EXCITE INC, 424B1, 1998-06-12

EXCITE INC
424B1, 1998-06-12
PREPACKAGED SOFTWARE

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<PAGE> 1

PROSPECTUS

1,350,000 Shares

LOGO

COMMON STOCK
------------------------

OF THE 1,350,000 SHARES OF COMMON STOCK OFFERED HEREBY, 1,232,500 SHARES ARE
BEING SOLD BY THE COMPANY AND 117,500 SHARES ARE BEING SOLD BY THE SELLING
SHAREHOLDERS. SEE "SELLING SHAREHOLDERS." THE COMPANY WILL NOT RECEIVE ANY OF
THE PROCEEDS FROM THE SALE OF THE SHARES BY THE SELLING SHAREHOLDERS. THE
COMPANY'S COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"XCIT." ON JUNE 10, 1998, THE LAST SALE PRICE OF THE COMMON STOCK AS REPORTED ON
THE NASDAQ NATIONAL MARKET WAS $63 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."
------------------------

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 6 HEREOF.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

PRICE $63 A SHARE
------------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share.......................... $63.00 $3.78 $59.22 $59.22
Total(3)........................... $85,050,000 $5,103,000 $72,988,650 $6,958,350
</TABLE>

- ------------

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $650,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of 202,500
additional Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$97,807,500, $5,868,450 and $84,980,700, respectively. See "Underwriters."
------------------------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel for
the Underwriters. It is expected that delivery of the Shares will be made on or
about June 16, 1998 at the office of Morgan Stanley & Co. Incorporated, New
York, N.Y., against payment therefor in immediately available funds.
------------------------

MORGAN STANLEY DEAN WITTER BANCAMERICA ROBERTSON STEPHENS

June 10, 1998
<PAGE> 2

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
BY THE SELLING SHAREHOLDERS OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................ 2
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 23
Dividend Policy........................ 23
Price Range of Common Stock............ 23
Capitalization......................... 24
Selected Consolidated Financial Data... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 26
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business............................... 40
Management............................. 56
Selling Shareholders................... 58
Underwriters........................... 59
Legal Matters.......................... 60
Experts................................ 60
Additional Information................. 61
</TABLE>

------------------------

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December 31,
1997; (ii) the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 1998; (iii) the Company's Current Report on Form 8-K/A filed
with the Commission on April 1, 1998; (iv) the Company's Current Reports on Form
8-K filed with the Commission on April 17, 1998, May 11, 1998, May 15, 1998
(which report includes the Company's Supplemental Consolidated Financial
Statements that are restated to give effect to the merger of the Company and
MatchLogic, Inc. in a transaction accounted for as a pooling of interests), May
19, 1998 and June 1, 1998; (v) the Company's definitive Proxy Statement filed
April 30, 1998 in connection with the Company's 1998 Annual Meeting of
Shareholders; and (vi) the description of the Company's Common Stock contained
in the Company's Registration Statement on Form 8-A filed under Section 12 of
the Exchange Act, including any amendment or report updating such description.

Each document filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and to be part hereof from the date of filing of
such document (all of such documents, and the documents enumerated above, being
hereinafter referred to as "Incorporated Documents"). Any statement contained in
an Incorporated Document shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed Incorporated Document modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of
the Prospectus is delivered, including any beneficial owner, upon the written or
oral request of such person, a copy of any or all of the Incorporated Documents,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference therein. Request for such copies should be submitted
in writing or by telephone at (650) 568-6000 to Investor Relations, Excite,
Inc., at the principal executive offices of the Company, 555 Broadway, Redwood
City, California 94063. The information relating to the Company contained in
this Prospectus does not purport to be comprehensive and should be read together
with the information contained in the Incorporated Documents.
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
------------------------

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITERS."

2
<PAGE> 3

PROSPECTUS SUMMARY

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus
or incorporated herein by reference. The following summary is qualified in its
entirety by the more detailed information, including "Risk Factors," and the
supplemental consolidated financial statements and notes thereto incorporated
herein by reference. Except as otherwise indicated, all information in this
Prospectus assumes no exercise of the underwriters' over-allotment option. See
"Underwriters."

THE COMPANY

The rapid adoption of the Internet as a means to obtain information,
communicate, interact and be entertained, combined with the vast proliferation
of Web sites providing such content and communication services, is transforming
the Web into a new mass medium. International Data Corporation estimates that
the number of Web users grew to approximately 69 million in 1997 and estimates
that this number will reach 320 million by 2002. By attracting millions of
consumers and providing important interactive tools, the Web has become a mass
medium with the potential to become a much more effective advertising and
marketing medium than traditional mass media, such as television. Jupiter
Communications estimates that spending on Web advertising in the U.S. by U.S.
companies will grow from $1.9 billion in 1998 to $7.7 billion in 2002. With
"click-through" advertising banners, advertisers can target specific audiences
as well as receive instantaneous feedback on impression levels and viewership.
Marketers can then respond to this information with new messages, increasing the
effectiveness of their direct marketing campaigns. The Web has also emerged as a
significant marketplace for buying and selling goods and services. Jupiter
Communications estimates that the amount of goods or services purchased in
online consumer transactions will grow from approximately $3 billion in 1997 to
approximately $38 billion in 2002. However, as the Web has become increasingly
crowded, it has become difficult for consumers, content providers, online
merchants and advertisers to effectively reach one another.

Internet search engines have evolved as a technology solution to bridge
this gap. Their popularity has grown rapidly, with many users starting their Web
sessions from a search engine Web site. Search engines, which aggregate users,
advertisers and merchants, serve as the gateway to the expanse of the Web and
have begun to evolve from technology-focused tools to navigate the Web to
media-oriented properties, like broadcast channels in more traditional media.
The Excite Network has become one of the most popular destinations on the Web.
The key to Excite's solution is delivering the best programming and services to
consumers, thereby providing the most efficient and effective platform for Web
advertisers and merchants to advertise, market and sell their goods and
services. Excite's programming and services provide content, commerce and
community, with the context to keep sessions relevant, the control to make the
experience personalized and the convenience of one-stop-shopping. In addition to
providing Excite Search and the Excite Shopping Search powered by Jango search
technology, the Excite Network offers a rich experience that includes the
Company's Excite Channels of topical content, Classifieds2000, Inc.
("Classifieds2000") Web classifieds, online chat functionality and the
personalized My Excite Channel home page. With its recent acquisition of
MatchLogic, Inc. ("MatchLogic"), the Company offers database targeting and
campaign management services for Web marketers.

Excite's objective is to become the Web's leading branded media network
with the largest consumer reach and the highest revenue per user. To achieve
this objective, the Company seeks to increase user traffic

3
<PAGE> 4

through distribution and strategic relationships, acquisitions, content
relationships with third-party information providers and premier positions on
the most heavily-trafficked Web sites. The Company is pursuing multiple revenue
opportunities from advertising sales, commerce transactions and database and
direct marketing activities and seeks to build brand awareness and loyalty
through advertising and public relations programs. Through these strategic
initiatives, the Excite Network seeks to maintain its leadership as a popular
Web destination and remain in front of the evolving opportunities and demands of
the Web.

The Company's address is 555 Broadway, Redwood City, California 94063, and
its telephone number is (650) 568-6000. Unless the context otherwise requires,
the term "Company" or "Excite" refers to Excite, Inc. and its wholly-owned
subsidiaries. Excite, Excite Search, Excite Shopping Search powered by Jango,
Excite Reviews, the Excite logo, Excite City.Net, City.Net, Classifieds2000,
ExciteSeeing Tours, Jango, My Excite Channel, My Page, WebCrawler and the
Magellan Internet Guide are service marks of the Company. All other trademarks,
service marks or trade names referred to in this Prospectus are the property of
their respective owners. Information contained on the Company's Web site shall
not be deemed to be a part of this Prospectus.

RECENT DEVELOPMENTS

On April 30, 1998, the Company and Netscape Communications Corporation
("Netscape") entered into a two-year agreement (the "Netcenter Agreement") under
which the Company will, among other things, provide, host and sell advertising
for certain co-branded content channels, a co-branded Web search service and a
co-branded Web directory service (collectively, the "Co-Branded Services") for
Netscape's recently-announced Netcenter service ("Netcenter"). In addition, the
Company's Classifieds2000 service will be featured as the provider of classified
advertising (excluding career-related advertising) throughout Netcenter. The
Netcenter Agreement requires the Company to pay Netscape $70.0 million (the
"Cash Payment"), $50.0 million of which has already been paid from proceeds of a
note payable and $20.0 million of which must be paid by June 30, 1998. The
Company will recognize all revenues generated from the Co-Branded Services. The
Company is obligated to pay Netscape a percentage of these revenues (the
"Netscape Revenues"). No amounts will be paid to Netscape until such time as the
amount of revenues generated by Co-Branded Services which would be payable to
Netscape as Netscape Revenues equals the portion of the Cash Payment
attributable to traffic and royalty prepayments under the Netcenter Agreement.
In addition, the Company has issued a warrant to Netscape to purchase 423,079
shares of Common Stock at an exercise price of approximately $59.09 per share
and a second warrant to purchase shares of Common Stock having an aggregate
exercise price of up to $25.0 million, subject to reduction to $10.0 million in
certain circumstances. In addition to the potential revenues to the Company
associated with the Netcenter Agreement, the Company believes that the potential
benefits of the Netcenter Agreement include the opportunity to increase its
brand awareness, strengthen its market position among consumers and advertisers,
share certain user registration data with Netscape and reduce exposure on
Netscape's Web site for the Company's competitors.

In May 1998, the Company entered into a non-exclusive three-year agreement
with AT&T to provide dial-up access to an online service to be named "Excite
Online Powered by AT&T Worldnet," which will feature a personalized Excite home
page. In addition, the Company and AT&T intend to offer users Internet-based
multimedia communications services such as click-to-dial directories, anonymous
voice chat, and Web-based conference calling. The service, which will be jointly
marketed by the Company and AT&T, is expected to be launched in June 1998.

On April 1, 1998, the Company acquired Classifieds2000 in a transaction
accounted for as a pooling of interests. On May 19, 1998, the Company published
its revenues and net loss of $7.4 million and $78.4 million, respectively, for
the 30-day period ended April 30, 1998. These results reflect the combined
results of the Company and Classifieds2000 and include nonrecurring charges of
$56.8 million related to the Netcenter Agreement, $16.2 million related to the
write-off of in-process technology associated with the acquisition of certain
assets, and other merger and acquisition-related costs of $683,000. This
information was reported on the Company's Current Report on Form 8-K dated May
19, 1998 for the purpose of complying with the Commission's Accounting Series
Release 135. The amounts set forth above are not necessarily indicative of the
results of operations for the Company's quarter ending June 30, 1998 or for the
year ending December 31, 1998. See "Risk Factors--Potential Fluctuations in
Quarterly Results; Unpredictability of Future Revenues."

4
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered....................................... 1,350,000 shares, including
1,232,500 shares by the Company and
117,500 shares by the Selling
Shareholders
Common Stock to be outstanding after the offering.......... 24,722,019 shares(1)
Use of proceeds............................................ For repayment of indebtedness related to,
and funding of a prepayment obligation
under, the Netcenter Agreement, and, if
available general corporate purposes,
including working capital. See "Use of
Proceeds."
Nasdaq National Market symbol.............................. XCIT
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------- ------------------
1995 1996 1997 1997 1998
------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues....................................... $ 953 $ 14,757 $ 54,114 $ 7,515 $ 23,001
Gross profit................................... 725 10,608 33,079 2,724 17,407
Operating loss................................. (6,390) (44,118) (40,801) (8,895) (6,286)
Net loss....................................... (6,435) (43,117) (41,392) (8,784) (6,959)
Basic and diluted net loss per share(2)........ $ (6.15) $ (4.75) $ (2.94) $ (.74) $ (.34)
Shares used in computing net loss per
share(2)..................................... 1,046 9,076 14,077 11,799 20,725
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------------
PRO PRO FORMA
ACTUAL FORMA(3) AS ADJUSTED(4)
------- ------------ ---------------
<S> <C> <C> <C>
UNAUDITED CONSOLIDATED BALANCE SHEET DATA (UNAUDITED):
Cash, cash equivalents and short-term investments........... $25,392 $ 25,392 $ 27,731
Borrowings under bank line of credit and other notes
payable................................................... 6,100 56,100 6,100
Other accrued liabilities................................... 13,779 33,779 13,779
Working capital (deficit)................................... 18,531 (51,469) 20,870
Total assets................................................ 72,912 102,197 104,536
Long-term obligations....................................... 10,041 10,041 10,041
Total shareholders' equity (deficiency)..................... 30,815 (9,900) 62,439
</TABLE>

- ---------------
(1) Based on shares of Common Stock outstanding as of April 30, 1998. Excludes
(i) 5,304,289 shares of Common Stock issuable upon the exercise of options
then outstanding at a weighted average exercise price of approximately
$15.28 per share, (ii) an aggregate of 473,307 shares of Common Stock
reserved for future grants or sale under the Company's employee stock option
and stock purchase plans, (iii) 497,070 shares of Common Stock issuable upon
the exercise of outstanding warrants to purchase Common Stock as of such
date and an additional number of shares of Common Stock subject to a warrant
having an aggregate exercise price of up to $25.0 million (which per share
exercise price will be based on the market value of the Common Stock as of
April 30, 1999, when the warrant becomes exercisable), (iv) 325,000 shares
of Common Stock issuable upon conversion of Convertible Preferred Stock
issuable upon the exercise of a warrant (the "AOL Warrant") and (v) 74,766
shares of Common Stock issuable upon conversion of a $5.0 million
convertible promissory note (based on the closing price of $66 7/8 per share
of the Company's Common Stock on April 30, 1998). See Notes 6, 7 and 8 of
Notes to Supplemental Consolidated Financial Statements incorporated herein
by reference.
(2) The net loss per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Standards No. 128, "Earnings Per
Share" and Staff Accounting Bulletin No. 98. For further discussion of net
loss per share and the impact of Statement No. 128 and Staff Accounting
Bulletin No. 98, see Note 1 of Notes to Supplemental Consolidated Financial
Statements incorporated herein by reference.
(3) Pro forma to reflect (i) a note payable (the "Intuit Note") of $50.0 million
due to Intuit Inc. ("Intuit") evidencing a loan by Intuit in April 1998 to
fund a portion of the Company's $70.0 million cash prepayment obligation to
Netscape under the Netcenter Agreement (Intuit is a principal shareholder of
the Company); (ii) an accrued liability of $20.0 million for the remaining
portion of the Cash Prepayment (the "Netscape Payable"); (iii) the issuance
of warrants to Netscape with an initial valuation of $16.1 million; (iv) the
estimated $56.8 million charge that the Company anticipates recording during
the second quarter of 1998 in connection with the Netcenter Agreement.
(4) Pro forma as adjusted to reflect the sale of the 1,232,500 shares of Common
Stock offered by the Company hereby after deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company and
the application of the estimated net proceeds therefrom to repay the $50.0
million Intuit Note and the $20.0 million Netscape Payable. See "Use of
Proceeds" and "Capitalization."

5
<PAGE> 6

RISK FACTORS

In addition to the other information in this Prospectus and in the
Incorporated Documents, the following factors should be considered carefully in
evaluating an investment in the shares of Common Stock offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in such forward-looking statements. Factors that may cause
such a difference include, but are not limited to, those discussed below, in the
sections entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" and elsewhere in this Prospectus and
in the Incorporated Documents.

Limited Operating History; No Assurance of Profitability; Certain Forward
Looking-Statements. The Company was founded in June 1994 and generated only
limited revenues prior to 1996. Accordingly, the Company has a limited operating
history upon which an evaluation of the Company and its current business can be
based. In addition, the Company's business model is evolving and relies
substantially upon the sale of advertising on the Web. The Company's business
must be considered in light of the risks, expenses and problems frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets such as the Web and Web-based
advertising. Specifically, such risks include, without limitation: the inability
of the Company to maintain premier positions on high traffic Web access points
or to maintain or enter into additional distribution relationships with Internet
Service Providers ("ISPs") or Online Service Providers ("OSPs"); the inability
of the Company to maintain and increase levels of traffic on the Excite Network;
the inability of the Company to derive sufficient revenues from the Co-Branded
Services of Netscape's Netcenter service and the additional costs the Company
expects to incur in order to perform its obligations under the Netcenter
Agreement; the inability of the Company to effectively integrate the technology
and operations of acquired businesses or technologies with its operations,
including, without limitation, those of Classifieds2000; increased operating
expenses as a result of the Company's recent acquisitions, particularly
increased costs the Company expects to incur in maintaining MatchLogic as an
independent entity; the inability of the Company to expand its international
operations, particularly in light of the Company's limited operating experience
in the international market; the failure by the Company to continue to develop
and extend the Excite and WebCrawler brands; the inability of the Company to
successfully integrate sponsored services or to meet minimum guaranteed
impressions under sponsorship agreements; the inability of the Company to
develop or acquire content for its services; the failure of consumers to accept
the Company's personalized Web services, such as My Excite Channel, email
services or chatroom services; the inability of the Company to generate
commerce-related revenues; the failure of the Company to anticipate and adapt to
a developing market; the introduction and development of equal or superior
services or products by competitors, particularly in light of the fact that
Microsoft and Netscape, operators of two of the most heavily-trafficked Web
sites, have announced that they will be offering competitive services; the
failure of the market to adopt the Web as an advertising and commercial medium;
reductions in market prices for Web-based advertising as a result of competition
or otherwise; the inability of the Company to achieve higher cost per thousand
impressions ("CPM") rates for targeted advertising or to increase the percentage
of its advertising inventory sold; the inability of the Company to identify,
attract, retain and motivate qualified personnel; and general economic
conditions. There can be no assurance that the Company will be successful in
addressing such risks, and any failure to do so could have a material adverse
effect on the Company's business, results of operations and financial condition.

The Company has incurred significant operating losses since inception, and
as of March 31, 1998, the Company had an accumulated deficit of approximately
$103.1 million. Although the Company experienced significant revenue growth
during 1996, 1997 and the first quarter of 1998, there can be no assurance that
this growth rate will be sustained or that revenues will continue to grow or
that historical operating results will be indicative of future operating
results. During the second quarter of 1998, the Company expects to incur charges
of approximately $16.2 million for purchased in-process technology as a result
of an asset acquisition by the Company in April 1998 and charges of
approximately $56.8 million related to the Netcenter Agreement. The Company may
record additional charges, which may be significant, related to the Netcenter
Agreement in the second quarter of 1998 and in future periods under certain
circumstances. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operation." As a result, the Company

6
<PAGE> 7

expects that its results of operations for the second quarter of 1998 will be,
and that such results in future periods may be, materially affected and that the
Company will incur a net loss for the 1998 year. In addition, as the Company has
grown, its operating expenses have increased, and the Company expects that its
operating expenses will continue to increase as a result of its acquisitions and
the performance of its obligations under the Netcenter Agreement, its increased
sales and marketing efforts, its increased funding for development activities
and the increased general and administrative staff needed to support the
Company's growth. To the extent that revenues do not grow at anticipated rates
or that increases in such operating expenses precede or are not subsequently
followed by commensurate increases in revenues, or that the Company is unable to
adjust operating expense levels accordingly, the Company's business, results of
operations and financial condition will be materially and adversely affected.
There can be no assurance that in the future the Company will be profitable on a
quarterly or annual basis. See "--Future Capital Needs" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Certain executive officers of the Company have made certain forward-looking
statements regarding the Company's future prospects, which statements have been
published in a variety of news articles. These statements include statements
regarding the Company's prospects for increased revenues and profitability in
the future, the amount of revenues that may be generated by MatchLogic and
Classifieds2000, which the Company acquired in February 1998 and April 1998,
respectively, the rate at which the Company's revenues will increase and the
ability of the Company to increase its advertising rates. The occurrence or
achievement of any of the events described in these statements is subject to
numerous risks and uncertainties. In particular, risks and uncertainties
relating to forward-looking statements as to the Company's revenues,
profitability and advertising rates include, without limitation: the need for
continued increases in the number of companies advertising on the Excite Network
as well as on the Web generally; risks related to the Netcenter Agreement,
particularly in light of the Cash Payment and the significant additional costs
that the Company expects to incur in order to perform its obligations under the
Netcenter Agreement; the Company's ability to increase sales of targeted
advertisements and advertisers' willingness to pay higher CPM rates for
advertisements on the Excite Network; the ability of the Company to realize
substantial revenues from the increasingly competitive environment for Web
advertising sales; the need for increases in the amount of traffic on the Excite
Network; the increased amount of expenses and negative cash flows resulting from
the Company's acquisitions of Classifieds2000, MatchLogic and Netbot, Inc.
("Netbot"); the Company's dependence on third parties to attract traffic to the
Excite Network, including payments to be made for distribution fees; the ability
of the Company to develop and achieve consumer and advertiser acceptance for the
Excite Network in the international market; general economic conditions; and the
risks relating to the acquisition of MatchLogic described below. See
"--Acquisition Strategy; Integration of Past and Future Acquisitions,"
"--Developing Market; Dependence on Continued Growth in Use of the Web" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Risks and uncertainties relating to forward-looking statements regarding
MatchLogic's contribution to revenues and other operating results of Excite in
1998 include without limitation: risks involved in assimilating MatchLogic while
maintaining MatchLogic as a separate operating unit; risks that MatchLogic
personnel, who are not subject to noncompetition agreements, will leave
MatchLogic; risks inherent in MatchLogic's business, including privacy concerns
arising out of MatchLogic's database marketing activities, which account for a
majority of MatchLogic's revenues; risks in the extremely limited operating
history of MatchLogic on which to base any revenue projections; the likely
fluctuations in operating results of MatchLogic due to factors beyond
MatchLogic's or Excite's control; reliance by MatchLogic on a very limited
number of customers for a substantial percentage of its projected revenues; the
acceptance by MatchLogic's advertising customers of MatchLogic being owned by
Excite (one of the Web sites from which MatchLogic purchases advertising); and
the willingness by other Web sites from which MatchLogic purchases advertising
(particularly those which are direct competitors of Excite) to accept future
advertising placements from MatchLogic as a result of the acquisition by Excite.

Potential Fluctuations in Quarterly Results; Unpredictability of Future
Revenues. As a result of the Company's limited operating history, the evolving
nature of its business and its acquisitions, the Company has limited meaningful
historical financial data upon which to base planned operating expenses.
Accordingly, the

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Company's expense levels are based in part on its expectations as to future
advertising revenues and to a large extent are fixed. The Company expects in the
future to derive revenues from a mix of advertising sales (including banner
advertisements and sponsorships), commerce transactions and direct and database
marketing activities. To date, the Company has not received any material amounts
of revenues from commerce transactions and the Company only recently acquired
MatchLogic, which the Company expects to be its primary source of revenues from
database and direct marketing activities. There can be no assurance that the
Company will be successful in deriving substantial revenues from these areas.
There can also be no assurance that the Company will be able to accurately
predict the levels of future advertising revenues, particularly in light of the
intense competition for the sale of Web advertisements, the Company's limited
operating history and the uncertainty as to the viability of the Web as an
advertising medium. The failure by the Company to accurately make such
predictions would have a materially adverse effect on the Company's business,
results of operations and financial condition. In addition, the Company derives
a significant portion of its revenues from the sale of advertising under
short-term advertising contracts. The cancellation or deferral of existing
advertising contracts or the failure to obtain new advertising contracts in any
quarter could materially and adversely affect the Company's business, results of
operations and financial condition for that quarter. Furthermore, the Company
derives banner advertising revenues, and believes it attracts sponsors and
advertisers, based on the amount of traffic, or page views, on the Excite
Network. Accordingly, any significant shortfall of traffic on the Excite Network
in relation to the Company's expectations or the expectations of existing or
potential advertisers, would have a material adverse effect on the Company's
business, results of operations and financial condition. See "--Risks Associated
with Banner Advertising" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The Company's operating results have varied on a quarterly basis during its
limited operating history and the Company expects to experience significant
fluctuations in future quarterly operating results. Such fluctuations have been
and may in the future be caused by numerous factors, many of which are outside
the Company's control, including but not limited to: specific economic
conditions relating to the Internet and the Web; usage of the Web; demand for
advertising on the Excite Network as well as demand for Web-based advertising in
general; changes in advertising rates as a result of competition or otherwise;
seasonal trends in advertising sales; the advertising budgeting cycles of
advertisers; incurrence of charges in connection with the Netcenter Agreement
and the Company's distribution relationships with Netscape and other ISPs and
OSPs or other third parties; demand for the Company's services; incurrence of
costs relating to acquisitions of businesses or technologies; introduction or
enhancement of new or existing services by the Company and its competitors;
market acceptance of new services; delays in the introduction of services or
enhancements by the Company or its competitors; mix of types of advertisements
sold, such as the amount of targeted advertising, which generally has higher CPM
rates, sold as a percentage of total advertising sold; capacity constraints and
dependencies on computer infrastructure; and general economic conditions.

During its limited operating history, the Company has experienced seasonal
fluctuations in the amount of banner advertisements purchased on its network,
with advertisers historically purchasing fewer advertisements in the first
calendar quarter of each year. Because the market for Web advertising is an
emerging market, additional seasonal patterns in Web advertising may develop in
the future as the market matures.

Due to all of the foregoing factors, the Company's quarterly revenues and
operating results are difficult to forecast. The Company believes that
period-to-period comparisons of its results of operations will not necessarily
be meaningful and should not be relied upon as an indication of future
performance. Also, it is likely that in some future quarter or quarters the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would be materially and adversely affected. See "Price Range of Common Stock"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Risks Related to Netcenter Agreement. In April 1998, the Company and
Netscape entered into the Netcenter Agreement. See "Business--Relationship with
Netscape." This agreement subjects the Company to numerous and substantial risks
and uncertainties, including, without limitation, those discussed below.

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Under the Netcenter Agreement, the Company will recognize all revenues
generated from the Co-Branded Services and will not receive revenues directly
from any other part of Netcenter. The Company will pay Netscape the Netscape
Revenues. No amounts will be paid to Netscape until such time as the amount of
revenues generated by the Co-Branded Services which would be payable to Netscape
thereunder equals the portion of the Cash Payment attributable to traffic and
royalty prepayments under the Netcenter Agreement. There are no minimum
guaranteed revenues under the Netcenter Agreement, and there can be no assurance
as to the level of revenues that the Company will generate from the Co-Branded
Services. Such revenues are subject to a number of risks and uncertainties.
These include, without limitation: general risks associated with providing an
advertising-supported Web service (as discussed elsewhere in these Risk
Factors); uncertainty as to whether the Company can increase its sales and
marketing capabilities in order to sell sufficient advertising on the Co-Branded
Services; pricing competition from Netscape as a result of advertising sold on
parts of Netcenter other than the Co-Branded Services; and risks that channels
on Netcenter other than those which are part of the Co-Branded Services (such as
a business channel and a sports channel) may be potentially more attractive to
advertisers than those on the Co-Branded Services. In addition, the Company
expects to incur significant costs to develop, host and sell advertising on the
Co-Branded Services, including the costs of hiring significant additional
technical and sales personnel. The Company will not be reimbursed for these
costs. The failure to generate sufficient revenues from the Co-Branded Services
to recoup the Cash Payment and these costs would have a material adverse effect
on the Company's business, results of operations and financial condition.

The success of Netcenter, and the Co-Branded Services in particular, will
be substantially dependent on the amount of traffic on Netcenter. Although
Netscape has made certain exposure guarantees with respect to Netcenter over the
term of the Netcenter Agreement, there can be no assurance that these guarantees
will be fulfilled. There is intense competition for attracting Web users, which
competition may be exacerbated by the upcoming release of Microsoft's Windows 98
operating system. Furthermore, many current Web users may not choose to utilize
Netcenter over other available Internet services. Any failure of Netcenter to
attract substantial user traffic would materially and adversely affect the
Company's business, results of operations and financial condition. Additionally,
the Netcenter Agreement provides that all page views generated from the
Co-Branded Services shall be deemed to be traffic attributable to Netscape. As a
result, the Company may not receive credit, under certain audience measurement
statistics which are commonly used by advertisers in making their advertising
placements, for traffic generated through the Co-Branded Services.

As part of the Netcenter Agreement, the Excite Network will also be
featured as a "premier provider" on Netscape's Net Search page, and will be
similarly featured on the "Netcenter Widget" tool which will be accessible from
Netcenter. Because Netscape only guarantees a specified number of impressions
from its Net Search page (as compared to a number of users who "click through"
to the Excite Network), there can be no assurance that this new "premier
provider" arrangement will result in significant increases in traffic on the
Excite Network. Although Netscape has guaranteed a minimum number of users who
"click through" to the Excite Network from the Netcenter Widget, Netscape is not
obligated to keep this tool on Netcenter after the first six months of the term
of the Netcenter Agreement. Accordingly, there can also be no assurance that
this tool will provide the Excite Network with significant amounts of traffic.

There can be no assurance that the Company and Netscape will agree to renew
the Netcenter Agreement at the end of its two-year term. In addition, even if
the Company were able to renew the Netcenter Agreement, if any replacement
agreement is on materially worse terms, there could be a material adverse effect
on the Company's business, results of operations and financial condition.

Upon the termination of the Netcenter Agreement (other than a termination
in connection with certain acquisitions of or by Netscape), Netscape will have a
perpetual, irrevocable license to utilize certain technology used by Excite to
provide the Co-Branded Services. Netscape will also have the right to sublicense
this technology to third parties. As a result, upon termination of the Netcenter
Agreement, Netscape will be able to operate Netcenter independently, without any
significant royalty or payment obligations to Excite. In addition, if Netscape
sublicenses this technology to a third party, the Excite Network could face
additional competition, which could have a material adverse effect on the
Company's business, results of operations and financial condition.

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The Netcenter Agreement is subject to termination if the Company materially
breaches its obligations under the Netcenter Agreement. In addition, if Netscape
believes that the Company's Excite service or that the content provided by
Excite for the Netcenter service contains any content that Netscape deems likely
to cause it material harm, Netscape may terminate the Netcenter Agreement if the
Company has not revised such objectionable content within five days after notice
from Netscape. In the event of such terminations, Netscape will not be obligated
to refund any portion of the amounts prepaid by the Company and the Company will
not be entitled to receive any reimbursement for its costs incurred in
performing its obligations under the Netcenter Agreement. Moreover, many of the
Company's obligations to be performed under the Netcenter Agreement must be
performed according to standards determined by Netscape at its sole discretion.

Many of the services to be offered by Netcenter will compete directly with
those offered by the Excite Network. There can be no assurance that this
increased competition for Web users or advertisers will not have a material
adverse effect on the Company's business, results of operations and financial
condition.

Acquisition Strategy; Integration of Past and Future Acquisitions. The
Company has in the past acquired, and may in the future acquire, businesses,
technologies, services, product lines, content databases, or access to content
databases that are complementary to the Company's business. Since August 1996,
the Company has made a number of acquisitions. The Company acquired
Classifieds2000 in April 1998, MatchLogic in February 1998, Netbot in November
1997, the assets relating to the WebCrawler service in November 1996 and The
McKinley Group, Inc. ("McKinley") in August 1996. In addition, in April 1998 the
Company purchased certain assets of a small company. Acquisitions involve a
number of special risks, including, among other things, the difficulty of
assimilating the technologies, operations and personnel of acquired companies
with those of the Company, the potential disruption of the Company's business,
the diversion of resources, the incurrence of acquisition-related expenses, the
write-off or amortization of intangible assets, the assumption of unknown
liabilities, the inability to maintain uniform standards, controls, procedures
and policies and the impairment of relationships with employees and strategic
partners as a result of such acquisitions or the integration of new personnel.
For example, the assimilation of prior acquisitions required, among other
things, the integration of service offerings, coordination of the research and
development and sales and marketing efforts, the assumption by the Company of
liabilities under distribution agreements and loan agreements, and the addition
of a significant number of additional personnel. The Company could face similar
integration issues with respect to its recent or future acquisitions, and there
can be no assurance that the Company will be successful in addressing these
risks. Any failure to successfully address these acquisition-related risks could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Intense Competition. The market for Web services and Web advertising is
intensely competitive. There are no substantial barriers to entry in this market
and the Company expects competition to intensify. The Company believes that the
number of companies relying on fees from Web-based advertising has increased
substantially during the past year. Accordingly, the Company may face increased
pricing pressure for the sale of advertisements on its network, which would have
a material adverse effect on the Company's business, results of operations and
financial condition.

The Company's primary competitors are Web search and retrieval companies
such as Infoseek Corporation, Lycos, Inc. and Yahoo!, Inc. and services and
products offered by other companies, including Digital Equipment Corporation's
Alta Vista, HotWired Ventures and Inktomi's HotBot, CNET Inc.'s search.com. and
Northern Light Technology LLC's Northern Light search service. The Company also
competes indirectly with Web content broadcasting services, such as The
PointCast Network's PointCast, and with services from other database vendors,
such as Lexis/Nexis and other companies that offer information search and
retrieval capabilities with their core database products. As the Company
increases the content offerings and services on the Excite Network, it will
increasingly face competition from a large number of businesses which offer Web
services such as email, stock quotes, news and chat features and who publish
information and content on the Web, including large OSPs such as America Online
and MSN.

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The Company also expects to compete with ISPs, OSPs, Web site operators,
providers of Web browser software (such as Netscape or Microsoft) and other
Internet services and products that incorporate search and retrieval features
into their offerings. Many of these potential competitors have announced plans
to offer competing Web services and could take actions that make it more
difficult for consumers to find and use the Excite Network. For example,
Netscape has announced the introduction of Netcenter, which is expected to
compete directly with the Excite Network for traffic and advertisers. See
"--Risks Related to Netcenter Agreement." Microsoft has announced that it will
offer Internet search engine services provided by Inktomi in the MSN and other
Microsoft online properties, and has announced that it will offer personalized
Web services through its Start service. Such search services could be tightly
integrated into Microsoft's operating systems, Internet Explorer Web browser and
other software applications, and Microsoft may promote such services within the
Microsoft Network or through other end-user services such as WebTV. Insofar as
Microsoft's search services may be more conveniently accessed, this may provide
Microsoft with significant competitive advantages that could have a material
adverse effect on the Company's user traffic. In addition, many large media
companies have announced that they are contemplating developing Internet
navigation services and are attempting to become Web "gateway" sites for Web
users. For example, both Time Inc. and CBS have announced initiatives to develop
Web services in order to have their Web sites become the starting point for
users navigating the Web. In the event such companies develop such "gateway"
sites, the Company could lose a substantial portion of its user traffic, which
would have a material adverse effect on the Company's advertising revenues and
on its business, results of operations and financial condition.

Many providers of Web services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other strategic
partnering arrangements with ISPs, OSPs, providers of Web browsers, operators of
high traffic Web sites and other businesses in an attempt to increase traffic
and page views, thereby making their Web sites more attractive to Web
advertisers while also making it more difficult for consumers to utilize the
Company's services. For example, Yahoo! and MCI have entered into an agreement
to offer an online service to be called "Yahoo! Online powered by MCI Internet"
under which Yahoo!'s services will be made easily available to MCI Internet
customers and NBC and CNET Inc. have recently announced a strategic
relationship. To the extent that the Company's direct competitors or other Web
site operators are able to enter into successful strategic relationships, these
competitors and Web sites could experience increases in traffic and page views,
or the Company's traffic and page views could remain constant or decline, either
of which could have the effect of making these Web sites appear more attractive
to advertisers and therefore could have a material adverse effect on the
Company's business, results of operations and financial condition.

As a result of its recent acquisition of MatchLogic, the Company expects
that a portion of its revenues will be derived from providing advertisers and
advertising agencies with services designed to manage targeted Internet
advertising campaigns. This market is also a new and evolving market which is
increasingly competitive and in which there are no substantial barriers to
entry. The Company competes in this area primarily with IMGIS, Inc., and
competes indirectly in this area with DoubleClick Inc., which offers Internet
advertising solutions for advertisers and Web sites, and NetGravity, Inc., which
provides advertising management software. The Company expects to face
competition in this area from additional companies in the future.

Many of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories in the Web market,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. Such competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
employees, distribution partners, advertisers and content providers. Further,
there can be no assurance that the Company's competitors will not develop Web
search and retrieval services or other online services that are equal or
superior to those of the Company or that achieve greater market acceptance than
the Company's offerings.

The Web in general, and the Company specifically, also must compete with
traditional advertising media, such as print, radio and television, for a share
of advertisers' total advertising budgets. To the extent that the Web is not
perceived as an effective advertising medium, advertisers may be reluctant to
devote a significant

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portion of their advertising budgets to Web-based advertising. As a result of
the foregoing factors, there can be no assurance that the Company will be able
to compete successfully against its current or future competitors or that
competition will not have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business--Industry
Background" and "--Competition."

Risks Related to Sponsorships. The Company has recently entered into, and
derives a substantial portion of its revenues from, sponsorship arrangements
with third parties to provide sponsored services and placements on the Excite
Network in addition to traditional banner advertising. In connection with these
arrangements, the Company may receive sponsorship fees, and in connection with
certain of its more recent arrangements it may receive a portion of transaction
revenues received by such third party sponsors from users originated through the
Excite Network. These arrangements expose the Company to potentially significant
financial risks, including the risk that the Company fails to deliver required
minimum levels of user impressions (in which case, these agreements are
typically subject to termination) and that third party sponsors do not renew the
agreements at the end of their term. These arrangements also require the Company
to integrate sponsors' content with the Company's services, which can require
the dedication of resources and significant programming and design efforts to
accomplish. There can be no assurance that the Company will be able to attract
additional sponsors or that it will be able to renew existing sponsorship
arrangements when they expire. In addition, the Company has granted exclusivity
provisions to certain of its sponsors, and may in the future grant additional
exclusivity provisions. Such exclusivity provisions may have the effect of
preventing the Company, for the duration of such exclusivity arrangements, from
accepting advertising or sponsorship arrangements with respect to portions of a
channel or service, an entire channel, across an entire service or over the
entire Excite Network. The inability of the Company to enter into further
sponsorship or advertising arrangements as a result of its exclusivity
arrangements could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business--Strategy" and "--Advertising and Commerce."

Risks Associated with Banner Advertising. The Company derives a substantial
portion of its revenues from the sale of banner advertisements on the Excite
Network. A majority of the Company's customers purchasing banner advertisements
purchase these advertisements on a short-term basis, and many of these customers
may terminate their advertising commitments at any time without penalty.
Consequently, there can be no assurance that these customers will continue or
increase their level of advertising on the Excite Network or that these
customers will not move their advertising to competing Web sites or to other
traditional media. Therefore, there can be no assurance that the Company will be
successful in maintaining or increasing the amount of banner advertising on the
Excite Network, and the failure to do so would have a material adverse effect on
the Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Advertising and Commerce."

Developing Market; Dependence on Continued Growth in Use of the Web. The
market for the Company's services has recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants who
have introduced or developed services and products for use on the Web or who
seek to derive significant revenues from the sale of advertisements on the Web.
The Company is highly dependent upon the increased use of the Web for
information, publication, distribution and commerce, and there can be no
assurance that the use of the Web for these purposes will continue to grow at
its current rate or at all. The growth of the use of the Web may be inhibited
for a number of reasons, including, but not limited to, potentially inadequate
development of network infrastructure, security concerns, inconsistent quality
of service and lack of availability of cost-effective, high-speed service. To
the extent that use of the Web continues to grow, there can be no assurance that
the Internet infrastructure will continue to support the demands placed on it by
such growth or that the performance or reliability of the Internet will not be
adversely affected. In addition, the Web as an advertising medium has not been
available for a sufficient period of time to gauge its effectiveness as compared
with traditional advertising media, and therefore the Web is an unproven medium
for advertising-supported services. Accordingly, the Company's future operating
results will

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depend substantially upon the increased use of the Web for information,
publication, distribution and commerce and the emergence of the Web as an
effective advertising medium.

The Company's ability to generate significant advertising revenues will
also depend on, among other things, the development of a large base of users of
the Company's services possessing demographic characteristics attractive to
advertisers, the ability of the Company to accurately measure its user base and
the ability of the Company to develop or acquire effective advertising delivery
and measurement systems. Many of the Company's advertisers have only limited
experience with the Web as an advertising medium, have not yet devoted a
significant portion of their advertising expenditures to Web-based advertising,
and may not find such advertising to be effective for promoting their products
and services relative to traditional print and broadcast media. The adoption of
Web advertising, particularly by those entities that have historically relied
upon traditional media for advertising, requires the acceptance of a new way of
conducting business and exchanging information. Entities that already have
invested substantial resources in other methods of conducting business may be
reluctant to adopt a new strategy that may limit or compete with their existing
efforts. There can be no assurance that the market for Web advertising will
continue to emerge or become sustainable. If the market fails to develop or
develops more slowly than expected, the Company's business, results of
operations and financial condition could be materially and adversely affected.
No standards have been widely accepted for the measurement of the effectiveness
of Web-based advertising, and there can be no assurance that such standards will
develop sufficiently to support the Web as an effective advertising medium.
There can be no assurance that advertisers will continue to accept the Company's
or other third-party measurements of impressions, or that such measurements will
not contain errors. In such event, the Company's advertising revenues could be
materially adversely affected, which would have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business--Industry Background."

In addition, there is intense competition in the sale of advertising on the
Web, resulting in a wide range of rates quoted and a variety of pricing models
offered by different vendors for a variety of advertising services, which makes
it difficult to project future levels of advertising revenues and rates. It is
also difficult to predict which pricing models will be adopted by the industry
or advertisers. For example, advertising rates based on the number of "click
throughs," or user requests for additional information made by clicking on the
advertisement from the Company's network to the advertiser's Web pages, instead
of rates based solely on the number of impressions displayed on users' computer
screens, would materially adversely affect the Company's revenues. As a result
of these risks, there can be no assurance that the Company will be successful in
generating significant future advertising revenues from Web-based advertising,
and the failure to do so would have a material adverse effect on the Company's
business, results of operations and financial condition. See
"Business--Competition."

Further, there can be no assurance that advertisers will determine that
banner advertising, the delivery of which currently comprises a substantial
portion of the Company's revenues, is an effective or attractive advertising
medium, and there can be no assurance that the Company will effectively
transition to any other forms of Web advertising should they develop and achieve
market acceptance. Moreover, "filter" software programs that limit or prevent
advertising from being delivered to a Web user's computer are available.
Widespread adoption of such software by users could have a material adverse
effect upon the commercial viability of Web advertising, which would have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business--Industry Background" and "--Advertising and
Commerce."

Dependence on Third-Party Relationships. The Company is currently, and will
be in the future, dependent on a number of third-party relationships for user
traffic and to provide content and services on the Excite Network and to make it
more attractive to advertisers and consumers. These relationships include the
Netcenter Agreement, arrangements relating to the positioning of the Excite
Network on Web browsers, agreements with ISPs and OSPs and arrangements for
providing content or services for the Excite Network such as email services,
stock quotes and news stories. The termination of, or the failure of the Company
to renew on reasonable terms, its position on a Web browser or its relationship
with an ISP, OSP or key content provider could significantly reduce traffic on
the Excite Network, have an effect of increasing traffic on a competing service
or could otherwise adversely affect the Company's advertising revenues, which
would also

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<PAGE> 14

have a material adverse effect on the Company's business, results of operations
and financial condition. The Company could also incur expenses relating to
distribution license fees as a result of its distribution agreements. These
distribution license fees could have a material adverse effect on the Company's
business, results of operations and financial condition.

The Company is also generally dependent on other Web site operators that
provide links to the Excite Network. Most of these arrangements do not require
future minimum commitments to provide access or links to the Excite Network or
to provide content to the Company, are often not exclusive and are often
short-term or may be terminated at the convenience of the other party. There can
be no assurance that these third parties regard their relationship with the
Company as important to their own respective businesses and operations, that
they will not reassess their commitment to the Excite Network at any time in the
future, or that they will not develop their own competitive services or
products. Further, there can be no assurance that the services of those
companies that provide access to the Excite Network will achieve market
acceptance or commercial success and therefore there can be no assurance that
any significant amount of traffic will be directed to the Excite Network as a
result of these third party relationships. Accordingly, there can be no
assurance that the Company's existing relationships will result in sustained
business partnerships, successful service offerings, the generation of
significant traffic on the Excite Network or significant revenues for the
Company.

The Company also has a five-year distribution agreement with AOL which
expires in November 2001 under which a co-branded version of the Excite search
and directory service is designated as the exclusive Web search and directory
service for the AOL service for an initial two-year period ending in November
1998. If the exclusivity period is not extended by AOL, the co-branded service
would become the "default" search and directory service of AOL. However, AOL
could enter into a strategic relationship with a competitor of the Company or
offer its own competing services, which could have a material adverse effect on
the Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Distribution."

Privacy Concerns. The Company's services and those of MatchLogic use
"cookies" to deliver targeted advertising, help compile demographic information
about users and limit the frequency with which an ad is shown to the user.
Cookies are bits of information keyed to a specific drive and passed to a Web
site server through the user's browser software. Cookies are placed on the
user's hard drive without the user's knowledge or consent, but can be removed by
the user at any time through the modification of the user's browser settings.
Due to privacy concerns, some Internet commentators, advocates and governmental
bodies have suggested that the use of cookies be limited or eliminated. In
addition, certain currently available Web browsers allow a user to delete
cookies or prevent cookies from being stored on the user's hard drive. Any
reduction or limitation in the use of cookies could limit the effectiveness of
the Company's ad targeting which could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business--Advertising and Commerce."

Uncertain Maintenance and Strengthening of the Company's Brands. The
Company believes that maintaining and strengthening its brands is critical to
achieving widespread acceptance of the Excite Network, particularly in light of
the competitive nature of the Company's market. Promoting and positioning its
brands will depend largely on the success of the Company's marketing efforts and
the ability of the Company to provide high quality services. In order to promote
its brands, the Company may find it necessary to increase its marketing budget
or otherwise increase its financial commitment to creating and maintaining brand
loyalty among customers. If the Company fails to promote and maintain its brands
or incurs excessive expenses in an attempt to promote and maintain its brands or
if the Company's existing or future strategic relationships fail to promote the
Company's brands or increase brand awareness, the Company's business, results of
operations and financial condition could be materially adversely affected. One
of the benefits the Company hopes to obtain from the Netcenter Agreement is
increased brand awareness for the Excite name and a larger audience reach. If
the Co-Branded Services are successful, it is possible that Netcenter will
receive greater brand awareness and consumer loyalty among Web users than the
Excite Network and that upon the expiration of the term of the Netcenter
Agreement, these users will continue to utilize Netcenter rather than the Excite
Network. In such event, the Company's business, results of operations and
financial condition could be materially and adversely affected. See
"Business--Strategy" and "--Relationship with Netscape."

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Security Risks. A significant barrier to electronic commerce and
communications is the secure transmission of confidential information over
public networks. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments will not result in compromises or breaches of the security systems
used by the Company or other Web sites to protect proprietary information. If
any well-publicized compromises of security were to occur it could have the
effect of substantially reducing the use of the Web for commerce and
communications, which would have a material adverse effect on the Company's
business, results of operations and financial condition. A party who is able to
circumvent the Company's security measures could misappropriate proprietary
information or cause interruptions in the Company's services or operations. The
Company may be required to expend significant capital and other resources to
protect against the threat of such security breaches or to alleviate problems
caused by such breaches. To the extent that activities of the Company or
sponsors of the Company's services involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
expose the Company to a risk of loss or litigation and possible liability. There
can be no assurance that the Company's security measures will prevent security
breaches or that the failure to prevent such breaches would not have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Business--Industry Background."

Rapid Technological Change. The market in which the Company competes is
characterized by rapidly changing technology, evolving industry standards,
frequent new service and product announcements, introductions and enhancements
and changing customer demands. These market characteristics are exacerbated by
the emerging nature of the Web and the apparent need of companies from a
multitude of industries to offer Web-based products and services. Accordingly,
the Company's future success will depend on its ability to adapt to rapidly
changing technologies, to adapt its services to evolving industry standards and
to continually improve the performance, features and reliability of its network
in response to competitive service and product offerings and evolving demands of
the marketplace. The failure of the Company to adapt to such changes and
evolution would have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the widespread
adoption of new Internet, networking or telecommunications technologies or other
technological changes could require substantial expenditures by the Company to
modify or adapt its services or infrastructure which could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Business--Technology, Research and Development."

Dependence on New and Enhanced Services. Because the attractiveness of the
Excite Network to advertisers is based substantially upon the amount of traffic
on the Excite Network, broad acceptance of the Excite Network by consumers is
critical to the Company's future success. The Company currently offers a variety
of Web-related services, including its email, Excite NewsTracker, chat and
instant paging services and the Company intends to introduce additional services
in the future. Any new service launched by the Company that is not favorably
received by consumers could adversely affect the Company's reputation or brand
name and could also adversely affect the Company's user traffic. There can also
be no assurance that the Company will not experience difficulties that could
delay or prevent the successful design, development, testing, introduction or
marketing of these services, or that its new services and enhancements will
achieve any degree of significant market acceptance. Furthermore, existing
services or new releases by the Company, whether improved versions of existing
services or introductions of new services, may contain undetected errors that
require significant design modifications. Delays in the commencement of or
errors contained in new services and enhancements may result in customer
dissatisfaction and delay or loss of advertising revenues. If the Company is
unable, for technological or other reasons, to develop and introduce new
services or enhancements in a timely manner, or if the recently introduced
services or enhancements contain errors or do not achieve a significant degree
of market acceptance, the Company's business, results of operations and
financial condition could be materially and adversely affected. See
"Business--The Excite Network" and "--Technology, Research and Development."

Management of Growth. The Company's rapid growth has placed, and is
expected to continue to place, a significant strain on the Company's managerial,
operational and financial resources. As of March 31, 1998, the Company had grown
to 455 employees from 188 employees at December 31, 1996. Further, as the number
of the Company's users, advertisers and other business partners has grown, the
Company has been required to

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<PAGE> 16

scale its operations and manage multiple relationships with various customers,
strategic partners and other third parties. These requirements will be
exacerbated in the event of further growth in the Company or in the number of
its strategic relationships or sponsorship arrangements. There can be no
assurance that the Company's systems, procedures or controls will be adequate to
support the Company's operations or that Company management will be able to
achieve the rapid execution necessary to successfully offer its services and
implement its business plan. The Company's future operating results will also
depend on its ability to expand its sales and marketing organization and expand
its support organization commensurate with the growth of its business and the
Web. If the Company is unable to manage growth effectively, the Company's
business, results of operations and financial condition will be materially and
adversely affected. See "--Acquisition Strategy; Integration of Past and Future
Acquisitions" and "Business--Employees."

Risks Associated with International Operations. A key component of the
Company's strategy is to expand its international operations and its
international sales and marketing activities by offering localized versions of
the Excite Network. Expansion into these markets has required and will continue
to require management attention and resources. The Company has limited
experience in localizing its services and many of the Company's competitors are
also undertaking to expand into foreign markets. There can be no assurance that
the Company will be successful in expanding into international markets. In
addition to the uncertainty regarding the Company's ability to generate revenues
from foreign operations and expand its international presence, there are certain
risks inherent in doing business on an international basis, including, among
others, regulatory requirements, legal uncertainty regarding liability, tariffs
and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, different accounting practices, problems in
collecting accounts receivable, political instability, seasonal reductions in
business activity and potentially adverse tax consequences, any of which could
adversely affect the success of the Company's international operations. To the
extent the Company expands its international operations and has additional
portions of its international revenues denominated in foreign currencies, the
Company could become subject to increased risks relating to foreign currency
exchange rate fluctuations. There can be no assurance that one or more of the
factors discussed above will not have a material adverse effect on the Company's
future international operations and, consequently, on the Company's business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business--International."

Risk of Capacity Constraints; System Failures. The Company is dependent on
its ability to generate a high volume of traffic to the Excite Network.
Accordingly, the performance of the Excite Network is critical to the Company's
reputation, its ability to attract advertisers and to achieve market acceptance
of the Excite Network. Any system failure that causes interruptions in the
availability of or that increases response time of the Company's services could
reduce user satisfaction and traffic to the Excite Network and, if sustained or
repeated, would reduce the attractiveness of the Excite Network to advertisers
and consumers. An increase in the volume of searches conducted through the
Excite Network could strain the capacity of the software or hardware deployed by
the Company, which could lead to slower response time or system failures. In
addition, as the amount of Web pages and traffic on the Company's services
increases, there can be no assurance that the Excite Network will be able to
scale proportionately. The Company is also dependent upon timely feeds and
downloads of information from content providers and is dependent upon providers
of Web browsers and on ISPs, OSPs and other Web site operators, which have
experienced significant outages in the past, for access to its network. In the
past, Web consumers have experienced outages, delays and other difficulties due
to system failures unrelated to the Company's systems and services. Additional
difficulties could also materially and adversely affect consumer and advertiser
satisfaction. To the extent that the capacity constraints described above are
not effectively addressed by the Company, such constraints would have a material
adverse effect on the Company's business, results of operations and financial
condition.

Substantially all of the Company's communications hardware and certain of
its computer hardware operations are located at leased facilities in Redwood
City, California, an area susceptible to earthquakes. The Company has
experienced system failures or outages from time to time in the past, which have
disrupted the operation of the Excite Network. There can be no assurance that a
system failure at this location would not adversely affect the performance of
the Excite Network. These systems are also vulnerable to damage from

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<PAGE> 17

fire, floods, earthquakes, power loss, telecommunications failures, break-ins
and similar events. The Company does not presently have a formal disaster
recovery plan. In the event that the Company seeks to replicate its systems at
other locations, it would face a number of technical challenges, particularly
with respect to database replication and the need to constantly update
distributed databases, and there can be no assurance that the Company would be
able to successfully address these challenges. Although the Company carries
property and business interruption insurance, its low coverage limits likely
will not be adequate to compensate the Company for all losses that may occur.
The Company's servers are also vulnerable to computer viruses, physical or
electronic break-ins and similar disruptive problems. Computer viruses,
break-ins or other problems caused by third parties could lead to interruptions,
delays or cessations in service to users of the Excite Network. The occurrence
of any of these risks could have a material adverse effect on the Company's
business, results of operations and financial condition. See
"Business--Facilities."

Dependence on the Web Infrastructure. The success of the Excite Network
will depend in large part upon the development and maintenance of the Web
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security, or timely development of complementary products such
as high speed modems, for providing reliable Web access and services. Because
global commerce and online exchange of information on the Web and other similar
open wide area networks are new and evolving, it is difficult to predict with
any assurance whether the Web will prove to be a viable commercial marketplace.
The Web has experienced, and is expected to continue to experience, significant
growth in the number of users and amount of traffic. To the extent that the Web
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users, there can be no assurance that the
Web infrastructure will continue to be able to support the demands placed on it
by this continued growth or that the performance or reliability of the Web will
not be adversely affected. Furthermore, the Web has experienced a variety of
outages and other delays as a result of damage to portions of its
infrastructure, and could face such outages and delays in the future, including
outages and delays resulting from the inability of certain computers or software
to distinguish dates in the 21st century from dates in the 20th century. See
"--Year 2000 Implications." These outages and delays could adversely affect the
level of Web usage and also the level of traffic on the Excite Network. In
addition, the Web could lose its viability due to delays in the development or
adoption of new standards and protocols (for example, the next-generation
Internet Protocol) to handle increased levels of activity or due to increased
governmental regulation. There can be no assurance that the infrastructure or
complementary products or services necessary to make the Web a viable commercial
marketplace will be developed, or, if they are developed, that the Web will
become a viable commercial marketplace for services such as those offered by the
Company. If the necessary infrastructure, standards or protocols or
complementary products, services or facilities are not developed, or if the Web
does not become a viable commercial marketplace, the Company's business, results
of operations and financial condition will be materially and adversely affected.
Even if such infrastructure, standards or protocols or complementary products,
services or facilities are developed and the Web becomes a viable commercial
marketplace, there can be no assurance that the Company will not be required to
incur substantial expenditures in order to adapt its services to changing Web
technologies, which could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business--Industry
Background."

Government Regulation and Legal Uncertainties. The Company is not currently
subject to direct regulation by any government agency, other than regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Web. However,
due to the increasing popularity and use of the Web, it is possible that a
number of laws and regulations may be adopted with respect to the Web, covering
issues such as user privacy, pricing, characteristics and quality of products
and services. For example, although it was held unconstitutional, the
Telecommunications Act of 1996 prohibited the transmission over the Internet of
certain types of information and content, and other nations, including Germany,
have taken actions to restrict the free flow of material deemed to be
objectionable on the Web. In addition, several telecommunications carriers are
seeking to have telecommunications over the Web regulated by the Federal
Communications Commission (the "FCC") in the same manner as other
telecommunications services. In addition, because the growing popularity and use
of the Web has burdened the existing telecommunications infrastructure and many
areas with high Web use have begun to experience interruptions in phone service,
local telephone carriers, such as Pacific Bell, have petitioned the FCC to

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<PAGE> 18

regulate ISPs and OSPs in a manner similar to long distance telephone carriers
and to impose access fees on the ISPs and OSPs. If any such petition is granted,
or the relief sought therein is otherwise granted, the costs of communicating on
the Web could increase substantially, potentially slowing the growth in use of
the Web, which could in turn decrease the demand for the Company's services. The
adoption of any additional laws or regulations may also decrease the growth of
the Web, which could in turn decrease the demand for the Excite Network or could
increase the Company's cost of doing business. Moreover, the applicability to
the Web of existing laws in various jurisdictions governing issues such as
property ownership, libel and personal privacy is uncertain and will take years
to resolve. Any such new legislation or regulation or application or
interpretation of existing laws could have a material adverse effect on the
Company's business, results of operations and financial condition.

The Company's contests may be subject to state and federal laws governing
lotteries and gambling. Although the Company seeks to design its contest rules
to fall within exemptions from such laws, there can be no assurance that these
contests will be exempt from such laws or that the applicability of such laws
will not have a material adverse effect on the Company's business, results of
operations and financial condition.

Due to the global nature of the Web, it is possible that, although
transmissions of the Excite Network originate in the State of California, the
governments of other states and foreign countries might attempt to regulate the
Company's transmissions or prosecute the Company for violations of their laws.
There can be no assurance that violations of local laws will not be alleged or
charged by state or foreign governments, that the Company might not
unintentionally violate such law or that such laws will not be modified, or new
laws enacted, in the future. Although there has been recently introduced the
proposed Internet Tax Freedom Act, which, if adopted, will place a temporary ban
on states and localities from passing new tax laws aimed at online transactions,
it is possible that, in the future, states or foreign countries may seek to
impose sales taxes on out-of-state companies that engage in commerce over the
Web or otherwise require the Company to qualify to do business in such
jurisdictions, with the failure to so qualify subjecting the Company to taxes or
penalties. In the event that states or foreign countries succeed in imposing
sales or other taxes on Web commerce, the growth of the use of the Web for
commerce could slow substantially. Any of the foregoing developments could have
a material adverse effect on the Company's business, results of operations and
financial condition. See "Business--Industry Background."

Liability for Information Retrieved from the Web. Because materials
contained on the Web may be accessed through the services offered by the Company
and be subsequently distributed to others, there is a potential that claims may
be made against the Company for defamation, negligence, copyright or trademark
infringement or other theories based on the nature and content of such
materials. Such types of claims have been brought, and sometimes successfully
pressed, against OSPs and ISPs in the past. In addition, the Company could be
exposed to liability with respect to the selection of listings that may be
accessible through the Company's services and through content and materials that
may be posted by users in classifieds, bulletin board and chat room services
offered by the Company. Such claims might include, among others, that by
providing hypertext links to Web sites operated by third parties, the Company is
liable for copyright or trademark infringement or other wrongful actions by such
third parties through such Web sites. It is possible that if any information
provided through the Company's services, such as stock quotes, analyst estimates
or other trading information, contains errors, third parties could make claims
against the Company for losses incurred in reliance on such information. The
Company recently began offering Web-based email services, which expose the
Company to potential risks, such as liabilities or claims resulting from
unsolicited email (spamming), lost or misdirected messages, illegal or
fraudulent use of email or interruptions or delays in email service.

Certain of the Company's newer sponsorship relationships contain provisions
under which the Company is entitled to receive a share of revenues from the
purchase of goods and services by users of the Company's services. Such
arrangements may expose the Company to additional legal risks and uncertainties,
including, without limitation, potential liabilities to consumers of such
products and services. Although the Company carries general liability insurance,
the Company's insurance may not cover potential claims of this type, or may not
be adequate to indemnify the Company for all liability that may be imposed. Any
imposition of liability

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that is not covered by insurance or is in excess of insurance coverage could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Business--The Excite Network."

Dependence on Key Personnel. The Company's performance is substantially
dependent on the performance of its executive officers and other key employees,
many of whom have worked together for only a short period of time. Given the
Company's relatively early stage of development, the Company is dependent on its
ability to attract, train, retain and motivate high quality personnel,
especially its management and engineering and development teams. The Company
does not have "key person" life insurance policies on any of its employees. The
Company's future success also depends on its continuing ability to attract,
train, retain and motivate other highly qualified technical and managerial
personnel. Competition for such personnel is intense, particularly in the San
Francisco Bay Area, and there can be no assurance that the Company will be able
to attract, train, retain or motivate other highly qualified technical and
managerial personnel in the future. The loss of the services of any of the
Company's executive officers or other key employees or the failure of the
Company to attract, integrate, motivate and retain additional key employees
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business--Employees" and "Management."

Proprietary Technology; Potential Litigation. The Company regards its
technology as proprietary and attempts to protect it with copyrights,
trademarks, trade secret laws, restrictions on disclosure and transferring title
and other methods, and has been issued a patent with respect to certain aspects
of its searching and indexing technology. The Company has filed two patent
applications with respect to other aspects of its technology. There can be no
assurance that the patent that has been issued is, or that any patents that may
issue from these pending applications will be, sufficiently broad to protect the
Company's technology. In addition, there can be no assurance that any patents
that have been issued or that may be issued will not be challenged, invalidated
or circumvented, or that any rights granted thereunder would provide proprietary
protection to the Company. The failure of any patents to protect the Company's
technology may make it easier for the Company's competitors to offer technology
equivalent or superior to the Company's technology. The Company also generally
enters into confidentiality or license agreements with its employees and
consultants, and generally controls access to and distribution of its
documentation and other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use the
Company's services or technology without authorization, or to develop similar
technology independently. In addition, effective copyright, trademark and trade
secret protection may be unavailable or limited in certain foreign countries,
and the global nature of the Web makes it virtually impossible to control the
ultimate destination of the Company's products. Policing unauthorized use of the
Company's technology is difficult. There can be no assurance that the steps
taken by the Company will prevent misappropriation or infringement of its
technology. In addition, litigation may be necessary in the future to enforce
the Company's intellectual property rights, to protect the Company's trade
secrets or to determine the validity and scope of the proprietary rights of
others. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
results of operations and financial condition.

Many parties, including competitors of the Company, are actively developing
search, indexing and related Web technologies. Some of these parties have taken,
and the Company believes that others will take, steps to protect these
technologies, including seeking patent protection. As a result, the Company
believes that disputes regarding the ownership of such technologies are likely
to arise in the future. In May 1998, one of the Company's competitors was issued
a patent with respect to certain aspects of its search technology. Although the
Company has not received any correspondence with regard to this patent, this
competitor has publicly stated that it intends to vigorously pursue entities it
believes may infringe this patent. The Company is currently reviewing this
patent with its patent counsel in order to determine whether the Company could
be subject to any potential claims. There can be no assurance that this
competitor will not initiate a lawsuit against the Company asserting patent
infringement. There can also be no assurance that the Company can defend
successfully any such litigation either on the grounds that such patent is
invalid or that the Company's search technology does not infringe such patent.
Even if the Company is successful, there can be no assurance that the costs and
resources required to defend any such litigation will not have a material
adverse effect on the Company's business, results of operations or financial
condition. In addition, from time to time, the

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Company has received, and may receive in the future, notice of claims of
infringement of other parties' proprietary rights, including claims for
infringement resulting from the downloading of materials by the service operated
by the Company. Although the Company investigates claims and responds as it
deems appropriate, there can be no assurance that infringement or invalidity
claims (or claims for indemnification resulting from infringement claims) will
not be asserted or prosecuted against the Company or that any assertions or
prosecutions will not materially and adversely affect the Company's business,
results of operations and financial condition. Irrespective of the validity or
the successful assertion of such claims, the Company would incur significant
costs and diversion of resources with respect to the defense thereof, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. If any claims or actions were asserted
against the Company, the Company might seek to obtain a license under a third
party's intellectual property rights. There can be no assurance, however, that
under such circumstances a license would be available on commercially reasonable
terms, or at all.

The Company currently owns and also licenses from third parties certain of
its technologies. As it continues to introduce new services that incorporate new
technologies, it anticipates that it may be required to license additional
technology from others. There can be no assurance that these third-party
technology licenses will be available to the Company on commercially reasonable
terms, if at all. The inability of the Company to obtain any of these technology
licenses could result in delays or reductions in the introduction of new
services or could materially and adversely affect the performance of its
services until equivalent technology could be identified, licensed and
integrated. Any such delays or reductions in the introduction of services or
adverse impact on service quality could materially and adversely affect the
Company's business, results of operations and financial condition. See
"Business--Intellectual Property."

Control by Directors, Executive Officers and Certain Shareholders. Upon
completion of this offering, the present directors and executive officers and
certain shareholders of the Company and their respective affiliates will, in the
aggregate, beneficially own approximately 13,245,002 shares of the outstanding
Common Stock. As a result, these shareholders will possess significant influence
over the Company, giving them the ability, among other things, to elect a
significant portion of the Company's Board of Directors (or the entire Board of
Directors when and if cumulative voting is eliminated upon reincorporation of
the Company into Delaware) and to approve significant corporate transactions.
See "--Proposed Reincorporation; Certain Anti-Takeover Provisions." In addition,
upon completion of this offering, AOL and Intuit will beneficially own
approximately 2,464,356 shares and 2,900,000 shares, respectively, of the
outstanding Common Stock. Such concentration of share ownership may also have
the effect of delaying or preventing a change in control of the Company, impede
a merger, consolidation, takeover or other business combination involving the
Company or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company.

Volatility of Stock Price. The market price of the Company's Common Stock
is highly volatile and is subject to wide fluctuations in response to a wide
variety of factors including, quarterly variations in operating results,
announcements of technological innovations or new services by the Company or its
competitors, conditions affecting the Internet industry, changes in financial
estimates by securities analysts, or other events or factors. For example, since
December 31, 1996, the Company's Common Stock closed as low as $7 7/8 and as
high as $91 1/8 per share. In addition, the stock market has experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many high technology companies and that
often have been unrelated to the operating performance of such companies. These
broad market fluctuations may adversely affect the market price of the Company's
Common Stock. In the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against such a company. If brought against the Company, such
litigation could result in substantial costs and a diversion of management's
attention and resources, which would have a material adverse effect on the
Company's business, results of operations and financial condition. See "Price
Range of Common Stock."

Future Capital Needs. The Company currently anticipates that the net
proceeds of this offering, together with its available funds, will be sufficient
to meet its anticipated needs for working capital, capital expenditures and
business expansion through at least the next 12 months. Thereafter, the Company
may need to raise additional funds. The Company may need to raise additional
funds sooner in order to fund more rapid

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<PAGE> 21

expansion, to develop new or enhanced services or products, to respond to
competitive pressures or to acquire complementary products, businesses or
technologies. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of the shareholders of the
Company will be reduced, shareholders may experience additional dilution and
such securities may have rights, preferences or privileges senior to those of
the holders of the Company's Common Stock. There can be no assurance that
additional financing will be available on terms favorable to the Company, or at
all. If adequate funds are not available or are not available on acceptable
terms, the Company may not be able to fund its expansion, take advantage of
unanticipated acquisition opportunities, develop or enhance services or products
or respond to competitive pressures. Such inability could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations--Liquidity and Capital
Resources."

Shares Eligible for Future Sale; Shelf Registration Statements and
Registration Rights. Sales of a substantial number of shares of Common Stock in
the public market following this offering could adversely affect the market
price for the Company's Common Stock. The number of shares of Common Stock
available for sale in the public market is limited by restrictions under the
Securities Act of 1933, as amended (the "Securities Act"). Upon completion of
this offering, the Company will have outstanding approximately 24,722,019 shares
of Common Stock (approximately 24,924,519 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, approximately
9,930,782 shares will be freely tradable without restriction under the
Securities Act. The approximately 14,791,237 remaining shares are "Restricted
Securities" (the "Restricted Securities") under the Securities Act.
Approximately 10,807,369 of the Restricted Shares will be eligible for sale in
the public market upon expiration of certain "lock-up" agreements with the
Underwriters, subject to the resale volume limitations of Rule 144 under the
Securities Act ("Rule 144"). The remaining 3,983,868 Restricted Securities will
be eligible for sale in the public marketplace upon the expiration of their
respective one-year holding periods under Rule 144 (or earlier pursuant to the
shelf registration statements described below). In addition, as of April 30,
1998, options to purchase a total of 5,304,289 shares of Common Stock were
outstanding, 473,883 shares of Common Stock were reserved for future issuance
under the Company's stock option and stock purchase plans, and a warrant to
purchase 325,000 shares of the Company's Series E-3 Preferred Stock were
outstanding and warrants to purchase 497,070 shares of Common Stock (plus an
additional number of shares of Common Stock subject to a warrant having an
aggregate exercise price of up to $25.0 million, based on the market value of
the Common Stock as of April 30, 1999, when such warrant becomes exercisable).

The Company has in effect three shelf Registration Statements with respect
to the 2,789,356 shares (as of April 30, 1998) of Common Stock held by AOL (or
issuable to AOL upon exercise of a warrant), with respect to the 2,900,000
shares of Common Stock held by Intuit, and with respect to the 2,992,522 shares
(as of April 30, 1998) held by, or issuable upon exercise of assumed warrants
to, the former stockholders and warrant holders of MatchLogic and Netbot. The
Company has also filed a shelf registration statement with respect to the shares
of Common Stock issuable upon exercise of the warrants issued to Netscape. The
Company will be required to file an additional shelf registration statement with
respect to the 1,065,337 shares of Common Stock held by, or issuable upon
exercise of assumed warrants or convertible debt to, the former securityholders
of Classifieds2000 and a company from which Excite purchased certain assets in
April 1998. Holders of an additional 4,591,144 shares of Common Stock have
certain rights to require the Company to register those shares of Common Stock
for offer and sale to the public. If such holders, by exercising their
registration rights or selling their shares of Common Stock pursuant to an
existing registration statement, cause a large number of shares to be registered
and sold in the public market, such sales could have a material adverse effect
on the market price for the Company's Common Stock.

Year 2000 Implications. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field and cannot distinguish 21st century dates from 20th century dates. These
date code fields will need to distinguish 21st century dates from 20th century
dates and, as a result, many companies' software and computer systems may need
to be upgraded or replaced in order to comply with such "Year 2000"
requirements. The Company has reviewed its internal programs, and has determined
that there are no significant Year 2000 issues within the Company's systems or
services. However,

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although the Company believes that its systems are Year 2000 compliant, the
Company utilizes third-party equipment and software that may not be Year 2000
compliant. Failure of such third-party equipment or software to operate properly
with regard to the year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. Furthermore, the purchasing patterns of advertisers may be affected
by Year 2000 issues as companies expend significant resources to correct their
current systems for Year 2000 compliance. These expenditures may result in
reduced funds available for Web advertising or sponsorship of Web services,
which could have a material adverse effect on the Company's business, results of
operations and financial condition.

Proposed Reincorporation; Certain Anti-Takeover Provisions. The Company has
submitted to its shareholders for approval at its 1998 annual meeting, to be
held in June 1998, a proposal to change the state of incorporation of the
Company from California to Delaware. If the Company's shareholders approve this
proposal, then upon the reincorporation of the Company into Delaware, the
Company's Certificate of Incorporation, like its current Articles of
Incorporation, will permit the Company's Board of Directors to issue up to
4,000,000 shares of Preferred Stock in one or more series and to determine the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions therefor. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing flexibility in
connection with possible financings, acquisitions or other corporate purposes,
may have the effect of delaying, deferring or preventing a change in control of
the Company, may discourage bids for the Company's Common Stock at a premium
over the market price of the Common Stock, and may adversely affect the market
price of, and the voting and other rights of the holders of, the Common Stock.
Other than shares issuable upon exercise of an outstanding warrant to purchase
up to 325,000 shares of Series E-3 Preferred Stock, the Company has no current
plans to issue shares of Preferred Stock. In addition, the Netcenter Agreement
is subject to termination in the event of an acquisition of the Company or in
the event the Company acquires certain specified companies. Such provisions may
have the effect of delaying, deferring or preventing a change in control of the
Company and may also have the effect of preventing the Company from pursuing
certain acquisitions which the Company may regard as strategic. See "--Risks
Related to Netcenter Agreement."

Certain material differences exist between the rights of the Company's
shareholders under California law and the Company's Articles of Incorporation
and Bylaws, and such rights as they will exist under Delaware Law and the
Company's Certificate of Incorporation and Bylaws, if the reincorporation
proposal is approved. These material differences include, but are not limited
to, the loss of the ability of shareholders to act by written consent, the loss
of cumulative voting rights, limitations on the availability of appraisal rights
with respect to certain reorganizations, more limited standing to bring
shareholder derivative actions, restrictions on the ability of shareholders to
submit proposals for annual meetings and the loss of the ability to call special
shareholder meetings. As a result of such material differences, the rights of
holders of the Company's capital stock will generally become more limited after
the proposed reincorporation.

In addition, if this reincorporation is approved by the Company's
shareholders, certain provisions of the Company's Certificate of Incorporation
and Bylaws will have the effect of delaying, deferring or preventing a change in
control of the Company. These provisions will provide, among other things, that
stockholders may not take action by written consent or call special meetings,
and that the ability of stockholders to submit proposals at stockholder meetings
will be restricted. In addition, the Company will be subject to the anti-
takeover provisions of Section 203 of the Delaware General Corporation Law,
which will prohibit the Company from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The Company's
Certificate of Incorporation and Bylaws will provide that the Company will
indemnify officers and directors against losses that they may incur in
investigations and legal proceedings resulting from their services to the
Company, which may be broad enough to include services in connection with
takeover defense measures. All of the foregoing provisions may have the effect
of preventing changes in the management of, or deferring or preventing a change
of control in, the Company.

22
<PAGE> 23

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,232,500 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$72.3 million ($84.3 million if the Underwriters' over-allotment is exercised in
full) after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company will not receive any
proceeds from the sale of the Common Stock by the Selling Shareholders.

The Company expects to use the net proceeds to the Company from this
offering for the repayment of approximately $50.0 million of indebtedness to
Intuit, a significant shareholder of the Company. This indebtedness is evidenced
by a promissory note (the "Intuit Note"), bears interest at 5.9% per annum and
matures on the earlier to occur of October 30, 1998 or two days after the
closing of this offering. The proceeds of this indebtedness were used to fund
the Company's prepayment of obligations to Netscape under the Netcenter
Agreement. The Company will use the balance of the net proceeds for the funding
of the Cash Payment due under the Netcenter Agreement. The remainder of the net
proceeds, if any, will be used to repay any remaining portion of the Cash
Payment and for general corporate purposes, including working capital.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. In addition, the Company's credit agreement with its bank prohibits the
payment of dividends without the bank's written consent.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol "XCIT" since April 4, 1996, the date of the Company's initial
public offering. The Company's initial public offering price was $17 per share.
The following table sets forth, for the period indicated, the high and low
closing sale prices per share for the Company's Common Stock as reported by the
Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
Year Ended December 31, 1996: ------ ------
<S> <C> <C>
Second Quarter (from April 4, 1996).................... $20 $ 8 1/4
Third Quarter.......................................... 8 3/8 5 1/8
Fourth Quarter......................................... 15 1/4 5 1/2

Year Ended December 31, 1997:
First Quarter.......................................... 21 1/8 8 3/4
Second Quarter......................................... 15 7/8 7 7/8
Third Quarter.......................................... 34 1/4 14 1/4
Fourth Quarter......................................... 34 3/8 20 1/8

Year Ended December 31, 1998:
First Quarter.......................................... 55 7/8 29 7/8
Second Quarter (through June 10, 1998)................. 91 1/8 51 3/8
</TABLE>

On June 10, 1998, the last reported sale price for the Company's Common
Stock on the Nasdaq National Market was $63 per share. On April 27, 1998, there
were approximately 320 holders of record of the Company's Common Stock, although
the Company believes that there is a larger number of beneficial owners of its
Common Stock.

23
<PAGE> 24

CAPITALIZATION

The following table sets forth the capitalization and certain other
obligations of the Company (i) as of March 31, 1998, (ii) pro forma to reflect
$50.0 million payable to Intuit under the Intuit Note, an accrual of $20.0
million for the remaining portion of the Cash Payment (the "Netscape Payable")
and the estimated $56.8 million charge in connection with the Netcenter
Agreement to be incurred during the second quarter of 1998, (iii) the issuance
of warrants to Netscape with an initial valuation of $16.1 million and (iv) pro
forma as adjusted to give effect to the sale of the 1,232,500 shares of Common
Stock offered by the Company hereby (after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company) and the
application of the net proceeds therefrom to repay the Intuit Note and the
Netscape Payable.

<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Intuit Note and Netscape Payable.......................... $ -- $ 70,000 $ --
========= ========= =========
Long-term debt(1):
Capital lease obligations............................... 3,715 3,715 3,715
Non-lease financing..................................... 1,326 1,326 1,326
Convertible note........................................ 5,000 5,000 5,000
--------- --------- ---------
Total long-term debt............................ 10,041 10,041 10,041
--------- --------- ---------
Shareholders' equity:
Convertible preferred stock, no par value; 4,000 shares
authorized, no shares issued and outstanding actual
and as adjusted(2)................................... 813 813 813
Common stock, no par value; 50,000 shares authorized,
22,317 shares issued and outstanding, actual and pro
forma; 23,600 shares issued and outstanding, as
adjusted(3).......................................... 134,283 150,400 222,739
Deferred compensation................................... (1,282) (1,282) (1,282)
Unrealized gain on available-for-sale securities........ 114 114 114
Accumulated deficit..................................... (103,113) (159,945) (159,945)
--------- --------- ---------
Total shareholders' equity (deficiency)............ 30,815 (9,900) 62,439
--------- --------- ---------
Total capitalization............................ $ 40,856 $ 141 $ 72,480
========= ========= =========
</TABLE>

- ---------------
(1) Excludes current portions of such obligations. See Notes 5 and 6 of Notes to
Supplemental Consolidated Financial Statements incorporated herein by
reference for a description of the Company's short-term and long-term debt.

(2) Excludes 325,000 shares of Series E-3 Convertible Preferred Stock issuable
to AOL upon exercise of the AOL Warrant.

(3) Excludes (i) 5,304,289 shares of Common Stock issuable upon the exercise of
stock options outstanding as of April 30, 1998 under the Company's stock
option plans with a weighted average exercise price of approximately $15.28
per share, (ii) an aggregate of 473,307 shares of Common Stock reserved for
future grants or sale under the Company's employee stock option and stock
purchase plans as of such date, (iii) 497,070 shares of Common Stock
issuable upon exercise of then-outstanding warrants to purchase Common Stock
as of such date and an additional number of shares of Common Stock subject
to a warrant having an aggregate exercise price of up to $25.0 million
(which per share exercise price will be based on the market value of the
Common Stock as of April 30, 1999, when the warrant becomes exercisable),
(iv) 325,000 shares of Common Stock issuable upon conversion of Convertible
Preferred Stock issuable upon exercise of the AOL Warrant and (v) 74,766
shares of Common Stock issuable upon conversion of a $5.0 million
convertible promissory note (based on the closing price of $66 7/8 per share
of the Company's Common Stock on April 30, 1998). See Notes 6, 7 and 8 of
Notes to Supplemental Consolidated Financial Statements incorporated herein
by reference.

24
<PAGE> 25

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the supplemental consolidated financial statements and notes
thereto and the interim condensed consolidated financial statements and notes
thereto incorporated herein by reference and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Prospectus. During 1996, Excite acquired The McKinley Group, Inc.
("McKinley") in a transaction accounted for as a pooling of interests, and in
February 1998 Excite acquired MatchLogic in a transaction accounted for as a
pooling of interests. All financial information has been restated to reflect the
combined operations of Excite, McKinley and MatchLogic. The consolidated
statements of operations data for each of the years in the three-year period
ended December 31, 1997 and the consolidated balance sheet data at December 31,
1996 and 1997, are derived from, and are qualified by reference to, the audited
supplemental consolidated financial statements of the Company, which have been
audited by Ernst & Young LLP, independent auditors, included in the Company's
Current Report on Form 8-K filed with the Commission on May 15, 1998,
incorporated herein by reference, and should be read in conjunction with those
financial statements and notes thereto. The consolidated statements of
operations data for the year ended December 31, 1994 and the consolidated
balance sheet data at December 31, 1994 and 1995 are derived from audited
financial statements of the Company which have been audited by Ernst & Young
LLP, independent auditors, not included in this Prospectus. The selected
consolidated financial statement of operations data for the three months ended
March 31, 1997 and 1998, and the selected historical balance sheet data as of
March 31, 1998, are derived from unaudited interim condensed consolidated
financial statements of the Company included in the Company's Quarterly Report
on Form 10-Q for the three months ended March 31, 1998, incorporated herein by
reference. In the opinion of the Company, all necessary adjustments (consisting
of normal recurring adjustments) have been included to present fairly the
unaudited consolidated quarterly results when read in conjunction with the
Company's audited supplemental consolidated financial statements and notes
thereto incorporated herein by reference. The financial data for the three
months ended March 31, 1998 is not necessarily indicative of the results for the
year ending December 31, 1998 or any other future period.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------ -------------------
1994(1) 1995 1996 1997 1997 1998
------- ------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues.................................................... $ 293 $ 953 $ 14,757 $ 54,114 $ 7,515 $ 23,001
Cost of revenues:
Hosting costs............................................ -- 65 3,296 8,586 1,852 2,788
Royalties and other cost of revenues..................... 88 163 667 4,235 540 2,806
Amortization of purchased technology..................... -- -- 186 8,214 2,399 --
------ ------- -------- -------- ------- --------
Total cost of revenues............................... 88 228 4,149 21,035 4,791 5,594
------ ------- -------- -------- ------- --------
Gross profit................................................ 205 725 10,608 33,079 2,724 17,407
Operating expenses:
Research and development................................. 415 2,810 8,030 16,694 3,066 5,900
Sales and marketing...................................... 37 1,648 21,103 32,009 6,281 10,074
Distribution license fees and data acquisition costs..... -- -- 11,878 9,365 30 3,986
General and administrative............................... 399 2,326 7,081 9,477 1,289 2,756
Charge for purchased in-process technology............... -- 331 3,500 2,346 -- --
Other merger and acquisition related costs, including
amortization of goodwill and other purchased
intangibles............................................ -- -- 3,134 3,989 953 977
------ ------- -------- -------- ------- --------
Total operating expenses............................. 851 7,115 54,726 73,880 11,619 23,693
------ ------- -------- -------- ------- --------
Operating loss.............................................. (646) (6,390) (44,118) (40,801) (8,895) (6,286)
Interest income (expense) and other......................... (4) (45) 1,001 (114) 111 (194)
Equity share of losses of affiliated company................ -- -- -- (477) -- (479)
------ ------- -------- -------- ------- --------
Net loss.................................................... $ (650) $(6,435) $(43,117) $(41,392) $(8,784) $ (6,959)
====== ======= ======== ======== ======= ========
Basic and diluted net loss per share(2)..................... $(1.88) $ (6.15) $ (4.75) $ (2.94) $ (.74) $ (.34)
====== ======= ======== ======== ======= ========
Shares used in computing net loss per share(2).............. 346 1,046 9,076 14,077 11,799 20,725
====== ======= ======== ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------- MARCH 31,
1994 1995 1996 1997 1998
----- ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 12 $ 1,118 $20,834 $31,764 $25,392
Working capital (deficit)................................... (442) (878) 8,124 22,970 18,531
Total assets................................................ 157 3,801 47,698 76,693 72,912
Long-term obligations....................................... 100 995 3,985 9,689 10,041
Redeemable convertible preferred stock...................... -- 3,847 -- -- --
Convertible preferred stock................................. -- -- 15,816 9,518 813
Total shareholders' equity (net capital deficiency)......... (542) (4,034) 25,097 34,852 30,815
</TABLE>

- ---------------
(1) The year ended December 31, 1994 includes the results of operations from
Inception to December 31, 1994. The inception date is June 9, 1994 for
Excite and December 7, 1993 for McKinley. The operating results for McKinley
from December 7, 1993 through December 31, 1993 were immaterial.

(2) The net loss per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Standards No. 128, "Earnings Per
Share" and Staff Accounting Bulletin No. 98. For further discussion of net
loss per share and the impact of Statement No. 128 and Staff Accounting
Bulletin No. 98, see Note 1 of Notes to Supplemental Consolidated Financial
Statements incorporated herein by reference.

25
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere in
this Prospectus and the Incorporated Documents. The following discussion should
also be read in conjunction with the supplemental consolidated financial
statements and the interim condensed consolidated financial statements and notes
thereto incorporated herein by reference.

OVERVIEW

The Company operates the Excite Network (which includes the Excite and
WebCrawler brands) and provides a gateway to the Web that organizes, aggregates
and delivers information to meet the needs of individual consumers. Excite,
Inc., formerly Architext Software, Inc., was formed in June 1994, and from its
inception to September 1995, its operating activities related primarily to
recruiting personnel, raising capital, purchasing operating assets, providing
custom product development and consulting services. The Company first launched
its Excite search and directory service in October 1995. In April 1997, the
Company launched a channels-based format for its service and content on the
Excite brand to provide consumers with an interface that reflects the way they
navigate through other forms of media and enables advertisers to more
effectively reach target consumers. The Excite brand currently includes 12
channels of topical interest such as Entertainment, Sports and Business &
Investing. In September 1997, the Company launched a similar channels-based
format for its WebCrawler brand which currently includes 16 channels.

Historically, advertising revenues have been derived principally from
short-term advertising contracts in which the Company guarantees a minimum
number of impressions (a view of an advertisement banner by a consumer) for a
fixed fee. Such banner advertising revenues are dependent upon both the number
of impressions and the rate per thousand impressions ("CPMs") charged. The
Company generally charges higher rates for advertisements focused on targeted
groups, either by key-word associations or affiliations with specific content,
than for general rotation advertisements on the Excite Network.

In 1997, the Company began entering into longer-term advertising and
commerce sponsorship agreements. These agreements generally involve more
integration with the Excite Network and provide for more varied sources of
potential revenues to Excite over the term of the agreements, which generally
average from two to three years. Under these agreements, Excite earns fees for
initial programming, for initiation of service and access to the Excite Network,
and for generating impressions, which in some instances are guaranteed by the
Company. A number of these agreements also provide that revenues or gross
margins from advertising and electronic commerce transactions are to be shared
between the advertiser and Excite as realized. Revenues or margin sharing
recognizable from such transactions were insignificant in 1997, and are expected
to be insignificant in 1998 as well. Sponsorship customers accounted for
approximately 24% and 31% of advertising revenues for 1997 and the three months
ended March 31, 1998, respectively. Revenues are generally recognized ratably
over the term of the agreement, provided that the Company does not have any
significant remaining obligations and collection of the resulting receivable is
probable. To the extent that impression deliveries are falling short of the
guarantees, the Company defers recognition of the corresponding revenues. See
"Risk Factors--Risks Related to Sponsorships" and "--Risks Associated with
Banner Advertising."

In April 1998, the Company and Netscape entered into the Netcenter
Agreement, under which the Company will, among other things, provide, host and
sell advertising for the Co-Branded Services for Netscape's recently announced
Netcenter service. In connection with the Netscape Agreement, the Company has
paid to Netscape $50.0 million with proceeds from the Intuit Note, and is
obligated to pay by June 30, 1998 an additional $20.0 million (together, the
"Cash Payment"). Also in connection with the Netcenter Agreement, the Company
has issued to Netscape a warrant to purchase 423,079 shares of the Company's
Common Stock at an exercise price of approximately $59.09 per share and a second
warrant to purchase shares of the Company's Common Stock at an aggregate
exercise price of up to $25.0 million (together, the

26
<PAGE> 27

"Warrants"). The aggregate exercise price of the second Warrant was to be
reduced to $10.0 million if Netscape and MatchLogic did not enter into a
marketing services agreement by May 22, 1998; however, the companies are
negotiating an extension of this deadline. The fair value of the first Warrant
and the aggregate $10.0 million exercise price of the second Warrant that is not
subject to contingencies initially has been estimated to be $16.1 million. The
Company expects to incur $56.8 million of distribution license fees and data
acquisition costs in the second quarter of 1998. The remaining $29.3 million of
the Cash Payment and Warrant valuation will be amortized over the two-year term
of the Netcenter Agreement. The Company may record additional charges related to
the Warrants in the second quarter of 1998 and future periods due to the
resolution of contingencies regarding the remaining $15.0 million aggregate
exercise price of the second Warrant and under certain other conditions. (See
Note 10 of Notes to the Interim Condensed Consolidated Financial Statements
incorporated herein by reference.) The Company will recognize all revenues
generated from the Co-Branded Services and will pay Netscape the Netscape
Revenues, provided that Excite will not be required to make any payments to
Netscape until it has recouped a substantial portion of the Cash Payment from
amounts which would otherwise have been payable as Netscape Revenues. There can
be no assurance that the Co-Branded Services will generate future revenues. See
"Risk Factors--Risks Related to Netcenter Agreement."

Since August 1996, the Company has acquired a number of businesses,
technologies, services, product lines and content. In April 1998, the Company
issued approximately 165,000 shares of its Common Stock and assumed options and
warrants to purchase up to an aggregate of approximately 159,000 shares of its
Common Stock in exchange for certain assets including in-process technology of
approximately $16.2 million which will be expensed in the second quarter of
1998. Also in April 1998, the Company acquired Classifieds2000, a provider of
online classified ads. The Company issued approximately 865,000 shares of its
Common Stock to former stockholders of Classifieds2000 and assumed options and
warrants to purchase up to approximately 25,000 shares of its Common Stock. In
February 1998, the Company acquired MatchLogic, a provider of solutions for the
management and optimization of Internet advertising campaigns. The Company
issued approximately 3.1 million shares of its Common Stock to former
stockholders of MatchLogic and assumed options and warrants to purchase up to
approximately 524,000 shares of its Common Stock. In November 1997, the Company
acquired Netbot, a developer of advanced search technology. The Company issued
approximately 854,000 shares of its Common Stock to former stockholders of
Netbot and assumed options and warrants to purchase up to approximately 211,000
shares of its Common Stock. In March 1997, the Company completed its acquisition
of the WebCrawler search and directory technology (the "WebCrawler Acquisition")
from America Online, Inc. ("AOL") for an aggregate of 1,950,000 shares of its
Convertible Preferred Stock. In August 1996, the Company acquired McKinley, the
creator of the Magellan Internet Guide. The Company issued 850,000 shares of its
Common Stock and assumed options and warrants to purchase up to approximately
14,000 shares of its Common Stock. All of the above acquisitions were accounted
for as pooling of interests transactions, except for the asset acquisition in
April 1998 and the WebCrawler Acquisition.

All financial information for dates and periods prior to the mergers with
MatchLogic and McKinley have been restated to reflect the combined operations of
the Company, MatchLogic and McKinley. Financial information for dates and
periods prior to the acquisition of Netbot has not been restated to reflect the
combined operations of the Company and Netbot, as Netbot's results of operations
were not material to the Company's consolidated financial statements. Because
the results of operations and financial position of Classifieds2000 were not
material to Excite's consolidated financial statements prior to March 31, 1998,
financial information prior to the date of acquisition will not be restated. See
Note 10 of Notes to the Interim Condensed Consolidated Financial Statements
incorporated herein by reference. For accounting purposes, the Company recorded
the WebCrawler Acquisition as of December 1, 1996. See "Risk
Factors--Acquisition Strategy; Integration of Past and Future Acquisitions" and
Notes 1, 2, 14 and 15 of Notes to Supplemental Consolidated Financial Statements
incorporated herein by reference.

27
<PAGE> 28

growth rate will be sustained or that revenues will continue to grow or that
historical operating results will be indicative of future operating results.
During the second quarter of 1998, the Company expects to incur a charge of
approximately $16.2 million for purchased in-process technology relating to the
acquisition of certain assets and charges of $56.8 million related to the
Netcenter Agreement. The Company may record additional charges, which may be
significant, related to the Netcenter Agreement in the second quarter of 1998
and future periods.

In addition, as the Company has grown, its operating expenses have
increased, and the Company expects that its operating expenses will continue to
increase as a result of its acquisitions, the performance of its obligations
under the Netcenter Agreement, its increased sales and marketing efforts, its
increased funding for development activities and the increased general and
administrative staff needed to support the Company's growth. To the extent that
revenues do not grow at anticipated rates or that increases in such operating
expenses precede or are not subsequently followed by commensurate increases in
revenues, or that the Company is unable to adjust operating expense levels
accordingly, the Company's business, results of operations and financial
condition will be materially and adversely affected. There can be no assurance
that in the future the Company will be profitable on a quarterly or annual
basis. See "--Future Capital Needs" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

28
<PAGE> 29

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain items from the Company's Supplemental
Consolidated Statement of Operations and Interim Condensed Consolidated
Statement of Operations incorporated herein by reference. The Company believes
that period-to-period comparisons of its financial results are not necessarily
meaningful because of its limited operating history, the evolving nature of its
business and its acquisitions. Results for 1995 are not comparable to those for
1996 and 1997 because the Company did not begin selling advertising space on its
network until October 1995.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ----------------
1995 1996 1997 1997 1998
---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising revenues................ 15% 95% 96% 100% 95%
Contract and other revenues......... 85 5 4 -- 5
---- ---- --- ---- ----
Total revenues.............. 100 100 100 100 100
---- ---- --- ---- ----
Cost of revenues:
Hosting costs....................... 7 22 16 25 12
Royalties and other cost of
revenues......................... 17 5 8 7 12
Amortization of purchased
technology....................... -- 1 15 32 --
---- ---- --- ---- ----
Total cost of revenues...... 24 28 39 64 24
---- ---- --- ---- ----
Gross profit.......................... 76 72 61 36 76
Operating expenses:
Research and development......... 295 54 31 41 26
Sales and marketing.............. 173 143 59 83 44
Distribution license fees and
data acquisition costs......... -- 81 17 -- 17
General and administrative....... 244 48 18 17 12
Charge for purchased in-process
technology..................... 35 24 4 -- --
Other merger and acquisition
related costs, including
amortization of goodwill and
other purchased intangibles.... -- 21 7 13 4
---- ---- --- ---- ----
Total operating expenses.... 747 371 136 154 103
---- ---- --- ---- ----
Operating loss........................ (671) (299) (75) (118) (27)
Interest income (expense) and other... (4) 7 -- 1 (1)
Equity share of losses of affiliated
company............................. -- -- (1) -- (2)
---- ---- --- ---- ----
Net loss.............................. (675)% (292)% (76)% (117)% (30)%
==== ==== === ==== ====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 AND 1998

Revenues

Revenues increased by $15.5 million from $7.5 million for the three months
ended March 31, 1997 to $23.0 million for the comparable period in 1998. This
increase is primarily the result of an increase in sales of targeted
advertisements with higher rates, an increase in the number of advertisers
purchasing advertising banners on the Company's Web sites and an increase in
sponsorship advertising revenues. Also contributing to the increase in revenues
was the acquisition of MatchLogic which began operations in May 1997. Revenues
from international operations were not significant during the three months ended
March 31, 1997 and 1998. The Company expects to continue to derive a substantial
majority of its total revenues from selling advertisements. Because the market
for advertising on the Web is intensely competitive, advertising rates

29
<PAGE> 30

could be subject to pricing pressures in the future. If the Company is forced to
reduce its advertising rates or experiences lower CPMs as a result of such
competition or otherwise, future revenues could be adversely affected. Beginning
in the second quarter of 1997, the Company started to sell a combination of
sponsorship and banner advertising contracts in addition to the banner
advertising contracts historically sold by the Company. Such sponsorship
advertising contracts have longer terms, involve more integration with Excite's
services and may allow advertisers to be the exclusive sponsor of portions of
the Excite and/or WebCrawler content. The Company does not expect revenue growth
relating to sponsorship advertising revenues to continue at the current rate in
future periods as availability of exclusive sponsorships may be limited.

Cost of Revenues

Cost of revenues consists primarily of hosting costs, royalties and other
cost of revenues and, in 1997, amortization of purchased technology. Hosting
costs relate to the maintenance and technical support of the Excite Network, and
are comprised principally of personnel costs, telecommunications costs,
equipment depreciation, and overhead allocations. Royalties and other cost of
revenues include expenses related to royalties, license agreements and revenue
sharing agreements for content and other services such as email and chat room
services. Total cost of revenues increased in absolute dollars by $803,000 from
$4.8 million, or 64% of revenues, for the three months ended March 31, 1997, to
$5.6 million, or 24% of revenues, for the comparable period in 1998. Hosting
costs increased in absolute dollars by $936,000 from $1.9 million, or 25% of
revenues, for the three months ended March 31, 1997, to $2.8 million, or 12% of
revenues, for the comparable period in 1998. The increase in hosting costs in
absolute dollars is due primarily to increased personnel expenses and equipment
costs relating to maintaining and supporting the Company's Web sites and
services. Royalties and other cost of revenues increased in absolute dollars by
$2.3 million from $540,000, or 7% of revenues, for the three months ended March
31, 1997, to $2.8 million, or 12% of revenues, for the comparable period in
1998. The increase in royalties and other cost of revenues was primarily due to
increased royalties and margin sharing payments from revenue sharing agreements
entered into in 1997.

In the first quarter of 1997, the Company recognized amortization of
purchased technology of $2.4 million related to the WebCrawler acquisition.
There were no corresponding costs in the first quarter of 1998 as the cost of
the technology was fully amortized at December 31, 1997. Excluding amortization
of purchased technology, total cost of revenues increased $3.2 million from $2.4
million, or 32% of revenues, for the three months ended March 31, 1997, to $5.6
million, or 24% of revenues, for the comparable period in 1998. Excluding
amortization, cost of revenues in future periods is expected to increase in
absolute dollars and may increase as a percentage of revenues as the Company
increases costs to support expanded services and content. The Company also
expects to experience increased hosting costs in connection with performing its
obligations under the Netcenter Agreement and to experience increased royalties
and other cost of revenues as a result of the revenue sharing provisions of the
Netcenter Agreement.

Gross Profit

Gross profit as a percentage of revenues was 36% for the three months ended
March 31, 1997 compared to 76% for the comparable period in 1998. The increase
in gross profit as a percentage of revenues was due primarily to the elimination
of amortization of purchased technology discussed above. Excluding amortization
of purchased technology, gross profit as a percentage of revenues was 68% for
the three months ended March 31, 1997. In addition, revenues grew at a faster
rate than hosting costs and royalties and other cost of revenues. In the future,
gross margins may be affected by the types of advertisements sold and
revenue-sharing provisions of distribution and content agreements. These items
have negatively affected gross profit in the past and may continue to negatively
affect gross profit in the future. Furthermore, pursuant to the provisions of
certain agreements with operators of Web access points and with content
providers, the Company shares advertising revenues based upon the number of
consumers directed to its network. A low level of targeted advertising as a
percentage of total advertising sold, a decrease in targeted or mass Web
advertising rates or an increase in the Company's advertising revenue sharing
obligations could adversely affect gross margins in the future.

30
<PAGE> 31

Operating Expenses

The Company's operating expenses have generally increased in absolute
dollar amounts since inception. This trend reflects the Company's rapid
transition from the product development stage to marketing and offering its
services. The Company believes that continued expansion of its operations is
essential to achieving and maintaining market leadership. As a consequence, the
Company intends to continue to increase expenditures in all operating areas for
the foreseeable future. The Company also expects operating expenses to increase
as a result of its recent acquisitions.

Research and Development. Research and development expenses consist
principally of engineering and editorial personnel costs, equipment
depreciation, consulting fees, supplies and allocation of overhead. Costs
related to research, design and development of products and services have been
charged to research and development expense as incurred. Research and
development expenses increased in absolute dollars by $2.8 million from $3.1
million, or 41% of revenues, for the three months ended March 31, 1997, to $5.9
million, or 26% of revenues, for the comparable period in 1998. The increase in
absolute dollars was primarily attributable to increased expenses as a result of
the Netbot and MatchLogic acquisitions as well as an increase in engineering and
editorial headcount to support the Company's channels format and personalization
capabilities for the Excite Network. The Company believes that a significant
level of research and development expense is required to remain competitive.
Accordingly, the Company anticipates that it will continue to devote substantial
resources to research and development and that these costs will increase in
absolute dollars in future periods. The Company expects to experience increased
research and development expenses in order to provide programming and content
for the Co-Branded Services.

Sales and Marketing. Sales and marketing expenses consist principally of
sales and marketing personnel costs, agency and consulting fees, commissions,
promotional and advertising expenses and allocation of overhead. Sales and
marketing expenses increased in absolute dollars by $3.8 million from $6.3
million, or 83% of revenues, for the three months ended March 31, 1997, to $10.1
million, or 44% of revenues, for the comparable period in 1998. The increase in
absolute dollars was due primarily to the hiring of additional sales and
marketing personnel and increased expenses resulting from the acquisition of
MatchLogic. Promotional expenses remained relatively constant in the three
months ended March 31, 1998 as compared to the same period of the prior year as
the prior year period included costs associated with a national media campaign
that started in the fourth quarter of 1996. The Company expects to continue to
incur significant promotional and advertising expenses and anticipates that
these costs will increase in absolute dollars in future periods as the Company
promotes its brands in order to create and maintain brand loyalty among
customers. The Company also expects to experience increased sales and marketing
expenses as it will be responsible for all advertising sales on the Co-Branded
Services.

Distribution License Fees and Data Acquisition Costs. Distribution license
fees and data acquisition costs consist principally of fees paid to third-party
Internet companies such as Netscape to provide entry points to the Excite
Network and, starting in 1997, costs to update and maintain the ad targeting and
tracking database by the Company's MatchLogic subsidiary. Distribution license
fees and data acquisition costs were $30,000 in the first quarter of 1997 and
$4.0 million in the first quarter of 1998. The first quarter of 1998 reflects
distribution license fees related to agreements entered into with Netscape in
March 1997 as well as data acquisition costs incurred by MatchLogic.

The Company expects to incur $56.8 million of distribution license fees and
data acquisition costs in the second quarter of 1998. The $29.3 million portion
of the Cash Payment and Warrant valuation under the Netcenter Agreement not
written off in the second quarter of 1998 will be amortized over the two-year
term of the Netcenter Agreement. In the future, high traffic Web sites, ISPs,
providers of Web browsers or other distribution channels could require cash
payments or other types of consideration as compensation for listing or
promoting the Excite Network, which could result in increased distribution
license fees. See "Risk Factors--Risks Related to Netcenter Agreement" and
"--Dependence on Third-Party Relationships."

General and Administrative. General and administrative expenses consist
principally of administrative and executive personnel costs, provision for
doubtful accounts, fees for professional services and allocation of overhead.
General and administrative expenses increased by $1.5 million from $1.3 million,
or 17% of

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<PAGE> 32

revenues, for the three months ended March 31, 1997, to $2.8 million, or 12% of
revenues, for the comparable period in 1998. The increase in general and
administrative expenses from the same quarter of the prior fiscal year was
primarily due to increased personnel to support expansion of the Company's
operations. In particular, growth in the Company's and MatchLogic's finance and
administrative departments contributed to this increase. The Company anticipates
that its general and administrative expenses will continue to increase in
absolute dollars as the Company expands its administrative and executive staff,
adds infrastructure and assimilates acquisitions of acquired technologies and
businesses. In addition, the Company plans to continue to run MatchLogic as in
independent subsidiary with its own administrative function, which will
contribute to increased general and administrative expenses in the future.

Other Merger and Acquisition Related Costs, Including Amortization of
Goodwill and Other Purchased Intangibles. The Company has in the past, and may
in the future, acquire businesses, technologies, services, product lines,
content databases or access to content databases that are complimentary to the
Company's business. During the three months ended March 31, 1998, the Company
incurred merger and acquisition related costs of $700,000 related to the
acquisition of MatchLogic. The remainder of the merger and acquisition related
costs for the first quarter of 1998 and all of the costs for the first quarter
of 1997 related to the amortization of goodwill and other purchased intangibles
resulting primarily from the WebCrawler acquisition in December 1996.

The Company anticipates that it will incur approximately $683,000 in merger
and acquisition related costs for the acquisition of Classifieds2000 in the
second quarter of 1998. In addition, the Company expects to incur expenses for
purchased in-process technology of approximately $16.2 million related to the
asset purchase in April 1998.

Interest Income (Expense) and Other. Interest income for the three months
ended March 31, 1997 and 1998 was $230,000 and $397,000, respectively. The
increase in interest income was primarily a result of higher cash, cash
equivalent and short-term investment balances in the first quarter of 1998.
Interest expense and other for the three months ended March 31, 1997 and 1998
was $119,000 and $591,000, respectively. This increase was due primarily to
expenses associated with additional capital lease obligations, non-lease
financing obligations and the convertible note issued to Itochu Corporation in
connection with the joint venture with respect to Excite Japan discussed below.

Equity Share of Losses of Affiliated Company. In October 1997, the Company
and Itochu Corporation and certain affiliated entities (collectively "Itochu")
entered into a joint venture agreement with respect to the Company's
wholly-owned subsidiary, Excite Japan, in order to provide Web-based information
services to the Japanese market. The Company currently holds, and intends to
retain, a 50% equity interest in Excite Japan. For the three months ended March
31, 1998, Excite's share of the losses of Excite Japan was $479,000. The Company
expects that it will record increased losses from Excite Japan for at least the
remainder of 1998.

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

Revenues

The Company began selling advertising space on its network in October 1995.
Revenues increased from $953,000 for 1995 to $14.8 million for 1996, and to
$54.1 million for 1997. These increases were primarily the result of increases
in the number of advertisements sold, increases in sales of targeted
advertisements with higher rates, increases in the number of advertisers
purchasing advertisements on the Company's Web sites and, in 1997, an increase
in sponsorship advertising revenues.

Included in revenues for 1995, 1996 and 1997 were contract and other
revenues of $808,000, $727,000 and $2.1 million for 1995, 1996 and 1997,
respectively. Prior to 1997, contract and other revenues consisted primarily of
revenues derived from custom product development, licensing of the McKinley
database, royalties from sales of the McKinley Internet Yellow pages and
consulting fees. The Company does not currently derive significant revenues from
these sources. The increase in 1997 was primarily attributable to the sale of
Internet consumer database information to direct marketers by the Company's
MatchLogic subsidiary.

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<PAGE> 33

Two customers accounted for 26% and 16%, respectively, of revenues in 1995.
One customer accounted for approximately 12% of revenues for 1996. No customer
accounted for more than 10% of revenues for 1997. Revenues generated from
international operations in 1997 were not significant. See Note 10 of Notes to
Supplemental Consolidated Financial Statements incorporated herein by reference.

Cost of Revenues

In 1996 and 1997, the Company recognized, as a component of total cost of
revenues, amortization of purchased technology of $186,000 and $8.2 million,
respectively, related to the WebCrawler Acquisition. As of December 31, 1997,
this purchased technology has been fully amortized. Total cost of revenues
increased $16.9 million, from $4.1 million, or 28% of revenues for 1996, to
$21.0 million, or 39% of revenues for 1997. Cost of revenues for 1995 was not
comparable to that for 1996 and 1997 as the nature of the Company's revenues
changed significantly with the launch of the Company's services in October 1995.

Excluding amortization of purchased technology, cost of revenues increased
in absolute dollars by $8.8 million, from $4.0 million, or 27% of revenues for
1996, to $12.8 million, or 24% of revenues for 1997. This increase in absolute
dollars was due primarily to increased personnel expenses and equipment costs
relating to hosting the Company's Web sites and increased royalties and revenue
sharing costs.

Gross Profit

Gross profit as a percentage of revenues was 76%, 72% and 61% for 1995,
1996 and 1997, respectively. The decline in the gross profit as a percentage of
revenues was due primarily to the amortization of purchased technology discussed
above, as well as increased hosting costs to support expanded Web site offerings
and increased royalties and margin sharing costs, offset in part by increased
revenues. Excluding the amortization of purchased technology, gross profit as a
percentage of revenues for those periods was 73% and 76%, respectively.

Operating Expenses

Research and Development. Research and development expenses increased from
$2.8 million, or 295% of revenues for 1995, to $8.0 million, or 54% of revenues
for 1996, and to $16.7 million, or 31% of total revenues for 1997. The increase
in absolute dollars in 1996 was primarily due to increased engineering and
editorial staff required to develop and enhance the Company's services as well
as increased research and development activities resulting from the WebCrawler
Acquisition and the merger with McKinley. The increase in absolute dollars for
1997 was due to an increase in engineering headcount to support the Company's
channels format and personalization capabilities for the Excite Network as well
as the commencement of operations of MatchLogic in May 1997.

Sales and Marketing. Sales and marketing expenses increased in absolute
dollars from $1.6 million, or 173% of revenues for 1995, to $21.1 million, or
143% of revenues for 1996, and to $32.0 million, or 59% of revenues for 1997.
The 1996 increase was mainly due to the launch of a significant media
advertising campaign during the fourth quarter of 1996, and to increased sales
personnel costs as a result of the transition from the use of outside
advertising sales agencies for the sales of advertisements to a direct sales
force. The 1997 increase was primarily due to the continuation of the media
campaign discussed above into the first quarter of 1997, the hiring of
additional sales and marketing personnel and the launching of the WebCrawler
brand.

Distribution License Fees and Data Acquisition Costs. Distribution license
fees and data acquisition costs decreased from $11.9 million for 1996 to $9.4
million for 1997. There were no distribution license fees or data acquisition
costs for 1995. In 1996, distribution license fees included a one-time, non-cash
charge of approximately $1.6 million related to the issuance of a warrant to AOL
during the first quarter of 1996, and a $10.0 million charge relating to the
Company's Premier Provider Agreements with Netscape in the second quarter of
1996. In March 1997, the Company entered into a new agreement with Netscape to
continue the Premier Provider arrangement for the Excite brand, and entered into
a Marquee Provider Agreement for the WebCrawler brand. Under the terms of these
agreements, the Company was committed to make minimum

33
<PAGE> 34

payments of approximately $8.3 million in exchange for a guaranteed number of
impressions. Of the $8.3 million minimum, a portion was applied towards
advertising by Netscape on the Excite Network over the term of the agreements
based upon delivery of such advertising, and the remainder was paid in cash at
intervals over the term of the agreements.

In June 1997, the Company entered into a Co-Marketing Services Agreement
and a Trademark License Agreement with Netscape. Under these agreements, the
Company is responsible for the programming, production, operations and
advertising sales of "International Netscape Guide by Excite," a service being
made available in Japan, Germany, France, the United Kingdom and Australia. In
connection with these agreements, the Company made a payment of $4.0 million to
Netscape in July 1997, which is being amortized over the terms of these
agreements to distribution license fees expense.

General and Administrative. General and administrative expenses increased
in absolute dollars from $2.3 million, or 244% of revenues for 1995, to $7.1
million, or 48% of revenues for 1996, and to $9.5 million, or 18% of revenues
for 1997. The increase in absolute dollars was primarily due to increased
personnel, professional service fees, provision for doubtful accounts and, in
1997, relocation to new facilities to support the Company's growth.

Charge for Purchased In-Process Technology. The Company recognized a charge
of $331,000 for 1995 related to the acquisition of City.Net Express
("City.Net"). The $3.5 million charge for purchased in-process technology in
1996 related to the WebCrawler Acquisition. The $2.3 million charge in 1997
related to the value of acquired in-process research and development that had
not reached technological feasibility at the time of MatchLogic's formation in
May 1997. See Notes 2 and 14 of Notes to Supplemental Consolidated Financial
Statements incorporated herein by reference.

Other Merger and Acquisition Related Costs, including Amortization of
Goodwill and Other Purchased Intangibles. Other merger and acquisition related
costs, including amortization of goodwill and other purchased intangibles,
totaled $3.1 million and $4.0 million for 1996 and 1997, respectively. The 1996
charge included approximately $2.2 million associated with the merger with
McKinley, and approximately $769,000 related to the amortization of goodwill and
other intangible assets resulting from the WebCrawler Acquisition and the
acquisition of City.Net. In 1997, the Company incurred other merger and
acquisition costs of $1.8 million resulting from the amortization of other
WebCrawler intangible assets, $1.5 million from the Netbot merger and $700,000
from the amortization of other acquired intangible assets. There were no other
merger and acquisition related costs for 1995.

Interest Income (Expense) and Other. Interest income was $5,000, $1.4
million and $1.3 million for 1995, 1996 and 1997, respectively. The increase in
1996 reflected interest earned on investments from cash received from the
Company's Series D Preferred Stock financing and its initial public offering.
The decrease in 1997 was primarily the result of the use of cash received from
the initial public offering to fund operations, offset in part by interest
earned on the proceeds of approximately $38.4 million from the sale of Common
Stock to Intuit in the second quarter of 1997. Interest expense increased from
$50,000 for 1995 to $409,000 for 1996, and to $1.4 million for 1997. This
increase was due primarily to increased expenses associated with an increased
amount of capital lease obligations and bank borrowings.

Equity Share of Losses of Affiliated Company. As of December 31, 1997, the
Company held a 50% equity interest in Excite Japan. Excite's share of the losses
of Excite Japan for 1997 was $477,000. See Notes 6 and 11 of Notes to
Supplemental Consolidated Financial Statements incorporated herein by reference.

Income Taxes

At December 31, 1997, the Company had federal and state net operating loss
carryforwards of approximately $76.3 million and $53.4 million, respectively.
The federal net operating loss carryforwards will expire beginning in 2009
through 2012, if not utilized. The state net operating loss carryforwards will
expire at various dates beginning in 1999 through 2002. An ownership change, as
defined in the Tax Reform Act of 1986, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the realization of the asset
due to the lack of earnings history of the Company. See Note 9 of Notes to
Supplemental Consolidated Financial Statements incorporated herein by reference.

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<PAGE> 35

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth a summary of the Company's unaudited
condensed consolidated quarterly results of operations, both in dollar amount
and as a percentage of total revenues, for the nine quarters in the period ended
March 31, 1998. The information for each of these quarters has been derived from
unaudited condensed consolidated financial statements that have been prepared on
the same basis as, and should be read in conjunction with, the Company's
Supplemental Consolidated Financial Statements and Notes thereto incorporated
herein by reference. In the opinion of the Company, all necessary adjustments
(consisting of normal recurring adjustments) have been included to present
fairly the unaudited consolidated quarterly results when read in conjunction
with the Company's audited Supplemental Consolidated Financial Statements and
Notes thereto incorporated herein by reference. The results of operations for
any quarter are not necessarily indicative of the results to be expected for any
future period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997 1997 1997 1997 1998
-------- -------- --------- -------- -------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues.................... $ 1,374 $ 2,816 $ 4,049 $ 6,518 $ 7,515 $ 10,089 $15,962 $ 20,548 $23,001
Cost of revenues:
Hosting costs............. 246 413 1,015 1,622 1,852 1,684 2,518 2,532 2,788
Royalties and other cost
of revenues............. 143 14 150 360 540 556 1,145 1,994 2,806
Amortization of purchased
technology.............. -- -- -- 186 2,399 1,938 1,939 1,938 --
------- -------- ------- -------- ------- -------- ------- -------- -------
Total cost of
revenues.......... 389 427 1,165 2,168 4,791 4,178 5,602 6,464 5,594
------- -------- ------- -------- ------- -------- ------- -------- -------
Gross profit................ 985 2,389 2,884 4,350 2,724 5,911 10,360 14,084 17,407
Operating expenses:
Research and
development............. 1,376 2,109 2,038 2,507 3,066 3,617 4,332 5,679 5,900
Sales and marketing....... 2,489 3,203 6,304 9,107 6,281 7,199 7,858 10,671 10,074
Distribution license fees
and data acquisition
costs................... 1,625 10,000 253 -- 30 1,707 3,216 4,412 3,986
General and
administrative.......... 1,141 2,782 1,753 1,405 1,289 1,843 2,837 3,508 2,756
Charge for purchased
in-process technology... -- -- -- 3,500 -- 2,346 -- -- --
Other merger and
acquisition related
costs, including
amortization of goodwill
and other purchased
intangibles............. -- 73 2,292 769 953 463 530 2,043 977
------- -------- ------- -------- ------- -------- ------- -------- -------
Total operating
expenses.......... 6,631 18,167 12,640 17,288 11,619 17,175 18,773 26,313 23,693
------- -------- ------- -------- ------- -------- ------- -------- -------
Operating loss.............. (5,646) (15,778) (9,756) (12,938) (8,895) (11,264) (8,413) (12,229) (6,286)
Interest income (expense)
and other................. 2 370 402 227 111 (112) 164 (277) (194)
Equity share of losses of
affiliated company........ -- -- -- -- -- -- -- (477) (479)
------- -------- ------- -------- ------- -------- ------- -------- -------
Net loss.................... $(5,644) $(15,408) $(9,354) $(12,711) $(8,784) $(11,376) $(8,249) $(12,983) $(6,959)
======= ======== ======= ======== ======= ======== ======= ======== =======
AS A PERCENTAGE OF REVENUES:
Revenues...................................... 100% 100% 100% 100% 100% 100% 100%
Cost of revenues:
Hosting costs............................... 18 15 25 25 25 17 16
Royalties and other cost of revenues........ 10 -- 4 5 7 6 7
Amortization of purchased technology........ -- -- -- 3 32 19 12
------- -------- ------- -------- ------- -------- -------
Total cost of revenues................ 28 15 29 33 64 42 35
------- -------- ------- -------- ------- -------- -------
Gross profit.................................. 72 85 71 67 36 58 65
Operating expenses:
Research and development.................... 100 75 50 38 41 36 27
Sales and marketing......................... 181 114 156 140 83 71 50
Distribution license fees and data
acquisition costs......................... 119 355 6 -- -- 17 20
General and administrative.................. 83 99 43 21 17 18 18
Charge for purchased in-process
technology................................ -- -- -- 54 -- 23 --
Other merger and acquisition related costs,
including amortization of goodwill and
other purchased intangibles............... -- 2 57 12 13 5 3
------- -------- ------- -------- ------- -------- -------
Total operating expenses.............. 483 645 312 265 154 170 118
------- -------- ------- -------- ------- -------- -------
Operating loss................................ (411) (560) (241) (198) (118) (112) (53)
Interest income (expense) and other........... -- 13 10 3 1 (1) 1
Equity share of losses of affiliated
company..................................... -- -- -- -- -- -- --
------- -------- ------- -------- ------- -------- -------
Net loss...................................... (411)% (547)% (231)% (195)% (117)% (113)% (52)%
======= ======== ======= ======== ======= ======== =======

<CAPTION>
<S> <C> <C>
AS A PERCENTAGE OF REVENUES:
Revenues...................................... 100% 100%
Cost of revenues:
Hosting costs............................... 12 12
Royalties and other cost of revenues........ 10 12
Amortization of purchased technology........ 10 --
-------- -------
Total cost of revenues................ 32 24
-------- -------
Gross profit.................................. 68 76
Operating expenses:
Research and development.................... 28 26
Sales and marketing......................... 52 44
Distribution license fees and data
acquisition costs......................... 21 17
General and administrative.................. 17 12
Charge for purchased in-process
technology................................ -- --
Other merger and acquisition related costs,
including amortization of goodwill and
other purchased intangibles............... 10 4
-------- -------
Total operating expenses.............. 128 103
-------- -------
Operating loss................................ (60) (27)
Interest income (expense) and other........... (1) (1)
Equity share of losses of affiliated
company..................................... (2) (2)
-------- -------
Net loss...................................... (63)% (30)%
======== =======
</TABLE>

35
<PAGE> 36

The Company's total revenues, total cost of revenues, and operating
expenses have generally increased in each of the nine quarters in the period
ended March 31, 1998. These increases are primarily the result of the growth of
the Excite service, on which the first advertising space was sold in October
1995, the addition of the WebCrawler service in March 1997, the redesign of the
Excite service into a channels format in April 1997 and the redesign of the
WebCrawler service into a channels format in September 1997. The Company also
ran a significant media advertising campaign for the Excite service during the
fourth quarter of 1996. These events contributed to increased revenues,
particularly in the second, third and fourth quarters of 1997, as the Company
began selling sponsorships on its channels. Expenses increased as the Company's
headcount and infrastructure increased to support and market the expanded
services, and as the result of acquisitions and certain significant contracts.

The Company has completed a number of acquisitions in the past which have
resulted in unusual fluctuations in expenses in absolute dollars because of
duplicated operations, acquisition-related costs and amortization of intangible
assets resulting from the acquisitions accounted for as purchases. For example,
hosting costs were negatively impacted in the first quarter of 1997 by
transition costs associated with the acquisition of the WebCrawler Assets. Cost
of revenues also includes amortization expenses associated with technology
purchased as part of the WebCrawler Assets in each of the quarters from December
1996 through December 1997. Both research and development expenses and general
and administrative expenses were negatively impacted in the quarters ended June
30, 1996 and September 30, 1996 by expenses resulting from the acquisition of
McKinley in August 1996, which was accounted for as a pooling of interests.
McKinley's general and administrative expenses included costs associated with a
failed initial public offering and the write-off of a note receivable in the
quarter ended June 30, 1996. In addition, after the acquisition, certain
redundant administrative and development operations of McKinley were eliminated.
Charges for purchased in-process technology and other merger and acquisition
related expenses have also fluctuated quarter to quarter as acquisitions have
occurred. See Note 2 of Notes to Supplemental Consolidated Financial Statements
and "Risk Factors--Acquisition Strategy; Integration of Past and Future
Acquisitions."

The Company has entered into a number of significant agreements which
resulted in increased expenses on a quarter-to-quarter basis. Distribution
license fees included a one-time, non-cash charge of approximately $1.6 million
related to the issuance of a warrant to AOL during the first quarter of 1996,
and a $10.0 million charge relating to the Company's Premier Provider Agreements
with Netscape in the second quarter of 1996. These payments were expensed
immediately because realizability at the time was not assured. In May 1997, the
Company entered into a new agreement with Netscape to continue the Premier
Provider arrangement for the Excite brand, and entered into a Marquee Provider
Agreement for the WebCrawler brand. The expense associated with these newer
contracts was amortized over the terms of the agreements. In June 1997 the
Company entered into a Joint Activities Agreement with Intuit under which the
two companies share certain revenues and expenses associated with the Company's
Finance and Investing channels on the Excite Network, resulting in an increase
in royalties and other costs of revenues beginning in the third quarter of 1997
as compared to previous quarters. See Notes 11 and 12 of Notes to Supplemental
Consolidated Financial Statements and "Risk Factors--Dependence on Third-Party
Relationships." As a result of the Netcenter Agreement, the Company anticipates
incurring additional significant charges in the second quarter of 1998. See
"Risk Factors--Risks Related to Netcenter Agreement."

As a result of the Company's limited operating history, the evolving nature
of its business and its acquisitions, the Company has limited meaningful
historical financial data upon which to base planned operating expenses.
Accordingly, the Company's expense levels are based in part on its expectations
as to future advertising revenues and to a large extent are fixed. The Company
expects in the future to derive revenues from a mix of advertising sales
(including banner advertisements and sponsorships), commerce transactions and
direct and database marketing activities. To date, the Company has not received
any material amount of revenues from commerce transactions, and the Company only
recently acquired MatchLogic, which the Company expects to be its primary source
of revenues from database and direct marketing activities. There can be no
assurance that the Company will be successful in deriving substantial revenues
from these areas. There can also be no assurance that the Company will be able
to accurately predict the levels of future advertising revenues, particularly in
light of the intense competition for the sale of Web-based

36
<PAGE> 37

advertisements, the Company's limited operating history and the uncertainty as
to the viability of the Web as an advertising medium. The failure by the Company
to accurately make such predictions would have a materially adverse effect on
the Company's business, results of operations and financial condition. In
addition, the Company derives a significant portion of its revenues from the
sale of advertising under short-term advertising contracts. The cancellation or
deferral of existing advertising contracts or the failure to obtain new
advertising contracts in any quarter could materially and adversely affect the
Company's business, results of operations and financial condition for that
quarter. Furthermore, the Company derives banner advertising revenues and
believes it attracts sponsors and advertisers based on the amount of traffic, or
page views, on the Excite Network. Accordingly, any significant shortfall of
traffic on the Excite Network in relation to the Company's expectations or the
expectations of existing or potential advertisers, would have a material adverse
effect on the Company's business, results of operations and financial condition.

The Company's operating results have varied on a quarterly basis during its
limited operating history and the Company expects to experience significant
fluctuations in future quarterly operating results. Such fluctuations have been
and may in the future be caused by numerous factors, many of which are outside
the Company's control, including but not limited to: specific economic
conditions relating to the Internet and the Web; usage of the Web; demand for
advertising on the Excite Network as well as demand for Web-based advertising in
general; changes in advertising rates as a result of competition or otherwise;
seasonal trends in advertising sales; the advertising budgeting cycles of
advertisers; incurrence of charges in connection with the Netcenter Agreement
and the Company's distribution relationships with Netscape, AOL and other ISPs
and OSPs or other third parties; demand for the Company's services; incurrence
of costs relating to acquisitions of businesses or technologies; introduction or
enhancement of new or existing services by the Company and its competitors;
market acceptance of new services; delays in the introduction of services or
enhancements by the Company or its competitors; mix of types of advertisements
sold, such as the amount of targeted advertising, which generally has higher CPM
rates, sold as a percentage of total advertising sold; capacity constraints and
dependencies on computer infrastructure; and general economic conditions.

Due to all of the foregoing factors, the Company's quarterly revenues and
operating results are difficult to forecast. The Company believes that
period-to-period comparisons of its results of operations will not necessarily
be meaningful and should not be relied upon as an indication of future
performance. Also, it is likely that in some future quarter or quarters the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would be materially and adversely affected. See "Risk Factors--Volatility of
Stock Price" and "Price Range of Common Stock."

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1998 the Company had $25.4 million in unrestricted cash, cash
equivalents and short-term investments, a decrease of $6.4 million from December
31, 1997. During the first quarter of 1998, the Company completed its merger
with MatchLogic. This merger resulted in significant increases in headcount and
overhead, as well as the assumption and payment of additional liabilities. The
Company maintains its cash and cash equivalents in short-term and medium-term
investment-grade interest-bearing securities until required for other purposes.

In March 1997, the Company entered into a line of credit agreement for $6.0
million that will mature on June 30, 1998. The Company is currently negotiating
a renewal of this line of credit. This line of credit bears interest at rates
ranging from the bank's prime rate to prime plus .25% and is collateralized by a
security interest in substantially all of the Company's assets. This line of
credit agreement contains certain financial covenants, including minimum
requirements for tangible net worth, quick ratio and accounts receivable
balances, and prohibits the declaration and payment of cash dividends on capital
stock without the prior

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written consent of the bank. As of March 31, 1998, the Company had outstanding
borrowings against this line of credit of $6.0 million, and was in compliance
with all financial covenants. The Company is currently in negotiations to renew
this line of credit. MatchLogic has an additional line of credit with a bank
allowing for borrowings of up to $3.0 million. As of March 31, 1998 the Company
had no borrowings outstanding against this additional line of credit. This
additional line is secured by certain assets of the Company, bears interest at
the bank's prime rate plus 1%, and expires on December 1, 1998.

The joint venture agreement with respect to Excite Japan obligates Excite
and Itochu to make capital contributions in the aggregate amount of $10.0
million by March 31, 1999. In October 1997, the Company borrowed $5.0 million
from Itochu under a convertible promissory note in order to fund its share of
these capital contribution obligations. This note bears interest at the London
InterBank Offered Rate plus 1% and is convertible into shares of the Company's
Common Stock based upon the market value of the Common Stock at its maturity
date in October 2002, or earlier in the event the Company desires to prepay such
note.

The Company's operating activities used cash of $4.7 million, $26.1
million, $35.5 million and $5.8 million in 1995, 1996, 1997 and the three months
ended March 31, 1998, respectively. The increased use of cash in 1996 was
primarily attributable to increased operating expenses and increases in accounts
receivable and prepaid expenses, reduced in part by increases in accrued
distribution license fees, accounts payable and other accrued liabilities. The
increased use of cash in 1997 was primarily attributable to the payment of
previously accrued expenses, including but not limited to payments to Netscape
and to the Company's advertising agency for an advertising campaign launched
during the fourth quarter of 1996, a $4.0 million license fee payment to
Netscape in July 1997 (see Note 12 of the Notes to Supplemental Consolidated
Financial Statements incorporated herein by reference) and an increase in
accounts receivable resulting from the sales of sponsorship advertising
contracts, offset in part by a decrease in net losses and an increase in accrued
liabilities. The decreased use of cash in the three months ended March 31, 1998
as compared to the same period of the prior year was primarily attributable to
higher revenue and resulting higher collections of accounts receivable and lower
payments for other accruals, offset in part by higher payments of accrued
compensation. The Company has in the past, and may in the future, acquire
businesses which result in significant increases in headcount and overhead, as
well as the assumption and payment of additional liabilities, resulting in an
increase in the use of cash to support operations. See "Risk
Factors--Acquisition Strategy; Integration of Past and Future Acquisitions."

Investing activities used cash of $1.3 million, $19.4 million, $5.7 million
and $1.8 million in 1995, 1996, 1997 and the three months ended March 31, 1998,
respectively. The 1996 increase was primarily attributable to net purchases of
short-term investments as well as property and equipment from cash proceeds of
the Company's initial public offering in April 1996. The decreased cash used in
1997 was primarily the result of cash being invested in cash equivalents rather
than short-term investments and net sales of short-term investments, partially
offset by increased purchases of property and equipment. In the three months
ended March 31, 1998, cash was used primarily for investments in an affiliated
company.

Financing activities generated cash of $6.7 million, $48.7 million, $52.6
million and $1.3 million in 1995, 1996, 1997 and the three months ended March
31, 1998, respectively. Financing activities in 1996 primarily consisted of the
sale of Redeemable Convertible Preferred Stock and debt securities totaling
$12.3 million and the sale of the Company's Common Stock for net proceeds of
$37.2 million, of which $35.4 million represented net proceeds from the
Company's initial public offering. Financing activities in 1997 primarily
consisted of a bank line of credit borrowing of $6.0 million, a convertible
promissory note of $5.0 million, the sale of convertible preferred stock by an
acquired company for net proceeds of $6.4 million, and the sale of Common Stock
for net proceeds of $40.0 million, of which $38.4 million represented net
proceeds from the sale of Common Stock to Intuit. Financing activities for the
first three months of 1998 primarily consisted of proceeds from the exercise of
common stock options, offset in part by payments on capital lease and other
financing obligations.

The Company's principal commitments at December 31, 1997 consisted of
obligations under operating leases, capital leases and other non-lease
financings of $23.0 million, $7.0 million and $3.1 million, respectively, as
well as bank and other borrowings. See Notes 4, 5, 6 and 15 of Notes to
Supplemental Consolidated Financial Statements incorporated herein by reference.
In April 1998, the Company paid

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$50.0 million to Netscape as part of its cash prepayment obligations under the
Netcenter Agreement, and the Company is obligated to pay Netscape an additional
$20.0 million by June 30, 1998. The Company borrowed $50.0 million from Intuit
in April 1998 to fund the $50.0 million payment to Netscape. The loan bears
interest at 5.9% per annum and is due on October 30, 1998 or two days after the
closing of this offering, whichever occurs first.

To date, the Company has had limited international operations and its
exposure to foreign currency exchange rate fluctuations has been minimal. The
Company evaluates its foreign currency exchange rate exposure on an ongoing
basis.

Capital expenditures have been, and future expenditures are anticipated to
be, primarily for facilities and equipment to support expansion of the Company's
operations and management information systems. The Company expects that its
capital expenditures will increase as its employee base grows. As of March 31,
1998, the Company did not have any material commitments for capital
expenditures, although the Company anticipates that its planned purchases of
capital equipment and leasehold improvements will require additional
expenditures in 1998, a substantial portion of which is expected to be financed
through equipment leases. At March 31, 1998, the Company had $6.5 million
available on an equipment lease line, and the Company believes that additional
lease financing will be available to it if necessary.

The Company believes that the net proceeds of this offering, together with
its existing working capital balance and cash flows generated from advertising
revenues, will be sufficient to meet its anticipated cash needs for working
capital, capital expenditures and business expansion for at least the next 12
months. Thereafter, the Company may need to raise additional funds. The Company
may need to raise additional funds sooner in order to fund more rapid expansion,
to develop new or enhanced services or products, to respond to competitive
pressures or to acquire complementary products, businesses or technologies. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of the shareholders of the Company will be
reduced, shareholders may experience additional dilution and such securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock.

YEAR 2000 IMPLICATIONS

Many existing computer programs use only two digits to identify a year in
the date field. These programs, which were developed without considering the
impact of the upcoming change in the century, could fail or create erroneous
results by or at the year 2000. The Company has reviewed its internal systems
and programs, and believes its results of operations will not be materially
adversely affected by year 2000 issues with respect thereto. However, the
Company cannot be certain that its customers, vendors or financial services
providers will not have year 2000 issues. Should such issues arise with any of
these parties, there could be a material adverse effect on the Company's
business, operating results and financial condition. See "Risk Factors--Year
2000 Implications."

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and display of
income and its components (revenue, expenses, gains, and losses) in a full set
of general-purpose financial statements. The Company adopted SFAS No. 130 as of
December 31, 1997 and has presented comprehensive income for all periods
presented in the Statement of Shareholders' Equity included in the Supplemental
Consolidated Financial Statements incorporated herein by reference.

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. The Company adopted SFAS No.
131 as of December 31, 1997. Previously reported information has been restated
to reflect the addition of an operating segment resulting from the merger with
MatchLogic. See Notes 10 and 14 of Notes to Supplemental Consolidated Financial
Statements incorporated herein by reference.

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BUSINESS

The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from the results discussed in these forward-looking statements as a
result of certain factors including, but not limited to, those discussed under
"Risk Factors" and elsewhere in this Prospectus and the Incorporated Documents.

Excite is a global Internet media company offering consumers and
advertisers comprehensive Internet navigation services with extensive
personalization and targeting capabilities. The Excite Network, which consists
of the Excite and WebCrawler brands, provides a gateway to the World Wide Web
(the "Web") that organizes, aggregates and delivers information to meet the
needs of individual consumers. Designed to help consumers navigate the Web, the
Excite Network contains a suite of specialized information services, organized
under numerous topical channels that combine proprietary search technology,
editorial Web reviews, aggregated content from third parties, bulletin boards,
chat and other community features and personalization capabilities. The Excite
Network offers advertisers a high-reach vehicle to aggregate and target one of
the largest Web audiences, with over 28.4% of domestic Web users having used the
Excite Network at least once during the month of April 1998, as measured by
Media Metrix. Through its MatchLogic subsidiary, the Company provides innovative
Internet ad campaign management tools and services in the form of reporting,
measurement and analytical techniques and sophisticated direct and database
marketing services. In addition, the Company believes there will be a
significant opportunity to derive revenues from online transactions and,
therefore, the Company has entered into, and is continuing to pursue,
transaction-based arrangements which are designed to allow the Company to
benefit from online purchases directed through advertisements on the Excite
Network.

INDUSTRY BACKGROUND

The Web as a Mass Medium

The rapid adoption of the Internet as a means to gather information,
communicate, interact and be entertained, combined with the vast proliferation
of Web sites providing such content and communication services, suggests that
the Web is becoming a new mass medium. International Data Corporation ("IDC")
estimates that the number of Web users grew to approximately 69 million in 1997,
and estimates that this number will reach 320 million by 2002. With its millions
of consumers, the Web has joined the ranks of other mass media as a means to
advertise and market products and services. Jupiter Communications estimates
that spending on Web advertising in the U.S. by U.S. companies will grow from
$1.9 billion in 1997 to $7.7 billion in 2002, yet will represent just over 3% of
the estimated $153 billion of their total advertising spending in 2000. The Web
offers two important new commercial opportunities beyond advertising not offered
by traditional mass media--personalized database marketing and online
transactions. Jupiter Communications estimates that the amount of goods or
services purchased in online consumer transactions will grow from approximately
$3 billion in 1997 to approximately $38 billion in 2002.

Web Advertising. As a mass medium, the Web has become a compelling
advertising vehicle due to its interactivity, flexibility, targetability and
accountability, providing advertisers targeting and feedback tools not available
from traditional advertising media. The interactive nature of the Web and the
development of "click-through" advertising banners enable advertisers to
establish dialogues and more meaningful relationships with potential customers.
The Web provides advertisers the flexibility to immediately adjust or change
their messages in response to consumer feedback or real world events. The
ability to target advertisements to broad audiences, specific regional
populations, affinity groups or individuals makes Web advertising highly
versatile and potentially more effective than traditional advertising. The
Company believes that, compared with traditional media, the Web is a more
accountable medium because advertisers can measure impression levels,
demographic viewership and effectiveness of their advertisements.

One indicator of the Web's popularity as an advertising medium is the
growing number and diversity of Web advertisers. Most early Web advertisers were
technology and Internet-related companies. Today, a

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growing number of Web advertisers consists of more traditional,
consumer-oriented companies such as Toyota, Procter & Gamble and American
Express. The Company believes that this trend is continuing, and that a wide
variety of companies outside of the technology and Internet industries, such as
financial services, consumer goods, automotive and pharmaceutical companies, are
using the Web to deliver their advertising messages.

Web-based Database Marketing. The Web's ability to allow marketers to
collect important demographic information and feedback from consumers, and to
rapidly respond to such information and feedback with new messages, offers a
significant new opportunity for businesses to increase the effectiveness of
their direct marketing campaigns. The Company believes that in traditional
media, a substantial majority of all advertising dollars are spent on direct
marketing, rather than general brand advertising, because of the potential for
greater return on investment with direct marketing. However, the effectiveness
of direct response advertising, relative to brand advertising, is dependent on
the currency and quality of the consumer data used to place direct response
advertisements. For instance, a Volkswagen direct marketing campaign for its new
Beetle would be far less cost effective if it failed to screen out mailings to
consumers under the legal driving age. The interactive sharing of information
between users and Web sites provides an opportunity for advertisers to develop a
robust and continually refreshed consumer database and to utilize this data to
improve the effectiveness of direct response advertising.

Online Transactions. The Web is emerging as a potentially significant
marketplace for buying and selling goods and services. Improvements in security,
interface design and back-end systems integration technologies have facilitated
the increase in online consumer transactions. Early adopters include online
merchants offering products and services with large product classes (such as
books, music CDs and toys), those seeking distribution efficiencies (such as
flowers and groceries) and those offering products and services with
differential pricing (such as automobiles and PCs). The Company believes that
traditional retailers will increasingly offer a wide variety of products and
services to consumers on the Web.

The Evolution of Search Engines

The rapid growth of the Web has made it increasingly difficult for
consumers, content providers, online merchants and advertisers to reach one
another effectively. Consumers find it a challenge to quickly find the most
relevant information, products and services related to a particular interest or
need. Content providers and online merchants are challenged to differentiate
their offerings from others in an increasingly crowded medium, and seek to
employ the widest, yet most targetable, distribution mechanisms available.
Advertisers find it a challenge to cost-effectively deliver their messages to
large, targeted audiences and to measure the impact of their messages.

Search engines were developed as a technology solution to the challenges
posed by the Web's growth. Sites offering users the ability to search through
proprietary databases of Web sites emerged as rapidly as the Web grew. The need
for, and thus the popularity of, such search engines grew as users typically
started their Web sessions by visiting a search engine Web site. Advertisers
became attracted to these sites because of the search engines' popularity,
frequency of use and volume of user traffic. Additionally, advertisers
increasingly realized the benefits of being able to target ads to affinity
groups or to geographic regions by inferring user interests from search queries,
thereby better focusing their advertising efforts. Search engines have largely
become media-oriented services by aggregating users and advertisers and thereby
serving as gateways to the Web.

The Challenges Facing Web Gateways

As a result of becoming Web gateways, these sites have aggregated millions
of targetable users that can be delivered to Web advertisers. Web gateways have
realized that by increasing the frequency and duration of usage, they have the
opportunity to become valuable areas on the Web through which to better market
and sell to consumers and thereby increase their advertising revenues. In order
to capitalize on these opportunities these companies have had to deliver more
sophisticated services to increasingly savvy Web users to prevent them from
quickly passing through their sites on the way to satisfying their specific
online needs. In providing

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additional services, gateway sites must deliver better, faster and more
efficient and satisfying experiences. In addition to providing ever-improving
features for users, gateways must continue to improve their offerings and value
to Web advertisers and merchants. Thus, gateways must seek to further evolve
into Web destinations by constantly anticipating the needs of users, advertisers
and merchants.

THE EXCITE SOLUTION

The Excite Network, which includes the Company's two branded services,
Excite and WebCrawler, has become one of the most popular destinations on the
Web. The key to Excite's solution is to deliver the best programming and
services to consumers, thereby providing an efficient and effective platform for
Web advertisers and merchants to advertise, market and sell their goods and
services. Excite's programming and services provide content, commerce and
community, with the context to keep sessions relevant, the control to keep the
experience personalized, and the convenience of one-stop-shopping. In addition
to providing Excite Search and Excite Shopping Search powered by Jango product
search technology, the Excite Network offers a rich experience that includes the
Company's Excite Channels of subject-based content, MailExcite email service,
online chat functionality and the personalized My Excite Channel home page. To
further enhance the online experience for users with varying levels of Web
sophistication, the Company offers two branded services -- Excite for more
experienced Web users and WebCrawler for users desiring a simpler platform.

The emergence of the Excite Network as a popular destination has made it
attractive to advertisers, merchants and direct marketers. The Excite Network
offers advertisers a high reach vehicle to aggregate and target one of the
largest Web audiences, with over 28.4% of domestic users accessing the Excite
Network at least once during the month of April 1998 as measured by Media
Metrix. In addition, through Excite's traffic and knowledge of consumer
demographic data from online registrations and traffic logs, the Excite Network
offers a substantial opportunity for direct marketers. With the recent
acquisition of MatchLogic, the Company can offer Web marketers a high degree of
database targeting, and provide campaign management services to Web agencies and
their advertising clients, including a third-party centralized facility for
changing, managing, reporting and measuring Web campaign efficiency. Online
merchants also benefit from Excite's reach, and with Excite's Excite Shopping
Search powered by Jango product search technology, users can find and compare
prices of desired products and services, and ultimately purchase such products
and services at attractive prices. In this way, the Excite Network maintains its
leadership as a popular Web destination, while staying in front of the evolving
opportunities and demands of the Web.

STRATEGY

The Company's goal is to become the Web's leading branded media network
with the largest consumer reach and the highest revenue per user. The key
elements of the Company's strategy to achieve this goal include:

Build Brand Awareness and Consumer Loyalty. To increase consumer awareness
among both new and experienced Web users, the Company engages in a number of
advertising, public relations and other marketing programs designed to promote
its brands. By offering a network of brands, the Company seeks to build loyalty
and awareness from different consumer demographics and to market this large,
segmented audience to advertisers, retailers and direct marketing customers.
Once they visit the Excite Network, consumers can easily access a wide variety
of customizable Web information and community services which allow them to
define their Web experience and which are designed to encourage repeat usage and
loyalty to the Excite Network. The Company offers My Excite Channel which can be
easily customized to automatically display content such as a personal stock
portfolio, local weather, selected news topics and sports scores, and a variety
of community building services, such as MailExcite, Excite PAL, Excite Boards
and Excite Chat.

Increase Traffic Through Distribution. The Company seeks to attract as many
consumers as possible to the Excite Network. To this end, the Company has
arrangements which give the Excite Network highly visible placements on popular
and heavily-trafficked Web access points. The Company has established premier
positions on Web sites operated by Netscape and Microsoft, two of the most
heavily-trafficked Web sites, and has entered into an exclusive co-branding
agreement with AOL, the leading online service provider.

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The Company will also provide the Co-Branded Services for Netcenter. In December
1997, the Company formed an alliance with Prodigy, enabling Prodigy subscribers
to quickly customize their start page as a personal My Excite Channel and has
also entered into a relationship with AT&T to provide an online service called
"Excite Online Powered by AT&T WorldNet.". In addition, the Excite Network is
featured as the default search and navigation service on the WebTV Networks,
Inc. ("WebTV") service. The Company intends to continue to pursue distribution
relationships with leading ISPs and popular Web sites in the future.

Expand and Enhance the Excite Network. The Company intends to broaden and
deepen its network of information services by leveraging its search technology,
programming skills and techniques, strategic partners' content and
personalization capabilities and, if necessary, by acquiring complementary
businesses and technologies. For example, through relationships with numerous
retailers and Excite's sophisticated but easy-to-use Excite Shopping Search
powered by Jango product search tool, the Company provides consumers a powerful,
simple, one-stop shopping source. In addition, the Company has entered into, and
plans to pursue in the future, strategic relationships with content providers.
These relationships can vary from providing content for a particular area of a
topical channel, such as the National Enquirer Online's entertainment gossip
section on the Entertainment Channel, to sponsoring an entire channel, such as
Quicken.com's Business & Investing Channel. These relationships enable the
Company to increase the breadth of content on the Excite Network without
incurring significant development or maintenance costs.

Maximize Value for Advertisers. The Company seeks to maximize value for its
advertisers by developing a large base of users with known demographic
characteristics and providing effective advertising delivery and measurements
systems. The Company helps its advertising and retail customers more effectively
target consumers by encouraging its users to provide demographic and other
information on product preferences and anticipated purchases, principally
through registration for services, prizes and other rewards. Aided by the
technology and expertise of MatchLogic, the Company strives to distinguish
itself as an industry leader in providing innovative Internet ad campaign
management tools and services in the form of reporting, measurement and
analytical techniques, and sophisticated direct and database marketing services,
both of which are designed to enable customers to maximize the value of their
advertising and direct marketing investments.

Pursue Multiple Revenue Opportunities. The Company is pursuing multiple
revenue opportunities for future growth. The Company currently derives
substantially all of its revenues from the sale of impression-based advertising
and sponsorships on the Excite Network and believes that online transactions and
database and direct marketing present key revenue opportunities for the future.
The Company believes that, as consumers become more comfortable with making
purchases over the Web, there will be a significant opportunity for online
transaction revenue. Accordingly, as part of certain of its newer sponsorship
relationships the Company has entered into transaction-based arrangements which
are designed to allow the Company to benefit from online purchases directed
through advertisements on the Excite Network. Through its recent acquisition of
MatchLogic, the Company also intends to leverage the wealth of stored computer
information about users and their buying preferences to generate revenues from
database and direct marketing arrangements.

Pursue Global Opportunities. The Company believes that there are
significant opportunities to leverage the Excite Network internationally.
Through a joint venture with its Excite Japan subsidiary, Itochu and Dainippon
Printing Co., Ltd. ("DNP"), the Company offers a localized version of the Excite
brand for Japan. The Company also offers, independently or in conjunction with
local content providers, localized versions of its services for Australia,
France, Germany, Japan, Scandinavia and the United Kingdom and is pursuing
additional distribution opportunities in these markets. In addition, the Company
provides navigation services for Netscape's International Netscape Guide and has
international distribution relationships with the Microsoft Network ("MSN") and
NETCOM On-Line Communications Services, Inc. ("NETCOM").

THE EXCITE NETWORK

As the Web has evolved, the Company has grown from being a provider of a
single-function Web search utility to offering a branded Internet media network
consisting of the Excite and WebCrawler brands.

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Excite Services

The Company's Excite services consist of: navigation, such as Excite Search
and Excite Channels, which help consumers more easily find relevant information;
community, such as chat, email, bulletin board and instant messaging services,
which help consumers connect and communicate; and personalization services, such
as My Excite Channel, a personalized home page which can be customized simply
and easily by a consumer to satisfy his or her personal interests.

Excite Search. The Company maintains an extensive index of Web documents
which is refreshed by the Company's automatic spider technology on a regular
basis. Excite's search technology allows consumers to search the Web in multiple
ways, including by keyword, phrase, concept, Boolean logic or proper name.
Excite's "More Like This" feature, which utilizes query-by-example technology,
allows users who find a document of interest to find similar documents with the
click of a button. In addition, Excite's automatic abstract technology provides
consumers with a brief and accurate abstract of each document returned by a
search. Excite Search also permits users to search news articles, Usenet
newsgroups, the Excite City.Net travel index or Excite's Web Guide of
approximately 100,000 Web sites.

Excite Channels. In April 1997, the Company launched a channels-based
format for its services and content to provide consumers with a more intuitive
interface that reflects the way they navigate through other forms of media, such
as television, and enables advertisers and retailers to more effectively reach
target consumers. The entire suite of Excite services can be accessed from each
channel. By combining existing services with specialized information and
services from leading content providers, Excite provides channel-specific
content including topical news, links to related Web sites, products and
services and directories, bulletin boards, chat and search capabilities.

The Excite brand includes the following channels of topical interest:
Autos
Business & Investing
Careers & Education
Computers & Internet
Entertainment

Games
Lifestyle
News
People & Chat
Shopping
Sports
Travel

My Excite Channel. My Excite Channel enables consumers to personalize their
home page Web interface and choose the information they want delivered to their
personal page, thereby delivering a personalized Web experience for each
consumer. After registering with Excite, consumers create a personal profile
which selects and automatically updates information of interest such as
personalized stock quotes, news stories, local and national sports scores,
horoscopes, local and national weather, television listings and special
reminders. As of March 31, 1998, the Company had approximately 1.8 million
registered users of My Excite Channel.

Excite Shopping. The Excite Shopping Channel offers a safe and convenient
online shopping service for consumers. This channel is arranged around 16
departments, including: automobiles, books, clothes, computers and software,
flowers and gifts, music and movies and other items. The Shopping Channel
features links to a number of leading retailers' Web sites, including
Amazon.com, J.Crew, the Disney Store and Music Boulevard, and also offers Excite
Shopping Search powered by Jango. After the customer enters a product request,
Excite Shopping Search powered by Jango determines the best sources of
information. The service then assembles the relevant information and displays
the final shopping results in an easy-to-browse report that typically includes
product reviews, specifications, pricing, secure transaction information and
other essential shopping details. When a consumer is ready to buy, the purchase
is completed on the merchant's Web site. In addition to simplifying shopping on
the Web for consumers, the Excite Shopping Channel also provides online
retailers a unique opportunity to market products to shoppers at the point of
decision. The Company also offers its "Excite Safe Shopping Guarantee" program.
Under this program, merchants which meet Excite's requirements for secure Web
transactions become an "Excite Certified Merchant," and links to an Excite
Certified Merchant's Web site display an "Excite Guaranteed" logo. If an Excite
consumer suffers a

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loss resulting from fraudulent use of his or her credit card as a result of an
online transaction from an Excite Certified Merchant, Excite will reimburse the
cardholder for any fraud liability not covered by the credit card issuer, up to
a maximum of $50.

Classifieds. The Company's Classifieds service provides consumers with
access to a nationwide database of online classified advertisements in a number
of categories, including auctions, automobiles, computers, general merchandise,
jobs, personals, real estate and rentals. Users can place their own
advertisements directly and can search the aggregated classifieds of the Company
and its partners, including those of Classified Ventures, a joint venture of The
Times Mirror Company, Tribune Company and The Washington Post Company,
Classifieds2000, which was acquired by the Company in April 1998 and is one of
the Web's largest and most comprehensive databases of classified advertising,
Auto-by-Tel and others. The Company's Classifieds2000 service will be featured
as the provider of classified advertising (other than career-related
advertising) on Netcenter.

Excite Communities. The Company offers a number of services which allow
users to connect and communicate with each other. The Company believes that
users who habitually check their email on Excite Mail or their instant messages
on Excite PAL are more likely to visit more frequently, spend more time on the
Excite Network and use other Excite services as well. Community-building
services, such as Excite Boards and Excite Chat, allow users to join communities
of other users with similar interests or needs, thereby enhancing the user
experience within the Excite Network with the goal of improving customer
retention.

WebCrawler Services

WebCrawler, which was created in early 1994 at the University of
Washington, was one of the first Internet search engines. WebCrawler was
acquired by AOL in April 1995 to be its exclusive Internet search engine. In
November 1996, Excite agreed to acquire the WebCrawler service from AOL and
WebCrawler became one of Excite's flagship brands.

The Company believes that WebCrawler still maintains a large and loyal
following on the Web. In March 1998, the Company redesigned the WebCrawler
service to focus on speed, simplicity and practicality. The new WebCrawler
features daily thematic programming and links to tips, information, chatrooms
and shopping services. The topical themes, which change daily, include: Health &
Fitness; Career; Kids & Family; Personal Finance; Computing; Entertainment; and
Travel. WebCrawler also features The Daily ToolBox, a call-out box of Web-based
consumer tools useful in daily life situations. Tools featured include a baby
name finder and a calorie counter, among many others. Users can also access
their favorite tools through a ToolBox archive.

The WebCrawler Search service helps consumers find information on the Web
by searching through WebCrawler's index of Web documents. WebCrawler Search
enables consumers to search the Web in multiple ways by keyword, Boolean logic,
phrase, example or document similarity. Search results can be listed by title
only or by full listing with an abstract. Listings which have been reviewed are
identified and consumers can easily click to the review. WebCrawler also
features a "Shortcuts" section. When search results are displayed, a series of
links to a related area within the service, such as related Usenet groups,
classified ads, content pages on one of the channels or to a retail Web site,
are prominently displayed on the right side of the search results page. The
Company believes that this feature enables it to more effectively direct
targeted traffic from Web search services into a WebCrawler channel or service
or into the Web pages of sponsors.

Similar to the Excite brand, content on WebCrawler is organized within
topical channels which include:
Arts & Books
Auto
Business & Investing
Careers & Education
Computers & Internet
Entertainment
Games

Health & Fitness
Home & Family
News
People & Chat
Reference
Relationships
Shopping
Sports & Recreation
Travel

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WebCrawler offers all of the community features offered throughout the
Excite brand. WebCrawler users can also create a personalized home page with the
My Page feature, which, like the My Excite Channel feature, selects and delivers
information of interest such as stock quotes and news headlines.

ADVERTISING AND COMMERCE

The Company currently derives substantially all of its revenues from the
sale of advertisements on the Excite Network though banner advertisements,
sponsorships and, through its MatchLogic subsidiary, database and direct
marketing arrangements. See "--MatchLogic." In the future, the Company also
intends to pursue revenues from online transactions.

Banner Advertisements. Banner advertisements are prominently displayed
throughout the Excite Network and as the consumer interacts with the Excite
Network, new advertisements are displayed. From each advertisement banner,
consumers can hyperlink directly to an advertiser's own Web site, thus enabling
the advertiser an opportunity to directly interact with an interested consumer.
The Company offers a variety of banner advertising programs that enable
advertisers to target their audiences at various levels of market segmentation.
Mass market placements deliver general rotation banner advertisements throughout
the Excite Network but do not have any particular market segmentation. With the
introduction of the Excite Network's channels format in April 1997, advertisers
can purchase targeted advertising for an audience with a specific content
interest as they do in traditional media. Advertisers can target general
interest topics such as "sports" or can target advertisements to more specific
subcategories such as "college basketball" or a particular team. The Company
charges higher per impression fees for advertising products based upon the
specificity of the target audience. The Company's standard rate card rates for
advertising currently range from $24 per thousand impressions ("CPMs") for
general rotation across undifferentiated users to up to $65 per thousand
impressions for targeted affinity or keyword packages.

The Company's banner advertising agreements generally are for a relatively
short term and provide for a minimum number of guaranteed impressions for a
fixed fee. Accordingly, actual CPM rates depend upon a variety of factors,
including, without limitation, the duration of the advertising contract and the
number of impressions purchased, and are often negotiated on a case-by-case
basis. Because of these factors, actual CPM rates experienced by the Company
have been lower than its standard rate card rates. Currently, a substantial
majority of the number of banner advertising placements on the Excite Network
are general rotation advertisements. The Company's strategy is to migrate
advertisers to more targeted advertisement placements such as on its channels
pages and on My Excite Channel pages.

Sponsorship Advertising and Online Transaction Revenue. During the second
quarter of 1997, the Company began selling advertising placements and links
outside of the space normally reserved for banner advertisements. These
arrangements are known as sponsorships because they typically involve the
placement of an advertisement or link in a topical channel as though the
advertiser was sponsoring the content on a specific page. The ad or link is
programmed to appear prominently on the same spot on the page, each time that
page of channel content is called for by the user. Some of these sponsorships
include relationships with Amazon.com, Inc., Barnes & Noble, Inc., Preview
Travel, Inc., N2K Inc. and CDnow, Inc.

Sponsorships have a longer duration than the Company's banner advertisement
agreements and typically have a two or three year term. In some instances, the
Company has entered into exclusive sponsorship arrangements for certain
channels. Some sponsorship arrangements provide that the Company will
participate in the revenue or profit margin from a purchase made by a consumer
who responded to an ad placed on the Excite Network. While Excite has not
received any online transaction revenues to date from these sponsorship
arrangements and does not anticipate receiving any significant amount of online
transaction revenues in 1998, the Company believes these arrangements provide an
additional revenue opportunity if online purchasing continues to grow. Through
March 31, 1998, the Company had entered into over 80 sponsorship arrangements,
of which approximately 21 included some form of transaction revenue or margin
sharing arrangement.

Through the Company's various advertising programs, advertisers can combine
multiple advertising packages in order to develop an advertising plan that
reaches many audience types and that is designed to maximize reach, frequency of
exposure and consumer response. For example, an airline company might utilize

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a general rotation advertisement as a base of mass exposure. The advertising
campaign could be enhanced by using a topical affinity consumer targeting
approach, by either sponsoring a section of the Travel Channel or purchasing
keywords such as "travel" or "airfare" on any of the Company's related services.

CUSTOMERS

For the three months ended March 31, 1998, over 175 brands from a wide
range of industries were advertised on the Excite Network. The following is a
list of brands or companies for which advertisers purchased more than $50,000 in
advertising on the Excite Network during the three months ended March 31, 1998:

<TABLE>
<S> <C>
FINANCIAL/INSURANCE TECHNOLOGY
Allstate IBM
AmeriTrade IDT
Charles Schwab Intel
Datek Online Microsoft
DLJdirect Netscape
E*TRADE
Fidelity ONLINE COMMERCE
FirstUSA Amazon.com
MasterCard Auto-By-Tel
SURETRADE/Quick & Reilly AutoConnect
Visa BarnesandNoble.com
Wells Fargo CDnow
Consumers Car Club
AUTOMOTIVE Cyberian Outpost
Acura/Honda Greet Street
General Motors N2K/Music Boulevard
Isuzu NetGrocer
Toyota ONSALE
Volvo software.net
ENTERTAINMENT CONSUMER/OTHER
Disney Anheuser-Busch
InterCasino CondeNast
SportsLine Foot Locker
Starwave The Fragrance Counter
Office Depot
Toys R Us
Preview Travel
</TABLE>

No customer accounted for more than 10% of revenues during 1997 or the
three months ended March 31, 1998.

RELATIONSHIP WITH NETSCAPE

In April 1998, the Company and Netscape entered into the Netcenter
Agreement, a two-year strategic relationship under which the Company will, among
other things, develop, host, program and sell advertising for co-branded
channels (the "Co-Branded Channels"), a co-branded search service (the
"Co-Branded Search Service") and a co-branded directory service (the "Co-Branded
Directory Service" and, collectively, the "Co-Branded Services"), for Netscape's
recently-announced Netcenter service ("Netcenter"). In addition to the potential
revenues to the Company associated with the Netcenter Agreement, the Company
believes that the potential benefits of the Netcenter Agreement include the
opportunity to increase its brand awareness, strengthen its market position
among consumers and advertisers, share certain user registration data with
Netscape and reduce exposure on Netscape's Web site for the Company's
competitors.

Netcenter is expected to feature a number of topical channels, including
the Co-Branded Channels (Education, Games, Lifestyle, Autos, Health, Arts &
Leisure, Real Estate, Auctions and Shopping) which will be provided by Excite
and co-branded with Netscape, and additional channels which will be provided by
Netscape (the "Netscape Channels"). Netcenter will also include the Co-Branded
Search Service and the Co-Branded Directory Service that will be developed and
operated by the Company (subject to Netscape's right to assume responsibility
for programming all or part of the Co-Branded Directory Service). Furthermore,

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the Company's Classifieds2000 service will be featured as the provider of
classified advertising, excluding career-related advertising, throughout
Netcenter. The Company will be responsible for developing, programming and
hosting and the Co-Branded Services. The Company will also be responsible for
selling advertising on the Co-Branded Services. The Company will bear all costs
incurred by it in connection with the Netcenter Agreement, without a right of
reimbursement. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "--Sales and Marketing."

Under the Netcenter Agreement, the Company will recognize all revenues
generated from the Co-Branded Services not directly from any other part of
Netcenter. The Company will pay to Netscape the Netscape Revenues. No amounts
will be paid to Netscape until such time as the amount of revenues generated by
the Co-Branded Services which would be payable to Netscape thereunder equals the
portion of the Cash Payment attributable to traffic and royalty prepayments
under the Netcenter Agreement. There can be no assurance as to the level of
revenues to be generated by the Company from the Co-Branded Services, and the
realization or amount of such revenues are subject to numerous risks. See "Risk
Factors--Risks Related to Netcenter Agreement."

The Company issued two warrants to Netscape in partial consideration for
Netscape entering into the Netcenter Agreement. One warrant is immediately
exercisable for up to 423,079 shares of Common Stock at an exercise price per
share of $59.09, and will expire on April 30, 2000. The second warrant, which
becomes exercisable on April 30, 1999 and which will expire on April 30, 2000,
will entitle Netscape to purchase a number of shares of Common Stock having an
aggregate exercise price of up to $25.0 million (with a per share exercise price
based on the market value of the Common Stock as of April 30, 1999, when the
warrant becomes exercisable), which was subject to reduction to $10.0 million if
Netscape and MatchLogic did not enter into a marketing services agreement on or
before May 22, 1998 providing for certain minimum payments to MatchLogic;
however, the companies are negotiating an extension of this deadline. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Upon the termination of the Netcenter Agreement (other than a termination
in connection with certain acquisitions of or by Netscape), the Company will be
obligated to deliver to Netscape one copy of certain technology used in
connection with the operation, production, development, management and support
of the Co-Branded Services for which the Company has granted Netscape a license
(the "Licensed Technology"). This license is a perpetual, royalty-free license,
including the right to sublicense the Licensed Technology. The Company will be
required to provide Netscape certain limited engineering support with respect to
the Licensed Technology. The Netcenter Agreement is subject to termination in
the event of certain acquisitions of or by the Company or Netscape, in which
event Netscape will be obligated to repay a portion of the Cash Payment and to
reimburse the Company for certain costs and expenses. In addition, if Netscape
believes that the Company's own service, or the content provided by Excite for
the Netcenter service, contains material that Netscape deems likely to cause it
material harm, and if the Company does not timely revise such objectionable
content, Netscape may terminate the Netcenter Agreement with no obligation to
repay any portion of the Cash Payment or to reimburse the Company for any costs
or expenses. There can be no assurance that the Company and Netscape will agree
to renew the Netcenter Agreement at the end of its two-year term. In addition,
even if the Company were able to renew the Netcenter Agreement, if any
replacement agreement is on materially worse terms, there could be a material
adverse effect on the Company's business, results of operations and financial
condition. See "Risk Factors--Risks Related to Netcenter Agreement."

DISTRIBUTION

The Company believes that maintaining a presence on Web access points and
other high-traffic Web sites, known as gateways, is an important factor in
obtaining traffic and attracting advertisers. The Company seeks to obtain new
consumers by providing multiple gateways into the Excite Network, thereby
increasing its visibility on Web access points. The Company has established
premier positions on Web sites operated by Microsoft and Netscape, two of the
most highly trafficked Web sites, has entered into the Netcenter Agreement with
Netscape and has entered into a co-branding relationship with AOL, the leading
online service provider. In addition, the Company has established a number of
distribution relationships under which

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the Excite brand is typically featured as the default Web navigation network.
The Company has distribution relationships with ISPs, OSPs and others such as
AT&T, Prodigy, PointCast and WebTV.

The Netcenter Agreement will replace the Company's existing distribution
agreement with Netscape when it expires in May 1998. Under this new agreement,
the Company will be featured as a "premier provider" on Netscape's Net Search
page and will be similarly featured on the Netcenter Widget tool. Excite's
services have been allocated 25% of the random rotation of premier provider
listings from the Net Search page for the two-year term of the Netcenter
Agreement, with Netcenter receiving 25% and 50% of the rotation during the first
and second years of the term of the agreement, respectively. Netscape has also
guaranteed that Excite will receive a certain minimum number of impressions from
the Net Search page and a certain minimum number of click-throughs from the
Netcenter Widget over the term of the Netcenter Agreement. Netscape has also
guaranteed that the Co-Branded Search Service will receive a certain minimum
number of page views and that the Co-Branded Channels will receive a certain
minimum number of initial page views over the term of the Netcenter Agreement.

The Netcenter Agreement expires two years from the date of the launch of
the Netcenter service and may be terminated sooner in the event of certain types
of changes in control with respect to Excite or Netscape. There can be no
assurance that the Company and Netscape will be able to agree to renew the
Netcenter Agreement at the end of its two-year term. In addition, even if the
Company were able to renew the Netcenter Agreement, if any replacement agreement
is on materially worse terms, there could be a material adverse effect on the
Company's business, results of operations and financial condition.

In May 1998, the Company entered into a three-year agreement with AT&T to
provide dial-up access to an online service to be named "Excite Online Powered
by AT&T Worldnet." Users will have dial-up access for a personalized Excite
page. In addition, the Company and AT&T intend to offer users Internet-based
multimedia communications services such as click-to-dial directories, anonymous
voice chat, and Web-based conference calling. The service, which will be jointly
marketed by the Company and AT&T, is expected to be launched in June 1998. In
the future, the Company and AT&T intend to offer users a selection of AT&T
services through a co-branded "Personal Communications Center" on the Excite
Network.

The Company's Excite brand is also featured as one of five services on the
"Search the Web" section of the Microsoft Search page and the WebCrawler brand
and Magellan guide are also listed on the Microsoft Search page. The Company's
agreement with Microsoft expires in June 1998. Although to date the Company has
not derived a significant portion of its traffic from Microsoft, there can be no
assurance that the Company will be able to renew its agreement with Microsoft on
favorable terms, if at all, or that Microsoft will not enter into an exclusive
arrangement with one of the Company's competitors, the occurrence of any of
which could also have a material adverse effect on the Company's business,
results of operations and financial condition.

The Company also has a five-year distribution agreement with AOL which
expires in November 2001 under which a co-branded version of the Excite search
and directory service, AOL NetFind Powered by Excite, is designated as the
exclusive Web search and directory service for the AOL service for an initial
two-year period ending in November 1998. If the exclusive period is not extended
by AOL beyond the initial two year term, the co-branded service would become the
"default" search and directory service of AOL, however, AOL could enter into a
strategic relationship with a competitor of the Company or offer its own
competing services, which could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Risk
Factors--Risks Related to Netcenter Agreement" and "--Dependence on Third-Party
Relationships."

CONTENT

The Company has entered into, and plans to pursue in the future,
relationships with third-party information providers. These relationships enable
the Company to increase the breadth of content on the Excite Network without
incurring significant development or maintenance costs. These content
relationships include relationships with: Reuters and UPI to provide news
stories; Charles Schwab to provide stock quotes; Sports Ticker to provide sports
scores; The National Enquirer to provide entertainment gossip news; The

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<PAGE> 50

Tribune Company to provide horoscopes; and GTE New Media Services, Inc. to
provide Yellow Pages information.

In October 1997, the Company launched its Business & Investing channel with
Quicken.com that offers integrated tools and content designed to help consumers
make the most of their money. This channel helps users with their investments
and covers other areas of their financial lives, including banking, mortgages,
taxes, planning and insurance.

MATCHLOGIC

In February 1998, the Company acquired MatchLogic, a provider of Internet
advertising campaign management and database and direct marketing solutions. In
order to assure Web advertisers and agencies of the independence of Matchlogic
campaign management services, and of the confidentiality of consumer data
collected from its campaign efficiency measurement and reporting services, the
Company operates Matchlogic as an independent subsidiary.

Campaign Management. Today, there are two methods of delivering advertising
messages on the Web: one is via the Web sites themselves, the other is via
"third party" ad servers such as MatchLogic. Prior to third-party ad serving,
ads were delivered exclusively by Web sites, such as the Excite Network. For
large advertisers planning to place advertisements on multiple sites, this
process was inefficient and ineffective, because a single Web site can only
provide information about its own activity and cannot provide consistent
reporting of advertising results from multiple Web sites. MatchLogic provides
campaign management services directly to large advertisers and agencies who are
planning ad campaigns across multiple sites. Using MatchLogic services,
individual advertisers or advertising agencies can deliver ads based on
particular demographic traits, geographic location or other traits or based on
keywords. MatchLogic serves ad messages simultaneously to multiple Web sites,
measures results immediately, produces consolidated results reports on the
success of the entire campaign and analyzes these results to enable advertisers
to quickly assess the effectiveness of the campaign. Changes to the campaign can
then be made quickly and centrally by MatchLogic in order to maximize the
effectiveness of the advertiser's investment.

Database and Direct Marketing. The principal challenge for direct marketers
is to continually increase response rates. In order to accomplish this goal,
direct marketers need to have access to a robust, continually refreshed consumer
database, which provides them with current, relevant demographic information.
MatchLogic acquires, packages and distributes consumer data through digital and
land-based data channels. Unlike land-based data channels, such as warranty
cards, which may take longer periods of time to collect and assemble, and which
can become obsolete in a short period of time, the digital Web-based data
channels are a new and emerging market from which current demographic
information and data on purchase intentions can be gathered and analyzed online
and on a real-time basis. The Company believes that the Web audience is
relatively affluent and well-educated, placing a premium on Web audience data.
The Company also believes that the currency of this data makes it potentially
more valuable. Furthermore, since the results of database and direct marketing
programs can be more effectively measured as compared to traditional brand
advertising, the Company believes that database and direct marketing will become
more attractive to advertisers and therefore present significant opportunities
for revenue in the future.

MatchLogic operates as an independent subsidiary of Excite with its own
sales force, research and development and operations departments; however, the
Company intends to utilize the ad serving and targeting technology of MatchLogic
to improve results for advertisers on the Excite Network. The Company believes
that over time, the expertise and technology acquired with MatchLogic will
provide it with the opportunity to generate more effective advertising programs
for its advertising customers, thereby providing the opportunity to charge
higher rates for its advertising. The Company also believes that MatchLogic's
relationship with large advertisers and advertising agencies will provide
opportunities for Excite to promote advertising on the Excite Network to these
large customers.

MatchLogic maintains five data centers in the U.S. and Europe which served
an average of approximately 16 million advertising impressions per day during
March 1998 to over 800 Web sites for approximately 160 advertisers. MatchLogic's
customers include large advertisers, such as General Motors Corporation and

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AT&T Corp., and leading advertising agencies, such as Advertising, Inc., DDB
Needham, Worldwide Communications Group, Inc. and Thunderhouse Online Marketing
Communications. MatchLogic is based in Louisville, Colorado, and as of March 31,
1998 had 116 full-time employees.

SALES AND MARKETING

As of March 31, 1998, the Company had a direct sales organization of 55
professionals located in San Francisco, New York, Los Angeles and Chicago. This
direct sales force sells to advertisers and advertising agencies and is
responsible for selling banner advertisements and sponsorships on the Excite
Network. The Company believes that an internal sales force dedicated to selling
advertising only on the Excite Network provides a higher level of customer
service and satisfaction to advertisers during both the buying and reporting
process. In addition, the Company has a dedicated group of professionals focused
on advertising reporting and measurement. Because of the campaign management
expertise of MatchLogic, advertisers on the Excite Network can receive
up-to-date information on the placement and effectiveness of their
advertisements. The Company believes that in order to be a leader in Web
advertising and provide the highest level of service, it must continue to
develop technologies for the precise and timely placement, targeting and
measurement of advertising. As part of the Netcenter Agreement, the Company's
sales organization will be responsible for selling advertising on the Co-Branded
Services and on Netcenter classified advertisement services (other than
career-related classified advertisements) and, therefore, the Company plans to
significantly expand its direct sales force.

The Company's marketing goal is to build the brands of the Excite Network,
Excite and WebCrawler, into well-recognized consumer brands. The Company
utilizes a variety of marketing programs, including traditional "off-Web"
programs such as joint marketing programs with strategic partners and
television, print, radio and billboard promotions as well as online advertising.
During the fourth quarter of 1996, the Company launched a national
brand-building campaign for its Excite brand centered around the Jimi Hendrix
song, "Are You Experienced?" and in the fourth quarter of 1997, launched another
national print campaign for Excite, which it refers to as the "Signature
Campaign." The Company believes that the WebCrawler brand has significant
consumer awareness today and the Company will make selective marketing
investments to increase that awareness. To this end, the Company recently began
a national marketing campaign designed to increase awareness of the redesigned
WebCrawler service.

INTERNATIONAL

The Company believes that there are significant opportunities to leverage
the Excite service internationally. The Company offers, either independently or
in conjunction with local content providers, localized versions of the Excite
service in Australia, France, Germany, Japan, the Netherlands, Sweden and the
United Kingdom. The Company has a multi-year agreement with Netscape under which
it is producing a local navigation service with topical channels and other
features for Netscape's International Netscape Guide for Australia, France,
Germany and the United Kingdom, and is also featured on Netscape's international
search page. The Company also has international distribution relationships with
MSN and NETCOM.

Because the Company believes that the Japanese Internet market is currently
the largest Internet market outside of the U.S., the Company will offer, through
a joint venture with Excite Japan, Itochu Corporation and certain affiliated
entities (collectively "Itochu") and DNP, comprehensive localized Excite
services in Japan. Advertising sales will be made through CTC Create
Corporation, a wholly-owned subsidiary of Itochu. The Company currently holds
50% of the outstanding capital stock of Excite Japan. The Company may seek to
enter into similar joint ventures with respect to other international markets,
although it currently has no agreements or understandings to do so.

During 1996, 1997 and the first quarter of 1998, less than 10% of the
Company's user traffic and less than 10% of the Company's total revenues were
derived from international sources. There can be no assurance that the Company's
services will achieve commercial success in international markets. See "Risk
Factors--Risks Associated with International Operations."

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TECHNOLOGY, RESEARCH AND DEVELOPMENT

Personalization. Excite has devoted significant resources in developing its
personalization technology, which provides users the ability to personalize
their Web experience. Excite uses a flexible architecture which allows the reuse
of a user's personalized information throughout the Excite Network. With
Excite's dynamic page generation technology, customized and personalized pages
can be delivered to each Excite user, allowing for many different types of
frequently updated content, such as sports stock information or news, to be
displayed each time a user returns to the Excite Network. Modular templates
allow the Company to quickly add new types of data to personal pages or produce
different appearances for use with different sponsorship arrangements.

Ad Serving. Excite's ad serving technology delivers targeted advertising in
a fast, accurate and efficient manner. Scheduling algorithms ensure delivery of
ad impressions in the quantities required, as well as support a pool of general
rotation ads. The Company's reporting infrastructure provides advertisers with
daily online reports of advertising performance.

Excite Shopping Search. Excite Shopping Search, which built upon Excite's
proprietary programming language, called the Adapter Language, is used to
aggregate and homogenize data gathered from various Web sites in response to
user queries regarding a particular product.

Universal Registration. Excite has developed a user registration statement
that allows users to register for the Excite Network and subsequently
authenticates them when they access specific services. The Company's universal
registration utilizes front-end caching which enables fast read access to user
data needed to support the Excite Network's user volume. Users can be
authenticated even if they have multiple user names and the Company also shares
user demographic information with its universal registration system.

As of March 31, 1998, there were 142 employees on the Company's research
and development staff. Excluding charges for purchased in-process technology,
product development costs were $2.8 million, $8.0 million, $16.7 million and
$5.9 million for 1995, 1996, 1997 and the three month period ended March 31,
1998, respectively. The Company believes that developing new and enhanced
services and technology is necessary to remain competitive. Accordingly, the
Company intends to continue to make investments in research and development,
including developing, licensing or acquiring new technologies. See "Risk
Factors--Rapid Technological Change."

USER SUPPORT

The Company offers user support via telephone and also offers a
comprehensive online help guide which offers searching tips and provides a
complete guide to the Excite Network. As of March 31, 1998, the Company had 9
customer support personnel. The Company also offers a "New to the Net" section
of its help service for Web novices. This service offers an overview of the Web
and the Excite Network as well as Excite Seeing Tours, which is a "how to"
service designed to instruct a consumer how to perform a particular task using
information from the Web. In addition, the Company offers Web and email-based
support for its Excite Mail, Excite Chat and Excite PAL services.

COMPETITION

The market for Web services and Web advertising is intensely competitive.
There are no substantial barriers to entry in these markets and the Company
expects competition to intensify. The Company believes that the number of
companies relying on fees from Web-based advertising has increased substantially
during the past year. Accordingly, the Company may face increased pricing
pressure for the sale of advertisements on its network, which would have a
material adverse effect on the Company's business, results of operations and
financial condition.

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search.com and Northern Light Technology LLC's Northern Light search service.
The Company also competes indirectly with Web content broadcasting services,
such as PointCast Inc.'s PointCast Network, and with services from other
database vendors, such as Lexis/Nexis and other companies that offer information
search and retrieval capabilities with their core database products. As the
Company increases the content offerings and services on the Excite Network, it
will increasingly face competition from a large number of businesses which offer
Web services such as email, stock quotes, news and chat features and who publish
information and content on the Web, including large OSPs such as America Online
and MSN.

The Company also expects to compete with ISPs, OSPs, Web site operators,
providers of Web browser software (such as Netscape or Microsoft) and other
Internet services and products that incorporate search and retrieval features
into their offerings. Many of these potential competitors have announced plans
to offer competing Web services and could take actions that make it more
difficult for consumers to find and use the Excite Network. For example,
Netscape has announced the introduction of Netcenter, which is expected to
compete directly with the Excite Network for traffic and advertisers. Microsoft
has announced that it will offer Internet search engine services provided by
Inktomi in the MSN and other Microsoft online properties, and has announced that
it will offer personalized Web services through its Start service. Such search
services could be tightly integrated with Microsoft's operating systems,
Internet Explorer Web browser and other software applications, and Microsoft may
promote such services within MSN or through other end-user services such as
WebTV. Insofar as Microsoft's search services may be more conveniently accessed,
this may provide Microsoft with significant competitive advantages that could
have a material adverse effect on the Company's user traffic. In addition, many
large media companies have announced that they are contemplating developing
Internet navigation services and are attempting to become Web "gateway" sites
for Web users. For example, both Time Inc. and CBS Worldwide, Inc. have
announced initiatives to develop Web services in order to have their Web sites
become the starting point for users navigating the Web. In the event such
companies develop such "gateway" sites, the Company could lose a substantial
portion of its user traffic, which would have a material adverse effect on the
Company's advertising revenues and on its business, results of operations and
financial condition.

Many providers of Web services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other strategic
partnering arrangements with ISPs, OSPs, providers of Web browsers, operators of
high traffic Web sites and other businesses in an attempt to increase traffic
and page views, and thereby making their Web sites more attractive to Web
advertisers while also making it more difficult for consumers to utilize the
Company's services. For example, Yahoo! and MCI entered into an agreement to
offer an online service to be called "Yahoo! Online powered by MCI Internet"
under which Yahoo!'s services will be made easily available to MCI Internet
customers and NBC and CNET Inc. have recently announced a strategic
relationship. To the extent that direct competitors or other Web site operators
are able to enter into successful strategic relationships, these competitors and
Web sites could experience increases in traffic and page views, or the Company's
traffic and page views could remain constant or decline, either of which could
have the effect of making these Web sites appear more attractive to advertisers
which could have a material adverse effect on the Company's business, results of
operations and financial condition.

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can be no assurance that the Company's competitors will not develop Web search
and retrieval services or other online services that are equal or superior to
those of the Company or that achieve greater market acceptance than the
Company's offerings.

The Web in general, and the Company specifically, also must compete with
traditional advertising media such as print, radio and television for a share of
advertisers' total advertising budgets. To the extent that the Web is not
perceived as an effective advertising medium, advertisers may be reluctant to
devote a significant portion of their advertising budget to Web-based
advertising. There can be no assurance that the Company will be able to compete
successfully against its current or future competitors or that competition will
not have a material adverse effect on the Company's business, results of
operations and financial condition. See "Risk Factors--Intense Competition."

INTELLECTUAL PROPERTY

The Company regards its technology as proprietary and attempts to protect
it with copyrights, trademarks, trade secret laws, restrictions on disclosure
and transferring title and other methods, and has been issued a patent with
respect to certain aspects of its searching and indexing technology. The Company
has filed two patent applications with respect to other aspects of its
technology. There can be no assurance that the patent that has been issued is,
or that any patents that may issue from these pending applications will be,
sufficiently broad to protect the Company's technology. In addition, there can
be no assurance that any patents that have been issued or that may be issued
will not be challenged, invalidated or circumvented, or that any rights granted
thereunder would provide proprietary protection to the Company. The failure of
any patents to protect the Company's technology may make it easier for the
Company's competitors to offer technology equivalent or superior to the
Company's technology. The Company also generally enters into confidentiality or
license agreements with its employees and consultants, and generally controls
access to and distribution of its documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use the Company's services or technology without
authorization, or to develop similar technology independently. In addition,
effective copyright, trademark and trade secret protection may be unavailable or
limited in certain foreign countries, and the global nature of the Web makes it
virtually impossible to control the ultimate destination of the Company's
products. Policing unauthorized use of the Company's technology is difficult.
There can be no assurance that the steps taken by the Company will prevent
misappropriation or infringement of its technology. In addition, litigation may
be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, results of operations and financial condition.

Many parties, including competitors of the Company, are actively developing
search, indexing and related Web technologies. Some of these parties have taken,
and the Company believes that others will take, steps to protect these
technologies, including seeking patent protection. As a result, the Company
believes that disputes regarding the ownership of such technologies are likely
to arise in the future. In May 1998, one of the Company's competitors was issued
a patent with respect to certain aspects of its search technology. Although the
Company has not received any correspondence with regard to this patent, this
competitor has publicly stated that it intends to vigorously pursue entities it
believes may infringe this patent. The Company is currently reviewing this
patent with its patent counsel in order to determine whether the Company could
be subject to any potential claims. There can be no assurance that this
competitor will not initiate a lawsuit against the Company asserting patent
infringement. There can also be no assurance that the Company can defend
successfully any such litigation either on the grounds that such patent is
invalid or that the Company's search technology does not infringe on such
patent. Even if the Company is successful, there can be no assurance that the
costs and resources required to defend any such litigation will not have a
material adverse effect on the Company's business, results of operations or
financial condition. In addition, from time to time, the Company has received,
and may receive in the future, notice of claims of infringement of other
parties' proprietary rights, including claims for infringement resulting from
the downloading of materials by the service operated by the Company. Although
the Company investigates claims and responds as it deems appropriate,

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there can be no assurance that infringement or invalidity claims (or claims for
indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company or that any assertions or prosecutions will not
materially and adversely affect the Company's business, results of operations
and financial condition. Irrespective of the validity or the successful
assertion of such claims, the Company would incur significant costs and
diversion of resources with respect to the defense thereof, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. If any claims or actions were asserted against the Company,
the Company might seek to obtain a license under a third party's intellectual
property rights. There can be no assurance, however, that under such
circumstances a license would be available on commercially reasonable terms, or
at all.

EMPLOYEES

As of March 31, 1998, the Company had 455 full-time employees, including
142 in research and development, 222 in marketing and sales, 65 in finance and
administration and 22 in operations and support. The Company's future success
will depend, in part, on its ability to continue to attract, retain and motivate
highly qualified technical and management personnel, particularly highly skilled
technical personnel and engineers involved in development, and upon the
continued service of its senior management and key sales and technical
personnel, none of whom is bound by an employment agreement. From time to time,
the Company also employs independent contractors to support its research and
development, marketing, sales and support and administrative organizations.
Competition for such qualified personnel in the Company's industry and primary
geographical location is intense, particularly for engineering and management
personnel. The Company's employees are not represented by any collective
bargaining unit, and the Company has never experienced a work stoppage. The
Company believes its relations with its employees are good. See "Risk
Factors--Dependence on Key Personnel."

FACILITIES

The Company's headquarters are located in, and substantially all of its
operations are conducted out of, a leased facility in Redwood City, California,
consisting of approximately 88,000 square feet of office space under a lease
expiring in March 2007 with a renewal option for an additional five years. The
Company has also leased an additional 23,000 square feet of office space
adjacent to its headquarters under a ten-year lease expiring in March 2007,
which space the Company has subleased through June 1999. The Company believes
that its existing facilities and offices are adequate to meet its requirements
for the foreseeable future. The Company also plans to lease approximately 46,000
square feet of space for its MatchLogic subsidiary in Westminister, Colorado.
MatchLogic is currently located in approximately 11,000 square feet of office
space in Louisville, Colorado. The Company also maintains offices in London,
England; New York, New York; Austin, Texas; Seattle, Washington; and other
cities in the United States. The Company's success is largely dependent on the
uninterrupted operation of its computer and communications systems. Accordingly,
a system failure at the Company's operations facilities could materially and
adversely affect the performance of the Company's services. See "Risk
Factors--Risk of Capacity Constraints; System Failures."

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<PAGE> 56

MANAGEMENT

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George Bell.............. 41 President, Chief Executive Officer and Director(1)
Brett T Bullington....... 44 Executive Vice President
James N. Desrosier....... 43 Executive Vice President, Corporate Marketing
Robert C. Hood........... 57 Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
Joseph R. Kraus, IV...... 26 Senior Vice President and Director
Kenneth Wachtel.......... 44 Senior Vice President, Advertising Sales
Chris Vail............... 37 Vice President, General Counsel and Secretary
Vinod Khosla............. 43 Director (1)(2)
Geoffrey Y. Yang......... 38 Director (1)(2)
</TABLE>

- ---------------
(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

Mr. Bell has been President, Chief Executive Officer and a director of the
Company since January 1996. From December 1995 until January 1996, he was a
consultant to the Company. From May 1991 to December 1995, Mr. Bell was employed
by The Times Mirror Company, a publishing and cable television company, most
recently as President -- The Skiing Company for Times Mirror Magazines and
previously as President -- The Outdoor Company and Vice President, Multimedia
for Times Mirror Magazines. Prior to joining The Times Mirror Company, Mr. Bell
worked as an independent producer, writer and packager of television sports and
documentary programming and as a staff producer and writer for the ABC
television network. Mr. Bell has received four Emmy Awards. He received a B.A.
in English from Harvard College.

Mr. Bullington has been Executive Vice President of the Company since
January 1997. From November 1995 to January 1997, he served as Senior Vice
President, Marketing and Sales of the Company and, from August 1995 until
November 1995, he was a consultant to the Company. From May 1995 to August 1995,
Mr. Bullington worked as an independent marketing and sales consultant. From May
1994 to May 1995, Mr. Bullington served as Vice President of Marketing and Sales
for Planning & Logic, Inc., a software company. From January 1992 to May 1994,
he was employed by Taligent, Inc., a software company, as Director of Worldwide
Channel Development. From 1986 to January 1992, Mr. Bullington was employed by
Computer Associates, a software company, where he served most recently as Vice
President, Sales and Marketing. He received a B.A. in Political Science from the
University of California at Santa Barbara.

Mr. Desrosier has been Executive Vice President, Corporate Marketing since
July 1997. From March 1996 until June 1997, he was employed by Infoseek
Corporation, an Internet search company, as Vice President, Chief Marketing
Officer. From March 1990 to March 1996, Mr. Desrosier held a number of positions
including Senior Vice President, Global Brand Marketing, Vice President, Debit
Product Management and Marketing, and Vice President, Advertising at MasterCard
International Incorporated, an electronic payments, systems, and products
company. Mr. Desrosier received an A.B. in Philosophy from Kenyon College. Mr.
Desrosier has expressed his intention to resign from the Company in late July
1998.

Mr. Hood has been Executive Vice President, Chief Administrative Officer
and Chief Financial Officer of the Company since December 1996. From November
1996 to December 1996, he was a consultant to the Company. From July 1995 to
February 1996, Mr. Hood served as Chief Operating Officer of RockShox Inc., a
mountain bike component manufacturer. From March 1992 to April 1995, he served
as Senior Vice President and Chief Financial Officer of Crowley Maritime
Corporation, a transportation services company. From April 1991 to February
1992, Mr. Hood served as Executive Vice President and Chief Financial Officer of
Qume Corp., a computer peripherals company. He received a B.A. in Economics from
Bates College and an M.B.A. from the Tuck School of Business Administration at
Dartmouth College.

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<PAGE> 57

Mr. Kraus has been Senior Vice President of the Company since January 1997
and a director of the Company since June 1994. He served as Senior Vice
President, Business Development of the Company from January 1996 to January 1997
and, from June 1994 to January 1996, served as President of the Company. Prior
to joining the Company, Mr. Kraus was a student at Stanford University. He
received a B.A. in Political Science from Stanford University.

Mr. Wachtel has been Senior Vice President, Advertising Sales since March
1997. From 1976 to March 1997, Mr. Wachtel was employed by CBS Television
Network, most recently as Vice President, News Sales. He received an A.B. in
Economics and Government from Dartmouth College and an M.B.A. from the
University of Chicago Graduate School of Business.

Mr. Vail has been Vice President, General Counsel since October 1997 and
Secretary of the Company since May 1997. From April 1997 to September 1997, Mr.
Vail served as Associate General Counsel of the Company and from September 1996
to March 1997 he served as Contracts Manager of the Company. From January 1996
to September 1996, Mr. Vail maintained his own law practice. From May 1989 to
January 1996, Mr. Vail was a member of the legal department of AT&T Corp, a
communications company. He received and a B.A. in Government from Georgetown
University and a J.D. from the University of California, Los Angeles. Mr. Vail
is a member of the State Bar of California.

Mr. Khosla has served as a director of the Company since July 1995. He is
currently also a director of MicroProse, Inc., Concentric Network Corporation
and several privately held companies. He has been a general partner at Kleiner
Perkins Caufield & Byers since 1986. Mr. Khosla received a Bachelor of
Technology in Electrical Engineering from the Indian Institute of Technology, an
M.S. in Biomedical Engineering from Carnegie Mellon University and an M.B.A.
from Stanford University.

Mr. Yang has served as a director of the Company since July 1995. He is
currently also a director of MMC Networks, Inc. and several privately held
companies. He has been a general partner of Institutional Venture Partners since
1987. He received a B.A. in Economics and a B.S.E. in Information Systems
Engineering from Princeton University and an M.B.A. from Stanford University.

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<PAGE> 58

SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's outstanding Common Stock as of April 30,
1998, and as adjusted to reflect the sale of the Common Stock being offered
hereby, by each of the Selling Shareholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) NUMBER OF OFFERING(1)
-------------------- SHARES BEING --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
---- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
George Bell(2)........................... 246,181 1.0% 25,000 221,181 *
Joseph R. Kraus, IV(3)................... 346,395 1.5 25,000 321,395 1.3%
Graham Spencer(4)........................ 545,340 2.3 25,000 520,340 2.1
Brett T Bullington(5).................... 196,716 * 17,500 179,216 *
Robert C. Hood(6)........................ 74,367 * 12,500 61,867 *
Kenneth Wachtel(7)....................... 40,105 * 12,500 27,605 *
</TABLE>

- ---------------
* Represents beneficial ownership of less than 1%.

(1) Assumes no exercise of the Underwriters' over-allotment option. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Except as indicated by footnote, and subject to
community property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them. Percentage of beneficial
ownership is based on 23,439,519 shares of Common Stock outstanding as of
April 30, 1998 and 24,722,019 shares of Common Stock outstanding after
completion of this offering.

(2) Represents shares issuable upon exercise of options exercisable within 60
days of April 30, 1998. Mr. Bell is President, Chief Executive Officer and a
director of the Company.

(3) Of these shares, 17,307 shares are subject to a right of repurchase held by
the Company. Mr. Kraus is Senior Vice President and a director of the
Company.

(4) Of these shares, 25,960 shares are subject to a right of repurchase held by
the Company. Mr. Spencer is Chief Technology Officer of the Company.

(5) Includes 28,942 shares issuable upon exercise of options exercisable within
60 days of April 30, 1998. Mr. Bullington is Executive Vice President of the
Company.

(6) Includes 74,167 shares issuable upon exercise of options exercisable within
60 days of April 30, 1998. Mr. Hood is Executive Vice President, Chief
Administrative Officer and Chief Financial Officer of the Company.

(7) Represents shares issuable upon exercise of options exercisable within 60
days of April 30, 1998. Mr. Wachtel is Senior Vice President, Advertising
Sales of the Company.

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<PAGE> 59

UNDERWRITERS

Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Morgan Stanley & Co. Incorporated and
BancAmerica Robertson Stephens are acting as Representatives (the
"Representatives"), have severally agreed to purchase, and the Company and the
Selling Shareholders have agreed to sell to them, severally, the respective
number of shares of Common Stock set forth opposite the names of such
Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated........................... 500,000
BancAmerica Robertson Stephens.............................. 500,000
Bear, Stearns & Co. Inc..................................... 50,000
William Blair & Company L.L.C. ............................. 50,000
BT Alex. Brown Incorporated................................. 50,000
CIBC Oppenheimer Corp. ..................................... 50,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 50,000
A.G. Edwards & Sons, Inc. .................................. 50,000
Volpe Brown Whelan & Company, LLC........................... 50,000
---------
Total............................................. 1,350,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel, and to certain other conditions. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $2.26 a share under the public offering price. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of $.10 a
share to other Underwriters or to certain other dealers. After the initial
offering of the shares of Common Stock, the offering price and other selling
terms may from time to time be varied by the Representatives.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of 202,500
additional shares of Common Stock at the public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The Underwriters
may exercise such option to purchase solely for the purpose of covering
overallotments, if any, incurred in the sale of the shares of Common Stock
offered hereby. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock set forth next to the names of all the Underwriters in the
preceding table.

The Company, the Selling Shareholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

Each of the Company and the directors, executive officers and certain other
shareholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending on September 8, 1998 (90 days after the date of this
Prospectus), (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in

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<PAGE> 60

whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover overallotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The Underwriters and dealers may engage in passive market making
transactions in the Common Stock in accordance with Rule 103 of Regulation M
promulgated by the Commission. In general, a passive market maker may not bid
for, or purchase, the Common Stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive market
maker generally may not exceed 30% of its average daily trading volume in the
Common Stock during a specified two month prior period, or 200 shares, whichever
is greater. A passive market maker must identify passive market making bids as
such on the Nasdaq electronic inter-dealer reporting system. Passive market
making may stabilize or maintain the market price of the Common Stock above
independent market levels. Underwriters and dealers are not required to engage
in passive market making and may end passive market making activities at any
time.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company and the Selling Shareholders by Fenwick &
West LLP, Palo Alto, California. Certain members of the firm of Fenwick & West
LLP own an aggregate of 8,605 shares of the Company's Common Stock. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP.

EXPERTS

The consolidated financial statements of Excite, Inc. incorporated by
reference in Excite's Annual Report (Form 10-K) for the year ended December 31,
1997 and the supplemental consolidated financial statements of Excite, Inc.
incorporated by reference in Excite's report on Form 8-K dated May 15, 1998,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon incorporated herein by reference. Such report, as to the
year ended December 31, 1995, is based in part on the report of Price Waterhouse
LLP, independent accountants. Such consolidated statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.

The financial statements of The McKinley Group, Inc. for the year ended
December 31, 1995, not separately presented in this Prospectus, have been
audited by Price Waterhouse LLP, independent accountants, whose report thereon
appears herein. Such financial statements, to the extent they have been included
in the consolidated financial statements and supplemental consolidated financial
statements of Excite, Inc., have been so included in reliance on their report
given on the authority of said firm as experts in auditing and accounting.

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<PAGE> 61

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the Rules and Regulations
of the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
to the exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Company is also subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Copies of the Registration Statement and the exhibits and schedules
thereto, reports, proxy statements and other information filed by the Company
may be inspected and copied at the public reference facilities of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at Seven World Trade Center,
13th Floor, New York, New York 10048, and Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
also can be obtained from the public reference section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a World Wide Web site that contains reports, proxy statements and
other information regarding the Company. The address of the site is
http://www.sec.gov. The Company's Common Stock is quoted on the Nasdaq National
Market. Reports, proxy statements and other information concerning the Company
may also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

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