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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 000-23709

DoubleClick Inc.

111 Eighth Avenue, 10th Floor

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

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

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

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

      The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2003 was approximately $1,166,825,858 (based on the last reported sale price on the NASDAQ National Market on that date). As of March 8, 2004 there were 137,007,276 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s Proxy Statement for the 2004 Annual Meeting of Stockholders, which is to be filed subsequent to the date hereof, are incorporated by reference into Part III.

DOUBLECLICK INC.

TABLE OF CONTENTS

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Cautionary Note Regarding Forward-Looking Statements

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

PART I

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

      In 2003, we derived our revenues from two business units: TechSolutions and Data (consisting of our Abacus and Data Management divisions).

      DoubleClick TechSolutions: DoubleClick TechSolutions offers direct marketers, Web publishers and advertisers industry-leading technology solutions for their marketing needs in an increasingly multi-channel world. In 2003, DoubleClick TechSolutions reported revenues of $175.4 million, a decline of 6.3% from 2002.

      Since the successful launch of our first technology product in 1997, DoubleClick TechSolutions has established a track record of innovation and reliability. Solutions offered by TechSolutions include our ad management products and services, consisting of the DART for Publishers Service, the DART Enterprise ad serving software product, the DART for Advertisers Service and DART Motif, and our marketing automation products and services, consisting of email products and services based on our DARTmail Service, Ensemble, our campaign management software product, and our SiteAdvance analytics tools.

      During 2003, we focused on improving the features and functionality of both our ad management and marketing automation products to address the needs of direct marketers and Web publishers. In particular, we released DARTmail 4.0, an enhanced email platform, that provides customers with advanced reporting capabilities, enhanced subscription management tools and integration with many of our other products and services. In addition, we launched Ensemble 6.5, an improved campaign management solution, that features new customer intelligence, real-time marketing and integration with our DARTmail product. In addition, we introduced DART Motif, a rich media authoring and delivery solution.

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      Our patented DART (Dynamic, Advertising, Reporting and Targeting) ad management technology is the platform for many of our TechSolutions products and services. The DART ad management technology is a sophisticated targeting, reporting and delivery tool, relied upon by our customers to measure campaign performance and provide dynamic ad space inventory management.

•	Ad Management Products and Services

	•	DART for Publishers Service. Since January 1997, our DART for Publishers Service has provided Web publishers with a comprehensive solution for ad inventory management and ad targeting, delivery and reporting. Deploying the DART ad management technology in data centers all over the world, the DART for Publishers Service offers the scalability, reliability and design needed to deliver large volumes of ads.
	•	DART Enterprise Software. DART Enterprise is an online advertising and marketing management licensed software product for Web publishers and merchants. This ad serving software automates critical processes needed to run a successful online marketing business, including sophisticated inventory and order management, precision targeting, dynamic delivery, tracking and detailed campaign reporting.
	•	DART for Advertisers Service. The DART for Advertisers Service, which also uses the DART ad management technology, is a Web-based application that enables advertisers and their agencies to increase their return on investment and to streamline the ad management process through analytical reporting. The DART for Advertisers Service offers effective campaign planning, management and optimization to allow advertisers and their agencies to simplify and control their online ad campaigns, understand their customers and act quickly on knowledge gained.
	•	DART Motif. DART Motif unites Macromedia Flash, a design authoring tool for rich media ads, with our ad management products, to reduce steps and resources in each stage of the rich media advertising process. It offers DART ad management product users the convenience of one unified system that automates the complete rich media workflow, including creative development, trafficking and delivery, comprehensive, centralized reporting, and billing and reconciliation.
	•	MediaVisor. MediaVisor is a Web-based workflow solution that streamlines the entire media planning, buying and tracking process for agencies and advertisers. MediaVisor can be used as a stand-alone tool or in conjunction with DART for Advertisers or with many existing in-house systems.

•	Marketing Automation Products and Services

	•	Email. Our suite of email technology products includes both the DARTmail Service, which is a Web-based application, and a licensed software product. Our DARTmail Service enables advertisers and merchants to deliver personalized email communications to their customers for the purpose of building long-term, profitable relationships. These products and services allow direct marketers and Web publishers to manage and deliver their email marketing campaigns. We also offer a Strategic Services team that helps our email marketing clients define, answer and act upon marketing problems and provides strategic consulting guidance and recommendations.
	•	Campaign Management. Ensemble is an integrated campaign management software solution that allows direct marketers to plan and execute their acquisition and retention programs from their desktop. Ensemble helps customers improve their marketing return on investment through faster and more granular segmentation as well as enhance marketing velocity through automated scheduling and execution of campaigns.
	•	Marketing Analytics. SiteAdvance is a hosted Web site measurement and analysis solution that provides in-depth marketing analytics connecting Web site metrics with multi-channel marketing data. This tool, which complements our DARTmail and DART for Advertisers products and services, enables direct marketers to understand the interaction between marketing programs, site traffic and online transactions.

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      Our TechSolutions offerings are backed worldwide by our Global Technical Services team, which offers service 24 hours a day, seven days a week. Through our Global Technical Services team, we provide our customers with a full range of support, from pre-sales technical design and architecture to post-sale implementation. We also provide comprehensive education and consulting services that help our customers maximize the value of our TechSolutions products and services. These consulting services include providing strategic guidance and recommendations, customizing and extending existing TechSolutions products and services, integrating our products and services into existing infrastructure and data assets and training employees to use our products and services more effectively.

      DoubleClick Data: DoubleClick Data, which consists of our Abacus and Data Management divisions, generated revenues of $95.9 million in 2003, an increase of 15.1% from 2002. 2003 revenues include $5.5 million of revenue from our new Data Management division that was formed in June 2003 when we acquired Computer Strategy Coordinators, Inc., a data management company. Abacus revenues were up 12.8% over 2002 to $90.4 million. DoubleClick Data’s 2002 revenues included $3.1 million in revenue from divested businesses.

      Abacus is a leading provider of information products and services to the direct marketing industry. Abacus services help direct marketers, merchants and businesses to increase response rates and profits from their direct mail marketing campaigns. Abacus applies advanced statistical modeling techniques to cooperative databases of consumer and business purchasing behavior to help the Alliance members acquire and retain customers. Based on this data modeling, Abacus identifies those consumers or businesses most likely to purchase a particular product or service. Alliance members use this data to reach identified consumers and businesses by direct mail and email. Abacus is a blind cooperative alliance and only those members of the Abacus Alliance that contribute transaction information into the Abacus Alliance database are entitled to the full range of Abacus services.

      Core Abacus Products. Abacus has been primarily a United States based merchant to consumer business. The Abacus Alliance databases offer a combination of transactional, geographic, demographic and behavioral profile data, enabling marketers to gain a better understanding of consumer behaviors and conduct more effective marketing campaigns. The key products and services we offer to our Abacus Alliance members in the United States include the following:

	•	Acquisition Solutions. Our acquisition solutions provide customers with new prospect names ranked according to the likelihood that the consumer will respond to a particular direct marketing offer. The criteria for ranking include recency, frequency, time of year and dollar amount of catalog purchases. This service enables catalog companies to expand their business base and offset consumer attrition.
	•	Retention Solutions. Abacus retention solutions allow customers to match Abacus Alliance data to their existing customer information and model the resulting information. This service offers our clients a ranking of the customers contained in a client’s housefile list according to their propensity to respond. This service also allows clients to select only optimal customers to mail, to reactivate older buyers, activate inquiries, suppress low performing names, cross-sell and replace marginal prospect lists at a lower cost.
	•	List Optimization. Like our acquisition solutions service, our list optimization service ranks names on a direct mail list according to likelihood of response. This optimization service enables the customer to identify and target the most likely buyers. This process not only increases the potential profitability of the lists a client currently uses, whether a house list or acquired from another source, but also permits the client to use lists that were previously considered unprofitable by selecting names most likely to generate sales.

      Business-to-Business Alliance. Abacus also maintains a Business-to-Business Alliance which now has over one billion transactions and helps its members to improve their direct mail targeting and customer

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      Abacus International. Abacus maintains the Abacus Alliance for direct marketers in the United Kingdom, which was operated through a joint venture with VNU Marketing Information Europe & Asia B.V., an affiliate of Claritas (UK) Limited, until June 2002, at which time we acquired VNU’s 50% interest in the joint venture. In addition, during 2003, we launched an Abacus Alliance in Japan and formed a joint venture with AZ Direct GmbH, a subsidiary of Bertelsmann AG, to operate an Abacus alliance in Germany. We plan to provide products similar to those offered to direct marketers in the United States to our Abacus clients internationally.

      Our Data Management division was formed in June 2003 following our acquisition of Computer Strategy Coordinators, Inc. This division offers direct marketers solutions for building and managing customer marketing databases, tools to plan, execute and measure multi-channel marketing campaigns, as well as list processing and data hygiene products and services. Our data management products and services enable clients to analyze their customer’s purchasing behavior and preferences to make better merchandising decisions and improve target marketing communications. These products and services can help direct marketers improve response rates to marketing campaigns, increase frequency with which customers make purchases, enhance the value of each order and improve customer loyalty over time.

Technology Infrastructure

      Our technology infrastructure and operations are built to deliver high availability, performance, security and scalability. We built our systems environment with multiple layers of redundancy to help ensure we meet and exceed any service level agreements with our customers. We utilize multiple hosting and Internet service provider partners to maximize redundancy and diversity.

      Our systems management tools are designed to switch traffic from one server to another, one data center to another and from one Internet service provider to another seamlessly and efficiently. We have built in horizontal scaling capabilities where appropriate to help ensure the unlimited scalability of our systems. At the same time, the design helps us to minimize the impact of the problems if they occur.

      We have implemented tight change management processes to help ensure the integrity of the production environment. We emphasize the quality of service to our customers by employing internal as well as external monitoring capabilities. We not only provide the 24 hour, seven days a week monitoring for our internal technology environment, but we also provide this service from the end-user perspective. In addition, we have a problem resolution process and escalation steps to handle problems we may encounter while monitoring.

Sales and Marketing

      We sell our products and services in the United States through a sales and marketing organization that consisted of 364 employees as of December 31, 2003. These employees are primarily located at our headquarters in New York and also are based in other North American cities, including Broomfield, Colorado, Thornton, Colorado, San Mateo, California and Toronto, Canada. We generally organize the sales force for our TechSolutions products into two teams, one focused on our ad management products and services and one focused on our marketing automation products and services. Our sales force for our Abacus products and services is generally organized into three teams, one dedicated to the business-to-consumer segment, another dedicated to the business-to-business segment, both of which focus on selling Abacus and other DoubleClick products and services to existing customers, and a third dedicated to new business development with new and existing customers. Our Data Management division has a separate sales force primarily focused on selling its product and services as well as our marketing automation products and services.

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      We conduct comprehensive marketing programs and support our direct sales efforts to actively promote the DoubleClick brand. These programs include public relations, online advertisements, print advertisements, Web advertising seminars, trade shows and ongoing customer communications programs.

      Our European operations are based out of our Irish subsidiary located in Dublin, Ireland. Our Asian operations are run through our branch office in Hong Kong. We sell our technology products and services through our directly and indirectly owned subsidiaries primarily located in Australia, China, France, Germany, Ireland, Spain, the United Kingdom and Hong Kong. In Japan, our technology products and services are sold through DoubleClick Japan, of which we own approximately 15% of the outstanding shares. We operate the international DoubleClick Data business through indirect wholly owned subsidiaries located in the United Kingdom and Japan and a joint venture located in Germany of which we own a 50% interest. Our international sales and marketing organization consisted of 103 employees as of December 31, 2003. Please see our discussion of the risks relating to our international operations under “Risk Factors” beginning on page 8.

Corporate History

      We were incorporated in Delaware on January 23, 1996 as DoubleClick Incorporated, and changed our name to DoubleClick Inc. on May 14, 1996.

      Our Internet address is www.doubleclick.net. We make available free of charge on our Internet Web Site our annual reports on Form 10-K quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

      See Note 18 to the Consolidated Financial Statements for revenues and operating income (loss) attributable to each of our lines of business and revenues and long-lived asset information by geographic region.

Competition

      The market for marketing technology and data products and services is very competitive. We expect this competitive environment to continue in some of our businesses due to low barriers to entry. Competition may also increase as a result of industry consolidation.

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

	•	the timing and acceptance of new products and services and enhancements to existing products and services developed either by us or our competitors;
	•	customer service and support efforts;
	•	our ability to adapt, integrate and scale our technology and products, and develop and introduce new technologies, as customer needs change and grow;
	•	sales and marketing efforts;
	•	the features, ease of use, performance, price and reliability of products and services developed either by us or our competitors; and
	•	the relative impact of general economic and industry conditions on either us or our competitors.

      TechSolutions’ ad management products and services compete with providers of outsourced ad management services, ad serving software and related services for the delivery of Web ads for direct marketers, Web publishers and advertisers as well as inhouse solutions. We also compete indirectly with providers of other solutions for online advertising, such as providers of paid search services.

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      Within marketing automation, our email delivery products and services compete with other providers of email delivery and inhouse solutions, including providers of email delivery software and related services. We also face competition from providers of enterprise software solutions for online and offline campaign management. In addition, we compete with Web analytics companies and providers of strategic consulting services to online marketers, advertisers and Web publishers.

      Data, through the Abacus division, competes with a broad range of companies that provide information products and marketing research services to the direct marketing industry. Data also competes with direct marketing list providers, data aggregation companies and providers of database marketing services and information products and marketing research services to the direct marketing industry.

      We also face competition from large marketing services providers, including service bureau solutions, that may offer competing products and services as an extension of their other offerings and, therefore may provide customers with a more integrated enterprise solution set. In addition, we compete with point solution providers that may offer expertise in a particular segment or solutions within a specialized market, including providers of online advertising and email products and services.

      We also compete indirectly with others, such as providers of customer relationship management services, and companies that facilitate marketing automation.

Privacy and Data Protection

      We continue to be a leader in promoting consumers’ privacy and understanding the technologies that our clients, direct marketers, advertising agencies and data companies use to communicate with their existing customers and to acquire new customers. Our Chief Privacy Officer leads our privacy and data protection efforts. Our privacy team focuses on ensuring that we are effectively implementing our privacy policies and procedures and works with our clients to institute and improve their privacy procedures, while helping them to educate their customers about the privacy issues applicable to them. In addition, our privacy team actively participates in a number of industry privacy organizations.

Seasonality and Cyclicality

      We believe that our business is subject to seasonal fluctuations. Advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which directly affects our DoubleClick TechSolutions business, and the direct marketing industry generally compiles more customer data in the third calendar quarter, which directly affects our DoubleClick Data business. Further, Internet user traffic typically drops during the summer months, which reduces the amount of online advertising. Expenditures by direct marketers and advertisers tend to vary in cycles that reflect overall economic conditions as well as budgeting and buying patterns. We believe that our email technology business may experience seasonal patterns similar to those of the traditional direct marketing industry, which typically generates lower revenues earlier in the calendar year and higher revenues later in the year. If these patterns continue our revenue may be affected by these fluctuations. Our revenue has in the past and may in the future be materially affected by a decline in the economic prospects of our customers or in the economy or our industry in general, which could alter our current or prospective customers’ spending priorities or budget cycles or extend our sales cycle.

Proprietary Rights

      Our success and ability to effectively compete are substantially dependent on the protection of our proprietary technologies and our other intellectual property, which we protect through a combination of patent, trademark, copyright, trade secret, unfair competition and contract law. In September 1999, the U.S. Patent and Trademark Office issued to us a patent that covers our DART ad management technology and service. We own other patents, and have patent applications pending, for our some of technology and related products and services.

      We also have rights in the trademarks and service marks that we use to market our products and services. These marks include, among others, DOUBLECLICK®, DART®, DARTMAIL®, ABACUS^SM,

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

      Third parties have asserted, and may in the future assert, infringement claims against us, which could adversely affect the value of our proprietary rights, our intellectual property and our reputation. Such claims could subject us to significant liability for damages, and we could be restricted from using our intellectual property. Any claims asserted by third parties or litigation instituted by third parties may also result in limitations on our ability to use our intellectual property, unless we enter into arrangements with third parties asserting such claims, which may not be available on commercially reasonable terms, if at all.

EMPLOYEES

      As of December 31, 2003, we employed 1,223 persons, including 467 in sales and marketing, 219 in engineering and product development, 397 in technology operations, customer support and consulting, and 140 in general administration. We are not subject to any collective bargaining agreements and believe that our relationships with our employees are good.

RISK FACTORS

      As indicated in this annual report on Form 10-K under the caption “Cautionary Note Regarding Forward-Looking Statements”, certain of the information contained in this annual report consists of forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements made in this Form 10-K include the following:

RISKS RELATING TO OUR COMPANY AND OUR BUSINESS

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

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

	•	achieve anticipated revenue growth rates;
	•	manage our operations;
	•	compete effectively in the marketplace;
	•	develop and introduce new products and services;
	•	continue to develop, upgrade and integrate our products and services;
	•	attract, retain and motivate qualified personnel;

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	•	maintain our current, and develop new, relationships with direct marketers, Web publishers, advertisers and advertising agencies; and
	•	anticipate and adapt to changing industry conditions.

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

      With the exception of this past fiscal year, we have incurred net losses each year since inception, including net losses of $117.9 million and $265.8 million for the years ended December 31, 2002 and 2001, respectively. As of December 31, 2003 our accumulated deficit was $649.5 million. With the exception of this past fiscal year, we have not achieved profitability on an annual basis and may incur operating losses at times in the future. We expect to continue to incur significant operating and capital expenditures, which may include obligations for facilities that currently constitute excess or idle facilities. Periodically, we evaluate the expenses likely to be incurred for these facilities, and where appropriate, have taken restructuring charges with respect to these expenses. We cannot assure you that there will not be additional restructuring charges recognized with respect to our excess or idle facilities. As a result of our expenditures, we will need to generate significant revenue to maintain profitability. Even if we do continue to achieve profitability, we cannot assure you that we can sustain or increase profitability on a quarterly or annual basis in the future. If revenue does not meet our expectations, or if operating expenses exceed what we anticipate or cannot be reduced accordingly, our business, results of operations and financial condition will be materially and adversely affected.

      We derive, and expect to continue to derive for the foreseeable future, a large portion of our revenue from products and services we provide to direct marketers, Web publishers, advertisers and advertising agencies. Expenditures by direct marketers and advertisers tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. The overall market for advertising, including online advertising, has been characterized in the last few 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 over the past few years. We cannot assure you that further reductions will not occur.

      The number of ad impressions delivered by DoubleClick TechSolutions have, at times in the past, declined and may in the future decline or fail to grow or the price that we can charge for our services may decline, which in either case would adversely affect our revenues. A decline in the economic prospects of direct marketers or the economy in general would also adversely impact the revenue outlook for our marketing automation business. DoubleClick Data, which provides products and services to direct marketers, may face similar pressures. Some direct marketers may respond to economic downturns by reducing the number of catalogs mailed, thereby possibly reducing the demand for DoubleClick Data’s services. If direct marketing activities fail to grow or decline, our revenues could be adversely affected.

      We cannot assure you that reductions in marketing spending will not occur or that marketing spending will not be diverted to more traditional media or other online marketing products and services. However, even if economic conditions improve, we cannot assure you that marketing budgets and advertising spending will increase, or not decrease, from current levels. A decline in the economic prospects of marketers or the economy in general could alter current or prospective marketers’ spending priorities or increase the time it

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

      Our operations are dependent on our ability to protect our computer systems against damage from natural disasters, fire, power loss, water damage, telecommunications failures, vandalism 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. Some of our data centers are located at facilities provided by third parties and if these parties are unable to adequately protect our data centers, our business, results of operations and financial conditions could be materially and adversely affected.

      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.

      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 and change the scope of our product and service offerings both domestically and internationally and to deploy our resources in accordance with changing business conditions and opportunities. We have also grown through geographic expansion and as a result have dispersed offices and operation centers that make it more challenging to manage, operate and monitor our business and operations. To continue to successfully implement our business plan in our changing industry requires effective planning and management processes. We expect that we will need to continue to improve our financial and managerial controls and information and reporting systems and procedures and will need to continue to train and manage

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

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

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

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

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

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

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

	•	direct marketer, Web publisher and advertiser demand for our products and services;
	•	downward pricing pressures from current and potential customers for our products and services;
	•	Internet user traffic levels;
	•	number and size of ad units per page on our customers’ Web sites;
	•	the introduction of new products or services by us or our competitors;
	•	variations in the levels of capital, operating expenditures and other costs relating to our operations;
	•	the size and timing of significant pre-tax charges, including for goodwill impairment and the write-down of assets and restructuring charges and credits, such as those relating to idle or excess facilities and severance;
	•	costs related to any acquisitions or dispositions of technologies or businesses;
	•	general seasonal and cyclical fluctuations; and
	•	general economic and industry conditions.

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

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

      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, MessageMedia, Protagona and Computer Strategy Coordinators. We have recorded goodwill in connection with a number of our acquired businesses, including MessageMedia and FloNetwork. We have in the past recognized impairment charges with respect to the goodwill of some acquired businesses as a result of significantly lower-than-expected revenues generated with respect to acquired businesses and considerably reduced estimates of future performance. If market conditions require, we may in the future record additional impairments in the value of our acquired businesses.

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

      We are also minority investors in a few technology companies, including AdLINK, MaxWorldwide and DoubleClick Japan. Our investments have decreased in value in the past, and may decrease in the future, as a result of market volatility, and periodically, we have recorded charges to earnings for all or a portion of the unrealized loss due to declines in market value considered to be other than temporary. The market value of these investments may decline in future periods due to the continued volatility in the stock market in general or the market prices of securities of technology companies in particular and we may be required to record further charges to earnings as a result. Further, we cannot assure you that we will be able to sell these securities at or above our cost basis.

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

	•	the difficulty of assimilating the operations and personnel of the acquired companies;
	•	the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
	•	the difficulty of incorporating acquired technology and rights into our products and services;
	•	unanticipated expenses related to technology and other integration;

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	•	difficulties in disposing of the excess or idle facilities of an acquired company or business;
	•	difficulties in maintaining uniform standards, controls, procedures and policies;
	•	the impairment of relationships with employees and customers as a result of the integration of new management personnel;
	•	the inability to develop new products and services that combine our knowledge and resources and our acquired businesses or the failure for a demand to develop for the combined companies’ new products and services;
	•	potential failure to achieve additional sales and enhance our customer base through cross-marketing of the combined company’s products to new and existing customers;
	•	potential litigation resulting from our business combinations or acquisition activities; and
	•	potential unknown liabilities associated with the acquired businesses.

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

      We depend 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 could be substantial and require us to reengineer our computer systems and telecommunications infrastructure to accommodate a new service provider. This process could 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.

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

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

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

	•	delays or difficulties in product acquisition, integration or development;
	•	our competitors’ introduction of new products ahead of our new products, or their introduction of superior or cheaper products; and
	•	our failure to anticipate changes in customers’ requirements.

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

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

      In September 1999, the U.S. Patent and Trademark Office issued to us a patent that covers our DART ad serving and ad management technology. We are currently seeking reissue of this patent, which would limit the scope of the existing patent, and this reissue proceeding is pending before the U.S. Patent and Trademark Office. The patent examiner has raised some objections to our reissue application. Although we are contesting these objections, we cannot assure you that this patent will be reissued. We own other patents, and have patent applications pending for some of our other technology. We cannot assure you that the patent applications that we have filed in the United States and internationally will be issued or that patents issued or acquired by us now or in the future will be valid and enforceable or provide us with any meaningful protection.

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

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

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

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

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

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

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

      Our clients’ promotion of their products and services may not comply with federal, state and local laws, including but not limited to laws and regulations relating to the Internet. Failure of our customers to comply with federal, state or local laws or our policies could damage our reputation and adversely affect our business,

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

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

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

	•	the high cost of maintaining international operations;
	•	uncertain demand for our products and services;
	•	the impact of recessions in economies outside the United States;
	•	changes in regulatory requirements;
	•	more restrictive data protection regulation, which may vary by country;
	•	reduced protection for intellectual property rights in some countries;
	•	potentially adverse tax consequences;
	•	difficulties and costs of staffing and managing foreign operations;
	•	cultural differences in the conduct of business;
	•	political and economic instability;
	•	fluctuations in currency exchange rates; and
	•	seasonal fluctuations in Internet usage and marketing and advertising spending.

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

      Some of our customers have experienced, and may continue to experience, difficulty raising capital and supporting their current operations and implementing their business plans, or may be anticipating such difficulties and, therefore, may elect to scale back the resources they devote to marketing in general and our

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

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

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

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

      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.

      As of December 31, 2003, we had 137,483,705 shares of common stock outstanding, excluding 18,583,969 shares subject to options outstanding as of such date under our stock option plans that are exercisable at prices ranging from $0.01 to $1,134.80 per share. We cannot predict the effect, if any, that future sales of common stock or the availability of shares of common stock for future sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of common stock, including shares issued upon the exercise of stock options, or the perception that such sales could occur, may materially reduce the market value for our common stock.

RISKS RELATED TO OUR INDUSTRY

      Companies doing business on the Internet, including us, must compete with traditional advertising media, including television, radio, cable and print, for a share of advertisers’ total marketing budgets. Potential customers may be reluctant to devote a significant portion of their marketing budget to online advertising or marketing

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

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

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

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

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

      Among the technologies we use are “cookies,” or small pieces of data that are recorded on the computers of Internet users. Some countries, including the countries of the European Union, require that Internet users be allowed to refuse to accept cookies or other online tracking technologies. New technologies may make it

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

      Future laws and regulations could also have a material adverse effect on our business. In particular, new online consumer protection requirements could impose significant, unanticipated compliance costs and could make it inefficient or infeasible to operate certain parts of our business. Governments in the U.S. and other countries are considering new limitations on the collection, use and disclosure of personal information for marketing purposes. Any legislation enacted or regulation issued could dampen the growth and acceptance of our industry in general and of our offerings in particular. We are unable to predict whether any particular proposal will pass, or the nature of the limitations that may be imposed.

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

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

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

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

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

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

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

Item 2.     Properties

      Our principal executive offices are currently located in a leased facility in New York, New York. We lease office space in Broomfield, Colorado, which was the headquarters for Abacus before our merger and is now primarily used by DoubleClick Data. We also lease office space in Louisville, Colorado, which space was the headquarters of MessageMedia, Inc. before our merger, and in London, England, which space was used by our TechSolutions and Media businesses until we fully vacated the space in 2002.

      We own property in Thornton, Colorado consisting of approximately 115,000 square feet, which is primarily used by our DoubleClick TechSolutions and DoubleClick Data business units and serves as our primary data center.

      A summary of our significant leased office facilities is as follows:

(1)	We currently occupy most of the Broomfield facility and do not occupy the Louisville facility. We are currently pursuing several options with respect to unused space in our Louisville facility, including subletting all or a portion of the vacant space in the facilities. The remaining obligations under the Louisville lease are approximately $12 million.

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(2)

We do not currently occupy the London facility. This office space is currently being sublet, however, some of this office space is being sublet for a period less than the remaining lease term and our subtenants have the right to terminate their subleases at times in the future. Our total remaining obligation under this lease is approximately $45 million, assuming that we do not receive any sublease income during the lease term. We cannot assure you that we will not incur additional expenses relating to this facility.

      Periodically, we evaluate the expenses likely to be incurred for our facilities, and where appropriate, have taken restructuring charges with respect to these expenses. We cannot assure you that there will not be additional restructuring charges recognized with respect to our excess or idle facilities.

      We also lease space for our domestic branch offices throughout the United States and for our international offices throughout Europe, Asia and Australia. We are continually evaluating our facilities requirements.

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

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

      In December 2003, an arbitration panel in Sweden issued a decision dismissing all claims brought by a former shareholder of DoubleClick Scandinavia AB. The shareholder claimed that we breached our obligation to issue and register shares of our common stock, which the shareholder claimed caused it to incur damages. The arbitration hearing took place in November 2003.

      We are defending two class action lawsuits, one filed in Allegheny County, Pennsylvania and the other in San Joaquin County, California, alleging, among other things, deceptive business practices, fraud, misrepresentation, invasion of privacy and right of association relating to allegedly deceptive content of online advertisements that plaintiffs assert we delivered to consumers. The actions seek, among other things, injunctive relief, compensatory and punitive damages and attorneys’ fees and costs. We believe these claims are without merit and intend to defend these actions vigorously. However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of these litigations. An unfavorable outcome in litigation could materially and adversely affect our business, financial condition and results of operations.

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      In October 2003, we received a grand jury subpoena from the United States Attorney’s Office for the Southern District of New York seeking documents regarding certain vendors that provided services to us during the period from 1999 through 2001. The services provided by these vendors are unrelated to the products and services provided by us to our customers. We are fully cooperating with the U.S. Attorney’s Office. In addition, we conducted an internal investigation and have implemented remedial measures to improve our selection, use and oversight of our vendors. We do not believe that any overpayments made by us or other inappropriate payments, if any, relating to these vendors are material with respect to our financial statements for the period in question or our current financial condition.

      No matter was submitted to a vote of our security holders during the fourth quarter of 2003.

PART II

      Our common stock has been quoted on the Nasdaq National Market under the symbol DCLK since our initial public offering on February 20, 1998. The following table sets forth, for the periods indicated, the high and low sales prices per share of the common stock as reported on the Nasdaq National Market.

      On December 31, 2003, the last sale price of our common stock reported by the Nasdaq National Market was $10.30 per share. On March 8, 2004, the last sale price of our common stock reported by the Nasdaq National Market was $10.98 per share. As of March 8, 2004, we had approximately 1,009 holders of record of our common stock.

Dividend Policy

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

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Purchases of Equity Securities

      The following provides information with respect to our purchases of our common stock during the fourth quarter of 2003:

(1)	In November 2003, the Board of Directors approved a $100 million stock repurchase program. We did not purchase any other shares of our common stock during 2003.

Item 6.     Selected Financial Data

      The selected consolidated financial data set forth below with respect to our consolidated statement of operations for each of the years ended December 31, 2003, 2002 and 2001 and with respect to our consolidated balance sheets as of December 31, 2003 and 2002 has been derived from the audited financial statements which are included elsewhere herein. The selected consolidated data set forth with respect to our consolidated statement of operations for each of the periods ended December 31, 2000 and 1999 and with respect to our consolidated balance sheet as of December 31, 2001, 2000, and 1999 are derived from our financial statements which are not included herein. The selected financial data set forth below is qualified in its entirety by, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes to those statements included elsewhere herein.

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(1)	In June 2003, we issued $135.0 million principal amount of Zero Coupon Convertible Subordinated Notes due 2023. These proceeds, together with existing cash, were used to redeem in July 2003 the remaining $154.8 million principal amount of our outstanding 4.75% Convertible Subordinated Notes due 2006. (See Note 10 to the Consolidated Financial Statements.)

Quarterly Results of Operations

      The following table sets forth certain unaudited consolidated quarterly statement of operations data for the eight quarters ended December 31, 2003. This information is unaudited, but in the opinion of management, it has been prepared substantially on the same basis as the audited consolidated financial statements appearing elsewhere in this report, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the unaudited consolidated quarterly results of operations. The consolidated quarterly data should be read in conjunction with our audited consolidated financial statements and the notes to such statements appearing elsewhere in this report. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period.

      The following paragraphs disclose charges or credits that we believe materially affected our quarterly results during 2003 and 2002:

      In the fourth quarter of 2003, we recorded $5.4 million in additional depreciation expense related to the acceleration of the amortization of leasehold improvements and furniture and fixtures at our New York office due to the change in useful life of these assets. (See Note 1 to the Consolidated Financial Statements). These charges were partially offset by the reversal of a $1.3 million reserve relating to the favorable resolution of certain tax matters. (See Note 13 to the Consolidated Financial Statements).

      In the third quarter of 2003, we recorded $8.3 million in additional depreciation expense related to the acceleration of the amortization of leasehold improvements and furniture and fixtures at our New York and

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      In the second quarter of 2003, we recorded a net restructuring credit of $6.9 million, which resulted from a $14.3 million reversal of the real estate reserve for our New York facility partially offset by $7.4 million in additional restructuring charges in connection with our other facilities. (See Note 13 to the Consolidated Financial Statements). In addition, we recognized a loss of $4.4 million associated with the redemption of our 4.75% Convertible Subordinated Notes due 2006. (See Note 10 to the Consolidated Financial Statements).

      In the fourth quarter of 2002, we recorded a restructuring charge of approximately $65.8 million. This charge was primarily related to a decrease in estimated sublease income associated with our New York facility. (See Note 14 to the Consolidated Financial Statements). In addition, we recognized a gain of approximately $7.9 million from the sale of certain investments in affiliates, including DoubleClick Japan and ValueClick, Inc. (See Notes 3 and 4, respectively to the Consolidated Financial Statements).

      In the third quarter of 2002, we recorded an impairment charge of approximately $43.8 million relating to the impairment of goodwill associated with our email reporting unit. (See Note 8 to the Consolidated Financial Statements). Also in the third quarter of 2002, we recorded a restructuring charge of approximately $23.8 million primarily relating to the abandonment of additional space at our New York facility. (See Note 13 to the Consolidated Financial Statements). In addition, we recorded impairment charges of approximately $14.1 million relating to certain investments in affiliates due to a decline in market value that was considered to be other than temporary. (See Note 5 to the Consolidated Financial Statements). In July 2002, we sold our North American Media business to MaxWorldwide, Inc. and recognized a gain of $8.1 million. (See Note 2 to the Consolidated Financial Statements). In addition, we repurchased $64.9 million of our outstanding 4.75% Convertible Subordinated Notes due 2006 for approximately $53.6 million in cash. As a result, we recognized a gain of approximately $11.9 million. (See Note 10 to the Consolidated Financial Statements).

      In the second quarter of 2002, we recognized a gain of approximately $12.3 million on the sale of our @plan research product line. (See Note 2 to the Consolidated Financial Statements). In addition, we recorded a restructuring charge of $7.3 million primarily relating to office consolidations and closures. (See Note 13 to the Consolidated Financial Statements).

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

      We provide technology and data products and services that direct marketers, Web publishers and advertisers use to optimize their marketing programs and efficiently reach their customers. We derive revenues from two business segments: DoubleClick TechSolutions, which we refer to as our TechSolutions segment and DoubleClick Data, which we refer to as our Data segment. During 2002, through a series of transactions, we divested of our Media businesses and as a result we no longer report a DoubleClick Media segment.

      DoubleClick TechSolutions TechSolutions includes our ad management products and services and our marketing automation products and services. Our ad management products and services consist of our DART for Publishers Service, DART Enterprise, DART for Advertisers Service, Motif and MediaVisor. Our marketing automation products and services include our suite of email technology products consisting of the DARTmail Service and a licensed email software product, our campaign management software product and other related products and services and our Web site measurement and analysis solution. We generate our TechSolutions revenue primarily from the delivery of advertising impressions and emails as well as the sale and the installation of our licensed software products.

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

Critical Accounting Policies

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

Restructuring estimates

      Our restructuring reserves at December 31, 2003 consisted of $8.2 million for our previous New York headquarters and approximately $24.8 million for our other facilities, primarily Louisville, Colorado and London, England. All remaining payments for our New York facility were made in January 2004. These payments were consistent with our restructuring accrual established for the New York location. The restructuring accrual associated with the other facilities represents the excess of future lease commitments over estimated sublease income, if any. These accruals were based on an analysis performed with the assistance of a real estate firm and are based on the current real estate market conditions in the local markets where these facilities are located. The most material estimate is associated with our facility in London where the office space is currently sublet for only a portion of the remaining lease term. The total remaining obligation for this facility is approximately $45.0 million. Our London reserve is based on our estimate of future sublease income relative to the total remaining obligation and was determined based on the probability weights of various future sublease scenarios. These scenarios resulted in a weighted average sublease rate where for each $1.00 change in this assumption, additional restructuring charges or credits of approximately

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Advertiser credits and bad debt

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

Valuation of investments and goodwill

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

      When it is determined that the carrying value of investments may not be recoverable, management measures impairment based on projected discounted cash flows, recent transactions involving similar businesses and price/revenue multiples at which they were bought and sold, price/revenue multiples of competitors and the closing market price for investments that are publicly traded.

      During the fourth quarter of 2003, we performed our annual impairment test on our email reporting unit to determine if the goodwill associated with this reporting unit was impaired. Projected discounted cash flows were determined based on internal budgets, which were assembled during our strategic planning process. Our internal budgets are based on review of recent sales data for existing products, industry reports by business analysts, planned timing of new product launches and prior period bookings. Based on the results of the projected discounted cash flows as well as price/revenue multiples of competitors, the fair value of our email reporting unit was determined to be in excess of the carrying value of such reporting unit, and, accordingly, no impairment charge was required. If our forecasts and market multiples were significantly lower, impairment charges might have been required. Our 2003 forecasts for the email reporting unit were not significantly different than our actual results.

      As of December 31, 2003, we held investments in equity instruments of public companies received as a result of certain business transactions, including shares held in DoubleClick Japan, AdLINK Internet Media AG and MaxWorldwide, Inc. Such investments, which are in the Internet industry, are subject to significant fluctuations in fair market value due to the volatility of the stock market. The following sets forth the cost basis and fair market value of these investments, which are included in as “Investment in affiliates” on the Consolidated Balance Sheets.

      Some of these investments have suffered a decrease in value in the past as a result of market volatility. We will continue to evaluate our investments in affiliates for impairment due to declines in market value

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Deferred tax assets

      Pursuant to SFAS 109, we record a valuation allowance to the extent realization of our deferred tax assets is not more likely than not. For the years ended December 31, 2003 and 2002, we recorded a valuation allowance of approximately $306.5 million and $293.7 million respectively, against those net deferred tax assets that we believe, after considering all the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, are not more likely than not expected to be realized. If we determine that we would be able to realize additional or all of our deferred tax assets, an adjustment to the net deferred tax asset would increase income and/or adjust additional paid-in capital and/or goodwill in the period such determination was made.

Property and equipment

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

Recent Accounting Pronouncements

      In May 2003, the Financial Accounting Standards Board, referred to as FASB, issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, known as SFAS No. 150. SFAS No. 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 with the exception of an indefinite deferral relating to application to limited life entities. The adoption of SFAS No. 150 did not have a material effect on our financial position, results of operations or cash flows.

      On April 30, 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”, known as SFAS No. 149. SFAS No. 149 amends SFAS No. 133 for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. SFAS No. 149 requires contracts with comparable characteristics to be accounted for similarly. In particular, SFAS No. 149 clarifies when a contract with an initial net investment meets the characteristic of a derivative and clarifies when a derivative that contains a financing component will require special reporting in the statement of cash flows. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a material effect on our financial position, results of operations or cash flows.

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

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      In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”, known as SFAS No. 148. SFAS No. 148 amends SFAS No. 123, “Stock-Based Compensation,” known as SFAS No. 123, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002 and have been incorporated into these financial statements and accompanying footnotes.

      In November 2002, the Emerging Issues Task Force, referred to as EITF, reached a consensus on the scope of the provisions of Issue 00-21, “Revenue Arrangements with Multiple Deliverables”, addressing how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. Under EITF 00-21, revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of undelivered items; and (3) delivery of any undelivered item is probable. Arrangement consideration should be allocated among the separate units of accounting based on their relative fair values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified performance conditions. EITF 00-21 is applicable to agreements entered into in fiscal periods beginning after June 15, 2003. The application of EITF 00-21 did not have a material effect on our financial condition or operating results.

      In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, known as SFAS No. 146. SFAS No. 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”, referred to as EITF 94-3. The principal difference between SFAS No. 146 and EITF 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 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 No. 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002 and has no effect on exit or disposal activities begun prior to this date.

Business Transactions

Acquisitions

Computer Strategy Coordinators, Inc.

      On June 30, 2003, we completed our acquisition of Computer Strategy Coordinators, Inc. a data management company known as CSC and based in Schaumburg, Illinois. In the transaction, we acquired all of the outstanding shares of CSC in exchange for approximately $2.8 million in cash, inclusive of $0.4 million of direct acquisition costs, and the assumption of certain indebtedness.

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MessageMedia

      On January 18, 2002, we completed our acquisition of MessageMedia, Inc., a provider of permission-based, email marketing and messaging solutions. We acquired all the outstanding shares, options and warrants of MessageMedia in exchange for approximately one million shares of our common stock valued at approximately $7.5 million, and stock options and warrants to acquire our common stock valued at approximately $0.2 million. In connection with the acquisition, we 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.

      On June 26, 2002, we acquired the remaining 50% of the Abacus Direct Europe B.V. joint venture that we 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. Our investment in the joint venture was previously accounted for under the equity method of accounting. We 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.

Protagona

      On November 4, 2002, we completed our acquisition of Protagona plc, a campaign management software company based in the United Kingdom. In the transaction, we acquired all the outstanding shares of Protagona in exchange for approximately $13.6 million in cash.

Divestitures

European Media Business

      On January 28, 2002, we completed the sale of our 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 our European Media business. Intercompany liabilities in an amount equal to $4.3 million were settled through a cash payment by AdLINK to us at the closing of the transaction. Following the closing of the transaction described above, United Internet AG, AdLINK’s largest shareholder, exercised its right to sell us 15% of the outstanding common shares of AdLINK in exchange for $30.6 million. Pursuant to our agreement with United Internet, the exercise of this right caused our option to acquire an additional 21% of AdLINK common shares from United Internet to vest. This option is only exercisable if AdLINK has achieved EBITDA-positive results for the fiscal quarters ending December 31, 2003 and March 31, 2004. 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 unexercisable as of December 31, 2003 or March 31, 2004, as applicable. AdLINK’s results for year ended December 31, 2003 were not publicly available as of the date of this filing.

      As the result of the transactions described above, we sold our European Media business and received a 15% interest in AdLINK, which represented approximately 3.9 million shares valued at approximately $8.3 million. Our option to acquire an additional 21% of the outstanding common shares of AdLINK from United Internet also vested. We received $2.0 million as partial reimbursement for our cash outlays related to the acquisitions of, and payments with respect to, the minority interests in certain of our European subsidiaries pursuant to our agreement to sell our European Media business. As a result of this transaction, we recognized

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North American Media Business

      On July 10, 2002, we sold our North American Media business to L90, Inc., which was renamed MaxWorldwide, Inc., in exchange for 4.8 million shares in MaxWorldwide and $5.0 million in cash. The 4.8 million shares represented 16.1% of outstanding MaxWorldwide common stock and were valued at approximately $3.1 million. Pursuant to the merger agreement, we have the right to receive an additional $6.0 million if, prior to July 10, 2005, MaxWorldwide achieves 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. During the three months ended September 30, 2002, December 31, 2002, March 31, 2003, and June 30, 2003, and the one month ended July 31, 2003, MaxWorldwide did not achieve EBITDA-positive results. As a result of MaxWorldwide’s repurchase of its common stock in 2002, our ownership percentage in MaxWorldwide increased to 19.8% as of December 31, 2003.

      As of August 1, 2003, MaxWorldwide has adopted the liquidation basis of accounting and therefore will not be reporting a statement of operations for periods subsequent to July 31, 2003. On July 22, 2003, MaxWorldwide stockholders approved a proposal to adopt a plan of liquidation and dissolution pursuant to which it would dissolve and liquidate MaxWorldwide and its subsidiaries. On July 31, 2003, MaxWorldwide completed the sale of its MaxOnline division and the plan of liquidation and dissolution became effective. As a result of these events it is unlikely that MaxWorldwide will achieve the financial milestones that would trigger our right to receive the $6.0 million in contingent cash consideration discussed above.

      In its quarterly report on Form 10-Q for the quarter ended September 30, 2003, MaxWorldwide reported net assets in liquidation of approximately $25.7 million. On March 2, 2004 MaxWorldwide announced that it will make a distribution of $0.50 per share of common stock outstanding payable on March 24, 2004 in connection with its plan of liquidation and dissolution. We expect to receive proceeds of approximately $2.4 million as a result of this distribution which will be recorded as income in the quarter ending March 31, 2004.

@plan

      On May 6, 2002, we sold our @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. We sold these shares in the fourth quarter of 2002 and the first quarter 2003.

DoubleClick Japan

      On December 26, 2002, we sold 45,049 shares of common stock in DoubleClick Japan and received proceeds of $14.3 million, reducing our ownership interest to 15.6%. As a result of this transaction, we account for our remaining 31,271 shares in DoubleClick Japan under the equity method of accounting. We have also retained one seat on DoubleClick Japan’s board of directors.

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Results of Operations

      A summary of our financial results is as follows:

2003 compared to 2002

      2003 revenues were $271.3 million, which was a decline of $28.9 million compared to 2002. This decrease was attributable to the divestitures of our Media and Research businesses in 2002 and weakness in our TechSolutions business during the first half of the year, partially offset by acquisition related growth from our new Data Management business and continued growth in our core Abacus business. Operating income improved by $167.6 million, as operating expenses declined over 50% due to the absence of goodwill impairment and restructuring charges recorded in 2002 and our continued focus on cost control. Net income was $16.9 million, or $0.12 per diluted share, versus a net loss of $117.9 million, or $0.87 per diluted share, in 2002. Net income in 2003 was negatively impacted by $14.6 million in accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the relocation of our New York headquarters and the termination of the lease for our facility in San Francisco. These costs were partially offset by a net restructuring credit of $9.1 million relating to the reversal of a portion of our real estate reserves. We expect revenue and operating income to increase in 2004 as a result of a positive business outlook for each of our product lines. In addition, we expect to invest additional resources in product development and sales and marketing in order to generate future revenue growth.

2002 compared to 2001

      2002 revenues were $300.2 million, a decline of $105.4 million compared to 2001. This decline was a result of the reduction in overall online advertising spending and our divestiture of certain businesses, partially offset by growth in our email and Abacus businesses. Operating loss improved by $128.6 million due to reductions in operating expenses partially offset by our decline in gross profit. Operating expenses decreased to $341.2 million from $511.7 million in 2001, and included $94.0 million in restructuring charges, $47.1 million in goodwill and other impairments and $12.4 million in amortization of intangibles in 2002. Operating expenses for the year ended December 31, 2001 included $43.5 million in amortization of goodwill, $8.7 million in amortization of intangibles, $72.1 million in goodwill and other impairments, $15.5 million in non-cash compensation charges, and $84.2 million in restructuring charges. Net loss including these charges was $117.9 million, or $0.87 per diluted share, in 2002 as compared to a loss $265.8 million, or $2.02 per diluted share, in 2001.

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

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(1)	Adjustments to reconcile segment reporting to consolidated results are included in “Elimination” and “Elimination/ Corporate.”

DoubleClick TechSolutions

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

2003 Compared to 2002

      TechSolutions revenue decreased by 6.3% to $175.4 million for the year ended December 31, 2003 from $187.2 million for the year ended December 31, 2002. The decrease in TechSolutions revenue was primarily attributable to declines in our ad management products and services, partially offset by growth in our marketing automation products and services. Ad management revenue decreased by 12.5% to $128.8 million in 2003 compared to 2002. The effective price of our hosted ad management products decreased by approximately 15.0%, net of aggregate beneficial foreign currency fluctuations of $5.0 million. For the period, volumes increased by approximately 6.1%. The decline in effective price was primarily due to a change in product and client mix as well as lower pricing for some renewals. The change in client mix was driven by the acquisition of higher-volume, lower-priced customers. As a large portion of our costs are fixed, we believe we can offer these clients lower prices while still maintaining our gross margins. Marketing automation revenue increased 16.8% to $46.6 million in 2003 compared to 2002. These revenues consisted primarily of our DARTmail products and services, which were $39.4 million in 2003, up marginally versus the prior year. Effective prices within DARTmail climbed approximately 5.1% offset by declines in volume of approximately 5.3%. Ensemble, which we acquired in November 2002 and SiteAdvance generated the remainder of our revenues.

      TechSolutions gross profit was $111.3 million or 63.4% of revenue for the year ended December 31, 2003 compared to $117.3 million or 62.7% for the year ended December 31, 2002. Gross profits declined primarily due to the decline in revenues and an increase in depreciation expense of $2.2 million, which was primarily due to the relocation of our New York headquarters and the termination of the lease for our facility in San Francisco. These items were partially offset by a reduction in Internet access costs of $4.1 million due to the renegotiation of many of our contracts with our Internet service providers and the absence of the restructuring charge of $4.4 million that was incurred in 2002 relating to the relocation of our data center from New York to Thornton, Colorado.

      TechSolutions operating income was $10.3 million for the year ended December 31, 2003, an increase of $53.5 million versus the prior year. This increase was a result of a reduction in operating expenses of $59.5 million, partially offset by the $6.0 million decline in gross profit. 2003 operating expenses declined due

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2002 Compared to 2001

      In 2002, TechSolutions revenue was $187.2 million, a decline of $19.9 million or 9.6% over the prior year. The reduction in TechSolutions revenue reflected in large part the decline in overall advertising spending. The decline in advertising spending intensified pricing competition. These two trends had a pronounced effect on our TechSolutions business. On a product basis, ad management revenue decreased 19.7% to $147.2 million in 2002 compared to $183.3 million in 2001. The effective price for our ad management products decreased approximately 12% while volume dropped approximately 9%. Nearly 50% of this volume decline was associated with the divestiture of our North American Media business in July 2002. Conversely, marketing automation revenue increased 89% to $39.9 million in 2002 compared to $21.1 million in 2001. This growth was primarily associated with our acquisitions of MessageMedia in January 2002 and FloNetwork in April 2001.

      TechSolutions gross profit in 2002 declined $15.0 million to $117.3 million versus $132.3 million in 2001. Gross margins declined as well to 62.7% in 2002 from 63.9% in 2001. These declines were associated with our drop in revenues, the restructuring charge of $4.4 million relating to the write-off of certain fixed assets associated with the move of our data center from New York to Thornton, Colorado and an increase in personnel and the amortization of purchased technology, both resulting from our acquisitions of FloNetwork and MessageMedia. These items were offset by reductions in depreciation expense of $10.1 million and Internet access costs of $4.5 million. The reduction of depreciation expense resulted from our 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 assets will be in service. The decline in Internet access costs was due to the renegotiation of many of our contracts with our Internet service providers.

      TechSolutions operating loss was $45.6 million in 2002, a decline of $23.0 million versus 2001. The increase in operating loss was driven by an increase in operating expenses of $5.2 million and the $15.0 million decline in gross profits. Operating expenses were impacted in 2002 by $56.6 million of goodwill impairment and restructuring charges as compared to $17.7 million in 2001. These costs were partially offset by reductions in headcount-related expenses and other cost saving initiatives in both years. Average TechSolutions headcount in 2002 was down approximately 11% from 2001.

      In 2004, we plan to invest additional resources in our TechSolutions research, product development and sales departments to fund future revenue growth. As a part of this strategy, we anticipate hiring additional employees during 2004. We anticipate TechSolutions overall revenue and operating income will grow in each product line even with the additional investments described above.

DoubleClick Data

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

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      Following the acquisition of @plan.inc in February 2001, we created a separate research division within 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 in 2002 and 2001 was derived primarily from the sale of annual subscriptions to its market research systems. On May 6, 2002, we sold our @plan research product line to NetRatings, Inc., a provider of technology-driven Internet audience information solutions for media and commerce. Revenue and operating losses recognized by the @plan research product line were approximately $3.1 million and $0.7 million, respectively, for the year ended December 31, 2002 and $9.9 million and $76.9 million for the year ended December 31, 2001, inclusive of a goodwill impairment charge of $53.3 million.

      On June 26, 2002, we acquired the remaining 50% of the Abacus Direct Europe B.V. joint venture that we did not previously own from VNU Marketing Information Europe & Asia B.V., an affiliate of Claritas (UK) Limited. On June 30, 2003, we completed the acquisition of CSC and formed our Data Management division. The results of operations for Abacus Direct Europe and CSC have been included in our Consolidated Statements of Operations from the date of acquisition. Revenues and operating losses recognized for these acquisitions were approximately $13.3 million and $6.4 million, respectively, for the year ended December 31, 2003 and $4.2 million and $0.1 million for the year ended December 31, 2002. Revenues for Abacus Direct Europe were primarily related to acquisition solutions provided to Abacus Alliance members in the United Kingdom.

2003 Compared to 2002

      Data revenue increased 15.1% to $95.9 million for the year ended December 31, 2003 compared to $83.3 million for the year ended December 31, 2002. The increase is primarily attributable to the acquisitions of Abacus Direct Europe and CSC, and continued growth from our core Abacus business. Abacus revenues increased 12.8% to $90.4 million in 2003 compared to $80.2 million in 2002. The increase in revenue from our core Abacus products in the United States was primarily attributable to increases in both the number of clients and revenues per client. In addition, revenue also increased as a result of the introduction of new products.

      Gross profits increased $6.2 million to $66.0 million or 68.8% of revenues versus $59.8 million or 71.7% of revenues in the prior year. Gross profits were driven by the improvement in sales, partially offset by an increase in the amortization of purchased technology associated with our acquisition of CSC and production costs associated with this lower margin business.

      Data operating income increased marginally to $27.3 million for the year ended December 31, 2003. This change was due to an increase in gross profits of $6.2 million offset by an increase in operating expenses of $5.8 million. Operating expenses increased primarily due to additional headcount assumed as a result of the Abacus Direct Europe and CSC acquisitions. Average Data headcount increased 27.3% in 2003 versus 2002. In addition, amortization expense associated with intangible assets acquired in connection with these acquisitions increased as well.

2002 Compared to 2001

      In 2002, Data revenue increased 2.5% to $83.3 million in 2002 compared to $81.3 million in 2001. This increase in revenues was primarily due to growth in the Abacus US business of $4.6 million and revenues generated from Abacus Direct Europe of $4.2 million, offset by the impact of the sale of the @plan research product line in May 2002. The growth in revenues from the Abacus US business related primarily to increases in acquisition and retention solutions provided to Abacus Alliance and Business-to-Business Alliance members as direct marketers began to focus on client acquisition towards the later half of 2002.

      Gross profits increased $5.0 million to $59.8 million or 71.7% of revenue in 2002 as compared to $54.8 million or 67.4% of revenues in 2001. The increase in gross profit was primarily attributable to an increase in sales, the reduction in depreciation expense on production equipment and the divestiture of the lower margin @plan research product line, partially offset by the amortization of purchased intangible assets associated with Abacus Direct Europe. The reduction in depreciation expense resulted from our extension of

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      Data’s operating income was $26.9 million in 2002, an improvement of $88.5 million versus 2001. This increase was primarily attributable to a decrease in operating expenses of $83.5 million and an increase in gross profits of $5.0 million. 2002 operating expenses declined primarily as a result of the sale of the @plan research product line in May of 2002 in addition to the absence of goodwill impairment charges of $53.3 million and goodwill amortization of $18.3 million, which were recorded during 2001 as well as reductions in personnel related expenses, bad debt expense and other cost saving initiatives. Average Data headcount declined approximately 17.5% in 2002 versus 2001. The reduction in bad debt reflected our improved collection efforts.

      We anticipate Data revenue to increase in 2004 as a result of our acquisition of CSC, growth from our Abacus Alliances in the United States and United Kingdom, new product offerings in the Data Management division and from our international businesses.

DoubleClick Media

      During 2002, through a series of transactions, we divested of our Media businesses and therefore did not report a Media segment during 2003. Our Media segment revenue was derived primarily from the sale and delivery of advertising impressions through third-party Web sites that comprised the DoubleClick Media network. Media cost of revenue consisted 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 TechSolutions.

      Revenue for Media decreased 74.7% to $32.7 million for the year ended December 31, 2002 compared to the prior year. The decrease in DoubleClick Media revenue primarily resulted from the sale of our European and North American Media businesses. On January 28, 2002, we completed the sale of the European Media business to AdLINK. On July 10, 2002, we completed the sale of the North American Media business to L90, which was renamed MaxWorldwide. For the years ended December 31, 2002 and 2001, revenues derived by the European Media business were $1.1 million and $29.0 million, respectively. Revenue recognized by the North American Media business was approximately $20.8 million and $85.5 million for the years ended December 31, 2002 and 2001, respectively. On December 26, 2002, we sold 45,049 shares of common stock in DoubleClick Japan and reduced our ownership interest to 15.6%. As a result of this transaction, we account for our remaining 31,271 shares in DoubleClick Japan under the equity method of accounting and no longer consolidate its results of operations. Revenue recognized by the DoubleClick Japan Media business was approximately $10.8 million and $14.8 million for the years ended December 31, 2002 and 2001, respectively.

      In 2002, Media revenue also decreased due to the decline in overall online advertising spending and the departure of the AltaVista Web site from our network. Media revenue for the year ended December 31, 2001 included approximately $8.8 million or 6.8% of Media revenue, for advertising impressions delivered to users of the AltaVista Web site. No such revenue was recognized in Media’s results during the year ended December 31, 2002.

      Operating losses recognized by the European, North American and DoubleClick Japan Media businesses was approximately $0.7 million, $2.4 million and $0.7 million, respectively, for the year ended December 31, 2002. Operating losses recognized by the European, North American and DoubleClick Japan Media businesses was approximately $26.8 million, $23.2 million and $1.1 million, respectively, for the year ended December 31, 2001.

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Operating Expenses

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

Sales and marketing

      Sales and marketing expenses consist primarily of compensation and related benefits, sales commissions, general marketing costs, advertising, bad debt expense and other operating expenses associated with our sales and marketing departments. Sales and marketing expenses declined $9.2 million in 2003 versus 2002, but remained flat at 34% as a percentage of revenue. The decrease was primarily attributable to reductions in personnel-related costs of $4.0 million as average sales and marketing headcount decreased 8.5% in 2003 compared to 2002 and a reduction of $7.6 million in bad debt expense due to improved collection results. Additionally, marketing expenses decreased by $1.1 million. These decreases were offset by a $4.7 million increase in depreciation expense relating to the termination of real estate leases.

      Sales and marketing expenses decreased $81.3 million in 2002 compared to 2001 and as a percentage of revenue from 45% in 2001 to 34% in 2002. The decrease was primarily attributable to headcount reductions associated with restructuring activities, which resulted in declines in personnel-related costs of $32.6 million and rent and utilities of $7.3 million. Average headcount dropped 43.3% in 2002 from 2001. The implementation of cost saving initiatives resulted in reductions to travel and entertainment expenses of $4.4 million and a decline in marketing expenditures of $9.8 million. Additional reductions in 2002 resulted from the elimination of non-cash compensation paid to former shareholders of DoubleClick Scandinavia of $15.2 million and bad debt expense of $4.2 million.

      In 2004, we expect the absolute dollar amount of sales and marketing expenses to increase due to the hiring of additional employees, but to decrease slightly as a percentage of revenues due to anticipated higher revenues.

General and administrative

      General and administrative expenses consist primarily of compensation and related benefits, professional services and other operating expenses associated with our executive, finance, human resources, legal, facilities and administrative departments. General and administrative expenses decreased $10.3 million to 13.3% of revenue in 2003 compared to 15.5% in 2002. The decrease was due to the decline in average general and administrative headcount of 30.1% in 2003 compared to 2002, resulting in a decrease of $5.6 million in personnel-related costs. Cost savings initiatives during the year resulted in reductions of $0.7 million in telephone expenses and $0.7 million in outside service fees. Professional fees decreased by $3.1 million in part due to the receipt of an approximately $1.4 million insurance claim settlement during the third quarter of 2003. These decreases were offset by a $1.2 million increase in depreciation expense relating to the termination of real estate leases.

      General and administrative expenses in 2002 were 15.5% of revenue versus 16.2% in 2001. The $19.3 million decrease in general and administrative expense was primarily the result of overall reductions in professional services fees of $8.9 million which resulted in part from a reduction in legal fees as well as a reduction in consulting fees associated with tighter cost controls. Personnel-related costs declined $6.3 million as the result of headcount reductions associated with our restructuring activities, as average general and administrative headcount was reduced 32.3% in 2002 compared to 2001. Additionally, rent and utilities decreased $1.8 million resulting from headcount reductions as well as office closures and consolidations.

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      In 2004, we expect general and administrative expenses to decrease in absolute dollars and as a percentage of revenues due to reductions in depreciation expense and anticipated higher 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. The product development departments perform research and development, enhance and maintain existing products and provide quality assurance. Product development expenses were flat in 2003 compared to 2002, but increased as a percentage of revenue to 14.4% from 13.3% in 2002. Product development expenses were impacted in 2003 by an increase of $1.0 million in personnel-related expenses and $0.5 million in depreciation expense relating to the termination of real estate leases. These expenses were offset by cost saving initiatives we employed during the year which resulted in reductions in computer expenses of $1.1 million and outside services fees of $0.5 million.

      Product development expenses declined $13.7 million in 2002 from 2001, but remained flat as a percentage of revenue at 13.3%. The decline in product development expenses was primarily the result of decreases in personnel-related costs of $9.1 million due to headcount reductions associated with our restructuring activities. Average product development headcount was reduced 25.7% in 2002 compared to 2001. In addition, professional fees decreased $2.4 million associated with the implementation of tighter cost controls and rent and utilities declined $2.1 million as a result of headcount reductions as well as office closures and consolidations.

      We believe that ongoing investment in product development is critical to the attainment of our strategic objectives. As such, we expect product development expenses in 2004 to increase in absolute dollars due to the allocation of additional resources but to remain flat as a percentage of revenue.

Amortization of goodwill and intangibles

      In accordance with SFAS 142, goodwill is no longer amortized as of January 1, 2002 but is periodically tested for impairment. Goodwill amortization was approximately $43.5 million as of December 31, 2001 and related to the acquisitions of @plan, Flashbase, FloNetwork, DoubleClick Scandinavia and DoubleClick Japan.

      Amortization of intangible assets consists primarily of the amortization of customer relationships and patents. Amortization expense was $5.9 million, $12.4 million and $8.7 million for the years ended December 31, 2003, 2002 and 2001, respectively. The decrease of $6.5 million in 2003 compared to the prior year was primarily the result of certain intangible assets becoming fully amortized during the year. The increase of $3.7 million from 2001 to 2002 was primarily the result of the amortization of customer relationships acquired in the business combinations of MessageMedia and Abacus Direct Europe.

      We expect amortization of intangible assets to decrease in 2004 as more intangible assets become fully amortized.

Goodwill and other impairments

      For the year ended December 31, 2003 we did not record any impairment charges for our goodwill or intangible assets.

      Goodwill and other impairments was $47.1 million for the year ended December 31, 2002 and $72.1 million for the year ended December 31, 2001. In 2002 based on the prolonged softness in the economy and the then current and operational performance of our email reporting unit, we initiated a third-party valuation of our email reporting unit to determine whether the recorded balance of goodwill related to this reporting unit was recoverable. The outcome of this valuation resulted in an impairment charge of approximately $43.8 million being recorded during the year. The fair market value of the email reporting unit was determined based on revenue projections, the then recent transactions involving similar businesses and the price/revenue multiples at which they were bought and sold, and the price/revenue multiples of our

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      In 2001 the persistence of unfavorable economic conditions led us to undertake a review of the recoverability of certain of our investments. As a result of the then significantly lower-than-expected revenues generated to date and considerably reduced estimates of future performance, we concluded that our investments in @plan and Flashbase were impaired. Accordingly, we recognized an approximately $63.3 million impairment charge equal to the difference between our investments in, and the estimated fair value of, these businesses in the third quarter of 2001. Of this amount, approximately $53.3 million related to @plan and $10.0 million related to Flashbase.

      The amount of the goodwill impairment was calculated based on discounted analyses of these entities’ expected future cash flows, which were no longer deemed adequate to support the value of the goodwill associated with these investments. In both cases, sharply-reduced estimates of anticipated revenue growth and operating results, triggered primarily by the continued softness in aggregate online advertising spending, generated correspondingly lowered expectations of future cash flows and formed the basis for the recording of the charge in the third quarter of 2001.

      These businesses expected future cash flows and terminal values were based on our budgeted forecasts and estimates. In our calculation to determine the impairment charge for our investment in @plan, we used a discount rate of 15% and assumed a remaining useful life of 2.5 years, which represented the remaining useful life of the goodwill associated with this investment. In our calculation to determine the impairment charge for Flashbase, we used a discount rate of 15% and a useful life of 1.75 years, which represented the remaining useful life of the goodwill associated with this investment.

      In addition, in connection with the decision to sell our European Media operations, we determined that the estimated fair value of the consideration we would receive pursuant to the sale agreement would be less than the carrying value of our European Media operations. We concluded that the investment in our European Media operations was impaired. As a result, we recorded a charge of approximately $8.8 million in the fourth quarter of 2001.

Restructuring (credits) charges, net

      During the year ended December 31, 2003, we recorded restructuring credits of approximately $16.5 million, partially offset by restructuring charges of approximately $7.4 million. This resulted in a net restructuring credit of $9.1 million. This credit was due to the reversal of a portion of our real estate reserve relating to our previous New York headquarters and our San Francisco facility. The reversal of the reserve was a result of final lease terminations with respect to our New York headquarters and San Francisco facility for which our reserve was in excess of our expected payments. Total costs to terminate the lease associated with these facilities were approximately $44.5 million and $26.4 million, respectively, inclusive of broker commissions and related costs. We anticipate average annual cash rent savings of approximately $14 million during the period commencing January 2004 and extending through January 2015 as a result of the New York and San Francisco lease terminations.

      Of the remaining $33.0 million in cash outlays relating to our restructuring activities, we estimate that we will pay approximately $12.0 million in 2004, and approximately $21.0 million in 2005 and the following years. We anticipate that these outlays will be funded from available sources of liquidity. However, there can be no assurance that such cost reductions can be sustained or that estimated costs of such actions will not change.

      During the year ended December 31, 2002, we took steps to realign our sales, development and administrative organization and reduce corporate overhead to position us for profitable growth in the future consistent with management’s long-term objectives. This involved the involuntary termination of approximately 250 employees, primarily from our TechSolutions division, as well as the closure of several offices and charges for excess real estate space. As a consequence, we recorded a charge of $98.4 million to operations

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      During the year ended December 31, 2001, we 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. As a consequence, we recorded an $84.2 million charge to operations during 2001. This charge included approximately $51.7 million for the accrual of future lease costs (net of estimated sublease income and deferred rent liabilities previously recorded), approximately $19.5 million for the write-off of fixed assets situated in office locations that were closed or consolidated, $10.4 million for severance-related payments to terminated employees and approximately $2.6 million in other lease exit costs. The fixed asset impairments arose primarily from the write-off of the carrying values of leasehold improvements in offices in New York, San Francisco and London that were abandoned as part of the restructuring activities. Other exit costs included consulting and professional fees related to the restructuring activities and expenses associated with the decision to move the TechSolutions customer support department from New York to Colorado

      We will continue to review our sublease assumptions surrounding our excess real estate, principally in London, England and Louisville, Colorado and may incur additional restructuring credits or charges in 2004.

Non-Operating Expenses and Income Taxes

Equity in losses of affiliates

      Equity in losses of affiliates was $2.5 million, $0.3 million and $2.5 million for the years ended December 31, 2003, 2002 and 2001, respectively. In 2003, we recognized equity losses of $2.0 million from our equity investment in MaxWorldwide and $0.5 million from our equity investment in DoubleClick Japan.

      In 2002, we recognized equity income of $0.2 million relating to our 50% interest in the Abacus Direct Europe joint venture and an equity loss of approximately $0.5 million from our equity investment in MaxWorldwide. Since the June 26, 2002 acquisition of the remaining 50% interest of Abacus Direct Europe that we did not previously own, the results of operations of Abacus Direct Europe have been consolidated into our operations.

      In 2001, our equity loss of $2.5 million was wholly attributed to ValueClick. As of December 31, 2001, we accounted for our investment in ValueClick as a cost method investment and no longer recorded our proportionate share of ValueClick’s results.

Gain on equity transactions of affiliates, net

      We did not recognize any gains or losses on equity transactions of affiliates during the years ended December 31, 2003 and 2002.

      For the year ended December 31, 2001, we recognized a gain of approximately $7.2 million from the initial public offering of our then consolidated subsidiary DoubleClick Japan, which was partially offset by a loss of approximately $5.7 million related to the decrease in value of our proportionate share of the net assets of our equity-method investee ValueClick following their consummation of business combinations with ClickAgents.com, Inc., Bach Systems Inc. and Mediaplex.

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Impairment of investments in affiliates

      We did not record impairment charges for any of our investments in affiliates for the year ended December 31, 2003.

      Impairment of investments in affiliates was $14.1 million for the year ended December 31, 2002 and $16.2 million for the year ended December 31, 2001. During the year ended December 31, 2002, we determined that the carrying value of certain of our investments, principally our cost-method investments in AdLINK Internet Media AG and NetRatings, Inc. and our equity-method investment in MaxWorldwide, Inc. were impaired based on the continued decline in the fair market value of these investments. As a result, we recorded impairment charges of $11.7 million during the third quarter of 2002, which represented the difference between our carrying value and the estimated fair value of these investments. The estimated fair values of our investments in AdLINK, NetRatings and MaxWorldwide were determined based on the closing market price of their stock on September 30, 2002. Additionally, it was determined that DoubleClick Asia, a joint venture and a cost method investment, would be liquidated and therefore had no continuing value. As a consequence, we wrote-off our entire investment in DoubleClick Asia and recognized an impairment charge of $2.4 million during the third quarter of 2002.

      During the year ended December 31, 2001, 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, we performed an assessment of the carrying values of certain of our investments in affiliates in the second quarter of 2001. In the course of our analysis, we determined that the carrying value of our cost-method investment in Return Path was no longer recoverable. As a consequence, we wrote off our entire investment in Return Path and recognized an impairment charge of $4.5 million during the second quarter of 2001. In addition, we determined that the carrying value of our equity method investment in ValueClick was impaired. Consequently, we wrote down our investment in ValueClick and recognized an impairment charge of approximately $11.7 million during the third quarter of 2001, which represented the difference between our carrying value and the estimated fair value of our investment in ValueClick. The estimated fair value of our investment in ValueClick was determined based on the closing market price of ValueClick stock on September 30, 2001.

Gain on sale of investments in affiliates

      We did not recognize any gains or losses on sales of investments in affiliates during the years ended December 31, 2003 and 2001.

      Our gain on sale of investments in affiliates was $7.9 million for the year ended December 31, 2002. The gain was associated with the sale of our investment in ValueClick and partial sales of our ownership interests in DoubleClick Japan and NetRatings. In the fourth quarter of 2002, we entered into a repurchase agreement with ValueClick whereby ValueClick repurchased all of our remaining 7.9 million shares for $21.3 million or approximately $2.70 per share. We recognized a gain of $4.7 million from the sale of the investment. In addition, in December 2002 we sold 45,049 shares of common stock in DoubleClick Japan and reduced our ownership interest to 15.6%. We received proceeds of $14.3 million and recognized a gain of $3.1 million. Additionally, in the fourth quarter of 2002 we sold 402,011 shares of NetRatings and received proceeds of approximately $2.5 million. We recognized an immaterial gain on the sale of this investment.

Gain on sale of businesses, net

      We did not recognize any gains or losses on sales of businesses during the years ended December 31, 2003 and 2001.

      Our gain on sale of businesses, net was $17.9 million for the year ended December 31, 2002. The net gain primarily consisted of gains on the sale of our North American Media business and @plan research product line of $8.1 million and $12.3 million, respectively, offset by a loss of $1.7 million recognized on sale of our European Media business.

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Gain (loss) on early extinguishment of debt

      On June 24, 2003, we called for redemption the remaining $154.8 million outstanding aggregate principal amount of our 4.75% Convertible Subordinated Notes due 2006. On July 24, 2003, we redeemed these notes at a redemption price equal to 102.036% of the aggregate principal (approximately $158.0 million) plus accrued and unpaid interest. The proceeds from the sale of the Zero Coupon Convertible Subordinated Notes due 2023, together with existing cash, were used towards this redemption. As a result of the redemption, we recorded a loss of approximately $4.4 million associated with the redemption premium and write-off of deferred issuance costs during the second quarter of 2003.

      For the year ended December 31, 2002, we repurchased $64.9 million of our then outstanding 4.75% Convertible Subordinated Notes due 2006 for approximately $53.6 million in cash, inclusive of $1.2 million of accrued interest payable. We wrote off approximately $0.7 million in deferred issuance costs and recognized a gain of approximately $11.9 million as the result of the early retirement of this debt.

      For the year ended December 31, 2001, we repurchased $30.3 million of our then outstanding 4.75% Convertible Subordinated Notes due 2006 for approximately $21.9 million in cash. We wrote off approximately $0.2 million in deferred issuance costs and recognized a gain of approximately $8.2 million as the result of the early retirement of this debt.

Interest and other, net

      Interest and other, net was $12.1 million, $15.9 million and $29.3 million for the years ended December 31, 2003, 2002 and 2001, respectively. In 2003, interest income decreased by $9.6 million due to a combination of a decrease of total cash, which includes cash and cash equivalents, investments in marketable securities and restricted cash, of $74.1 million compared to the prior year and a decrease in the average interest rates. Interest expense decreased due the redemption of our 4.75% Convertible Subordinated Notes due 2006 in July 2003. In 2002, interest income decreased by $17.3 million and was attributable to the decrease in average investment yields due to declines in interest rates as compared to 2001.

      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.

Provision for income taxes

      The provision for income taxes recorded for the year ended December 31, 2003 of $1.0 million consists principally of income taxes of $2.7 million on the earnings of our foreign subsidiaries, a Federal tax benefit of $1.1 million related to the reversal of a reserve in connection with the favorable resolution of certain tax matters and $0.6 million of net state and local tax benefits relating principally to the receipt of tax refunds. The provision for income taxes recorded for the year ended December 31, 2002 of $4.8 million consists principally of income taxes of $4.1 million on the earnings of some of our foreign subsidiaries and gain on the sale of our European Media business and $0.7 million of state and local taxes. The provision for income taxes recorded for the year ended December 31, 2001 of $4.8 million consists principally of income taxes of $3.5 million on the earnings of certain of the our foreign subsidiaries and state and local taxes of $1.3 million. The provision for income taxes for all years presented does not reflect tax benefits attributable to our net operating loss and other tax carryforwards due to limitations and uncertainty surrounding our prospective realization of such benefits.

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Liquidity and Capital Resources