VALUECLICK INC/CA - 10-K Annual Report

Delaware (State or Other Jurisdiction of Incorporation or Organization)		77-0495335 (I.R.S. Employer Identification No.)
4353 Park Terrace Drive, Westlake Village, California 91361 (Address of principal executive offices, including zip code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value
(Title of each class)

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 ý No o

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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 the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).Yes ý No o

As of June 28, 2002, which was the last business day of ValueClick's most recently completed second fiscal quarter, the approximate aggregate market value of voting stock held by non-affiliates of the registrant was $280.8 million (based upon the closing price for shares of the Registrant's Common Stock as reported by The National Market System of the National Association of Securities Dealers Automated Quotation System as of that date). As of March 15, 2003, there were approximately 73,476,000 shares of Common Stock outstanding.

Portions of the Definitive Registrant's Proxy Statement for the 2003 Annual Meeting of Stockholders, to be held Mat 15, 2003, are incorporated by reference in Part III of this Form 10-K the extent described therein. The Exhibit Index begins on page 37.

This Annual Report on Form 10-K, including information incorporated herein by reference, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to expectations concerning matters that are not historical facts. Words such as "projects," "believes," "anticipates," "will," "estimate," "plans," "expects," "intends," and similar words and expressions are intended to identify forward-looking statements. Although we believe that such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. Important language regarding factors which could cause actual results to differ materially from such expectations are disclosed in this Report, including without limitation under the caption "Risk Factors" beginning on page 9 of this Report and in the other documents we file, from time to time, with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. All forward-looking statements attributable to ValueClick, Inc. are expressly qualified in their entirety by such language. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

We offer marketers innovative media and technology solutions to achieve their marketing goals for attracting, converting, and growing customer relationships. The broad range of products and services that we provide enable our customers to address all aspects of the marketing process, from strategic planning through execution, including results measurement and campaign refinements. By combining our media and technology offerings with our experience in both online and offline marketing, we help our customers around the world optimize their marketing campaigns on the Internet and through other media.

Our customers are predominantly advertisers and direct marketers, as well as the agencies who service these groups. Our value proposition to these groups is our ability to provide distinctive expertise, flexible product customization, superior service, and a diligent focus on the performance of their marketing investments. This approach has enabled us to build relationships with over 1,300 advertisers and agencies, assisting them to build brands, generate qualified leads and drive sales, and to do so with both acquisition and retention programs.

Another key component in our value proposition is the base of relationships we have developed with quality website publishers. To fulfill our clients' marketing programs, we rely on our relationships with websites of all sizes—from many of the largest portals on the web, to heavily-trafficked and well-branded content and shopping sites, to high-quality niche content properties. Our relationships with these partners span from representation of most of their advertising space, to monetization of their unsold advertising inventory, to regular spot buys of media and email for specific client needs. Our ability to offer these partners a wide variety of ways to generate revenue has enabled us to now reach over 60 million unique Internet users in the U.S. each month, and over 120 million worldwide. ValueClick believes that the effectiveness of our advertising solutions is dependent on the quality of the partner relationships, and therefore we have established stringent quality standards that include rejection on the basis of inappropriate content, illegal activity and fraudulent clicking activity, among other criteria. We enforce these quality standards using a combination of manual auditing and automated processes that continually monitor and review Web site content.

We derive our revenue from two business segments, based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology, which are described in more detail below.

ValueClick Media provides marketers with tailored programs to both build brand value and attract and grow high-value leads and customers. Our ValueClick Media segment has grown through the acquisition of complementary firms, such as Bach Systems, Inc., which does business as onResponse.com, completed in November of 2000; ClickAgents.com, Inc., completed in December 2000; and Z Media, Inc., completed in January 2001. Our strategic expansion and subsequent integration within the ValueClick Media segment has increased our presence in digital marketing, with powerful offerings in both Web Advertising and Email Marketing.

Web Advertising comprises a variety of ways to utilize available space on the website properties with which we have established relationships. With traditional banner ads, smaller and larger ad units, interstitials, text links and more, we attempt to maximize the impact of marketing campaigns by using the most effective placement for each type of campaign. Within these placements, we also offer clients the ability to execute rich media campaigns, providing even greater visual and auditory impact. As the Company began as a performance-based marketing network, we continue to offer flexible pricing arrangements, designed around maximizing our clients' return on investment. Our Web advertising placements are offered on both cost-per-thousand (CPM) pricing, whereby clients pay based on the number of times the target audience is exposed to the advertisement, and cost-per-click (CPC), where payment is triggered only when an interested individual visits the client's website.

The benefits that our clients enjoy in Web advertising include our flexible pricing models, reaching a new and larger audience through our affiliate partners, the ability to have a single media negotiation v. negotiations with many individual properties, and the ability to improve campaigns in a variety of ways while the campaign is still running, by optimizing at site, placement and creative levels, based on both response and conversion.

ValueClick's proprietary UltraLeads product is an email marketing solution that allows us to develop customized and permissioned databases of individuals who have voluntarily expressed interest in learning more about a specific client's product or service. Using a technique called co-registration, we place opt-in offers on registration areas of publisher partners' sites, inviting the visitors to those sites the ability to get more information, or to receive special offers from a specific advertiser. If consumers voluntarily opt-in to a given offer, they receive the requested information via an email from us to the address they provided. UltraLeads is priced on a cost-per-lead (CPL) basis.

An additional email marketing offering is our onResponse product. This approach is based on cost-per-action (CPA), whereby clients only pay us—and we only pay our publisher partners—when Internet users perform specific actions, such as completing requests for more information, website registrations, product sample requests, trial subscriptions, etc. These marketing messages are delivered by our publisher partners via solo email messages and e-newsletters to their base of registered visitors. When one of the recipients of these messages responds, they are directed toward the client's website to complete the desired action.

The benefits that these two offerings provide our customers include fresh, high-quality names, explicit consumer permission, scalability, customization, online and offline address submission and turnkey integration with our email campaign management technology (described below). In addition, onResponse provides the benefit of delivering interested visitors to our clients' websites.

Our highly-automated online application process is supported by a team of network development and customer service professionals across all ValueClick properties. Their responsibilities include

screening and approving or declining prospective Web publishers; monitoring network quality; maintaining relationships; consulting with publishers on additional revenue opportunities; and the trafficking and optimization of client advertising campaigns.

Our Technology segment provides marketers, agencies, website publishers and other firms with the tools they need to manage both their business operations and marketing programs effectively. The technology products and services outlined below are offered through our wholly-owned subsidiaries Be Free, Inc., acquired on May 23, 2002, and Mediaplex, Inc. and AdWare Systems, Inc. acquired on October 19, 2001

Affiliate marketing is a technique whereby online properties agree to display advertising messages in a variety of locations and configurations in return for a share of any revenue that is generated when their website visitors respond to the advertisement by purchasing products or services from the advertiser. We provide a comprehensive marketing system that enables online marketers to use this technique to attract, convert and retain customers easily and cost effectively. This marketing platform, called BFAST, includes technology and services to manage, track and analyze a variety of online marketing programs. It is offered on a hosted basis to enable marketers to execute their own affiliate marketing programs without the expense of building and maintaining their own in-house technical infrastructure and resources. Our revenues are driven by a combination of fixed fees and variable compensation that is based on a percentage of transaction revenue generated from the programs managed with the BFAST system. In addition to the technology-related revenue streams, we also receive service fees from clients who elect to utilize our Outsourced Program Management (OPM) offering. With this service, we manage the customer's online marketing programs, including marketing program planning, marketing partner management, marketing partner support, and marketing program administration.

The benefits of our affiliate marketing technology include professional services, a pay-for-performance model, customer ownership of affiliate partner relationships, a comprehensive technology platform, and extensive expertise.

BSELECT Onsite is a sophisticated hosted solution that delivers individually-personalized product, service or content recommendations in real-time directly on the pages of their website. Using website visitors' anonymous online behavior to determine which recommendations are most likely to be of interest to the individual, BSELECT Onsite then measures the effectiveness of each of those personalized recommendations in order to continually evolve and improve the performance of the recommendations. These recommendations can help to increase the number of visitors that purchase products or services, increase average order size and decrease shopping cart abandonment. For content sites, BSELECT Onsite can help to increase the number of pages viewed and the overall visit length by delivering relevant content to each site visitor, thereby deepening brand affinity and creating additional advertising opportunities for the publisher. BSELECT Onsite customers pay a one-time initialization fee and variable monthly fees, based on the performance of the system. The performance fees are generally based on the number of times an Internet site visitor responds to a recommendation made by BSELECT Onsite. BSELECT Onsite is used by online retailers with a large variety of products, or content publishers who rely on advertising revenue to support their site.

The benefits of BSELECT Onsite includ ease of implementation, cost-effectiveness, increased conversion rates and average order sizes, and improved site ROI.

As more marketers use online advertising, and as their programs continue to grow in complexity and sophistication, third-party adserving becomes increasingly important. This technological approach ensures consistent configuration, testing, execution, and tracking, regardless of the number of sites, placements, and creative executions that are being employed. Our third-party adserving product, MOJO® Adserver, allows users to configure web advertising campaigns, serve those campaigns according to time and site placements—commonly known in the industry as trafficking—and report results from such campaigns. MOJO® Adserver operates on the same platform as MOJO® Mail; it is also web-based and is available as either a full-service or ASP offering.

The benefits of our third-party adserving technology and service include an intuitive interface, advanced targeting options, response and conversion tracking, near real-time reporting, full-service or ASP, automated creative and placement optimization, the ability to handle rich media, and back-end data feeds for quantitative analysis.

MOJO® Publisher is an ad management technology solution for websites and networks, which has powered the ValueClick Media network of thousands of publisher partners since 1999. With MOJO® Publisher, websites and networks can quickly implement, manage, sell, and traffic advertising inventory on their properties, ensuring maximum revenue from those properties.

The benefits of our publisher ad management technology and service include flexible configuration, effective inventory management, accurate forecasting, advanced targeting capabilities, real-time reporting, conversion tracking, and financial system integration.

Either alone or in combination with ValueClick Media's Email Marketing solutions above, our email campaign management product—MOJO® Mail—allows users to configure, traffic and report results for permission-based prospect and customer email campaigns. In addition to basic email campaign execution, MOJO® Mail affords the user the unique ability to populate email messages with dynamic content that is updated in real-time when the recipient opens the email. The product's Web-based interfaces, MOJO® Works (delivery configuration) and MOJO® Reports (tracking results), provide a single point of access for email messaging campaigns across all platforms, including web advertising and wireless devices. The system—available in both full-service and Application Service Provider (ASP) modes—provides the ability to target customer and prospect audience segments with tailored offers and creative message versions, and to track through to conversion activity in near-real-time.

The benefits of our email campaign management technology include an intuitive interface, systematic list management and segmentation, advanced targeting options, unsubscribe and bounce management, near real-time reporting, response and conversion tracking, back-end data feeds for quantitative analysis, full-service or ASP, ability to handle rich media programs, and integration with our email marketing media programs above.

Our AdWare subsidiary is an ASP that delivers high-quality web-based information management systems to advertising agencies, marketing communications companies, public relations agencies and other large corporate advertisers. The solutions that AdWare provides span three primary categories—Business Management, Media Management and Content Management, as outlined below. AdWare's revenue is generated primarily from monthly service fees paid by customers over the service periods.

The benefits offered by our enterprise management solutions include ease of implementation, exceptional customer service, web-based ASP, and significant scalability.

Business Management—Our business management systems aid companies who can increase productivity by making their business processes more efficient through diligent tracking and monitoring of the way they are executed.

AdWare® PRODUCTION: A comprehensive web-based business-management system, this module efficiently monitors workflow and enables control of the complex day-to-day activity involved in tracking, producing and billing jobs. Cost and time tracking and analysis, bid comparisons, automated email task assignment notification, status reporting, purchase order generation, expense tracking, and production billing are combined in a single menu-driven package designed for ease of use.

AdWare FINANCIALS: A robust multi-company, multi-office financial system that provides for the managing of accounts receivable, accounts payable, general ledger, budgeting and cost accounting functions.

Media Management—Customers plan, execute, track, analyze and bill out media buys for network broadcast, spot broadcast, national cable, local cable, syndication, newspaper, magazine, and outdoor media channels. Our media planning systems aid media planners in corporate marketing departments or advertising agencies. Media planners use these systems to record the available advertising opportunities and their corresponding cost, then choosing the configuration that best meets campaign needs. They can then generate a media plan that consists of the media placements they have selected. Different systems are available for each type of media buying—print, network, and spot advertisements.

AdWare® BROADCAST is a web-enabled tool for making, tracking and analyzing spot broadcast, syndication and local cable media buys.

AdWare® NETWORK provides the technology required to track and analyze the flight schedule of network, national cable and syndication buys. The system also enables efficient invoicing and payment capabilities for the commercial schedule.

AdWare® PRINT provides all of the functionality needed to estimate, contract for, buy, bill and pay for ads scheduled in newspapers, magazines and trade publications. In addition, AdWare PRINT can handle outdoor media buys such as billboards.

Content Management—A web-based digital asset management solution designed for storage, retrieval and play/view of digital assets such as documents, audio files, video files, and graphics. Accessible via both Macintosh and PC, Content Depot is designed for both easy installation and use, and is targeted at any business that needs an affordable way to manage and utilize their digital assets.

We currently have international operations in the United Kingdom, Germany, France and Japan. All operations are wholly-owned subsidiaries, with the exception of ValueClick Japan, in which we have a majority ownership position.

ValueClick Japan commenced operations in November 1998. We currently own a 59.2% interest in ValueClick Japan, which has 44 employees. In May 2000, ValueClick Japan completed its initial public offering on the Tokyo Stock Exchange for emerging growth companies. In August 1999, we commenced operations in the European market with ValueClick Europe Ltd., a wholly-owned subsidiary of ValueClick based in the United Kingdom. In 2000, we expanded in Europe by opening wholly-owned subsidiaries in Paris, France and Munich, Germany. Also in 2000, we continued to expand our international presence outside Europe by opening wholly-owned subsidiaries in Sao Paolo, Brazil and Toronto, Canada, which were subsequently discontinued in the second quarter of 2001. Employees in our international subsidiaries, including Japan, totaled 87 as of December 31, 2002.

For further financial information regarding our international sales, see note 14 to our consolidated financial statements contained in this Report.

To help ensure our success in offering quality media products, in a number of different channels, several proprietary software applications have been developed. Each application has been developed by a qualified team of information technology professionals whose primary mission is to partner with our customers and a ValueClick product specialist to transform functionality requirements into technology solutions.

Our proprietary applications are constructed from established, readily available technologies. These technologies are crafted into applications whose main objective is to out-perform offerings of our competitors within the same business segment. Some of the basic components our products are built on come from leading software providers such as Oracle, IBM, Sun, Dell, EMC, and Cisco while some components are constructed from leading Open Source software projects such as Apache Web Server, FreeBSD, and Perl. By striking the proper balance between using commercially available software and Open Source software, we direct our Information Technology expenditures toward developing distinguishing application functionality while minimizing third party technology supplier costs.

We build in high performance, availability and reliability into our product offerings. Within the particular business segment, each offering out-performs industry-wide acceptable performance measurements. We safeguard against the potential for service interruptions at our third party technology vendors by engineering failsafe controls into our critical components. ValueClick delivers its hosted solutions from three collocation centers, geographically disbursed within the United States. ValueClick applications are monitored 24 hours a day, 365 days a year by specialized monitoring systems that aggregate alarms to a human staffed network operations center. If a problem occurs, appropriate engineers are notified and corrective action is taken.

Our continued investment in ValueClick's technology infrastructure helps to ensure our product offerings remain innovative, competitive, and cost-effective.

We market our products and services primarily through direct marketing, print advertising and online advertising throughout the year. We also market them through the ValueClick properties' Web sites, trade show participation and other media events. In addition, we actively pursue public relations programs to promote our brand, products and services to potential network Web publishers and advertisers, as well as to industry analysts.

We sell our products and services to a variety of advertisers and advertising agencies primarily through our direct sales force, consisting of 96 sales persons across all ValueClick properties. We make extensive use of telemarketing and e-marketing strategies. Each of our account executives assists the advertisers he or she services, typically advertising, direct marketing and e-commerce companies, with all aspects of media planning and design of their advertising campaigns and their related technology needs. These services and products include advertisement purchasing and placement, assessment of results and optimization of performance and related technology platforms

We derive our revenue from two business segments based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology. In 2002, one individual customer accounted for 14.5% of our total revenue and 27.7% of revenue generated through ValueClick Technology. We expect that this customer may continue to account for a significant percentage of our ValueClick Technology revenue for the foreseeable future. The loss of this customer or any material decrease in the amount of our products purchased by this customer would have a material adverse impact on our revenue and results of operations. For additional information regarding our business segments, see note 14 to our consolidated financial statements contained in this Report.

We face intense competition in the Internet advertising market. We expect that this competition will continue to intensify in the future as a result of industry consolidations and the continuing maturation of the industry. We compete with a diverse and large pool of advertising, media and Internet companies.

Additional competitive factors include each competitor's reputation, knowledge of the advertising market, financial controls, geographical coverage, relationships with clients, technological capability and quality and breadth of services. We expect that we will face additional competition from new entrants into the market in the future.

We believe that our business is subject to seasonal fluctuations. Marketers generally place fewer advertisements during the first and third calendar quarters of each year, and direct marketers generally mail substantially more marketing materials in the third calendar quarter of each year. In addition, expenditures by advertisers and direct marketers vary in cycles and tend to reflect the overall economic conditions, as well as budgeting and buying patterns. Furthermore, user traffic on the Internet tends to decrease during the summer months which results in fewer advertisements to sell and deliver. A further decline in the general economy or in the economic prospects of advertisers and direct marketers could adversely affect our revenue.

We currently rely on a combination of copyright and trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to and distribution of our software documentation and other proprietary information. We have registered the trademark "ValueClick" in the United States, the European Union and Japan. We currently have four pending U.S. patent applications. We do not know if our current patent applications or any future patent application will result in a patent being issued within the scope of the claims we seek, if at all, or whether any patents we may receive will be challenged or invalidated. Although patents are only one component of the protection of intellectual property rights, if our patent applications are denied, it may result in increased competition and the development of products substantially similar to our own. In addition, it is difficult to monitor unauthorized use of technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, and our competitors may independently develop technology similar to those of our own. We will continue to assess appropriate occasions for seeking patent and other intellectual property protections for those aspects of our technology that we believe constitute innovations providing significant competitive advantages.

In February 2000, in connection with a strategic investment transaction with DoubleClick, DoubleClick agreed, as long as it owns or has the right to acquire at least 5% of our capital stock, not to sue or threaten to sue us or any of our customers, affiliates or licensees (1) for infringement of any claim of DoubleClick's U.S. Patent No. 5,948,061 or (2) for infringement of any claim of any U.S. patent or patent application, or foreign patent or patent application, that is related to U.S. Patent No. 5,948,061 or that claims priority from this patent or otherwise makes claims similar to those made in this patent. DoubleClick's Patent No. 5,948,061 covers the process of using linked advertising space and compiling statistics on individual users in order to target advertisements over the Internet or computer networks. In November 2002, in connection with our Stock Repurchase Program, we repurchased our remaining common stock held by DoubleClick. In the related repurchase agreement, both parties agreed not to sue or threaten to sue each other or any of their customers for infringement of outstanding patents for a three-year period beginning in November 2002. See "Business—The DoubleClick Investment" below.

In October of 2001, ValueClick received a demand letter from 24/7 Real Media, Inc. alleging that the ad-serving technology of both ValueClick and Mediaplex infringed upon 24/7 Real Media's '368 ad-serving patent and included a demand that the companies purchase a license for the patent. ValueClick responded with a detailed letter denying liability. In February of 2002, 24/7 Real Media filed a patent infringement suit against ValueClick and Mediaplex in the Southern District of New York. The complaint sought injunctive relief and unspecified damages relating to alleged patent infringement of 24/7 Real Media's '368 patent. On December 30, 2002 we purchased a license from 24/7 Real Media for the '368 patent under a Patent License Agreement. In connection with the Patent License Agreement, 24/7 Real Media also agreed to terminate their lawsuit against the Company. The terms of the Patent License and Settlement Agreements are confidential.

We commenced operations as ValueClick, LLC, a California limited liability company, on May 1, 1998. Prior to the formation of ValueClick, LLC, the ValueClick Internet advertising business began in July 1997 as a line of business within Web-Ignite Corporation, a company wholly-owned by the founding member of ValueClick, LLC. The reorganization and formation of ValueClick, LLC was effected by the transfer of the Internet advertising business of Web-Ignite to ValueClick, LLC. On December 31, 1998, ValueClick, LLC reorganized as ValueClick, Inc., a Delaware corporation. On March 30, 2000, we completed our initial public offering of common stock. Our common stock is publicly traded and is reported on the Nasdaq National Market under the symbol "VCLK."

Be Free, Inc. On May 23, 2002, we completed our acquisition of Be Free, Inc. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Be Free and Be Free survived as a wholly-owned subsidiary of the Company. Under the terms of the merger agreement, Be Free stockholders received 0.65882 shares of ValueClick common stock for each share of Be Free common stock. The Company issued a total of approximately 43.4 million shares of its common stock for all the outstanding stock of Be Free. In addition, the Company assumed options to purchase approximately 4.2 million additional shares of ValueClick common stock. The acquisition of Be Free expanded our online and offline marketing and advertising technology capabilities.

Mediaplex, Inc. On October 19, 2001, we completed our acquisition of Mediaplex, Inc., a provider of technology software tools used in both online and offline advertising campaigns. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Mediaplex and Mediaplex survived as a wholly-owned subsidiary of ValueClick. Under the terms of the merger agreement, approved by both boards of directors and stockholders, Mediaplex stockholders received 0.4113 shares of ValueClick common stock for each share of Mediaplex common stock. We issued approximately 15.1 million shares of our common stock for all the outstanding stock of Mediaplex. In

addition, we assumed options to purchase approximately 2.8 million additional shares of ValueClick common stock.

Z Media, Inc. On January 31, 2001, we completed our acquisition of Z Media, Inc., a leading co-registration company. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Z Media and Z Media survived as a wholly-owned subsidiary of ValueClick. In connection with the merger, we issued a total of approximately 2.7 million shares of our common stock in exchange for all outstanding shares of Z Media and reserved approximately 420,000 additional shares of common stock for issuance upon exercise of outstanding employee stock options of Z Media. With the acquisition of Z Media, we added co-registration to our product line.

ClickAgents.com, Inc. On December 8, 2000, we completed our acquisition of ClickAgents.com, Inc., a provider of performance-based Internet advertising solutions for ad agencies, advertisers and Web publishers focused on a cost-per-click model. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into ClickAgents and ClickAgents survived as a wholly-owned subsidiary of ValueClick. In connection with the merger, we issued approximately 4.9 million shares of our common stock in exchange for all outstanding shares of ClickAgents and reserved approximately 430,000 additional shares of our common stock for issuance upon exercise of outstanding employee stock options of ClickAgents.

Bach Systems, Inc. On November 20, 2000, we completed our acquisition of Bach Systems, Inc., dba onResponse.com, a developer of customized cost-per-action and cost-per-lead campaigns on behalf of advertising and direct marketing clients. Under the terms of the merger agreement, Bach Systems was merged with and into Bach Acquisition corp., a wholly-owned subsidiary of ValueClick. Bach Acquisition survived as our wholly-owned subsidiary. Under the terms of the agreement, we paid $825,000 and issued 1,777,814 shares of our common stock in exchange for all outstanding shares of Bach Systems. With the acquisition of Bach Systems, we added cost-per-action advertising services to our product line.

On February 28, 2000, we completed a strategic investment transaction with DoubleClick, a worldwide provider of Internet advertising solutions for advertisers and Web publishers. The terms of this agreement involved an investment by DoubleClick under which DoubleClick acquired 7,878,562 shares of our common stock in exchange for $10.0 million in cash and 732,860 shares of DoubleClick common stock. The shares of DoubleClick common stock were valued at approximately $85.8 million for accounting purposes based on an average price of $117.07 per share. DoubleClick's common stock is quoted on the Nasdaq National Market under the symbol "DCLK." Under the terms of the investment, DoubleClick acquired approximately 30% of our fully-diluted outstanding common stock and a 15-month warrant to acquire additional shares of our common stock at $21.76 per share for an amount of shares so that DoubleClick could own up to 45% of our fully-diluted capital stock. The warrant expired unexercised in May 2001.

During May 2000, we sold 165,000 shares of our DoubleClick common stock for cash proceeds of $10.3 million. The sale of these shares resulted in a realized non-cash loss of $9.0 million.

In December 2000, we made an assessment that the decline in market value of the remaining DoubleClick stock was other than temporary. Accordingly, for the year ended December 31, 2000 we recorded a non-cash charge to operations of $60.2 million representing the unrealized holding losses previously accounted for as a separate component of stockholders' equity.

During April 2001, we sold our remaining 567,860 shares of our DoubleClick common stock for cash proceeds of $6.9 million. The sales of these shares resulted in a realized gain of $701,000.

In November 2002, in connection with our Stock Repurchase Program, we repurchased the 7,878,562 shares of our common stock held by DoubleClick for an aggregate purchase price of

$21.3 million. In the related repurchase agreement, both parties agreed not to sue or threaten to sue each other or any of their customers for infringement of outstanding patents for a three-year period.

We may collect personally identifiable data. We store such data securely and do not use said data without the explicit, knowing permission of the user when we collect such data on behalf of our clients. We rely on our clients to treat such data with the appropriate precaution and responsibility as stated in their privacy policies. In addition, we use non-personally identifiable information provided by Web sites, pursuant to their privacy policies, about their viewers' general demographics and interests in order to target appropriate advertising to the sites.

Moreover, if our clients have databases of their customers, we can use this data on behalf of those clients, again pursuant to their privacy policies. The premise is that both the site providing the ad space and the advertiser (1) have a relationship with the customer, or opt-in, (2) have an opportunity to share their privacy policy with their customers, and (3) provide an opportunity to opt-out.

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

We collect certain technical data (such as type of browser, operating system, domain type, date and time of viewer's response) when serving Internet advertisements. This type of information is defined by the Network Advertising Initiative as Non-personally Identifiable Information ("Ad Delivery and Reporting Data".) We may retain this Ad Delivery and Reporting Data indefinitely.

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

We are compliant with the Platform for Privacy Protection Project, or P3P, compliance criteria. P3P is the most current privacy standard effort in the industry, providing simple and automated privacy controls for users.

As of December 31, 2002, we had 332 employees in the U.S., 44 employees in Japan and 43 employees in our other international locations. None of these employees are covered by collective bargaining agreements. Management believes that our relations with our employees are good.

Our primary Internet address is www.valueclick.com. We make our periodic SEC Reports (Forms 10-Q and Forms 10-K) and current reports (Form 8-K) available free of charge through our Web site as soon as reasonably practicable after they are filed electronically with the SEC. We may from time to time provide important disclosures to investors by posting them in the investor relations section of our Web site, as allowed by SEC rules.

Materials we file with the SEC may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet Web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file electronically with the SEC.

You should carefully consider the following risks before you decide to buy shares of our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties, including those risks set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" below, may also adversely impact and impair our business. If any of the following risks actually occur, our business, results of operations or financial condition would likely suffer. In such case, the trading price of our common stock could decline, and you may lose all or part of the money you paid to buy our stock.

This Report contains forward-looking statements based on the current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements as a result of certain factors, as more fully described in this section and elsewhere in this Report. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

INTEGRATING OUR ACQUIRED OPERATIONS MAY DIVERT MANAGEMENT'S ATTENTION AWAY FROM OUR DAY-TO-DAY OPERATIONS.

We have grown in part because of business combinations with other companies. Acquisitions generally involve significant risks, including difficulties in the assimilation of the operations, services, technologies and corporate culture of the acquired companies, diversion of management's attention from other business concerns, overvaluation of the acquired companies, and the acceptance of the acquired companies' products and services by our customers. The integration of our acquired operations, products and personnel may place a significant burden on management and our internal resources. The diversion of management attention and any difficulties encountered in the transition and integration process could harm our business. Moreover, we consummated the acquisitions of Mediaplex, Inc. and Be Free, Inc. on October 19, 2001 and May 23, 2002, respectively. Because of the maturity and the size of Mediaplex's and Be Free's operations, the locations of their headquarters, the differences in their customer base and functionality of Mediaplex's and Be Free's and our products, the acquisition may present a materially higher product, marketing, research and development, facilities, information systems, accounting, personnel, and other integration challenges than those we have faced in connection with our prior acquisitions and may delay or jeopardize the complete integration of certain businesses we had acquired previously.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR EXPENSES COULD INCREASE AND OUR MANAGEMENT'S TIME AND ATTENTION COULD BE DIVERTED.

As we continue to increase the scope of our operations, we will need an effective planning and management process to implement our business plan successfully in the rapidly evolving Internet advertising market. Our business, results of operations and financial condition will be substantially harmed if we are unable to manage our expanding operations effectively. We plan to continue to expand our sales and marketing, customer support and research and development organizations. Past growth has placed, and any future growth will continue to place, a significant strain on our management systems and resources. We will likely need to continue to improve our financial and managerial controls and our reporting systems and procedures. In addition, we will need to expand, train and manage our work force. Our failure to manage our growth effectively could increase our expenses and divert management's time and attention.

UNEXPECTED SIGNIFICANT COSTS TO INTEGRATE OUR ACQUIRED OPERATIONS INTO A SINGLE BUSINESS MAY NEGATIVELY IMPACT OUR FINANCIAL CONDITION AND THE MARKET PRICE OF OUR STOCK.

We will incur costs from the integration of purchased company operations, products and personnel. These costs may be significant and may include expenses and other liabilities for:

The integration costs that we incur may negatively impact our financial condition and the market price of our stock.

WE HAVE A LIMITED OPERATING HISTORY, A HISTORY OF LOSSES, AN ACCUMULATED DEFICIT AND MAY CONTINUE TO EXPERIENCE LOSSES.

For the year ended December 31, 2002, we incurred a net loss of approximately $10.6 million and at December 31, 2002 we had an accumulated deficit of approximately $74.2 million. Though we achieved net income in the fourth quarter of 2002, events could arise that prohibit obtaining net income in future periods.

Because we have a limited operating history, it may be difficult to evaluate our business and prospects. You should consider our prospects in light of the risks, expenses and difficulties frequently encountered by early-stage companies in the rapidly-changing Internet market. These risks include our ability to:

If we are unsuccessful in addressing these risks and uncertainties, our business, results of operations and financial condition could be materially and adversely affected.

IF ADVERTISING ON THE INTERNET LOSES ITS APPEAL TO DIRECT MARKETING COMPANIES, OUR REVENUE COULD DECLINE.

Our Media segment accounted for 47.6% of our revenue for the year ended December 31, 2002 by delivering advertisements that generate click-throughs and other actions to our advertisers' Web sites. This business model may not continue to be effective in the future for a number of reasons, including the following: click rates have always been low and may decline as the number of banner advertisements on the Web increases; Internet users can install "filter" software programs which allow them to prevent advertisements from appearing on their screens; advertisements are, by their nature, limited in content relative to other media; direct marketing companies may be reluctant or slow to adopt online advertising that replaces, limits or competes with their existing direct marketing efforts;

and direct marketing companies may prefer other forms of Internet advertising we do not offer, including search engine placements. If the number of direct marketing companies who purchase online advertising from us does not continue to grow, we may experience difficulty in attracting publishers, and our revenue could decline.

IF OUR BUSINESS MODEL IS NOT ACCEPTED BY INTERNET ADVERTISERS OR WEB PUBLISHERS, OUR REVENUE COULD DECLINE.

Traditionally, substantially all of our revenue have been derived from our Media segment. Although we intend to grow our Technology segment, we expect that our Media segment will continue to generate a substantial amount of our revenue in the future. For the year ended December 31, 2002, our Media segment accounted for 47.6% of our revenue. In addition, most of our Media products and services are based on a cost-per-click, or CPC, cost-per-action, or CPA, or cost-per-lead, or CPL, pricing model. These business models differ from the cost-per-thousand impressions, or CPM, pricing model, which many other Internet advertising companies use. Our ability to generate significant revenue from advertisers will depend, in part, on our ability to demonstrate the effectiveness of our pricing models to advertisers, many of which may be more accustomed to the CPM pricing model, and to Web publishers; and on our ability to attract and retain advertisers and Web publishers by differentiating our technology and services from those of our competitors. One component of our strategy is to enhance advertisers' ability to measure their return on investment and track the performance and effectiveness of their advertising campaigns. However, we have limited experience in implementing our strategy. To date, few advertisers have taken advantage of the most sophisticated tool we offer for tracking Internet users' activities after they have reached advertisers' Web sites. We will not be able to assure you that our strategy will succeed.

Intense competition among Web sites and Internet advertising services has led to the proliferation of a number of alternative pricing models for Internet advertising. These alternatives, and the likelihood that additional pricing alternatives will be introduced, make it difficult for us to project the levels of advertising revenue or the margins that we, or the Internet advertising industry in general, will realize in the future. Moreover, an increase in the amount of advertising on the Web may result in a decline in click rates. Since we predominantly rely on a performance-based pricing model to generate revenue, any decline in click rates may make our pricing models less viable or less attractive solutions for Web publishers and advertisers.

OUR REVENUE COULD DECLINE IF WE FAIL TO EFFECTIVELY MANAGE OUR EXISTING ADVERTISING SPACE AND OUR GROWTH COULD BE IMPEDED IF WE FAIL TO ACQUIRE NEW ADVERTISING SPACE.

Our success depends in part on our ability to effectively manage our existing advertising space. The Web sites that list their unsold advertising space with us are not bound by long-term contracts that ensure them a consistent supply of advertising space, which we refer to as inventory. In addition, Web sites can change the amount of inventory they make available to us at any time. If a Web site publisher decides not to make advertising space from its Web sites available to us, we may not be able to replace this advertising space with advertising space from other Web sites that have comparable traffic patterns and user demographics quickly enough to fulfill our advertisers' requests. This would result in lost revenue. We expect that our customers' requirements will become more sophisticated as the Web matures as an advertising medium. If we fail to manage our existing advertising space effectively to meet our customers' changing requirements, our revenue could decline. Our growth depends on our ability to expand our advertising inventory. To attract new customers, we must maintain a consistent supply of attractive advertising space. We intend to expand our advertising inventory by selectively adding to our network new Web sites that offer attractive demographics, innovative and quality content and growing Web user traffic. Our ability to attract new Web sites to our network and to retain Web sites currently in our network will depend on various factors, some of which are beyond our control.

These factors include our ability to introduce new and innovative product lines and services, our ability to efficiently manage our existing advertising inventory, our pricing policies and the cost-efficiency to Web publishers of outsourcing their advertising sales. In addition, the number of competing Internet advertising networks that purchase advertising inventory from small- to medium-sized Web sites continues to increase. We will not be able to assure you that the size of our inventory will increase or even remain constant in the future.

WE MAY FACE INTELLECTUAL PROPERTY DISPUTES THAT ARE COSTLY OR COULD HINDER OR PREVENT OUR ABILITY TO DELIVER OUR PRODUCTS AND SERVICES.

We may be subject to disputes and legal actions alleging intellectual property infringement, unfair competition or similar claims against us. Companies may apply for or be awarded patents or have other intellectual property rights covering aspects of our technology or business.

IF THE TECHNOLOGY THAT WE CURRENTLY USE TO TARGET THE DELIVERY OF BANNERS AND TO PREVENT FRAUD ON OUR NETWORK IS RESTRICTED OR BECOMES SUBJECT TO REGULATION, OUR EXPENSES COULD INCREASE AND WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY.

Web sites typically place small files of information, commonly known as cookies, on an Internet user's hard drive, generally without the user's knowledge or consent. Cookie information is passed to the Web site through an Internet user's browser software. We currently use cookies to track an Internet user's movement through the advertiser's Web site and to monitor and prevent potentially fraudulent activity on our network. Most currently available Internet browsers allow Internet users to modify their browser settings to prevent cookies from being stored on their hard drive, and some users currently do so. Internet users can also delete cookies from their hard drives at any time. Some Internet commentators and privacy advocates have suggested limiting or eliminating the use of cookies, and legislation has been introduced in some jurisdictions to regulate the use of cookie technology. The effectiveness of our technology could be limited by any reduction or limitation in the use of cookies. If the use or effectiveness of cookies were limited, we would have to switch to other technologies to gather demographic and behavioral information. While such technologies currently exist, they are substantially less effective than cookies. We would also have to develop or acquire other technology to prevent fraud. Replacement of cookies could require significant reengineering time and resources, might not be completed in time to avoid losing customers or advertising inventory, and might not be commercially feasible. Our use of cookie technology or any other technologies designed to collect Internet usage information may subject us to litigation or investigations in the future. Any litigation or government action against us could be costly and time-consuming, could require us to change our business practices and could divert management's attention.

WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY IF WE FAIL TO MEASURE IMPRESSIONS, CLICKS AND ACTIONS ON ADVERTISEMENTS IN A MANNER THAT IS ACCEPTABLE TO OUR ADVERTISERS AND WEB PUBLISHERS.

We earn advertising revenue and make payments to Web publishers based on the number of impressions, clicks and actions from advertisements delivered on our network. Advertisers' and Web publishers' willingness to use our services and join our network will depend on the extent to which they perceive our measurements of impressions, clicks and actions to be accurate and reliable. Advertisers and Web publishers often maintain their own technologies and methodologies for counting, and from time to time we have had to resolve differences between our measurements and theirs. Any significant dispute over the proper measurement of clicks or other user responses to advertisements could cause us to lose customers or advertising inventory.

IF WE FAIL TO COMPETE EFFECTIVELY AGAINST OTHER INTERNET ADVERTISING COMPANIES, WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY AND OUR REVENUE COULD DECLINE.

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

The market for Internet advertising and related services is intensely competitive. We expect this competition to continue to increase because there are no significant barriers to entry. Increased competition may result in price reductions for advertising space, reduced margins and loss of our market share. Our principal competitors include other companies that provide advertisers with performance-based Internet advertising solutions, such as CPC, CPL or CPA. We directly compete with a number of competitors in the CPC market segment, such as Advertising.com. We also compete in the performance-based marketing segment with CPL and CPA performance-based companies such as DirectLeads and CommissionJunction. In addition, we compete with other Internet advertising networks that focus on the traditional CPM model, including Maxworldwide and ²⁴/7 Real Media. Large Web sites with brand recognition, such as Yahoo and MSN, have direct sales personnel and substantial proprietary inventory that provide significant competitive advantage compared to our networks and have significant impact on pricing for online advertising. These companies have longer operating histories, greater name recognition and have greater financial and marketing resources than we have.

Competition for advertising placements among current and future suppliers of Internet navigational and informational services, high-traffic Web sites and ISPs, as well as competition with other media for advertising placements, could result in significant price competition and reductions in advertising revenue. In addition, as we expand the scope of our Web services, we may compete with a greater number of Web publishers and other media companies across an increasing range of different Web services, including in vertical markets where competitors may have advantages in expertise, brand recognition and other areas. If existing or future competitors develop or offer services that provide significant performance, price, creative or other advantages over those offered by us, our business, result of operations and financial condition would be negatively affected. We will also compete with traditional advertising media, such as direct mail, television, radio, cable and print, for a share of advertisers' total advertising budgets. Many current and potential competitors enjoy competitive advantages over us, such as longer operating histories, greater name recognition, larger customer bases, greater access to advertising space on high-traffic Web sites, and significantly greater financial, technical and marketing resources. As a result, we may not be able to compete successfully. If we fail to compete successfully, we could lose customers or advertising inventory and our revenue could decline.

OUR REVENUE GROWTH COULD BE NEGATIVELY IMPACTED IF INTERNET USAGE AND THE DEVELOPMENT OF INTERNET INFRASTRUCTURE DO NOT CONTINUE TO GROW.

Our business and financial results will depend on continued growth in the use of the Internet. Internet usage may be inhibited for a number of reasons, such as: inadequate network infrastructure; security concerns; inconsistent quality of service; and unavailability of cost-effective, high-speed service. If Internet usage grows, our infrastructure may not be able to support the demands placed on it and our performance and reliability may decline. In addition, Web sites have experienced interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure, and as a result of sabotage, such as electronic attacks designed to interrupt service on many Web sites. The Internet could lose its viability as a commercial medium due to delays in the development or adoption of new technology required to accommodate increased levels of Internet

activity. If use of the Internet does not continue to grow, or if the Internet infrastructure does not effectively support our growth, our revenue could be materially and adversely affected.

OUR LONG-TERM SUCCESS MAY BE MATERIALLY ADVERSELY AFFECTED IF THE MARKET FOR E-COMMERCE DOES NOT GROW OR GROWS SLOWER THAN EXPECTED.

Because many of our customers' advertisements encourage online purchasing, our long-term success may depend in part on the growth and market acceptance of e-commerce. The growth and acceptance of e-commerce has developed more slowly than expected and our business will be adversely affected if the market for e-commerce does not grow or grows slower than now expected. A number of factors outside of our control could hinder the future growth of e-commerce, including the following:

In particular, any well-publicized compromise of security involving Web-based transactions could deter people from purchasing items on the Internet, clicking on advertisements, or using the Internet generally, any of which could cause us to lose customers and advertising inventory and could materially, adversely affect our revenue.

The successful integration of the companies we have acquired will depend in part on the retention of personnel critical to our combined business and operations due to, for example, unique technical skills or management expertise. We may be unable to retain existing management, technical, sales and customer support personnel that are critical to the success of the integrated company, resulting in disruption of operations, loss of key information, expertise or know-how and unanticipated additional recruitment and training costs and otherwise diminishing anticipated benefits of these acquisitions.

Our future success is substantially dependent on the continued service of our key senior management. Our employment agreements with our key personnel are short-term and on an at-will basis. We do not have key-person insurance on any of our employees. The loss of the services of any member of our management team, or of any other key employees, could divert management's time and attention, increase our expenses and adversely affect our ability to conduct our business efficiently. Our future success also depends on our continuing ability to attract, retain and motivate highly skilled employees. We may be unable to retain our key employees or attract, assimilate or retain other highly qualified employees in the future. We have experienced difficulty from time to time in attracting the personnel necessary to support the growth of our business, and may experience similar difficulties in the future.

DELAWARE LAW AND OUR STOCKHOLDER RIGHTS PLAN CONTAIN ANTI-TAKEOVER PROVISIONS THAT COULD DETER TAKEOVER ATTEMPTS THAT COULD BE BENEFICIAL TO OUR STOCKHOLDERS.

Provisions of Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. Section 203 of the Delaware General Corporation Law may make the acquisition of the company and the removal of incumbent officers and directors more difficult by prohibiting stockholders holding 15% or more of our outstanding voting stock from

acquiring the company without the board of director's consent for at least three years from the date they first hold 15% or more of the voting stock. In addition, our Stockholder Rights Plan has significant anti-takeover effects by causing substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors.

SYSTEM FAILURES COULD SIGNIFICANTLY DISRUPT OUR OPERATIONS, WHICH COULD CAUSE US TO LOSE CUSTOMERS OR ADVERTISING INVENTORY.

Our success depends on the continuing and uninterrupted performance of our systems. Sustained or repeated system failures that interrupt our ability to provide services to customers, including failures affecting our ability to deliver advertisements quickly and accurately and to process users' responses to advertisements, would reduce significantly the attractiveness of our solutions to advertisers and Web publishers. Our business, results of operations and financial condition could be materially and adversely affected by any damage or failure that interrupts or delays our operations. Our computer systems will be vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious human acts and natural disasters. We lease server space in Los Angeles and Sunnyvale, California; Louisville, Kentucky; Pittsburgh, Pennsylvania and Tokyo, Japan. Therefore, any of the above factors affecting the Los Angeles, Sunnyvale, Louisville, or Tokyo areas would substantially harm our business. Moreover, despite network security measures, our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems in part because we cannot control the maintenance and operation of our third-party data centers. Despite the precautions taken, unanticipated problems affecting our systems could cause interruptions in the delivery of our solutions in the future. Our data storage centers incorporate redundant systems, consisting of additional servers, but our primary system does not switch over to our backup system automatically. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures in our systems.

Our future success depends in part on the efficient performance of our software and technology, as well as the efficient performance of the systems of third parties. As the numbers of Web pages and Internet users increase, our services and infrastructure may not be able to grow to meet the demand. A sudden and unexpected increase in the volume of advertising delivered through our servers or in click rates could strain the capacity of the software or hardware that we have deployed. Any capacity constraints we experience could lead to slower response times or system failures and adversely affect the availability of advertisements, the number of advertising views delivered and the level of user responses received, which would harm our revenue. To the extent that we do not effectively address capacity constraints or system failures, our business, results of operations and financial condition could be harmed substantially. We also depend on the Internet service providers, or ISPs, that provide consumers with access to the Web sites on which our customers' advertisements appear. Internet users have occasionally experienced difficulties connecting to the Web due to failures of their ISPs' systems. Any disruption in Internet access provided by ISPs or failures by ISPs to handle the higher volumes of traffic expected in the future could materially and adversely affect our revenue.

IT MAY BE DIFFICULT TO PREDICT OUR FINANCIAL PERFORMANCE BECAUSE OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.

Our revenue and operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our results of operations as an indication of our future performance. Our results of operations may fall below the expectations of market analysts and investors in some future periods. If this happens, the

market price of our common stock may fall. The factors that may affect our quarterly operating results include:

Expenditures by advertisers also tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. Any decline in the economic prospects of advertisers or the economy generally may alter current or prospective advertisers' spending priorities, or may increase the time it takes us to close sales with advertisers, and could materially and adversely affect our business, results of operations and financial condition.

WE MAY BE UNABLE TO REDUCE SPENDING IF OUR REVENUE IS LOWER THAN EXPECTED BECAUSE OUR SHORT-TERM EXPENSES ARE FIXED AND FUTURE REVENUE AND OPERATING RESULTS ARE DIFFICULT TO FORECAST.

Our current and future expense estimates are based, in large part, on our estimates of future revenue and on our investment plans. In particular, we plan to increase our operating expenses significantly in order to expand our sales and marketing operations; enhance our technology and software solutions; acquire additional advertising inventory; enhance our advertising management platform; and continue our international expansion. Most of our expenses are fixed in the short term. We may be unable to reduce spending if our revenue is lower than expected. Any significant shortfall in revenue in relation to our expectations could materially and adversely affect our cash flows.

IF WE DO NOT SUCCESSFULLY DEVELOP OUR INTERNATIONAL STRATEGY, OUR REVENUE AND CASH FLOWS AND THE GROWTH OF OUR BUSINESS COULD BE HARMED.

We initiated operations, through joint ventures and wholly-owned subsidiaries or divisions, in Japan in 1998, in the United Kingdom in 1999, and Brazil, Canada, France and Germany in 2000. Subsequently, we discontinued operations in Brazil and Canada in 2001. Our foreign operations subject us to foreign currency exchange risks. We currently do not utilize hedging instruments to mitigate foreign exchange risks.

Our international expansion will subject us to additional foreign currency exchange risks and will require management's attention and resources. We expect to pursue expansion through a number of international alliances and to rely extensively on these business partners initially to conduct operations, establish local networks, register Web sites as affiliates and coordinate sales and marketing efforts. Our success in these markets will depend on the success of our business partners and their willingness to

dedicate sufficient resources to the relationships. We cannot assure you that we will be successful in our efforts overseas. International operations are subject to other inherent risks, including:

Our failure to address these risks adequately could materially and adversely affect our business, results of operations and financial condition.

WE MAY BE LIABLE FOR CONTENT DISPLAYED ON THE WEB SITES OF OUR PUBLISHERS WHICH COULD INCREASE OUR EXPENSES.

We may be liable to third parties for content in the advertising we deliver if the artwork, text or other content involved violates copyright, trademark, or other intellectual property rights of third parties or if the content is defamatory. Any claims or counterclaims could be time-consuming, could result in costly litigation and could divert management's attention.

REVENUE GENERATED BY OUR TECHNOLOGY PRODUCTS AND SERVICES DEPEND UPON A FEW KEY CLIENTS, AND IF WE LOSE A MAJOR CLIENT FOR THESE PRODUCTS OR SERVICES, OUR REVENUE MAY BE SIGNIFICANTLY REDUCED.

For the year ended December 31, 2002, revenue from our Technology segment accounted for 52.4% of our revenue. With our recent acquisition of companies offering complimentary technology products and services, including our May 2002 acquisition of Be Free, Inc. and our October 2001 acquisition of Mediaplex, Inc., we expect that our Technology segment may account for a greater percentage of our revenue in the future. Revenue generated by our technology products and services have been derived from a limited number of advertisers and advertising agencies. Our results of operations would be materially adversely impacted by the loss of any of these clients. For the year ended December 31, 2002, one individual company accounted for 14.5% of our overall revenue and 27.7% of revenue generated by our technology products and services. No other customer accounted for more than 10% of our total revenue in 2002. We expect that this and other entities may continue to account for a significant percentage of our revenue generated by our technology products and services. Current advertisers may not continue to purchase advertising services from us or may significantly reduce their purchases or we may not be able to successfully attract additional advertisers, all of which would have a material adverse impact on our results of operations. If sales of our technology products and services do not grow, we will be unable to grow our Technology segment.

IF WE FAIL TO ESTABLISH, MAINTAIN AND EXPAND OUR TECHNOLOGY BUSINESS AND MARKETING ALLIANCES AND PARTNERSHIPS, OUR ABILITY TO GROW COULD BE LIMITED, WE MAY NOT ACHIEVE DESIRED REVENUE AND OUR STOCK PRICE MAY DECLINE.

In order to grow our technology business, we must generate, retain and strengthen successful business and marketing alliances with advertising agencies.

We depend, and expect to continue to depend, on our business and marketing alliances, which are companies with which we have written or oral agreements to work together to provide services to our clients and to refer business from their clients and customers to us. If companies with which we have business and marketing alliances do not refer their clients and customers to us to perform their online campaign and message management, our revenue and results of operations would be severely harmed.

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

WE WILL BE DEPENDENT UPON TECHNOLOGIES, INCLUDING OUR MOJO, ADWARE AND BE FREE TECHNOLOGIES, FOR OUR FUTURE REVENUE, AND IF THESE TECHNOLOGIES DO NOT GENERATE REVENUE, OUR BUSINESS MAY FAIL.

Our future revenue is likely to be dependent on the acceptance by clients of the use of technologies, which we believe to be the cornerstone of the technology business. If these technologies do not perform as anticipated or otherwise do not attract clients to use our services, our operations will suffer. In addition, we have incurred and will continue to incur significant expense developing our technologies. If our revenue generated from the use of our technologies does not cover these development costs, our financial condition would suffer.

IF OUR TECHNOLOGIES SUFFER FROM DESIGN DEFECTS, WE MAY NEED TO EXPEND SIGNIFICANT RESOURCES TO ADDRESS RESULTING PRODUCT LIABILITY CLAIMS.

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

TECHNOLOGY SALES AND IMPLEMENTATION CYCLES ARE LENGTHY, WHICH COULD DIVERT OUR FINANCIAL AND OTHER RESOURCES, AND ARE SUBJECT TO DELAYS, WHICH COULD RESULT IN DELAYED REVENUE.

If the sales and implementation cycle of our technology products and services are delayed, our revenue will likewise be delayed. Our sales and implementation cycles are lengthy, causing us to recognize revenue long after our initial contact with a client. During our sales effort, we spend significant time educating prospective clients on the use and benefit of our message management services. As a result, the sales cycle for our products and services is long, ranging from a few weeks to several months for our larger clients. The sales cycle for our message management services and media management applications is likely to be longer than the sales cycle for competitors because we believe that clients may require more extensive approval processes related to integrating internal business information with their advertising campaigns. In addition, in order for a client to implement our services, the client must commit a significant amount of resources over an extended period of time. Furthermore, even after a client purchases our services, the implementation cycle is subject to delays. These delays may be caused by factors within our control, such as possible technology defects, as well

as those outside our control, such as clients' budgetary constraints, internal acceptance reviews, functionality enhancements, lack of appropriate customer staff to implement our media management applications and the complexity of clients' advertising needs. Also, failure to deliver service or application features consistent with delivery commitments could result in a delay or cancellation of a client agreement.

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY FROM UNAUTHORIZED USE, WHICH COULD DIMINISH THE VALUE OF OUR SERVICES, WEAKEN OUR COMPETITIVE POSITION AND REDUCE OUR REVENUE.

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

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

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

IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES, WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY.

The Internet advertising market is characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing customer demands. The introduction of new products and services embodying new technologies and the emergence of new industry standards and practices can render existing products and services obsolete and unmarketable or require unanticipated investments in research and development. Our success will depend on our ability to adapt to rapidly changing technologies, to enhance existing solutions and to develop and introduce a variety of new solutions to address our customers' changing demands. For example, advertisers are increasingly requiring Internet advertising networks to have the ability to deliver advertisements utilizing new formats that surpass stationary images and incorporate rich media, such as video and audio, interactivity, and more precise consumer targeting techniques. Our system does not support some types of advertising formats, such as certain video and audio formats, and a number of the Web sites in our network have not implemented systems to allow rich media advertisements. In addition, an increase in the bandwidth of Internet access resulting in faster data delivery may provide new products and services that will take advantage of this expansion in delivery capability. If we fail to adapt successfully to developments such as these, we could lose customers or advertising inventory. We purchase most of the software used in our business from third parties. We intend to continue to acquire technology necessary for us to conduct our business from third parties. We cannot assure you that, in the future, these technologies will be available on commercially reasonable terms, or at all. We may also experience difficulties that could delay or prevent the successful design, development,

introduction or marketing of new solutions. Any new solution or enhancement that we develop will need to meet the requirements of our current and prospective customers and may not achieve significant market acceptance. If we fail to keep pace with technological developments and the introduction of new industry and technology standards on a cost-effective basis, our expenses could increase, and we could lose customers or advertising inventory.

CHANGES IN GOVERNMENT REGULATION AND INDUSTRY STANDARDS COULD DECREASE DEMAND FOR OUR SERVICES AND INCREASE OUR COSTS OF DOING BUSINESS.

Laws and regulations that apply to Internet communications, commerce and advertising are becoming more prevalent. These regulations could affect the costs of communicating on the Web and adversely affect the demand for our advertising solutions or otherwise harm our business, results of operations and financial condition. The United States Congress has enacted Internet legislation regarding children's privacy, copyrights and taxation. Other laws and regulations may be adopted, and may address issues such as user privacy, pricing, intellectual property ownership and infringement, copyright, trademark, trade secret, export of encryption technology, acceptable content, taxation and quality of products and services. This legislation could hinder growth in the use of the Web generally and decrease the acceptance of the Web as a communications, commercial and advertising medium.

Legislation has been proposed recently to prohibit the sending of unsolicited commercial e-mail. We have a consent-based email delivery business that we believe should not, as a matter of policy, be affected by this kind of legislation. However, it is possible that legislation will be passed that requires us to change our current practices, or subject us to increased possibility of legal liability for our practices.

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

WE COULD BE HELD LIABLE FOR OUR OR OUR CLIENTS' FAILURE TO COMPLY WITH FEDERAL, STATE AND FOREIGN LAWS GOVERNING CONSUMER PRIVACY.

Recent growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to increased federal, state and foreign scrutiny and legislative and regulatory activity concerning data collection and use practices. Any failure by us to comply with applicable foreign, federal and state laws and regulatory requirements of regulatory authorities may result in, among other things, indemnification liability to our clients and the advertising agencies we work with, administrative enforcement actions and fines, class action lawsuits, cease and desist orders, and civil and criminal liability. Recently, class action lawsuits have been filed alleging violations of privacy laws by Internet service providers. The European Union's directive addressing data privacy limits our ability to collect and use information regarding Internet users. These restrictions may limit our ability to target advertising in most European countries. Our failure to comply with these or other federal, state or foreign laws could result in liability and materially harm our business.

In addition to government activity, privacy advocacy groups and the high-technology and direct marketing industries are considering various new, additional or different self-regulatory standards. This focus, and any legislation, regulations or standards promulgated, may impact us adversely. Governments, trade associations and industry self-regulatory groups may enact more burdensome laws, regulations and guidelines, including consumer privacy laws, affecting our clients and us. Since many of the proposed laws or regulations are just being developed, and a consensus on privacy and data usage has not been reached, we cannot yet determine the impact these regulations may have on our business. However, if the gathering of profiling information were to be curtailed, Internet advertising would be less effective, which would reduce demand for Internet advertising and harm our business.

Our customers are also subject to various federal and state regulations concerning the collection and use of information regarding individuals. These laws include the Children's Online Privacy Protection Act, the Federal Drivers Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-Bliley Act, as well as other laws that govern the collection and use of consumer credit information. We cannot assure you that our clients are currently in compliance, or will remain in compliance, with these laws and their own privacy policies. We may be held liable if our clients use our technology in a manner that is not in compliance with these laws or their own stated privacy standards.

Our common stock has been publicly traded only since March 30, 2000. The market price of our common stock has been subject to significant fluctuations since the date of our initial public offering. The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities, particularly securities of technology companies. As a result, the market price of our common stock may materially decline, regardless of our operating performance. 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. We may become involved in this type of litigation in the future. Litigation of this type is often expensive and diverts management's attention and resources.

Our principal executive offices are located in Westlake Village, California, where we lease a property with approximately 14,300 square feet of space. Our current monthly rent due under this lease is $22,100. We also lease approximately 21,700 square feet of office space in San Francisco, California, 20,800 square feet of office space for our AdWare Systems enterprise solutions organization in Louisville, Kentucky, and 10,080 square feet of office space in Fremont, California. We also lease small office space and facilities in New York, New York, London, England, Paris, France, Munich, Germany, and Tokyo, Japan. In addition, we use third-party co-location facilities that house our web servers in Sunnyvale, California, Pittsburgh, Pennsylvania and El Segundo, California. Our existing office space is adequate for our current operations. For additional information regarding our obligations under leases, see note 12 to our consolidated financial statements included in this Report.

Mediaplex, Inc., ValueClick's wholly-owned subsidiary acquired on October 19, 2001, is involved in three putative class action lawsuits. In July and August 2001, these class action lawsuits were commenced on behalf of all persons who acquired Mediaplex securities between November 19, 1999 and December 6, 2000. The cases are entitled Levovitz v. Mediaplex, Inc. et al., Atlas v. Mediaplex, Inc. et al., and Mashayekh v. Mediaplex, Inc. et al. In addition to Mediaplex and each of its underwriters for its November 1999 initial public offering, Gregory Raifman, Sandra Abbott, Jon Edwards, Lawrence Lenihan, Peter Sealy, James Desorrento, and A. Brooke Seawell, all of whom are former officers and directors of Mediaplex, are named as individual defendants. We are defending and indemnifying these individual defendants as part of our obligation under our indemnification agreements. The cases are pending before the United States District Court for the Southern District of New York.

Be Free, Inc., ValueClick's wholly-owned subsidiary acquired on May 23, 2002, is involved in a putative class action litigation. This class action lawsuit, entitled Saul Kassin v. Be Free et al., was filed on November 30, 2001 with the United States District Court for the Southern District of New York on behalf of all persons who acquired Be Free securities between November 3, 1999 and December 6, 2000. This lawsuit names as defendants Be Free, its underwriters for its November 3, 1999 initial public offering and its March 28, 2000 public offering, and Gordon B. Hoffstein, Samuel Gerace, Jr., Thomas A. Gerace and Stephen M. Joseph, all of whom were either officers and/or directors of Be Free during the class period. Gordon Hoffstein and Samuel Gerace, Jr. are members of our board of directors, Mr. Gerace is also the Chief Technology Officer of Be Free. We are defending and indemnifying the individual defendants in this lawsuit as part of our obligation under our indemnification agreements.

These complaints allege that the defendants violated the Securities Act of 1933 and the Securities Exchange Act of 1934 by issuing a prospectus that contained "materially false and misleading information and failed to disclose material information." They allege that the prospectuses were false and misleading because they failed to disclose the underwriter defendants' purported agreement with investors to provide them with unspecified amounts of Mediaplex and Be Free shares in their respective initial public offerings in exchange for undisclosed commissions; and the purported agreements between the underwriter defendants and certain of their customers whereby the underwriter defendants would allocate shares in Mediaplex's and Be Free's public offerings to those customers in exchange for the customers' agreement to purchase Mediaplex and Be Free shares in the after-market at pre-determined prices.

ValueClick believes that the plaintiffs' allegations are without merit and intends to vigorously defend its subsidiaries. ValueClick has not recorded an accrual related to damages, if any, resulting from these cases, as an unfavorable outcome is, in management's opinion, not probable and an amount of loss, if any, is not estimable.

In October of 2001, ValueClick received a demand letter from 24/7 Real Media, Inc. alleging that the ad-serving technology of both ValueClick and Mediaplex infringed upon 24/7 Real Media's '368 ad-serving patent and included a demand that the companies purchase a license for the patent. ValueClick responded with a detailed letter denying liability. In February of 2002, 24/7 Real Media filed a patent infringement suit against ValueClick and Mediaplex in the United States District Court for the Southern District of New York. The complaint sought injunctive relief and unspecified damages relating to alleged patent infringement of 24/7 Real Media's '368 patent. On December 30, 2002 we purchased a license from 24/7 Real Media for the '368 patent under a Patent License Agreement. In connection with the Patent License Agreement, 24/7 Real Media also agreed to terminate their lawsuit against the Company. The terms of the Patent License and Settlement Agreements are confidential.

On September 27, 2000, Joseph Lorenc, a former employee of Be Free, Inc. filed a lawsuit against Be Free and two officers of Be Free, Steven Joseph and Gordon Hoffstein, in the United States District Court, District of Massachusetts. The complaint alleges, among other things, breach of contract stemming form Mr. Lorenc's former complaint with Be Free. Defendants brought a motion for summary judgment as to all of plaintiff's claims. In February of 2003, the Court granted the Company's motion for summary judgment with respect to plaintiff's claim for violation by the Company of the American with Disabilities Act and remanded the remaining seven (non-federal) claims to be heard in the Massachusetts state court. ValueClick believes that the plaintiff's allegations are without merit and intends to vigorously defend itself.

ValueClick has not recorded an accrual related to damages, if any, resulting from this case, as an unfavorable outcome is, in management's opinion, not probable and an amount of loss, if any, is not estimable.

Other than the matters discussed above, we are not a party to any other material legal proceedings, nor are we aware of any pending or threatened litigation that would have a material adverse effect on our business, operating results, cash flows or financial condition. From time to time, we may become subject to additional legal proceedings, claims, and litigation arising in the ordinary course of business. In addition, we may receive letters alleging infringement of patent or other intellectual property rights. Our management believes that these letters generally are without merit and intend to contest them vigorously.

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

Our common stock has traded on The NASDAQ National Market under the symbol "VCLK" since our initial public offering on March 30, 2000. 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, 2002, the last sale price of our common stock reported by the Nasdaq National Market was $2.79 per share.

	Price Range of Common Stock
	High		Low
Fiscal Year Ended December 31, 2002
Fourth Quarter	$	2.87	$	2.00
Third Quarter		3.10		2.11
Second Quarter		3.24		2.55
First Quarter		3.11		2.35

	Price Range of Common Stock
	High		Low
Fiscal Year Ended December 31, 2001
Fourth Quarter	$	2.93	$	1.87
Third Quarter		3.03		1.95
Second Quarter		3.74		2.58
First Quarter		5.88		3.03

As of February 28, 2003, there were 537 stockholders of record who held shares of our common stock.

We have not declared or paid any cash dividends on our capital stock since our inception and we intend to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future.

The following is a summary of transactions by ValueClick during our 2001 fiscal year involving sales of our securities that were not registered under the Securities Act of 1933, as amended:

On January 31, 2001, we acquired Z Media, Inc. in a stock for stock transaction. As consideration for this transaction, we issued 2,727,678 shares of our common stock to the stockholders of Z Media and reserved 419,366 additional shares of our common stock for issuance upon exercise of outstanding employee stock options of Z Media. The issuance of these shares was exempt from registration pursuant to Section 3(a)(10) of the Securities Act and was qualified for issuance under California law after a fairness hearing held by the California Commissioner of Corporations.

During our 2000 and 2002 fiscal years we had no sales of our securities that were not registered under the Securities Act of 1933.

On March 30, 2000, we completed an initial public offering of 4,000,000 shares of our Common Stock at $19.00 per share.

The selected consolidated financial data set forth below with respect to our consolidated statement of operations for each of the years ended December 31, 2002, 2001 and 2000 and with respect to our consolidated balance sheet as of December 31, 2002 and 2001 have been derived from the audited financial statements of ValueClick which are included elsewhere herein. The consolidated statement of operations data for the period from May 1, 1998 (Inception) through December 31, 1999 and the consolidated balance sheet data as of December 31, 2000, 1999 and 1998 have been derived from our audited consolidated financial statements not included herein. The information contained herein reflects our merger with Z Media in January 2001, which was accounted for as a pooling-of-interests and, accordingly, all prior periods have been restated to combine the results of ValueClick and Z Media. The selected consolidated financial data set forth below is qualified in our 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.

The following table sets forth some of our selected financial information for our eight most recent fiscal quarters in dollar terms. In the opinion of our management, this unaudited financial information has been prepared on the same basis as the audited financial information, and includes all adjustments, consisting only of normal recurring adjustments, necessary to present this information fairly when read

in conjunction with our financial statements and the related notes contained elsewhere herein. These operating results are not necessarily indicative of results of any future period.

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

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Report on Form 10-K beginning on page F-1. The following discussion contains forward-looking statements that involve risks and uncertainties including anticipated financial performance, business prospects, anticipated capital expenditures and other similar matters, which reflect managements best judgment based on factors currently known. Actual results could differ materially from those discussed herein. Factors that could cause or contribute to the differences are discussed in "Business—Risk Factors" and elsewhere in this Report.

We provide digital marketing solutions including advertising technology tools. We offer a broad range of media and technology products and services to our customers to allow them to address all aspects of the digital marketing process, from pre-campaign to execution, including measurement and campaign refinements. Combining media and technological expertise, our products and services help our customers optimize their advertising and marketing campaigns on the Internet and through other media.

We derive our revenue from two business segments based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology.

VALUECLICK MEDIA—Our Media segment provides digital marketing solutions for advertisers and Web publishers. Through a combination of digital advertising, digital marketing and digital retention marketing, our Media segment provides marketers with custom media solutions to both build brand value and attract targeted, high-quality customers. To accomplish this, we employ rigorous network quality control, advanced targeting capabilities and an integrated product line. For Web site publishers of all sizes, we offer the ability to create reliable new revenue opportunities from their advertising inventory. We offer marketers and advertisers a wide spectrum of custom media solutions. Specifically, we provide online advertisers and publishers of Web sites advertising models known as cost-per-click ("CPC"), cost-per-action ("CPA") and cost-per-lead ("CPL"), in which an advertiser only pays us, and we in turn only pay a publisher of a Web site, when an Internet user clicks on an advertiser's banner advertisement or performs a specific action, such as a software download, an online registration or other transactions. Additionally, we provide media on a cost-per-thousand-impressions ("CPM") basis whereby the advertiser pays for the number of times an advertisement is viewed.

VALUECLICK TECHNOLOGY—Our Technology segment operates through our wholly-owned subsidiaries Be Free, Inc. (Be Free,) acquired on May 23, 2002, and Mediaplex, Inc. (Mediaplex) and AdWare Systems, Inc. (AdWare) acquired on October 19, 2001.

Be Free provides a marketing platform that enables online businesses to attract, convert and retain customers easily and cost effectively. Be Free's marketing platform includes technology and services to manage, track and analyze a variety of online marketing programs. It is offered on a hosted basis to enable businesses to execute marketing programs without the expense of building and maintaining their own in-house technical infrastructure and resources. Be Free offers two types of services on this platform, partner marketing services and site personalization services.

data system and to provide ongoing campaign optimization. Mediaplex's revenue is primarily derived from software access and use charges paid by our software clients. These fees vary based on the client's use of the technology.

AdWare is an applications service provider ("ASP") delivering high-quality information management systems to advertising agencies, marketing communications companies, and public relations agencies. AdWare's revenue is generated primarily from monthly service fees paid by customers over the service periods.

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

Our operations are domiciled in the United States with operations in Japan through our majority owned subsidiary, ValueClick Japan and with operations in Europe through our wholly-owned subsidiaries, ValueClick Europe Ltd., ValueClick France, ValueClick GmbH, Be Free U.K. Ltd., Be Free France and Be Free GmbH. Other international subsidiaries included ValueClick Brazil and ValueClick Canada, which were closed during 2001. The Company's geographic information is as follows (in thousands):

	Year Ended December 31, 2002
	Year Ended December 31, 2002					Long-lived Assets at December 31, 2002
	Revenue		Loss from Operations			Long-lived Assets at December 31, 2002
United States	$	48,048	$	(6,811	)	$	12,731
Japan		7,476		(230	)		851
Europe		7,030		(1,779	)		208

Total	$	62,554	$	(8,820	)	$	13,790

	Year Ended December 31, 2001
	Year Ended December 31, 2001					Long-lived Assets at December 31, 2002
	Revenue		Loss from Operations			Long-lived Assets at December 31, 2002
United States	$	29,513	$	(11,233	)	$	13,389
Japan		10,199		(179	)		1,101
Europe		5,094		(1,283	)		111
Other International		67		(268	)		24

Total	$	44,873	$	(12,963	)	$	14,625

	Year Ended December 31, 2000
	Year Ended December 31, 2000					Long-lived Assets at December 31, 2002
	Revenue		Loss from Operations			Long-lived Assets at December 31, 2002
United States	$	50,194	$	(3,005	)	$	9,989
Japan		11,679		1,523			471
Europe		2,443		(1,140	)		154
Other International		16		(634	)		48

Total	$	64,332	$	(3,256	)	$	10,662

Revenue. Net revenue from our Media segment and our Technology segment accounted for $29.8 million and $32.8 million respectively, resulting in net revenue for the year ended December 31, 2002 of $62.6 million compared to $44.9 million for 2001, an increase of $17.7 million or 39.4%. The increase in net revenue was a result of the inclusion of the Technology segment in the 2002 period, with a full year of Mediaplex operations and seven months of Be Free operations. The decline in Media segment revenue reflects the continued effects of the generally weak U.S. and Japan economies and advertising markets, offset by increased media revenue in the Europe market.

Cost of Revenue. Cost of revenue for the Media segment consists primarily of amounts that we pay to Web site publishers on the ValueClick consolidated networks. We pay these publishers on either a CPC, CPA, CPL or CPM basis. Cost of revenue for both the Media and Technology segments also includes depreciation costs of the revenue producing technologies and Internet access costs. Cost of revenue was $21.7 million for the year ended December 31, 2002 compared to $20.4 million for 2001, an increase of $1.4 million or 6.7%. Cost of revenue decreased as a percentage of net revenue over the 2001 period. This decrease, as well as the corresponding increase in the gross profit margin to 65.3% for the year ended December 31, 2002 from 54.6% for the 2001 fiscal year, was primarily attributable to the change in product mix as a result of the inclusion of the operations of our higher profit margin Technology segment in the 2002 period.

Sales and Marketing. Sales and marketing expenses consist primarily of compensation, sales commissions, travel, advertising, trade show costs and costs of marketing materials. Sales and marketing expenses for the year ended December 31, 2002 were $17.3 million compared to $12.0 million for 2001, an increase of $5.3 million or 44.6%. The increase in sales and marketing expenses was due primarily to the addition of sales and marketing personnel for our Technology segment. Our sales and marketing costs as a percentage of revenue increased to 27.7% for the year ended December 31, 2002 from 26.7% for 2001 due primarily to the mix of sales and marketing personnel within our Technology segment.

General and Administrative. General and administrative expenses consist primarily of facilities costs, executive and administrative compensation and professional service and other public reporting fees. General and administrative expenses increased to $16.7 million for the year ended December 31, 2002 compared to $13.3 million for the 2001 year, an increase of $3.4 million or 25.7%. General and administrative expenses increased due primarily to the addition of facilities costs and additional executive and administrative personnel in our Technology segment offset by management's efforts to scale general and administrative costs in line with revenue, as well as cost reductions associated with the merger integration activities related to Mediaplex, Inc. and Be Free, Inc.

Product Development. Product development costs include expenses for the development of new technologies designed to enhance the performance of our service, including the salaries and related expenses for our software engineering department, as well as costs for contracted services and supplies. With the exception of certain internal use software qualifying for capitalization, all product development costs have been expensed as incurred. Product development for the year ended December 31, 2002 were $11.2 million compared to $5.3 million for 2001, an increase of $5.9 million or 111.1%. The increase in product development expenses was due primarily to the addition of engineers and support personnel in our Technology segment as a result of the acquisitions of Mediaplex and Be Free. We anticipate that the ratio of product development expense to revenue will continue to be higher than the prior year due to the increasing importance of, and contribution to our business by, our Technology segment.

Stock-Based Compensation. Stock-based compensation included in the accompanying consolidated statements of operations reflects the amortization of the difference between the deemed fair value of our common stock for financial accounting purposes and the exercise price of options on the date of

the options were granted. Stock-based compensation expense for the year ended December 31, 2002 amounted to $1.5 million, which relates primarily to the amortization of existing deferred compensation recorded in prior periods for stock options and restricted shares. The decrease in stock-based compensation from $2.7 million for the year ended December 31, 2001 relates to our amortization method that charges to expense a higher portion of the deferred stock-based compensation in the earlier years of the option vesting period, offset by additional deferred compensation recorded in 2002 related to stock options granted to Be Free employees. We expect a continued decline in the amortization of the existing deferred stock-based compensation over future periods.

Amortization of Intangible Assets and Acquired Software. Amortization of intangible assets for the year ended December 31, 2002 represents principally the amortization of software acquired through business combinations.

For the year ended December 31, 2001 amortization of intangible assets also included the amortization of goodwill created as a result of the acquisitions of Bach Systems and a majority interest in ValueClick Japan. On January 1, 2002, we adopted the accounting standards set forth in Statement of Financial Accounting Standards No. 142, "Goodwill and other Intangible Assets" ("SFAS No. 142"). SFAS No. 142 changed the methodology for assessing goodwill impairments and ceased the continued amortization of goodwill. In accordance with the transitional guidance of SFAS No. 142, we completed our impairment assessment in the second quarter of 2002 from the adoption of this standard and determined that goodwill of $7.6 million related to the Bach Systems and ValueClick Japan acquisitions was impaired at January 1, 2002 and reflected a cumulative effect of change in accounting principle for the goodwill impairment.

Merger-Related Costs. Merger-related costs represent the direct transaction costs incurred related to the mergers with ClickAgents and Z Media in December 2000 and January 2001, respectively, accounted for as a pooling-of-interests.

Restructuring charge. In the second quarter of 2002 and in the fourth quarter of 2001, we recorded restructuring charges of $2.3 million and $515,000, respectively. These restructuring charges were the result of certain redundancies as a result of our acquisitions of Mediaplex and Be Free and primarily represent a provision for consolidating certain leased facilities which will be paid out through 2010. As of December 31, 2002, $484,000 of the charges had been paid.

Interest Income, Net. Interest income, net principally consists of interest earned on our cash and cash equivalents and marketable debt securities and is net of interest paid on debt obligations. Interest income was $5.9 million for the year ended December 31, 2002 compared to $5.1 million for 2001. The increase is attributable to increased balances of cash and cash equivalents and marketable debt securities resulting from the Mediaplex and Be Free acquisitions offset by the effects of decreasing average investment yields due to declines in interest rates since 2001. Interest income in future periods may decline in correlation with decreases in the market rates of our investment and with the average cash and investment balances we maintain which may be reduced by funds used for items such as our Stock Repurchase Program and capital expenditures.

Provision for Income Taxes. For the year ended December 31, 2002, our provision for federal, state and foreign income taxes amounted to $163,000, compared to $34,000 for 2001. The effective income tax rate reflects certain non-deductible expenses, including the stock-based compensation charges and goodwill amortization and impairment charges. Additionally, income tax benefits from the available net operating losses are not fully reflected in the 2002 and 2001 provisions as the realization of these benefits is not deemed more likely than not. The tax expense in 2002 and 2001 relate primarily to State and foreign taxes.

Minority Share of Income of ValueClick Japan. Minority share of income of ValueClick Japan was $15,000 for the year ended December 31, 2002. We account for our interest in ValueClick Japan on a consolidated basis for financial reporting purposes, resulting in a minority interest in the net income or losses incurred by ValueClick Japan.

Revenue. Net revenue from our Media segment and our Technology segment accounted for $41.5 million and $3.4 million respectively, resulting in net revenue for the year ended December 31, 2001 of $44.9 million compared to $64.3 million for 2000, a decrease of $19.5 million or 30.2%. The revenue decline for 2001 was attributable primarily to the continued softness in the overall media market, due in part to the continued decline in advertising from electronic commerce and other Internet customers, the September 11, 2001 terrorist attacks in the United States and the aftermath therefrom and the general economic slowdown, partially offset by increased revenue from the Technology segment from the Mediaplex acquisition and the inclusion of Bach Systems' onResponse.com business for the entire 2001 period.

Cost of Revenue. Cost of revenue was $20.4 million for the year ended December 31, 2001 compared to $31.9 million for 2000, a decrease of $11.5 million or 36.2%. The decrease in cost of revenue was directly attributable to the decreased delivery of advertisements. Gross profit margin increased to 54.6% for the year ended December 31, 2001 from 50.4% in 2000. The increase in gross margin was primarily due to a decrease in the average cost per click and the change in product mix in 2001, including our higher profit margin Technology segment.

Sales and Marketing. Sales and marketing expenses for the year ended December 31, 2001 were $12.0 million compared to $11.4 million in 2000, an increase of $540,000 or 4.7%. The slight increase in sales and marketing expenses was due primarily to the addition of sales and marketing personnel for our Technology segment.

General and Administrative. General and administrative expenses for the year ended December 31, 2001 were $13.3 million compared to $12.9 million for 2000, an increase of $405,000 or 3.1%. The slight increase in general and administrative expenses was due primarily to the addition of facilities costs and additional executive and administrative personnel in our Technology segment offset by management's efforts to scale general and administrative costs in line with the decreased media revenue production, as well as synergistic cost savings associated with the ClickAgents and Z Media mergers.

Product Development. Product development expenses for the year ended December 31, 2001 were $5.3 million compared to $4.8 million for 2000, an increase of $467,000 or 9.6%. The slight increase in product development expenses was due primarily to the addition of engineers and support personnel in our Technology segment, offset by the decrease in the number of technology support personnel in our Media segment from the same period in 2000. We believe the expenses in this area will increase in 2002 to support the Technology segment.

Stock-Based Compensation. Stock-based compensation expense for the year ended December 31, 2001 amounted to $2.7 million, which relates primarily to the amortization of existing deferred compensation recorded in prior periods for stock options and restricted shares. The decrease in stock-based compensation from $5.1 million for the year ended December 31, 2000 relates to our amortization method that charges to expense a higher portion of the deferred stock-based compensation in the earlier years of the option vesting period, offset by additional deferred compensation recorded in 2001 related to stock options granted to Mediaplex employees.

Amortization of Intangible Assets and Acquired Software. Amortization of intangibles and acquired software represents principally the amortization of acquired software purchased from a founding stockholder in May 1998, goodwill created as a result of the acquisitions of Bach Systems in November 2000 and a majority interest in ValueClick Japan in August 1999 and software acquired from StraightUP!, Inc. in September 2000.

Restructuring charge. In the fourth quarter of 2001, we recorded a restructuring charge of $515,000. The restructuring charge represents a provision for consolidating certain leased facilities. As of December 31, 2001, $52,000 of the charge was paid.

Loss on Sale of Marketable Securities/Impairment Write-Down of Marketable Securities. On February 28, 2000, we consummated an investment by DoubleClick under which DoubleClick acquired 7,878,562 shares of our common stock in exchange for $10.0 million in cash and 732,860 shares of DoubleClick common stock. The shares of DoubleClick common stock were valued at approximately $85.8 million for accounting purposes based on an average price of $117.07 per share.

We accounted for our holdings of DoubleClick common stock as an available for sale investment, whereby the investment was carried at market value with unrealized holding gains and losses from increases and decreases in market value being recorded as a separate component of stockholders' equity until realized or when losses were determined to be other than temporary.

During May 2000, we sold 165,000 shares of our DoubleClick common stock for cash proceeds of $10.3 million. The sale of these shares resulted in a realized non-cash loss of $9.0 million. In December 2000, we made a judgmental determination that the decline in market value of our DoubleClick stock was other than temporary. Factors considered in arriving at this determination in December 2000 included: the market value of the DoubleClick common stock was significantly below the carrying value for a continuous period of six months or more; the prospects for a recovery in the market value of the DoubleClick common stock was not likely in the near term given the market conditions that developed in the Internet advertising market and the market performance of DoubleClick in the fourth quarter of 2000; and DoubleClick significantly adjusting downward its fourth quarter 2000 results and future financial projections in December 2000 as a result of market conditions. Accordingly, for the year ended December 31, 2000, we recorded a non-cash charge to operations of $60.2 million representing the unrealized holding losses previously accounted for as a separate component of stockholders' equity.

In April 2001, we sold our remaining 567,860 shares of DoubleClick common stock for cash proceeds of $6.9 million. The sale of these shares resulted in a realized gain of $701,000.

Gain on the ValueClick Japan Stock Issuance. On May 31, 2000, ValueClick Japan, our majority-owned subsidiary, completed its initial public offering on Japan's "Mothers Market" in which it sold 1,000 shares of its common stock at $27,822 per share. The proceeds to ValueClick Japan from the offering, after deducting direct incremental costs and underwriting discounts and commissions, were $25.4 million. The gain of $13.7 million recorded in our consolidated statements of operations for the

year ended December 31, 2000 represents the change in net equity for our share of the proceeds received by ValueClick Japan for their stock issuance. No such ValueClick Japan stock issuances occurred in 2001.

Gain on the Sale of ValueClick Japan Stock. During 2000, we sold 177 shares of our ValueClick Japan holdings for aggregate proceeds of $2.6 million and a resulting realized gain of $2.3 million. We made no such sale in 2001.

Provision for Income Taxes. For the year ended December 31, 2001, our provision for federal, state and foreign income taxes amounted to $34,000, compared to $2.5 million for 2000. The provision for income taxes for both periods reflects certain non-deductible expenses, including the stock-based compensation charges and goodwill amortization. Additionally, income tax benefits from the impairment write-down of marketable securities and the net realized capital losses are not reflected in the 2000 provision as the realization of theses benefits is not deemed more likely than not.

Minority Share of (Income) loss of ValueClick Japan. Minority share of loss of ValueClick Japan was $32,000 for the year ended December 31, 2001. We account for our interest in ValueClick Japan on a consolidated basis for financial reporting purposes, resulting in a minority interest in the net loss incurred by ValueClick Japan.

Since our inception, we have financed our operations through working capital generated from operations and equity financings. The net cash provided by operating activities of $1.7 million for the year ended December 31, 2002 reflects the significant non-cash charges included in our operating results.

The net cash provided by investing activities for the year ended December 31, 2002 of $49.8 million was primarily the result of the proceeds from the net sale of marketable securities of $55.1 million, offset by $2.3 million of computer equipment purchases, $1.1 million paid for a technology patent license and $1.7 million used to acquire Be Free common stock.

Net cash used in financing activities for the year ended December 31, 2002 of $53.8 million primarily resulted from $56.2 million in market purchases of ValueClick common stock pursuant to the Stock Repurchase Program and the repayment of $0.8 million on notes payable, offset by the proceeds received from the exercise of stock options of $3.3 million.

In September 2001, the board of directors authorized a $10 million Stock Repurchase Program to purchase outstanding shares of ValueClick common stock from time to time at prevailing market prices in the open market or through unsolicited negotiated transactions depending on market conditions. The Stock Repurchase Program was increased by the board of directors to $30 million in February 2002, to $50 million in July 2002 and to $75 million in October 2002. Under the program, the purchases will be funded from available working capital, and the repurchased shares will be retired, held in treasury or used for ongoing stock issuances such as issuances under employee stock plans. There is no guarantee as to the exact number of shares that will be repurchased by us and we may discontinue purchases at any time that management determines additional purchases are not warranted. As of December 31, 2002 and since the initiation of the Stock Repurchase Program we had repurchased a total of approximately 22.9 million shares of our common stock for approximately $60.9 million, $57.6 million of which was purchased pursuant to the Stock Repurchase Program. As a result of the October 2002 increase to the Stock Repurchase Program, up to $17.4 million of our capital may be used to purchase shares of our outstanding common stock.

Future minimum lease payments under noncancellable operating and capital leases and related sublease income with initial or remaining lease terms in excess of one year as of December 31, 2002 are as follows (in thousands):

As of December 31, 2002, we also had notes payable to a bank aggregating $915,000, which require monthly payments through 2007.

We believe that our existing cash and cash equivalents and our marketable securities are sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. However, it is possible that we may need or elect to raise additional funds to fund our activities beyond the next year or to consummate acquisitions of other businesses, products or technologies. We could raise such funds by selling more stock to the public or to selected investors, or by borrowing money. In addition, even though we may not need additional funds, we may still elect to sell additional equity securities or obtain credit facilities for other reasons. We cannot assure you that we will be able to obtain additional funds on commercially favorable terms, or at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders would be reduced. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock.

Although we believe we have sufficient capital to fund our activities for at least the next twelve months, our future capital requirements may vary materially from those now planned. The amount of capital that we will need in the future will depend on many factors, including:

Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, investments, deferred taxes, impairment of long-lived assets, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

We apply the following critical accounting policies in the preparation of our consolidated financial statements:

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 establishes a new standard for accounting and reporting requirements for business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interests method for combinations initiated after June 30, 2001. On January 1, 2002, we adopted the accounting standards set forth in SFAS No. 142, "Goodwill and other Intangible Assets." SFAS No. 142 changed the methodology for assessing goodwill impairments and ceased the continued amortization of goodwill. In accordance with the transitional guidance of SFAS No. 142, the Company completed its impairment assessment from the adoption of this standard and determined that goodwill of $7.6 million related to the Bach Systems and ValueClick Japan acquisitions was impaired at January 1, 2002 and reflected a cumulative effect of change in accounting principle for the goodwill impairment. Under the new standard, impairment is determined by comparing the carrying values of reporting units to the corresponding fair values. Additionally, under the new standard, goodwill is no longer amortized but is to be tested at the reporting unit within the related business segment annually and whenever events or circumstances occur indicating that goodwill might be impaired.

In August of 2001, the FASB issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets," which establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. We expect to adopt SFAS No. 143 effective January 1, 2003 and do not expect that the adoption of this new standard will have a significant impact on our results of operations and financial position.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. This Statement supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for "Long-Lived Assets to Be Disposed Of." This Statement also supersedes the accounting and reporting provisions of APB Opinion No. 30 ("APB 30"), "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for segments of a business to be disposed of. This Statement also amends ARB No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a temporarily controlled subsidiary. The adoption of SFAS No. 144 effective January 1, 2002 did not have a material effect on our results of operation or financial position.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force 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)." This Statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002, though early adoption is encouraged. Management is currently evaluating the provisions of SFAS No. 146 and its potential impact on our consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition Disclosure—an amendment of FAS 123" (SFAS No. 148). This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", 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, this Statement amends the disclosure requirements of Statement 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 provisions of FAS 148 are effective for financial statements for fiscal years ending after December 15, 2002, and disclosure requirements shall be effective for interim periods beginning after December 15, 2002. We intend to continue to account for stock-based compensation to our employees and directors using the intrinsic value method prescribed by APB Opinion No. 25, and related interpretations. We have made certain disclosures required by SFAS No. 148 in our consolidated financial statements for the year ended December 31, 2002 and will begin making the additional interim disclosures required by SFAS No. 148 in the first quarter of 2003. Accordingly, adoption of SFAS No. 148 will not impact our financial position or results of operations.

Inflation was not a material factor in either revenue or operating expenses during the past three fiscal years ended December 31, 2002, 2001 and 2000.

The primary objective of our investment activities is to preserve capital while at the same time maximizing yields without significantly increasing risk. We are exposed to the impact of interest rate changes and changes in the market values of our investments. Our interest income is sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on our cash equivalents and marketable debt securities. Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We have not used derivative financial instruments in our investment portfolio. We invest a portion of our excess cash in debt instruments of high-quality corporate issuers and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if forced to sell securities, which have declined in market value due to changes in interest rates.

Marketable securities as of December 31, 2002 consist primarily of marketable debt securities in high-grade corporate and government securities with maturities of less than two years. As of December 31, 2002, our investment in marketable securities had a weighted-average time to maturity of approximately 187 days. We classify all of our investments as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in a separate component of stockholders' equity. As of December 31, 2002, unrealized gains in our investments in marketable securities aggregated $30,000.

During the three-month period ended December 31, 2002, our investments in marketable securities yielded an effective interest rate of 2.49%. If interest rates were to decrease 1%, the result would be an annual decrease in our interest income related to our cash and cash equivalents of approximately $2.0 million. However, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effect of the change in the level of overall economic activity that could exist in such an environment.

We transact business in various foreign countries and are thus subject to exposure from adverse movements in other foreign currency exchange rates. This exposure is primarily related to revenue and operating expenses for ValueClick Japan and ValueClick Europe, which denominate their transactions in Japanese Yen and primarily in U.K. pounds, respectively. The effect of foreign exchange rate fluctuations for the year ended December 31, 2002 was not material to the consolidated results of operations. If there were an adverse change of 14.5% in overall foreign currency exchange rates over an entire year, the result of translations would be a reduction of revenue of approximately $1.5 million. Historically, we have not hedged our exposure to exchange rate fluctuations. Accordingly, we may experience economic loss and a negative impact on earnings, cash flows or equity as a result of foreign currency exchange rate fluctuations. We assess the need to utilize financial instruments to hedge currency exposures on an ongoing basis. As of December 31, 2002, we had $23.5 million in cash and cash equivalents denominated in foreign currencies, primarily the Japanese yen.

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

ValueClick, Inc. financial statements, schedules and supplementary data, as listed under Item 15, appear in a separate section of this Report beginning on page F-1.

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

The information required by this Item is incorporated by reference from our definitive proxy statement for the 2003 Annual Meeting of Stockholders to be held May 15, 2003.

GORDON B. HOFFSTEIN, SAMUEL P. GERACE AND JEFFERY F RAYPORT were appointed to the Board of Directors in May 2002 in connection with the acquisition of Be Free, Inc.

MR. HOFFSTEIN was the President and Chief Executive Officer and a director of Be Free, Inc. from August 1998 to the merger with ValueClick, Inc. in May 2002, and was elected Chairman of the Board of Directors of Be Free, Inc. in January 2000. From October 1991 to April 1997, he was a co-founder and the Chief Executive Officer of PCs Compleat, a direct marketer of PCs and related products now known as CompUSA Direct. He currently serves as a director of various private companies. Mr. Hoffstein earned a B.S. from the University of Massachusetts and an M.B.A. from Babson College.

MR. GERACE has been the Executive Vice President, Chief Technology Officer of Be Free, Inc. since August 1998. He was a founder of and has been involved in managing of Be Free, Inc. since the inception of one of its affiliated companies in September 1985. Mr. Gerace holds an A.B. from Harvard College.

DR. RAYPORT was a former Director of Be Free, Inc. Dr. Rayport currently works at Monitor Group, a management consulting firm, as the founder and Chief Executive Officer of Monitor Marketspace, an e-commerce research and media unit established in 1998. From 1991 to 2000, he was a faculty member at Harvard Business School in the Service Management Unit. He currently serves as a director of Global Sports Interactive and CBS MarketWatch. Dr. Rayport earned an A.B., A.M. and Ph.D. from Harvard University and an M. Phil. from the University of Cambridge (U.K.).

The information required by this Item is incorporated by reference from our definitive proxy statement for the 2003 Annual Meeting of Stockholders to be held May 15, 2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table provides aggregated information with respect to our compensation plans under which equity securities of ValueClick are authorized for issuance as of December 31, 2002:

The remaining information required by this Item is incorporated by reference from our definitive proxy statement for the 2003 Annual Meeting of Stockholders to be held May 15, 2003.

Evaluation of disclosure controls and procedures. Within the 90 day period prior to the date of this report, we carried out an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 ("Exchange Act") Rules 13a-14(c) and 15d-14(c)) under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Changes in our internal controls. Subsequent to the date of the evaluation of our disclosure controls and procedures, there have been no significant changes in our internal controls or any other factors that could significantly affect our internal controls, nor were any corrective actions required with regard to significant deficiencies and material weaknesses.

1. Financial Statements. The following financial statements of ValueClick, Inc. are included in a separate section of this Annual Report on Form 10-K commencing on the pages referenced below:

		Page
ValueClick, Inc. Consolidated Financial Statements
	Report of Independent Accountants	F-2
	Consolidated Balance Sheets at December 31, 2002 and 2001	F-3
	Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000	F-4
	Consolidated Statements of Stockholders' Equity for the years ended December 31, 2002, 2001 and 2000	F-5
	Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000	F-6
	Notes to Consolidated Financial Statements	F-8

2. Financial Statement Schedule. The following financial statement schedule of ValueClick, Inc. is included in a separate section of this Annual Report on Form 10-K commencing on the pages referenced below. All other schedules have been omitted because they are not applicable, not required, or the information is included in the financial statements or notes thereto.

3. Exhibits. The Exhibits filed as part of this Annual Report are listed in Item 15(c) of this Annual Report on Form 10-K.

Exhibit Number		Description of Document
2.1+		Agreement and Plan of Merger, dated as of March 20, 2002, by and among ValueClick, Bravo Acquisition I Corporation and Be Free, Inc.
2.2(1)		Agreement and Plan of Merger, dated as of July 1, 2001, by and among ValueClick, Mars Acquisition Corporation and Mediaplex, Inc.
2.3(2)		Agreement and Plan of Merger dated as of November 17, 2000 by and among ValueClick, Bach Systems, Inc. and Bach Acquisition Corp.
2.4(3)		Agreement and Plan of Merger, dated as of November 1, 2000 by and among ValueClick, ClickAgents.com, Inc., ValueClick Acquisition Corp. and other parties, and certain exhibits and schedules thereto
3.1.1(4)		Amended and Restated Certificate of Incorporation of ValueClick
3.1.2(4)		Certificate of Amendment to Amended and Restated Certificate of Incorporation of ValueClick

In our opinion, the accompanying consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of ValueClick, Inc. and its consolidated subsidiaries (the "Company") at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respect, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."

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

ValueClick, Inc., and its subsidiaries ("ValueClick" or "the Company") provide digital marketing solutions and advertising technology tools. ValueClick offers a broad range of media and technology products and services to its customers to allow them to address all aspects of the digital marketing process, from pre-campaign to execution, including measurement and campaign refinements.

The Company derives its revenue from two reportable business segments based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology.

VALUECLICK MEDIA—The ValueClick Media segment provides digital marketing solutions for advertisers and Web publishers. Through a combination of digital advertising, digital marketing and digital retention marketing, the ValueClick Media segment provides marketers with custom media solutions to build brand value and attract targeted, high-quality customers. ValueClick provides online advertisers and publishers of Web sites advertising models known as cost-per-click ("CPC"), cost-per-action ("CPA") and cost-per-lead ("CPL"), in which an advertiser only pays ValueClick, and ValueClick in turn only pays a publisher of a Web site, when an Internet user clicks on an advertiser's banner advertisement or performs a specific action, such as a software download, an online registration or other transactions. Additionally, ValueClick provides media on a cost-per-thousand-impressions ("CPM") basis whereby the advertiser pays for the number of times an advertisement is viewed.

VALUECLICK TECHNOLOGY—The ValueClick Technology segment operates through its wholly-owned subsidiaries Be Free, Inc., ("Be Free") acquired on May 23, 2002, and Mediaplex, Inc. ("Mediaplex") and AdWare Systems, Inc. ("AdWare") acquired on October 19, 2001.

Mediaplex serves the marketing communications industry with technology solutions for digital messaging, support services that enhance campaign return, and infrastructure tools to ensure effective program implementation. Mediaplex enables marketers to manage, target and distribute integrated messaging across all digital media. Mediaplex's proprietary MOJO® technology platform has the ability to automatically configure messages in response to real-time information from a marketer's enterprise data system and to provide ongoing campaign optimization. Mediaplex's revenue is primarily derived from software access and use charges paid by its customers. These fees vary based on the customers' use of the technology.

The consolidated financial statements include the accounts of the Company, its majority owned subsidiary and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

The consolidated financial statements include the accounts of the Company and its subsidiaries from the dates of their respective acquisitions, acquisition of majority voting control or date of formation. For subsidiaries accounted for as a pooling of interests, all prior period financial statements have been restated to include the results of their operations.

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

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. At December 31, 2002 and 2001, cash equivalents consist of money market accounts.

Marketable securities are recorded at fair value and unrealized gains and losses are recorded as a separate component of stockholders' equity, net of tax, until realized or until a determination is made that an other than temporary decline in market value has occurred. Factors considered by management in assessing whether an other than temporary impairment has occurred include: fair value is significantly below cost for a significant period of time, generally six months or more; whether the decline in fair value is attributable to specific adverse conditions affecting the investment; the financial condition of the investee; and whether the Company has both the ability and intent to hold the investment. When it is determined that an other than temporary impairment has occurred, the investment is permanently written down to the market value at the end of the period in which it is determined that an other than temporary decline has occurred. The cost of securities sold is based upon the specific identification method.

Marketable securities at December 31, 2002 are comprised of the available for sale investment grade corporate debt securities with an aggregate cost and estimated fair value of $205.9 million.

Property and equipment are stated at cost. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets ranging from 3 to 5 years. Leasehold improvements are amortized over their estimated useful lives, or the term of the lease, whichever is shorter.

Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets in accordance with SFAS No. 144, which generally requires the assessment of these assets for recoverability when events or circumstances indicate a potential impairment by estimating the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. On January 1, 2002, the Company adopted the accounting standards set forth in Statement of Financial Accounting Standards No. 142, "Goodwill and other Intangible Assets." SFAS No. 142 changed the

methodology for assessing goodwill impairments and ceased the continued amortization of goodwill. Although the application of this standard did not change management's evaluation of the Company's other identifiable intangible assets, the initial application of this statement resulted in an impairment of goodwill of $7.6 million to write down goodwill related to the Bach Systems and ValueClick Japan acquisitions. The amount of the impairment was estimated based on a valuation process that combined estimating the present value of the future cash flows of Bach Systems and ValueClick Japan with obtaining the market value to revenue multiples of comparable publicly traded companies and applying these multiples to the projected and historical revenue of Bach Systems and ValueClick Japan and was reported as a cumulative effect of a change in accounting principle during the first quarter of 2002.

The impact of the cumulative effect of this change in accounting principle on the results of operations for the first quarter of 2002 were as follows (in thousands, except per share data):

Pro forma net loss and basic and diluted net loss per common share for the years ended December 31, 2001 and 2000, excluding amortization of goodwill are as follows (in thousands, except per share data):

		Year Ended December 31
		2001			2000
Reported net loss		$	(7,218	)	$	(55,333	)
	Add back: Goodwill amortization		1,722			969

Pro forma net loss		$	(5,496	)	$	(54,364	)

Reported basic and diluted net loss per common share		$	(0.20	)	$	(1.72	)
	Add back: Goodwill amortization		0.05			0.03

Pro forma basic and diluted net loss per common share		$	(0.15	)	$	(1.69	)

The change in the balance of goodwill during the year ended December 31, 2002 is set forth below (in thousands):

		Bach Systems			ValueClick Japan			Total
Balance, December 31, 2001			6,049			3,979			10,028
	Accumulated amortization, December 31, 2001		(1,034	)		(1,979	)		(3,013	)
	Net balance, December 31, 2001		5,015			2			7,015
	Goodwill increase for Bach Systems earnout		634			—			634
	Less: Cumulative effect of change in accounting principle		(5,649	)		(2	)		(7,649	)

Balance, December 31, 2002		$	—		$	—		$	—

As of December 31, 2002 and 2001, all other intangible assets were subject to amortization. A summary of the other intangible assets as of December 31, 2002 and 2001 is set forth below (in thousands):

			Gross Balance		Accumulated Amortization		Amount Carrying
December 31, 2002:
	Patent license		$	1,841	—		$	1,841
	Acquired technology			1,596	(805	)		791
	Trademarks			57	(6	)		51
	Covenant not-to-compete			114	(49	)		65
	Domain names			125	(54	)		71

		Total intangible assets	$	3,733	(914	)	$	2,819

December 31, 2001:
	Acquired technology		$	582	(321	)	$	261
	Trademarks			57	(2	)		55
	Covenant not-to-compete			114	(26	)		88
	Domain names			111	(30	)		81

		Total intangible assets	$	864	(379	)	$	485

In 2002, $1.0 million was added to the intangible asset balance as part of the purchase of Be Free, Inc. attributable to acquired technology and $1.8 million related to a patent license acquisition. Amortization expense for all intangible assets was $535,000 for the year ended December 31, 2002. Estimated intangible asset amortization expense remaining for the next five years ending December 31 is as follows (amounts in thousands):

The Company's Media segment revenue is principally derived from the delivery of advertising impressions, click-throughs, actions, as specifically defined, from click-throughs and customer leads delivered from third-party Web sites, online newsletters and email lists, comprising the ValueClick Consolidated Network (the "Network"). Revenue is recognized in the period that the advertising impressions, click-throughs or actions occur or when lead-based information is delivered, provided that no significant Company obligations remain and collection of the resulting receivable is reasonably assured and prices are fixed and determinable. To date, the Company's agreements have not required a guaranteed minimum number of click-throughs or actions.

The Company becomes obligated to make payments to third-party Web sites, online newsletters and email lists, which have contracted with the Company to be part of the Network, in the period the advertising impressions, click-throughs or actions are delivered. Such expenses are classified as cost of revenue in the accompanying consolidated statements of operations.

The Company's Technology segment revenue is generated primarily from fees for campaign management services and from application management services and professional services. Affiliate marketing and campaign management service revenue is recognized when the related services are performed, provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured and fees are fixed and determinable. Application management services revenue consists of monthly recurring fees for hosting services and is recognized as the services are performed, provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured and fees are fixed and determinable. The Company's application management services provide customers rights to access applications, hardware for the application access and customer service. The Company's customers do not have the right to take possession of the software at any time during the hosting agreement or at its termination. Contracts for application management services that exceed designated minimum monthly or quarterly volume usage are recognized as revenue by the Company in the month or quarter in which minimum volume is exceeded.

Deferred revenue consists of fees received or billed in advance of the delivery of the services or services performed in which cash receipt is not reasonably assured. This revenue is recognized when the services are provided and no significant Company obligations remain or when cash is received for previously performed services. To date, the Company has not had any barter transactions.

Cost of revenue consists of payments to third-party Web sites, online newsletters and email lists, in the Company's Network, telecommunication costs and depreciation of equipment related to the Company's ad-delivery and affiliate marketing infrastructure.

Sales and marketing expenses include salaries, sales commissions, employee benefits, travel and related expenses for the Company's sales force, and advertising costs.

Advertising costs are expensed as incurred and totaled approximately $129,000, $979,000 and $1.7 million for the years ended December 31, 2002, 2001 and 2000, respectively.

General and administrative expenses include facility costs, professional service fees, salaries, related benefits and expenses for the executive, finance, legal and human resources personnel, and other general overhead costs.

Product development costs include expenses for the development of new technologies designed to enhance the performance of the Company's service, including the salaries and related expenses for its software engineering department, as well as costs for contracted services and supplies. With the exception of certain internal use software qualifying for capitalization, all product development costs have been expensed as incurred. The Company follows the guidance of Statement of Position 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." As of December 31, 2002, capitalized software development costs aggregated $841,000 net of related accumulated amortization of $233,000. There were no capitalized software development costs as of December 31, 2001.

At December 31, 2002, the Company has six stock-based employee compensation plans which are described more fully in Note 8. The Company accounts for its employee stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and the related interpretations of FASB Interpretation (FIN) No. 44, "Accounting for Certain Transactions involving Stock Compensation." Accordingly, compensation expense related to employee stock options is recorded only if, on the date of the grant, the fair value of the underlying stock exceeds the exercise price.

Certain options have been granted or assumed with exercise prices below the market value of the underlying common stock on the grant date or assumption date in business combinations. The following table illustrates the effect on stock-based compensation, net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation (in thousands, except per share data).

The Company's foreign subsidiaries measure their operations in the local currency and translate these operations into U.S. dollars for purposes of consolidation.

Assets and liabilities of the Company's foreign subsidiaries are translated at the period-end exchange rate while revenue and expenses are translated at the average rates in effect for the period. The effects of these translation adjustments are reported in a separate component of stockholders' equity. Transaction gains and losses are included in the statement of operations and were not significant for the years ended December 31, 2002, 2001 and 2000.

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents, marketable securities and accounts receivable. Cash and cash equivalents are deposited in local currency with major financial institutions in Europe and Japan; at most times, such balances with any one financial institution may be in excess of FDIC insurance limits. Credit is extended to customers based on an evaluation of their financial condition. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for potential bad debts. To date such losses, if any, have been within management's expectations. At December 31, 2002 and 2001, no customer comprised more than 10% of accounts receivable. For the year ended December 31, 2002, one customer accounted for 14.5% of total revenue. For the years ended December 31, 2001 and 2000, no customer comprised more than 10% of total revenue.

The Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, are carried at historical basis. At December 31, 2002 and 2001, the fair values of these instruments approximated their financial statement carrying amounts because of the short-term maturity of these instruments. The historical basis of the Company's notes payable approximates the fair value based on quoted market prices for the same or similar issues offered to the Company or its subsidiaries for debt with the same or similar remaining maturities.

ValueClick uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

At the time a subsidiary or investee accounted for under the consolidation or equity method of accounting sells its stock to a third party at a price per share which is different than the Company's carrying value per share, the Company's share of the subsidiary net equity changes. Pursuant to the Securities and Exchange Commission's SAB No. 84 and Accounting Principles Board Opinion No. 18 "The Equity Method of Accounting for Investments in Common Stock" if, at that time, the subsidiary is not a newly-formed, non-operating entity, nor a research and development start-up or development stage company, nor is there any question as to the subsidiary's ability to continue in existence, the Company records the change in its share of the subsidiary's net equity as a non-operating gain or loss in its consolidated statements of operations. To date, the only such transaction has been the issuance of ValueClick Japan common stock as discussed in Note 2.

The Company has adopted the provisions of SFAS No. 128, "Earnings Per Share". Basic and diluted net loss per share is computed by dividing the net loss by the weighted average shares of common stock outstanding for the period.

The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income, as defined, includes all changes in equity (net assets) during a period from non-owner sources. The elements of comprehensive income, other than net loss, relate to foreign currency translation adjustments for all periods presented and unrealized gains on marketable securities for the years ended December 31, 2002 and 2001.

As of December 31, 2002, the Company has $30,000 in unrealized gains on marketable securities and has reported such gains, net of tax, in comprehensive income.

The reclassification amount in other comprehensive loss related to the unrealized loss on available for sale securities which was realized upon the impairment charge to earnings for an other than temporary decline in market value was as follows for the year ended December 31, 2000 (in millions):

Unrealized holding loss arising during the period		$	(60.2	)
Less: reclassification adjustment for losses included in net income for an other than temporary impairment of available for sale securities			60.2

	Net unrealized gain or loss on available for sale securities	$	—

In August of 2001, the FASB issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets," which establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. The Company expects to adopt SFAS No. 143 effective January 1, 2003 and do not expect that the adoption of this new standard will have a significant impact on its results of operations and financial position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition Disclosure—an amendment of FAS 123" (SFAS No. 148). This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", 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, this Statement amends the disclosure requirements of Statement 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 provisions of FAS 148 are effective for financial statements for fiscal years ending after December 15, 2002, and disclosure requirements shall be effective for interim periods beginning after December 15, 2002. The Company intends to continue to account for stock-based compensation to its employees and directors using the intrinsic value method prescribed by APB Opinion No. 25, and related interpretations. The Company has made certain disclosures required by SFAS No. 148 in the consolidated financial statements for the year ended December 31, 2002 and will begin making the additional interim disclosures required by SFAS No. 148 in the first quarter of 2003. Accordingly, adoption of SFAS No. 148 will not impact ValueClick's financial position or results of operations.

Z Media, Inc. On December 18, 2000, ValueClick, Z Media and Z Media Acquisition Corp., a wholly-owned subsidiary of ValueClick, entered into an Agreement and Plan of Merger, under which ValueClick agreed to acquire Z Media. The merger was completed on January 31, 2001. On that date, the Z Media Acquisition Corp. was merged with and into Z Media and Z Media remained as the surviving corporation and a wholly-owned subsidiary of ValueClick. ValueClick accounted for the merger as a pooling-of-interests, and as such, the consolidated financial statements were restated to include Z Media's financial data as if the Z Media had always been a part of ValueClick.

Z Media is a co-registration company that provides highly qualified email subscribers to advertisers and direct marketers.

In connection with the merger, ValueClick issued an aggregate of 2,727,678 shares of its common stock in exchange for all outstanding shares of Z Media and reserved 419,366 additional shares of Common Stock for issuance upon exercise of outstanding employee stock options of Z Media.

ClickAgents.Com, Inc. On November 1, 2000, ValueClick, ClickAgents and ValueClick Acquisition Corp., a wholly-owned subsidiary of ValueClick, entered into an Agreement and Plan of Merger, under which ValueClick agreed to acquire ClickAgents. The merger was completed on December 8, 2000. On that date, the ValueClick Acquisition Corp. was merged with and into ClickAgents and ClickAgents remained as the surviving corporation and a wholly-owned subsidiary of ValueClick. ValueClick

accounted for the merger as a pooling-of-interests, and as such, the consolidated financial statements have been restated to include ClickAgents' financial data as if the ClickAgents had always been a part of ValueClick.

ClickAgents, founded on January 26, 1999, is a provider of performance-based Internet advertising solutions for ad agencies, advertisers and Web publishers focused a cost-per-click model.

In connection with the merger, ValueClick issued an aggregate of 4,906,071 shares of its common stock in exchange for all outstanding shares of ClickAgents and reserved 427,261 additional shares of common stock for issuance upon exercise of outstanding employee stock options of ClickAgents. The Company recorded a charge to operations relating to non-recurring merger costs of $353,000, comprised of direct incremental transaction costs.

The following table presents the historical results of ValueClick, ClickAgents and Z Media for periods prior to the consummation of the mergers (in thousands):

		2001			2000
Revenue:
	ValueClick	$	42,703		$	43,756
	ClickAgents		—			12,950
	Z Media		2,170			7,626

		$	44,873		$	64,332

Net income (loss):
	ValueClick	$	(4,607	)	$	(57,544	)
	ClickAgents		—			1,865
	Z Media		(2,611	)		346

		$	(7,218	)	$	(55,333	)

Merger-related costs of $17,000, $1.8 million, and $353,000 included in the consolidated statements of operations for the years ended December 31, 2002, 2001 and 2000, respectively, were comprised of direct transaction and other costs related to the ClickAgents and Z Media mergers.

Be Free, Inc. On May 23, 2002, the Company completed its acquisition of Be Free, Inc. Under the terms of the merger agreement, a wholly-owned subsidiary of the Company was merged with and into Be Free and Be Free survived as a wholly-owned subsidiary of the Company. Be Free is a provider of performance-based marketing technology and services.

Under the terms of the merger agreement, Be Free stockholders received 0.65882 shares of the Company common stock for each share of Be Free common stock. The Company issued a total of approximately 43.4 million shares of its common stock for all the outstanding stock of Be Free. In addition, the Company assumed options to purchase approximately 4.2 million additional shares of ValueClick common stock.

The Company accounted for the acquisition under the purchase method. Accordingly, the results of Be Free's operations are included in the Company's consolidated financial statements from the date

of acquisition. The aggregate consideration constituting the purchase price of approximately $129.3 million, includes the issuance of 43,361,717 shares of common stock valued at approximately $122.3 million (based on the average common stock price for the public announcement date and the day before, the day of and after that date), the assumption of options and warrants to purchase an aggregate of 4,164,918 shares of common stock valued at $5.0 million using the Black-Scholes option pricing model and transaction costs of approximately $2.0 million, which include legal fees, accounting fees, and fees for other related professional services.

Mediaplex, Inc. On October 19, 2001, ValueClick completed its acquisition of Mediaplex, Inc. and its wholly-owned subsidiary AdWare Systems, Inc. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Mediaplex and Mediaplex survived as a wholly-owned subsidiary of ValueClick. Mediaplex serves the marketing communications industry with technology solutions for digital messaging, support services that enhance campaign return, and infrastructure tools to ensure effective program implementation.

Under the terms of the merger agreement, Mediaplex stockholders received .4113 shares of ValueClick common stock for each share of Mediaplex common stock. ValueClick issued a total of approximately 15.1 million shares of its common stock for all the outstanding stock of Mediaplex. In addition, based on shares of Mediaplex common stock underlying its outstanding stock options as of the record date and the exchange ratio, options to purchase approximately 3.0 million additional shares of ValueClick common stock were assumed by ValueClick.

ValueClick accounted for the acquisition under the purchase method. Accordingly, the results of Mediaplex's operations are included in the Company's consolidated financial statements from the date of acquisition. The aggregate consideration constituting the purchase price of approximately $47.6 million at closing, includes the issuance of 15,084,898 shares of common stock valued at approximately $42.7 million (based on the average ValueClick common stock price for the public announcement date and the five trading before and after that date), the assumption options and warrants to purchase an aggregate of 2,968,562 shares of common stock valued at $3.4 million and transaction costs of approximately $1.5 million, which include legal fees, accounting fees, and fees for other related professional services.

The purchase price approximated the fair value of the tangible net assets acquired.

Bach Systems, Inc. On November 20, 2000, ValueClick completed its acquisition of Bach Systems, Inc. ("Bach Systems"), a Florida corporation, by means of an Agreement and Plan of Merger dated as of November 17, 2000 by and between ValueClick, Bach Systems, Inc. and Bach Acquisition Corp. The acquisition was accomplished through a forward triangular merger by which Bach Systems, Inc. merged into Bach Acquisition Corp., a wholly-owned subsidiary of ValueClick. The surviving corporation is Bach Acquisition Corp.

Bach Systems does business as onResponse.com and is an online affiliate advertising firm. onResponse.com conducts customized cost-per-action and cost-per-lead campaigns on behalf of advertising and direct marketing clients.

ValueClick accounted for the acquisition under the purchase method. Accordingly, the results of Bach Systems' operations are included in the Company's consolidated financial statements from the date of acquisition. The aggregate consideration constituting the purchase price of approximately

$5.5 million at closing, includes, $825,000 in cash paid on the closing date of the transaction, 750,000 shares of common stock valued at approximately $3.5 million (based on the average ValueClick common stock price for the public announcement date and the five trading before and after that date), $1.0 million in cash payments to a member of Bach Systems' management with a residual equity interest, and transaction costs of approximately $200,000, which include legal fees, accounting fees, and fees for other related professional services. The consideration was increased by earnout payments totaling approximately 1,028,000 shares of ValueClick common stock valued at approximately $2.3 million (based on the average ValueClick common stock prices for the earnout determination date and the five trading days before and after that date) over the eight successive calendar quarters after the closing date.

The excess purchase price, including the earnout payments made, over the fair value of the tangible net assets acquired of approximately $6.4 million at the closing date was allocated primarily to goodwill and was being amortized using a three year life through December 31, 2002. The unamortized balance of goodwill associated with the Bach Systems acquisition as of January 1, 2002 was considered impaired upon the Company's adoption of SFAS No. 142 and such impairment was reported as a cumulative effect of a change in accounting principle during the first quarter of 2002 as described in Note 1.

The historical operating results of Be Free and Mediaplex prior to the acquisition date have not been included in the Company's historical operating results. Pro forma data (unaudited) for the years ended December 31, 2002 and 2001 as if the Mediaplex and Be Free acquisitions had been effective as of January 1, 2001 is as follows (in thousands, except per share data):

	2002			2001
Revenue	$	70,687		$	82,613

Net loss attributable to its common shareholders	$	(11,596	)	$	(37,390	)

Basic and diluted net loss per share	$	(0.13	)	$	(0.39	)

ValueClick Japan On August 6, 1999, the Company entered into a Stock Purchase Agreement (the "Agreement") to acquire a controlling interest in ValueClick Japan. Under the Agreement, ValueClick purchased an additional 22.3% of the ValueClick Japan stock for an aggregate purchase price of approximately $4.2 million that was comprised of $78,000 in cash and 320,000 shares of ValueClick common stock with an estimated fair value of $4.1 million giving ValueClick a 54% controlling ownership interest in ValueClick Japan. In January 2000, ValueClick purchased an additional 3.4% of ValueClick Japan stock in exchange for 48,836 shares of ValueClick common stock, which gave ValueClick a 57.4% ownership interest in ValueClick Japan. The estimated fair value of the ValueClick common stock was determined based on the estimated initial public offering stock price. The acquisition was accounted for using the purchase method and the purchase price was allocated to the estimated fair value of assets acquired and liabilities assumed to the extent acquired by the Company.

On May 31, 2000, ValueClick Japan, the Company's majority owned subsidiary, completed its initial public offering on Japan's "Mothers Market" in which it sold 1,000 shares of its common stock at $27,822 per share. This initial public offering reduced the Company's ownership interest in ValueClick Japan from 57.4% before the offering to 54.0% after the offering. The proceeds to ValueClick Japan from the offering, after deducting direct incremental costs and underwriting discounts

and commissions, were $25.4 million. A related gain of $13.7 million was recorded in the consolidated statements of operations for the year ended December 31, 2000 representing the change in net equity for the Company's share of the proceeds received by ValueClick Japan for its stock issuance. A deferred tax liability of approximately $5.6 million was also recognized to reflect the tax impacts of the related gain.

During 2000, the Company sold 177 shares of its ValueClick Japan holdings for aggregate proceeds of $2.6 million and a resulting gain of $2.3 million. In December 2001, the Company purchased an additional 2,075 shares of ValueClick Japan for aggregate purchase price of $1.3 million. The Company has maintained a majority interest in ValueClick Japan with 59.2% ownership subsequent to the purchase of these shares.

On February 28, 2000, the Company consummated an investment by DoubleClick, Inc. ("DoubleClick") under a common stock and warrant purchase agreement entered into on January 11, 2000 whereby DoubleClick acquired 7,878,562 shares of the Company's common stock for an estimated purchase price of $12.16 per share to be paid in cash of $10.0 million and 732,860 shares of DoubleClick common stock. The shares of DoubleClick common stock were valued at approximately $85.8 million for accounting purposes based on an average price of $117.07 per share for the public announcement date of January 13, 2000 and the 5 trading days before and 5 trading days thereafter. Under the Agreement, the Company also issued a warrant to DoubleClick to acquire additional shares of the Company's common stock at $21.76 per share payable in DoubleClick common stock which is exercisable for that number of shares that would result in DoubleClick owning 45% of the Company's outstanding common stock on a fully diluted basis. The warrant was exercisable for the 15-month period commencing on February 28, 2000. The warrant expired unexercised in May 2001.

During 2000, the Company sold 165,000 shares of its DoubleClick common stock for cash proceeds of $10.3 million. The sale of these shares resulted in a realized non-cash loss of $9.0 million. In December 2000, the Company's management made an assessment that the decline in market value of the remaining DoubleClick stock was other than temporary. Accordingly, for the year ended December 31, 2000 the Company recorded a non-cash charge to operations of $60.2 million representing the unrealized holding losses previously accounted for a separate component of stockholders' equity. In April 2001, the Company sold its remaining 567,860 shares of its DoubleClick common stock for cash proceeds of $6.9 million. The sale of these shares resulted in a realized gain of $701,000. In November 2002, in connection with the Stock Repurchase Program, the Company repurchased the remaining 7,878,562 shares of its common stock held by DoubleClick for an aggregate purchase price of $21.3 million.

	December 31,
	2002			2001
Computer equipment and purchased software	$	17,282		$	15,261
Furniture and equipment		2,770			2,336
Vehicles		41			92
Leasehold improvements		445			472

		20,538			18,161
Less: accumulated depreciation and amortization		(11,301	)		(11,036	)

	$	9,237		$	7,125

Accounts payable and accrued expenses consisted of the following (in thousands):

	December 31,
	2002		2001
Accounts payable	$	1,714	$	1,746
Accrued payments to third-party web sites		3,940		3,478
Other accrued liabilities		8,000		6,701

	$	13,654	$	11,925

The provision for income taxes for the years ended December 31, 2002, 2001 and 2000 is comprised of the following (in thousands):

		Year Ended December 31,
		2002			2001			2000
Current:
	Federal	$	(188	)	$	(280	)	$	2,381
	State		406			21			569
	Foreign		131			330			497

		$	349		$	71		$	3,447
Deferred:
	Federal	$	(144	)	$	(32	)	$	(789	)
	State		(42	)		(5	)		(119	)

			(186	)		(37	)		(908	)

Provision for income taxes		$	163		$	34		$	2,539

The components of the deferred tax assets at December 31, 2002 and 2001 are as follows (in thousands):

			December 31,
			2002			2001
Deferred tax assets:
	Net operating losses		$	52,227		$	16,834
	Capital loss carryforward			26,438			28,958
	Allowance for doubtful accounts			623			618
	Accrued expenses			1,183			689
	Current state taxes			81			7
	Depreciation and amortization			9,231			86
	Other			670			7

		Gross deferred tax assets		90,453			47,199
	Valuation allowance			(83,412	)		(39,577	)

	Net deferred tax assets			7,041			7,622
Deferred tax liabilities:
	Capital gains on issuance of ValueClick Japan Stock			5,454			5,454
	Other			335			1,102

	Total deferred tax liabilities			5,789			6,556

	Net deferred tax assets		$	1,252		$	1,066

Due to the uncertainty surrounding realization of the tax benefits in the future, the Company has placed a valuation allowance against its deferred tax assets except for the balance it believes is more likely than not of being recovered. At December 31, 2002, the Company had net operating losses and capital loss carryforwards for federal and state purposes of $142.2 million and $66.2 million, respectively. The federal and state net operating losses begin to expire in 2011 and 2004, respectively.

The overall effective tax rate differs from the statutory Federal tax rate for the years ended December 31, 2002, 2001 and 2000 as follows:

	Year Ended December 31,
	2002		2001		2000
Tax benefit based on the federal statutory rate	(34.0	)%	(34.0	)%	(34.0	)%
State income taxes, net of federal benefit	6.6		(6.1	)	(6.1	)
Stock based compensation	—		11.6		3.8
Non-deductible amortization / impairment	1.0		4.2		0.8
Non-deductible merger-related costs	—		3.0		—
Impairment write-down of marketable securities	—		—		45.5
Gain on ValueClick Japan stock issuance	—		—		(10.3	)
Capital losses	—		—		5.0
Effects of foreign income	—		6.9		—
Federal effect of state rate change	2.5		6.9		—
Deferred tax recognition for prior acquisition	—		8.6		—
Adjustment to valuation allowance, net of purchase accounting adjustments	28.8		—		—
Other, net	1.0		(0.6	)	0.1

	5.9	%	0.5	%	4.8	%

Upon the closing of the Company's initial public stock offering as described below, all of the then outstanding Series A, B and C Preferred Stock automatically converted into common stock on a one-for-one basis. In addition, the Z Media preferred stock was exchanged for ValueClick common stock upon the consummation of the merger with ValueClick as discussed in Note 2. Accordingly, no preferred stock is currently issued or outstanding.

On March 30, 2000 the Company completed its initial public offering in which the Company sold 4,000,000 shares of its Common Stock at $19.00 per share. The initial public offering closed on April 5, 2000. The proceeds to the Company from the offering, after deducting direct incremental costs and underwriting discounts and commissions, were $68.6 million. Upon the closing of the offering, all of the Company's then outstanding Preferred Stock automatically converted into Common Stock on a one-for-one basis. After the offering, the Company's authorized capital consists of 520,000,000 shares of capital stock (500,000,000 shares of Common Stock at a par value of $0.001 per share and 20,000,000 shares of Preferred Stock at a par value of $0.001 per share.)

In connection with the Mediaplex acquisition, the Company assumed a fully vested warrant to purchase 205,650 shares of common stock at $1.22 per share. The warrant was exercised during 2001.

In May and June of 1998, the Company issued LLC ownership interests to six founding employees for no consideration and recorded a charge to stock-based compensation of $61,375 for the estimated fair value of the LLC ownership interests issued to these employees. The ownership interests were converted into 707,923 shares of common stock upon completion of the LLC conversion and reincorporation on December 31, 1998. In May 1999, the Company entered into stock restriction agreements with these founding employees' restricting 608,878 of their shares to monthly vesting over a 48-month period from their original dates of employment, with the unvested shares fully vesting upon the completion of the Company's initial public offering. The unvested shares were subject to repurchase upon the employees termination. The Company recorded deferred stock compensation amounting to $1.4 million for the remeasurement of these shares covered under the restriction agreements. The deferred amount will be recognized as compensation expense over the vesting period. During the years ended December 31, 2002, 2001 and 2000, such compensation expense included in stock-based compensation in the accompanying consolidated statement of operations amounted to approximately $0, $225,000 and $527,000, respectively. At December 31, 2002 and 2001, none and 209,263 shares of common stock, respectively, were subject to repurchase under the restricted stock agreements.

In September 2001, the Board of Directors authorized a $10 million Stock Repurchase Program to purchase outstanding shares of ValueClick common stock from time to time at prevailing market prices in the open market or through unsolicited negotiated transactions depending on market conditions. The Stock Repurchase Program was increased by the board of directors to $30 million in February 2002, to $50 million in July 2002 and to $75 million in November 2002. Under the program, the purchases will be funded from available working capital, and the repurchased shares will be retired, held in treasury or used for ongoing stock issuances such as issuances under employee stock plans. There is no

guarantee as to the exact number of shares that will be repurchased by the Company and the Company may discontinue purchases at any time that management determines additional purchases are not warranted. As of December 31, 2002, and since the initiation of the Stock Repurchase Program, the Company has repurchased approximately 22.9 million shares of the Company's common stock for approximately $60.9 million, $57.6 million of which was purchased pursuant to the Stock Repurchase Program. As December 31, 2002 up to an additional $17.4 million of the Company's capital may be used to purchase shares of the Company's outstanding common stock under the Stock Repurchase Program.

On May 23, 2002, the Board of Directors adopted and the stockholders approved, the 2002 Stock incentive Plan (the "2002 Stock Plan") replacing the 1999 Stock Option Plan. A total of 10,000,000 shares of common stock have been reserved for issuance under the 2002 Stock Plan, of which 6,903,411 shares were available for future grant at December 31, 2002.

The 2002 Stock Plan provides for the granting of nonstatutory and incentive stock options to employees, officers, directors and consultants of the Company. Options granted generally begin vesting on the employee's date of employment, and vest over a four-year period ¹/4 on the first anniversary date and then pro rata monthly over the remaining three years and generally expire ten years from the date of grant.

On May 13, 1999, the Board of Directors adopted and the stockholders approved, the 1999 Stock Option Plan (the "1999 Stock Plan"). A total of 5,000,000 shares of common stock had been reserved for issuance under the 1999 Stock Plan, of which 1,034,318 shares were available for future grant at December 31, 2002.

The 1999 Stock Option Plan provided for the granting of nonstatutory and incentive stock options to employees, officers, directors and consultants of the Company. Options granted generally begin vesting on the employee's date of employment, and vest pro rata monthly over periods ranging from 12 to 42 months or annually over 4 years and generally expire ten years from the date of grant.

Pursuant to the merger with Be Free, the Company assumed the 1998 Stock Incentive Plan of Be Free (the "Be Free Option Plan"), including incentive stock options to purchase 4,164,875 shares of common stock with exercise prices ranging from $0.23 to $68.59. Options granted under the Be Free Option Plan are generally exercisable over a maximum term of ten years from the date of grant and generally vest over periods of up to four years. No shares were available for future grant at December 31, 2002.

Pursuant to the merger with Mediaplex, the Company assumed the 1997 Stock Option Plan of Mediaplex (the "Mediaplex Plan"), including incentive stock options to purchase 2,762,912 shares of common stock with exercise prices ranging from $1.22 to $247.99. Options granted under the Mediaplex Plan are generally exercisable over a maximum term of ten years from the date of grant and

generally vest over periods of up to four years. No shares were available for future grant at December 31, 2002.

Pursuant to the merger with Z Media, the Company assumed the Stock Option Plan of Z Media (the "Z Media Plan"), including incentive stock options to purchase 419,366 shares of common stock with exercise prices ranging from $0.26 to $7.91. Options granted under the Z Media Plan are generally exercisable over a maximum term of ten years from the date of grant and generally vest over periods of up to four years. No shares were available for future grant at December 31, 2002.

Pursuant to the merger with ClickAgents, the Company assumed the Stock Option Plan of ClickAgents (the "ClickAgents Plan"), including incentive stock options to purchase 427,269 shares of common stock with exercise prices ranging from $0.07 to $3.95. Options granted under the ClickAgents Plan are generally exercisable over a maximum term of ten years from the date of grant and generally vest over periods of up to four years. No shares were available for future grant at December 31, 2002.

The following table summarizes activity under the all stock option plans for the years ended December 31, 2002, 2001 and 2000:

Options acquired in business combinations or granted during the years ended December 31, 2002, 2001 and 2000, net of cancellations, resulted in a total deferred compensation amount of approximately $547,000, $282,000 and $3,910,000, respectively, which was included in deferred stock compensation in stockholders' equity. Deferred compensation expense is recognized over the service period by using the aggregate percentage of compensation accrued by the end of each year of service (the vesting period). During the years ended December 31, 2002, 2001 and 2000, such compensation expense included in

stock-based compensation in the statement of operations amounted to approximately $1,527,000, $2,699,000 and $5,058,000 respectively.

The weighted-average per-share fair value of individual options granted during 2002, 2001 and 2000 were $2.46, $3.24 and $13.69 respectively.

Additional information with respect to the outstanding options as of December 31, 2002 is as follows:

				Options Exercisable
	Options Outstanding Average Remaining Contractual Life (In Years)			Options Exercisable
Number of Shares		Average Exercise Prices		Number of Shares	Average Exercise Price
804,977	5.91	$	0.25	738,770	$	0.26
2,148,183	8.04		1.31	2,118,950		1.31
4,769,866	8.64		2.45	1,179,503		2.47
1,329,201	6.23		5.21	852,240		5.56
1,051,630	7.17		29.76	846,521		29.34

10,103,857	7.30	$	5.24	5,735,984	$	6.18

The Company calculated the fair value of each option grant on the date of grant using the option-pricing models as prescribed by Statement No. 123 using the following assumptions:

	Year Ended December 31,
	2002		2001		2000
Risk-free interest rates	3	%	5	%	5	%
Expected lives (in years)	4		4		4
Dividend yield	0	%	0	%	0	%
Expected volatility	45	%	145	%	109	%

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

		Year Ended December 31,
		2002			2001			2000
Numerator:
	Net loss	$	(10,572	)	$	(7,218	)	$	(55,333	)
Denominator:
	Weighted average common shares		73,744			37,058			32,151

Basic and diluted net loss per common share		$	(0.14	)	$	(0.20	)	$	(1.72	)

The diluted per share computations exclude convertible preferred stock, unvested restricted shares, and common stock options which were antidilutive. The numbers of shares excluded from the diluted net loss per common share computation were 2,457,729, 4,023,977 and 1,614,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

		December 31,
		2002		2001
Note payable bank 2.9%, $900 principal and interest paid monthly, due December 2002		$	—	$	13
Short Term Borrowing, ValueClick Japan			45		—
Note payable bank, 3.25%, $14 principal and interest paid monthly, due December 2007			760		912
Note payable shareholder, non-interest bearing, $100 due in March 2002 and $110 due in March 2003			110		210

	Total		915		1,135
Less current portion			307		266

		$	608	$	869

The Company has a Savings Plan (the "Savings Plan") that qualifies as a defined contribution plan under Section 401(k) of the Internal Revenue Code. Under the Savings Plan, participating employees may defer a percentage (not to exceed 20%) of their eligible pretax earnings up to the Internal Revenue Service's annual contribution limit. All full time employees on the payroll of the Company are eligible to participate in the plan. The Savings Plan does not invest participant contributions in the Company's common stock. Company matching and profit sharing contributions are discretionary. Company contributions to the Plan amounted to $75,000, $135,000 and $75,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

Future minimum lease payments under noncancellable operating and capital leases and related sublease income, with initial or remaining lease terms in excess of one year as of December 31, 2002 are as follows (in thousands):

Total rent expense under operating leases, net of sublease income was $2.2 million, $2.2 million, and $1.3 million, for the years ended December 31, 2002, 2001 and 2000, respectively.

Mediaplex, Inc., ValueClick's wholly-owned subsidiary acquired on October 19, 2001, is involved in three putative class action lawsuits. In July and August 2001, these class action lawsuits were commenced on behalf of all persons who acquired Mediaplex securities between November 19, 1999 and December 6, 2000. The cases are entitled Levovitz v. Mediaplex, Inc. et al., Atlas v. Mediaplex, Inc. et al., and Mashayekh v. Mediaplex, Inc. et al. In addition to Mediaplex and each of its underwriters for its November 1999 initial public offering, Gregory Raifman, Sandra Abbott, Jon Edwards, Lawrence Lenihan, Peter Sealy, James Desorrento, and A. Brooke Seawell, all of whom are former officers and directors of Mediaplex, are named as individual defendants. The Company is defending and indemnifying these individual defendants as part of its obligation under its indemnification agreements. The cases are pending before the United States District Court for the Southern District of New York.

Be Free, Inc., ValueClick's wholly-owned subsidiary acquired on May 23, 2002, is involved in a putative class action litigation. This class action lawsuit, entitled Saul Kassin v. Be Free et al., was filed on November 30, 2001 with the United States District Court for the Southern District of New York on behalf of all persons who acquired Be Free securities between November 3, 1999 and December 6, 2000. This lawsuit names as defendants Be Free, its underwriters for its November 3, 1999 initial public offering and its March 28, 2000 public offering, and Gordon B. Hoffstein, Samuel Gerace, Jr., Thomas A. Gerace and Stephen M. Joseph, all of whom were either officers and/or directors of Be Free during the class period. Gordon Hoffstein and Samuel Gerace, Jr. are members of the Company's board of directors, Mr. Gerace is also the Chief Technology Officer of Be Free. The Company is defending and indemnifying the individual defendants in this lawsuit as part of its obligation under its indemnification agreements.

ValueClick believes that the plaintiffs' allegations are without merit and intends to vigorously defend itself. ValueClick has not recorded an accrual related to damages, if any, resulting from these cases, as an unfavorable outcome is, in management's opinion, not probable and an amount of loss, if any, is not estimable.

ValueClick responded with a detailed letter denying liability. In February of 2002, 24/7 Real Media filed a patent infringement suit against ValueClick and Mediaplex in the Southern District of New York. The complaint sought injunctive relief and unspecified damages relating to alleged patent infringement of 24/7 Real Media's '368 patent. In December of 2002 the Company purchased a license from 24/7 Real Media for the '368 patent under a Patent License Agreement. In connection with the Patent License Agreement, 24/7 Real Media also agreed to terminate their lawsuit against the Company. The terms of the Patent License and Settlement Agreements are confidential.

On September 27, 2000, Joseph Lorenc, a former employee of Be Free, Inc. filed a lawsuit against Be Free and two officers of Be Free, Steven Joseph and Gordon Hoffstein, in the United States District Court, District of Massachusetts. The complaint alleges, among other things, breach of contract. Defendants brought a motion for summary judgment as to all of plaintiff's claims. In February of 2003, the Court granted the Company's motion for summary judgment with respect to plaintiff's claim of violation by the Company of the American with Disabilities Act and remanded the remaining seven (non-federal) claims to be heard in the Massachusetts state court. ValueClick believes that the plaintiff's allegations are without merit and intends to vigorously defend itself. ValueClick has not recorded an accrual related to damages, if any, resulting from this case, as an unfavorable outcome is, in management's opinion, not probable and an amount of loss, if any, is not estimable.

Other than the matters discussed above, we are not a party to any other material legal proceedings, nor are we aware of any pending or threatened litigation that would have a material adverse effect on the Company's operating results, cash flows or financial condition. From time to time, we may become subject to additional legal proceedings, claims, and litigation arising in the ordinary course of business. In addition, we may receive letters alleging infringement of patent or other intellectual property rights. Management believes that these letters generally are without merit and the Company intends to contest them vigorously.

In the second quarter of 2002 and in the fourth quarter of 2001, the Company recorded restructuring charges of $2.3 million and $515,000, respectively. These restructuring charges were the result of certain redundancies as a result of ValueClick's acquisitions of Mediaplex and Be Free and primarily represent a provision for consolidating certain leased facilities which will be paid out through 2010. As a result of this process, four existing ValueClick employee positions were eliminated. As of December 31, 2002, $484,000 of the charges has been paid.

	Employee Related			Lease Exit Costs			Total
	(in thousands, except per share data)
Restructuring accruals	$	9		$	2,827		$	2,836
Cash payments		(9	)		(475	)		(484	)

Accrual at December 31, 2002	$	—		$	2,352		$	2,352

ValueClick derives its revenue from two business segments based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology.

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

The Company's operations are domiciled in the United States with operations in Japan through its majority owned subsidiary, ValueClick Japan and with operations in Europe through its wholly-owned subsidiary, ValueClick Europe, ValueClick France and ValueClick Germany. Other international subsidiaries included ValueClick Canada and ValueClick Brazil, which were closed during 2001.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Westlake Village, State of California, on the 26th day of March, 2003.

KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and appoint each of James R. Zarley and Samuel J. Paisley their true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his respective substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

Certification of CEO Pursuant to
Securities Exchange Act Rules 13a-14 and 15d-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, James R. Zarley, the Chief Executive Officer of ValueClick, Inc., certify that:

Certification of CFO Pursuant to
Securities Exchange Act Rules 13a-14 and 15d-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Samuel J. Paisley, the Chief Financial Officer of ValueClick, Inc., certify that:

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 2002
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

			Page
PART I			1
	ITEM 1.	BUSINESS	1
	ITEM 2.	PROPERTIES	23
	ITEM 3.	LEGAL PROCEEDINGS	24
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	25
PART II			26
	ITEM 5.	MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS	26
	ITEM 6.	SELECTED FINANCIAL DATA	27
	ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	42
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	42
PART III			43
	ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	43
	ITEM 11.	EXECUTIVE COMPENSATION	43
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	43
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	44
	ITEM 14.	CONTROLS AND PROCEDURES	44
PART IV			45
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K	45
		SIGNATURES
		CERTIFICATION OF CEO—Sarbanes-Oxley Act Section 302
		CERTIFICATION OF CFO—Sarbanes-Oxley Act Section 302

															Period from May 1, 1998 (inception) Through December 31, 1998
			For the Years ended December 31,
			2002			2001			2000			1999
			(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue			$	62,554		$	44,873		$	64,332		$	25,971		$	2,059
Cost of revenue				21,733			20,370			31,930			12,465			1,107

	Gross profit			40,821			24,503			32,402			13,506			952
Operating expenses:
	Sales and marketing (1)			17,314			11,976			11,436			2,989			523
	General and administrative (1)			16,714			13,301			12,896			4,706			410
	Product development (1)			11,216			5,313			4,846			1,100			155
	Stock-based compensation			1,527			2,699			5,058			3,506			61
	Amortization of intangible assets and acquired software			533			1,875			1,069			401			33
	Merger-related costs			17			1,787			353			—			—
	Restructuring charges			2,320			515			—			—			—

		Total operating expenses		49,641			37,466			35,658			12,702			1,182

Income (loss) from operations				(8,820	)		(12,963	)		(3,256	)		804			(230	)
	Equity in loss of investee			—			—			—			(64	)		(9	)
	Interest income, net			5,909			5,051			4,120			45			7
	Gain (loss) on sale of marketable securities			134			701			(9,006	)		—			—
	Impairment write-down of marketable securities			—			—			(60,233	)		—			—
	Gain from consolidated subsidiary stock issuance			—			—			13,656			—			—
	Gain on the sale of consolidated subsidiary stock			—			—			2,344			—			—
	Other income (expense)			32			(5	)		—			—			—

Income (loss) before income taxes, minority interests and cumulative effect of change in accounting principle				(2,745	)		(7,216	)		(52,375	)		785			(232	)
	Provision for income taxes			163			34			2,539			1,853			—

Loss before minority interest and cumulative effect of change in accounting principle				(2,908	)		(7,250	)		(54,914	)		(1,068	)		(232	)
	Minority share of (income) loss in consolidated subsidiary			(15	)		32			(419	)		(6	)		—

Loss before cumulative effect of change in accounting principle				(2,923	)		(7,218	)		(55,333	)		(1,074	)		(232	)
	Cumulative effect of change in accounting principle (2)			(7,649	)		—			—			—			—

		Net loss	$	(10,572	)	$	(7,218	)	$	(55,333	)	$	(1,074	)	$	(232	)

Net loss per common share:
	Basic and diluted		$	(0.14	)	$	(0.20	)	$	(1.72	)	$	(0.06	)	$	(0.02	)

Shares used to calculate basic and diluted net loss per common share				73,744			37,058			32,151			17,683			12,640

	December 31,
	2002		2001		2000		1999		1998
	(In thousands)
Cash, cash equivalents and marketable securities	$	232,978	$	163,355	$	127,450	$	3,681	$	262
Working capital		234,229		161,928		129,036		6,828		454
Total assets		263,850		190,626		154,050		18,737		1,323
Total stockholders' equity		231,981		165,507		127,493		11,593		755

			Three-Month Period Ended
			Dec. 31, 2002			Sept. 30, 2002			Jun. 30, 2002			Mar. 31, 2002			Dec. 31, 2001			Sept. 30, 2001			Jun. 30, 2001			Mar. 31, 2001
Revenue			$	18,789		$	17,302		$	14,107		$	12,356		$	12,208		$	10,289		$	9,660		$	12,716
Cost of revenue				6,250			5,951			4,961			4,571			4,887			4,607			4,753			6,123

	Gross profit			12,539			11,351			9,146			7,785			7,321			5,682			4,907			6,593
Operating expenses:
	Sales and marketing (1)			4,607			4,975			3,766			3,966			3,542			2,680			2,789			2,965
	General and administrative (1)			4,232			4,579			4,165			3,738			3,303			3,320			2,968			3,710
	Product development (1)			3,025			3,373			2,697			2,121			2,612			807			853			1,041
	Stock-based compensation			121			412			444			550			542			542			655			960
	Amortization of intangible assets			220			219			49			45			520			453			440			462
	Merger-related costs			—			—			—			17			666			141			267			713
	Restructuring charges			—			—			2,320			—			515			—			—			—

		Total operating expenses		12,205			13,558			13,441			10,437			11,700			7,943			7,972			9,851

Income (loss) from operations				334			(2,207	)		(4,295	)		(2,652	)		(4,379	)		(2,261	)		(3,065	)		(3,258	)
	Interest income, net			1,490			1,641			1,501			1,277			1,325			1,162			1,174			1,390
	Gain on sale of marketable securities			—			—			134			—			—			—			701			—
	Other income (expense)			—			(10	)		(17	)		59			382			(387	)		—			—

Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle				1,824			(576	)		(2,677	)		(1,316	)		(2,672	)		(1,486	)		(1,190	)		(1,868	)
	Provision for (benefit from) income taxes			(18	)		200			118			(137	)		(121	)		175			(120	)		100

Income (loss) before minority interest and cumulative effect of change in accounting principle				1,842			(776	)		(2,795	)		(1,179	)		(2,551	)		(1,661	)		(1,070	)		(1,968	)
	Minority share of (income) loss in consolidated subsidiary			(25	)		(10	)		(44	)		64			(194	)		264			106			(144	)

Income (loss) before cumulative effect of change in accounting principle				1,817			(786	)		(2,839	)		(1,115	)		(2,745	)		(1,397	)		(964	)		(2,112	)
	Cumulative effect of change in accounting principle (2)			—			—			—			(7,649	)		—			—			—			—

		Net income (loss)	$	1,817		$	(786	)	$	(2,839	)	$	(8,764	)	$	(2,745	)	$	(1,397	)	$	(964	)	$	(2,112	)

Basic and diluted income (loss) before cumulative effect of change in accounting principle per share			$	0.02		$	(0.01	)	$	(0.04	)	$	(0.02	)	$	(0.06	)	$	(0.04	)	$	(0.03	)	$	(0.06	)

									Period from May 1, 1998 (inception) Through December 31, 1998
	Year ended
	2002		2001		2000		1999
Sales and marketing	$	488	$	864	$	1,610	$	1,122	$	—
General and administrative		779		1,376		2,718		1,893		61
Product development		260		459		730		491		—

	$	1,527	$	2,699	$	5,058	$	3,506	$	61

						Operating Sublease
				Operating Lease
Year Ending December 31		Capital Leases		Operating Lease
Year Ending December 31		Capital Leases		Commitments		Income
2003		$	926	$	3,498	$	(248	)
2004			228		3,340		(216	)
2005			146		1,048		—
2006			—		719		—
2007			—		493		—
Thereafter			—		1,330		—

	Total minimum lease payments	$	1,300	$	10,428	$	(464	)

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights(1)		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders	5,633,714	$	2.69	7,937,729
Equity compensation plans not approved by security holders (2)	4,470,143		8.45	—

Total	10,103,857	$	5.24	7,937,729

3.2(4)		Amended and Restated Bylaws of ValueClick
4.1		See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation and Bylaws for ValueClick, Inc. defining the rights of holders of common stock of ValueClick, Inc.
4.2(4)		Specimen stock certificate for the ValueClick common stock
10.1(4)		Form of Indemnification Agreement by and between ValueClick and directors and executive officers
10.2(4)		Deed of Assignment, dated January 1, 1999 by and between Web-Ignite Corporation and ValueClick
10.3(4)		Trademark Assignment, dated as of May 1, 1998 from Web-Ignite Corporation to ValueClick
10.4(4)		Exchange Agreement, dated December 31, 1998, by and between ValueClick and ValueClick, LLC
10.5(4)		Bill of Sale and Assignment and Assumption of Liabilities, dated December 31, 1998
10.6(4)		License and Option Agreement, dated January 1, 1999, by and between ValueClick, LLC and ValueClick Japan, Inc. in effect from January 1, 1999 to December 17, 1999
10.7(4)		Stock Purchase Agreement, dated August 6, 1999, by and between Jonathan Hendricksen and Timothy Williams and ValueClick
10.8(4)		Share Purchase Agreement, dated December 31, 1999, by and between ValueClick and Todd Treusdell
10.9(4)		Share Purchase Agreement, dated December 31, 1999, by and between ValueClick and James R. Zarley
10.10(4)		Share Purchase Agreement, dated December 31, 1999, by and between ValueClick and Brian Coryat
10.11(4)		License Agreement, dated August 17, 1999, between ValueClick and ValueClick Europe, Limited
10.12(5) †		1999 Stock Option Plan, as amended, and form of option agreement
10.13(6) †		2002 Stock Incentive Plan and form of option agreement
10.14†		Key Employee Agreement between ValueClick and James R. Zarley
10.15†		Key Employee Agreement between ValueClick and Samuel J. Paisley
10.16†		Key Employee Agreement between ValueClick and Peter Wolfert
10.18(4)		Intercompany License Agreement dated December 19, 1999, between ValueClick and ValueClick Japan, Inc.
10.19(4)		Stock Purchase Agreement, dated January 20, 2000, between Jonathan Hendriksen and Timothy Williams and ValueClick.
21.1		Subsidiaries of ValueClick
23.1		Consent of PricewaterhouseCoopers LLP
99.1		Certification of CEO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

				December 31,
				2002			2001
				(in thousands, except share data)
Assets
Current assets:
	Cash and cash equivalents			$	27,066		$	26,891
	Marketable securities				205,912			136,464
	Accounts receivable, net of allowance for doubtful accounts of $1,892 and $1,546 as of December 31, 2002 and 2001, respectively				13,739			9,026
	Prepaid expenses and other current assets				1,513			933
	Income taxes receivable				578			257
	Deferred tax assets				1,252			1,066

		Total current assets			250,060			174,637
Property and equipment, net					9,237			7,125
Intangible assets, net					2,819			7,500
Other assets					1,734			1,364

		Total assets		$	263,850		$	190,626

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable and accrued expenses			$	13,654		$	11,925
	Income taxes payable				218			148
	Deferred revenue				739			93
	Notes payable				307			266
	Capital lease obligations				913			277

		Total current liabilities			15,831			12,709
Notes payable, less current portion					608			869
Capital lease obligations, less current portion					337			123
Other non-current liabilities					3,681			33
Minority interest in consolidated subsidiary					11,412			11,385
Stockholders' equity:
	Convertible preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued or outstanding at December 31, 2002 and 2001				—			—
	Common stock, $0.001 par value; 500,000,000 shares authorized; 99,118,475 and 52,698,617 shares issued and outstanding at December 31, 2002 and 2001, respectively;				99			53
	Additional paid-in capital				370,438			238,522
	Treasury stock, at cost, 22,853,073 and 1,304,172 shares at December 31, 2002 and 2001, respectively				(60,883	)		(2,959	)
	Deferred stock compensation				(473	)		(1,453	)
	Accumulated other comprehensive loss				(2,994	)		(5,022	)
	Accumulated deficit				(74,206	)		(63,634	)

		Total stockholders' equity			231,981			165,507

			Total liabilities and stockholders' equity		263,850		$	190,626

			Preferred Stock				Common Stock												Accumulated Other Comprehensive Loss
			Preferred Stock				Common Stock			Additional Paid-In Capital			Treasury Stock			Deferred Stock Compensation						Accumulated Deficit			Total Stockholders' Equity
			Shares		Amount		Shares	Amount		Additional Paid-In Capital			Treasury Stock			Deferred Stock Compensation						Accumulated Deficit			Total Stockholders' Equity
			(in thousands, except share data)
Balance at December 31, 1999			2,932,648		3		17,513,577		18		18,363			—			(5,678	)		(30	)		(1,083	)		11,593
	Issuance of Z Media shares		116,241		—		—		—		504			—			—			—			—			504
	Conversion of preferred stock		(2,646,786	)	(3	)	5,293,572		5		(2	)		—			—			—			—			—
	Stock issuance in DoubleClick transaction		—		—		7,878,562		8		95,788			—			—			—			—			95,796
	Sale of common stock in initial public offering		—		—		4,000,000		4		68,580			—			—			—			—			68,584
	Stock issued in the Bach Systems purchase business combination		—		—		750,000		1		3,119			—			—			—			—			3,120
	Purchase of treasury shares		—		—		—		—		—			(574	)		—			—			—			(574	)
	Common stock issuance to ValueClick Japan		—		—		48,836		—		—			—			—			—			—			—
	Deferred stock compensation		—		—		—		—		3,910			—			(3,910	)		—			—			—
	Amortization of stock-based compensation		—		—		—		—		—			—			5,059			—			—			5,059
	Exercise of common stock options		—		—		545,231		1		333			—			—			—			—			334
	Comprehensive loss:
		Net loss	—		—		—		—		—			—			—			—			(55,333	)		(55,333	)
		Foreign currency translation	—		—		—		—		—			—			—			(1,590	)		—			(1,590	)

	Total comprehensive loss		—		—		—		—		—			—			—			(1,590	)		(55,333	)		(56,923	)

Balance at December 31, 2000			402,103		—		36,029,778		37		190,595			(574	)		(4,529	)		(1,620	)		(56,416	)		127,493
	Conversion of preferred stock upon merger		(402,103	)	—		402,103		—		—			—			—			—			—			—
	Stock issued in the Bach Systems purchase business combination		—		—		768,439		1		1,688			—			—			—			—			1,689
	Stock issued in the Mediaplex purchase business combination		—		—		15,084,898		15		46,160			—			—			—			—			46,175
	Purchase of treasury shares		—		—		—		—		—			(739	)		—			—			—			(739	)
	Conversion of acquired company's purchased stock to treasury stock		—		—		—		—		—			(1,646	)		—			—			—			(1,646	)
	Deferred stock compensation		—		—		—		—		282			—			(282	)		—			—			—
	Amortization of stock-based compensation		—		—		—		—		—			—			2,699			—			—			2,699
	Deferred compensation adjustment for forfeited stock options		—		—		—		—		(659	)		—			659			—			—			—
	Exercise of common stock options		—		—		207,749		—		206			—			—			—			—			206
	Exercise of common stock warrants		—		—		205,650		—		250			—			—			—			—			250
	Comprehensive loss:
		Net loss	—		—		—		—		—			—			—			—			(7,218	)		(7,218	)
		Change in market value of marketable securities	—		—		—		—		—			—			—			281			—			281
		Foreign currency translation	—		—		—		—		—			—			—			(3,683	)		—			(3,683	)

	Total comprehensive loss		—		—		—		—		—			—			—			(3,402	)		(7,218	)		(10,620	)

Balance at December 31, 2001			—		—		52,698,617		53		238,522			(2,959	)		(1,453	)		(5,022	)		(63,634	)		165,507

	Stock issued in the Be Free purchase business combination		—		—		43,361,717		43		127,252			—			—			—			—			127,295
	Stock issued in the Bach Systems purchase business combination		—		—		259,375		1		633			—			—			—			—			634
	Purchase of treasury shares		—		—		—		—		—			(56,250	)		—			—			—			(56,250	)
	Conversion of acquired company's purchased stock to treasury stock		—		—		—		—		—			(1,674	)		—			—			—			(1,674	)
	Deferred stock compensation		—		—		—		—		547			—			(547	)		—			—			—
	Amortization of stock-based compensation		—		—		—		—		—			—			1,527			—			—			1,527
	Exercise of common stock options		—		—		2,798,766		2		3,259			—			—			—			—			3,261
	Tax benefit from the exercise of stock options		—		—		—		—		225			—			—			—			—			225
	Comprehensive loss:
		Net loss	—		—		—		—		—			—			—			—			(10,572	)		(10,572	)
		Change in market value of marketable securities	—		—		—		—		—			—			—			(430	)		—			(430	)
		Foreign currency translation	—		—		—		—		—			—			—			2,458			—			2,458

	Total comprehensive loss		—		—		—		—		—			—			—			2,028			(10,572	)		(8,544	)

Balance at December 31, 2002			—		—		99,118,475	$	99	$	370,438		$	(60,883	)	$	(473	)	$	(2,994	)	$	(74,206	)	$	231,981

Supplemental disclosures of cash flow information:
	Cash paid for interest	$	109	$	30	$	28

	Cash paid for taxes	$	670	$	2,937	$	956

Non-cash investing and financing activities:
	Issuance of common stock in the Be Free, Inc. acquisition	$	127,295	$	—	$	—

	Purchase of Patent license through payables	$	788	$	—	$	—

	Issuance of common stock in the Mediaplex, Inc. acquisition	$	—	$	46,175	$	—

	Issuance of common stock in the Bach Systems, Inc. acquisition	$	634	$	1,689	$	3,120

	Conversion of acquired company's purchased stock to treasury stock	$	1,645	$	1,646	$	—

	Finance of Director and Officer Insurance	$	—	$	912	$	—

	Issuance of common stock in the DoubleClick transaction	$	—	$	—	$	85,788

	Three-Month Period Ended March 31, 2002
	As Reported			Adjusted
Net loss	$	(1,115	)	$	(8,764	)

Net loss per share	$	(0.02	)	$	(0.16	)

		Number of Shares		Price Per Share		Weighted Average Exercise Price
Options outstanding at December 31, 1999		2,862,822		$	0.26 to $11.00	$	1.20
	Granted	1,502,000			5.06 to 11.00		9.84
	Assumed from ClickAgents	427,269			0.07 to 3.95		.76
	Assumed from Z Media	419,366			0.26 to 7.91		2.30
	Exercised	(585,111	)		0.25 to 2.00		.57
	Forfeited/expired	(825,398	)		0.25 to 11.00		4.01

Options outstanding at December 31, 2000		3,800,948		$	0.26 to $11.00	$	1.20
	Granted	1,708,366			2.03 to 5.69		4.03
	Assumed from Mediaplex	2,762,912			1.22 to 247.99		10.52
	Exercised	(207,749	)		0.07 to 2.00		2.49
	Forfeited/expired	(1,755,876	)		0.07 to 190.86		4.01

Options outstanding at December 31, 2001		6,308,601		$	0.07 to $247.99	$	5.65
	Granted	3,983,100			2.30 to 2.90		2.46
	Assumed from Be Free	4,164,875			0.23 to 68.59		6.27
	Exercised	(2,798,897	)		0.07 to 2.85		1.17
	Forfeited/expired	(1,553,822	)		0.07 to 190.86		9.87

Options outstanding at December 31, 2002		10,103,857		$	0.07 to $247.99	$	5.24

					Operating Sublease
			Operating Lease
Year Ending December 31:			Operating Lease					Capital Leases
Year Ending December 31:			Commitments		Income			Capital Leases
2003			$	3,498	$	(248	)	$	926
2004				3,340		(216	)		228
2005				1,048		—			146
2006				719		—			—
2007				493		—			—
Thereafter				1,330		—			—

	Total minimum lease payments		$	10,428	$	(464	)	$	1,300

		Less amount representing interest							(50	)

	Present value of minimum lease payments								1,250
		Less current portion							(913	)

								$	337

2003	$	1,206
2004	$	429
2005	$	404
2006	$	377
2007	$	370

	Year Ended December 31, 2001
	Year Ended December 31, 2001					Long-lived Assets at December 31, 2001
	Revenue		Loss from Operations			Long-lived Assets at December 31, 2001
United States	$	29,513	$	(11,233	)	$	13,389
Japan		10,199		(179	)		1,101
Europe		5,094		(1,283	)		111
Other International		67		(268	)		24

Total	$	44,873	$	(12,963	)	$	14,625

	Year Ended December 31, 2000
	Year Ended December 31, 2000					Long-lived Assets at December 31, 2000
	Revenue		Loss from Operations			Long-lived Assets at December 31, 2000
United States	$	50,194	$	(3,005	)	$	9,989
Japan		11,679		1,523			471
Europe		2,443		(1,140	)		154
Other International		16		(634	)		48

Total	$	64,332	$	(3,256	)	$	10,662

		Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions(1)			Balance at End of Period
2002:
	Allowance for doubtful accounts	$	1,546	$	1,409	$	(1,063	)	$	1,892
2001:
	Allowance for doubtful accounts	$	1,759	$	1,751	$	(1,964	)	$	1,546
2000:
	Allowance for doubtful accounts	$	849	$	2,600	$	(1,690	)	$	1,759

		VALUECLICK, INC.

		By:		/s/ JAMES ZARLEY James Zarley President and Chief Executive Officer

Signature	Title	Date

/s/ JAMES R. ZARLEY James R. Zarley	Chairman of the Board of Directors, Chief Executive Officer and President (Principal Executive Officer)	March 26, 2003
/s/ SAMUEL J. PAISLEY Samuel J. Paisley	Chief Financial Officer and Chief Operating Officer of Media	March 26, 2003
/s/ DAVID S. BUZBY David S. Buzby	Director	March 26, 2003
/s/ MARTIN T. HART Martin T. Hart	Director	March 26, 2003
/s/ TOM A. VADNAIS Tom A. Vadnais	Director	March 26, 2003
/s/ GORDON B. HOFFSTEIN Gordon B. Hoffstein	Director	March 26, 2003
/s/ SAMUEL P. GERACE Samuel P. Gerace	Director	March 26, 2003
/s/ JEFFREY F. RAYPORT Jeffrey F. Rayport	Director	March 26, 2003