers LLP as independent auditors.

ITEM 5. OTHER INFORMATION

On June 7, 2002, we completed a voluntary stock option exchange offer with
sixteen of our employees, including five of our executive officers. Employees
participating in the exchange offer had the opportunity to exchange previously
granted options with an exercise price well in excess of the market price of our
common stock for a more favorable vesting schedule for outstanding options that
were granted on June 18, 2001. As a result of the exchange offer, approximately
two million options were cancelled. We did not issue additional options as a
result of the exchange offer.

ITEM 6. EXHIBITS AND REPORT ON FORM 8-K

(a) Exhibits

(b) Reports on Form 8-K

We filed a Current Report on Form 8-K, Items 5 and 7, on April 3, 2002,
attaching the press release we issued on March 29, 2002 announcing a settlement
agreement relating to all the federal and state class action privacy litigation
against DoubleClick.

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SIGNATURE

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

Date: August 14, 2002 DOUBLECLICK INC.

By: /s/ THOMAS BOYLE
..................................
THOMAS BOYLE
CORPORATE CONTROLLER
(CHIEF ACCOUNTING OFFICER AND
DULY AUTHORIZED OFFICER)

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INDEX TO EXHIBITS

44

STATEMENT OF DIFFERENCES
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The registered trademark symbol shall be expressed as .................... 'r'