GOTO COM INC, 424B4, 1999-06-18

GOTO COM INC
424B4, 1999-06-18
BUSINESS SERVICES, NEC

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<PAGE> 1
As filed pursuant to Rule 424(b)4
under the Securities Act of 1933
Registration No. 333-76415

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

PROSPECTUS
JUNE 18, 1999 GOTO.COM LOGO
6,000,000 SHARES OF COMMON STOCK

- --------------------------------------------------------------------------------
GOTO.COM, INC.:

- We have created an online
auction where advertisers
bid for introductions to
consumers seeking
information, services and
products.
SYMBOL AND MARKET:
- GOTO/NASDAQ NATIONAL
MARKET
- GoTo.com is not affiliated
with the Walt Disney
Company, Infoseek
Corporation or the "GO

Network."
THE OFFERING:

- - This is our initial public offering, and no public market currently
exists for our shares. The initial public offering price is $15.00 per
share.

- - The underwriters have an option to purchase an additional 900,000 shares
from GoTo.com to cover over-allotments.

- - Closing: June 23, 1999

<TABLE>
<CAPTION>
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Per Share Total
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<S> <C> <C> <C>
Public offering price: $ 15.00 $ 90,000,000
Underwriting fees: 1.05 6,300,000
Proceeds to GoTo.com: 13.95 83,700,000
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</TABLE>

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
- --------------------------------------------------------------------------------

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. NOR HAVE THEY MADE, NOR WILL THEY MAKE, ANY
DETERMINATION AS TO WHETHER ANYONE SHOULD BUY THESE SECURITIES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

In connection with this offering, the underwriters have reserved up to 500,000
shares of common stock being sold by GoTo.com for sale at the public offering
price to officers, employees, advertisers, vendors and other persons selected by
GoTo.com.
- --------------------------------------------------------------------------------

DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
THOMAS WEISEL PARTNERS LLC
DLJDIRECT INC.
<PAGE> 2

[INSIDE FRONT COVER]

[Graphic Header: The GoTo.com Marketplace]

[Graphic: 3 end-to-end arrows in a circle] Search made simple.(TM)

GoTo.com is dedicated to assisting
consumers in finding the most
relevant results for the widest
variety of searches.

GoTo.com's banner-free home page permits fast loading and features a
prominent search box that makes it easier for users to find what they
are looking for on the Internet.

[Graphic: GoTo.com search box as it appears on GoTo.com's Web site.]

By foregoing advertising relationships and extraneous content, GoTo.com
eliminates the inherent conflict in assisting consumers to locate relevant
information and to pass quickly through GoTo.com to the desired information
source. In the GoTo.com marketplace, consumers are able to find relevant search
listings for information, products and services from our more than 7,500
participating advertisers who place hundreds of thousands of search listings in
the GoTo.com marketplace.

<PAGE> 3

[Graphic Header: The GoTo.com Marketplace]

[Graphic: 3 end-to-end arrows in a circle] Search Syndication Network.(TM)

GoTo.com offers its search service at no charge to destination Web
sites participating in what we call the "search syndication
network." This provides Web sites with the opportunity to enhance
their users' experience with search functionality and to generate
additional revenue from their consumer audiences.

[Graphic: Excerpt from page of search results
listed on Web site of infospace.com, a network
affiliate of GoTo.com]
Integrated Search
-----------------
GoTo.com provides a free
search offering that
participants in the search
syndication network, who we
call "network affiliates," can
easily incorporate into the
"look and feel" and navigation
of their Web sites. Consumers
can search the Web within the
network affiliate's site
because both the GoTo.com
search box and the search
results are provided directly
on the network affiliate's
site. GoTo.com offers an
outsourced solution for
network affiliates to generate
revenue by selling targeted
banner advertising on the
search results pages.

Search-in-a-Box
---------------
GoTo.com offers a simple and free search product
that enables network affiliates to provide Internet
search capability from a GoTo.com search box on
their Web sites. Search results are delivered on the
GoTo.com site. Network affiliates generate revenue
each time a user searches from their sites.
[Graphic: GoTo.com search box as
it appears on network affiliates'
sites]

<PAGE> 4

[Graphic Header: The GoTo.com Marketplace]

[Graphic: 3 end-to-end arrows in a circle] Targeted Pay-for-Performance
Advertising.(TM)

The GoTo.com marketplace offers any online advertiser
the ability to specifically target consumerswho are
interested in the information, products or services
offered by the advertiser. This results in efficient
and cost-effective advertising expenditures.

Advertisers bid in an open auction format for placement in the search results
provided for the specific keywords which are relevant to their sites.
Advertisers pay only for consumers who click on their listings in the GoTo.com
search results.

[Graphic: Search results display for the keywords "fly fishing" on the GoTo.com
Web site.]

Advertisers maintain precise control over their keyword selection, bids
and total amount spent on GoTo.com. As a result, advertisers manage the
placement of their listings in the GoTo.com search results and their cost
of customer acquisition.

<PAGE> 5

You should rely only on the information contained in this document. We have
not authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.

TABLE OF CONTENTS

<TABLE>
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Page
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 5
Use of Proceeds..................... 20
Dividend Policy..................... 20
Corporate Information............... 20
Capitalization...................... 21
Dilution............................ 22
Selected Financial Data............. 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 24
</TABLE>

<TABLE>
<CAPTION>
Page
<S> <C>
Business............................ 35
Management.......................... 48
Transactions with Related Parties... 58
Principal Stockholders.............. 60
Description of Capital Stock........ 63
Shares Eligible for Future Sale..... 66
Underwriting........................ 69
Legal Matters....................... 72
Experts............................. 73
Available Information............... 73
Index to Financial Statements....... F-1
</TABLE>

i
<PAGE> 6

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before buying shares in the offering. You should read the entire
prospectus carefully.

INVESTMENT RISKS

An investment in this offering involves risk. The market for Internet
products, services and advertising is new, rapidly evolving and intensely
competitive. Our service has achieved only limited market acceptance to date.
GoTo.com was founded in September of 1997 and has a limited operating history
and a history of operating losses. GoTo.com's losses for the year ended December
31, 1998 and March 31, 1999 were $14.0 million and $7.4 million, respectively.
At March 31, 1999, GoTo.com's accumulated deficit, or accumulated net loss since
inception, was $21.5 million. GoTo.com expects to incur net losses for the
foreseeable future.

GOTO.COM

OUR BUSINESS

GoTo.com created and operates an online marketplace that introduces
consumers and advertisers. Consumers conduct keyword searches using the GoTo.com
search service at our Web site and at thousands of other sites across the
Internet that carry our search service. Advertisers bid in an ongoing auction
for priority placement in the keyword search results with the highest bidder's
site appearing first in the results. Each advertiser pays GoTo.com the amount of
its bid whenever a consumer clicks on an advertiser's listing in the search
results. An advertiser only pays GoTo.com for those consumers who actively
indicate their interest by clicking on the advertiser's Web site listing. In
addition, since advertisers on GoTo.com choose how much they pay for each
consumer, GoTo.com enables each advertiser to choose the bid amount that is
optimal for its business. Because advertisers must pay GoTo.com for each
click-through to their Web site, they select and bid only on keywords most
relevant to their offerings. Further, GoTo.com search result pages are not
filled with multiple banner advertisements, which allows these pages to load
quickly, and a search on the GoTo.com service leads directly to a list of 40
results per page. Consequently, we believe GoTo.com improves a consumer's
ability to quickly and easily find relevant Web sites providing information,
products and services.

GoTo.com attracts consumers to its Web site through online and traditional
advertising. GoTo.com also attracts consumers through what we call the "search
syndication network," a network of Web sites that have included the GoTo.com
search service on their sites or that direct consumer traffic to the GoTo.com
Web site. GoTo.com enables Web sites participating in the search syndication
network, who GoTo.com calls "network affiliates," to include a search box and
GoTo.com search results on their sites. This affords these network affiliates
the opportunity to enhance their users' experience with Internet search
capabilities and to generate additional revenue from the sale of advertising on
resulting search pages. Because GoTo.com derives its revenue primarily from
advertiser paid click-through transactions, GoTo.com offers its search service
at no cost to its network affiliates.
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<PAGE> 7

A growing number of consumers using the GoTo.com search service at Web
sites across the Internet increases the incentive for advertisers to bid in the
GoTo.com marketplace. In turn, a breadth of relevant advertiser links increases
the value to consumers of using the GoTo.com search service. Consequently, we
believe a large and active base of advertisers, consumers and network affiliates
in our marketplace can stimulate growth in bidding, searches and paid
click-through transactions. Increases in these paid click-through transactions
result in greater revenue for GoTo.com. From the month ended December 31, 1998
to the month ended April 30, 1999, the number of consumer searches in the
GoTo.com marketplace increased approximately 85% to over 100 million per month
and the number of active, paying advertisers in our marketplace increased
approximately 150% to over 7,500. Over the same period, the number of paid
click-throughs per month on our service increased approximately 400% to over 10
million.

MARKET OPPORTUNITY

In an effort to retain consumer attention and generate more advertising
revenues, traditional search sites have added additional content and services,
which has resulted in a conflict with consumers' desires to locate relevant
information and pass quickly through a search site to the desired information
source. As a result of this conflict as well as the growth in volume and
diversity of Internet content, searches now frequently generate hundreds and
often even thousands of results, many of which may have little relevance to the
consumers' interest. Moreover, most Internet advertising, like traditional media
advertising, requires advertisers to pay for each consumer who sees or may see
an advertisement, rather than only those consumers who specifically express
interest in the advertised information, products or services. This approach does
not allow advertisers to take full advantage of the Internet's unique attributes
for targeted marketing. GoTo.com therefore believes that there is a significant
market opportunity for an online marketplace that facilitates introductions
between advertisers and consumers. GoTo.com serves these constituencies by
providing consumers with quick, easy and relevant search listings and providing
advertisers with a cost-effective way to target potential consumers.

OUR STRATEGY

GoTo.com's objective is to expand participation and increase transactions
in its online marketplace. Key elements of GoTo.com's strategy include:

- - INCREASE ADVERTISERS THROUGH AUTOMATED SIGN UP. Because advertisers on
GoTo.com can easily sign up and manage their bidding and accounts through
our automated processes, and because every keyword can support hundreds of
GoTo.com advertisers, we believe that GoTo.com can support a growing
marketplace with a larger number of advertisers than traditional online
advertising solutions.

- - EXPAND CONSUMER BASE WITH SEARCH SYNDICATION NETWORK. We intend to
increase consumer traffic on our service by growing the search syndication
network and increasing consumer marketing and acquisition initiatives.

- - UTILIZE TECHNOLOGY TO FURTHER EXPAND OPERATIONS INFRASTRUCTURE. We intend
to utilize our technology to grow an efficient operations infrastructure
enabling millions of billing events for hundreds of thousands of
advertisers at a high quality service level and at a relatively low
internal cost.
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<PAGE> 8

- - DERIVE STRATEGIC ADVANTAGE FROM EFFICIENT COST STRUCTURE. Our business
model allows us to control costs because it does not require us to carry
any physical inventory or maintain a large sales or editorial
infrastructure, so we are able to direct the capital that would otherwise
be used for these purposes toward growing our business, enhancing our
services, building brand awareness and pursuing other strategic
opportunities.

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

Our principal executive offices are located at 140 West Union Street,
Pasadena, California 91103, and our telephone number is (626) 685-5600.

THE OFFERING

Common stock offered by
GoTo.com........................ 6,000,000 shares

Common stock to be outstanding
after this offering........... 44,397,921 shares

Use of proceeds................. We plan to use the proceeds from this
offering for general corporate purposes,
principally working capital, capital
expenditures and additional marketing and
sales efforts, as well as potential
acquisitions.

Proposed Nasdaq National Market
symbol........................ GOTO

This table is based on shares outstanding as of May 15, 1999. This table
excludes:

- 3,737,675 shares of common stock reserved for issuance under our 1998
stock option plan, and

- 2,000,000 shares available for issuance under our 1999 employee stock
purchase plan.

This table also assumes that the underwriters do not exercise the option
granted by GoTo.com to purchase additional shares in the offering. See
"Underwriting."
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<PAGE> 9

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

The following table summarizes the statement of operations and balance
sheet data for our business. For a more detailed explanation of these financial
data, see "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements
located elsewhere in this prospectus. The pro forma as adjusted balance sheet
data reflects the following assumptions:

- The receipt of approximately $25 million in proceeds from the issuance of
3,628,447 shares of preferred stock on April 14, 1999.

- The conversion of all outstanding shares of preferred stock including the
preferred stock issued on April 14, 1999.

- The sale of 6,000,000 shares of our common stock in this offering at an
offering price of $15.00 per share after deducting underwriting
discounts, commissions and estimated offering expenses and the
application of the resulting net proceeds.

- The exercise of warrants outstanding at March 31, 1999 to purchase
104,971 shares of common stock.

Included in general and administrative and product development expenses are
non-cash charges totaling $370,000 related to common stock and warrants issued
as compensation to non-employees during the twelve months ended December 31,
1998, and $180,000 related to warrants as compensation to non-employees during
the three months ended March 31, 1999, respectively.

<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS ENDED
ENDED -----------------------------------------------------
DECEMBER 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1998 1998 1998 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $ 822 $ 38 $ 19 $ 185 $ 580 $ 1,451
Cost of revenue.............................. 1,429 10 101 596 722 957
-------- ----- ------- ------- ------- -------
Gross profit (loss).......................... (607) 28 (82) (411) (142) 494
Operating expenses:
Marketing and sales........................ 9,645 174 1,119 3,697 4,655 4,614
General and administrative................. 1,655 179 236 511 729 1,555
Product development........................ 1,232 168 150 302 612 520
Amortization of deferred compensation...... 1,199 232 154 525 288 1,297
-------- ----- ------- ------- ------- -------
Total operating expenses..................... 13,731 753 1,659 5,035 6,284 7,986
-------- ----- ------- ------- ------- -------
Loss from operations......................... (14,338) (725) (1,741) (5,446) (6,426) (7,492)
Interest income, net....................... 316 1 48 139 128 132
-------- ----- ------- ------- ------- -------
Loss before provision for income taxes....... (14,022) (724) (1,693) (5,307) (6,298) (7,360)
Provision for income taxes................... 1 -- -- -- 1 --
-------- ----- ------- ------- ------- -------
Net loss..................................... $(14,023) $(724) $(1,693) $(5,307) $(6,299) $(7,360)
======== ===== ======= ======= ======= =======
Historical basic and dilutive net loss per
share...................................... $ (1.36) $ (0.68)
========
Pro forma net loss per share................. $ (0.75) $ (0.24)
========
Shares used to compute historical basic and
dilutive loss per share.................... 10,296 10,894
Shares used to compute pro forma loss per
share...................................... 18,714 30,387
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $11,195 $118,981
Working capital......................................... 9,154 116,940
Total assets............................................ 16,679 124,300
Long term debt and capital lease obligations............ 590 590
Total stockholders' equity.............................. 11,075 118,860
</TABLE>

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<PAGE> 10

RISK FACTORS

You should carefully consider the risks described below before buying
shares in this offering.

WE HAVE A LIMITED OPERATING HISTORY.

Because we have recently begun operations, it is difficult to evaluate our
business and our prospects. Our revenue and income potential is unproven and our
business model is still emerging. GoTo.com was founded in September of 1997 and
has a limited operating history. We launched a proof-of-concept version of our
service in December 1997. Our "pay-for-performance" model was announced in
February 1998, and, following further proof-of-concept testing, the service was
officially launched on June 1, 1998. An investor in our common stock must
consider the risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets. These risks include our:

- complete dependence on online advertising and consumer search services
with only limited market acceptance;

- need to develop and upgrade our infrastructure, including internal
controls, transaction processing systems, data storage and retrieval
systems and Web site;

- need to manage changing operations, including our recent implementation
of a new financial and accounting system; and

- dependence upon and need to hire key personnel including software
developers.

We cannot assure you that the GoTo.com service will retain its existing, or
attract new, advertisers, consumers and network affiliates, achieve significant
additional revenues or improve operating margins in future periods. There can be
no assurance that GoTo.com's service will achieve commercial success and, if it
does not, the price of our common stock will decline.

WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.

We have not achieved profitability. We expect to incur net losses for the
foreseeable future and may never become profitable. We incurred a net loss of
approximately $14.0 million and $7.4 million for the year ended December 31,
1998 and the three months ended March 31, 1999, respectively, and as of March
31, 1999, we had an accumulated deficit of $21.5 million.

Our limited operating history makes it difficult to forecast our future
operating results. Although our revenue has grown in recent quarters, we cannot
be certain that this growth will continue. We expect to continue to increase our
marketing and sales, product development and general and administrative
expenses. As a result we will need to generate significant additional revenue
and/or raise additional funds to achieve profitability. If we do achieve
profitability, we cannot be certain that we will sustain or increase it.

OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS BECAUSE
OF MANY FACTORS, AND ANY OF THESE COULD ADVERSELY AFFECT OUR STOCK PRICE.

We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of our future performance. It is likely that in some
future quarter our operating

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results may be below the expectations of public market analysts and investors
and, as a result of these or other factors, the price of our common stock may
fall. Our operating results have varied widely in the past, and we expect that
they will continue to vary significantly from quarter-to-quarter due to a number
of factors, including:

- demand for our online services by advertisers and consumers, including
the number of searches performed by consumers and the rate at which they
click-through to paid search listing advertisements;

- prices paid by advertisers using the GoTo.com service, which are not
determined by GoTo.com;

- our costs of attracting consumers to the GoTo.com Web site, including
costs of receiving exposure on third-party Web sites and advertising
costs;

- costs related to agreements with suppliers of consumer traffic to our
service and professional services;

- loss of these agreements;

- the mix of paying vs. non-paying search results on the GoTo.com service;

- our ability to significantly increase our distribution channels;

- the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;

- costs and delays in introducing new GoTo.com services and improvements to
existing services;

- changes in the growth rate of Internet usage and acceptance by consumers
of electronic commerce;

- technical difficulties, system failures or Internet downtime;

- government regulations related to the Internet;

- our ability to upgrade and develop our information technology systems and
infrastructure;

- costs related to acquisitions of technologies or businesses; and

- general economic conditions, as well as those specific to the Internet
and related industries.

As a result of our limited operating history, it is difficult to accurately
forecast our revenue, and we have limited meaningful historical financial data
upon which to base planned operating expenses. We plan to significantly increase
our operating expenses to expand our marketing and sales operations, broaden our
customer support capabilities and fund greater levels of product development. We
base our current and future expense levels on our operating plans and estimates
of future revenue, and our expenses are relatively fixed. Revenue and operating
results are difficult to forecast because they generally depend upon the volume
of the searches conducted on our service, the amounts bid by advertisers for
keyword search listings on the service and the number of advertisers that bid on
the service, none of which are under our control. As a result, we may be unable
to adjust our spending in a timely manner to compensate for any unexpected
revenue shortfall. We also

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<PAGE> 12

may be unable to increase our spending and expand our operations in a timely
manner to adequately meet user demand to the extent it exceeds our expectations.

OUR SUCCESS DEPENDS UPON ACHIEVING A LARGE AND ACTIVE BASE OF ADVERTISERS AND
CONSUMERS.

Our ability to increase the volume of transactions on our service and the
amounts bid by our advertisers is dependent upon achieving market acceptance
from more advertisers and consumers using our service. Our service has achieved
only limited market acceptance to date. Internet advertising in general is at an
early stage of development. Most potential advertisers have only limited
experience advertising on the Internet and have not devoted a significant
portion of their advertising expenditures to Internet advertising. Advertising
through priority placement on our search service in particular has been
introduced only recently, and we cannot predict the level of its acceptance as
an advertising medium, even if we achieve initial market acceptance. Our service
may not achieve significant acceptance by consumers. Among other things, because
our service prioritizes search results based on advertising bids associated with
keywords rather than on algorithmic or other traditional search and retrieval
technologies, consumers may perceive our results to be less objective than those
provided by traditional search methods. Failure to achieve and maintain a large
and active base of advertisers and consumers would seriously harm our business.

WE DEPEND ON A LIMITED NUMBER OF SOURCES TO DIRECT CONSUMERS TO OUR SERVICE TO
CONDUCT SEARCHES.

The consumers who conduct searches on our service come from a limited
number of sources. Our sources for consumers conducting searches are providers
of Internet browsers such as Netscape Communicator and Microsoft Internet
Explorer; aggregators of search offerings of various providers; our Web site;
banner advertising; and the search syndication network. Although sources of
consumer traffic to our service fluctuate, in any given month we typically
depend upon one or a few of these sources for a significant majority of traffic
and searches conducted on our service. In particular, Microsoft Corporation,
Netscape Communications Corp. (a wholly owned subsidiary of America Online) and
Dogpile, our three largest sources of search traffic, collectively directed
consumers to our service who accounted for approximately 50% of our search
revenue in March 1999. We generally obtain traffic from these sources through
short term agreements. Our contract with Netscape expires at the end of June
1999, our contract with Microsoft expires in September 1999 unless terminated
earlier or extended in the event that traffic delivered under the contract fails
to meet certain specifications and our contract with Dogpile expires in April
2000. There can be no assurance that we will be successful in renewing any of
these agreements on commercially acceptable terms as a result of competition
among providers of Internet search services.

OUR FUTURE SUCCESS IS DEPENDENT UPON FURTHER DEVELOPING AND ENHANCING THE SEARCH
SYNDICATION NETWORK.

We believe that our future success in penetrating our target markets
depends in part on our ability to further develop and maintain relationships
with network affiliates in the search syndication network. These network
affiliates provide their users with GoTo.com search capabilities on their sites
or direct their traffic to our Web site. We believe these relationships are
important in order to facilitate broad market acceptance of our service and
enhance our sales. Our future ability to attract consumers to our service is
dependent upon the growth of the search syndication network, which is new and
unproven. If we are

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unable to successfully develop and maintain relationships with network
affiliates in our search syndication network, our business will be damaged.

OUR CONTRACTS WITH NETWORK AFFILIATES ARE GENERALLY TERMINABLE AT ANY TIME.

Our agreement with network affiliates are generally terminable at will by
either party. Our network affiliates can generally terminate these agreements at
any time. The loss of our agreements with our existing network affiliates could
damage our business. Further, if we are unable to extend or obtain new
agreements or arrangements for traffic on commercially acceptable terms,
including with network affiliates, our business will be damaged.

WE ARE DEPENDENT UPON OTHER COMPANIES WHO SUPPLY SERVICES TO US.

We also depend on non-distribution related relationships. Following the
paid advertising search results offered to consumers on our service, we offer
search results provided by Inktomi Corporation. We rely on Inktomi as the sole
source of these additional search results, which constitute a very high
percentage of the search results displayed by GoTo.com. For example, for March
1999, this percentage was approximately 82%. We also rely on 24/7 Media, Inc. to
provide advertising sales for us as well as for some participants in the search
syndication network. The loss of either of these key relationships could damage
our business. Our contract with Inktomi expires in April 2000 and our contract
with 24/7 Media expires in March 2001. There can be no assurance that we will be
successful in renewing these contracts on commercially acceptable terms or that
our costs with respect to these contracts will not increase following any
renewal. If we are unable to develop future key relationships or maintain and
enhance our existing relationships, our business will be damaged.

OUR INDUSTRY IS HIGHLY COMPETITIVE, AND WE CANNOT ASSURE YOU THAT WE WILL BE
ABLE TO COMPETE EFFECTIVELY.

The market for Internet products, services and advertising is new, rapidly
evolving and intensely competitive. GoTo.com currently or potentially competes
with many other providers of Web directories, search and information services as
well as traditional media for consumer attention and advertising expenditures.
We expect competition to intensify in the future. Barriers to entry may not be
significant, and current and new competitors may be able to launch new Web sites
at a relatively low cost. Accordingly, we believe that our success will depend
heavily upon achieving significant market acceptance before our competitors and
potential competitors introduce competing services.

GoTo.com competes with online services, other Web sites and advertising
networks such as DoubleClick Inc., 24/7 Media, Inc. and Net Gravity Inc., as
well as traditional offline media such as television, radio and print for a
share of advertisers' total advertising budgets. We believe that the number of
companies selling Web-based advertising and the available inventory of
advertising space has recently increased substantially. Accordingly, GoTo.com
may face increased pricing pressure for the sale of advertisements and direct
marketing opportunities, which could adversely affect our business and operating
results.

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<PAGE> 14

and Yahoo! Inc. In addition, we expect that other companies will offer directly
competing services in the future. For example, AltaVista, a division of Compaq
Computer Corporation, has announced it will offer such a service.

Many of these competitors, as well as potential entrants into our market,
have longer operating histories, larger customer or user bases, greater brand
recognition and significantly greater financial, marketing and other resources
than we do. Many of these current and potential competitors can devote
substantially greater resources to promotion and Web site and systems
development than we can. In addition, as the use of the Internet and other
online services increases, larger, well-established and well-financed entities
may continue to acquire, invest in or form joint ventures with providers of Web
directories, search and information services or advertising solutions, and
existing providers of Web directories, search and information services or
advertising solutions may continue to consolidate. In addition, providers of
Internet browsers and other Internet products and services who are affiliated
with providers of Web directories and information services in competition with
the GoTo.com service may more tightly integrate these affiliated offerings into
their browsers or other products or services. Any of these trends would increase
the competition we face and could adversely affect our business and operating
results.

WE ARE DEPENDENT UPON MAINTAINING AND EXPANDING OUR COMPUTER AND COMMUNICATIONS
SYSTEMS.

Our failure to achieve or maintain high capacity data transmission without
system downtime and achieve improvements to our transaction processing systems
and network infrastructure would adversely affect our business and results of
operations. Our success, in particular our ability to provide high quality
customer service, largely depends on the efficient and uninterrupted operation
of our computer and communications systems in order to accommodate the consumers
and advertisers using our service. Our success also depends upon our ability to
rapidly expand our transaction-processing systems and network infrastructure
without any systems interruptions in order to accommodate any significant
increases in use of our service. We believe that our current
transaction-processing systems and network infrastructure are insufficient to
support our future growth. Although we are enhancing and expanding our
transaction-processing systems and network infrastructure, we have experienced
periodic systems interruptions and infrastructure failures, which we believe
will continue to occur. In the past, limitations of our technology
infrastructure have prevented us from maximizing our business opportunities. In
addition, many of our software systems are custom-developed and we rely on our
employees and certain third-party contractors to develop and maintain these
systems. If certain of these employees or contractors become unavailable to us,
we may experience difficulty in improving and maintaining these systems.
Furthermore, we expect that we will continue to be required to manage multiple
relationships with various software and equipment vendors whose technologies may
not be compatible, as well as relationships with other third parties to maintain
and enhance our technology infrastructure.

WE ARE IN THE PROCESS OF IMPLEMENTING NEW FINANCIAL AND ACCOUNTING SYSTEMS WHICH
MAY NOT WORK AS EXPECTED.

If we fail to successfully implement and integrate new financial reporting
and information systems, or we are not able to scale these systems with our
growth, we may not have adequate, accurate or timely financial information.
Failure to have adequate, accurate or timely financial information would harm
our business and could lead to volatility in our stock price. We are in the
process of implementing new financial and accounting reporting software which we
expect to complete prior to or during the third

9
<PAGE> 15

quarter of 1999, although we cannot assure you that implementation will not take
longer. In connection with this implementation, we have encountered difficulties
integrating the new software with certain of our other information systems.
Additionally, we are in the process of upgrading certain sales databases used
for finance, sales and account management. If we grow rapidly, we will face
additional challenges in upgrading and maintaining these systems.

OUR ADVERTISING REVENUE IS CONCENTRATED AMONG A LIMITED NUMBER OF ADVERTISERS.

If our major advertisers were to substantially cut back advertising or stop
using our services, our business would be seriously harmed. Although no
advertiser accounted for more than 10% of our revenue for the quarter ended
March 31, 1999, a significant majority of our total revenue is derived from a
small proportion of our advertisers. We believe that a substantial amount of
revenue from advertising sales in any given future period may come from a
relatively small number of advertisers. We do not have formal contractual
relationships with many of our advertisers and when we do have contracts, most
are terminable at any time by the advertiser. As a result, we cannot assure you
that any of our advertisers will purchase advertising from us in the future.

CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.

The failure of the Internet to continue to develop as a commercial and
business medium would adversely affect our business. The widespread acceptance
and adoption of the Internet by traditional businesses for conducting business
and exchanging information is likely only if the Internet provides these
businesses with greater efficiencies and improvements.

FAILURE TO EXPAND INTERNET INFRASTRUCTURE COULD LIMIT OUR FUTURE GROWTH.

The recent growth in Internet traffic has caused frequent periods of
decreased performance, and if Internet usage continues to grow rapidly, the
Internet's infrastructure may not be able to support these demands and its
performance and reliability may decline. If outages or delays on the Internet
occur frequently or increase in frequency, overall Web usage, including usage of
our Web site in particular, could grow more slowly or decline. Our ability to
increase the speed and scope of our services to users is ultimately limited by
and dependent upon the speed and reliability of both the Internet and our
advertisers' and consumers' internal networks. Consequently, the emergence and
growth of the market for our services depends upon improvements being made to
the entire Internet as well as to our individual advertisers' and consumers'
networking infrastructures to alleviate overloading and congestion.

INCREASED SECURITY RISKS OF ONLINE COMMERCE MAY DETER FUTURE USE OF OUR
SERVICES.

Concerns over the security of transactions conducted on the Internet and
the privacy of consumers may also inhibit the growth of the Internet and other
online services generally, and online commerce in particular. Our failure to
prevent security breaches could significantly harm our business and results of
operations. We cannot be certain that advances in computer capabilities, new
discoveries in the field of cryptography, or other developments will not result
in a compromise or breach of the algorithms we use to protect our transaction
data. Anyone who is able to circumvent our security measures could

10
<PAGE> 16

misappropriate proprietary information, cause interruptions in our operations or
damage our brand and reputation. We do not believe that our data repositories,
financial systems and other technology resources are secure from security
breaches or sabotage and we occasionally experience attempts at "hacking" or
security breaches. We may be required to incur significant costs to protect
against security breaches or to alleviate problems caused by breaches. Any
well-publicized compromise of security could deter people from using the
Internet to conduct transactions that involve transmitting confidential
information or downloading sensitive materials, which would adversely affect the
business of our advertisers and, accordingly, our business.

WE FACE THE RISKS OF SYSTEM FAILURES.

We currently do not have a disaster recovery plan in effect and do not have
fully redundant systems for our services at an alternate site. A disaster such
as fire, flood, earthquake, power loss, telecommunications failure, break-in,
sabotage or a similar event could severely damage our business and results of
operations because our services could be interrupted for an indeterminate length
of time. Our operations depend upon our ability to maintain and protect our
computer systems, all of which are located in our principal headquarters in
Pasadena, California and at an offsite location managed by a third party,
Frontier Global Center, in Sunnyvale, California. Pasadena and Sunnyvale exist
on or near known earthquake fault zones. The occurrence of a natural disaster or
unanticipated problems at our principal headquarters or at the third-party
facility could cause interruptions or delays in our business, loss of data or
render us unable to provide our services. In addition, failure by the
third-party facility to provide the data communications capacity required by us,
as a result of human error, natural disaster or other operational disruptions,
could cause interruptions in our service. The occurrence of any or all of these
events could adversely affect our reputation, brand and business which could
cause the price of our common stock to decline.

WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS, AND
ANY FAILURE TO MANAGE THIS GROWTH COULD DAMAGE OUR BUSINESS.

Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We have increased, and plan to continue to increase, the
scope of our operations. These expansion efforts could be expensive and put a
strain on management, and, if we do not manage growth properly, it could
adversely affect our business. Our headcount has grown and will continue to grow
substantially. Prior to February 1998, we had no employees, although a small
number of personnel with Bill Gross' idealab! and certain consultants were
performing services for us. At March 31, 1999, we had a total of 83 employees.
We will need to expand our infrastructure, which will include hiring certain key
employees, including without limitation, key employees in marketing and
technology development. Hiring such employees has historically been difficult,
and we cannot assure you that we will be able to successfully attract and retain
a sufficient number of qualified personnel.

OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS,
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.

Our future success depends upon the continued service of our executive
officers and other key technology, marketing, sales and support personnel. Our
key employees include Jeffrey Brewer, Ted Meisel, Todd Tappin, Harry Chandler,
James B. Gallinatti, Jr.,

11
<PAGE> 17

Stephanie Sarka, Talmadge O'Neill, Tom Soulanille, Gregory Robleski, Dan
Scholnick, Eric Hovanec, Joshua Metzger, Paul Ryan and Paul Schulz. None of our
officers or key employees is bound by an employment agreement for any specific
term. If we lost the services of one or more of our key employees, or if one or
more of our executive officers or employees decided to join a competitor or
otherwise compete directly or indirectly with us, this could have a significant
adverse effect on our business and could cause the price of our stock to
decline. In particular, the services of key members of our research and
development team would be difficult to replace. We cannot assure you that we
will be able to successfully retain our key personnel or, in the event we were
to lose the services of any key personnel, to replace such personnel.

WE ARE EXPOSED TO RISKS ASSOCIATED WITH CREDIT CARD FRAUD.

We have suffered losses and may continue to suffer losses as a result of
orders placed with fraudulent credit card data, even though the associated
financial institution approved payment of the orders. Under current credit card
practices, a merchant is liable for fraudulent credit card transactions when, as
is the case with the transactions we process, that merchant does not obtain a
cardholder's signature. A failure to adequately control fraudulent credit card
transactions would adversely affect our business and could cause a decline in
our stock price.

WE FACE RISKS OF CLAIMS FROM THIRD PARTIES FOR INTELLECTUAL PROPERTY
INFRINGEMENT AND OTHER MATTERS THAT COULD ADVERSELY AFFECT OUR BUSINESS.

Our services operate in part by making Internet services and content
available to our users. This creates the potential for claims to be made against
us, either directly or through contractual indemnification provisions with third
parties. These claims might, for example, be made for defamation, negligence,
copyright, trademark or patent infringement, personal injury, invasion of
privacy or other legal theories. We receive correspondence alleging some of
these types of claims from time to time. Any claims could result in costly
litigation and be time consuming to defend, divert management's attention and
resources, cause delays in releasing new or upgrading existing services or
require us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all.

Litigation regarding intellectual property rights is common in the Internet
and software industries. We expect that Internet technologies and software
products and services may be increasingly subject to third-party infringement
claims as the number of competitors in our industry segment grows and the
functionality of products in different industry segments overlaps.

There can be no assurance that our services do not infringe the
intellectual property rights of third parties. A successful claim of
infringement against us and our failure or inability to license the infringed or
similar technology could adversely affect our business.

WE MAY NOT BE ABLE TO PROTECT THE INTELLECTUAL PROPERTY RIGHTS UPON WHICH OUR
BUSINESS RELIES.

Our success and ability to compete are substantially dependent upon our
internally developed technology and data resources, which we protect through a
combination of

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<PAGE> 18

We are aware that certain other companies are using or may have plans to
use the terms "GoTo," "Go," "Go2" and variations of these terms as part of a
company name, domain name, trademark or service mark. In addition, we have
received notice from companies claiming superior rights to marks such as these.
We cannot assure you that additional companies will not claim such superior
rights or that we will not be subject to infringement claims. A successful
infringement claim by the owner of a mark including "GoTo" or a variation could
require us to change our name, which would be expensive and disruptive to our
business. Further, despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
services, technology and other intellectual property, and we cannot be certain
that the steps we have taken will prevent any misappropriation or confusion
among consumers and advertisers.

WE ARE ENGAGED IN LITIGATION WITH THE WALT DISNEY COMPANY AND CERTAIN OF ITS
AFFILIATES, INCLUDING INFOSEEK CORPORATION, THAT COULD SERIOUSLY HARM OUR
BUSINESS.

We are engaged in litigation that will be expensive to pursue and will be
distracting to our management and other employees. Any adverse developments
resulting from this litigation could seriously harm our business. We believe
that The Walt Disney Company and certain of its affiliates, including Infoseek
Corporation, are infringing our GoTo.com logo. On February 18, 1999 we sued
these companies and two affiliated companies in the United States District Court
for the Central District of California alleging violation of federal trademark
law and unfair competition. Our lawsuit is based on the use by these companies
of a "GO" design mark to provide Internet services, including a search engine in
connection with their "Go Network." We are seeking to prevent these companies
from using this "GO" design mark as well as other remedies. The lawsuit is at a
preliminary stage, and we cannot assure you that the outcome of this litigation
will be favorable to us. For example, we may not prevail and be able to stop
these companies from causing confusion among consumers and advertisers through
continued use of the "GO" design mark. In addition, these companies could file
counterclaims or separate lawsuits or other proceedings against us, possibly
seeking to prevent us from using the GoTo.com logo or other relief. An
unfavorable result could affect the value of or even prevent us from using the
GoTo.com logo.

WE MAY NOT BE ABLE TO PROTECT OUR INTERNET DOMAIN NAME.

The Internet domain name we use, "GoTo.com," is an extremely important part
of our business and we may not be able to protect it. The acquisition and
maintenance of domain names generally are regulated by governmental agencies and
their designees. For example, in the United States, the National Science
Foundation has appointed Network Solutions, Inc. as the current exclusive
registrar for the ".com," ".net" and ".org" domains. The regulation of domain
names in the United States and in foreign countries is subject to change in the
near future. We believe that such changes in the United States may include a
transition from the current system to a system that is controlled by a
non-profit corporation and the creation of domains in addition to ".com," ".net"
and ".org." Governing bodies may establish other domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we conduct business. Furthermore, the relationship between
regulations governing domain names and laws

13
<PAGE> 19

protecting trademarks and similar proprietary rights is unclear. Therefore, we
may be unable to prevent third parties from acquiring domain names that are
similar to, infringe upon or otherwise decrease the value of our trademarks and
other proprietary rights. Third parties have acquired domain names that include
"goto" or varieties thereof both in the United States and elsewhere.

WE MAY NEED ADDITIONAL CAPITAL WHICH COULD DILUTE THE OWNERSHIP INTEREST OF
INVESTORS.

We require substantial working capital to fund our business. If we raise
additional funds through the issuance of equity, equity-related or convertible
debt securities, these securities may have rights, preferences or privileges
senior to those of the rights of our common stock and our stockholders may
experience additional dilution. We cannot be certain that additional financing
will be available to us on favorable terms when required, or at all. Since our
inception, we have experienced negative cash flow from operations and expect to
experience significant negative cash flow from operations in the future. We
currently anticipate that the net proceeds of this offering, together with our
available funds, will be sufficient to meet our anticipated needs for working
capital and capital expenditures through at least the next 12 months. However,
we may need to raise additional funds prior to the expiration of this period or
at a later date.

POTENTIAL ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS,
DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.

We may make investments in or acquire complementary products, technologies
and businesses. These acquisitions and investments could disrupt our ongoing
business, distract our management and employees and increase our expenses. If we
acquire a company, we could face difficulties in assimilating that company's
personnel and operations. In addition, the key personnel of the acquired company
may decide not to work for us. Acquisitions of additional services or
technologies also involve risks of incompatibility and the need for integration
into our existing services and marketing, sales and support efforts. If we
finance the acquisitions by issuing equity securities, this could dilute our
existing stockholders. Any amortization of goodwill or other assets, or other
charges resulting from the costs of these acquisitions, could adversely affect
our operating results.

POTENTIAL YEAR 2000 PROBLEMS WITH OUR INTERNAL OPERATING SYSTEMS OR OUR SERVICES
COULD ADVERSELY AFFECT OUR BUSINESS.

We cannot assure you that we will not experience unanticipated negative
consequences from year 2000 problems, including material costs caused by
undetected errors or defects in the technology used in our internal systems.
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these code fields will need to accept four digit entries to distinguish
the year 2000 and 21st century dates from other 20th century dates. As a result,
computer systems and/or software products used by many companies may need to be
upgraded to solve this problem.

Our online services and their associated and supporting tools, Web sites
and infrastructure were designed and developed to be year 2000 compliant. Our
internal systems, including those used to deliver our services, utilize
third-party hardware and software. We have begun the process of contacting the
vendors of these infrastructure products in order to gauge their year 2000
compliance. Based on vendors' representations

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<PAGE> 20

received thus far, we believe that the third-party hardware and software we use
is year 2000 compliant, although we have not heard from all of these vendors.

To date, we have spent less than an estimated $10,000 to address year 2000
issues. We presently estimate that the total remaining cost of addressing year
2000 issues will not be material. These estimates were derived utilizing a
number of assumptions, including the assumption that we have already identified
any significant year 2000 issues. However, these assumptions may not be
accurate, and actual results could differ materially from those anticipated. In
view of our year 2000 review and remediation efforts to date, the recent
development of our services, the recent installation of our information
technology equipment and systems, we do not consider contingency planning to be
necessary at this time. We believe that the most likely worst case scenario is
that the Internet fails and we are unable to offer our services.

If we discover that certain of our services need modification, or certain
of our third-party hardware and software is not year 2000 compliant, we will try
to make modifications to our services and systems on a timely basis. We do not
believe that the cost of these modifications will materially affect our
operating results. However, we cannot assure you that we will be able to modify
these products, services and systems in a timely, cost-effective and successful
manner and the failure to do so could have a material adverse effect on our
business and operating results.

SPENDING BY OUR ADVERTISERS TO EVALUATE AND ADDRESS YEAR 2000 COMPLIANCE COULD
RESULT IN LOWER DEMAND FOR OUR SERVICES.

Year 2000 compliance issues also could cause a significant number of
companies, including our current advertisers, to reevaluate their current system
needs and, as a result, consider switching to other systems and means of
advertising. This could result in a material adverse effect on our business,
operating results and financial condition. Also, during the next six months
there is likely to be an increased advertiser focus on addressing year 2000
compliance issues, creating the risk that advertisers may reallocate
expenditures to fix year 2000 problems of existing systems. Although we have not
experienced these effects to date, if advertisers defer Internet advertising and
commerce and related services because of such a reallocation, it would adversely
affect our business and operating results.

OUR MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE AND OUR FUTURE SUCCESS WILL
DEPEND ON OUR ABILITY TO MEET THE CHANGING NEEDS OF OUR INDUSTRY.

For our business to survive and grow, we must continue to enhance and
improve the functionality and features of our online services. The Internet and
the online advertising industry are rapidly changing. If new industry standards
and practices emerge, our existing services, technology and systems may become
obsolete. Our future success will depend on our ability to do the following:

- license and internally develop leading technologies useful in our
business;

- enhance our existing services;

- develop new services and technologies that address the increasingly
sophisticated and varied needs of prospective consumers; and

- respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.

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<PAGE> 21

Developing our services and other proprietary technology entails
significant technical and business risks, as well as substantial costs. We may
use new technologies ineffectively, or we may fail to adapt our services,
transaction-processing systems and network infrastructure to user requirements
or emerging industry standards. If we face material delays in introducing new
services, products and enhancements, our users may forego the use of our
services and use those of our competitors.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES MAY DAMAGE OUR BUSINESS.

The laws and regulations applicable to the Internet and our services are
evolving and unclear and could damage our business. There are currently few laws
or regulations directly applicable to access to, or commerce on, the Internet.
Due to the increasing popularity and use of the Internet, it is possible that
laws and regulations may be adopted, covering issues such as user privacy,
defamation, pricing, taxation, content regulation, quality of products and
services, and intellectual property ownership and infringement. Such legislation
could expose GoTo.com to substantial liability as well as dampen the growth in
use of the Internet, decrease the acceptance of the Internet as a communications
and commercial medium, or require GoTo.com to incur significant expenses in
complying with any new regulations. The European Union has recently adopted
privacy and copyright directives that may impose additional burdens and costs on
international operations. In addition, several telecommunications carriers,
including America's Carriers' Telecommunications Association, are seeking to
have telecommunications over the Internet regulated by the Federal
Communications Commission, or FCC, in the same manner as other
telecommunications services. Because the growing popularity and use of the
Internet has burdened the existing telecommunications infrastructure and many
areas with high Internet usage have begun to experience interruptions in phone
services, local telephone carriers, such as Pacific Bell, have petitioned the
FCC to regulate the Internet and to impose access fees. Increased regulation or
the imposition of access fees could substantially increase the costs of
communicating on the Internet, potentially decreasing the demand for our
service. A number of proposals have been made at the federal, state and local
level that would impose additional taxes on the sale of goods and services
through the Internet. Such proposals, if adopted, could substantially impair the
growth of electronic commerce and could adversely affect us. Also, Congress
recently passed (and the President has signed into law) the Digital Millenium
Copyright Act, which is intended to reduce the liability of online service
providers for listing or linking to third-party Web sites that include materials
that infringe copyrights. Congress also recently passed (and the President has
signed into law) the Children's Online Protection Act and the Children's Online
Privacy Act, which will restrict the distribution of certain materials deemed
harmful to children and impose additional restrictions on the ability of online
services to collect user information from minors. Further, Congress recently
passed (and the President has signed into law) the Protection of Children from
Sexual Predators Act, which mandates that electronic communication service
providers report facts or circumstances from which a violation of child
pornography laws is apparent. GoTo.com is currently reviewing this legislation,
and cannot currently predict the effect, if any, that this legislation will have
on our business. There can be no assurance that this legislation will not impose
significant additional costs on our business or subject GoTo.com to additional
liabilities. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, copyright, defamation, obscenity
and personal privacy is uncertain. GoTo.com may be subject to claims that our
services violate such laws. Any new legislation or regulation in the United

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<PAGE> 22

States or abroad or the application of existing laws and regulations to the
Internet could damage our business and cause the price of our common stock to
decline.

Due to the global nature of the Internet, it is possible that the
governments of other states and foreign countries might attempt to regulate its
transmissions or prosecute GoTo.com for violations of their laws. GoTo.com might
unintentionally violate such laws. Such laws may be modified, or new laws may be
enacted, in the future. Any such development could damage our business.

WE MAY INCUR LIABILITIES FOR THE ACTIVITIES OF USERS OF OUR SERVICE.

The law relating to the liability of providers of online services for
activities of their users is currently unsettled and could damage our business.
We do not carry insurance that will indemnify us for liability for activities of
our users. We are aware that certain of our advertisers' Web sites offer or
contain information about alcohol, tobacco, firearms, adult material and other
products, services and information that may be subject to regulation by local,
state or federal authorities. In addition, our advertisers' Web sites may
contain text, images or information that could infringe third-party copyrights,
trademarks or other intellectual property rights. We cannot assure you that
GoTo.com will successfully avoid civil or criminal liability for unlawful
activities carried out by users of our service. The imposition upon GoTo.com of
potential liability for unlawful activities of users of our service could
require us to implement measures to reduce our exposure to such liability, which
may require us, among other things, to spend substantial resources or to
discontinue certain service offerings. Any costs incurred as a result of such
liability or asserted liability could damage our business.

WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS AND HOW WE INVEST THESE
PROCEEDS MAY NOT YIELD A FAVORABLE RETURN.

Our management can spend the proceeds from this offering in ways with which
the stockholders may not agree. The net proceeds of this offering are not
allocated for specific uses other than working capital and general corporate
purposes, which gives our management broad discretion on the use of these
proceeds. We cannot predict that the proceeds will be invested to yield a
favorable return.

OUR SECURITIES HAVE NO PRIOR MARKET, AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THE OFFERING.

The trading market price of our common stock may decline below the initial
public offering price. In addition, an active public market for GoTo.com's
common stock may not develop or be sustained after this offering. Before this
offering, there has not been a public market for our common stock. The initial
public offering price has been determined by negotiations between GoTo.com and
the representatives of the underwriters.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

If our stockholders sell substantial amounts of common stock in the public
market, including shares issued upon the exercise of outstanding options, the
market price of our common stock could fall. After this offering, we will have
outstanding 44,397,921 shares of common stock, based upon shares outstanding as
of May 15, 1999 and including the 6,000,000 shares offered hereby (assuming no
exercise of the underwriters' over-allotment option), of which 23,121,594 of
these 44,397,921 shares will be issued upon conversion of

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<PAGE> 23

outstanding preferred stock upon completion of this offering. The 38,397,921
shares of common stock outstanding as of May 15, 1999 will be available for sale
in the public market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OF AVAILABILITY FOR SALE
<S> <C>
301,756 Prior to 180 days after the date of this prospectus
32,588,048 180 days after the date of this prospectus
5,538,117 Between December 1999 and May 2000
</TABLE>

The above table assumes the effectiveness of certain lock-up arrangements
with the underwriters under which the stockholders have agreed not to sell or
otherwise dispose of their shares of common stock. The table also includes
2,655,068 shares which, as of May 15, 1999, were subject to repurchase by
GoTo.com and transfer restrictions as a result of vesting agreements. Most of
the shares that will be available for sale after the 180th day after the date of
this prospectus or afterwards will be subject to certain volume limitations
because they are held by affiliates of GoTo.com. In addition, we cannot assure
you that the underwriters will not remove these lock-up restrictions prior to
180 days after the offering without prior notice.

WE WILL BE CONTROLLED BY OUR CURRENT STOCKHOLDERS, EVEN AFTER THE OFFERING.

idealab! Holdings, L.L.C., idealab! Capital Management I, LLC, Draper
Fisher Jurvetson, Moore Capital Management, Inc. and Global Retail Partners,
L.P. and/or entities affiliated with them will, in the aggregate, beneficially
own approximately 58.3% of our outstanding common stock following the completion
of this offering. In addition, Bill Gross, a director of GoTo.com, serves as
Managing Member of idealab! Holdings, L.L.C. and as Managing Director of
idealab! Capital Management I, LLC, and exercises voting and investment power
over shares held beneficially by those entities. The stockholders listed above
if acting together, would be able to significantly influence all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions.

OUR CHARTER DOCUMENTS AND CHANGE OF CONTROL SEVERANCE AGREEMENTS WITH OUR
MANAGEMENT WILL MAKE IT MORE DIFFICULT TO ACQUIRE US.

Provisions of our Amended and Restated Certificate of Incorporation and
Bylaws could make it more difficult for a third party to acquire us, even if
doing so would be beneficial to our stockholders. For example, our board of
directors is divided into three classes, with one class being elected each year
by our stockholders, which generally makes it more difficult for stockholders to
replace a majority of directors and obtain control of our board. In addition,
stockholder meetings may be called only by our board of directors, the chairman
of the board and the president, advanced notice is required prior to stockholder
proposals, and stockholders may not act by written consent. Further, we have
authorized preferred stock that is undesignated, making it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
GoTo.com.

Delaware law also could make it more difficult for a third party to acquire
us. Specifically, Section 203 of the Delaware General Corporation Law may have
an anti-takeover effect with respect to transactions not approved in advance by
the board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by our
stockholders.

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<PAGE> 24

In addition, in April 1999, we entered into Change of Control Severance
Agreements with members of our senior management providing for certain benefits,
including acceleration of option vesting, to these members if they are
terminated other than for cause following an acquisition of GoTo.com. These
agreements could make us less attractive to a third party who may want to
acquire us because they will make any replacement of management more expensive.

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN.

You should not rely on forward-looking statements in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify these
forward-looking statements. This prospectus also contains forward-looking
statements attributed to certain third parties relating to their estimates
regarding the growth of the Internet, Internet advertising and online commerce
markets and spending. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described above and elsewhere in this prospectus.

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<PAGE> 25

USE OF PROCEEDS

The net proceeds to us from the sale of the 6,000,000 shares of common
stock offered by us are estimated to be $82.6 million after deducting the
underwriting discount, estimated offering expenses and assuming no exercise of
the underwriters' over-allotment option to purchase 900,000 shares from us.

We expect to use the net proceeds for general corporate purposes,
principally working capital, capital expenditures, including upgrades to
transaction processing systems and network infrastructure, and additional
marketing and sales efforts. In addition, we may use a portion of the net
proceeds to acquire complementary products, technologies or businesses; however,
we currently have no commitments or agreements for such acquisitions and are not
involved in any negotiations related to such acquisitions. We intend to invest
the net proceeds of this offering in interest-bearing, investment-grade
securities until they are used.

DIVIDEND POLICY

We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.

CORPORATE INFORMATION

Our principal executive offices are located at 140 West Union Street,
Pasadena, California 91103, and our telephone number is (626) 685-5600.

GoTo.com owns common law rights in the United States in the service marks
GOTO.COM, GOTO, the GOTO.COM logo, SEARCH MADE SIMPLE and other marks. In
addition, GoTo.com has applied for federal registrations of these four marks and
other marks, including PAY FOR PERFORMANCE, TARGETED PAY-FOR-PERFORMANCE
ADVERTISING and SEARCH SYNDICATION NETWORK. All other trademarks or service
marks appearing in this prospectus are trademarks or service marks of others. We
are engaged in litigation with the Walt Disney Company and certain of its
affiliates, including Infoseek Corporation. An unfavorable result in any
counterclaims or separate litigation with these parties could affect the value
of, or even prevent us from using, the GOTO.COM logo.

20
<PAGE> 26

CAPITALIZATION

The following table sets forth the following information:

- the actual capitalization of GoTo.com as of March 31, 1999;

- the pro forma capitalization of GoTo.com after giving effect to the sale
of 3,628,447 shares of preferred stock for an aggregate purchase price of
approximately $25 million on April 14, 1999, conversion of all
outstanding shares of convertible preferred stock into 23,121,594 shares
of common stock and the exercise of warrants outstanding as of March 31,
1999 to purchase 104,971 shares of common stock; and

- the pro forma as adjusted capitalization to give effect to the sale of
6,000,000 shares of common stock at the initial public offering price of
$15.00 per share in this offering, less underwriting discounts and
commissions and estimated offering expenses payable by GoTo.com.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................... $ 11,195 $ 36,381 $118,981
======== ======== ========
Long-term capital lease obligations and
debt...................................... $ 590 $ 590 $ 590
Stockholders' equity:
Convertible preferred stock, issuable in
series, $0.0001 par value, 20,187,401
shares authorized, 19,493,147 shares
issued and outstanding, actual;
10,000,000 shares authorized and no
shares issued and outstanding, pro
forma and pro forma as adjusted........ 28,645 -- --
Common stock, $0.0001 par value;
45,000,000 shares authorized,
13,426,320 shares issued and
outstanding, actual; 200,000,000 shares
authorized, 36,652,885 shares issued
and outstanding, pro forma; and
200,000,000 shares authorized,
42,652,885 shares issued and
outstanding, pro forma as adjusted..... 1 3 4
Additional paid-in capital................ 7,466 61,294 143,893
Deferred compensation.................. (3,534) (3,534) (3,534)
Accumulated deficit.................... (21,503) (21,503) (21,503)
-------- -------- --------
Total stockholders' equity............. 11,075 36,260 118,860
-------- -------- --------
Total capitalization........................ $ 11,665 $ 36,850 $119,450
======== ======== ========
</TABLE>

This table excludes 7,517,242 shares of common stock reserved for issuance
under GoTo.com's stock option and employee stock purchase plans, including
2,752,984 shares subject to outstanding options as of March 31, 1999 with an
average exercise price of $0.19 per share.

21
<PAGE> 27

DILUTION

The pro forma net tangible book value of our common stock on March 31, 1999
was $36.1 million, or approximately $0.98 per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets less total
liabilities, assuming the issuance of 3,628,447 shares of Series D preferred
stock on April 14, 1999 and exercise of all outstanding warrants occurred on
March 31, 1999, divided by the number of shares of common stock outstanding,
after giving effect to the conversion of all preferred stock including the
Series D preferred stock. Dilution in pro forma net tangible book value per
share represents the difference between the amount per share paid by purchasers
of shares of our common stock in this offering and the pro forma net tangible
book value per share of our common stock immediately afterwards. After giving
effect to our sale of 6,000,000 shares of common stock offered by this
prospectus at a price of $15.00 per share and after deducting the underwriting
discount and estimated offering expenses payable by us, our pro forma net
tangible book value would have been $118.9 million, or approximately $2.79 per
share. This represents an immediate increase in pro forma net tangible book
value of $1.81 per share to existing stockholders and an immediate dilution in
pro forma net tangible book value of $12.21 per share to new investors.

<TABLE>
<S> <C> <C>
Public offering price per share............................. $ 15.00
Pro forma net tangible book value per share as of March
31, 1999.............................................. $ 0.98
Increase per share attributable to new investors....... 1.81
-------
As adjusted pro forma net tangible book value per share
after the offering........................................ 2.79
-------
Dilution in pro forma net tangible book value per share to
new investors............................................. $ 12.21
=======
</TABLE>

This table excludes all options that will remain outstanding upon
completion of this offering. As of March 31, 1999, there were options
outstanding to purchase a total 2,752,984 shares of common stock with an average
exercise price of $0.19 per share. The exercise of outstanding options having an
exercise price less than the offering price would increase the dilutive effect
to new investors.

The following table sets forth, as of March 31, 1999, the differences
between the number of shares of common stock purchased from us, the total price
and average price per share paid by existing stockholders and by the new
investors, before deducting expenses payable by us, using the public offering
price of $15.00 per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 36,652,885 85.9% $ 54,841,599 37.9% $ 1.50
New investors............... 6,000,000 14.1% 90,000,000 62.1% $ 15.00
------------ ------- ------------- -------
Total............. 42,652,885 100.0% $ 144,841,599 100.0%
============ ======= ============= =======
</TABLE>

The existing stockholder amounts in the table above assumes the issuance of
3,628,447 shares of preferred stock on April 14, 1999 and the issuance of
104,971 shares of common stock upon exercise of warrants outstanding as of March
31, 1999.

If the underwriters' over-allotment option is exercised in full, the number
of shares held by new public investors will be increased to 6,900,000 or
approximately 15.8% of the total number of shares of our common stock
outstanding after this offering.

22
<PAGE> 28

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements appearing elsewhere in this prospectus.
The statement of operations data set forth below for the period from September
15, 1997 (inception) to December 31, 1997 and the year ended December 31, 1998,
and the balance sheet data at December 31, 1997 and 1998 are derived from our
audited financial statements included elsewhere in this prospectus. The
statement of operations data for the three-month periods ended March 31, 1998
and 1999 and the balance sheet data as of March 31, 1999 are derived from
unaudited financial statements included elsewhere in this prospectus. Other
quarterly statement of operations data set forth below is derived from our
unaudited quarterly financial statements not included elsewhere herein. In our
opinion, these unaudited financial statements have been prepared on the same
basis as our audited financial statements and reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of our results of operations and financial position for these
periods. The historical results are not necessarily indicative of results to be
expected for any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
INCEPTION TO TWELVE MONTHS ENDED MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
DECEMBER 31, 1997 DECEMBER 31, 1998 1998 1998 1998 1998 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................... $ 22 $ 822 $ 38 $ 19 $ 185 $ 580 $ 1,451
Cost of revenue............. 6 1,429 10 101 596 722 957
------ -------- ----- ------- ------- ------- -------
Gross profit (loss)......... 16 (607) 28 (82) (411) (142) 494
Operating expenses:
Marketing and sales....... 65 9,645 174 1,119 3,697 4,655 4,614
General and
administrative(a)....... 24 1,655 179 236 511 729 1,555
Product development(a).... 46 1,232 168 150 302 612 520
Amortization of deferred
compensation............ -- 1,199 232 154 525 288 1,297
------ -------- ----- ------- ------- ------- -------
Total operating expenses.... 135 13,731 753 1,659 5,035 6,284 7,986
------ -------- ----- ------- ------- ------- -------
Loss from operations........ (119) (14,338) (725) (1,741) (5,446) (6,426) (7,492)
Interest income, net...... -- 316 1 48 139 128 132
------ -------- ----- ------- ------- ------- -------
Loss before provision for
income taxes.............. (119) (14,022) (724) (1,693) (5,307) (6,298) (7,360)
Provision for income
taxes..................... 1 1 -- -- -- 1 --
------ -------- ----- ------- ------- ------- -------
Net loss.................... $ (120) $(14,023) $(724) $(1,693) $(5,307) $(6,299) $(7,360)
====== ======== ===== ======= ======= ======= =======
Historical basic and
dilutive loss per
share(b).................. $(0.01) $ (1.36) $ (0.68)
====== ======== =======
Pro forma net loss per
share(b).................. $ (0.75) $ (0.24)
======== =======
Shares used to compute
historical basic and
dilutive loss per
share(b).................. 9,869 10,296 10,894
Shares used to compute pro
forma loss per share(b)... 18,714 30,387
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------ ----------------
1997 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 87 $16,357 $11,195
Working capital.......................................... 18 15,215 9,154
Total assets............................................. 214 19,969 16,679
Long term debt and capital lease obligations............. -- 183 590
Total stockholders' equity............................... 123 16,397 11,075
</TABLE>

- -------------------------
(a) Included in general and administrative and product development expenses are
non-cash charges totaling $370,000 related to common stock and warrants
issued as compensation to non-employees during the twelve months ended
December 31, 1998 and $180,000 related to warrants issued as compensation to
non-employees during the three months ended March 31, 1999, respectively.
(b) See Note 1 of Notes to the Financial Statements for an explanation of the
determination of the number of shares used in computing per share data.

23
<PAGE> 29

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

This prospectus contains forward-looking statements, the accuracy of which
involve risks and uncertainties. We use words such as "anticipates," "believes,"
"plans," "expects," "future," "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to certain third parties relating to their estimates
regarding the growth of the Internet, Internet advertising and online commerce
markets and spending. Prospective investors should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus. GoTo.com's actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by GoTo.com described in "Risk Factors" and elsewhere in this
prospectus.

OVERVIEW

GoTo.com has created and operates an online marketplace that introduces
consumers who search the Internet using keyword terms to advertisers who have
bid in an ongoing auction for priority placement in the search results for those
keywords. Each advertiser pays GoTo.com the amount of its bid whenever a
consumer clicks on the advertiser's listings in the search results. Advertisers
must pay for each click-through, so they bid only on keywords relevant to their
offerings. Further, GoTo.com search result pages are not filled with multiple
banner advertisements, which allows these pages to load quickly, and a search on
the GoTo.com service leads directly to a list of 40 results per page.
Consequently, we believe GoTo.com offers consumers quick, easy and relevant
search results. In addition, the GoTo.com marketplace enables each advertiser to
choose the bid amount and advertisement placement that is optimal for its
business, which we believe provides advertisers with a cost-effective way to
target consumers. Consumers access the GoTo.com search service at our Web site
and through what we call the "search syndication network," a network of Web
sites that have integrated the GoTo.com search service into their sites or that
direct consumer traffic to our site.

A growing number of consumers using the GoTo.com search service at Web
sites across the Internet increases the incentive for advertisers to bid in the
GoTo.com marketplace. In turn, a breadth of relevant advertiser links increases
the value to consumers of using the GoTo.com search service. Consequently, we
believe a large and active base of advertisers, consumers and network affiliates
in our marketplace can stimulate growth in bidding, searches and paid
click-throughs transactions. From the month ended December 31, 1998 to the month
ended April 30, 1999, the number of consumer searches in the GoTo.com
marketplace increased approximately 85% to over 100 million per month and the
number of active, paying advertisers in our marketplace increased approximately
150% to over 7,500. Over the same period, the number of paid click-throughs per
month on our service increased approximately 400% to over 10 million.

GoTo.com was incorporated in September of 1997 and has a limited operating
history. We launched a proof-of-concept version of our search service in the
fiscal year ended December 31, 1997. Our pay-for-performance service was
announced in February 1998, and following further proof-of-concept testing, was
officially launched on June 1, 1998. Our service has achieved only limited
market acceptance to date. GoTo.com has devoted significant resources to
launching its search service, including developing an infrastructure

24
<PAGE> 30

and building a management team. GoTo.com's losses for the year ended December
31, 1998 and March 31, 1999 were $14.0 million and $7.4 million, respectively.

Our revenue consists of search listing advertisements and banner
advertisements. For the quarter ended March 31, 1999, banner advertisement
revenue constituted less than 15% of our revenue. Search listing advertisement
revenue is determined by multiplying the number of click-throughs on paid search
results by the amounts bid for applicable keywords. Search listing revenue is
recognized when earned based on click-through activity to the extent that the
advertiser has deposited sufficient funds with us or collection is probable.
Banner advertisement revenue is recognized when earned under the terms of the
contractual arrangement with the advertiser or advertising agency, provided that
collection is probable.

We believe that our search service will be more attractive to advertisers
as more consumers use it for their search needs and more attractive to consumers
as more advertisers bid for placement in our search results. A significant
component of our expenses consists of costs incurred to attract consumers to our
service. To date, we have primarily attracted consumers through online and
offline marketing, including radio and outdoor advertising as well as
advertising on the Internet. We expect to continue to rely upon these sources
for a significant proportion of consumer searches conducted on our service. Our
future success is dependent upon reducing our consumer acquisition costs and
increasing the revenue we derive from this traffic.

RESULTS OF OPERATIONS

The following table sets forth the results of operations for GoTo.com on a
quarterly basis for the five quarters ended March 31, 1999.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1998 1998 1998 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue.............................. $ 38 $ 19 $ 185 $ 580 $ 1,451
Cost of revenue...................... 10 101 596 722 957
----- ------- ------- ------- -------
Gross profit (loss).................. 28 (82) (411) (142) 494
Operating expenses:
Marketing and sales................ 174 1,119 3,697 4,655 4,614
General and administrative(a)...... 179 236 511 729 1,555
Product development(a)............. 168 150 302 612 520
Amortization of deferred
compensation.................... 232 154 525 288 1,297
----- ------- ------- ------- -------
Total operating expenses............. 753 1,659 5,035 6,284 7,986
----- ------- ------- ------- -------
Loss from operations................. (725) (1,741) (5,446) (6,426) (7,492)
Interest income, net............... 1 48 139 128 132
----- ------- ------- ------- -------
Loss before provision for income
taxes.............................. (724) (1,693) (5,307) (6,298) (7,360)
Provision for income taxes........... -- -- -- 1 --
----- ------- ------- ------- -------
Net loss............................. $(724) $(1,693) $(5,307) $(6,299) $(7,360)
===== ======= ======= ======= =======
</TABLE>

25
<PAGE> 31

QUARTERLY RESULTS OF OPERATIONS

REVENUE

Revenue for the first quarter of 1998 was attributable to banner revenue
generated during an early proof-of-concept version of our Web site, which was
introduced during fiscal 1997 and continued into the first quarter of 1998.
GoTo.com officially launched its site on June 1, 1998. Revenues declined in the
second quarter of 1998 as a result of our de-emphasis of sales of banner
advertising during this period in favor of developing our search listing
marketplace. Revenue increased in the third and fourth quarter of 1998 and first
quarter of 1999 as a result of significant growth in our search listing revenue
which increased as a result of growth in our advertiser base and an increase in
the number of consumers using our service. We expect that search listing
advertisement revenue will represent an increasing percentage of total revenue
in future periods.

COST OF REVENUE

Cost of revenue consists primarily of costs associated with maintaining our
Web site and fees paid to outside service providers that provide and manage our
unpaid listings and banner advertisements. Costs associated with maintaining our
Web site include salaries of related personnel, depreciation of Web site
equipment, co-location charges for our Web site equipment and software license
fees. Cost of revenue increased in each quarter presented. The increase was
primarily due to the growth of database and hardware costs associated with
increases in capacity requirements resulting from growth of traffic, searches
and click-through activity. The increase was also due to an increase in
personnel associated with maintaining the Web site. Further, increases in
traffic increased our expenses associated with the outside service provider
supplying our unpaid listings. We anticipate cost of revenue to continue to
increase as our traffic and number of advertisers increase.

OPERATING EXPENSES

Marketing and Sales. Marketing and sales expenses consist primarily of our
advertising and promotional expenditures such as online links from other Web
sites, banner advertisements on other sites and public relations, as well as
payroll and related expenses for personnel engaged in marketing, customer
service and sales functions.

Our sales and marketing contracts with other Web sites provide that we pay
these Web sites to direct traffic to our search service through online links
placed on their sites as well as banner advertisements promoting our service on
their sites. These banner advertisements contain online links to our Web site.
We also have contracts with Web sites that aggregate the search offerings of
several providers of search services. These contracts provide that our search
service is included in the aggregated search offerings on these sites. Our
contracts with providers of Internet browsers, like Microsoft Internet Explorer
and Netscape Communicator, provide that our search service is offered as an
offering on the browser's search page or as part of the browser's search
functionality. These contracts with other Web sites and browser providers are
typically short term, generally expiring within a year or less. Our costs for
traffic under these contracts vary widely and are generally incurred on either a
per impression basis where we pay a specified amount for each consumer who views
the Web page upon which the link or banner advertisement is placed, or a
click-through basis where we pay for each consumer who clicks through to our
service. Generally, these contracts do not require minimum payments, although
our contract with Microsoft Corporation provides for a minimum payment of $6
million paid in

26
<PAGE> 32

four installments. Set forth below are descriptions of certain of our existing
and historical agreements with Web sites and browser providers.

Microsoft: GoTo.com and Microsoft entered into a one-year agreement dated
September 16, 1998 under which Microsoft agreed to deliver at least 180 million
impressions to GoTo.com by placing GoTo.com's search service in various versions
of Microsoft's browser in exchange for which GoTo.com agreed to pay Microsoft
$6,000,000, payable in four equal quarterly installments. Expenses under this
agreement were $1.5 million and $1.5 million during the year ended December 31,
1998 and the three months ended March 31, 1999, respectively. Remaining amounts
to be expensed under this agreement as of March 31, 1999 were approximately $3.0
million. If the number of impressions under this agreement continues at current
levels, we do not expect to make additional payments under the agreement other
than as described above.

Netscape Home Page Agreement: In April 1999, Netscape and GoTo.com entered
into an agreement providing for GoTo.com to appear as one of the search engine
providers in the search portion of the Netscape home page. This agreement
originally expired on May 31, 1999 but was extended until June 30, 1999.
GoTo.com paid Netscape $100,000 as a guaranteed minimum under this agreement.
Under the agreement, Netscape guaranteed that GoTo.com will receive no fewer
than 2 million clicks per month and that GoTo.com would appear at the top of the
listing of search engine providers a minimum of 10% of the time. Any traffic in
excess of two and one-half million click-throughs will be charged to GoTo.com at
the rate of $0.04 per click-through.

Netscape Search Page Agreement: On June 1, 1998 Netscape and GoTo.com
entered into an agreement providing for GoTo.com to appear as one of the search
engine providers on the Netscape search page. This agreement originally expired
on May 31, 1999 but was extended until June 30, 1999. Under this agreement,
GoTo.com pays Netscape a monthly price based on the number of clicks from the
search page to the GoTo.com Web site. The monthly price ranges from $20,000 per
month to $60,000 per month based on the number of clicks generated from the
search page to GoTo.com's Web site in that month. Expenses under this agreement
were $210,000 and $90,000 during the year ended December 31, 1998 and the three
months ended March 31, 1999, respectively. Under this agreement, remaining
commitments to Netscape as of March 31, 1999 were approximately $60,000.

Netscape Advertiser Acquisition Agreement: On October 29, 1998, Netscape
and GoTo.com entered into an agreement under which Netscape places a link on
Netscape's Web site to information about becoming an advertiser on GoTo.com. The
cost for this agreement ranges from $0.40 per click from Netscape's Web site if
clicks are fewer than 1,650 clicks in any month, to $20,000 per month to $60,000
per month depending on the number of clicks in any particular month. Expenses
under this agreement were $30,000 and $40,000 during the year ended December 31,
1998 and the three months ended March 31, 1999.

Netscape Bookmark Agreement: On July 15, 1998 Netscape and GoTo.com entered
into a one-year agreement that placed GoTo.com in the Search Bookmark category
that is part of Netscape Communicator. Under this agreement, GoTo.com pays
Netscape $0.10 per click-through. Expenses under this agreement were $25,000 and
$65,000 during the year ended December 31, 1998 and the three months ended March
31, 1999.

Netscape Banner Ads: Banner advertising expense related to Netscape was
$1.5 million and $585,000 during the year ended December 31, 1998 and the three
months

27
<PAGE> 33

ended March 31, 1999, respectively. GoTo.com purchased banner ads from Netscape
for a three month period beginning April 1, 1999 for a monthly fee of $195,000
for 43,333,333 impressions in each month.

theglobe: GoTo.com and theglobe.com, Inc. entered into a one-year agreement
effective September 17, 1998 under which GoTo.com is the sole search provider
for theglobe.com. Under the agreement, GoTo.com incurs a minimum monthly expense
of $12,500, for a total of $150,000 over the term of the agreement, in addition
to certain expenses which may result from revenue sharing arrangements.
Goto.com's total expenses under this agreement were $57,000 and $45,000 during
the year ended December 31, 1998 and the three months ended March 31, 1999,
respectively.

Warner Brothers: GoTo.com and Warner Bros. Online entered into a one year
agreement beginning October 1, 1998 under which GoTo.com search boxes were
placed on Warner Bros. Online's web sites. In exchange for impressions at Warner
Bros. Online, GoTo.com has agreed to pay Warner Bros. Online $22,000 per month
for the first six months under the agreement and $44,000 per month for the
subsequent six months plus up to an additional $150,000 for promotions. The
agreement can be extended if Warner Bros. Online has not supplied GoTo.com with
at least 5.1 million visits by September 30, 1999. Expenses under this agreement
were $135,000 and $140,000 during the year ended December 31, 1998 and the three
months ended March 31, 1999. Remaining commitments to Warner Bros. Online as of
March 31, 1999 were approximately $275,000.

Xoom: Xoom and GoTo.com entered into an agreement beginning November 30,
1998 that would provide for GoTo.com to be the exclusive search provider for
Xoom.com and other Xoom properties. Under the agreement, GoTo.com agreed to pay
Xoom $500,000. In addition, GoTo.com agreed to pay monthly payments beginning in
January 1999, totaling $400,000 for the twelve-month period. Xoom, in turn, was
to provide GoTo.com with a minimum of 30 million clicks during the term of the
agreement. This agreement was terminated on May 7, 1999 and Xoom paid GoTo.com
$740,000 to terminate the agreement and GoTo.com made a final payment of
$40,000. Prior to the termination of the agreement, expenses were $70,000 and
$210,000 during the year ended December 31, 1998 and the three months ended
March 31, 1999, respectively.

In addition to the expenses relating to the agreements noted above,
additional expenses for all other Web sites were $3.3 million and $1.2 million
for the year ended December 31, 1998 and the three months ended March 31, 1999,
respectively.

Marketing and sales expenses increased throughout 1998. The increase was
primarily related to preparation for the official launch of our Web site, which
occurred in June 1998, and continued efforts to expand our presence throughout
the Internet. The increase was also attributable to an increase in marketing and
sales personnel from no employees on January 1, 1998 to 29 such employees on
December 31, 1998. However, these costs decreased slightly, $41,000, from the
fourth quarter of 1998 to the first quarter of 1999. This slight decrease was
due to slightly less advertising by GoTo.com during the first quarter of 1999.
We believe that continued investment in marketing, sales and distribution is
critical to attaining our strategic objectives and as a result, expect these
costs to continue increasing in the future.

General and Administrative. General and administrative expenses consist
primarily of payroll and related expenses for executive and administrative
personnel; facilities; professional services, including consulting; travel and
other general corporate expenses.

28
<PAGE> 34

General and administrative expenses increased in each of the quarters presented.
These increases were primarily due to increases in headcount and related
expenses associated with the hiring of personnel and professional services. We
expect general and administrative expenses to continue to increase as we expand
our staff and incur additional costs related to the growth of our business and
compliance with the reporting obligations of a public company.

Product Development. Product development expenses consist primarily of
payroll and related expenses for personnel responsible for development of
features and functionality for our service as well as license fees for software
used in product development and depreciation for related equipment. Product
development expenses decreased in the second quarter of 1998 as a result of
certain consulting services incurred only in the first quarter as well as the
transition of some of these consultants to employees of GoTo.com and associated
decreases in compensation expense. Product development expenses increased during
the third and fourth quarters of 1998. The increase was primarily due to
increased staffing and associated costs relating to enhancing features and
functionality of our Web site, search experience and customer service. However,
costs decreased from the fourth quarter 1998 to the first quarter 1999. This
decrease was primarily due to a decrease in the use of outside services
partially offset by an increase in personnel. We believe that continued
investment in product development is critical to attaining our strategic
objectives and as a result, expect product development expenses to continue
increasing in the future.

Amortization of Deferred Compensation. In connection with this offering of
shares of our common stock, certain stock options granted during the year ended
December 31, 1998, the quarter ended March 31, 1999 and on April 6, 1999 have
been considered to be compensatory for financial accounting purposes. Total
compensation associated with these stock options amounted to $7.6 million. This
amount represents the difference between the exercise price of the stock options
and the deemed fair value of our common stock at the time of the grants or
issuances. Compensation associated with these stock options is amortized and
expensed over the applicable vesting periods. Approximately $1.2 million was
charged to operations for the twelve months ended December 31, 1998,
approximately $1.3 million was amortized and charged to operations for the
quarter ended March 31, 1999 and the remaining $5.1 million will be amortized
and charged over the vesting periods of the applicable options through the
fiscal year ending December 31, 2003 using a graded methodology. The stock
option compensation relates only to stock options awarded to employees, while
salaries and related benefits are included in the applicable cost of revenue or
operating expense line item. Issuances of common stock and warrants to non-
employees as compensation are included in the applicable cost of revenue or
operating expense line item.

INTEREST INCOME, NET

Interest income, net, consists primarily of earnings on our cash and cash
equivalents, net of interest expense attributable to equipment leases and any
taxes. Net interest income increased during the second and third quarters of
1998 and decreased during the fourth quarter of 1998. However, net interest
income increased from the fourth quarter 1998 to the first quarter 1999. These
changes were primarily due to fluctuations in average cash and cash equivalent
balances as we received funds from our financing activities. We expect interest
income, net, to increase following this offering as a result of increased cash
balances resulting from this offering.

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INCOME TAXES

As of December 31, 1998 we had $12.4 million of net operating loss
carryforwards for federal income tax purposes, which begin to expire in 2012. We
have provided a full valuation allowance on the deferred tax asset, consisting
primarily of net operating loss carryforwards, because of uncertainty regarding
its realizability. Certain changes in the ownership of our common stock, as
defined in the Internal Revenue Code of 1986 may limit the utilization of these
carryforwards.

THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1999

Our revenue increased to approximately $1.5 million for the quarter ended
March 31, 1999 compared to approximately $38,000 for the quarter ended March 31,
1998 as a result of continued growth in our advertiser base and the number of
consumers using our product. Cost of revenue increased to approximately $1.0
million for the quarter ended March 31, 1999 compared to approximately $10,000
for the quarter ended March 31, 1998 primarily due to increased database and
hardware capacity requirements and an increase in the number of personnel
required to support our Web site. Marketing and sales expenses increased to
approximately $4.6 million for the quarter ended March 31, 1999 compared to
approximately $174,000 for the quarter ended March 31, 1998, primarily due to an
increased distribution of our search service and additional personnel for
marketing and sales functions. General and administrative expenses increased to
approximately $1.6 million for the quarter ended March 31, 1999 compared to
approximately $179,000 for the quarter ended March 31, 1998, as a result of
increased headcount and related expenses associated with the hiring of
additional personnel and increased professional services, which were primarily
due to costs associated with this offering. Product development expenses
increased to approximately $520,000 for the quarter ended March 31, 1999
compared to approximately $168,000 for the quarter ended March 31, 1998 as a
result of increased staffing and associated costs relating to enhancing features
and functionality to our Web site and search service. Net interest income
increased to approximately $132,000 for the quarter ended March 31, 1999
compared to approximately $1,000 for the quarter ended March 31, 1998 as a
result of an increase in earnings on cash and cash equivalent balances.

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TWELVE MONTHS ENDED DECEMBER 31, 1998 AND INCEPTION TO DECEMBER 31, 1997

<TABLE>
<CAPTION>
INCEPTION TO TWELVE MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
(IN THOUSANDS)
<S> <C> <C>
Revenue..................................... $ 22 $ 822
Cost of revenue............................. 6 1,429
------ --------
Gross profit (loss)......................... 16 (607)
Operating expenses:
Marketing and sales....................... 65 9,645
General and administrative(a)............. 24 1,655
Product development(a).................... 46 1,232
Amortization of deferred compensation..... -- 1,199
------ --------
Total operating expenses.................... 135 13,731
------ --------
Loss from operations........................ (119) (14,338)
Interest income, net...................... -- 316
------ --------
Loss before provision for income taxes...... (119) (14,022)
Provision for income taxes.................. 1 1
------ --------
Net loss.................................... $ (120) $(14,023)
====== ========
</TABLE>

- -------------------------
(a) Included in general and administrative and product development expenses are
non-cash charges totalling $370,000 related to common stock and warrants as
compensation to non-employees during the twelve months ended December 31,
1998.

Our fiscal year runs from January 1 through December 31. We were founded in
September of 1997. We completed proof-of-concept testing and formally commenced
operations on June 1, 1998. As a result of these factors, comparisons between
the fiscal years ended December 31, 1997 and 1998 have limited meaning.

Our revenue increased to approximately $822,000 for the twelve months ended
December 31, 1998 compared to approximately $22,000 for the period from
inception to December 31, 1997 as a result of our commencement of operations as
well as growth in our advertiser base and an increase in the number of consumers
using our product. Cost of revenue increased to approximately $1.4 million for
the twelve months ended December 31, 1998 from approximately $6,000 for the
period from inception to December 31, 1997 primarily due to increased database
and hardware capacity requirements as well as an increase in the number of
personnel required to support our Web site. Marketing and sales expenses
increased to approximately $9.6 million for the twelve months ended December 31,
1998 from approximately $65,000 for the period from inception to December 31,
1997, primarily as a result of increased distribution of our search service and
additional personnel for marketing and sales functions. General and
administrative expenses increased to approximately $1.7 million for the twelve
months ended December 31, 1998 from approximately $24,000 for the period from
inception to December 31, 1997 primarily due to increased headcount and related
expenses associated with the hiring of additional personnel and increased
professional services. Product development expenses increased to approximately
$1.2 million for the twelve months ended December 31, 1998 from approximately
$46,000 for the period from inception to December 31, 1997 primarily due to
increased staffing and associated costs relating to enhancing features and
functionality to our Web site, search experience and customer service. Net
interest income increased to approximately $316,000 for the twelve months

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<PAGE> 37

ended December 31, 1998 from no interest income for the period from inception to
December 31, 1997 primarily due to earnings on cash and cash equivalent
balances.

LIQUIDITY AND CAPITAL RESOURCES

GoTo.com has historically satisfied its cash requirements primarily through
private placements of equity securities. GoTo.com also increases liquidity by
leasing rather than buying some equipment. Through May 15, 1999, GoTo.com has
raised approximately $53.9 million through equity financings.

Net cash used in operating activities totaled approximately $46,000 for the
period from inception through December 31, 1997 and $11.2 million for the year
ended December 31, 1998. The increase in the year ended December 31, 1998 was
primarily attributable to cash used in marketing and sales efforts as well as
product development, partially offset by increases in revenue. Net cash used in
operating activities totaled $252,000 for the quarter ended March 31, 1998 and
$5.1 million for the quarter ended March 31, 1999. The increase in the quarter
ended March 31, 1999 was primarily attributable to cash used in marketing and
sales efforts as well as product development, partially offset by increases in
revenue.

Net cash used in investing activities totaled approximately $110,000 for
the period from inception through December 31, 1997 and $1.6 million for the
year ended December 31, 1998. This increase resulted primarily from capital
expenditures for property and equipment. Net cash used in investing activities
totaled approximately $94,000 for the quarter ended March 31, 1998 and $1.1
million for the quarter ended March 31, 1999. This increase resulted from
capital expenditures for properties and equipment.

Net cash provided by financing activities totaled approximately $243,000
for the period from inception through December 31, 1997 and $29.0 million for
the year ended December 31, 1998. The increase resulted primarily from the net
proceeds from issuances of convertible preferred stock. Net cash provided by
financing activities totaled approximately $2.7 million for the quarter ended
March 31, 1998 and $1.0 million for the quarter ended March 31, 1999. The
decrease was primarily due to the lack of equity financing activities during the
quarter ended March 31, 1999.

On April 14, 1999, the Company issued 3,628,447 shares of preferred stock
for $6.89 per share and received gross proceeds of approximately $25 million.

GoTo.com's principal sources of liquidity consisted of $16.4 million of
cash and cash equivalents, as of December 31, 1998, and $11.2 million of cash
and cash equivalents as of March 31, 1999. Although GoTo.com has no material
long-term commitments for capital expenditures, it anticipates an increase in
its capital expenditures consistent with anticipated growth of operations,
infrastructure and personnel.

GoTo.com believes that the net proceeds from this offering, combined with
its current cash and short-term investments, will be sufficient to meet its
anticipated liquidity needs for working capital and capital expenditures for at
least 12 months from the date of this offering. After this period, GoTo.com may
seek additional capital through the issuance of debt or equity depending upon
results of operations, market conditions or unforeseen opportunities. GoTo.com's
future liquidity and capital requirements will depend upon numerous factors. The
pace of expansion of GoTo.com's operations will affect GoTo.com's capital
requirements. GoTo.com may also have increased capital requirements in order to
respond to competitive pressures. In addition, GoTo.com may need additional
capital to

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fund acquisitions of complementary products, technologies or businesses.
GoTo.com's forecast of the period of time through which its financial resources
will be adequate to support its operations is a forward-looking statement that
involves risks and uncertainties and actual results could vary materially as a
result of the factors described above. If GoTo.com requires additional capital
resources, GoTo.com may seek to sell additional equity or debt securities or
obtain a bank line of credit. The sale of additional equity or convertible debt
securities could result in additional dilution to GoTo.com's stockholders. There
can be no assurance that any financing arrangements will be available in amounts
or on terms acceptable to GoTo.com, if at all.

YEAR 2000 COMPLIANCE

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BUSINESS

OVERVIEW

INDUSTRY OVERVIEW

GROWTH OF CONSUMER USE AND COMMERCIALIZATION OF THE INTERNET

The Internet is a global medium, enabling millions of people worldwide to
share information, communicate and conduct business electronically. The
availability of powerful new tools that facilitate the development and
distribution of Internet content has led to a proliferation of information,
products and services offered on the Internet and dramatic growth in the number
of consumers using the Internet. International Data Corporation, commonly
referred to as IDC, estimates that the number of Internet users will grow from
approximately 97 million worldwide in 1998 to approximately 320 million
worldwide by the end of 2002. In addition, commerce conducted over the Internet
has grown and is expected to continue to grow dramatically. IDC estimates that
the percentage of Internet users buying goods and services on the Internet will
increase from approximately 28% at the end of 1998 to approximately 40% in 2002,
and that over the same period of time, the total value of goods and services
purchased over the Internet will increase from approximately $32.4 billion to
approximately $425.7 billion.

GROWTH IN INTERNET ADVERTISING AND INITIAL DEPENDENCE ON A FEW LARGE
PORTALS

The Internet has emerged as an attractive new medium for advertisers of
information, products and services to reach consumers. Forrester Research
estimates that the total worldwide dollar value of Internet advertising will
increase from $1.5 billion in 1998 to $15.2 billion in 2003, including $10.4
billion in the United States.

Historically, advertisers have been particularly attracted to sites
providing Web directories or search engines, such as Yahoo! and Excite. These
search services enable consumers to search the Internet for a listing of Web
sites based on a specific topic, product or service of interest. Search services
are, after e-mail, the most frequently used tool on the Internet. As a result,
Web sites providing search services offer advertisers significant reach into the
Internet audience. These Web sites also offer advertisers the opportunity to
target consumer interests based on keyword or topical search requests.

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Many Web sites providing search capabilities have realized that increasing
the number, frequency and duration of consumer visits to their sites yields
greater potential advertising and electronic commerce opportunities.
Accordingly, these search sites have evolved into "portals" which, in addition
to providing consumers with search functionality, deliver a broader array of
content and services in an effort to retain consumers at their sites.

CONSUMERS' UNMET SEARCH NEEDS

The traditional search services of the portals have had difficulty scaling
as the volume and diversity of Internet content has grown. For example, on the
portals, consumers must frequently click-through multiple branches of a
hierarchical directory to locate relevant Web sites. This unwieldy process
actually benefits the portals because they can earn additional advertising
revenue by exposing consumers to multiple pages and prolonging the search
process.

In addition, traditional search engines rely upon an unregulated process
for assigning results to keywords that often generates irrelevant search
listings. Search engines that use automated search technology to catalog search
results generally rely on invisible Web site descriptions or "meta tags" that
are authored by Web site operators. Operators may freely tag their sites as they
choose. Consequently, some operators tag their sites with popular search terms
which are not relevant because by doing so they may attract additional consumer
attention at little or no marginal cost. In addition, many Web sites have
similar tags, and automated search technology is not equipped to prioritize
results in accordance with consumers' preferences.

The portals' objective to retain the consumer and thereby realize
additional advertising revenue is in direct conflict with the consumer's desire
to quickly and easily find relevant information, products and services. As a
result of this conflict and the difficulties traditional search engines are
encountering as the number of Web sites on the Internet continues to grow,
consumer searches now frequently generate hundreds and often even thousands of
results, many of which may have little relevance to the consumer's interest.

LIMITATIONS OF TRADITIONAL INTERNET ADVERTISING

As a result of portals' cost of revenue and operating expenses, portals
have focused on sales of advertisements to relatively large accounts, often on
an exclusive basis. Consequently, GoTo.com believes Internet advertising to date
has generally been limited to a relatively small number of large advertisers
capable of paying significant advertising fees.

Moreover, traditional online advertising fails to exploit many of the
unique attributes of the Internet. Internet advertising can offer a level of
targetability, interactivity and measurability not generally available in other
media. With the proper tools, Internet advertisers have the ability to target
their messages to specific groups of consumers and receive prompt feedback as to
the effectiveness of their advertising campaigns. Accordingly, the Internet can
give advertisers the opportunity to develop one-to-one relationships with
consumers worldwide without a local market presence. However, to date, Internet
advertising has primarily taken the form of banner or sponsorship advertisements
which, like traditional media advertising, are typically priced with advertisers
paying for exposures to potential consumers. This approach, which is called
impression-based advertising, inefficiently exploits the Internet's direct
marketing potential, resulting in low consumer click-through rates averaging
approximately 1%. Advertisers therefore are paying for

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exposure to many viewers who are not interested in the product or service
advertised. As a result of these factors, advertisers are increasingly
concluding that portals do not represent an effective Internet advertising
solution. Jupiter Communications estimates that less than 5% of companies are
highly likely to renew their current advertising agreements with portal sites.

OUTSOURCED INTERNET SERVICES

To date, online advertising spending has been highly concentrated on portal
sites. Like the portals, other Web sites seek to attract and retain consumer
attention and maximize the revenue opportunity represented by that attention.
Web sites other than large portals currently represent approximately 85% of all
page views on the Web according to Forrester Research. However, as a result of
the concentration of Internet advertising on the portals, other Web sites are
disadvantaged in their efforts to monetize consumer attention. In an effort to
more effectively capitalize on their consumer audiences and provide more
valuable advertising vehicles, many Web sites are now outsourcing popular
consumer services and content offerings. In traditional media such as
television, radio and print, syndicated content has been widely used by local
media in order to augment their core programming and, in so doing, extend their
audience reach and retention. On the Internet, providers have emerged offering
Web sites syndicated services such as search, e-mail and mapping as well as
content such as stock quotes and news wires. Web sites use these offerings to
enhance consumer usage, loyalty and retention.

THE NEED FOR AN ONLINE CONSUMER AND ADVERTISER MARKETPLACE

Conventional search increasingly generates multiple pages of irrelevant
results. At the same time, the diffusion of consumer attention across the
Internet, the concentration of online advertising on large Web sites, the
pricing of Internet advertisements on an impression basis with significant
minimum expenditure requirements, and the frequent use of exclusive
arrangements, have made it increasingly difficult for advertisers to cost-
effectively acquire qualified consumer leads on the Internet. This is
particularly true for advertisers seeking to reach targeted markets, despite the
unique abilities of the Internet to facilitate direct marketing. As a result,
consumers' needs and advertisers' desires to meet those needs often go
unmatched. GoTo.com believes there is a significant need for a sophisticated,
distributed online marketplace to serve both of these constituencies by
providing a targeted, cost-effective Internet advertising solution.

THE GOTO.COM SOLUTION

We believe the GoTo.com marketplace offers consumers quick, easy and
relevant search results while providing advertisers with a cost-effective way to
target consumers. Key elements of GoTo.com's solution include the following:

SEARCH MADE SIMPLE. GoTo.com is dedicated to assisting consumers in easily
finding what they are looking for on the Internet. GoTo.com does not fill its
home page with banner advertisements, which facilitates faster downloading than
portal search engines. Instead, the GoTo.com home page prominently features the
GoTo.com search box, without distractions, which we believe enables consumers to
easily execute their searches. By generating a list of 40 results per page,
GoTo.com frequently allows consumers to locate a relevant destination site on
the first page of results. By foregoing exclusive advertising relationships and
extraneous content, GoTo.com removes the otherwise inherent conflict in

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assisting consumers to locate relevant information and to pass quickly through
GoTo.com to the desired information source.

Since advertisers must pay for each click-through to their Web site,
advertisers select and bid on those search keywords that are most relevant to
their offerings. We believe this improves a consumer's ability to quickly and
easily find relevant search listings for information, products and services on
the GoTo.com service. GoTo.com believes that its pay-for-performance advertising
model aligns advertiser and consumer interests. Consequently, we believe
GoTo.com can provide more relevant and higher quality search results by
assigning a cost to advertiser placement decisions. In an independent online
consumer survey recently conducted by NPD Online Research and funded by a number
of providers of search services including GoTo.com, GoTo.com ranked ahead of
Yahoo!, Excite, Lycos and Infoseek in the category "frequency of finding
information sought every time."

TARGETED PAY-FOR-PERFORMANCE ADVERTISING. Any advertiser in the GoTo.com
marketplace is able to specifically target those consumers who are interested in
the information, products or services offered by the advertiser. We believe
GoTo.com enables highly efficient and cost-effective advertising expenditures.
Advertisers pay only for consumers who elect to visit the advertiser's Web site
after searching targeted keywords on which the advertiser has bid. As a result,
advertisers pay only for self-qualified leads rather than exposures to potential
consumers, as with impression-based advertising.

Advertisers maintain control on a real-time basis over the amounts of their
bids for keywords they have selected and the aggregate amount spent on
advertising with GoTo.com. As a result, advertisers are able to precisely
control their costs of customer acquisition using the GoTo.com service. In
addition, GoTo.com does not enter into exclusive advertising arrangements,
thereby enabling access to the marketplace by all potential advertisers.

SEARCH SYNDICATION NETWORK. GoTo.com offers its search service at no charge
to Web sites participating in what we call the "search syndication network," a
network of Web sites that have included the GoTo.com search service on their
sites or that direct consumer traffic to the GoTo.com Web site. Web sites
participating in our search syndication network, who we call "network
affiliates," can provide Internet search capabilities with a search box on their
sites which generate GoTo.com search results while maintaining the look, feel
and navigation features specific to the network affiliates' sites. This enables
network affiliates to enhance their users' experience with search functionality
and to generate additional revenue from the consumer audiences visiting their
sites through the sale of advertising on search pages. Because GoTo.com focuses
on deriving its revenue primarily from search results rather than banner
advertising, GoTo.com can provide these benefits without charging licensing or
set-up fees and without competition for consumer attention for non-search
content. Also, GoTo.com offers an outsourced solution for selling banner
advertising for searches conducted on network affiliates' sites, and allows the
network affiliates to keep resulting banner advertising revenue. GoTo.com's
agreements with its network affiliates are generally terminable at any time by
either party. Through the search syndication network, GoTo.com is building
relationships with network affiliates that are intended to increase the number
of click-throughs delivered to advertisers, which would increase the value of
the GoTo.com advertising proposition.

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GOTO.COM STRATEGY

GoTo.com's objective is to expand participation and increase transactions
in its online marketplace. We believe that a critical mass of advertisers,
consumers and network affiliates supports a self-reinforcing cycle that
stimulates growth in the number of marketplace participants which, in turn, can
increase the efficiency of the GoTo.com service. We further believe that this
efficiency will increase the competition for prominent search result placement
and may, thereby, increase the amounts advertisers are willing to bid for
participation in the GoTo.com marketplace. We believe that advertisers are
attracted to GoTo.com as a result of the large number of opportunities to create
interested consumers, and that consumers are attracted to GoTo.com by the
breadth of relevant advertiser links displayed on the GoTo.com service. A large
and active base of paying advertisers increases GoTo.com's ability to generate
comprehensive, relevant search results and to monetize consumer search requests.
The resulting revenue opportunity provides the incentive for GoTo.com's network
affiliates to direct traffic to our syndicated search offering. Key elements of
GoTo.com's strategy are:

INCREASE ADVERTISERS THROUGH AUTOMATED SIGN UP. The GoTo.com marketplace
currently supports over 7,500 advertisers. GoTo.com intends to substantially
increase the number of paying advertisers using the GoTo.com marketplace
primarily through the use of its online automated sign up form. To build further
advertiser participation, GoTo.com will also leverage its reputation for
pay-for-performance, direct response marketing among advertisers and their
intermediaries, such as advertising consultants and media buyers. GoTo.com
intends to reach these constituencies through multiple marketing channels,
including targeted online marketing, mailings, sponsorship of Web sites where
advertisers congregate, participation at trade shows and appearances in
advertising industry periodicals. We believe that the GoTo.com marketplace is
scalable and can support a broader and deeper array of advertisers than
traditional online advertising solutions. Accordingly, GoTo.com intends to
capture a significant share of the advertising from the growing number of new
online businesses.

EXPAND CONSUMER BASE WITH SEARCH SYNDICATION NETWORK. The GoTo.com
marketplace currently supports over 10 million paid consumer click-throughs per
month. GoTo.com intends to substantially increase the number of consumers
participating in the GoTo.com marketplace. By providing the GoTo.com search
engine as a syndicated service to destination Web sites, GoTo.com plans to
leverage and grow the search syndication network to greatly expand its consumer
reach. Further, GoTo.com intends to increase traffic at the GoTo.com home page
through a variety of consumer marketing and acquisition initiatives, including
search box banner advertisements as well as through paid placements within
browser environments and payments to destination Web sites that direct traffic
to the GoTo.com home page.

UTILIZE TECHNOLOGY TO FURTHER EXPAND OPERATIONS INFRASTRUCTURE. The
services GoTo.com currently provides to advertisers include automated account
creation and keyword bidding, as well as a proprietary account maintenance
product that allows advertisers to log-in to a secure Web site where they can
perform basic account management functions such as adding funds to their
accounts, viewing performance reports and changing their bids. GoTo.com intends
to utilize its technology to grow an efficient and scalable operations
infrastructure enabling millions of billing events for hundreds of thousands of
advertisers at a high quality service level and at a relatively low internal
cost. In addition, GoTo.com plans to continue to enhance the services it
provides to advertisers. GoTo.com also intends to increasingly automate the sale
of advertising, enabling

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advertisers to have greater control over, and satisfaction with, advertising on
the GoTo.com marketplace. GoTo.com reduces its cost of revenue and customer
service costs because a majority of advertisers open and maintain their accounts
with GoTo.com through an automated interface.

DERIVE STRATEGIC ADVANTAGE FROM EFFICIENT COST STRUCTURE. GoTo.com believes
that its business model provides a number of competitive advantages. The
advertisers participating in the GoTo.com marketplace provide their own Web site
descriptions and, through competitive bidding, with bid amounts visible to all
participants, rank and set the prices paid for search results. This reduces the
costs GoTo.com must pay to perform these tasks. In addition, our business model
does not require us to carry any physical inventory or build or manage creative
materials. GoTo.com is therefore able to direct the capital that would otherwise
be used for these purposes towards growing our business, enhancing our services,
building brand awareness and pursuing other strategic opportunities.

THE GOTO.COM SERVICE

SEARCH TOOL

Consumers use the GoTo.com service to locate desired providers of
information, products and services. The home page of GoTo.com's stand-alone Web
site features a prominent search box and no banner advertising, enabling the
page to load quickly. In addition, consumers can access the GoTo.com service
from any of the approximately 40,000 Web sites currently participating in the
search syndication network. After entering a targeted keyword search, consumers
are presented with a list of 40 search results per page. This relatively large
number of results per page frequently enables one-click searches. Consumers then
access the desired Web site by clicking on the hypertext links included in the
search results. To further assist consumers in locating desired Web sites,
GoTo.com search results pages include suggested related searches.

AUCTION FOR PRIORITY PLACEMENT OF SEARCH RESULTS

GoTo.com search results are prioritized for consumers based on advertiser
bids for placement within the listing. Paying advertisers are listed in
descending bid order, with the highest bidder appearing at the top of the search
results. Bids are expressed as the amount advertisers pay GoTo.com for each
consumer click-through. As evidenced by the superior consumer click-through
rates associated with the top search result listings, consumers are attracted to
advertisers listed highest in the search results. Based on GoTo.com search data,
a disproportionate number of GoTo.com consumers click on the first, second or
third Web sites listed. Following paid priority results, GoTo.com offers a
listing of Web sites generated by traditional search technology provided through
a partnership with Inktomi Corporation.

Advertiser bid amounts are displayed under each search result. By
disclosing bids to both consumers and other advertisers, GoTo.com promotes an
open and efficient marketplace. Using the open bidding information, advertisers
are able to determine the bids necessary to achieve their desired ranking, which
enables competition among advertisers and promotes greater relevancy for
consumers.

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ADVERTISING ON GOTO.COM

GoTo.com offers a self-service, automated online form where advertisers can
sign up and bid for search listings. Potential advertisers find the GoTo.com Web
site directly or through custom offer pages on other sites. On the welcome page
of the sign up form, potential advertisers are able to link to a frequently
asked questions page that contains information about GoTo.com's editorial
policies, instructions for opening a new account and account maintenance
information.

As part of the sign up process, advertisers enter basic contact information
and select a unique user ID and password for accessing and maintaining account
information online using GoTo.com's proprietary account maintenance product.
Each advertiser also enters keywords on which it wishes to bid, the bid amounts
and information about the advertiser's Web site including a title customized for
the applicable keyword, a description of its Web site offerings and information
necessary for hypertext linking. Advertisers are only required to provide a
textual description of their offerings, as opposed to labor-intensive graphics
and other multimedia content, which significantly enlarges the number of
potential participants.

During the sign up process, advertisers also enter payment information.
Advertisers must currently commit to a minimum initial payment of $25.00. An
advertiser may choose to pay by check or credit card. After entering payment
information, advertisers are presented with the terms and conditions of
advertising on the GoTo.com service, which must be accepted before an order is
processed. After the advertiser accepts these terms, a confirmation screen
appears with a tracking number for the advertiser's convenience. If an
advertiser contacts GoTo.com's customer service, the tracking number enables us
to quickly find the advertiser's enrollment application. Once the sign up
process has been completed, the advertiser receives a confirmation by e-mail
that the sign up form was received by GoTo.com.

By automating the sale and maintenance of advertising accounts, GoTo.com
enables advertisers to have greater control over, and satisfaction with, the
advertising process, while simultaneously reducing GoTo.com's cost of revenue.
GoTo.com also employs an experienced sales and support team to attract large
accounts, to review advertising for relevancy and to assist advertisers in cases
where more personal attention is required.

GoTo.com offers advertisers a variety of payment plans to ensure that
advertisers maintain sufficient funds in their GoTo.com account and remain
active on the service. Advertisers on the GoTo.com service may pay for
advertising in advance, or for qualified accounts, may elect to be invoiced.
GoTo.com notifies advertisers using its service by e-mail when account balances
are running low. Advertisers may authorize GoTo.com to either charge them on a
monthly basis to refresh their account or charge them an additional fixed amount
each time their account approaches a zero balance.

To promote fairness and efficiency, GoTo.com has adopted marketplace rules
and policies. For example, advertisers are not permitted to bid on search
results unrelated to their Web site offerings, use false or misleading
advertising, or engage in defamation, harassment or other illegal activity. Each
advertiser's compliance with these rules and policies is enforced in part by
other advertisers participating in the service. The GoTo.com service also uses
proprietary fraud protection systems designed to ensure that advertisers pay
only for genuine click-throughs by consumers.

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MARKETING AND SALES

GoTo.com attracts consumer attention to its service through direct
marketing efforts, as well as through the search syndication network. GoTo.com
attracts consumers with banner advertisements incorporating the GoTo.com search
box on several major Web sites. In addition to online marketing with
high-traffic Web sites, GoTo.com has established relationships with browsers
that offer GoTo.com search functionality as a default search service in rotation
with other providers of search functionality.

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extended until June 30, 1999. Under this agreement, GoTo.com pays Netscape a
monthly price based on the number of clicks from the search page to the GoTo.com
Web site. The monthly price ranges from $20,000 per month to $60,000 per month
based on the number of clicks generated from the search page to GoTo.com's Web
site in that month. Expenses under this agreement were $210,000 and $90,000
during the year ended December 31, 1998 and the three months ended March 31,
1999, respectively. Under this agreement, remaining commitments to Netscape as
of March 31, 1999 were approximately $60,000.

Netscape Banner Ads: Banner advertising expense related to Netscape was
$1.5 million and $585,000 during the year ended December 31, 1998 and the three
months ended March 31, 1999, respectively. GoTo.com purchased banner ads from
Netscape for a three month period beginning April 1, 1999 for a monthly fee of
$195,000 for 43,333,333 impressions in each month.

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<PAGE> 49

1999, totaling $400,000 for the twelve-month period. Xoom, in turn, was to
provide GoTo.com with a minimum of 30 million clicks during the term of the
agreement. This agreement was terminated on May 7, 1999 and Xoom paid GoTo.com
$740,000 to terminate the agreement and GoTo.com made a final payment of
$40,000. Prior to the termination of the agreement, expenses were $70,000 and
$210,000 during the year ended December 31, 1998 and the three months ended
March 31, 1999, respectively.

GoTo.com has also established a search syndication network consisting of
approximately 40,000 destination Web sites operated by third parties across the
Internet. Web sites in the search syndication network may participate in two
ways.

First, network affiliate sites can place a GoTo.com search box on their
site and earn a payment for each consumer they deliver to the GoTo.com home
page. Web sites interested in receiving payment for directing traffic to
GoTo.com's Web site fill out an application form at our site. Once the
application form is accepted, the Web site receives a confirmation e-mail from
us, which directs the network affiliate to a Web site where it can obtain a
search box to place on its site. At this Web site, the network affiliate can
also obtain traffic information and revenue reports. GoTo.com offers network
affiliates several different search box options. Once a network affiliate
selects a search box, it receives a tracking ID that enables GoTo.com, with
assistance from a third party provider, to track traffic from the network
affiliate to GoTo.com. Payments by GoTo.com to network affiliates participating
in this program are made once per quarter.

Second, GoTo.com generates traffic on its service by syndicating the
GoTo.com search service to other sites. Through this part of the search
syndication network, a consumer queries the GoTo.com search engine at a Web site
operated by a network affiliate and receives search results without leaving the
affiliate's site.

Network affiliates electing to host GoTo.com search functionality on their
sites can take advantage of any or all of the following benefits:

- acquire turnkey search service without the need to develop and manage it
in-house;

- generate revenues without the costs and challenges associated with
building and maintaining their own advertising sales force;

- enable rapid implementation of search functionality with no out-of-pocket
investment; and

- build and maintain brand loyalty by delivering content with the look,
feel and navigation features specific to each network affiliate, creating
the impression to consumers that they have not left the network
affiliate's site.

To build further advertiser participation, GoTo.com will leverage its
reputation for pay-for-performance, direct response marketing among advertisers
and their intermediaries, such as advertising consultants and media buyers.
GoTo.com intends to reach these constituencies through multiple marketing
channels, including targeted online marketing, mailings, sponsorship of Web
sites where advertisers congregate, participation at trade shows and appearances
in advertising industry periodicals.

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<PAGE> 50

TECHNOLOGY

The GoTo.com technical operating environment is designed to provide the
best search experience on the Internet to our consumers, advertisers and network
affiliates. GoTo.com intends to continue investing in its technology
infrastructure to maintain and enhance its competitive advantage.

GoTo.com makes its services available to advertisers and consumers through
a combination of its own proprietary technology and commercially available
technology from industry leading providers such as Sun Microsystems, Cisco and
Oracle. GoTo.com also relies upon Frontier Global Center, a third party located
in Sunnyvale, California, to provide Web hosting services, including hardware
support and service and network coordination. GoTo.com also maintains its data
warehouse at this third party's facilities. Any disruption in the Internet
access or other services provided by this third party could have a material
adverse effect on our business. Accordingly, our research and development
efforts include the development and implementation of business continuity and
disaster recovery systems, improvement of data retention, backup and recovery
processes and systems and standardization of technology platforms.

COMPETITION

GoTo.com competes with online services, other Web sites and advertising
networks such as DoubleClick, Inc., 24/7 Media, Inc. and Net Gravity Inc., as
well as traditional offline media such as television, radio and print for a
share of advertisers' total advertising budgets. We believe that the number of
companies selling Web-based advertising and the available inventory of
advertising space has recently increased substantially. Accordingly, GoTo.com
may face increased pricing pressure for the sale of advertisements and direct
marketing opportunities, which could adversely affect our business and operating
results.

GoTo.com also competes with providers of Web directories, search and
information services, all of whom offer advertising, including, among others,
America Online, Inc. (AOL.com, NetFind and Netscape Netcenter), AskJeeves, Inc.
CNET, Inc. (Snap), Excite, Inc. (including WebCrawler and Magellan), Inktomi
Corporation, LookSmart, Ltd., Lycos, Inc. (including HotBot), Microsoft
Corporation (LinkExchange, Inc. and msn.com), The Walt Disney Company/Infoseek
Corporation (including the Go Network) and Yahoo! Inc. In addition, we expect
that other companies will offer directly competing services in the future. For
example, AltaVista, a division of Compaq Computer Corporation has announced it
will offer such a service.

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<PAGE> 51

search and information services or advertising solutions, and existing providers
of Web directories, search and information services or advertising solutions may
continue to consolidate. In addition, providers of Internet browsers and other
Internet products and services who are affiliated with providers of Web
directories and information services in competition with the GoTo.com service
may more tightly integrate these affiliated offerings into their browsers or
other products or services. Any of these trends would increase the competition
we face and could adversely affect our business and operating results.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

Our success and ability to compete are substantially dependent upon our
internally developed technology and data resources, which we protect through a
combination of copyright, trade secret and trademark law. We have no patents
issued to date on our technology.

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<PAGE> 52

companies of a "GO" design mark to provide Internet services, including a search
engine in connection with their "Go Network." We are seeking to prevent these
companies from using this "GO" design mark as well as other remedies. The
lawsuit is at a preliminary stage, and we cannot assure you that the outcome of
this litigation will be favorable to us. For example, we may not prevail and be
able to stop these companies from causing confusion among consumers and
advertisers through continued use of the "GO" design mark. In addition, these
companies could file counterclaims or separate lawsuits or other proceedings
against us, possibly seeking to prevent us from using the GoTo.com logo or other
relief. An unfavorable result could affect the value of or even prevent us from
using the GoTo.com logo.

The Internet domain name we use, "GoTo.com," is an extremely important part
of our business and we may not be able to protect it. The acquisition and
maintenance of domain names generally are regulated by governmental agencies and
their designees. For example, in the United States, the National Science
Foundation has appointed Network Solutions, Inc. as the current exclusive
registrar for the ".com," ".net" and ".org" domains. The regulation of domain
names in the United States and in foreign countries is subject to change in the
near future. The Company believes that such changes in the United States may
include a transition from the current system to a system that is controlled by a
non-profit corporation and the creation of additional top-level domains.
Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we conduct business. Furthermore, the relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. Therefore, we may be unable to prevent third
parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of our trademarks and other proprietary rights.
Third parties have acquired domain names that include "goto" or varieties
thereof both in the United States and elsewhere.

EMPLOYEES

As of March 31, 1999, GoTo.com had 83 full-time employees, 24 of whom were
engaged in product development, 35 in marketing and sales, and 24 in finance,
administration and operations. Sales and marketing employees include customer
service representatives, salespeople, sales administration personnel, marketing
and communications personnel and creative services personnel. GoTo.com's future
success depends, in part, on its continuing ability to attract, train and retain
highly qualified technical, sales and managerial personnel. Competition for such
personnel is intense, and there can be no assurance that GoTo.com will be able
to recruit and retain sufficient numbers of qualified personnel. None of
GoTo.com's employees is represented by a labor union. GoTo.com has not
experienced any work stoppages and considers its relations with its employees to
be good.

FACILITIES

GoTo.com leases approximately 10,000 square feet of office space in a
single office building located in Pasadena, California. GoTo.com believes its
current facilities will not be adequate to sustain the anticipated increase in
headcount for the 1999 fiscal year.

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<PAGE> 53

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of GoTo.com as of May 15, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey S. Brewer.............. 30 Chief Executive Officer and Director
Ted Meisel..................... 35 President and Chief Operating Officer
Todd Tappin.................... 37 Chief Financial Officer
Harry Chandler................. 45 Executive Vice President
Stephanie A. Sarka............. 36 Senior Vice President of Marketing
James B. Gallinatti Jr......... 43 Vice President of Sales and Service
Alan Colner(2)................. 44 Director
Timothy Draper(1).............. 40 Director
William Elkus.................. 47 Director
William Gross(2)............... 40 Director
Robert M. Kavner(1)(2)......... 55 Director, Chairman of the Board
Linda Fayne Levinson(1)........ 57 Director
</TABLE>

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

(2) Member of the Compensation Committee.

Jeffrey S. Brewer has served as Chief Executive Officer since March 1,
1998, and as a Director since June 25, 1998. From March 1998 to May 1999 he also
served as President. From August 1995 to January 1998, he was a founder and
served as Chief Technology Officer of Ticketmaster Online-CitySearch, Inc.
(formerly CitySearch, Inc.), an online provider of city guides and live event
ticketing. From June 1994 to August 1995, he served as Manager of Online
Development at Knowledge Adventure, Inc., an educational software developer of
multimedia CD-ROMs for children. Mr. Brewer received his B.A. in Economics from
Southern Methodist University.

Ted Meisel has served as Chief Operating Officer since December 1, 1998 and
has served as President since May 1999. From April 1996 to November 1998, he
served in a variety of roles at Ticketmaster Online-CitySearch, Inc. (formerly
CitySearch, Inc.), an online provider of city guides and live event ticketing,
most recently as Vice President of the Products and Technology Group. From
November 1991 to March 1996, he worked at McKinsey & Company, a management
consulting firm, most recently as an Engagement Manager. Mr. Meisel holds a B.A.
in History from Dartmouth College and a J.D. from Stanford Law School.

Todd Tappin has served as Chief Financial Officer since October 1, 1998.
From March 1992 to October 1998, Mr. Tappin served as Senior Vice President of
Finance for News Corp.-Twentieth Century Fox, where he oversaw all Finance,
Strategic Planning and Business Development for the Home Entertainment and
Interactive Divisions, and as the General Manager of Twentieth Century Fox's
Home Entertainment Division in Canada. Mr. Tappin began his professional career
as a certified public accountant at Deloitte, Haskins and Sells. He holds a B.S.
in Business from the University of Colorado.

Harry Chandler has served as Executive Vice President since March 29, 1999.
From April 1994 to March 1999, he served as Director of New Business Development
at the Los Angeles Times. From 1991 to 1994, he served as President of Dream
City Films. Mr. Chandler holds a B.A. in Communications from Stanford
University.

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<PAGE> 54

Stephanie A. Sarka has served as Senior Vice President of Marketing since
March 23, 1998. From March 1993 to September 1997, Ms. Sarka worked for Mark
Cross, the American luxury goods brand, where she served first as Senior Manager
of Product Management, then as Director of Merchandise Planning & Brand
Development, then as Divisional Vice President & General Manager. Ms. Sarka
holds a B.A. in Economics from Stanford University and an M.B.A. from Harvard
Business School.

James B. Gallinatti Jr. has served as Vice President of Sales and Service
since March 30, 1998. From May 1996 to September 1997, Mr. Gallinatti served as
Vice President of Sales and Marketing at Austin James, Inc., a consumer software
company. From June 1986 to July 1995, he worked for Lotus Development
Corporation in a variety of roles, including West Coast Regional Director of
Sales from March 1990 to June 1994, and Director of Marketing for cc:Mail from
June 1994 to July 1995. Mr. Gallinatti received his B.A. in Human Biology from
Stanford University.

Alan Colner has served as a Director of GoTo.com since November 11, 1998.
Mr. Colner has served as Managing Director, Private Equity Investments at Moore
Capital Management, Inc. since August 1996. From 1988 until 1996, he was a
Managing Director of Corporate Advisors, L.P., the general partner of Corporate
Partners, a private equity fund affiliated with Lazard Freres & Co. LLC. Mr.
Colner serves as a director of iVillage Inc. and NextCard Inc. He also serves on
the board of directors of several private companies. Mr. Colner received his
B.A. from Yale University and his M.B.A. from the Stanford University Graduate
School of Business.

Timothy Draper has served as a Director of GoTo.com since June 25, 1998.
Mr. Draper founded and has served as Managing Director of Draper Fisher
Jurvetson, a venture capital firm, since July 1985. He serves on the board of
directors of PLX Technology Inc. He also serves on the board of directors of
several private companies. Mr. Draper received his B.S. in Electrical
Engineering from Stanford University and his M.B.A. from Harvard Business
School.

William Elkus has served as a Director of GoTo.com since March 29, 1999.
Mr. Elkus has served as Managing Director of idealab! Capital Management I, LLC,
a venture capital firm, since March 1998. From January 1994 to December 1997, he
was a co-founder and served as Managing Director of Klein Investment Group LP, a
merchant bank. He serves on the board of directors of several private companies.
Mr. Elkus received an S.B. in Mathematics from MIT, an S.M. in Management from
MIT Sloan School of Management and a J.D. from Harvard Law School.

William Gross has served as a Director of GoTo.com since its inception. He
also served as President and Chief Executive Officer of GoTo.com from its
inception until March 1, 1998 and served as Chairman of the Board from
GoTo.com's inception until November 1998. Since March 1996, Mr. Gross was a
founder and served as Chairman of the Board, Chief Executive Officer and
President of Bill Gross' idealab!, an incubator and venture capital firm
specializing in Internet companies. He also has served as a Managing Director of
idealab! Capital Management I, LLC, a venture capital firm, since March 1998.
From June 1991 to January 1997, he served as Chairman of Knowledge Adventure,
Inc., an educational software developer of multimedia CD-ROMs for children,
which was founded by Mr. Gross. From February 1986 to March 1991, he was a
developer at Lotus Development Corporation. Mr. Gross serves on the board of
directors of Ticketmaster Online-CitySearch, Inc. (formerly CitySearch, Inc.),
an online provider of city guides and live event ticketing. He also serves on
the board of directors of several private companies.

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<PAGE> 55

Mr. Gross received his B.S. in Mechanical Engineering from the California
Institute of Technology.

Robert M. Kavner has served as Chairman of the Board of Directors since
November 11, 1998. Mr. Kavner has served as a General Partner of Bill Gross'
idealab!, an incubator and venture capital firm specializing in Internet
companies, since December 1998. From September 1995 to December 1998, he served
as President and Chief Executive Officer of On Command Corporation, a supplier
of in-room entertainment and information services to the lodging industry. From
June 1994 to September 1995, he served as an advisor to Creative Artists Agency.
From May 1984 to May 1994, he served as an Executive Vice President of AT&T,
where he acted as Chief Executive Officer of Multimedia Products and Services.
Mr. Kavner currently serves on the board of directors of the following public
companies: Fleet Financial Group, Earthlink Networks and Ticketmaster
Online-CitySearch, Inc. (formerly CitySearch, Inc.), an online provider of city
guides and live event ticketing. He also serves on the board of directors of
several private companies. Mr. Kavner received his B.B.A. in Business Management
from Adelphi University.

Linda Fayne Levinson has served as a Director of GoTo.com since November
25, 1998. Ms. Levinson has served as a principal of Global Retail Partners,
L.P., a private equity investment fund financing early stage companies, since
April 1997. From 1994 to 1997, she served as President of Fayne Levinson
Associates, a management consulting firm. Ms. Levinson serves on the board of
directors of Genentech, Inc., NCR Corporation, Administaff Inc. and Jacobs
Engineering Group. She also serves on the board of directors of several private
companies. Ms. Levinson received her A.B. in Russian Studies from Barnard
College, her M.A. in Russian Literature from Harvard University, and her M.B.A
from New York University.

CLASSIFIED BOARD

GoTo.com's certificate of incorporation provides for a classified board of
directors consisting of three classes of directors, each serving a staggered
three-year term. As a result, a portion of GoTo.com's board of directors will be
elected each year. To implement the classified structure, prior to the
consummation of the offering, two of the nominees to the board will be elected
to one-year terms, two will be elected to two-year terms and three will be
elected to three-year terms. Thereafter, directors will be elected for
three-year terms. Jeffrey Brewer, Timothy Draper and Robert Kavner have been
designated Class I directors whose term expires at the 2000 annual meeting of
stockholders. William Elkus and William Gross have been designated Class II
directors whose term expires at the 2001 annual meeting of stockholders. Linda
Fayne Levinson and Alan Colner have been designated Class III directors whose
term expires at the 2002 annual meeting of stockholders. See "Description of
Capital Stock--Delaware Anti-Takeover Law and Certain Charter and Bylaw
Provisions."

Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been duly elected and qualified.
There are no family relationships among any of the directors, officers or key
employees of GoTo.com.

BOARD COMMITTEES

GoTo.com established both an audit committee and compensation committee in
January 1999.

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<PAGE> 56

GoTo.com's audit committee consists of Messrs. Draper and Kavner and Ms.
Levinson. The audit committee reviews the internal accounting procedures of
GoTo.com and consults with and reviews the services provided by GoTo.com's
independent accountants.

GoTo.com's compensation committee consists of Messrs. Colner, Gross and
Kavner. The compensation committee reviews and recommends to the board of
directors the compensation and benefits of GoTo.com's employees. It also sets
executive salary levels and determines option grants under the Company's stock
option programs.

GoTo.com's executive compensation program has been designed to ensure that
the compensation provided to executive officers is closely aligned with
GoTo.com's financial performance and, ultimately, the creation of stockholder
value, and to ensure that GoTo.com can attract and retain key executives
critical to its long-term success.

The compensation committee establishes the salary of each executive
officer, including the Chief Executive Officer, by considering the salaries of
executive officers in similar positions with comparably sized companies in
GoTo.com's industry and in related industries, based upon survey data obtained
from various sources, the experience and contribution levels of the individual
executive officers, the Company's financial performance during the past year,
and, in the case of executive officers other than the Chief Executive Officer,
the recommendations of the Chief Executive Officer.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the board of directors or the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of GoTo.com's board of
directors or compensation committee.

DIRECTOR COMPENSATION

Directors currently do not receive any cash compensation from GoTo.com for
their service as members of the board of directors.

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<PAGE> 57

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below summarizes the compensation earned for services rendered to
GoTo.com in all capacities for the fiscal years ended December 31, 1997 and
December 31, 1998, by each person serving as GoTo.com's Chief Executive Officer
in the fiscal year ended December 31, 1998. These executives are referred to as
the Named Executive Officers elsewhere in this prospectus. No GoTo.com executive
officer earned more than $100,000 in salary and bonus during the fiscal year
ended December 31, 1998.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(3)
<S> <C> <C> <C> <C>
Jeffrey S. Brewer(1)............... 1998 $70,833 -- 1,586,869
President and Chief Executive
Officer
William Gross(2)................... 1998 -- -- --
President and Chief Executive 1997 -- -- --
Officer
</TABLE>

- -------------------------
(1) Mr. Brewer joined GoTo.com as Chief Executive Officer on March 1, 1998 and
served as President from March 1998 to May 1999. He currently is compensated
with an annual salary of $85,000.

(2) Mr. Gross served as President and Chief Executive Officer of GoTo.com from
its inception until March 1, 1998. He received no compensation from GoTo.com
for his service as President and Chief Executive Officer.

(3) These options were granted pursuant to GoTo.com's 1998 stock option plan and
are options to purchase common stock of GoTo.com.

OPTION GRANTS DURING LAST FISCAL YEAR

The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers in the fiscal year ended
December 31, 1998, including the potential realizable value over the ten-year
term of the options, based on assumed rates of stock appreciation of 5% and 10%,
compounded annually. These assumed rates of appreciation comply with the rules
of the Securities and Exchange Commission and do not represent GoTo.com's
estimate of future stock price. Actual gains, if any, on stock option exercises
will depend on the future performance of GoTo.com's common stock.

In fiscal year 1998, GoTo.com granted options to purchase up to an
aggregate of 4,888,610 shares to employees, directors and consultants. All
options were granted under GoTo.com's 1998 stock option plan at exercise prices
at or above the fair market value of GoTo.com's common stock on the date of
grant, as determined in good faith by the board of directors. All options have a
term of ten years. Optionees may pay the exercise price by cash, check or
delivery of already-owned shares of GoTo.com's common stock. All options are
immediately exercisable upon grant; however, any unvested shares are subject to

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<PAGE> 58

repurchase by GoTo.com at their cost in the event of the optionee's termination
of employment.

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
-------------------------------------------------- AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN LAST PRICE EXPIRATION -------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Jeffrey S. Brewer..... 1,586,869 32.5% $0.15 03/01/08 $149,696 $379,359
William Gross......... -- -- -- -- -- --
</TABLE>

AGGREGATE OPTION EXERCISES DURING THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

The following table sets forth for each of the Named Executive Officers
information concerning exercisable and unexercisable options held as of December
31, 1998. No Named Executive Officer exercised options during the fiscal year
ended December 31, 1998.

The "Value of Unexercised In-the-Money Options at December 31, 1998" is
based on a value of $0.30 per share, the fair market value of GoTo.com's common
stock as of December 31, 1998, as determined by the board of directors, less the
per share exercise price multiplied by the number of shares issued upon exercise
of the option. All options were granted under GoTo.com's 1998 stock option plan.
All options are immediately exercisable upon grant; however, any unvested shares
are subject to repurchase by GoTo.com at their cost in the event of the
optionee's termination of employment.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998($)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Jeffrey S. Brewer.......... 1,586,869(1) -- $238,030(2) --
William Gross.............. -- -- -- --
</TABLE>

- -------------------------
(1) Of these shares, 1,057,913, if purchased, would be subject to a right of
repurchase by GoTo.com at a price of $0.15 per share as of December 31,
1998.

(2) Of this amount, $79,343 relates to shares not subject to a right of
repurchase by GoTo.com, and $158,687 relates to shares subject to a right of
repurchase by GoTo.com, as of December 31, 1998.

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<PAGE> 59

INCENTIVE STOCK PLANS

1999 EMPLOYEE STOCK PURCHASE PLAN

GoTo.com's 1999 Employee Stock Purchase Plan, or the 1999 Purchase Plan,
was adopted by the board of directors and stockholders of GoTo.com in April
1999. A total of 2,000,000 shares of common stock have been reserved for
issuance under the 1999 Purchase Plan, plus annual increases equal to the lesser
of 1,000,000 shares, 3% of the outstanding shares on such date, or a lesser
amount determined by the board of directors. No shares have been issued under
the 1999 Purchase Plan.

The 1999 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, contains successive six-month offering
periods. The offering periods generally start on the first trading day on or
after March 1 and September 1 of each year, except for the first offering
period, which commences on the first trading day on or after the effective date
of this offering and ends on the last trading day on or before February 28,
2000.

Employees are eligible to participate if they are customarily employed by
GoTo.com or any participating subsidiary for at least 20 hours per week and for
more than five months in any calendar year. However, any employee who either
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of the capital stock of GoTo.com, or whose
rights to purchase stock under all of GoTo.com's employee stock purchase plans
accrues at a rate that exceeds $25,000 worth of stock for each calendar year,
may not be granted an option to purchase stock under the 1999 Purchase Plan. The
1999 Purchase Plan permits participants to purchase common stock through payroll
deductions of up to 15% of the participant's "compensation." Compensation is
defined as the participant's base straight time gross earnings and commissions,
exclusive of payments for overtime, profit sharing payments, shift premium
payments, incentive compensation, incentive payments and bonuses. The maximum
number of shares a participant may purchase during a single offering period is
25,000 shares.

Amounts deducted and accumulated by the participant are used to purchase
shares of common stock of GoTo.com at the end of each offering period. The price
of stock purchased under the 1999 Purchase Plan is 85% of the lower of the fair
market value of the common stock at the beginning or at the end of the offering
period. Participants may end their participation at any time during an offering
period, and they will be paid their payroll deductions to date. Participation
ends automatically upon termination of employment with GoTo.com.

Rights granted under the 1999 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1999 Purchase Plan. The 1999 Purchase Plan provides
that, in the event of a merger of GoTo.com with or into another corporation or a
sale of substantially all of GoTo.com's assets, each outstanding option may be
assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened and a new exercise date will
be set. The 1999 Purchase Plan will terminate in 2009. The board of directors
has the authority to amend or terminate the 1999 Purchase Plan, except that no
such action may adversely affect any outstanding rights to purchase stock under
the 1999 Purchase Plan.

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<PAGE> 60

1998 STOCK PLAN

GoTo.com's 1998 Stock Plan, or the 1998 Plan, provides for the granting to
employees of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, and for the granting to employees, directors and
consultants of nonstatutory stock options and stock purchase rights. The 1998
Plan, as amended, was approved by the board of directors and stockholders of
GoTo.com in April 1999. Unless terminated sooner, the 1998 Plan will terminate
automatically in 2008. A total of 8,500,000 shares of common stock is reserved
for issuance pursuant to the 1998 Plan, of which 2,012,039 are available for
future grants as of May 15, 1999, plus annual increases equal to the lesser of:

- 7,500,000 shares;

- 4% of the outstanding shares on such date; or

- a lesser amount determined by the board of directors.

The 1998 Plan may be administered by the board of directors or a committee
of the board of directors, which committee shall, in the case of options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Internal Revenue Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code.
The 1998 Plan administrator has the power to determine the terms of the options
or stock purchase rights granted, including the exercise price, the number of
shares subject to each option or stock purchase right, exercisability and the
form of consideration payable upon exercise. The board of directors has the
authority to amend, suspend or terminate the 1998 Plan, provided that no such
action may affect any share of common stock previously issued and sold or any
option previously granted under the 1998 Plan.

Options and stock purchase rights granted under the 1998 Plan are not
generally transferable by the optionee, and each option and stock purchase right
is exercisable during the lifetime of the optionee only by the optionee. Options
granted under the 1998 Plan generally must be exercised within three months of
the optionee's separation of service from GoTo.com, or within twelve months
after the optionee's termination by death or disability, but in no event later
than the expiration of the option's ten-year term. In the case of stock purchase
rights, unless the 1998 Plan administrator determines otherwise, the optionee's
restricted stock purchase agreement will grant GoTo.com a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service for GoTo.com for any reason (including death or disability). The
purchase price for shares repurchased pursuant to the purchaser's restricted
stock purchase agreement will be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness to GoTo.com. The repurchase
option will lapse at a rate determined by the 1998 Plan administrator. The
exercise price of all incentive stock options granted under the 1998 Plan must
be at least equal to the fair market value of the common stock on the date of
grant. The exercise price of nonstatutory stock options and stock purchase
rights granted under the 1998 Plan is determined by the 1998 Plan administrator,
but with respect to nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, the exercise price must at least be equal to the fair
market value of the common stock on the date of grant. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of GoTo.com's outstanding capital stock, the exercise price of any
incentive

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stock option granted must equal at least 110% of the fair market value of the
common stock on the date of grant, and the term of any incentive stock option
must not exceed five years. The term of all other options granted under the 1998
Plan may not exceed ten years.

The 1998 Plan provides that, in the event of a merger of GoTo.com with or
into another corporation or a sale of substantially all of GoTo.com's assets,
each outstanding option and stock purchase right will be assumed or an
equivalent option or stock purchase right substituted by the successor
corporation. If each outstanding option or stock purchase right is not assumed
or substituted, the 1998 Plan administrator is required to notify the optionees
that each such option or stock purchase right will be fully vested and
exercisable, including shares as to which it would not otherwise be vested or
exercisable, for a period of 15 days from the date of notice, and the option or
stock purchase right will terminate upon the expiration of such period.

EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS

GoTo.com has not entered into employment agreements with its executive
officers, and their employment may be terminated at any time at the discretion
of GoTo.com's board of directors. GoTo.com has entered into Change in Control
Severance Agreements with Ted Meisel, Todd Tappin, Harry Chandler, James B.
Gallinatti Jr., Stephanie A. Sarka, Talmadge O'Neill, Tom Soulanille, Gregory
Robleski, Dan Scholnick, Erik Hovanec, Joshua Metzger, Paul Ryan and Paul Schulz
who are employees of GoTo.com. These agreements provide that, in the event of
the employee's involuntary termination without cause within 12 months after a
change in control of GoTo.com, the employee will be entitled to six months of
severance pay, potential payments for health care continuation coverage and
immediate vesting of his or her options.

LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION

GoTo.com's certificate of incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for any of
the following:

- any breach of their duty of loyalty to the corporation or its
stockholders;

- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or

- any transaction from which the director derived an improper personal
benefit.

This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.

GoTo.com's certificate of incorporation and bylaws provide that GoTo.com
will indemnify its directors and executive officers and may indemnify its other
officers and employees and other agents to the fullest extent permitted by law.
GoTo.com believes that indemnification under its bylaws covers at least
negligence and gross negligence on the part

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of indemnified parties. GoTo.com's bylaws also permit it to secure insurance on
behalf of any officer, director, employee or other agent for any liability
arising out of his or her actions in such capacity, regardless of whether the
bylaws would permit indemnification.

GoTo.com has entered into agreements to indemnify its directors and certain
officers, in addition to indemnification provided in GoTo.com's bylaws. These
agreements, among other things, provide for indemnification of GoTo.com's
directors and officers for expenses, judgments, fines and settlement amounts
incurred by any such person in any action or proceeding arising out of such
person's services as a director or officer of GoTo.com or at the request of
GoTo.com. GoTo.com believes that these provisions and agreements are necessary
to attract and retain qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.

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TRANSACTIONS WITH RELATED PARTIES

FINANCING TRANSACTIONS AND CHANGE IN CONTROL SEVERANCE AGREEMENTS WITH
MANAGEMENT AND OTHERS

1. In connection with its financing activities, GoTo.com issued shares of
its preferred stock to certain investors who beneficially own more than 5% of
GoTo.com's capital stock or whose principals serve as directors of GoTo.com.
These transactions and relationships are described below.

- In March 1998, GoTo.com issued a total of 471,111 shares of Series A
Preferred Stock to various investors at a purchase price of $0.45 per
share. Of the total number of shares of Series A Preferred Stock issued,
222,222 shares were issued to Bill Gross' idealab!.

- In May 1998, GoTo.com issued a total of 8,311,688 shares of Series B
Preferred Stock to various investors at a purchase price of $0.77 per
share. Of the total number of shares of Series B Preferred Stock issued,
2,597,403 shares were issued to entities affiliated with idealab! Capital
Management I, LLC, 4,009,769 shares were issued to entities affiliated
with Draper Fisher Jurvetson, and 649,351 shares were issued to entities
affiliated with Moore Capital Management, Inc.

- In July 1998, November 1998 and December 1998, GoTo.com issued a total of
10,710,348 shares of Series C Preferred Stock to various investors at a
purchase price of $2.076 per share. Of the total number of shares of
Series C Preferred Stock issued, 963,392 shares were issued to entities
affiliated with idealab! Capital Management I, LLC, 438,218 shares were
issued to entities affiliated with Draper Fisher Jurvetson, 4,850,001
shares were issued to entities affiliated with Moore Capital Management,
Inc., and 1,830,443 shares were issued to entities affiliated with Global
Retail Partners, L.P.

- In April 1999, GoTo.com issued a total of 3,628,447 shares of Series D
Preferred Stock to various investors at a purchase price of $6.89 per
share. Of the total number of shares of Series D Preferred Stock issued,
703,993 were issued to idealab! Holdings, L.L.C., 370,110 were issued to
entities affiliated with idealab! Capital Management I, LLC, 230,813
shares were issued to entities affiliated with Draper Fisher Jurvetson,
571,604 shares were issued to entities affiliated with Moore Capital
Management, Inc., and 190,230 shares were issued to entities affiliated
with Global Retail Partners, L.P.

With respect to the above preferred stock issuances, shares issued to Bill
Gross' idealab! currently are held by idealab! Holdings, L.L.C., which is the
beneficial owner of more than 5% of GoTo.com's outstanding capital stock, and
William Gross, the Managing Member of idealab! Holdings, L.L.C., serves as a
director of GoTo.com. idealab! Capital Management I, LLC is the beneficial owner
of more than 5% of GoTo.com's outstanding capital stock, and William Gross and
William Elkus, Managing Directors of idealab! Capital Management I, LLC, serve
as directors of GoTo.com. Draper Fisher Jurvetson is the beneficial owner of
more than 5% of GoTo.com's outstanding capital stock, and Timothy Draper, a
principal of Draper Fisher Jurvetson, serves as a director of GoTo.com. Moore
Capital Management, Inc. may be deemed the beneficial owner of more than 5% of
GoTo.com's outstanding capital stock, and Alan Colner, a principal of Moore
Capital Management, Inc., serves as a director of GoTo.com. Global Retail
Partners, L.P. and its

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affiliates are the beneficial owner of more than 5% of GoTo.com's outstanding
capital stock, and Linda Fayne Levinson, a principal of Global Retail Partners,
L.P., serves as a director of GoTo.com. Global Retail Partners, L.P. is an
affiliate of Donaldson, Lufkin & Jenrette Securities Corporation, an underwriter
of this offering. See "Underwriting."

2. GoTo.com has entered into Change in Control Severance Agreements with
Ted Meisel, Todd Tappin, Harry Chandler, James B. Gallinatti Jr., Stephanie A.
Sarka, Talmadge O'Neill, Tom Soulanille, Gregory Robleski, Dan Scholnick, Erik
Hovanec, Joshua Metzger, Paul Ryan and Paul Schulz who are employees of
GoTo.com. These agreements provide that, in the event of the employee's
involuntary termination without cause within 12 months after a change in control
of GoTo.com, the employee will be entitled to six months of severance pay,
potential payments for health care continuation coverage and immediate vesting
of his or her options.

FINANCING TRANSACTIONS, SUBLEASE AND SUPPORT SERVICES AGREEMENTS WITH PROMOTERS

Bill Gross' idealab! may be deemed a promoter of GoTo.com. Listed below are
all transactions between GoTo.com and Bill Gross' idealab! from GoTo.com's
inception until the present.

1. On September 16, 1997, GoTo.com issued 8,400,000 shares of Common Stock
to Bill Gross' idealab! for an aggregate offering price of $84,000.

2. From GoTo.com's inception until March 31, 1999, Bill Gross' idealab!
provided GoTo.com with management services, such as payroll and benefits
administration, facilities management and accounting services. Bill Gross'
idealab! also currently provides GoTo.com with Internet connection and e-mail
services, as well as a small number of administrative services.

3. On February 1, 1999, GoTo.com entered into a Sublease Agreement with
Bill Gross' idealab! for approximately 10,506 square feet of office space. The
lease term is from February 1, 1999 until January 31, 2003 and is cancellable
with a 90 day written notice by GoTo.com. The lease provides for a rate of $2.00
per square foot per month, to increase by $0.10 each year of the lease term. The
Sublease Agreement amends a short-form Lease Terms agreement between the parties
dated October 7, 1998.

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PRINCIPAL STOCKHOLDERS

The table on the following page sets forth information regarding the
beneficial ownership of GoTo.com's common stock as of May 15, 1999, by the
following individuals or groups:

- each person or entity who is known by GoTo.com to own beneficially more
than 5% of GoTo.com's outstanding stock

- each of the Named Executive Officers

- each director of GoTo.com

- all directors and executive officers as a group

Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table below have sole voting and investment power
with respect to all shares of common stock held by them.

Applicable percentage ownership in the following table is based on
38,397,921 shares of common stock outstanding as of May 15, 1999, as adjusted to
reflect the conversion of all outstanding shares of preferred stock upon the
closing of this offering.

To the extent that any shares are issued upon exercise of options, warrants
or other rights to acquire GoTo.com's capital stock that are presently
outstanding or granted in the future or reserved for future issuance under
GoTo.com's stock plans, there will be further dilution to new public investors.

The numbers shown in the table below assume no exercise by the underwriters
of their over-allotment option. GoTo.com has granted the underwriters an option
to purchase up to 900,000 shares to cover over-allotments, if any.

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PRINCIPAL STOCKHOLDERS TABLE

<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------- -----------------------
NUMBER PERCENT NUMBER PERCENT
<S> <C> <C> <C> <C>
5% STOCKHOLDERS:
idealab! Holdings, L.L.C.(1)......... 9,192,882 23.9% 9,192,882 20.7%
Entities affiliated with idealab!
Capital Management I, LLC(2)...... 3,930,905 10.2 3,930,905 8.9
Entities affiliated with Draper
Fisher Jurvetson(3)............... 4,678,800 12.2 4,678,800 10.5
Entities affiliated with Moore
Capital Management, Inc.(4)....... 6,070,956 15.8 6,070,956 13.7
Global Retail Partners, L.P. and
affiliated entities(5)............ 2,020,673 5.3 2,020,673 4.6
DIRECTORS AND OFFICERS:
Jeffrey S. Brewer(6)................. 1,586,869 4.0 1,586,869 3.5
Alan Colner(7)....................... 6,070,956 15.8 6,070,956 13.7
Timothy Draper(8).................... 4,901,688 12.8 4,901,688 11.0
William Elkus(9)..................... 3,930,905 10.2 3,930,905 8.9
William Gross(10).................... 13,123,787 34.2 13,123,787 29.6
Robert M. Kavner(11)................. 395,871 1.0 395,871 0.9
Linda Fayne Levinson(12)............. 2,020,673 5.3 2,020,673 4.6
All directors and officers as a group
(12 persons)(13)..................... 30,201,169 75.7 30,201,169 65.8
</TABLE>

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

(1) The address of idealab! Holdings, L.L.C. is 130 West Union Street,
Pasadena, California 91103.

(2) Includes 2,623,134 shares held of record by idealab! Capital Partners I-A,
LP, and 1,307,771 shares held of record by idealab! Capital Partners I-B,
LP. idealab! Capital Management I, LLC is the general partner of idealab!
Capital Partners I-A, LP and idealab! Capital Partners I-B, LP, and
exercises voting and investment power over the shares held by those
entities. The address of idealab! Capital Management I, LLC is 130 West
Union Street, Pasadena, California 91103.

(3) Includes 317,773 shares held of record by Draper Fisher Partners Fund IV,
L.L.C., 139,193 shares held of record by Draper Associates LP and 4,221,834
shares held of record by Draper Fisher Associates Fund IV, L.P. The address
of Draper Fisher Jurvetson is 400 Seaport Court, Suite 250, Redwood City,
California 94063.

(4) Includes 3,838,074 shares held of record by Moore Global Investments, Ltd.,
1,382,948 shares held of record by Multi-Strategies Fund Ltd., 303,548
shares held of record by Multi-Strategies Fund, L.P., and 546,386 shares
held of record by Remington Investment Strategies, L.P. Moore Capital
Management, Inc. exercises voting and investment power with respect to
portfolio assets held for the accounts of Moore Global Investments, Ltd.
and Multi-Strategies Fund Ltd. Moore Capital Advisors, L.L.C. is the sole
general partner of Multi-Strategies Fund, L.P. and Remington Investment
Strategies, L.P. Mr. Louis M. Bacon is the majority shareholder of Moore
Capital Management, Inc. and is the majority equity holder of Moore Capital
Advisors, L.L.C. As a result, Mr. Bacon may be deemed to be the beneficial
owner of the aggregate shares held by Moore Global Investments, Ltd.,
Multi-Strategies Fund Ltd., Multi-Strategies Fund, L.P. and Remington
Investment Strategies, L.P. The address of Moore Capital Management, Inc.
and Moore Capital Advisors, L.L.C. is 1251 Avenue of the Americas, 53rd
Floor, New York, New York 10020.

(5) Includes 1,295,547 shares held of record by Global Retail Partners, L.P.,
386,047 shares held of record by DLJ Diversified Partners, L.P., 143,365
shares held of record by DLJ Diversified Partners-A, L.P., 84,221 shares
held of record by GRP Partners, L.P., 89,196 shares held of record by
Global Retail Partners Funding Inc. and 22,297 shares held of record by DLJ
ESC II, L.P. The address of Global Retail Partners, L.P. is 2121 Avenue of
the Stars, Suite 1630, Los Angeles, California 90067.

(6) Includes 793,435 shares subject to a right of repurchase by GoTo.com as of
May 15, 1999.

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<PAGE> 67

(7) Represents 6,070,956 shares held of record by entities affiliated with
Moore Capital Management, Inc. Mr. Colner serves as Managing Director,
Private Equity Investments, at Moore Capital Management, Inc., which is the
trading advisor of Moore Global Investments, Ltd. and Multi-Strategies Fund
Ltd. He does not have voting or investment power with respect to the shares
of securities owned by Moore Global Investments, Ltd., Multi-Strategies
Fund Ltd., Multi-Strategies Fund, L.P. or Remington Investment Strategies,
L.P., and disclaims beneficial ownership of such shares.

(8) Includes 4,678,800 shares held of record by entities affiliated with Draper
Fisher Jurvetson and 222,888 shares held of record by the Timothy Draper
Living Trust. Mr. Draper is a Managing Director of Draper Fisher Jurvetson
and a trustee of the Timothy Draper Living Trust, and exercises voting and
investment power over shares held beneficially by those entities.

(9) Represents 3,930,905 shares held of record by entities affiliated with
idealab! Capital Management I, LLC. Mr. Elkus is a Managing Director of
idealab! Capital Management I, LLC, and exercises voting and investment
control over shares held by that entity.

(10) Represents 9,192,882 shares held of record by idealab! Holdings, L.L.C. and
3,930,905 shares held of record by entities affiliated with idealab!
Capital Management I, LLC. Mr. Gross is the Managing Member of idealab!
Holdings, L.L.C. and a Managing Director of idealab! Capital Management I,
LLC, and exercises voting and investment power over shares held
beneficially by those entities.

(11) Includes options to purchase 311,417 shares, 249,133 of which, if
purchased, would be subject to a right of repurchase by GoTo.com as of May
15, 1999. Although 62,284 of Mr. Kavner's options to purchase shares were
vested as of May 15, 1999, all of his 311,417 options to purchase shares
will vest as of the closing of this offering.

(12) Represents 2,020,673 shares held of record by Global Retail Partners, L.P.
and its affiliates. Ms. Levinson is a principal of Global Retail Partners,
L.P. Ms. Levinson disclaims beneficial ownership of all shares owned by
Global Retail Partners, L.P. and its affiliates, except for any
proportional interest in such shares.

(13) Includes 1,549,138 shares that are subject to repurchase by GoTo.com as of
May 15, 1999, and 660,224 options to purchase shares which, if exercised,
would be subject to repurchase by GoTo.com as of May 15, 1999.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the completion of this offering, GoTo.com is authorized to issue
200,000,000 shares of common stock, $0.0001 par value, and 10,000,000 shares of
undesignated preferred stock, $0.0001 par value. The following description of
GoTo.com's capital stock does not purport to be complete and is subject to and
qualified in its entirety by GoTo.com's certificate of incorporation and bylaws,
which are included as exhibits to the registration statement of which this
prospectus forms a part, and by the provisions of applicable Delaware law.

COMMON STOCK

As of March 31, 1999, there were 32,919,467 shares of common stock
outstanding, which were held of record by approximately 100 stockholders, as
adjusted for conversion of all outstanding shares of convertible preferred stock
into an aggregate of 19,493,147 shares of common stock, which will occur upon
the closing of this offering.

The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available for that
purpose. The holders of common stock have no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. In the event of a liquidation, dissolution or
winding up of GoTo.com, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of preferred stock, if any, then outstanding.

GoTo.com has a classified board of directors consisting of three classes of
directors, each serving a staggered three-year term. GoTo.com's stockholder may
not vote cumulatively in the election of directors.

PREFERRED STOCK

The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of such preferred stock. However, the effects
might include, among other things:

- restricting dividends on the common stock;

- diluting the voting power of the common stock;

- impairing the liquidation rights of the common stock; or

- delaying or preventing a change in control of GoTo.com without further
action by the stockholders.

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Upon the completion of this offering, no shares of preferred stock will be
outstanding, and GoTo.com has no present plans to issue any shares of preferred
stock.

WARRANTS

At March 31, 1999, there were warrants outstanding to purchase 104,971
shares of common stock. All such warrants terminate immediately prior to an
initial public offering of GoTo.com's common stock.

REGISTRATION RIGHTS

The holders of 23,121,594 shares of common stock are entitled to certain
rights with respect to registration of sales of these shares under the
Securities Act of 1933. These rights are provided under the terms of agreements
between GoTo.com and the holders of these shares, as described below. Future
sales of substantial amounts of common stock, including shares issued upon
exercise of outstanding options and warrants, in the public market following
this offering could adversely affect market prices prevailing from time to time
and could impair GoTo.com's ability to raise capital through sale of its equity
securities.

The holders of 471,111 of these shares have the following rights: The
holders of at least 50% of these 471,111 shares may require on two separate
occasions that GoTo.com register their shares for public resale, if the value of
the securities to be registered is at least $500,000. Also, if after this
offering, GoTo.com elects to register any of its shares of common stock for a
public offering, the holders of these 471,111 shares are entitled to include
their shares of common stock in the registration, although GoTo.com may reduce
the number of shares proposed to be registered in view of market conditions. All
such registration rights will terminate on the third anniversary following the
consummation of this offering or earlier for any holder who can sell his or her
shares under certain circumstances in any three month period without requiring
registration.

The holders of 8,311,688 of these shares have the following rights: The
holders of at least 50% of these 8,311,688 shares may require on two separate
occasions that GoTo.com register their shares for public resale if the value of
the securities to be registered is at least $500,000. Also, if after this
offering, GoTo.com elects to register any of its shares of common stock for a
public offering, the holders of these 8,311,688 shares are entitled to include
their shares of common stock in the registration, although GoTo.com may reduce
the number of shares proposed to be registered in view of market conditions. All
such registration rights will terminate on the third anniversary following the
consummation of this offering or earlier for any holder who can sell his or her
shares under certain circumstances in any three month period without requiring
registration.

The holders of 10,710,348 of these shares have the following rights:
Beginning one year from the date of this offering the holders of at least 50% of
these 10,710,348 shares may require on two separate occasions that GoTo.com
register their shares for public resale if the value of the securities to be
registered is at least $500,000, or $2 million for certain registrations
requiring greater disclosures. Also, if after this offering, GoTo.com elects to
register any of its shares of common stock for a public offering, the holders of
these 10,710,348 shares are entitled to include their shares of common stock in
the registration, although GoTo.com may reduce the number of shares proposed to
be registered in view of market conditions. All such registration rights will
terminate on the fifth anniversary following the consummation of this offering
or earlier for any holder who

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<PAGE> 70

can sell his or her shares under certain circumstances in any three month period
without requiring registration.

The holders of 3,628,447 of these shares have the following rights:
Beginning one year from the date of an initial public offering of common stock
with anticipated proceeds of at least $30,000,000 at a per share price of at
least $2.60, the holders of at least 50% of these 3,628,447 shares may require
on two separate occasions that GoTo.com register their shares for public resale,
if the value of the securities to be registered is at least $500,000, or $2
million for certain registrations requiring greater disclosures. Also, if after
this offering, GoTo.com elects to register any of its shares of common stock for
purposes of effecting any public offering, the holders of these 3,628,447 shares
are entitled to include their shares of common stock in the registration,
although GoTo.com may reduce the number of shares proposed to be registered in
view of market conditions. All such registration rights will terminate on the
fifth anniversary following the consummation of this offering or earlier for any
holder who can sell his or her shares under certain circumstances in any three
month period without requiring registration.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

Certain provisions of Delaware law and GoTo.com's certificate of
incorporation and bylaws could make the following more difficult:

- the acquisition of GoTo.com by means of a tender offer;

- acquisition of GoTo.com by means of a proxy contest or otherwise; or

- the removal of GoTo.com's incumbent officers and directors.

These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
GoTo.com to first negotiate with GoTo.com's board of directors. GoTo.com
believes that the benefits of increased protection of its potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to acquire
or restructure GoTo.com outweigh the disadvantages of discouraging such
proposals, because negotiation of such proposals could result in an improvement
of their terms.

Election and Removal of Directors. GoTo.com's board of directors is divided
into three classes. The directors in each class will serve for a three-year
term, one class being elected each year by GoTo.com's stockholders. See
"Management-Classified Board." This system of electing and removing directors
may tend to discourage a third party from making a tender offer or otherwise
attempting to obtain control of GoTo.com, because it generally makes it more
difficult for stockholders to replace a majority of the directors.

Stockholder Meetings. Under GoTo.com's bylaws, only the board of directors,
the chairman of the board and the president may call special meetings of
stockholders.

Requirements for Advance Notification of Stockholder Nominations and
Proposals. GoTo.com's bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the board of
directors or a committee of the board.

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Delaware Anti-Takeover Law. GoTo.com is subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date the person became an interested stockholder, unless the
"business combination" or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with affiliates
and associates, owns or within three years prior to the determination of
interested stockholder status, did own, 15% or more of a corporation's voting
stock. The existence of this provision may have an anti-takeover effect with
respect to transactions not approved in advance by the board of directors,
including discouraging attempts that might result in a premium over the market
price for the shares of common stock held by stockholders.

Elimination of Stockholder Action By Written Consent. GoTo.com's
certificate of incorporation eliminates the right of stockholders to act by
written consent without a meeting.

Absence of Cumulative Voting. GoTo.com's certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors.

Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of GoTo.com. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of GoTo.com.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services L.L.C.

NASDAQ NATIONAL MARKET LISTING

GoTo.com has applied for listing of its shares on the Nasdaq National
Market under the symbol "GOTO."

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the common stock of
GoTo.com, and there can be no assurance that a significant public market for the
common stock will develop or be sustained after this offering. Future sales of
substantial amounts of common stock, including shares issued upon exercise of
outstanding options and warrants, in the public market following this offering
could adversely affect market prices prevailing from time to time and could
impair GoTo.com's ability to raise capital through sale of its equity
securities. As described below, no shares currently outstanding will be
available for sale immediately after this offering because of certain
contractual restrictions on resale. Sales of substantial amounts of common stock
of GoTo.com in the public market after the restrictions lapse could adversely
affect the prevailing market price and the ability of GoTo.com to raise equity
capital in the future.

66
<PAGE> 72

Upon completion of this offering, GoTo.com will have outstanding 44,397,921
shares of common stock based upon shares outstanding as of May 15, 1999,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants prior to completion of this offering. Of
these shares, the 6,000,000 shares sold in this offering will be freely tradable
without restriction under the Securities Act except for any shares purchased by
"affiliates" of GoTo.com, as that term is defined in Rule 144 under the
Securities Act of 1933. The remaining 38,397,921 shares of common stock held by
existing stockholders are "Restricted Shares" as that term is defined in Rule
144. 38,096,165 of such Restricted Shares are subject to lock-up agreements
providing that, with certain limited exceptions, the stockholder will not offer,
sell, contract to sell or otherwise dispose of any common stock or any
securities that are convertible into common stock for a period of 180 days after
the date of this prospectus without the prior written consent of Donaldson,
Lufkin & Jenrette. As a result of these lock-up agreements, notwithstanding
possible earlier eligibility for sale under the provisions of Rules 144, 144(k)
and 701, 301,756 of these shares will be resellable prior to 181 days after the
date of this prospectus. Beginning 181 days after the date of this prospectus,
approximately 38,096,165 Restricted Shares will be eligible for sale in the
public market, all of which are subject to volume limitations under Rule 144,
except 1,556,667 shares eligible for sale under Rule 144(k) and 4,762,325 shares
eligible for sale under Rule 701. Of those Restricted Shares not eligible for
sale beginning 181 days after the date of this prospectus, 1,830,443 Restricted
Shares will be eligible for sale on December 14, 1999, 9,087 Restricted Shares
will be eligible for sale on December 22, 1999, 3,671,888 shares will be
eligible for sale on April 14, 2000, and 26,699 shares will be eligible for sale
on May 5, 2000 all of which are subject to volume limitations under Rule 144. In
addition, as of May 15, 1999, there were outstanding 1,725,636 options and
warrants to purchase 34,831 shares of common stock, some of which will be
exercised prior to this offering. All such options and warrants are subject to
lock-up agreements. Donaldson, Lufkin & Jenrette may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to lock-up agreements; however, any release shall apply pro-rata to all
stockholders subject to the lock-up agreements.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned Restricted
Shares for at least one year including the holding period of any prior owner
except an affiliate would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding which will
equal approximately 433,979 shares immediately after this offering; or

- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.

Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about GoTo.com. Under Rule 144(k), a person who is not deemed to have been an
affiliate of GoTo.com at any time during the three months preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two years
including the holding period of any prior owner except an affiliate, is entitled
to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement,

67
<PAGE> 73

of Rule 144. Any employee, officer or director of or consultant to GoTo.com who
purchased shares under a written compensatory plan or contract may be entitled
to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirements of Rule 144. Rule 701 further provides that non-affiliates
may sell such shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation or notice provisions of
Rule 144. All holders of Rule 701 shares are required to wait until 90 days
after the date of this prospectus before selling such shares. However, all Rule
701 shares are subject to lock-up agreements and will only become eligible for
sale at the earlier of the expiration of the 180-day lock-up agreements or no
sooner than 90 days after the offering upon obtaining the prior written consent
of Donaldson, Lufkin & Jenrette.

Following the effectiveness of this offering, GoTo.com will file a
Registration Statement on Form S-8 registering 10,500,000 shares of common stock
subject to outstanding options or reserved for future issuance under its stock
plans. As of May 15, 1999, options to purchase a total of 1,725,636 shares were
outstanding and 3,737,675 shares were reserved for future issuance under
GoTo.com's stock plan. Common stock issued upon exercise of outstanding vested
options or issued under GoTo.com's purchase plan, other than common stock issued
to affiliates of GoTo.com, is available for immediate resale in the open market.

Also beginning six months after the date of this offering, holders of
23,121,594 Restricted Shares will be entitled to certain registration rights for
sale in the public market. Registration of such shares under the Securities Act
would result in such shares becoming freely tradable without restriction under
the Securities Act, except for shares purchased by affiliates, immediately upon
the effectiveness of such registration.

68
<PAGE> 74

UNDERWRITING

Subject to the terms and conditions contained in an underwriting agreement
dated June 17, 1999, the underwriters named below, for whom Donaldson, Lufkin &
Jenrette Securities Corporation, DLJdirect Inc., Salomon Smith Barney Inc. and
Thomas Weisel Partners LLC are acting as representatives, have severally agreed
to purchase from GoTo.com for resale to the public, directly or through dealers,
the respective number of shares of common stock set forth opposite their names
below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 2,046,500
Salomon Smith Barney Inc.................................... 1,311,750
Thomas Weisel Partners LLC.................................. 1,311,750
DLJ Direct, Inc............................................. 100,000
Banc of America Securities LLC.............................. 60,000
BancBoston Robertson Stephens............................... 60,000
Bear, Stearns & Co. Inc..................................... 60,000
DEUTSCHE BANK SECURITIES INC................................ 60,000
Credit Suisse First Boston Corporation...................... 60,000
A.G. Edwards & Sons, Inc.................................... 60,000
Hambrecht & Quist LLC....................................... 60,000
ING Baring Furman Selz LLC.................................. 60,000
Lehman Brothers Inc......................................... 60,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 60,000
PaineWebber Incorporated.................................... 60,000
SG Cowen.................................................... 60,000
Warburg Dillon Read LLC..................................... 60,000
William Blair & Company..................................... 30,000
Crowell, Weedon & Co........................................ 30,000
First Union Capital Markets Corp............................ 30,000
Gruntal & Co., L.L.C........................................ 30,000
Janney Montgomery Scott Inc................................. 30,000
Johnston, Lemon & Co. Incorporated.......................... 30,000
Kaufman Bros., L.P.......................................... 30,000
Legg Mason Wood Walker, Incorporated........................ 30,000
Needham & Company, Inc...................................... 30,000
Pennsylvania Merchant Group................................. 30,000
Sanders Morris Mundy........................................ 30,000
Sands Brothers & Co., Ltd................................... 30,000
Sutro & Co. Incorporated.................................... 30,000
Tucker Anthony Cleary Gull.................................. 30,000
C.E. Unterberg, Towbin...................................... 30,000
---------
Total............................................. 6,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters to purchase and accept delivery of the shares of common stock in
the offering are subject to approval by their counsel of legal matters
concerning the offering and to conditions precedents that must be satisfied by
GoTo.com. The underwriters are obligated to purchase and accept delivery of all
the shares of common stock in the offering, other than those shares covered by
the over-allotment option described below, if any are purchased.

69
<PAGE> 75

The underwriting agreement provides that the underwriters will severally
agree to purchase shares of common stock from the Company at $15.00 per share
and propose to make a public offering of those shares at the initial public
offering price set forth on the cover of this prospectus. If the shares are sold
at the initial public offering price, the underwriters will receive a fee,
referred to as the underwriting fee, of $1.05 per share. The underwriting fee is
7% of the initial public offering price.

In addition to offering part of the shares of common stock directly to the
public at the initial public offering price, the underwriters plan to offer part
of the shares to dealers, including the underwriters, at such price less a
concession not in excess of $0.63 per share. The underwriters may allow, and
such dealers may re-allow, to other dealers a concession not in excess of $0.10
per share. After the initial offering of the common stock, the public offering
price and other selling terms may be changed by the representatives of the
underwriters at any time without notice. The underwriters do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
An electronic prospectus will be available on the Web site maintained by
DLJdirect Inc., one of the underwriters and an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation.

The underwriting agreement provides that GoTo.com will grant to the
underwriters an option, exercisable for 30 days after the date of this
prospectus, to purchase, from time to time, in whole or in part, up to an
aggregate of 900,000 additional shares of common stock at the initial public
offering price less underwriting discounts and commission. The underwriters may
exercise the option solely to cover over-allotments, if any, made in connection
with the offering. To the extent that the underwriters exercise the option, each
underwriter will become obligated, subject to conditions contained in the
underwriting agreement, to purchase its pro rata portion of such additional
shares based on the underwriters' percentage underwriting commitment as
indicated in the above table.

The underwriting agreement also provides that GoTo.com will indemnify the
underwriters against liabilities which may arise in connection with the
offering, including liabilities under the Securities Act of 1933, and contribute
to payments that the underwriters may be required to make.

As required by the underwriting agreement, each of GoTo.com's officers and
directors and other stockholders and option holders who hold in the aggregate
41,020,679 shares of common stock and options (including shares held by officers
and directors) have agreed not to:

- 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, other than shares
acquired in the initial public offering or on the Nasdaq National Market,
or any securities convertible into or exercisable or exchangeable for
common stock

- Enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any such transaction described above is to be
settled by delivery of common stock or other securities, in cash, or
otherwise.

Donaldson, Lufkin & Jenrette Securities Corporation may choose to release
some of these shares from such restrictions prior to the expiration of the
180-day period lock-up period, although it has no current intention of doing so.

70
<PAGE> 76

In addition, during such 180-day period, GoTo.com has also agreed not to
file any registration statement with respect to, and each of its executive
officers, directors and stockholders of GoTo.com have agreed not to make any
demand for, or exercise any right with respect to, the registration of any
shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation.

The following table sets forth the items of compensation considered to be
underwriting compensation under the rules of the National Association of
Securities Dealers:

<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting fees paid by us...... $1.05 $1.05 $6,300,000 $7,245,000
Estimated expenses payable by
us.............................. 0.13 0.11 750,000 750,000
Deemed compensation paid by us.... 0.02 0.02 130,498 130,498
----- ----- ---------- ----------
Total............................. $1.20 $1.18 $7,180,498 $8,125,498
</TABLE>

Global Retail Partners, L.P. and its affiliates, each an affiliate of
Donaldson, Lufkin & Jenrette Securities Corporation, are stockholders of
GoTo.com and Linda Fayne Levinson, a director of GoTo.com, is a principal of
Global Retail Partners, L.P. In December of 1998, Global Retail Partners, L.P.
and its affiliates acquired an aggregate of 1,830,443 shares of our Series C
Preferred Stock. In April of 1999 Global Retail Partners, L.P. and its
affiliates acquired an aggregate of 190,230 shares of our Series D Preferred
Stock. Certain affiliates of Donaldson, Lufkin & Jenrette, Inc., the corporate
parent of Donaldson, Lufkin & Jenrette Securities Corporation, have an aggregate
economic interest in approximately 154,833 shares of such Series C Preferred
Stock and 16,091 shares of such Series D Preferred Stock (referred to as the
"Affiliated Series D Stock"). All shares of Series C Preferred Stock and Series
D Preferred Stock will automatically convert to common stock at the time of this
offering. The Affiliated Series D Stock will be subject to an agreement with the
National Association of Securities Dealers that restricts the sale, transfer,
pledge, assignment or hypothecation of such shares for one year from the
effective date of this offering, except to officers or partners of the entities
currently holding such stock. The additional compensation included in the chart
above was computed based on the difference in the maximum offering price and the
price paid for the Affiliated Series D Stock as demonstrated in the table below.

<TABLE>
<CAPTION>
AFFILIATED PRICE PAID PRICE DEEMED
SHARES PER SHARE DIFFERENCE COMPENSATION
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Series D...................... 16,091 $6.89 $8.11 $130,498
</TABLE>

Prior to the offering, there has been no established trading market for the
common stock. The initial public offering price of the shares of common stock
offered will be determined by negotiation among GoTo.com and the underwriters.
The factors to be considered in determining the initial public offering price
include:

- Our history and the prospects for the industry in which we compete

- Our past and present operations

- Our historical results of operations

- Our prospects for future earnings

- The recent market prices of securities of generally comparable companies

71
<PAGE> 77

- The general condition of the securities markets at the time of the
offering

Other than in the United States, no action has been taken by GoTo.com or
the underwriters that would permit a public offering of the shares of common
stock offered in any jurisdiction where action for that purpose is required. The
shares of common stock offered may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and observe any restrictions
relating to the offering and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a solicitation of any offer
to buy any shares of common stock offered in any jurisdiction in which such an
offer or a solicitation is unlawful.

In connection with the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot the offering,
creating a syndicate short position. The underwriters may bid for and stabilize
the price of the common stock. In addition, the underwriting syndicate may
reclaim selling concessions from syndicate members and selected dealers if they
repurchase previously distributed common stock in syndicate covering
transactions, in stabilizing transactions or otherwise. 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.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 40 filed
public offerings of equity securities, of which nineteen have been completed,
and has acted as a syndicate member in an additional eighteen public offerings
of equity securities. Thomas Weisel Partners does not have any material
relationship with GoTo.com or any of its officers, directors or controlling
persons, except with respect to its rights and obligations in the underwriting
agreement to be entered into in connection with this offering.

The underwriters have reserved for sale, at the initial public offering
price, up to 500,000 shares of the common stock to be sold in the offering for
officers, employees, advertisers, vendors and other persons selected by
GoTo.com. The number of shares available for sale to the general public will be
reduced to the extent these individuals and entities purchase these reserved
shares. Any reserved shares not so purchased will be offered by the underwriters
to the general public on the same basis as other shares sold in this offering.

LEGAL MATTERS

The validity of the common stock in the offering will be passed upon for
GoTo.com by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Certain legal matters will be passed upon for the underwriters
by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo Park,
California. As of the date of this prospectus, certain investment partnerships
composed of certain current and former members of and persons associated with
Wilson Sonsini Goodrich & Rosati, Professional Corporation, as well as certain
individual attorneys of this firm, beneficially own an aggregate of 164,894
shares of GoTo.com's common stock on an as-converted to common stock basis.

72
<PAGE> 78

EXPERTS

The financial statements of GoTo.com, Inc. as of December 31, 1997 and 1998
and for the period from September 15, 1997 (inception) through December 31, 1997
and the year ended December 31, 1998 appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

GoTo.com has filed with the Securities and Exchange Commission a
registration statement on Form S-1 with respect to the common stock offered by
this prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement or the exhibits and schedules which are part of the registration
statement. For further information with respect to GoTo.com and its common
stock, see the registration statement and the exhibits and schedules thereto.
Any document GoTo.com files may be read and copied at the Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information about the
public reference rooms. GoTo.com's filings with the Commission are also
available to the public from the Commission's Web site at http://www.sec.gov.

Upon completion of this offering, GoTo.com will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, accordingly, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the
Commission's public reference rooms, and the Web site of the Commission referred
to above.

73
<PAGE> 79

GOTO.COM, INC.

INDEX TO FINANCIAL STATEMENTS

CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2

FINANCIAL STATEMENTS

Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 80

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
GoTo.com, Inc.

We have audited the accompanying balance sheets of GoTo.com, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the period from September 15, 1997
(inception) through December 31, 1997 and for the year ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GoTo.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from September 15, 1997 (inception) through December 31, 1997,
and for the year ended December 31, 1998, in conformity with generally accepted
accounting principles.

/s/ ERNST & YOUNG LLP
Los Angeles, California
April 2, 1999

F-2
<PAGE> 81

GOTO.COM, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
AS OF MARCH 31 MARCH 31
DECEMBER 31 1999 1999
1997 1998 ----------- -------------
----------------
(UNAUDITED)
(UNAUDITED) SEE NOTE 7
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 87 $ 16,357 $ 11,195
Accounts receivable, net of allowance of $0, $86 and $97
for 1997, 1998, and March 31, 1999, respectively........ 22 356 699
Other receivables......................................... -- 90 162
Prepaid expenses and other................................ -- 60 292
Prepaid marketing expenses................................ -- 1,741 1,820
----- -------- --------
Total current assets........................................ 109 18,604 14,168
Property and equipment:
Furniture and fixtures.................................... -- 17 203
Computer hardware......................................... 56 1,302 2,122
Computer software......................................... 1 292 611
----- -------- --------
57 1,611 2,936
Accumulated depreciation and amortization................. (3) (275) (444)
----- -------- --------
54 1,336 2,492
Other assets................................................ 51 29 19
----- -------- --------
Total assets................................................ $ 214 $ 19,969 $ 16,679
===== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 91 $ 2,816 $ 3,506
Accrued expenses.......................................... -- 282 616
Deferred revenues......................................... -- 181 474
Current portion of debt................................... -- -- 111
Current portion of capital lease obligations.............. -- 110 307
----- -------- --------
Total current liabilities................................... 91 3,389 5,014
Long-term debt.............................................. -- -- 99
Long-term capital lease obligations......................... -- 183 491
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock; $.0001 par value, 20,187
shares authorized:
Series A Preferred Stock; liquidation preference over
Common Stockholders; none, $212 and $212 (unaudited)
for 1997, 1998 and March 31, 1999, respectively
Shares issued and outstanding--none, 471 and 471
(unaudited) for 1997, 1998 and March 31, 1999,
respectively (no shares pro forma (unaudited))....... -- 212 212 $ --
Series B and C Preferred Stock; aggregate liquidation
preference over Common Stockholders and Series A
Preferred Stockholders; none, $28,634 and $28,634
(unaudited) for 1997, 1998 and March 31, 1999,
respectively
Shares issued and outstanding--none, 19,022 and 19,022
(unaudited) for 1997, 1998 and March 31, 1999,
respectively (no shares pro forma (unaudited))....... -- 28,433 28,433 --
Common Stock, $.0001 par value, 45,000 shares
authorized; Shares issued and outstanding--10,017,
10,444 and 13,426 (unaudited) for 1997, 1998 and March
31, 1999, respectively, (36,653 shares outstanding pro
forma (unaudited))..................................... 1 1 1 3
Additional paid-in capital on Common Stock.............. 242 3,212 7,466 61,294
Deferred compensation................................... -- (1,318) (3,534) (3,534)
Accumulated deficit..................................... (120) (14,143) (21,503) (21,503)
----- -------- -------- --------
Total stockholders' equity.................................. 123 16,397 11,075 $ 36,260
----- -------- -------- ========
Total liabilities and stockholders' equity.................. $ 214 $ 19,969 $ 16,679
===== ======== ========
</TABLE>

See accompanying notes.

F-3
<PAGE> 82

GOTO.COM, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15,
1997
(INCEPTION)
THROUGH YEAR ENDED THREE MONTHS ENDED
DECEMBER 31 DECEMBER 31 MARCH 31
1997 1998 1998 1999
------------- ----------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue........................ $ 22 $ 822 $ 38 $ 1,451
Cost of revenue................ 6 1,429 10 957
-------- -------- -------- ---------
Gross profit (loss)............ 16 (607) 28 494
Operating expenses:
Marketing and sales.......... 65 9,645 174 4,614
General and administrative... 24 1,655 179 1,555
Product development.......... 46 1,232 168 520
Amortization of deferred
compensation.............. -- 1,199 232 1,297
-------- -------- -------- ---------
135 13,731 753 7,986
-------- -------- -------- ---------
Loss from operations........... (119) (14,338) (725) (7,492)
Other income (expense):
Interest expense............. -- (19) -- (38)
Interest income.............. -- 335 1 170
-------- -------- -------- ---------
Loss before provision for
income taxes................. (119) (14,022) (724) (7,360)
Provision for income taxes..... 1 1 -- --
-------- -------- -------- ---------
Net loss....................... $ (120) $(14,023) $ (724) $ (7,360)
======== ======== ======== =========
Historical basic and dilutive
net loss per share........... $ (0.01) $ (1.36) $ (0.07) $ (0.68)
Pro forma net loss per share... $ (0.75) $ (0.07) $ (0.24)
Weighted average shares used to
compute historical basic and
dilutive net loss per
share........................ 9,869 10,296 10,017 10,894
Weighted average shares used to
compute pro forma net loss
per share.................... 18,714 10,043 30,387
</TABLE>

See accompanying notes.

F-4
<PAGE> 83

GOTO.COM, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
SERIES A SERIES B AND C PAID-IN
CONVERTIBLE CONVERTIBLE COMMON CAPITAL ON
PREFERRED STOCK PREFERRED STOCK STOCK COMMON DEFERRED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT STOCK COMPENSATION
------ ------ ---------- ------- ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock......... -- $ -- -- $ -- 10,017 $1 $ 242 $ --
Issuance of Series A Convertible
Preferred stock................ -- -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- -- --
--- ---- ---------- ------- ------ -- ------ -------
BALANCE AT DECEMBER 31, 1997....... -- 10,017 1 242 --
Issuance of Common Stock for cash
and services................... -- -- -- -- 427 -- 286 --
Issuance of Series A Convertible
Preferred Stock................ 471 212 -- -- -- -- -- --
Issuance of Series B Convertible
Preferred Stock and capital
contribution................... -- -- 8,312 6,281 -- -- 77 --
Issuance of Series C Convertible
Preferred Stock................ -- -- 10,710 22,152 -- -- -- --
Issuance of warrants............. -- -- -- -- -- -- 90 --
Stock option compensation........ -- -- -- -- -- -- 2,517 (2,517)
Amortization of deferred
compensation................... -- -- -- -- -- -- -- 1,199
Net loss......................... -- -- -- -- -- -- -- --
--- ---- ---------- ------- ------ -- ------ -------
BALANCE AT DECEMBER 31, 1998....... 471 212 19,022 28,433 10,444 1 3,212 (1,318)
Exercise of common stock options
(unaudited).................... -- -- -- -- 2,982 -- 561 --
Issuance of warrants
(unaudited).................... -- -- -- -- -- -- 180 --
Stock option compensation
(unaudited).................... -- -- -- -- -- -- 3,513 (3,513)
Amortization of deferred
compensation (unaudited)....... -- -- -- -- -- -- -- 1,297
Net loss (unaudited)............. -- -- -- -- -- -- -- --
--- ---- ---------- ------- ------ -- ------ -------
BALANCE AT MARCH 31, 1999
(UNAUDITED)...................... 471 $212 19,022 $28,433 13,426 $1 $7,466 $(3,534)
=== ==== ========== ======= ====== == ====== =======

ACCUMULATED
DEFICIT TOTAL
----------- --------
<S> <C> <C>
Issuance of Common Stock......... $ -- $ 243
Issuance of Series A Convertible
Preferred stock................ -- --
Net loss......................... (120) (120)
-------- --------
BALANCE AT DECEMBER 31, 1997....... (120) 123
Issuance of Common Stock for cash
and services................... -- 286
Issuance of Series A Convertible
Preferred Stock................ -- 212
Issuance of Series B Convertible
Preferred Stock and capital
contribution................... -- 6,358
Issuance of Series C Convertible
Preferred Stock................ -- 22,152
Issuance of warrants............. -- 90
Stock option compensation........ -- --
Amortization of deferred
compensation................... -- 1,199
Net loss......................... (14,023) (14,023)
-------- --------
BALANCE AT DECEMBER 31, 1998....... (14,143) 16,397
Exercise of common stock options
(unaudited).................... -- 561
Issuance of warrants
(unaudited).................... -- 180
Stock option compensation
(unaudited).................... -- --
Amortization of deferred
compensation (unaudited)....... -- 1,297
Net loss (unaudited)............. (7,360) (7,360)
-------- --------
BALANCE AT MARCH 31, 1999
(UNAUDITED)...................... $(21,503) $ 11,075
======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 84

GOTO.COM, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15
1997
(INCEPTION)
THROUGH YEAR ENDED THREE MONTHS ENDED
DECEMBER 31 DECEMBER 31 MARCH 31
1997 1998 1998 1999
------------ ----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(120) $(14,023) $ (724) $ (7,360)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Amortization of deferred stock option
compensation...................... -- 1,199 232 1,297
Other common stock and warrants
expense........................... -- 370 151 180
Depreciation and amortization........ 5 294 14 179
Changes in operating assets and
liabilities:
Accounts receivable.................. (22) (334) 16 (343)
Other receivables.................... -- (90) -- (72)
Prepaid expenses and other........... -- (60) -- (232)
Prepaid marketing expenses........... -- (1,741) -- (79)
Accounts payable and accrued
expenses.......................... 91 3,007 59 1,024
Deferred revenues.................... -- 181 -- 293
----- -------- -------- --------
Net cash used in operating
activities........................ (46) (11,197) (252) (5,113)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and
equipment......................... (57) (1,554) (94) (1,088)
Other assets......................... (53) -- -- --
----- -------- -------- --------
Net cash used in investing
activities........................ (110) (1,554) (94) (1,088)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of Common
Stock............................. 243 6 -- 561
Proceeds from the issuance of
Preferred Stock................... -- 28,722 212 --
Proceeds from lease line............. -- 330 -- 587
Repayments under lease line.......... -- (37) -- (82)
Repayment of debt.................... -- -- -- (27)
Proceeds from stockholder funding.... -- -- 2,500 --
----- -------- -------- --------
Net cash provided by financing
activities........................ 243 29,021 2,712 1,039
----- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents.................. 87 16,270 2,366 (5,162)
Cash and cash equivalents at
beginning of period............... -- 87 87 16,357
----- -------- -------- --------
Cash and cash equivalents at end of
period............................ $ 87 $ 16,357 $ 2,453 $ 11,195
===== ======== ======== ========
Supplemental disclosures:
Income taxes paid.................... $ -- $ 2 $ -- $ --
Interest paid........................ $ -- $ 11 $ -- $ 28
Financing obligation incurred........ $ -- $ -- $ -- $ 237
</TABLE>

See accompanying notes.

F-6
<PAGE> 85

GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES

GENERAL

GoTo.com, Inc. (the Company or GoTo.com) was incorporated on September 15,
1997, in the state of Delaware and officially launched its Web site on June 1,
1998. GoTo.com has created and operates an online marketplace that facilitates
introductions between consumers who search the Internet for information,
products or services using keyword terms with advertisers who have bid in an
ongoing auction for priority placement in the search results for those keywords.
Advertisers competitively bid on keyword search terms that are most relevant to
their business offerings. Advertisers are rank-ordered in search results based
on bid amounts, which are expressed as the amount the advertiser pays GoTo.com
for each consumer click-through to the advertiser's Web site. The advertiser
with the highest bid is listed first in the search results, with the remaining
advertisers appearing in descending bid amount order. Priority placement
increases the likelihood that a consumer will click-through to the advertiser's
Web site. Consumers access GoTo.com at our branded stand-alone Web site and
through Web sites that participate in the search syndication network. The
Company operates in one reportable business segment.

UNAUDITED INTERIM RESULTS

The accompanying balance sheet as of March 31, 1999, the statements of
operations and cash flows for the three months ended March 31, 1998 and 1999 and
the statement of stockholders' equity for the three months ended March 31, 1999
are unaudited. The unaudited interim financial statements have been prepared on
the same basis as the annual financial statements and, in the opinion of
management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company's financial position,
results of operations and cash flows as of March 31, 1999 and for the three
months ended March 31, 1998 and 1999. The financial data and other information
disclosed in these notes to the financial statements related to these periods
are unaudited. The results for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999.

ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ materially from those
estimates.

REVENUE RECOGNITION

Revenue consists of search listing advertisements and banner
advertisements. Banner advertising arrangements are short-term in duration and
have no minimum guarantees.

F-7
<PAGE> 86
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Search listing advertising enables the advertisers to determine their
placement within the GoTo.com search term results by placing a bid (the price
they will pay when a user clicks through to their site) for each keyword search
item that they select. The amount of the bid determines the placement of the
advertiser's site within the search results. Search listing advertisement
revenue is determined by multiplying the number of click-throughs on paid search
results by the price bid for the particular keyword listing at the time of the
click-through. Search listing advertising revenues are earned and recognized as
actual click-throughs occur to the extent the customer has deposited sufficient
funds with the Company or provided that the collection of any resulting
receivable is probable.

Banner advertisement arrangements provide for the Company to receive
specified amounts each time a customer's banner advertisement is made visible to
a user (an impression) and/or each time a user clicks-through to the
advertiser's web site. Banner advertisement revenue is recognized when earned
under the terms of the contractual arrangement with the advertiser or agency,
provided that collection of the resulting receivable is probable. Under the
terms of these arrangements revenues are generally earned when the banner
advertisement is displayed or when the click-through occurs.

COST OF REVENUE

Cost of revenue consists primarily of the cost of serving the Company's Web
site and fees paid to outside resources that provide unpaid line item search
results and other outside resources that assist in placing, managing and
tracking banner advertisements. Cost associated with serving the Web site
includes salaries, depreciation of Web site equipment, co-location charges for
equipment, and software licensing fees.

PRODUCT DEVELOPMENT

Product development expenses consist of expenses incurred by the Company in
the development and creation of its Internet site. Product development expenses
include compensation and related expenses, costs of computer hardware and
software, and costs incurred in developing features and functionality of the
service. Product development costs are expensed as incurred.

CASH AND CASH EQUIVALENTS

The Company considers those investments which are highly liquid, readily
convertible to cash and which mature within three months from the original date
of purchase as cash equivalents.

F-8
<PAGE> 87
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ONLINE MARKETING PARTNERS

The Company enters into short-term agreements with other internet companies
(partners) whereby the Company provides search services within the partners' Web
sites or the partners provide a link to the Company's site. In some cases, the
Company pays the partners fees based on the term of the agreement, and amount of
traffic the Company receives from the web sites. Some of these fees are paid at
the beginning of the contract resulting in prepaid distribution partner fees and
some of the fees are billed during the term of the contracts resulting in
accrued partner fees. The fees are charged to marketing and sales expense
ratably over the contract or based on actual traffic received under the terms of
the agreements. A significant portion of the Company's revenue has been
generated from traffic provided by only a few of the Company's online marketing
partners.

The Company expenses advertising costs as incurred. For the period from
inception through December 31, 1997, the year ended December 31, 1998, and the
three months ended March 31, 1999, the Company incurred advertising costs of
$29,000, $8.8 million and $4.2 million, respectively.

CONCENTRATION OF CREDIT RISK

Accounts receivable are typically unsecured and are due from customers
primarily located in the United States. Credit losses have generally been within
management's expectations. At December 31, 1998 and March 31, 1999 one customer
represented 13% and 19%, respectively, of total accounts receivable.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is provided using
the straight-line method based upon estimated useful lives of the assets, which
range from two to five years. Leasehold improvements are recorded at cost.
Amortization is provided using the straight-line method over the shorter of the
term of the related lease or estimated useful lives of the assets.

LONG-LIVED ASSETS

The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." The Company assesses the impairment of long-lived assets and
certain identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss would be recognized when estimated future cash flows expected to
result from the use of the asset and its eventual disposition is less

F-9
<PAGE> 88
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
than its carrying amount. No such impairment losses have been identified by the
Company.

DEFERRED REVENUE

Deferred revenue represents all payments received from customers in excess
of revenue earned based on line item click-through activity and will be
recognized as actual click-throughs occur.

INCOME TAXES

Income taxes are accounted for under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under SFAS No. 109,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax basis of assets and liabilities, and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

ACCOUNTING FOR STOCK-BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based Compensation," requires that
stock awards granted subsequent to January 1, 1995, be recognized as
compensation expense based on their fair value at the date of grant.
Alternatively, a company may account for granted stock awards under Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees," and disclose pro forma income amounts which would have resulted from
recognizing such awards at their fair value. The Company has elected to account
for stock-based compensation expense under APB No. 25 and make the required pro
forma disclosures for compensation expense (see Note 4).

EARNINGS (LOSS) PER SHARE COMPUTATION

Historical basic net loss per share is computed using the weighted average
number of shares of Common Stock outstanding excluding the unvested portion of
stock issued in connection with the exercise of such options subject to
repurchase. Historical dilutive net loss per share is computed using the
weighted average number of shares of common stock outstanding plus the dilutive
effects of options, convertible Preferred Stock and non-vested stock. Historical
basic and dilutive loss per share are the same since shares associated with
stock options and the Convertible Preferred Stock are not included as they are
antidilutive.

Pro forma net loss per share (unaudited) is computed using the weighted
average number of shares of Common Stock outstanding excluding the unvested
portion of stock issued in connection with the exercise of such options subject
to repurchase, including the pro forma effects of the automatic conversion of
the Company's Convertible Preferred

F-10
<PAGE> 89
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock into shares of the Company's Common Stock effective upon the closing of
the Company's initial public offering as if such conversion occurred at the
issuance date.

The following table sets forth the computation of basic and pro forma net
loss per share for the periods indicated (in thousands except per share data):

<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15,
1997
(INCEPTION)
THROUGH YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31 MARCH 31
1997 1998 1998 1999
------------- ------------ -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net loss......................... $ (120) $(14,023) $ (724) $ (7,360)
======= ======== ======== ========
Denominator:
Denominator for basic
calculation -- Weighted
average shares................ 9,869 10,296 10,017 10,894
Weighted average effect of pro
forma securities:
Series A Convertible Preferred
Stock......................... 360 26 471
Series B Convertible Preferred
Stock......................... 5,403 -- 8,312
Series C Convertible Preferred
Stock......................... 2,655 -- 10,710
-------- -------- --------
Denominator for pro forma
calculation................... 18,714 10,043 30,387
======== ======== ========
Net loss per share:
Historical basic and diluted..... $ (0.01) $ (1.36) $ (0.07) $ (0.68)
Pro forma (unaudited)............ $ (0.75) $ (0.07) $ (0.24)
</TABLE>

F-11
<PAGE> 90
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

2. INCOME TAXES

As a result of the net operating losses incurred since inception, no income
tax provision has been recorded except for state minimum taxes of approximately
$1,000 for 1997 and 1998. The following is a reconciliation of the statutory
federal income tax rate to the Company's effective income tax rate:

<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Statutory federal rate.................... (34)% (34)%
State income taxes (net of federal
benefit)................................ (5) (5)
Valuation allowance....................... 41 37
Nondeductible stock compensation.......... -- 3
Other..................................... (2) (1)
--- ---
--% --%
=== ===
</TABLE>

The components of the deferred tax assets and related valuation allowance
at December 31, 1997 and 1998, are as follows:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1998
---- -------
(IN THOUSANDS)
<S> <C> <C>
Other....................................................... $ 7 $ 167
Net operating loss carryforwards............................ 43 4,955
---- -------
Deferred tax assets......................................... 50 5,122
Valuation allowance......................................... (50) (5,122)
---- -------
$ -- $ --
==== =======
</TABLE>

Due to the uncertainty surrounding the timing of realizing the benefits of
its deferred tax assets in future tax returns, the Company has recorded a
valuation allowance against its deferred tax assets.

The Company has net operating loss carryforwards for federal and state tax
purposes of approximately $12,438,000 expiring beginning in the years 2012
through 2018 for federal and 2005 through 2006 for state. The net operating
losses can be carried forward to offset future taxable income. Utilization of
the above carryforwards will be subject to utilization limitations, which may
inhibit the Company's ability to use carryforwards in the future.

The Company also has federal and state credit carryforwards of
approximately $28,000 and $22,000, respectively, expiring beginning in the years
2012 through 2018, which may be used to offset future liabilities.

F-12
<PAGE> 91
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

3. STOCKHOLDERS' EQUITY

COMMON AND PREFERRED STOCK

In November 1998, the Company amended its Certificate of Incorporation to,
among other matters, increase the total number of authorized shares of Common
and Preferred Stock to 45,000,000 and 20,187,401, respectively. In conjunction
with this amendment, the Company authorized 500,000 shares of Series A Preferred
Stock (Series A), 8,500,000 shares of Series B Preferred Stock (Series B), and
11,187,401 shares of Series C Preferred Stock (Series C).

As part of the Series B Preferred Stock financing the Company's founder
paid a consultant 111,111 shares of the Company's Common Stock owned by the
Company's founder for services provided in connection with the Series B
Preferred Stock financing. The exchange of the founder's shares was recorded at
the fair market value of the Common Stock, on the date of the exchange, as a
contribution to capital and cost of the Series B Preferred financing.

The following table summarizes the issuances of the Preferred Stock
outstanding at December 31, 1998 and March 31, 1999 (in thousands, except per
share data):

<TABLE>
<CAPTION>
AMOUNT ORIGINAL
(NET OF PER SHARE
SHARES ISSUANCE ISSUANCE
OUTSTANDING COST) PRICE DATE OF ISSUANCE
----------- -------------- --------- -----------------
<S> <C> <C> <C> <C>
Series A............. 471 $ 212 $0.45 March 26, 1998
Series B............. 8,312 6,281 0.77 May 7, 1998
Series C............. 4,850 10,032 2.076 July 31, 1998
Series C............. 4,021 8,316 2.076 November 12, 1998
Series C............. 1,839 3,804 2.076 December 14, 1998
------ -------
19,493 $28,645
====== =======
</TABLE>

F-13
<PAGE> 92
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

3. STOCKHOLDERS' EQUITY (CONTINUED)
The following table is presented to summarize the Common Stock reserved for
future issuance upon conversion of the outstanding Preferred Stock, exercise of
warrants and stock options:

<TABLE>
<CAPTION>
COMMON SHARES ISSUABLE UPON
CONVERSION OR EXERCISE
-----------------------------
DECEMBER 31 MARCH 31
1998 1999
DESCRIPTION OF INSTRUMENT ------------- -------------
<S> <C> <C>
Series A Convertible Preferred Stock.............. 471,111 471,111
Series B Convertible Preferred Stock.............. 8,311,688 8,311,688
Series C Convertible Preferred Stock.............. 10,710,348 10,710,348
Stock options outstanding......................... 5,000,471 2,752,984
Stock options available for future grant.......... 999,529 264,258
Common Stock purchase warrants.................... 63,272 104,971
---------- ----------
Common Stock reserved............................. 25,556,419 22,615,360
========== ==========
</TABLE>

PREFERRED STOCK

Each share of Preferred Stock is convertible, at the holder's option, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $0.45 in the case of Series A, $0.77 in the case of
Series B, and $2.076 in the case of Series C by the Conversion Price, as
defined. At December 31, 1998 and March 31, 1999, the Conversion Price of the
Series A, Series B and Series C Preferred Stock was $0.45, $0.77 and $2.076
respectively. The Conversion Price is subject to adjustment based on certain
anti-dilution provisions. In the event of a Qualified Public Offering, as
defined, of the Company's equity securities with proceeds from such offering in
the amount of $30 million or greater and a per share selling price of $2.60 or
greater, all outstanding Preferred Stock will automatically be converted into
Common Stock, based on the then effective conversion ratios. The holders of the
Preferred Stocks also have certain registration rights, which under certain
circumstances, allow them to require the Company to register their shares at the
expense of the Company.

In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of Series B and Series C are
entitled to receive prior and in preference to any distribution of any assets or
surplus funds to the holders of the Series A Preferred Stock and the holders of
the Common Stock in an amount per share equal to $0.77 and $2.076, respectively,
plus an amount equal to any dividends declared but unpaid on such shares. After
payment or setting apart of payment to the holders of the Series B and C, each
share of Series A Preferred Stock is entitled to receive, prior and in
preference to any distribution to Common Stock holders an amount per share equal
to $0.45 plus an amount equal to any dividends declared but unpaid on such
shares.

F-14
<PAGE> 93
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

3. STOCKHOLDERS' EQUITY (CONTINUED)
The voting rights of the Series A, Series B, and Series C are equal to one
vote for each share of Common Stock into which such Preferred Stock may be
converted. The holders of the Series B and C have certain specific voting
rights, as defined, with respect to the election of directors of the Company.
The Company's Amended and Restated Certificate of Incorporation include certain
protective provisions which require a majority vote of the holders of the Series
A, Series B and Series C with respect to certain actions of the board of
directors including changing the rights, preferences and privileges of the
Preferred Stockholders, changing the number of shares authorized of each Series,
repurchasing Common Stock, increasing or decreasing the members of the board of
directors, declaring a dividend on the Common Stock, and consummating a merger,
consolidation, reorganization or other business combination.

Each share of Series A, Series B and Series C entitles the holder to
receive, when and if declared by the board of directors, noncumulative dividends
in cash at an annual rate of $0.0315, $0.054 and $0.145 per share, respectively
(as adjusted for any stock splits, combinations and the like). Series B and
Series C dividends are payable in preference and prior to any payment of any
dividend on Series A Preferred Stock and the Common Stock. Dividends payable on
Series A Preferred Stock are payable in preference to any payment of any
dividend on the Common Stock.

WARRANTS

In September and November of 1998, the Company issued warrants in exchange
for certain consulting services to purchase 63,272 shares in total of the
Company's Common Stock at exercise prices ranging from $0.77 to $2.076 per
share. In February 1999, the Company issued additional warrants in exchange for
certain consulting and other services to purchase 41,699 shares of the Company's
Common Stock at exercise prices ranging from $2.076 to $5.00 per share. The
warrants are fully exercisable upon issuance and expire upon the earlier of 1)
five years from the date of issuance, 2) a change in control of the Company or
3) immediately before an initial public offering of the Company's Common Stock.
The deemed fair value of warrants issued in 1998 and the three months ended
March 31, 1999 was $90,000 and $180,000, respectively; these amounts were
recorded in general and administrative expenses in the respective periods.

DEFERRED STOCK OPTION COMPENSATION

The excess of the deemed fair value of the Company's Common Stock over the
exercise price of options granted during the year ended December 31, 1998 and
the three months ended March 31, 1999 at the date of grant amounted to an
aggregate of $2,517,000 and $3,513,000, respectively. The deemed fair value of
the Common Stock was determined by the Company based on the selling prices of
contemporaneous sales of each Series of Preferred Stock considering the relative
rights and privileges of each security, the stages of development of the
Company's business and the inherent risks and perceived

F-15
<PAGE> 94
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

3. STOCKHOLDERS' EQUITY (CONTINUED)
future potential of the Company at the time of grant or issuance. The typical
vesting period of the options is 20% immediately upon grant with the remaining
balance vesting evenly over the following four years. The amortization of
deferred compensation will be charged to operations on a graded methodology
basis over the vesting period of the options. During the year ended December 31,
1998 and the three months ended March 31, 1999, deferred compensation
amortization of $1,199,000 and $1,297,000, respectively, was recorded. At
December 31, 1998 and March 31, 1999, deferred compensation of $1,318,000 and
$3,534,000, respectively, was reflected as a reduction of stockholders' equity.
The deferred compensation amortization relates only to stock options awarded to
employees; the salaries and related benefits of these employees are included in
the applicable cost of revenue or operating expense line item.

OTHER STOCK COMPENSATION

In addition, the Company sold or issued 427,195 shares of Common Stock to
various consultants during 1998 at prices less than the deemed fair value of the
Common Stock on the day it was sold. The excess of the deemed fair value of the
Common Stock on the day it was sold aggregating $280,000 was recognized as
consulting expense.

4. STOCK OPTION PLANS

The Company has a Stock Option Plan which provides for the granting of
options for the purchase of up to 6,000,000 shares of the Company's Common
Stock. Under terms of the plan, options may be granted to employees, nonemployee
directors or consultants at prices not less than the fair value at the date of
grant. Options granted to nonemployees are recorded at the value of negotiated
services received. All options are immediately exercisable, however, shares
issuable upon exercise of the option vest typically 20% immediately upon grant
of the option with the remaining balance vesting evenly over the following four
years. The Company has the right to repurchase unvested shares issued upon
exercise of the option.

F-16
<PAGE> 95
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

4. STOCK OPTION PLANS (CONTINUED)
Information relating to the outstanding stock options is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Outstanding at inception........................... -- --
Granted.......................................... 115 $0.44
Exercised........................................ -- --
Canceled......................................... -- --
------ -----
Outstanding at December 31, 1997................... 115 0.44
Granted.......................................... 4,888 0.15
Exercised........................................ -- --
Canceled......................................... (3) 0.15
------ -----
Outstanding at December 31, 1998................... 5,000 0.16
Granted.......................................... 749 0.37
Exercised........................................ (2,982) 0.19
Cancelled........................................ (14) 0.17
------ -----
Outstanding at March 31, 1999 2,753 $0.19
====== =====
</TABLE>

The following table summarizes information regarding options outstanding
and options exercisable (in thousands except per share data):

<TABLE>
<CAPTION>
OUTSTANDING AND EXERCISABLE
------------------------------------
WEIGHTED
AVERAGE WEIGHTED
NUMBER REMAINING AVERAGE
OF CONTRACTUAL EXERCISE
RANGE OF EXERCISE PRICES SHARES LIFE PRICE
- ------------------------------------------- --------- ----------- --------
<S> <C> <C> <C>
December 31, 1998
$0.15 - 0.45 5,000 9.2 $0.16
========= === =====
March 31, 1999
$0.15 - 1.50 2,753 9.1 $0.19
========= === =====
</TABLE>

Options available for future grant totaled 999,529 and 264,258 at December
31, 1998 and March 31, 1999, respectively.

F-17
<PAGE> 96
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

4. STOCK OPTION PLANS (CONTINUED)
The fair value of these options were estimated at the date of grant using a
Black-Scholes option pricing model with the following assumptions:

<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15,
1997
(INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Risk free interest rate..................... 6% 5.14%
Expected lives (in years)................... 4 4
Dividend yield.............................. -- --
Expected volatility......................... -- --
</TABLE>

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Under SFAS No.
123, the Company would have incurred an additional compensation expense of zero,
and $51,000 for the period from inception through December 31, 1997 and for the
year ended December 31, 1998, respectively.

<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15,
1997
(INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31 DECEMBER 31
1997 1998
-------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net loss, as reported................ $(120) $(14,023)
Pro forma net loss................... (120) (14,074)
Pro forma historical basic and
diluted loss per share............. (0.01) (1.37)
Pro forma loss per share............. (0.01) (0.75)
</TABLE>

Applying SFAS No. 123 in the pro forma disclosure may not be representative
of the effects on pro forma net income (loss) for future years as options vest
over several years and additional awards will likely be made each year.

5. RELATED PARTY TRANSACTIONS

During 1997 and 1998, the Company shared facilities and received certain
management services including certain accounting, payroll processing, access to
shared local area computer communications network, and general business
insurance from Bill Gross' idealab!, a significant stockholder of the Company.
Bill Gross' idealab! charges a

F-18
<PAGE> 97
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

5. RELATED PARTY TRANSACTIONS (CONTINUED)
management fee for the use of its facilities and the services provided. In
October 1998, the Company entered into a lease agreement beginning in February
1999 with Bill Gross' idealab! for office space in a building adjacent to the
Bill Gross' idealab! facility. The lease is cancellable with a 90 day written
notice from the Company. The total management and leasing fee was $59,000,
$229,000 and $75,000 during the period from inception through December 31, 1997,
the year ended December 31, 1998, and the three months ended March 31, 1999,
respectively. Management believes these amounts are materially representative of
the fair value of services provided. From inception through March 1, 1998, the
Company's founder and significant stockholder was the President and Chief
Executive Officer of the Company and received no compensation for his service.
The value of these services was not material to the financial statements. During
March 1998 certain stockholders provided temporary funding of $2.5 million to
the Company which carried no interest. In early May 1998 this funding was
contributed to the Company in return for Series B Preferred Stock.

6. COMMITMENTS AND CONTINGENCIES

LEASES

At December 31, 1998, noncancellable future lease commitments were as
follows:

<TABLE>
<CAPTION>
CAPITAL
LEASE
--------------
(IN THOUSANDS)
<S> <C>
1999........................................................ $136
2000........................................................ 136
2001........................................................ 79
----
Total minimum lease payments................................ 351
Less amount representing interest........................... 58
----
$293
====
</TABLE>

Total rent expense was $2,000, $116,000 and $62,000 during the period from
July 1, 1997 (inception) through December 31, 1997, the year ended December 31,
1998, and the three months ended March 31, 1999, respectively.

EQUIPMENT FINANCING ARRANGEMENT

At December 31, the Company had a line of credit arrangement with a leasing
institution that provides for a capital equipment lease line of up to a maximum
of $1,500,000. The terms of the agreement include a requirement for the Company
to keep an unrestricted cash balance of no less than $1.0 million at any time.
The Company was in compliance as of December 31, 1998. Under this agreement,
$1,207,000 was available for future financing transactions at December 31, 1998.

F-19
<PAGE> 98
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
During the quarter ended March 31, 1999 the Company obtained an additional
equipment financing line of credit with a lender in the amount of $1 million.
Under terms of the agreement, the credit line can apply to qualified equipment
delivered and funded not later than January 31, 2000 and the lender will be
repaid over a 36-month period. Title to the assets will reside with the Company
and the assets will be pledged as collateral.

Under the two arrangements, $1,580,000 was available for future financing
transactions at March 31, 1999.

OTHER DEBT

During January 1999 the Company executed a licensing and consulting
agreement with a software vendor for the implementation of a new financial
reporting system. The cost has been financed by an affiliate of the vendor and
will be repaid in quarterly installments of $34,000 through the end of fiscal
2000. Implementation of the system is anticipated to be completed during the
third quarter of 1999.

MARKETING PARTNER COMMITMENTS

The Company is obligated to make payments totaling $4.6 million in 1999
under contracts to provide search services to its marketing partners.

7. EVENTS SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT (UNAUDITED)

On April 6, April 12 and April 23, 1999, the Company granted options to
purchase 413,454, 338,765 and 20,000 shares of Common Stock at exercise prices
of $2.50, $6.20 and $6.20 per share, respectively. The excess of the deemed fair
market value of the Common Stock, determined using a methodology similar to that
applied during 1998, over the exercise prices amounted to an aggregate of
$1,530,000 for the grants on April 6. The Company intends to record related
compensation expense ratably using a graded methodology over the vesting period
of the options.

On April 14, 1999, the Company issued 3,628,447 shares of Series D
Preferred Stock for $6.89 per share and gross proceeds of approximately $25
million. The Series D Preferred Stock carry rights and privileges similar to
those of the Series B and C Preferred Stock and automatically convert into
Common Stock upon the closing of a qualified initial public offering, as
defined.

In April 1999, the Board of Directors approved the filing of the Company's
Registration Statement on Form S-1 with the Securities and Exchange Commission
to reflect the proposed sale by the Company of shares of Common Stock.

If the initial public offering is consummated under the terms presently
anticipated, all of the outstanding Preferred Stock will automatically convert
into Common Stock. On an unaudited pro forma basis, using the conversion price
as of March 31, 1999, 36,652,885

F-20
<PAGE> 99
GOTO.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AT MARCH 31, 1999 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)

7. EVENTS SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT (UNAUDITED)
(CONTINUED)
shares of Common Stock would have been issued and outstanding assuming all of
the outstanding Preferred Stock, including the Series D Preferred Stock issued
in April 1999, converted into Common Stock and all outstanding warrants were
exercised as of March 31, 1999. The pro forma effect on stockholders' equity, as
adjusted for the assumed conversion of the Preferred Stock, including the Series
D Preferred Stock issued in April 1999, and exercise of all outstanding warrants
is set forth on the accompanying balance sheet.

In April 1999 the Board of Directors also approved the establishment, upon
the closing of the Company's initial public offering, of the 1999 Employee Stock
Purchase Plan (1999 Purchase Plan) and the amended and restated 1998 Stock Plan
(1998 Plan). The 1999 Purchase Plan initially reserves 2,000,000 shares of
Common Stock for future issuance which will increase annually by the lesser of
1,000,000 shares, 3% of the outstanding shares on such date, or a lesser amount
determined by the Board. The 1999 Purchase Plan provides for successive six
month offering periods and allows eligible employees to participate in the plan
through payroll deductions that will be used to purchase Common Stock at the end
of each six month period for the lesser of 85% of the price of the Common Stock
at the beginning or the end of the six month offering period.

The 1998 Plan provides for the granting of stock options to employees,
directors and consultants. A total of 8,500,000 shares of Common Stock has been
initially reserved for issuance under the 1998 Plan and this amount will
increase annually by the lessor of 7,500,000 shares, 4% of the outstanding
shares on such date, or a lesser amount determined by the Board of Directors.

Upon completion of the Company's initial public offering the number of
common and undesignated preferred shares authorized for issuance will be
200,000,000 and 10,000,000, respectively.

F-21
<PAGE> 100

[INSIDE BACK COVER]

[Graphic Header: The GoTo.com Marketplace]

[Graphic: 3 end-to-end arrows in a circle] Tools of the GoTo.com Marketplace

GoTo.com offers advertisers control over their
advertising in the marketplace by providing a range of
online tools to manage their accounts and achieve
optimal results.

[Graphic: Page of account maintenance center
where advertisers can view the terms they have
bid on and the amount of each bid.]

GoTo.com has an online account maintenance center where advertisers can:

Revise bids on current search terms

View activity reports

Deposit funds into their accounts

[Graphic: Summary report where advertisers can view the
amount owed based on number of clicks to the advertisers' Web
sites.]

GoTo.com also offers advertisers
online tools to:

Add new search terms

Change the descriptions of
their Web sites in the search
listings

Get suggestions on additional
search terms on which to bid
<PAGE> 101

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June 18, 1999

LOGO

6,000,000 SHARES OF COMMON STOCK

-------------------------
PROSPECTUS
-------------------------

DONALDSON, LUFKIN & JENRETTE

SALOMON SMITH BARNEY

THOMAS WEISEL PARTNERS LLC

DLJDIRECT INC.

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of GoTo.com
have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Until July 13, 1999 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------