DOUBLECLICK INC - 10-Q Quarterly Report

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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-23709

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

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

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

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

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

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DOUBLECLICK INC.
INDEX TO FORM 10-Q

PART I: FINANCIAL INFORMATION

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

PART II: OTHER INFORMATION

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

ii

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

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

1

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

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

2

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

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

3

DOUBLECLICK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- DESCRIPTION OF BUSINESS AND OTHER

DESCRIPTION OF BUSINESS

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

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

BASIS OF PRESENTATION

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

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

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

BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

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

4

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

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

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

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

NEW ACCOUNTING PRONOUNCEMENTS

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

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

5

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

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

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

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

CHANGE IN ACCOUNTING ESTIMATE

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

6

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

NOTE 2 -- GOODWILL

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

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

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

7

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

NOTE 3 -- INTANGIBLE ASSETS

Intangible assets consists of the following:

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

NOTE 4 -- BUSINESS TRANSACTIONS

MESSAGEMEDIA

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

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

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

8

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

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

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

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

ABACUS DIRECT EUROPE

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

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

9

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

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

NOTE 5 -- INVESTMENT IN VALUECLICK, INC.

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

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

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

NOTE 6 -- WRITE-DOWN OF INVESTMENT IN AFFILIATE

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

10

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

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

NOTE 7 -- INITIAL PUBLIC OFFERING OF DOUBLECLICK JAPAN

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

NOTE 8 -- NON-CASH COMPENSATION

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

NOTE 9 -- SALE OF EUROPEAN MEDIA BUSINESS

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

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

11

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

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

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

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

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

NOTE 11 -- RESTRUCTURING CHARGE

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

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

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

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

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

12

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

NOTE 12 -- SEGMENT REPORTING

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

NOTE 13 -- COMPREHENSIVE INCOME (LOSS)

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

NOTE 14 -- CONTINGENCIES

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

13

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

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

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

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

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

NOTE 15 -- SUBSEQUENT EVENTS

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

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

14

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

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

OVERVIEW

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

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

DoubleClick Data ('Data'); and

DoubleClick Media ('Media').

BUSINESS TRANSACTIONS

MESSAGEMEDIA

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

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

15

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

EUROPEAN MEDIA BUSINESS

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

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

@PLAN

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

ABACUS DIRECT EUROPE

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

16

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

NORTH AMERICAN MEDIA BUSINESS

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

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

RESULTS OF OPERATIONS

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

DOUBLECLICK TECHSOLUTIONS

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

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

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

17

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

DOUBLECLICK DATA

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

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

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

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

DOUBLECLICK MEDIA

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

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

18

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

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

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

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

OPERATING EXPENSES

SALES AND MARKETING

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

GENERAL AND ADMINISTRATIVE

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

19

PRODUCT DEVELOPMENT

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

AMORTIZATION OF INTANGIBLE ASSETS

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

AMORTIZATION OF GOODWILL

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

PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT

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

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

RESTRUCTURING CHARGE

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

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

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

20

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

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

LOSS FROM OPERATIONS

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

EQUITY IN INCOME (LOSSES) OF AFFILIATES

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

GAIN ON EQUITY TRANSACTIONS OF AFFILIATES, NET

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

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

INTEREST AND OTHER, NET

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

21

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

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

PROVISION FOR INCOME TAXES

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

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

RESULTS OF OPERATIONS

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

DOUBLECLICK TECHSOLUTIONS

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

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

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

DOUBLECLICK DATA

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

DOUBLECLICK MEDIA

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

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

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

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

OPERATING EXPENSES

SALES AND MARKETING

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

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

GENERAL AND ADMINISTRATIVE

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

PRODUCT DEVELOPMENT

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

AMORTIZATION OF INTANGIBLE ASSETS

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

AMORTIZATION OF GOODWILL

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

PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT

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

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

RESTRUCTURING CHARGE

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

24

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

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

DoubleClick expects to eliminate certain operating expenses totaling
approximately $11.0 million on an annualized basis, primarily related to
personnel- and facility-related expenses, as a result of the restructuring
initiatives under