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 89,000 government agencies and purchasing offices nationwide. Thousands of records are added to our database each day. Private sector data includes over 180,000 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 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.

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. 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.

Our comprehensive database contains much of this relevant decision making 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.

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

We have two distinct access levels to our public and private sector information:
Onvia Business Builder; and the Onvia Guide.

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.

Private Sector Content
Subscribers to our Onvia Business Builder product also receive access to early stage project information and a detailed overview on commercial and residential development projects. This market intelligence covers the top 85 metropolitan areas within the U.S. and 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, private sector content 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 June 30, 2009, revenue was $6.2 million compared to $5.1 million in the same quarter of 2008, an increase of 21%. Revenue increased primarily due to the growth in Annual Contract Value, or ACV. At June 30, 2009 ACV grew to $21.7 million, up 4% compared to $20.9 million in the previous quarter, and up 19% compared to $18.2 million in the second quarter of 2008. Annual contract value is the annualized aggregate revenue value of our subscription contracts.

A significant driver of ACV is Annual Contract Value per Client or ACVC, which grew 5% from the previous quarter and 15% from the same year-ago period to an average of $2,571 per client. ACVC increased in the second quarter, in part, due to our emphasis on higher valued database products. Adoption of our database products has increased to 57% up from 47% a year ago.

At June 30, 2009, Onvia's had a total of approximately 8,500 clients. This represented an increase of 5% from approximately 8,100 clients in the same period a year ago, but flat with the previous quarter. Client count was unchanged from the previous quarter, since new client acquisition is seasonally slower during the second and third quarters of every year. Out of the 8,500 total clients in second 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. High value clients were also flat compared to the previous quarter, but increased 7% from approximately 7,500 in the same period a year ago.

Operating expenses for the quarter ended June 30, 2009 totaled $5.2 million compared to $5.4 million in the same quarter of 2008 and remained flat compared to $5.3 million in the first quarter of 2009. Sales and marketing expenses increased as a result of our planned investment in our sales force offset by lower technology and development expenses. Our efforts to outsource development projects have reduced our internal, non-capitalizable headcount costs.

As a result of the above activities, net loss decreased to $197,000, or $0.02 per share, in the second quarter of 2009 compared to a net loss of $1.3 million, or $0.15 per share, in the second quarter of 2008.

Cash flows from operations provided us with $2.2 million in the first six months of 2009 compared to using $1.7 million in the same period in 2008. The change to net cash provided by operating activities was primarily attributable to an increase in cash collected due to increased sales. We ended the quarter with $13.8 million in cash and cash equivalents and short term investments.

Year-over-year, unearned revenue increased by 22% to $10.9 million at June 30, 2009, compared to $8.9 million at June 30, 2008. The year-over-year increase is due to higher sales in the second quarter of 2009 compared to the same quarter in 2008.

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 second quarter of 2009, QCVC was $2,806, an increase of 17% compared to $2,393 in the second quarter of 2008.

Recovery.org was launched in March 2009 to provide visibility into how federal funds distributed under the American Recovery and Reinvestment Act are flowing into local communities. As of the end of July, Recovery.org was tracking more than 22,600 projects and an aggregate of $73 billion in government stimulus spending, which has virtually doubled from the numbers we reported at the beginning of May. Recovery.org has attracted the attention of major business media, like CNN, BusinessWeek, Bloomberg and USA Today, which have recognized Onvia as the authoritative source on the subject in recent articles, as well interviews by Fox News and NPR. This coverage has helped the site continue to be a valuable marketing tool for Onvia.

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 the third quarter of 2009, we plan to launch new core technologies, including a comprehensive new user interface which combines access to public and private sector content. 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.

Seasonality

Our customer acquisition business is subject to some seasonal fluctuations. The second and third quarters are seasonally slower 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 and Six Months Ended June 30, 2009 Compared to the Three and Six Months Ended June 30, 2008

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

                                               Three Months Ended June 30,              Six Months Ended June 30,
                                               2009                   2008             2009                  2008
Revenue:
 Subscription                                        87 %                   85 %             86 %                  85 %
 Content license                                      9 %                   11 %              9 %                  11 %
 Management information reports                       3 %                    2 %              4 %                   3 %
 Other                                                1 %                    2 %              1 %                   1 %
 Total revenue                                      100 %                  100 %            100 %                 100 %

Cost of revenue                                      20 %                   22 %             20 %                  21 %


Gross margin                                         80 %                   78 %             80 %                  79 %

Operating expenses:
 Sales and marketing                                 52 %                   60 %             56 %                  55 %
 Technology and development                          10 %                   19 %             11 %                  20 %
 General and administrative                          21 %                   26 %             20 %                  23 %

 Total operating expenses                            83 %                  105 %             87 %                  98 %

Loss from operations                                 (3 %)                 (27 %)            (7 %)                (19 %)
Interest and other income, net                        0 %                    3 %              0 %                   3 %

Net loss                                             (3 %)                 (24 %)            (7 %)                (16 %)

Revenue and Cost of Revenue

Revenue for the three and six months ended June 30, 2009 was $6.2 million and $12.1 million, respectively, compared to $5.1 million and $10.5 million for the same periods in 2008. Revenue increased as a result of prior and current period increases in our ACV, which is attributable to increased adoption of our database products, and positive results from investments in our sales force and sales processes. The increase in revenue is explained in more detail under the "Executive Summary of Operations and Financial Position" section above.

Costs of revenues decreased to 20% of revenue for the three and six months ended June 30, 2009, respectively, compared to 22% and 21% in both respective periods in 2008. In total, costs of revenues were $1.2 million and $2.5 million in the three and six month periods in 2009, respectively, compared to $1.1 million and $2.2 million for these respective periods in 2008, representing an increase of $103,000 for the three month period in 2009 and $292,000 for the six month period in 2009.

Our costs of revenues primarily represent payroll-related costs associated with the research and aggregation of the data in our proprietary database, and third party content fees, but also include credit card processing fees. The increase for the comparable three and six month periods was primarily due to increases of $83,000 and $164,000, respectively, in third party content costs as a result of collecting a larger volume of high value content compared to last year. The remaining change is due to credit card fees which increased $42,000 and $90,000 for the same three and six month periods as a result of a combination of higher sales in 2009 and an increase in the number of sales paying via credit card.

Sales and marketing expenses increased in total and as a percentage of revenue to $3.2 million and 52% of revenue in the three months ended June 30, 2009, compared to $3.1 million and 60% in the same period in 2008. In the six month periods ended June 30, 2009 sales and marketing expenses increased in total to $6.7 million and 56% of revenue compared to $5.8 million and 55% in the same period in 2008.

For the quarter ended June 30, 2009, sales and marketing expenses increased $175,000, or 6%, compared to the same period in 2008. The increase is primarily comprised of an increase of $117,000 in payroll-related costs and an increase in marketing expenses of $29,000. Payroll-related costs increased primarily due to . . .