The information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" below includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act, and is subject to the safe harbor created by those Sections. Factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in this section and later in this Report under Part II - Item 1A "Risk Factors," and in "Part I - Item 1A - Risk Factors" in our 2008 Annual Report on Form 10-K. The following discussion should also be read in conjunction with the Consolidated Financial Statements and accompanying Notes thereto.

In this Report, the words "we," "our," "us," "Onvia," or the "Company" refer to Onvia, Inc. and its wholly owned subsidiary.

Company Overview

We are a leading provider of information products and planning tools that help companies plan, market and sell to targeted markets throughout the United States, or U.S. Our information products and planning tools focus on federal, state, local and educational purchasing entities, and on early stage commercial and residential infrastructure projects. Our information products and planning tools help clients proactively track their competitors, analyze market trends, and identify new market opportunities. Marketers can research government agencies and private sector businesses to establish and maintain business relationships. Our clients can leverage sales leads from our database in the form of new business prospects, alerts for upcoming contracting opportunities, and from historical public and private infrastructure projects to find and win new revenue opportunities. Historically, comprehensive market intelligence was only available to large companies with the resources to perform the research and store the data themselves, or companies that could afford to hire outside firms to perform the research for them. Our processes, which collect and organize transactional information into actionable market intelligence, have enabled us to make the same high-value sales intelligence affordable to businesses of all sizes. We believe our business solutions provide our clients with a distinct competitive advantage.

Our information products and planning tools leverage our database which has been compiled over the last ten years, and includes comprehensive, historical and real-time information on public and private infrastructure activities unavailable elsewhere in the marketplace. Public sector information within our database is classified and linked within four key hubs of data: project history, agency research, buyer research and competitive intelligence. Our database provides information on approximately 5 million procurement related records connected to over 275,000 companies from across approximately 78,000 government agencies and purchasing offices nationwide. Thousands of records are added to our database each day. Private sector data includes over 160,000 current and historical opportunities covering activity within the top 85 U.S. markets, and comprehensive information on tens of thousands of companies, including architects, developers, owners and land use attorneys. The data collected covers high demand land use planning details, including zoning changes, development type, proposed use and key contacts for each project. We also provide contact information for over 24,000 planning and zoning officials. Information in our database has been collected, formatted and classified by an in-house team of researchers and third-party providers so clients are able to quickly find and analyze information relevant to their businesses.

Most of our revenues are currently generated from three main business channels:
subscriptions, content licenses, and management reports. Subscription-based services are typically prepaid, have a minimum term of one year and revenues are recognized ratably over the term of the subscription. Subscriptions are priced based upon the geographic range, nature of content purchased and, with respect to certain products, the number of users or number of records purchased.

Revenue from content licenses is generated from clients who resell our business content data to their customers. Content license contracts are generally multi-year arrangements that are invoiced on a monthly or quarterly basis, and these agreements typically have a higher annual contract value or ACV than our subscription-based services. ACV represents the aggregate annual contract value of our client base. Revenue from content license agreements is recognized ratably over the term of the agreement.

Revenue from the sale of management information reports is recognized upon delivery of the report to the client. Pricing for management information reports is generally based on one, or a combination of, the following: the number of records included in the report; the geographic range of the report; or a flat fee based on the type of report. We also generate revenue from document download services and list rental services, and these fees are recognized upon delivery.

Onvia was incorporated in January 2000 in the state of Delaware. Our principal corporate office is located in Seattle, Washington. On April 30, 2009, we transferred our securities from The NASDAQ Global Market to The NASDAQ Capital Market. Our securities continue to trade under the symbol ONVI.

Industry Background

The infrastructure marketplace, defined as the industries supported by public and private construction projects and facilities maintenance, spends over $1 trillion annually on new projects and in support of new and existing facilities. Over 3.4 million businesses compete for opportunities within this highly competitive marketplace and identifying qualified business partners and prospects is essential to a company's success. Identifying relevant infrastructure projects and partners can be difficult and companies spend a substantial amount of time and effort to locate and research new partners and opportunities to grow their businesses. The Internet provides short-term visibility into government and private sector contracting information for both government agencies and businesses alike, but does not provide the on-demand intelligence required to guide strategic decisions.

Even after a new business opportunity is identified, many companies do not have enough information about the project to prequalify the opportunity, such as decision maker information, the purchasing history of the government agency or project owner, and who competes for similar projects. This information is useful not only for companies contracting directly with the project owner, but also for subcontractors that would like to compete for work on awarded contracts. This information is rarely available from one source, and may not be available at all for historical projects.

Success in the private commercial and residential construction marketplace is largely based upon strong business relationships and corporate positioning. Development projects must be identified early in the planning and zoning process for a contractor or architect to be considered for the engagement. Business relationships are essential for some specialties, such as environmental engineers, who may need to identify projects before presentation to the zoning and planning board. Strong segment contacts are the primary way for companies to identify private sector projects at the very earliest stage. Companies competing in this market need to understand who the key decision makers are within their segment and geographic footprint to ensure that they are properly positioned to win future opportunities.

Public sector opportunities are difficult to prequalify for most businesses. Often, revenue opportunities are included within the specification documents behind the request for proposal, or RFP, and request for quote, or RFQ, documents. Without tools to quickly identify the pertinent information, businesses must read the entire documents to determine if there are opportunities relevant to their business. Our comprehensive database contains much of this information on both a historical and real-time basis and thousands of records are added to our database each day. Much of the information in our database is linked, so clients can quickly research information relevant to a particular project in one centralized location. Clients can also perform customized searches on both the public record and within the project specification documents to identify relevant opportunities using any number of variables, such as publication date, geographic location and contract value, among others. Using our database and tools, our clients spend less time on research and more time preparing winning proposals, establishing relationships, and executing contracts.

Products and Services

Our products and services provide access to our database of project specific information and provide clients specialized tools for analyzing information relevant to their business. We expect to continue to expand our content and develop new database analysis and access tools to meet the needs of our existing clients as well as potential new categories of clients.

We leverage technology, tools and business processes to research, classify and publish actionable public and private sector opportunities from public and private sources. Through an automated process, we link related records within our database, prequalify business opportunities for our clients based upon the client's profile, and provide access to the information in a timely manner, generally within 24 hours of their public release. Our database contains information on the largest industry verticals, with a focus on the infrastructure verticals, which include:

· Architecture and Engineering

· Construction and Building Supplies

· IT / Telecommunications

· Professional Services

· Operations and Maintenance Services

· Transportation

· Healthcare

· Water and Energy / Alternative Energy

Within these verticals we also provide hard to find content, which creates a comprehensive view of a project throughout the most critical phases of the procurement lifecycle. These transactional records include:

· Advance Notice - alerts businesses of projects in the early stages of the development process, before the bid or RFP is released in its final form, or before final zoning and planning board approval;

· RFPs, RFQs, and related amendments;

· Planholders and Bidders Lists - provides competitive intelligence by presenting a list of competitors that have acquired plans, specifications, bidding documents and/or proposals for specific projects in the active bid or proposal stage, and a list of competitors who submit bids for prime contracts with the owner of the project;

· Bid Results and Awards Information - notifies businesses of awarded bids, providing valuable information for use in their own sales and marketing activities; and

· Grants - supplies federal grant information critical to anyone tracking or applying for publicly-funded projects.

Our suite of information services is comprised of the following products:

Onvia's Business Solutions

Onvia's public and private sector solutions are two distinct service offerings, but when used together, the combined information provides a comprehensive view of the infrastructure marketplace.

Onvia Business Builder
Onvia Business Builder is our most comprehensive public sector product and is intended to enable businesses of all sizes to compete more effectively in the government procurement marketplace. This product leverages Onvia's proprietary database of historical information gathered from local, state and federal government agencies and education entities to help clients evaluate and respond to new bid requests and RFPs with more competitive responses by allowing them to easily research competitor and buyer information.

Subscribers to Onvia Business Builder receive customized daily email notifications about relevant business opportunities focused on the verticals described above and associated around four key data hubs; project history, agency research, agency buyer research, and competitor research. The association of each record makes it possible to evaluate purchasing trends by agency and by agency buyer and identify or evaluate potential competitors.

Project History
Project History tracks and provides information through a project's life cycle, including advance notice information, planholder/bidder lists and bid results. This information offers competitive intelligence as well as leads on potential subcontracting opportunities.

Agency Research
Agency Research offers historical research into government agencies, including procurement archives, decision maker contact lists and purchasing contact lists. This intelligence provides insight into purchasing trends within each agency and allows clients to tailor bids and proposals for each sales opportunity.

Buyer Research
Buyer Research provides clients with a more comprehensive view of their potential client, including their areas of expertise and past relationships with other vendors. This information enables clients to effectively target their sales activity and manage relationships with government purchasers.

Competitor Research
Competitor Research is a public sector activity archive that informs clients about where their competitors have won work and provides detailed product and price information that enables clients to conduct competitive analysis prior to submitting bids and proposals.

Onvia Business Builder provides information necessary to qualify opportunities, improve decision making, prepare tailored bids, and manage agency relationships, all of which should improve the success rates of our clients.

The Onvia Guide
Onvia Guide subscribers receive the same customized daily email notifications about relevant business opportunities that subscribers to the Onvia Business Builder product receive, without the user interface to research information in our database. This product is an affordable entry level option for our clients.

Onvia Planning and Construction
Onvia Planning and Construction or OPC provides early stage project information on commercial and residential development projects. This market intelligence solution is comprehensive, covering the top 76 metropolitan areas within the U.S. Our database of over 86,000 commercial and residential records provides a detailed overview of the commercial and residential marketplace. This market intelligence can be leveraged to identify business expansion opportunities and growth markets, evaluate overall market conditions, forecast demand for specific products and services, and align personnel and resources with future opportunities. At the tactical level, Onvia Planning and Construction helps companies identify upcoming projects and sales opportunities by monitoring land use planning and zoning information. New and updated land use activities can be tracked with daily customized alerts delivered directly to our clients' inbox. Clients can research projects and the companies associated with each project, and track permit approval and project status as the engagement progresses. The company and project information can be used to build relationships with corporate decision makers and planning officials to be in a good position to act upon future opportunities.

Management Information Reports
In addition to our subscription services, we also offer a number of custom market information reports. These reports are generally one-time deliverables and revenue is recognized upon delivery.
· Term Contracts - The Term Contract report contains actionable sales information on term or continuing service contracts at public agencies coming up for renewal. With this report clients know what contracts exist, when they are coming up for renewal, who the incumbent is and who the buyers are, allowing them to perform an early evaluation of the opportunity so they can be more competitive with their proposals to increase their public sector business.

· Contact Lists - Provide our clients a comprehensive list of decision makers, agency procurement officers and zoning officials that can be used to develop relationships and identify potential business partners.

· Market Opportunity Reports - Provides vital market intelligence needed for strategic planning and marketing, such as:

o Year-over-year growth rates by market or category to help understand buying trends;

o Market growth rates to assist in business planning;

o Distribution of state and local opportunities by sales territory to help allocate resources;

o Competitive analysis; and

o Seasonality and buying trends.

· Winning Proposals Library - Compare and contrast winning proposals submitted by competing firms in order to gain valuable competitive insights. Provides insight into how other companies position their qualifications and personnel, structure and format persuasive proposals, incorporate supporting materials, price goods and services, and differentiate themselves from their competitors.

Executive Summary of Operations and Financial Position

For the quarter ended March 31, 2009, revenue was $5.9 million compared to $5.3 million in the same quarter of 2008, an increase of 10%. Revenue increased primarily due to the growth in Annual Contract Value, or ACV, our leading indicator for future revenue growth. At March 31, 2009, ACV grew to $20.9 million, up 6% compared to $19.8 million in the previous quarter, and up 19% compared to $17.5 million in the first quarter of 2008. (For more information about ACV, see "About Annual Contract Value," below.)

During the first quarter, ACV improved, in part, due to better first-year revenue retention, primarily as a result of the new client on-boarding program initiated in early 2008. New client acquisitions also improved due to our targeted marketing strategy and planned investment in our sales force and sales process. We also believe that there has been an increased level of interest in the public sector as a result of the slowing commercial sector, and our new government spending tracking site, Recovery.org, creates a marketplace that drives this interest.

A significant driver of ACV is Annual Contract Value per Client or ACVC, which grew 4% from the previous quarter and 14% from the same year-ago period to an average of $2,448 per client. ACVC improved by targeting higher value clients and emphasizing higher value database products.

During the first quarter, Onvia added approximately 100 net clients, bringing the total client base to approximately 8,500. This represented an increase of 1% from approximately 8,400 in the previous quarter and an increase of 5% from approximately 8,100 clients in the same period a year ago. Out of the 8,500 total clients in first quarter, approximately 8,000 of these were categorized as high value clients, i.e., excludes subscribers to the company's entry level Metropolitan notification product. This represented a 3% increase from approximately 7,800 high value clients in the previous quarter and an increase of 16% from approximately 6,900 in the same period a year ago.

Cost of sales totaled $1.2 million for the first quarter of 2009 compared to $1.0 million in the same quarter of 2008, an increase of 18%. The increase is primarily due toan increase in payroll-related costs from hiring our new Director of Information Production, in November of 2008, an increase in overtime hours worked by our content researchers, and third-party content costs related to greater content requirements for our OPC product launched in February 2008.

Operating expenses for the quarter ended March 31, 2009 totaled $5.3 million, which was unchanged from the previous quarter and increased 7% from $4.9 million in the first quarter of 2008. The increase is primarily due to our planned investment in our sales force, offset by lower technology and development expenses. Technology and development expenses decreased primarily because the development organization was more engaged in fully capitalizable projects during the quarter.

As a result of the above activities, net loss increased to $631,000, or $0.08 per share, in the first quarter of 2009 compared to a net loss of $445,000, or $0.05 per share, in the first quarter of 2008.

Cash flows from operations provided us with $1.3 million in the first three months of 2009 compared to using $1.1 million in the same period in 2008. The change to net cash provided by operating activities from net cash used in operating activities was primarily attributable to an increase in cash collected due to increased sales and policies implemented to reduce the percentage of sales made on quarterly payment terms. We ended the quarter with $13.5 million in cash and cash equivalents.

Year-over-year, unearned revenue increased by 13% to $10.1 million at March 31, 2009, compared to $8.9 million at March 31, 2008. The year-over-year increase is due to higher sales in the first quarter of 2009 compared to the same quarter in 2008 and from an increase in the sales force which resulted in an increase in client base. Unearned revenue increased to $10.1 million in the first quarter of 2009 due in part to the previously discussed changes in payment terms and due to an increase in sales driven in part by an increase in our sales force.. In the first quarter of 2009, the economic stimulus activity, the recently passed recovery

legislation, and the stalled commercial sector increased interest in public sector opportunities and this accelerated revenue growth.

Over the last several years, we have introduced new tools to enhance the access to information contained in our database and tools to improve the relevance of the information returned from searches against our database. In 2009, we plan to launch new core technologies, including a comprehensive new user interface which combines access to public and private sector data. By continuing to enhance our product offering through the introduction of new tools and content that further improve our clients' ability to tailor the information to the needs of their business, we expect that this will increase the satisfaction of our existing clients, thereby increasing retention rates, and broaden the appeal of our products to potential new categories of clients.

Management evaluates the following four key operating metrics, among others, to assist in the evaluation of Onvia's operating performance, and believes these metrics provide a means to compare our business with other businesses in the information industry.

Annual Contract Value ("ACV")
Annual Contract Value, or "ACV," represents the annualized aggregate revenue value of subscription contracts. ACV is driven by an increase in Annual Contract Value per Client (ACVC) and the growth in the number of clients. Onvia also generates revenues from multi-year content reseller licenses, management reports, document download services, and list rental services, which are not included in the calculation of ACV. ACV is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to revenue or any other financial measures so calculated. Management uses this information as a basis for planning and forecasting core business activity for future periods and believes it is useful in understanding the results of its operations. At March 31, 2009, ACV was $20.9 million, up 19% compared to $17.5 million at March 31, 2008.

Number of Clients
Number of clients represents the number of individual businesses subscribing to our products. At March 31, 2009 we had approximately 8,500 clients, up 5% from approximately 8,100 at March 31, 2008.

Annual Contract Value per Client ("ACVC") Annual contract value per client is the annual contract value divided by the number of clients and indicates the average value of each of our subscriptions. At March 31, 2009, ACVC was $2,448, an increase of 14% compared to $2,151 at March 31, 2008.

Quarterly Contract Value per Client ("QCVC") Quarterly contract value per client represents the average annual contract value of all new and renewing clients transacting during the quarter and is a leading indicator of future annual contract value per client. In the first quarter of 2009, QCVC was $2,647, an increase of 13% compared to $2,336 in the first quarter of 2008.

Seasonality

Our customer acquisition business is subject to some seasonal fluctuations. The third quarter is generally our slowest quarter for customer acquisition. The construction industry is our single largest market and these prospects are typically engaged on projects during the summer months, not prospecting for new work, which causes customer acquisition to decline compared to the remaining quarters in the year. For this reason, it may not be possible to compare the performance of our business quarter to consecutive quarter, and our quarterly results should be considered on the basis of results for the whole year or by comparing results in a quarter with the results in the same quarter of the previous year.

Results of Operations for the Three Months Ended March 31, 2009 Compared to the
Three Months Ended March 31, 2008

The following table provides selected consolidated results of operations for the
periods presented as a percentage of total revenue:


                                      Three Months Ended March 31,
                                      2009                    2008
Revenue:
 Subscription                               85 %                    85 %
 Content license                            10 %                    10 %
 Management information reports              4 %                     4 %
 Other                                       1 %                     1 %
 Total revenue                             100 %                   100 %

Cost of revenue                             21 %                    19 %


Gross margin                                79 %                    81 %

Operating expenses:
 Sales and marketing                        59 %                    51 %
 Technology and development                 12 %                    21 %
 General and administrative                 18 %                    20 %

 Total operating expenses                   89 %                    92 %

Loss from operations                       (10 %)                  (11 %)
Interest and other income, net               0 %                     3 %

Net loss                                   (10 %)                   (8 %)

Revenue and Cost of Revenue

Revenue for the three months ended March 31, 2009 increased 11% to $5.9 million, compared to $5.3 million for the three months ended March 31, 2008. Revenue increased as a result of prior period increases in our ACV, which is attributable to increased adoption of our database products, improved first year retention rates, and positive results from our investment in our sales force and sales processes.

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