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 annual report on Form 10-K beginning on page F-1.

The following discussion 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 Item 1A "Risk Factors" and elsewhere in this annual report on Form 10-K. We undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We offer a suite of products and services that enable marketers to advertise and sell their products through all major online marketing channels-display advertising, lead generation marketing, email marketing, search marketing, comparison shopping, and affiliate marketing. We also offer technology infrastructure tools and services that enable marketers to implement and manage their own online display advertising and email campaigns, and that assist online publishers with management of their website inventory. The broad range of products and services that we provide enables our customers to address all aspects of their online marketing process, from strategic planning through execution, including results measurement and campaign refinements. In October 2008, we completed the dispositions of our Mediaplex Systems subsidiary and our e-commerce operations. The results of operations of these disposed business have been classified as discontinued operations in our consolidated financial statements. All current year and prior year financial information discussed herein pertains to the remaining continuing operations.

On July 30, 2007, we completed the acquisition of MeziMedia and on December 1, 2006, we completed the acquisition of Shopping.net. We have included the results of operations of MeziMedia and Shopping.net in our consolidated results of operations beginning on the date of acquisition. Note 4 "Recent Business Combinations" to our consolidated financial statements included in this annual report on Form 10-K provides unaudited pro forma revenue, net income and basic and diluted net income per common share for the year ended December 31, 2007 as if the acquisition of MeziMedia occurred as of January 1, 2007.

We derive our revenue from four business segments. These business segments are presented on a worldwide basis and include: Media, Affiliate Marketing, Comparison Shopping & Search, and Technology. In the second quarter of 2008, we changed our internal reporting structure, which resulted in changes in our reportable segments to include our Search 123 product (which was previously included in the Affiliate Marketing segment) with the Comparison Shopping segment (renamed "Comparison Shopping & Search") in order to present search traffic-based businesses in one segment. In accordance with Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), all prior period segment information has been revised to conform to the new segment presentation. Each of these four business segments is described in Item 1 "Business" of this annual report on Form 10-K.

Our operations and financial performance depend on general economic conditions. The U.S. economy has experienced, and could continue to experience, an economic downturn due to various factors including: the crisis in credit markets, slower economic activity, decreased consumer confidence, high consumer debt levels and unemployment rates, and other adverse business conditions. Such fluctuations in the U.S. economy could cause, among others, deterioration and continued decline

in business and consumer spending, reductions in our customer's advertising budgets, and a decrease in demand for the types of online marketing services we provide or the products our customers offer. These factors have negatively impacted our revenue levels and could continue to negatively impact our business in the future.

The following table provides revenue, gross profit, operating expenses, and income from operations information for each of our four business segments. Segment income from operations, as shown below, excludes the effects of:
stock-based compensation; amortization of intangible assets; impairment of goodwill and intangible assets, and corporate expenses, as these items are excluded from the segment performance measures utilized by the Company's chief operating decision maker in evaluating the performance of the segments. Corporate expenses consist of those costs not directly attributable to a business segment, and include: salaries and benefits for the Company's executive, finance, legal, corporate governance, human resources, and facilities organizations; fees for professional service providers including audit, legal, tax, and Sarbanes-Oxley compliance; insurance; and other corporate expenses. A reconciliation of segment income from operations to consolidated income from operations and a reconciliation of segment revenue to consolidated revenue are also provided in the following table.

                                               For the Year Ended December 31,
                                                2008           2007        2006
                                                        (in thousands)
     Media Segment
     Revenue                                 $   301,256     $ 366,312   $ 353,281
     Cost of revenue                             136,220       140,625     120,280

     Gross profit                                165,036       225,687     233,001
     Operating expenses                           91,854       138,838     140,845

     Segment income from operations          $    73,182     $  86,849   $  92,156

     Affiliate Marketing Segment
     Revenue                                 $   121,972     $ 115,977   $  98,569
     Cost of revenue                              19,374        12,978      10,646

     Gross profit                                102,598       102,999      87,923
     Operating expenses                           43,143        39,798      32,243

     Segment income from operations          $    59,455     $  63,201   $  55,680

     Comparison Shopping & Search Segment
     Revenue                                 $   177,145     $ 112,706   $  39,765
     Cost of revenue                              46,950        33,695      11,256

     Gross profit                                130,195        79,011      28,509
     Operating expenses                           89,263        56,504      23,207

     Segment income from operations          $    40,932     $  22,507   $   5,302

     Technology Segment
     Revenue                                 $    28,670     $  23,741   $  18,778
     Cost of revenue                               4,147         3,880       3,555

     Gross profit                                 24,523        19,861      15,223
     Operating expenses                           10,923         9,324       8,607

     Segment income from operations          $    13,600     $  10,537   $   6,616

                                              For the Year Ended December 31,
                                               2008           2007        2006
                                                       (in thousands)
       Reconciliation of segment income
       from operations to consolidated
       income from operations:
       Total segment income from
       operations                           $    187,169    $ 183,094   $ 159,754
       Corporate expenses                        (31,436 )    (30,288 )   (26,932 )
       Stock-based compensation                  (52,483 )    (18,291 )   (11,867 )
       Amortization of intangible assets         (28,882 )    (24,745 )   (19,490 )
       Impairment of goodwill and
       intangible assets                        (322,000 )          -           -

       Consolidated income (loss) from
       operations                           $   (247,632 )  $ 109,770   $ 101,465

       Reconciliation of segment revenue
       to consolidated revenue:
       Media                                $    301,256    $ 366,312   $ 353,281
       Affiliate Marketing                       121,972      115,977      98,569
       Comparison Shopping & Search              177,145      112,706      39,765
       Technology                                 28,670       23,741      18,778
       Inter-segment eliminations                 (3,237 )     (2,228 )    (1,285 )

       Consolidated revenue                 $    625,806    $ 616,508   $ 509,108

RESULTS OF OPERATIONS-Fiscal Years Ended December 31, 2008 and 2007

Revenue. Consolidated revenue for the year ended December 31, 2008 was $625.8 million, representing a 1.5% increase over the prior year total of $616.5 million.

Media segment revenue decreased to $301.3 million for the year ended December 31, 2008 compared to $366.3 million for 2007 due to a decrease in our lead generation marketing revenue, offset by a small increase in our display advertising revenue. We believe the decrease in our lead generation marketing revenue was primarily due to the FTC inquiry into this business that is described further in note 16 "Commitments and Contingencies" to our consolidated financial statements, as well as general macroeconomic weakness during 2008.

Affiliate Marketing segment revenue increased to $122.0 million for the year ended December 31, 2008 compared to $116.0 million in 2007. This increase of $6.0 million, or 5.2%, was due to an increase, both in the U.S. and Europe, in the number of customers and an increase in transaction volumes associated with both our new and existing customers, offset by the loss of a major customer in the first half of 2008.

Comparison Shopping & Search segment revenue increased to $177.1 million for the year ended December 31, 2008 compared to $112.7 million in 2007. The increase of $64.4 million, or 57.2%, was primarily attributable to the acquisition of MeziMedia in July 2007 as well as growth in our existing European comparison shopping operations. With the acquisition of MeziMedia, Comparison Shopping & Search segment revenue is concentrated with a limited number of customers. A loss of, or reduction of revenue from, one or more of these customers could have a significant negative impact on the revenue of this segment.

Technology segment revenue was $28.7 million for the year ended December 31, 2008 compared to $23.7 million in 2007, an increase of $4.9 million, or 20.8%. The increase in revenue was primarily related to higher volumes of ad serving, both domestically and in Europe, during the year ended December 31, 2008 compared to the same period of the prior year. Technology segment revenue is highly concentrated with a few significant customers. A loss of, or reduction of revenue from, one or more of these customers could have a significant negative impact on the revenue of this segment.

Cost of Revenue and Gross Profit. Cost of revenue for the Media and Comparison Shopping & Search segments consists primarily of amounts that we pay to website publishers that are directly related to a revenue-generating event. We pay these publishers on a CPC, CPA, CPL, or CPM basis. Cost of revenue for all segments also includes labor costs, depreciation on revenue-producing technologies and Internet access costs. Consolidated cost of revenue was $204.1 million for the year ended December 31, 2008 compared to $188.7 million in 2007, an increase of $15.4 million, or 8.1%. The consolidated gross margin decreased from 69.4% for the year ended December 31, 2007 to 67.4% for the year ended December 31, 2008. This decrease in consolidated gross margin is primarily a result of the lower gross margins experienced by our Media and Affiliate Marketing segments in 2008 as described below.

Cost of revenue for the Media segment decreased $4.4 million, or 3.1%, to $136.2 million for the year ended December 31, 2008 compared to $140.6 million in 2007. Our Media segment gross margin decreased to 54.8% for the year ended December 31, 2008 compared to 61.6% for the same period in 2007. The decrease in Media segment gross margin resulted primarily from a lower mix of promotion-based lead generation revenue, which generates a higher gross margin than other components of Media segment revenue due largely to the classification of certain online advertising costs as sales and marketing expense and not as cost of revenue. These online advertising costs are classified as sales and marketing expense as they are not directly related to a revenue-generating event.

Cost of revenue for the Affiliate Marketing segment was $19.4 million for the year ended December 31, 2008 compared to $13.0 million in 2007. Our Affiliate Marketing segment gross margin decreased to 84.1% for the year ended December 31, 2008 from 88.8% for the same period in 2007 due to the mix of lower margin services revenue in the current year as compared to the prior year.

Cost of revenue for the Comparison Shopping & Search segment was $47.0 million for the year ended December 31, 2008 compared to $33.7 million in 2007. The increase in cost of revenue was primarily due to the acquisition of MeziMedia, acquired in July 2007. Our Comparison Shopping segment gross margin increased to 73.5% for 2008 from 70.1% in 2007 due primarily to the full year impact in 2008 of the acquisition of MeziMedia.

Technology segment cost of revenue was $4.1 million for the year ended December 31, 2008 compared to $3.9 million in 2007. Our Technology segment gross margin increased to 85.5% in 2008 from 83.7% in 2007 due to the operating leverage associated with higher revenue. As the gross margin for the Technology segment is highly dependent upon revenue due to the existing operating leverage, any increases or decreases in segment revenue may have a significant impact on segment gross margin.

Sales and Marketing. Sales and marketing expenses consist primarily of compensation and employee benefits of sales and marketing, network development and related support teams, certain online and offline advertising costs, travel, trade shows, and marketing materials. Online advertising costs included in sales and marketing expenses are comprised of: amounts that we pay to website publishers that are not directly associated with a revenue-generating event; and amounts that we pay to search engines for driving consumer traffic to our owned and operated websites. Sales and marketing expenses for the year ended December 31, 2008 were $181.1 million compared to $183.3 million in 2007, a decrease of $2.2 million, or 1.2%. Sales and marketing expenses decreased primarily due to lower online advertising costs in our lead generation marketing business, offset by higher stock-based compensation and the inclusion of a full year of online advertising costs for MeziMedia, acquired in July 2007. Please refer to the Stock-Based Compensation section below for a discussion of the higher stock-based compensation expense in 2008. Our sales and marketing expenses as a percentage of revenue decreased to 28.9% for the year ended December 31, 2008 compared to 29.7% in 2007 due to the lower lead generation marketing activities.

General and Administrative. General and administrative expenses consist primarily of facilities costs, executive and administrative compensation and employee benefits, depreciation, professional services fees, insurance costs, and other general overhead costs. General and administrative expenses increased to $98.1 million for the year ended December 31, 2008 compared to $75.6 million in 2007, an increase of $22.5 million, or 29.8%. General and administrative expenses increased primarily due to an increase of $20.2 million in stock-based compensation. Please refer to the Stock-Based Compensation section below for a discussion of the higher stock-based compensation expense in 2008. As a result, our general and administrative expenses as a percentage of revenue increased to 15.7% for the year ended December 31, 2008 compared to 12.3% in 2007.

Technology. Technology expenses include costs associated with the maintenance of our technology platforms, including compensation and employee benefits for our engineering and network operations departments, as well as costs for contracted services and supplies. Technology expenses for the year ended December 31, 2008 were $39.3 million compared to $34.4 million in 2007, an increase of $4.8 million, or 14.1%. The increase in technology expenses was due primarily to an increase of $2.7 million in stock-based compensation and the inclusion of a full year of MeziMedia's technology expenses. Please refer to the Stock-Based Compensation section below for a discussion of the higher stock-based compensation expense in 2008. Our technology expenses as a percentage of revenue increased to 6.3% for the year ended December 31, 2008 compared to 5.6% in 2007 primarily due to the higher stock-based compensation.

Segment Income from Operations. Media segment income from operations for the year ended December 31, 2008 decreased 15.7%, or $13.7 million, to $73.2 million, from $86.8 million in the prior year, and represented 24.3% and 23.7% of Media segment revenue in these respective periods. Media segment operating margin increased due to cost reduction efforts initiated in response to the lower lead generation marketing revenue described above.

Affiliate Marketing segment income from operations for the year ended December 31, 2008 decreased 5.9%, or $3.7 million, to $59.5 million, from $63.2 million in the prior year, and represented 48.7% and 54.5% of Affiliate Marketing segment revenue in these respective periods. The lower operating margin was due primarily to the lower gross margin as described above and higher operating costs associated with our international expansion.

Comparison Shopping & Search segment income from operations for the year ended December 31, 2008 increased to $40.9 million, from $22.5 million in the prior year, and represented 23.1% and 20.0% of Comparison Shopping segment revenue in these respective periods. The increase in Comparison Shopping & Search segment income from operations and operating margin was largely attributable to the full year impact of MeziMedia, which was acquired in July 2007.

Technology segment income from operations for the year ended December 31, 2008 increased to $13.6 million, from $10.5 million in the prior year, and represented 47.4% and 44.4% of Technology segment revenue in these respective periods. The increase in Technology segment income from operations and the higher operating margin was attributable to the operating leverage associated with the higher revenue as described above.

Stock-Based Compensation. Stock-based compensation for the year ended December 31, 2008 amounted to $52.5 million compared to $18.3 million in 2007. The increase of $34.2 million was primarily due to the impact of a one-time stock-based compensation charge of $33.8 million, which represents the acceleration of expense associated with unvested stock options repurchased by the Company through a tender offer process completed during 2008.

We currently anticipate total stock-based compensation of approximately $10 million for the year ending December 31, 2009. Such amounts may change as a result of higher or lower than anticipated equity award grants to new and existing employees, differences between actual and estimated

forfeitures of stock options and restricted stock, fluctuations in the market value of our common stock, modifications to our existing stock option programs, additions of new stock-based compensation programs, or other factors.

Amortization of Intangible Assets. Amortization of intangible assets for the year ended December 31, 2008 was $28.9 million compared to $24.7 million in 2007. This expense represents the amortization of intangible assets acquired through business combinations. The increase compared to the prior year was due to the intangible assets purchased in the MeziMedia acquisition in July 2007. We currently anticipate total amortization of intangible assets of approximately $25 million for the year ending December 31, 2009.

Impairment of Goodwill and Intangible Assets. During 2008 we recorded an impairment charge on our goodwill and intangible assets of $322.0 million related to our Media and Comparison Shopping & Search reporting units. We believe this impairment charge is primarily a result of the significant decline in our stock price during 2008 and the weak macroeconomic environment. Refer to Critical Accounting Policies below for further details about this impairment charge.

Interest Income and Other, net. Interest income and other, net, consists principally of interest earned on our cash and cash equivalents and marketable securities and foreign currency exchange gains or losses. Interest income and other, net was $2.2 million for 2008 compared to $12.0 million for the same period in 2007. The decrease of $9.9 million was primarily attributable to a reduction in interest income due to lower average cash and cash equivalents and marketable securities balances in 2008, as well as the achievement of lower investment yields as compared to the prior year. In addition, the significant strengthening of the U.S. dollar in the second half of 2008 resulted in a foreign currency exchange loss in the amount of $3.6 million due primarily to the requirement to mark-to-market certain intercompany loan balances with certain of our European subsidiaries.

Income Tax Expense. For the year ended December 31, 2008, we recorded an income tax benefit of $27.0 million compared to income tax expense of $51.4 million in 2007. The decrease in the effective income tax rate for the year ended December 31, 2008 to (11.0)% from 42.2% for the year ended December 31, 2007 was primarily a result of a $245.5 million loss from continuing operations before income taxes associated with the goodwill impairment and the recognition of $10.0 million in tax benefits related to the reversal of contingency reserves due to the expiration of certain statutes of limitations. We currently expect our effective tax rate to be approximately 42% in the year ending December 31, 2009.

RESULTS OF OPERATIONS-Fiscal Years Ended December 31, 2007 and 2006

Revenue. Consolidated revenue for the year ended December 31, 2007 was $616.5 million, representing a 21.1% increase over 2006 revenue of $509.1 million.

Media segment revenue increased 3.7% to $366.3 million for the year ended December 31, 2007 compared to $353.3 million for 2006. In 2007, strong growth in our display advertising revenue was largely offset by a decrease in our lead generation marketing revenue. We believe the decrease in our lead generation marketing revenue was primarily due to the FTC inquiry into this business that is described further in note 16 "Commitments and Contingencies" to our consolidated financial statements.

Affiliate Marketing segment revenue increased to $116.0 million for the year ended December 31, 2007 compared to $98.6 million in 2006. This increase of $17.4 million, or 17.7%, was due to an increase, both in the U.S. and Europe, in the number of customers and an increase in transaction volumes associated with both our new and existing customers.

Comparison Shopping & Search segment revenue increased to $112.7 million for the year ended December 31, 2007 compared to $39.8 million in 2006. The increase of $72.9 million was primarily attributable to the acquisition of MeziMedia in July 2007 as well as growth in our historical European comparison shopping operations.

Technology segment revenue was $23.7 million for the year ended December 31, 2007 compared to $18.8 million in 2006, an increase of $5.0 million, or 26.4%. The increase in revenue was primarily related to higher volumes of ad serving, both domestically and in Europe, during the year ended December 31, 2007 compared to the same period of the prior year.

Cost of Revenue and Gross Profit. Consolidated cost of revenue was $188.7 million for the year ended December 31, 2007 compared to $145.0 million in 2006, an increase of $43.7 million, or 30%. The consolidated gross margin decreased from 71.5% for the year ended December 31, 2006 to 69.4% for the year ended December 31, 2007. This decrease in consolidated gross margin is primarily a result of the lower gross margins experienced by our Media segment in 2007 as described more fully below.

Cost of revenue for the Media segment increased $20.3 million, or 16.9%, to $140.6 million for the year ended December 31, 2007 compared to $120.3 million in 2006. Our Media segment gross margin decreased to 61.6% for the year ended December 31, 2007 compared to 66.0% for the same period in 2006. The decrease in Media segment gross margin resulted primarily from a lower mix of promotion-based lead generation revenue, which generates a higher gross margin than other components of Media segment revenue due largely to the classification of certain online advertising costs as sales and marketing expense and not as cost of revenue. These online advertising costs are classified as sales and marketing expense as they are not directly related to a revenue-generating event.

Cost of revenue for the Affiliate Marketing segment was $13.0 million for the year ended December 31, 2007 compared to $10.6 million in 2006. Our Affiliate Marketing segment gross margin remained relatively consistent at 88.8% in 2007 compared to 89.2% in 2006.

Cost of revenue for the Comparison Shopping & Search segment was $33.7 million for the year ended December 31, 2007 compared to $11.3 million in 2006. The increase in cost of revenue was primarily due to the acquisition of MeziMedia in July 2007. Our Comparison Shopping & Search segment gross margin decreased to 70.1% for 2007 from 71.7% in 2006 due primarily to increased publisher costs associated with third-party revenue-share arrangements and the impact of the acquisition of MeziMedia.

Technology segment cost of revenue was $3.9 million for the year ended December 31, 2007 compared to $3.6 million in 2006. Our Technology segment gross margin increased to 83.7% in 2007 from 81.1% in 2006 due to the operating leverage associated with higher revenue.

Sales and Marketing. Sales and marketing expenses for the year ended December 31, 2007 were $183.3 million compared to $156.4 million in 2006, an increase of $26.9 million, or 17.2%. Sales and marketing expenses increased primarily due to the inclusion of online advertising costs of MeziMedia, acquired in July 2007, and increases in our worldwide sales and marketing staff, offset partially by a decrease in online advertising costs in our lead generation marketing business. Our sales and marketing expenses as a percentage of revenue decreased to 29.7% for the year ended December 31, 2007 compared to . . .