GEOCITIES, S-1, 1998-06-12

GEOCITIES
S-1, 1998-06-12

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GEOCITIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

---------------
DELAWARE 7310 95-4515867
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)

---------------
1918 MAIN STREET, SUITE 300
SANTA MONICA, CALIFORNIA 90405
(310) 664-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------
STEPHEN L. HANSEN
CHIEF OPERATING OFFICER AND CHIEF FINANCIAL OFFICER
GEOCITIES
1918 MAIN STREET, SUITE 300
SANTA MONICA, CALIFORNIA 90405
(310) 664-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

---------------
COPIES TO:
RICHARD A. FINK, ESQ. DONALD M. KELLER, JR., ESQ.
GREG T. WILLIAMS, ESQ. JEFFREY Y. SUTO, ESQ.
NEEL A. GROVER, ESQ. DAVID R. YOUNG, ESQ.
BROBECK, PHLEGER & HARRISON LLP DAVID T. SOBOTA, ESQ.
38 TECHNOLOGY DRIVE VENTURE LAW GROUP
IRVINE, CALIFORNIA 92618 A PROFESSIONAL CORPORATION
(949) 790-6300 2775 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(650) 854-4488

---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

---------------
CALCULATION OF REGISTRATION FEE
===============================================================================
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par value............... $72,450,000 $21,373
</TABLE>
================================================================================
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating
the registration fee.

---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 12, 1998

[GEOCITIES LOGO] GEOCITIES

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)

-----------

All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to the offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . For factors to be considered in
determining the initial public offering price, see "Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN THE COMMON STOCK.

Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "GCTY".

----------

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

----------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total (3)............................... $ $ $
</TABLE>

- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such options are exercised in full, the total initial public offering
price, underwriting discount and proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting".

----------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1998, against payment therefor in immediately available
funds.

GOLDMAN, SACHS & CO.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

HAMBRECHT & QUIST

----------

The date of this Prospectus is , 1998.
<PAGE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF THE
COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH
THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Financial Statements and the Notes thereto appearing elsewhere
in this Prospectus. This Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in "Risk Factors" and
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus: (i) reflects, upon the closing of the offering, the automatic
conversion of all outstanding shares of the Company's preferred stock into
shares of Common Stock (the "Preferred Stock Conversion"); (ii) reflects the
Company's reincorporation in Delaware and a concurrent three-for-two stock
split of the Company's capital stock to be effected in June 1998 (including
associated changes to the Company's Certificate of Incorporation and Bylaws)
and (iii) assumes no exercise of the Underwriters' over-allotment option.

THE COMPANY

GeoCities offers the world's largest and one of the fastest growing
communities of personal Web sites on the Internet. GeoCities pioneered the
first large-scale, Web-based community for Internet users to express
themselves, share ideas, interests and expertise, and publish content
accessible to other users with common interests. To attract members to its
community, the Company enables Internet users to become "Homesteaders" by
creating their own personal Web sites in themed "neighborhoods" on the
GeoCities Web site. These neighborhoods provide a context for Web users to
publish content, to share experiences and ideas with other users and to access
a centralized and easy-to-navigate destination for user-published content. With
thousands of new Homesteaders joining each day, the GeoCities community has
grown from approximately 10,000 Homesteads in October 1995 to over 1.9 million
in May 1998. Homesteaders have created an estimated 15 million pages of
personalized content, attracting over 14 million unique visitors to, and
generating over 850 million page views on, the GeoCities Web site in April
1998, according to Relevant Knowledge and Nielsen I/PRO, respectively.
GeoCities was the fourth most trafficked Web site on the Internet among home
users in April 1998, according to Media Metrix, and, based on this information,
the Company believes it was the most popular community of personal Web sites on
the Internet during April. This combination of GeoCities' distinctive community
context, topical organization and high volume of traffic provides advertisers
and businesses with an attractive platform for targeted Web advertising and Web
commerce.

As the Internet continues to grow, Web users, advertisers and businesses are
increasingly seeking online communities. Users are seeking from the Web the
same opportunity for expression, interaction, sharing and recognition that they
seek in the everyday world. To date, a typical Internet user's experience
surfing the Web has been essentially one-way--searching and viewing Web sites
containing professionally created content on topics of general interest, such
as current events, sports, finance, politics and weather. In general, the Web
does not provide a context to publish, promote, search, view and react to
personal content. While Internet search and navigational sites have improved a
user's ability to seek out aggregated Web content, these sites are not
primarily focused on providing a robust platform for publishing or aggregating
the rapidly increasing volume of personalized content created by users with
similar interests, or enabling such users to interact with one another.
Similarly, users browsing the Web are increasingly seeking ways of accessing
unique, personalized content, and interacting and communicating with other
individuals with similar interests. Often the most relevant content for a user
is that generated by other users who share a common interest. Online
communities offer a centralized means of accessing diverse, user-created
content in an easy-to-navigate context and the ability to interact directly
with the author of such personalized content. For advertisers and businesses,
online communities hold the potential of reaching highly targeted audiences
within a more personalized context, thus providing the opportunity to increase
advertising efficiency and improve the likelihood of a sale.

3
<PAGE>

GeoCities offers Web users the ability to join and become actively involved
in the world's largest Web community of personal Web sites. GeoCities provides
Web users with free disk space and publishing tools to quickly and easily
create their own sites in one of over 40 topically organized neighborhoods,
such as CapitolHill for politics, Colosseum for sports, Hollywood for movies
and television and WallStreet for finance. Homesteaders are encouraged to
become active participants in the GeoCities community by updating their sites
and communicating with others through free e-mail, chat and bulletin-board
services provided by the Company. The Company offers Homesteaders seeking
greater involvement the opportunity to join the ranks of over one thousand
active Community Leaders and Community Liaisons--volunteers who welcome
Homesteaders and provide them with assistance, suggest improvements to
GeoCities and monitor the GeoCities community for compliance with community
guidelines. In addition, the Company seeks to make the GeoCities community a
primary destination point for Internet users seeking personalized, user-created
content. Through the Company's enhanced user interface, GeoCities provides a
central site for Internet users to quickly access and view millions of pages of
topically organized content created by fellow users. This distinct community
context and high volume of traffic attracts advertisers, vendors and third-
party content providers from whom the Company derives revenue from advertising
and online commerce. For the three months ended March 31, 1998, the Company had
over 90 advertising customers, including Acura, IBM, Microsoft and VISA, and
four premier commerce partners, including Amazon.com, CDnow, First USA and
Surplus Direct/Egghead. The Company's equity investors include Chase Capital
Partners, CMG@Ventures, Intel Corporation, SOFTBANK Holdings, Inc. and Yahoo!
Inc.

The Company's objective is to be the world's leading member-created online
community for Web users. The Company's strategy includes: (i) expanding its
Homesteader base and strengthening Homesteader affinity through the
introduction of new classes of membership, more advanced and easier-to-use
publishing tools and affinity-building programs; (ii) building the GeoCities
brand; (iii) enhancing the GeoCities site functionality and performance through
continued investments in technology and site infrastructure; (iv) expanding
globally, through initiatives similar to its current GeoCities Japan joint
venture with SOFTBANK and (v) establishing additional strategic relationships,
such as its current distribution relationship with Yahoo!. The Company believes
that this strategy will result in a highly scalable business platform from
which it can generate revenues from multiple sources, including advertising,
commerce and premium membership services.

The Company was incorporated under the laws of California in December 1994
and intends to reincorporate in Delaware in June 1998. Unless the context
otherwise requires, references in this Prospectus to the "Company" or
"GeoCities" refer to GeoCities, a Delaware corporation and its predecessor
California corporation. The Company's principal executive offices are located
at 1918 Main Street, Suite 300, Santa Monica, California 90405. Its telephone
number at that location is (310) 664-6500.

GeoCities is a registered service mark of the Company. GeoPlus, GeoPoints,
GeoRewards, GeoShops and GeoTickets are service marks of the Company. This
Prospectus contains other product names, trade names, service marks and
trademarks of the Company and of other organizations, all of which are the
property of their respective owners.

4
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company... shares
Common Stock to be outstanding after
the offering......................... shares(1)
Use of proceeds....................... For investments in the GeoCities
community site, including enhancements
to the Company's server and networking
infrastructure and the functionality of
its Web site, and general corporate
purposes, including working capital,
expansion of its sales and marketing
capabilities and brand-name promotions.
See "Use of Proceeds".
Proposed Nasdaq National Market
symbol............................... "GCTY"
</TABLE>

SUMMARY FINANCIAL DATA

The following table sets forth certain summary financial data for the
Company. This information should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ---------------------------
1995 1996 1997 1997 1998
-------- ------- -------- ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues............ $ 46 $ 314 $ 4,582 $ 582 $ 2,173
Gross profit (loss)..... (57) (474) (52) 211 608
Loss from operations.... (479) (2,965) (9,019) (1,262) (3,101)
Net loss................ $ (482) $(3,006) $ (8,903) $(1,234) $(2,898)
======== ======= ======== ======= =======
Basic and diluted net
loss per share (2)..... $ (4.52) $ (1.37)
Share outstanding used
in basic and diluted
per-share
calculation (2)........ 1,968 2,111
Pro forma basic and
diluted net loss per
share (3).............. $ (0.48) $ (0.15)
Shares outstanding used
in pro forma basic and
diluted net loss per
share calculation (3).. 18,641 18,784
<CAPTION>
MARCH 31, 1998
-------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
-------- ------------ --------------
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash
equivalents and short-
term investments....... $ 25,332 $25,332
Working capital......... 22,204 22,204
Total assets............ 30,986 30,986
Debt and capital lease
obligations, less
current portion........ 778 778
Mandatory redeemable
convertible preferred
stock.................. 37,585 --
Total stockholders'
equity (deficiency).... (12,153) 25,432
</TABLE>
- --------
(1) Based on the number of shares of Common Stock outstanding as of March 31,
1998. Excludes (i) 3,167,000 shares of Common Stock issuable upon the
exercise of outstanding stock options, including stock options outstanding
under the Company's 1997 Stock Option Plan (the "1997 Stock Option Plan"),
at a weighted average exercise price of $1.14 per share; (ii) 508,000
shares of Common Stock reserved for future issuance under the 1997 Stock
Option Plan (which includes increases of 1,674,570 and 450,000 shares in
the reserve under the 1997 Stock Option Plan approved in April and May
1998, respectively, and from which reserve options to purchase 2,034,570
shares of Common Stock at a weighted average exercise price of $4.99 per
share were granted in April and May 1998) and (iii) 15,228 shares of Common
Stock issuable upon the exercise of an outstanding warrant at an exercise
price of $6.17 per share. See "Capitalization", "Management--Employee
Benefit Plans", "Description of Capital Stock" and Notes 2, 6, 8 and 10 of
Notes to Financial Statements.
(2) See Notes 2 and 10 of Notes to Financial Statements for the determination
of shares used in computing basic and diluted loss per share.
(3) Pro forma gives effect to the Preferred Stock Conversion.
(4) As adjusted to reflect the sale of shares of Common Stock offered hereby
at an assumed initial public offering price of $ per share after deducting
the estimated underwriting discount and estimated offering expenses payable
by the Company. See "Use of Proceeds" and "Capitalization".

5
<PAGE>

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. The following factors, in addition to the other information
contained in this Prospectus, should be carefully considered in evaluating the
Company and its business before purchasing the Common Stock offered hereby.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus.

LIMITED OPERATING HISTORY; NO ASSURANCE OF PROFITABILITY; ANTICIPATED LOSSES

The Company was founded in December 1994, but did not begin generating
advertising revenues until mid-1996. For 1997 and the three months ended March
31, 1998, the Company generated revenues of $4.6 million and $2.2 million,
respectively. Accordingly, the Company has a limited operating history upon
which an evaluation of the Company, its current business and prospects can be
based. In addition, the Company's revenue model is evolving and relies
substantially upon the sale of advertising on its Web site. The Company's
business must be considered in light of the risks, expenses and problems
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets such as the
Internet. Specifically, such risks include, without limitation, the inability
of the Company to maintain and increase levels of traffic on the GeoCities Web
site, the failure by the Company to continue to develop and extend the
GeoCities brand, the inability of the Company to meet minimum guaranteed
impressions under advertising agreements, the lack of broad acceptance of the
community model on the Internet, the inability of the Company to attract or
retain members, the inability of the Company to generate significant Web-based
commerce revenues or premium service revenues from its members, the failure of
the Company to anticipate and adapt to a developing market, the failure of its
server and networking systems to efficiently handle the Company's Web traffic,
changes in laws that adversely affect the Company's business, competition, the
inability to effectively manage rapidly expanding operations, dependence on
the Internet, the introduction and development of different or more extensive
communities by direct and indirect competitors, particularly in light of the
fact that many of such competitors are much larger and have greater financial,
technical and marketing resources than the Company, the failure of the Web to
achieve broad acceptance as an advertising and commercial medium, reductions
in market prices for Web-based advertising as a result of competition or
otherwise, the inability of the Company to maintain or achieve higher rates
for advertising, the inability of the Company to identify, attract, retain and
motivate qualified personnel, other risks noted in this section of the
Prospectus, and general economic conditions. There can be no assurance that
the Company will be successful in addressing such risks, and any failure to do
so could have a material adverse effect on the Company's business, results of
operations and financial condition.

As of March 31, 1998, the Company had an accumulated deficit of $15.7
million. Although the Company has experienced revenue growth in recent
periods, there can be no assurance that the revenues of the Company will
continue at their current level or increase in the future. The Company has not
achieved profitability on a quarterly or annual basis to date, and the Company
anticipates that it will incur net losses for the foreseeable future. The
extent of these losses will be contingent, in part, on the amount of growth in
the Company's revenues from advertising, commerce and premium membership
service fees. The Company expects its operating expenses to increase
significantly, especially in the areas of sales and marketing and brand
promotion, and, as a result, will need to generate increased quarterly
revenues to achieve profitability. The extremely limited operating history of
the Company makes the prediction of future results of operations difficult or
impossible, and, therefore, the recent revenue growth experienced by the
Company should not be taken as an indication of the rate of revenue growth, if
any, that can be expected in the future. The Company believes that period-to-
period comparisons of its operating results are not meaningful and that the

6
<PAGE>

results for any period should not be relied upon as an indication of future
performance. To the extent that revenues do not grow at anticipated rates or
that increases in its operating expenses precede or are not subsequently
followed by commensurate increases in revenues, or that the Company is unable
to adjust operating expense levels accordingly, the Company's business,
results of operations and financial condition will be materially and adversely
affected. There can be no assurance that the Company's operating losses will
not increase in the future or that the Company will ever achieve or sustain
profitability.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; UNPREDICTABILITY OF FUTURE
REVENUES; SEASONALITY

The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside of the Company's
control. These factors include demand for Web-based advertising, advertisers'
market acceptance of the Web as an advertising medium, the level of traffic on
the GeoCities Web site, the advertising budgeting cycles of advertisers, the
amount and timing of capital expenditures and other costs relating to the
expansion of the Company's operations, the introduction of new or enhanced
services by the Company or its competitors, the timing and number of new
hires, pricing changes for Web-based advertising as a result of competition or
otherwise, the loss of a key advertising contract or relationship by the
Company, changes in the Company's pricing policy or those of its competitors,
the mix of types of advertisements sold by the Company, engineering or
development fees that may be paid in connection with adding new Web site
development and publishing tools, technical difficulties with the GeoCities
Web site, incurrence of costs relating to future acquisitions, general
economic conditions, and economic conditions specific to the Internet or all
or a portion of the technology sector. As a strategic response to changes in
the competitive environment, the Company may from time to time make certain
pricing, service or marketing decisions or business combinations that could
have a material adverse effect on the Company's business, results of
operations and financial condition. In order to accelerate the promotion of
the GeoCities brand, the Company intends to significantly increase its
marketing budget which could materially and adversely affect the Company's
business, results of operations and financial condition for a number of
quarterly periods. The Company has experienced, and expects to continue to
experience, seasonality in its business, with user traffic on the GeoCities
Web site being lower during the summer and year-end vacation and holiday
periods when overall usage of the Web is lower. Additionally, seasonality may
significantly affect the Company's advertising revenues during the first and
third calendar quarters, as advertisers historically spend less during these
periods. Because Web-based advertising is an emerging market, additional
seasonal and other patterns in Web advertising may develop in the future as
the market matures, and there can be no assurance that such patterns will not
have a material adverse effect on the Company's business, results of
operations and financial condition.

As a result of the Company's limited operating history, the Company has
limited meaningful historical financial data upon which to base planned
operating expenses. Accordingly, the Company's expense levels are based in
part on its expectations as to future revenues from advertising, commerce
revenue-sharing arrangements, premium membership service fees and its
anticipated growth in memberships and to a large extent are fixed. There can
be no assurance that the Company will be able to accurately predict its
revenues, particularly in light of the intense competition for the sale of
Web-based advertisements, revenue-sharing opportunities and new members, the
Company's limited operating history and the uncertainty as to the broad
acceptance of the Web as an advertising and commerce medium. Any failure by
the Company to accurately make such predictions would have a material adverse
effect on the Company's business, results of operations and financial
condition.

The Company derives a significant portion of its revenues from the sale of
advertising under short-term contracts, averaging one to two months in length.
As a result, the Company's quarterly revenues and operating results are, to a
significant extent, dependent on advertising revenues from contracts entered
into within the quarter, as well as on the Company's ability to adjust
spending in a

7
<PAGE>

timely manner to compensate for any unexpected revenue shortfall. To date, a
significant portion of the Company's revenues in any given period has been
attributable to a small group of customers, the composition of which generally
changes from period to period. The Company expects this situation to continue
in the future. The Company's largest customer, Egghead, Inc. ("Surplus
Direct/Egghead"), accounted for approximately 12% and 13% of the Company's net
revenues during 1997 and the three months ended March 31, 1998, respectively.
The Company's four largest customers during 1997 and the three months ended
March 31, 1998, including Surplus Direct/Egghead, which were, other than
Surplus Direct/Egghead, different customers in both of such periods, accounted
for approximately 29% and 30%, respectively, of the Company's net revenues in
such periods. The cancellation or deferral of existing advertising or commerce
contracts or the failure to obtain new contracts in any quarter could
materially and adversely affect the Company's business, results of operations
and financial condition for that quarter and future periods. Furthermore, the
Company's advertising revenues are based in part on the amount of traffic on
the GeoCities Web site. Accordingly, any significant shortfall in traffic on
the GeoCities Web site in relation to the Company's expectations or the
expectations of existing or potential advertisers would have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, substantially all of the Company's advertising
contracts require the Company to guarantee a minimum number of impressions. In
the event that these minimum impressions are not met, the Company could be
required to provide credit for additional impressions and the ability of the
Company to sell advertising to new or existing advertisers could be adversely
affected, and the Company could be forced to reduce advertising rates.

A key element of the Company's strategy is to generate revenues through
revenue-sharing relationships with commerce partners in addition to selling
standard banner advertising. The Company currently has short-term agreements
with four premier commerce partners: Amazon.com, CDnow, First USA and Surplus
Direct/Egghead. Under the terms of these agreements, the Company has agreed to
limit the number of such premier commerce partners on its Web site to four and
certain other restrictions. Each of these agreements is renewable at the
option of the other party, subject to the payment of certain renewal fees and
rates. To date, the revenues received by the Company under the revenue-sharing
portions of these arrangements have not been material, and there can be no
assurance that the Company will receive a material amount of revenue under
these agreements in the future. The Company's agreement with Surplus
Direct/Egghead allows Surplus Direct/Egghead to terminate its agreement with
the Company upon 30 days notice, subject to the payment of certain termination
fees. Moreover, there can be no assurance that any of these parties will
exercise its renewal right or that Surplus Direct/Egghead will not exercise
its right to terminate its agreement with the Company, either of which events
could have a material adverse effect on the Company's business, results of
operations and financial condition.

Due to any of the foregoing factors, in some future quarter or quarters the
Company's operating results may fall below the expectations of securities
analysts and investors. In such event, the trading price of the Company's
Common Stock would likely be materially and adversely affected.

UNPROVEN BUSINESS MODEL; DEPENDENCE ON MEMBERS

The Company's business model depends upon its ability to leverage its
community platform and generate multiple revenue streams. The potential
profitability of this business model is unproven, and, to be successful, the
Company must, among other things, develop and market solutions that achieve
broad market acceptance by its members, Internet advertisers, commerce vendors
and Internet users. Under the Company's model, the Company is substantially
dependent upon its member-generated content, the grass-roots promotional
efforts of its members and the voluntary involvement of its Community Leaders
and Liaisons to attract Web users to its site and to reduce the demands on
Company personnel. This model has not existed for a substantial period of
time, and, as a result, is relatively unproven. There can be no assurance that
the Company's member-generated content or the promotional efforts of its
members will continue to attract users to the Company's Web site. There can

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also be no assurance that the Company's Community Leaders and Liaisons will
continue to devote their time voluntarily to improving the community, or,
given the fact that the Company provides free disk space to its Homesteaders
and the Company supports the involvement of its Community Leaders and
Liaisons, that third parties will not attempt to hold the Company responsible
for such content and/or any actions or omissions of such Community Leaders and
Liaisons. Moreover, there can be no assurance that community on the Internet
or the Company's services and brand will achieve broad market acceptance.
Accordingly, no assurance can be given that the Company's business model will
be successful or that it can sustain revenue growth or generate sufficient
profits.

RELIANCE ON ADVERTISING REVENUES AND UNCERTAIN ADOPTION OF THE WEB AS AN
ADVERTISING MEDIUM

The Company has derived a substantial majority of its revenues to date from
the sale of advertisements, including banner advertising revenues and
advertising revenues from its premier commerce partners. For 1997 and the
three months ended March 31, 1998, advertising revenues represented 91% and
88%, respectively, of the Company's net revenues. The Company's strategy is to
continue to emphasize advertising as a method of generating revenues. The
Company's current business model is therefore highly dependent on the amount
of traffic on the Company's Web site. This type of business model, however, is
relatively unproven. The Internet as an advertising medium has not been
available for a sufficient period of time to gauge its effectiveness as
compared with traditional advertising media. Many of the Company's advertisers
have only limited experience with the Web as an advertising medium, have not
yet devoted a significant portion of their advertising budgets to Web-based
advertising and may not find such advertising to be effective for promoting
their products and services relative to traditional print and broadcast media.
For 1997, advertising on the Web represented less than 0.5% of overall
advertising revenues in the United States according to industry sources. The
Company's ability to generate significant advertising revenues will also
depend on, among other things, the development of a large base of users of the
Company's services possessing demographic characteristics attractive to
advertisers and the ability of the Company to develop or acquire effective
advertising delivery and measurement systems.

The adoption of Web-based advertising, particularly by those entities that
have historically relied upon traditional media for advertising, requires the
acceptance of a new way of conducting business and exchanging information.
Entities that already have invested substantial resources in other methods of
conducting business may be reluctant to adopt a new strategy that may limit or
compete with their existing efforts. There can be no assurance that the market
for Web advertising will continue to emerge or become sustainable. If the
market develops more slowly than expected, the Company's business, results of
operations and financial condition could be materially and adversely affected.
No standards have been widely accepted for the measurement of the
effectiveness of Web-based advertising, and there can be no assurance that
such standards will develop sufficiently to support the Web as an effective
advertising medium. There can be no assurance that advertisers will accept the
Company's or other third-party measurements of impressions, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, there is intense competition in the sale of
advertising on the Web resulting in a wide variety of pricing models, rate
quotes and advertising services, making it difficult to project future levels
of advertising revenues and rates. It is also difficult to predict which
pricing models, if any, will achieve broad acceptance among advertisers. The
Company has traditionally based its advertising rates on providing advertisers
with a guaranteed number of impressions, and any failure of the Company's
advertising model to achieve broad market acceptance would have a material
adverse effect on the Company's business, results of operations and financial
condition.

The process of managing advertising within a large, high-traffic Web site
such as the Company's is an increasingly important and complex task. The
Company licenses from a third party an advertising management system. To the
extent that the Company encounters system failures or material

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difficulties in the operation of this system, the Company could be unable to
deliver banner advertisements and sponsorships through its Web site. Any
extended failure of, or material difficulties encountered in connection with,
the Company's advertising management system may expose the Company to "make
good" obligations with its advertisers, which, by displacing saleable
advertising inventory, among other consequences, would reduce revenues and
have a material adverse effect on the Company's business, results of
operations and financial condition.

There can be no assurance that current advertisers will continue to purchase
advertising space and services from the Company at current levels or at all,
or that impressions sufficient to generate revenues will be achieved, or that
the Company will be able to successfully attract additional advertisers.
Furthermore, with the rapid growth of available advertising inventory on the
Internet and the intense competition among sellers of advertising space, it is
difficult to project pricing models that will be adopted by the industry or
individual companies. The Company's ability to generate significant
advertising revenues will depend, in part, on the ability of the Company to
leverage additional platforms within its community for new advertising
programs without diluting the perceived value of its existing programs.
Moreover, "filter" software programs that limit or remove advertising from a
Web user's desktop are available; widespread adoption or increased use of such
software by users could have a material adverse effect upon the viability of
advertising on the Web and on the Company's business, results of operations
and financial condition. There can be no assurance that the Company will be
successful in generating significant future advertising revenues or other
source of revenues, and any failure to do so would have a material adverse
effect on the Company's business, results of operations and financial
condition.

MANAGEMENT OF GROWTH AND RELATIONSHIPS; BRIEF TENURE OF MANAGEMENT; DEPENDENCE
ON KEY PERSONNEL

The Company has experienced and may continue to experience rapid growth,
which has placed, and could continue to place, a significant strain on the
Company's managerial, financial and operational resources. The Company is
required to manage multiple relationships with various strategic partners,
technology licensors, members, advertisers and other third parties. These
requirements will be exacerbated in the event of further growth of the Company
or in the number of third party relationships, and there can be no assurance
that the Company's systems, procedures or controls will be adequate to support
the Company's operations or that Company management will be able to manage any
growth effectively. To effectively manage its potential growth, the Company
must continue to implement and improve its operational, financial and
management information systems and to expand, train and manage its employee
base. As of March 1998, the Company had grown to approximately 114 full-time
employees from approximately 48 in March 1997 and the Company anticipates that
the number of its employees will increase significantly in the next 12 months.
The Company has recently hired substantially all of its executive officers,
including its Chief Executive Officer (May 1998), Chief Financial and Chief
Operating Officer (November 1997), Vice President, Advertising Sales
(September 1997), Vice President, Marketing (May 1998) and Vice President,
Business Development (May 1998). These individuals have not previously worked
together and are in the process of integrating as a management team, and there
can be no assurance that they will be able to work together effectively or
successfully manage any growth experienced by the Company. Certain of the
Company's new executives lack experience in an Internet industry environment
and, accordingly, there can be no assurance that they will quickly adapt to
the Internet marketplace. In addition, the majority of the Company's sales
personnel have recently joined the Company, and there can be no assurance that
they will be successful in increasing the Company's level of sales.

The Company's performance is substantially dependent on the performance of
its executive officers and other key employees. The Company does not currently
have "key person" life insurance policies on any of its employees, other than
on Mr. David Bohnett, the Company's Chairman and

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founder. The loss of the services of any of its executive officers or other
key employees could have a material adverse effect on the business, results of
operations and financial condition of the Company. Competition for senior
management, experienced media sales and marketing personnel, qualified Web
engineers and other employees is intense, and there can be no assurance that
the Company will be successful in attracting and retaining such personnel. The
Company has experienced difficulty from time to time in hiring and retaining
the personnel necessary to support the growth of its business, and there can
be no assurance that the Company will not experience similar difficulty in the
future. The failure of the Company to successfully manage its personnel
requirements would have a material adverse effect on the Company's business,
results of operations and financial condition.

INTENSE COMPETITION

The market for members, visitors and Internet advertising is new and rapidly
evolving, and competition for members, visitors and advertisers is intense and
is expected to increase significantly in the future. Barriers to entry are
relatively insubstantial. The Company believes that the principal competitive
factors for companies seeking to create community on the Internet are critical
mass, functionality, brand recognition, member affinity and loyalty, broad
demographic focus and open access for visitors. Other companies who are
primarily focused on creating Web-based community on the Internet are Tripod,
Inc., a subsidiary of Lycos, Inc. ("Tripod/Lycos"), Angelfire Communications
("Angelfire"), Xoom, Inc. ("Xoom") and theglobe.com ("theglobe"). The Company
could also face competition in the future from Web directories, search
engines, shareware archives, content sites, commercial online service
providers ("OSPs"), sites maintained by Internet service providers ("ISPs"),
traditional media companies and other entities that attempt to or establish
communities on the Internet by developing their own community or acquiring one
of the Company's competitors. Further, there can be no assurance that the
Company's competitors and potential competitors will not develop communities
that are equal or superior to those of the Company or that achieve greater
market acceptance than the Company's community. The Company also competes for
visitors with many Internet content providers and ISPs, including Web
directories, search engines, shareware archives, content sites, commercial
online services and sites maintained by Internet service providers, as well as
thousands of Internet sites operated by individuals and government and
educational institutions. These competitors include free information, search
and content sites or services, such as America Online, Inc. ("AOL"), CNET,
Inc. ("CNET"), CNN/Time Warner, Inc. ("CNN/Time Warner"), Excite, Inc.
("Excite"), Infoseek Corporation ("Infoseek"), Lycos, Inc. ("Lycos"), Netscape
Communications Corporation ("Netscape"), Microsoft Corporation ("Microsoft")
and Yahoo! Inc. ("Yahoo!") some of whom, such as Yahoo! and Lycos, may also
have relationships with GeoCities. The Company also competes with many
companies for advertisers, including those companies with whom the Company
competes for visitors as well as traditional forms of media such as
newspapers, magazines, radio and television. The Company believes that the
principal competitive factors in attracting advertisers include the amount of
traffic on its Web site, brand recognition, customer service, the demographics
of the Company's members and viewers, the Company's ability to offer targeted
audiences and the overall cost-effectiveness of the advertising medium offered
by the Company. The Company believes that the number of Internet companies
relying on Web-based advertising revenue will increase substantially in the
future. Accordingly, the Company will likely face increased competition,
resulting in increased pricing pressures on its advertising rates which could
in turn have a material adverse effect on the Company's business, results of
operations and financial condition.

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advertisers and third-party content providers. There can be no assurance that
Internet content providers and ISPs, including Web directories, search
engines, shareware archives, sites that offer professional editorial content,
commercial online services and sites maintained by ISPs will not be perceived
by advertisers as having more desirable Web sites for placement of
advertisements. In addition, substantially all of the Company's current
advertising customers and strategic partners also have established
collaborative relationships with certain of the Company's competitors or
potential competitors, and other high-traffic Web sites. Accordingly, there
can be no assurance that the Company will be able to grow its membership base,
traffic levels and advertiser customer base at historical levels or retain its
current members, traffic levels or advertiser customers, or that competitors
will not experience greater growth in traffic than the Company as a result of
such relationships which could have the effect of making their Web sites more
attractive to advertisers, or that the Company's strategic partners will not
sever or will elect not to renew their agreements with the Company. There can
also be no assurance that the Company will be able to compete successfully
against its current or future competitors or that competition will not have a
material adverse effect on the Company's business, results of operations and
financial condition.

RISK OF CAPACITY CONSTRAINTS; SYSTEM FAILURES; TECHNOLOGICAL RISKS

The performance of the Company's server and networking hardware and software
infrastructure is critical to the Company's business and reputation and its
ability to attract Web users, advertisers, new members and commerce partners
to the Company's Web site. Any system failure that causes an interruption in
service or a decrease in responsiveness of the Company's Web site could result
in less traffic on the Company's Web site and, if sustained or repeated, could
impair the Company's reputation and the attractiveness of its brand name. The
Company entered into a Web hosting agreement with Exodus Communications, Inc.
("Exodus") in November 1997 and relies on Exodus for its Internet connectivity
as well as the management of power and environmentals for the Company's server
and networking equipment. Any disruption in the Internet access provided by
Exodus or any failure of the Company's server and networking systems to handle
current or higher volumes of traffic would have a material adverse effect on
the Company's business, results of operations and financial condition. An
increase in the use of the Company's Web site could strain the capacity of its
systems, which could lead to slower response time or system failures. System
failures or slowdowns adversely affect the speed and responsiveness of the
Company's Web site and would diminish the experience for the Company's members
and visitors and reduce the number of impressions received by advertisers,
and, thus, could reduce the Company's advertising and commerce revenues. The
ability of the Company to provide effective Internet connections or of its
systems to manage substantially larger numbers of customers at higher
transmission speed is as yet unknown, and, as a result, the Company faces
risks related to its ability to scale up to its expected customer levels while
maintaining superior performance. If GeoCities' usage of bandwidth increases,
GeoCities will need to purchase additional servers and networking equipment
and rely more heavily on its equipment and on Exodus and its services to
maintain adequate data transmission speeds, the availability of which may be
limited or the cost of which may be significant. The successful delivery of
the Company's services is also dependent in substantial part upon the ability
of Exodus and the Company to protect GeoCities' server and network
infrastructure against damage from human error, fire, flood, power loss,
telecommunications failure, sabotage, intentional acts of vandalism and
similar events. In addition, substantially all of the Company's server and
network infrastructure is located in Northern California, an area susceptible
to earthquakes, which also could cause system outages or failures if one
should occur. Despite precautions taken by and planned to be taken by the
Company and Exodus, the occurrence of other natural disasters or other
unanticipated problems at their respective facilities could result in
interruption in the services provided by the Company or significant damage to
GeoCities' equipment. Despite the implementation of network security measures
by the Company, its servers are vulnerable to computer viruses, break-ins, and
similar disruptions from unauthorized tampering. The occurrence of any of
these events could result in interruptions, delays or cessations in service,
which could have a material adverse effect on the Company's business, results
of

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<PAGE>

operations and financial condition. In addition, the Company's reputation and
the GeoCities' brand could be materially and adversely affected.

The market in which the Company competes is characterized by rapidly
changing technology, evolving industry standards, frequent new product and
service announcements and enhancements and changing customer demands.
Accordingly, the Company's success will depend on its ability to adapt to
rapidly changing technologies and industry standards, and its ability to
continually improve the speed, performance, features, ease of use and
reliability of its server and networking system in response to both evolving
demands of the marketplace and competitive service and product offerings. Any
failure to rapidly adapt in a changing environment would have a material
adverse effect on the Company's business, results of operations and financial
condition.

The Company continually strives to incorporate new technology into its Web
site for the benefit of its members, visitors and advertising and commerce
partners. Introducing new technology into the Company's systems involves
numerous technical challenges, substantial amounts of personnel resources and
often times takes many months to complete. There can be no assurance that the
Company will be successful at integrating such technology into its Web site on
a timely basis or without degrading the responsiveness and speed of its Web
site or that, once integrated, such technology will function as expected.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

GENERAL

The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there
are currently few laws or regulations directly applicable to access to or
commerce on the Internet. However, due to the increasing popularity and use of
the Internet, a number of legislative and regulatory proposals are under
consideration by federal, state, local and foreign governmental organizations,
and it is possible that a number of laws or regulations may be adopted with
respect to the Internet relating to such issues as user privacy, taxation,
infringement, pricing, quality of products and services and intellectual
property ownership. The adoption of any such laws or regulations may decrease
the growth in the use of the Internet, which could in turn decrease the demand
for the Company's community, increase the Company's cost of doing business, or
otherwise have a material adverse effect on the Company's business, results of
operations and financial condition. Moreover, the applicability to the
Internet of existing laws governing issues such as property ownership,
copyright, trademark, trade secret, obscenity, libel and personal privacy is
uncertain and developing. Any new legislation or regulation, or application or
interpretation of existing laws, could have a material adverse effect on the
Company's business, results of operations and financial condition. For
example, although it was held unconstitutional, the Telecommunications Act of
1996 prohibited the transmission over the Internet of certain types of
information and content. Other nations, including Germany and China, have
taken actions to restrict the free flow of material on the Web deemed to be
objectionable. In addition, the Company may be subject to the provisions of
the recently enacted Communications Decency Act (the "CDA"). Although certain
portions of the CDA were held to be unconstitutional, there can be no
assurance that similar legislation will not be enacted in the future, and it
is possible that such legislation could expose the Company to substantial
liability. Legislation like the CDA could also dampen the growth in use of the
Web generally and decrease the acceptance of the Web as a communications and
commercial medium, and could, thereby, have a material adverse effect on the
Company's business, results of operations and financial condition. In
addition, 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
over the Internet and certain states have taken measures to tax Internet-
related activities. Currently, Congress is considering a number of versions of
legislation which would place a moratorium of a number of years on any new
taxation of Internet commerce. There can be no assurance that any such
legislation will be adopted by Congress or that new taxes will not be imposed
upon Internet commerce after any moratorium adopted by Congress

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expires or that current attempts at taxing or regulating commerce over the
Internet would not substantially impair the growth of commerce and as a result
adversely affect the Company's opportunity to derive financial benefit from
such activities. In addition, several telecommunications carriers are seeking
to have telecommunications over the Web regulated by the Federal
Communications Commission (the "FCC") in the same manner as other
telecommunications services. In addition, because the growing popularity and
use of the Web has burdened the existing telecommunications infrastructure and
many areas with high Web use have begun to experience interruptions in phone
service, local telephone carriers, such as Pacific Bell, have petitioned the
FCC to regulate ISPs and OSPs in a manner similar to long distance telephone
carriers and to impose access fees on the ISPs and OSPs. If either of these
petitions is granted, or the relief sought therein is otherwise granted, the
costs of communicating on the Web could increase substantially, potentially
slowing the growth in use of the Web, which could in turn decrease demand for
the Company's community or increase the Company's cost of doing business.

Due to the global nature of the Web, it is possible that, although
transmissions by the Company over the Internet originate primarily in the
State of California, the governments of other states and foreign countries
might attempt to regulate the Company's transmissions or prosecute the Company
for violations of their laws. There can be no assurance that violations of
local laws will not be alleged or charged by state or foreign governments,
that the Company might not unintentionally violate such laws or that such laws
will not be modified, or new laws enacted, in the future. Any of the foregoing
developments could have a material adverse effect on the Company's business,
results of operations and financial condition.

Because materials may be downloaded by members and other users of the
Company's Web site and subsequently distributed to others, there is a
potential that claims will be made against the Company for defamation,
negligence, copyright or trademark infringement, personal injury or other
theories based on the nature, content, publication and distribution of such
materials. Such claims have been brought, and sometimes successfully pressed,
against OSPs in the past. The Company has received inquiries on a regular
basis from third parties regarding such matters, all of which have been
resolved to date without any payments or other material adverse effect on the
Company. In addition, the increased attention focused upon liability issues as
a result of these lawsuits and legislative proposals could impact the overall
growth of Internet use. The Company could also be exposed to liability with
respect to the offering of third party content that may be accessible through
the Company's Web site, or through content and materials that may be posted by
members on their personal Web sites or chat rooms, or bulletin boards offered
by the Company. Such claims might include, among others, that by directly or
indirectly providing hyperlink text links to Web sites operated by third
parties, the Company is liable for copyright or trademark infringement or
other wrongful actions by such third parties through such Web sites. It is
also possible that if any third-party content information provided on the
Company's Web site contains errors, third parties could make claims against
the Company for losses incurred in reliance on such information. The Company
also offers e-mail services, which exposes the Company to potential risk, such
as liabilities or claims resulting from unsolicited e-mail (spamming), lost or
misdirected messages, illegal or fraudulent use of e-mail or interruptions or
delays in e-mail service. Even to the extent such claims do not result in
liability to the Company, the Company could incur significant costs in
investigating and defending against such claims. The imposition on the Company
of potential liability for information carried on or disseminated through
their systems could require the Company to implement measures to reduce its
exposure to such liability, which may require the expenditure of substantial
resources and limit the attractiveness of the Company's services to members
and users. The Company also enters into agreements with commerce partners and
sponsors under which the Company is entitled to receive a share of any revenue
from the purchase of goods and services through direct links from the
Company's Web site. Such arrangements may expose the Company to additional
legal risks and uncertainties, including potential liabilities to consumers of
such products and services by virtue of the Company's involvement in providing
access to such products or services, even if the Company does not itself
provide such products or services. While the Company's

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agreements with these parties often provide that the Company will be
indemnified against such liabilities, there can be no assurance that such
indemnification, if available, will be adequate. Although the Company carries
general liability insurance, the Company's insurance may not cover all
potential claims to which it is exposed or may not be adequate to indemnify
the Company for all liability that may be imposed. Any imposition of liability
that is not covered by insurance or is in excess of insurance coverage could
have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, the increased attention
focused upon liability issues as a result of these lawsuits and legislative
proposals could impact the overall growth of Internet use.

The Company's "GeoRewards" affinity program, which entitles Homesteaders to
receive GeoPoints and GeoTickets redeemable for merchandise, such as t-shirts,
books, music or other merchandise, also exposes the Company to certain
additional risks and expenses including, without limitation, those related to
compliance with consumer protection laws, loss of customer data, disputes over
redemption procedures and rules, product liability, sales taxation and
liabilities associated with any failure in the performance by participating
merchants.

FEDERAL TRADE COMMISSION INVESTIGATION

In September 1997, GeoCities received a letter from the Federal Trade
Commission (the "FTC") requesting that GeoCities voluntarily produce certain
information regarding GeoCities' collection and use of personal identifying
information. GeoCities produced the requested information as well as certain
supplemental information in late 1997. In February 1998, the FTC staff sent a
draft complaint and draft consent order to GeoCities. At that time, the FTC
staff indicated that, if approved by the FTC, an administrative suit would be
brought against GeoCities alleging that it had violated Section 5(a) of the
Federal Commission Act (the "FTC Act") by engaging in unfair and deceptive
practices in connection with the Company's collection and use of personal
identifying information obtained from individuals, including children. The FTC
staff also offered to settle the matter under the terms contained in the draft
consent order.

After receiving the draft complaint and draft consent order, GeoCities and
the FTC staff engaged in settlement discussions. As a result of these
discussions, on June 11, 1998, the Company and FTC staff attorneys executed an
Agreement Containing Consent Order (the "Proposed Consent Order") which is
subject to FTC approval including a period of public comment, to settle the
matter. The Proposed Consent Order resolves the FTC's allegations (which are
contained in a revised draft complaint to be filed by the FTC with the
Proposed Consent Order) that the Company: (i) disclosed to third parties
personal identifying information collected in its member application process
contrary to what had been represented to consumers by the Company; (ii)
implied that there was an affiliation between the Company and a children's
club operated by a GeoCities Community Leader such that children provided
personal identifying information to the club believing they were disclosing
the information to GeoCities and (iii) failed to disclose to consumers
(including the parents of children) how the Company would use the personal
identifying information it collected from those consumers and children. Under
the Proposed Consent Order, GeoCities would be required to: (i) cease and
desist from the allegedly deceptive practices in the future and (ii) establish
certain procedures to: (a) give adequate notice to consumers regarding
GeoCities' information collection and disclosure practices; (b) provide
consumers with the ability to have GeoCities delete their personal identifying
information from GeoCities' database; (c) more clearly identify its
affiliation (or lack thereof) with third parties which may collect information
or sponsor activities on GeoCities; and (d) obtain express parental consent
prior to collecting and using personal identifying information obtained from
children under 13 years of age. By the terms of the Proposed Consent Order,
GeoCities would not admit any of the allegations contained in the complaint,
nor would it be required to make any monetary payment to the FTC or consumers.

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Although the Proposed Consent Order requires that the Company take specific
actions, including those outlined above, GeoCities has been and remains
committed to protecting the privacy rights of all consumers (and, in
particular children) on the Internet. As part of its ongoing efforts to
enhance the protection of the privacy of its members, the Company has
consulted and worked with industry self-regulation groups and has implemented
or intends to implement programs designed to enhance the protection of the
privacy of its members, including children. Such programs include: (i)
publishing a comprehensive, multi-screen, privacy statement that is accessible
from many places on the Company's Web site, including the GeoCities home page
and new member application form; (ii) revamping the new member application
form to make the questions clearer to consumers; (iii) enhancing its training
program for Community Leaders; (iv) suspending certain e-mail marketing
programs of an affiliate and confirming that the affiliate had never sent e-
mails to individuals based on the representation included in the application
form; (v) altering its rules to expressly forbid third parties from collecting
information in connection with promotions for any purpose other than to
fulfill the promotion; (vi) instructing companies that received information
from the Company regarding children under 13 to cease use of such information;
(vii) making changes to the content that appears on the Company's Web site,
such as warnings to children not to give out personal information, and
removing inappropriate advertising and promotions from GeoCities' children and
family-oriented "EnchantedForest" neighborhood and (viii) requiring that
individuals under 13 involve their parents in the process of applying for a
free membership in GeoCities. To confirm the adequacy of its disclosure
practices in the area of information collection and use, the Company submitted
its privacy statement to TRUSTe, an industry self-regulation group. TRUSTe has
certified such statement as an accurate representation to consumers of
GeoCities' information collection practices.

The Proposed Consent Order is subject to the approval of the Director of
Consumer Protection for the FTC, and preliminary and final approval by the FTC
after a period of public comment. There can be no assurance that the Proposed
Consent Offer ultimately will be approved; however, the FTC staff has sent a
letter to the Company indicating that the FTC's Director of Consumer
Protection concurs with the staff's agreement to the Proposed Consent Order.
If the Proposed Consent Order is not approved by the FTC and the FTC
ultimately decides to file suit, the Company intends to vigorously defend
itself against the FTC's allegations. If the FTC files suit, there can be no
assurance that the FTC will not make additional allegations against the
Company or seek more extensive relief than the relief sought by the Proposed
Consent Order, or that any subsequent settlement, or other relief ultimately
obtained by the FTC will not exceed the relief contained in the Proposed
Consent Order. If more extensive relief is obtained by the FTC, there can be
no assurance that it will not have a material adverse effect on the Company's
business, results of operations or financial condition.

RISKS ASSOCIATED WITH BRAND DEVELOPMENT

The Company believes that establishing and maintaining the GeoCities brand
is a critical aspect of its efforts to attract and expand its member base, Web
traffic and advertising and commerce relationships, and that the importance of
brand recognition will increase due to the growing number of Internet sites
and the low barriers to entry. In order to attract and retain members,
Internet users, advertisers and commerce partners, and to promote and maintain
the GeoCities brand in response to competitive pressures, the Company intends
to increase substantially its financial commitment to creating and maintaining
distinct brand loyalty among these groups, including through traditional media
advertising campaigns in print, radio, billboards and television. Promotion
and enhancement of the GeoCities brand will also depend, in part, on the
Company's success in providing a high-quality community experience, which
success cannot be ensured. If the Company does not generate a corresponding
increase in revenue as a result of its branding efforts or otherwise fails to
promote its brand successfully, or if the Company incurs excessive expenses in
an attempt to promote and maintain its brand, the Company's business, results
of operations

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and financial condition, will be materially and adversely affected. If
members, visitors to the GeoCities Web site, advertisers or businesses do not
perceive the Company's existing services to be of high quality, or if the
Company introduces new services or enters into new business ventures that are
not favorably received by such parties, the value of the Company's brand could
be diluted, thereby decreasing the attractiveness of its Web site to such
parties.

SECURITY RISKS

The Company has experienced attempts by experienced programmers or "hackers"
to penetrate the Company's network security, some of which have succeeded, and
expects these attempts to continue to occur from time to time. If successful,
such actions could have a material adverse effect on the Company's business,
results of operations and financial condition, although such actions have not
done so to date. A party who is able to penetrate the Company's network
security could misappropriate proprietary information or cause interruptions
in the Company's Web site. The Company may be required to expend significant
capital and resources to protect against the threat of such security breaches
or to alleviate problems caused by such breaches. Concerns over the security
of Internet transactions and the privacy of users may also inhibit the growth
of the Internet generally, particularly as a means of conducting commercial
transactions. Security breaches or the inadvertent transmission of computer
viruses could expose the Company to a risk of loss or litigation and possible
liability. There can be no assurance that contractual provisions attempting to
limit the Company's liability in such areas will be successful or enforceable,
or that other parties will accept such contractual provisions as part of the
Company's agreements which could have a material adverse effect on the
Company's business, results of operations and financial condition.

RELIANCE ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company regards its technology as proprietary and attempts to protect it
by relying on trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. The
Company currently has no patents or patents pending and does not anticipate
that patents will become a significant part of the Company's intellectual
property in the foreseeable future. The Company also generally enters into
confidentiality or license agreements with its employees and consultants, and
generally controls access to and distribution of its documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's proprietary
information without authorization or to develop similar technology
independently. The Company pursues the registration of its service marks in
the United States and internationally, and has applied for and obtained the
registration in the United States for a number of its service marks, including
"GeoCities". Effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which the Company's
services are distributed or made available through the Internet, and policing
unauthorized use of the Company's proprietary information is difficult.

17
<PAGE>

time to time, the Company has been, and expects to continue to be, subject to
claims in the ordinary course of its business including claims of alleged
infringement of the trademarks, service marks and other intellectual property
rights of third parties by the Company and the content generated by its
members. Although such claims have not resulted in any significant litigation
or had a material adverse effect on the Company's business to date, such
claims and any resultant litigation, should it occur, might subject the
Company to significant liability for damages and might result in invalidation
of the Company's proprietary rights and even if not meritorious, could be time
consuming and expensive to defend and could result in the diversion of
management time and attention, any of which might have a material adverse
effect on the Company's business, results of operations and financial
condition.

The Company currently licenses from third parties certain technologies
incorporated into the Company's Web site. As it continues to introduce new
services that incorporate new technologies, it may be required to license
additional technology from others. There can be no assurance that these third-
party technology licenses will continue to be available to the Company on
commercially reasonable terms, if at all. The inability of the Company to
obtain any of these technology licenses could result in delays or reductions
in the introduction of new services or could adversely affect the performance
of its existing services until equivalent technology could be identified,
licensed and integrated. See "Business--Intellectual Property and Proprietary
Rights".

DEPENDENCE ON CONTINUED GROWTH IN THE USE OF THE INTERNET; DEPENDENCE ON WEB
INFRASTRUCTURE

The Company's future success is substantially dependent upon continued
growth in the use of the Internet and the Web in order to support the sale of
advertising on the Company's Web site and in the acceptance and volume of
commerce transactions on the Internet. There can be no assurance that the
number of Internet users will continue to grow or that commerce over the
Internet will become more widespread. As is typical in the case of a new and
rapidly evolving industry, demand and market acceptance for recently
introduced services are subject to a high level of uncertainty. The Internet
may not prove to be a viable commercial marketplace for a number of reasons,
including lack of acceptable security technologies, lack of access and ease of
use, congestion of traffic, inconsistent quality of service and lack of
availability of cost-effective, high-speed service, potentially inadequate
development of the necessary infrastructure, excessive governmental
regulation, uncertainty regarding intellectual property ownership or timely
development and commercialization of performance improvements, including high
speed modems.

The success of the GeoCities Web site will depend in large part upon the
continued development of a Web infrastructure, such as a reliable network
backbone with the necessary speed, data capacity and security, and timely
development of complementary products such as high speed modems for providing
reliable Web access and services. Because global commerce and online exchange
of information on the Web and other similar open wide area networks are new
and evolving, it is difficult to predict with any assurance whether the Web
will support increasing use or will prove to be a viable commercial
marketplace. The Web has experienced, and is expected to continue to
experience, significant growth in the number of users and the amount of
content. To the extent that the Web continues to experience increased numbers
of users, frequency of use or increased bandwidth requirements of users, there
can be no assurance that the Web infrastructure will continue to be able to
support the demands placed on it by this continued growth or that the
performance or reliability of the Web will not be adversely affected by this
continued growth. In addition, the Web could lose its viability or
effectiveness due to delays and the development or adoption of new standards
and protocols to handle increased levels of activities or due to increased
government regulation. There can be no assurance that the infrastructure or
complementary products or services necessary to make the Web a viable
commercial marketplace will be developed, or, if they are developed, that the
Web will achieve broad acceptance. If the necessary infrastructure standards,
protocols or complementary products, services or facilities are not developed,
or if the Web does not become a viable commercial marketplace, the Company's
business, results of operations and financial condition will be materially and
adversely affected. Even if such infrastructure, standards or

18
<PAGE>

protocols or complementary products, services or facilities are developed and
the Web becomes a viable commercial marketplace, there can be no assurance
that the Company will not be required to incur substantial expenditures in
order to adapt its services to changing Web technologies, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXPANSION

A part of the Company's strategy is to develop the GeoCities community model
in international markets. There can be no assurance that the Internet, the Web
or the Company's community model will become widely accepted in any
international markets. The Company has developed and operates with SOFTBANK
Corporation of Japan ("SOFTBANK"), GeoCities Japan Corporation ("GeoCities
Japan"), a joint venture that is 40% owned by GeoCities. The Company has not
generated a material amount of revenue from its ownership interest in
GeoCities Japan to date. The Company has only limited experience in developing
this localized version of its community model and will be relying heavily on
the efforts and abilities of SOFTBANK in such venture. In addition, the
Company expects that the success of any additional foreign operations it
initiates in the future will also be substantially dependent upon local
partners. If revenues from international ventures are not adequate to cover
the investments in such activities, the Company's business, results of
operations and financial condition could be materially and adversely affected.
The Company may experience difficulty in managing international operations as
a result of difficulty in locating an effective foreign partner, competition,
technical problems, distance and language and cultural differences, and there
can be no assurance that the Company or its international partners will be
able to successfully market and operate the Company's community model in
foreign markets. The Company also believes that in light of substantial
anticipated competition, it will be necessary to move quickly into
international markets in order to effectively obtain market share, and there
can be no assurance that the Company will be able to do so. There are certain
risks inherent in doing business on an international level, such as unexpected
changes in regulatory requirements, trade barriers, difficulties in staffing
and managing foreign operations, fluctuations in currency exchange rates,
longer payment cycles in general, problems in collecting accounts receivable,
difficulty in enforcing contracts, political and economic instability,
seasonal reductions in business activity in certain other parts of the world
and potentially adverse tax consequences. There can be no assurance that one
or more of such factors will not have a material adverse effect on the
Company's future international operations and, consequently, on the Company's
business, results of operations and financial condition.

CONTROL BY DIRECTORS, EXECUTIVE OFFICERS, CMG@VENTURES AND SOFTBANK

Upon completion of the offering, CMG@Ventures and SOFTBANK, and their
respective affiliates, will, in the aggregate, beneficially own
approximately % of the outstanding Common Stock. In addition, upon completion
of the offering, the directors, executive officers and principal stockholders
of the Company and their respective affiliates will, in the aggregate,
beneficially own approximately % of the outstanding Common Stock. As a result,
these stockholders will possess significant influence over the Company, giving
them the ability, among other things, to elect a majority of the Company's
Board of Directors and approve significant corporate transactions. Such share
ownership and control may also have the effect of delaying or preventing a
change in control of the Company, impeding a merger, consolidation, takeover
or other business combination involving the Company or discourage a potential
acquiror from making a tender offer or otherwise attempting to obtain control
of the Company which could have a material adverse effect on the market price
of the Company's Common Stock.

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING

The Company currently anticipates that the net proceeds of the offering,
together with its existing line of credit and available funds will be
sufficient to meet its anticipated needs for working capital and capital
expenditures for at least the next 12 months. The Company may need to raise
additional funds in the future in order to fund more aggressive brand
promotions and more rapid expansion, to develop newer or

19
<PAGE>

enhanced services, to respond to competitive pressures or to acquire
complementary businesses, technologies or services. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of the rights of the
Company's Common Stock. There can be no assurance that additional financing
will be available on terms favorable to the Company, or at all. If adequate
funds are not available or not available on acceptable terms, the Company may
not be able to fund its expansion, promote its brand names as the Company
desires, take advantage of unanticipated acquisition opportunities, develop or
enhance services or respond to competitive pressures. Any such inability could
have a material adverse effect on the Company's business, results of
operations and financial condition.

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS

As part of its business strategy, the Company expects to review acquisition
prospects that would complement its existing business, augment the
distribution of its community or enhance its technological capabilities.
Although the Company currently has no agreements with respect to any material
acquisitions, the Company may make acquisitions of complementary businesses,
products or technologies in the future. However, there can be no assurance
that the Company will be able to locate suitable acquisition opportunities.
Future acquisitions by the Company could result in potentially dilutive
issuances of equity securities, large and immediate write-offs, the incurrence
of debt and contingent liabilities or amortization expenses related to
goodwill and other intangible assets, any of which could materially and
adversely affect the Company's results of operations. Furthermore,
acquisitions entail numerous risks and uncertainties, including difficulties
in the assimilation of operations, personnel, technologies, products and the
information systems of the acquired companies, diversion of management's
attention from other business concerns, risks of entering geographic and
business markets in which the Company has no or limited prior experience and
potential loss of key employees of acquired organizations. The Company has not
made any material acquisitions in the past. No assurance can be given as to
the ability of the Company to successfully integrate any businesses, products,
technologies or personnel that might be acquired in the future, and the
failure of the Company to do so could have a material adverse effect on the
Company's business, results of operations and financial condition.

YEAR 2000 COMPLIANCE

The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "year 2000 problem"
is pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or fail. The Company
is in the process of working with its software vendors to ensure that the
Company's systems are prepared for the year 2000. In addition, the Company is
working with its external suppliers and service providers to ensure that they
and their systems will be able to support the Company's needs in preparation
for the year 2000. Management does not anticipate that the Company will incur
significant operating expenses or be required to invest heavily in computer
systems improvements to be year 2000 compliant. However, significant
uncertainty exists concerning the potential costs and effects associated with
any year 2000 compliance. Any year 2000 compliance problems of either the
Company, its customers or vendors could have a material adverse effect on the
Company's business, results of operations and financial condition.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of significant amounts of Common Stock in the public market after the
offering or the perception that such sales will occur could materially and
adversely affect the market price of the Common Stock or the future ability of
the Company to raise capital through an offering of its equity

20
<PAGE>

securities. Of the shares of Common Stock to be outstanding upon the closing
of the offering (assuming no exercise of the Underwriters' over-allotment
option), the shares offered hereby will be eligible for immediate sale in
the public market without restriction, unless the shares are purchased by
"affiliates" of the Company within the meaning of Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). The remaining
19,247,907 shares of Common Stock held by existing stockholders upon the
closing of the offering (based on the number of shares of Common Stock
outstanding as of May 31, 1998, and giving effect to the Preferred Stock
Conversion) will be "restricted securities" as that term is defined in Rule
144 under the Securities Act. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act. The Company's directors, officers, stockholders and holders of options to
purchase Common Stock have agreed that they will not sell, directly or
indirectly, any Common Stock without the prior consent of the representatives
of the Underwriters for a period of 180 days from the date of this Prospectus.
However, one affiliate of the Company who is subject to a lock-up agreement
and the volume restrictions of Rule 144 has been authorized by the
representatives of the Underwriters to sell up to $1.0 million of Common Stock
commencing 91 days after the date of this Prospectus. Subject to the
provisions of Rules 144, 144(k) and 701, 19,247,907 shares will be eligible
for sale 180 days after the date of this Prospectus upon the expiration of the
lock-up agreements. In addition, as of May 31, 1998, there were outstanding
options to purchase up to 5,162,304 shares of Common Stock which will be
eligible for sale in the public market following the offering from time to
time subject to becoming exercisable and the expiration of the lock-up
agreements. There is also a warrant outstanding to purchase up to 15,228
shares of Common Stock which will be eligible for sale in the public market
following the offering, subject to being exercised and the expiration of the
lock-up agreement applicable thereto. In addition, subject to the lock-up
agreements, certain stockholders, holding an aggregate of 19,605,096 shares of
Common Stock (including shares issuable upon the exercise of certain options
to purchase Common Stock), have the right, subject to certain conditions, to
include their shares in future registration statements relating to the
Company's securities, and certain stockholders holding an aggregate of
16,672,596 shares of Common Stock have the right, subject to certain
conditions, to cause the Company to register their shares of Common Stock. In
addition, in the event that the Company proposes to register any shares of
Common Stock under the Securities Act to the public in a firm commitment
underwritten public offering, Mr. David Bohnett and Mr. John Rezner, as well
as any other officer or director designated by the Company's Board of
Directors by unanimous vote, shall be entitled to piggyback registration
rights if such persons who choose to include their shares in such registration
shall continue to serve the Company as an officer or director on the effective
date of such registration statement.

The Company intends to file, as of the date of this Prospectus, Form S-8
registration statements under the Securities Act to register all shares of
Common Stock issuable under outstanding options, including options outstanding
under the Company's 1997 Stock Option Plan, the 1998 Stock Option Plan that
the Company intends to adopt and the Employee Stock Purchase Plan that the
Company intends to adopt. Such registration statements are expected to become
effective immediately upon filing, and shares covered by those registration
statements will thereupon be eligible for sale in the public markets, subject
to the lock-up agreements and Rule 144 limitations applicable to affiliates.
See "Management--Employee Benefit Plans", "Description of Capital Stock--
Registration Rights", "Shares Eligible for Future Sale" and "Underwriting".

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the offering, there has been no public market for the Common Stock.
Accordingly, there can be no assurance that an active trading market for the
Common Stock will develop or be sustained following the closing of the
offering or that the market price of the Common Stock will not decline below
the initial public offering price. The initial public offering price, which
may bear no relationship to the

21
<PAGE>

price at which the Common Stock will trade upon completion of the offering,
will be determined by negotiations between the Company and the representatives
of the Underwriters based upon factors that may not be indicative of future
market performance. See "Underwriting".

The trading price of the Company's Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly results of
operations, the gain or loss of significant advertisers, changes in earnings
estimates by analysts, announcements of technological innovations or new
solutions by the Company or its competitors, general conditions in the
technology and Internet sectors and in Internet-related industries, other
matters discussed elsewhere in this section of the Prospectus and other events
or factors, many of which are beyond the Company's control. In addition, the
stock market in general and the technology and Internet sectors in particular
have recently experienced extreme price and volume fluctuations which have
affected the market price for many companies in industries similar or related
to that of the Company and which have been unrelated to the operating
performance of these companies. These market fluctuations, as well as general
economic, political and market conditions, may have a material adverse effect
on the market price of the Company's Common Stock. In the past, following
periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such
companies. Such litigation, if instituted, and irrespective of the outcome of
such litigation, could result in substantial costs and a diversion of
management's attention and resources and have a material adverse effect on the
Company's business, results of operations and financial condition.

BROAD DISCRETION IN USE OF PROCEEDS

The net proceeds of the offering will be added to the Company's working
capital. As of the date of this Prospectus, the Company cannot specify with
certainty the particular uses for the net proceeds to be received upon
completion of the offering. Accordingly, the Company's management will have
broad discretion in the application of the net proceeds. The failure of
management to apply such funds effectively could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Use of Proceeds".

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BYLAWS AND DELAWARE LAW PROVISIONS;
POSSIBLE ISSUANCE OF PREFERRED STOCK

Following the closing of the offering, the Company's Board of Directors will
have the authority to issue up to 5,000,000 shares of Preferred Stock without
any further vote or action by the stockholders, and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of
such shares. Since the Preferred Stock could be issued with voting,
liquidation, dividend and other rights superior to those of the Common Stock,
the rights of the holders of Common Stock would be subject to, and may be
adversely affected by, the rights of the holders of any such Preferred Stock.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. Further, certain provisions of the Company's Certificate
of Incorporation and Bylaws and of Delaware law could have the effect of
delaying or preventing a change in control of the Company. See "Description of
Capital Stock--Anti-Takeover Effects of Certain Provisions of Delaware Law and
the Company's Certificate of Incorporation and Bylaws".

DILUTION; ABSENCE OF DIVIDENDS

Investors purchasing shares of Common Stock in the offering will incur
immediate and substantial dilution of $ per share in net tangible book value
per share of the Common Stock from the initial public offering price. To the
extent outstanding options to purchase Common Stock are exercised, there will
be further dilution. In addition, the Company does not anticipate paying any
cash dividends in the foreseeable future. See "Dividend Policy" and
"Dilution".

22
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common
Stock offered hereby are estimated to be approximately $ million ($ million
if the Underwriters' over-allotment option is exercised in full) after
deducting the underwriting discount and estimated offering expenses payable by
the Company and assuming an initial public offering price of $ per share. The
primary purposes of the offering are to create a public market for the Common
Stock, to facilitate the Company's future access to public equity markets and
to obtain additional working capital.

The Company intends to use the net proceeds of the offering for investments
in the GeoCities community site, including enhancements to the Company's
server and networking infrastructure and the functionality of its Web site,
and general corporate purposes, including working capital, expansion of its
sales and marketing capabilities and brand-name promotions. As of the date of
this Prospectus, the Company cannot specify with certainty the particular uses
for the net proceeds to be received upon completion of the offering.
Accordingly, the Company's management will have broad discretion in the
application of the net proceeds.

Pending such uses, the net proceeds will be invested in interest-bearing
investment-grade instruments, certificates of deposit or direct or guaranteed
obligations of the United States.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on its capital stock
since inception and does not expect to pay any cash dividends for the
foreseeable future. The Company currently intends to retain future earnings,
if any, to finance the expansion of its business. The Company's line of credit
arrangement prohibits the payment of dividends by the Company without the
lender's prior consent.

23
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1998, (i) on an actual basis; (ii) on a pro forma basis to reflect the
Preferred Stock Conversion and (iii) the pro forma capitalization as adjusted
to reflect the receipt by the Company of the estimated net proceeds from the
sale of shares of Common Stock offered hereby at an assumed initial public
offering price of $ per share.

<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term borrowings.......................... $ 379 $ 379 $ 379
======== ======== ========
Long-term debt, less current portion........... $ 778 $ 778 $ 778
-------- -------- --------
Mandatory Redeemable Convertible Preferred
Stock:
Series A through F, $0.001 par value,
19,895,000 authorized, actual and pro forma,
16,672,000 issued and outstanding, actual,
none issued and outstanding, pro forma and
as adjusted................................. 37,585 -- --
-------- -------- --------
Stockholders' equity:
Common Stock, $0.001 par value, 45,000,000
shares authorized; 2,553,000 shares issued
and outstanding, actual, 19,225,000 shares
issued and outstanding, pro forma and
shares issued and outstanding, as
adjusted(1)................................. 1,508 19
Preferred Stock, $0.001 par value, 5,000,000
shares authorized; none issued and
outstanding, actual, pro forma and as
adjusted ................................... -- -- --
Additional paid-in capital..................... 3,196 42,270
Unearned deferred compensation................. (1,185) (1,185) (1,185)
Accumulated deficit............................ (15,672) (15,672) (15,672)
-------- -------- --------
Total stockholders' equity (deficiency)........ (12,153) 25,432
-------- -------- --------
Total capitalization......................... $ 26,210 $ 26,210 $
======== ======== ========
</TABLE>
- --------
(1) Based on the number of shares of Common Stock outstanding as of March 31,
1998. Excludes (i) 3,167,000 shares of Common Stock issuable upon the
exercise of outstanding stock options, including options outstanding under
the 1997 Stock Option Plan at a weighted average exercise price of $1.14
per share; (ii) 508,000 shares of Common Stock reserved for future
issuance under the 1997 Stock Option Plan (which includes increases of
1,674,570 and 450,000 shares in the reserve under the 1997 Stock Option
Plan approved in April and May 1998, respectively, and from which reserve
options to purchase 2,034,570 shares of Common Stock at a weighted average
exercise price of $4.99 per share were granted in April and May 1998) and
(iii) 15,228 shares of Common Stock issuable upon the exercise of an
outstanding warrant at an exercise price of $6.17 per share. See
"Management--Employee Benefit Plans", "Description of Capital Stock" and
Notes 2, 6, 8 and 10 of Notes to Financial Statements.

24
<PAGE>

DILUTION

The pro forma net tangible book value of the Company's Common Stock as of
March 31, 1998, was $25.4 million, or $1.32 per share of Common Stock, after
giving effect to the Preferred Stock Conversion. Pro forma net tangible book
value per share is equal to the amount of the Company's total tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding as of March 31, 1998. Assuming the sale by the Company of
shares of Common Stock offered hereby at an assumed initial public offering
price of $ per share and the application of the estimated net proceeds
therefrom, the pro forma net tangible book value of the Company as of
March 31, 1998, would have been $ million, or $ per share of Common Stock.
This represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $ per share to new investors. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book value per share as of March 31,
1998......................................................... $1.32
Increase per share attributable to new investors..............
-----
Pro forma net tangible book value per share after the offering..
----
Dilution per share to new investors............................. $
====
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences in total consideration paid and the average price per share
paid to the Company by existing stockholders (including holders of preferred
stock) and by new investors with respect to the number of shares of Common
Stock purchased from the Company, assuming an initial public offering price of
$ per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 19,225,000 % $42,289,000 % $2.20
New investors...............
---------- ----- ----------- ----- -----
Total..................... 100.0% $ 100.0% $
========== ===== =========== ===== =====
</TABLE>

The foregoing computations are based on the number of shares of Common Stock
outstanding as of March 31, 1998. These computations exclude (i) 3,167,000
shares of Common Stock issuable upon the exercise of outstanding stock
options, including options outstanding under the Company's 1997 Stock Option
Plan at a weighted average exercise price of $1.14 per share; (ii) 508,000
shares of Common Stock reserved for future issuance when the 1997 Stock Option
Plan (which includes increases of 1,674,570 and 450,000 shares in the reserve
under the 1997 Stock Option Plan approved in April and May 1998, respectively,
and from which reserve options to purchase 2,034,570 shares of Common Stock at
a weighted average exercise price of $4.99 per share which were granted in
April and May 1998) and (iii) 15,228 shares of Common Stock issuable upon the
exercise of an outstanding warrant at an exercise price of $6.17 per share.
See "Capitalization", "Management--Employee Benefit Plans", "Description of
Capital Stock" and Notes 2, 6, 8 and 10 of Notes to Financial Statements.

25
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
Company's Financial Statements and related Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The statement of operations data for
each of the years in the three-year period ended December 31, 1997, and the
balance sheet data at December 31, 1996 and 1997, are derived from financial
statements of the Company which have been audited by Coopers & Lybrand L.L.P.,
independent accountants, and are included elsewhere in this Prospectus. The
balance sheet data at December 31, 1995, are derived from audited financial
statements of the Company not included herein. The statement of operations
data for each of the three-month periods ended March 31, 1997 and 1998, and
the balance sheet data at March 31, 1998, are derived from unaudited interim
financial statements of the Company included elsewhere in this Prospectus. The
unaudited financial statements have been prepared on substantially the same
basis as the audited financial statements and, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations for such
periods. Historical results are not necessarily indicative of the results to
be expected in the future, and results of interim periods are not necessarily
indicative of results for the entire year.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------ -----------------
1995 1996 1997 1997 1998
------ ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $ 46 $ 314 $ 4,582 $ 582 $ 2,173
Cost of revenues.................. 103 788 4,634 371 1,565
------ ------- ------- -------- -------
Gross profit (loss).............. (57) (474) (52) 211 608
Operating expenses:
Sales and marketing.............. 117 764 5,045 721 2,118
Product development.............. 72 475 1,021 201 508
General and administrative....... 233 1,252 2,901 551 1,083
------ ------- ------- -------- -------
Total operating expenses....... 422 2,491 8,967 1,473 3,709
------ ------- ------- -------- -------
Loss from operations.............. (479) (2,965) (9,019) (1,262) (3,101)
Interest income (expense), net.... (2) (40) 117 29 204
------ ------- ------- -------- -------
Loss before provision for income
taxes............................ (481) (3,005) (8,902) (1,233) (2,897)
Provision for income taxes........ (1) (1) (1) (1) (1)
------ ------- ------- -------- -------
Net loss.......................... $ (482) $(3,006) $(8,903) $ (1,234) $(2,898)
====== ======= ======= ======== =======
Basic and diluted net loss per
share............................ $(0.15) $ (1.53) $ (4.52) $ (0.63) $ (1.37)
Weighted average shares
outstanding used in basic and
diluted per share calculation.... 3,323 1,963 1,968 1,963 2,111
Pro forma basic and diluted net
loss per share(1)................ $ (0.48) $ (0.15)
Weighted average shares
outstanding used in pro forma
basic and diluted per share
calculation(1)................... 18,641 18,784
<CAPTION>
DECEMBER 31,
------------------------
1995 1996 1997 MARCH 31, 1998
------ ------- ------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and
short-term investments........... $ 1 $ 33 $ 3,785 $ 25,332
Working capital................... (135) (1,642) 26,451 22,204
Total assets...................... 105 1,448 32,868 30,986
Debt and capital lease
obligations, less current
portion.......................... -- 437 834 778
Mandatory redeemable convertible
preferred stock.................. -- 2,063 37,585 37,585
Total stockholders' equity
(deficiency)..................... (40) (3,046) (9,494) (12,153)
</TABLE>
- -------
(1) See Note 2 and 10 of Notes to Financial Statements for an explanation of
the method used to determine the number of shares used to compute pro
forma basic and diluted net loss per share.

26
<PAGE>

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

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the related Notes thereto included elsewhere in this
Prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, those set forth under "Risk
Factors" and elsewhere in this Prospectus.

OVERVIEW

Founded in December 1994 as Beverly Hills Internet, the Company first
launched an online community of six neighborhoods in January 1995. From
January 1995 through early 1996, the Company's operating activities related
primarily to developing software and hardware infrastructure for the Company's
Web site, recruiting personnel, raising capital and developing programs to
attract Homesteaders. During this period, the Company's revenues were derived
from commercial Web site set-up and maintenance operations which were de-
emphasized in early 1996. The Company changed its name to GeoCities in early
1996, and, for the remainder of 1996 and through 1997, shifted its focus
toward building its Homesteader membership base, broadening the functionality
of the Company's Web site, developing a broader range of neighborhoods and, to
a lesser extent, selling advertising on its Web site. The Company reached one
million Homesteads in October 1997 and over 1.9 million Homesteads in May
1998. From the end of 1997 through May 1998, the Company hired substantially
all of its senior management team and began to focus more strongly on building
its revenue base.

To date, the Company's revenues have been derived principally from the sale
of advertisements. Advertising revenues constituted 88% of net revenues for
the three months ended March 31, 1998 and 91% of net revenues for 1997. The
Company sells banner advertisements, event sponsorships and premium site
locations within the Company's Web site. The Company also receives advertising
revenues from select premier commerce partners in return for preferred banner
advertising locations on, and integration into, the Company's Web site. The
Company has also recently begun receiving advertising revenues from third-
party content providers who pay the Company for displaying their content on
the Company's Web site. Currently, the duration of the Company's banner
advertising arrangements averages between one to two months. Advertising rates
are dependent on whether the impressions are for general rotation throughout
the Company's Web site or for targeted audiences and properties within
specific areas of the GeoCities site. All advertising revenues are recognized
ratably in the period in which the advertisement is displayed, provided that
no significant Company obligations remain and collection of the resulting
receivable is probable. Company obligations typically include guarantees of a
minimum number of "impressions" or times that an advertisement appears in page
views downloaded by users. Payments received from advertisers prior to
displaying their advertisements on the site are recorded as deferred revenues
and are recognized as revenue ratably when the advertisement is displayed.

27
<PAGE>

In addition to advertising revenues, the Company derives other revenues
primarily from its GeoPlus program, and, to a lesser extent, from its GeoShops
program and revenue-sharing arrangements with its premier commerce partners.
The Company's GeoPlus program offers premium services for a monthly fee,
providing Homesteaders additional disk space and enhanced publishing tools for
their Web pages. Beginning in March 1998, the Company introduced the GeoShops
program, a commerce service that, for a monthly fee, allows Homesteaders to
sell products and services on their personal Web sites, and, for an additional
fee, provides Homesteaders with transaction authorization and processing
capabilities. The Company's agreements with its premier commerce partners
generally provide the Company with a share of any sales resulting from direct
links from the Company's Web site, subject to certain minimum sales levels.
Revenues from the GeoPlus and GeoShops programs are recognized in the month
that the service is provided. Revenues from the Company's share of the
proceeds from its premier commerce partners' sales are recognized by the
Company upon notification from its premier commerce partners of sales
attributable to the Company's Web site. To date, revenues from such revenue-
sharing arrangements have not been material.

The Company has incurred significant losses since its inception, and as of
March 31, 1998, had an accumulated deficit of approximately $15.7 million.
Also, in connection with the grant of certain stock options to employees
during 1997 and the three months ended March 31, 1998, the Company recorded
total unearned deferred compensation of approximately $1.2 million as of March
31, 1998, and the Company expects to record additional unearned deferred
compensation of approximately $6.2 million for the three months ending June
30, 1998, representing the difference between the deemed value of the
Company's Common Stock for accounting purposes and the exercise price of such
options at the date of grant. Such amount is presented as a reduction of
stockholders' equity and amortized over the vesting period of the applicable
options. As a result, the Company currently expects to amortize the following
amounts of deferred compensation annually: 1998--$1.1 million; 1999--
$1.6 million; 2000--$1.8 million; 2001--$1.8 million; 2002--$766,000; 2003--
$265,000 and 2004--$90,000. Amortization of deferred compensation was $40,000
and $24,000 for the three months ended March 31, 1998 and the year ended 1997,
respectively.

28
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth the results of operations for the Company
expressed as a percentage of net revenues:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------------- ---------------
1995 1996 1997 1997 1998
-------- ------ ------ ------ ------
(AS A PERCENTAGE OF NET REVENUES)
<S> <C> <C> <C> <C> <C>
Net revenues................... 100% 100% 100% 100% 100%
Cost of revenues............... 224 251 101 64 72
-------- ------ ------ ------ ------
Gross profit (loss)........... (124) (151) (1) 36 28
Operating expenses:
Sales and marketing........... 254 243 110 124 97
Product development........... 157 151 22 34 23
General and administrative.... 507 399 63 95 50
-------- ------ ------ ------ ------
Total operating expenses..... 918 793 195 253 170
-------- ------ ------ ------ ------
Loss from operations........... (1,042) (944) (196) (217) (142)
Interest income (expense),
net........................... (4) (13) 2 5 9
-------- ------ ------ ------ ------
Loss before provision for
income taxes.................. (1,046) (957) (194) (212) (133)
Provision for income taxes..... (2) -- -- -- --
-------- ------ ------ ------ ------
Net loss....................... (1,048)% (957)% (194)% (212)% (133)%
======== ====== ====== ====== ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1998 AND 1997

NET REVENUES

Net revenues increased 273% to $2.2 million for the three months ended March
31, 1998, from $582,000 for the three months ended March 31, 1997. The
increase in net revenues was due primarily to an increase in the number of
advertisers, including the addition of the Company's premier commerce
partners, the increase in the Company's Web site traffic and, to a lesser
extent, expansion in GeoPlus memberships. Advertising revenues accounted for
approximately 88% and 91% of net revenues for the three months ended March 31,
1998 and 1997, respectively. The GeoPlus program accounted for approximately
12% and 6% of net revenues for the three months ended March 31, 1998 and 1997,
respectively. The Company's four largest customers accounted for approximately
30% and 40% of net revenues in the three months ended March 31, 1998 and 1997,
respectively. At March 31, 1998, the Company had deferred revenues of
$354,000. The Company anticipates that advertising revenues will continue to
account for a substantial share of net revenues for the foreseeable future.

COST OF REVENUES

Cost of revenues consists primarily of Internet connection charges, Web site
equipment leasing costs, depreciation, salaries of operations personnel and
other related operations costs. Cost of revenues increased to $1.6 million or
72% of net revenues for the three months ended March 31, 1998, from $371,000
or 64% of net revenues for the three months ended March 31, 1997. The absolute
dollar and percentage of net revenues increases in cost of revenues were
primarily due to building the Company's server and networking infrastructure
in response to the growth in number of Homesteaders. The Company anticipates
that its Internet connection, Web site equipment and related operating costs
will continue to grow in absolute dollars for the foreseeable future.

29
<PAGE>

OPERATING EXPENSES

SALES AND MARKETING EXPENSES

Sales and marketing expenses consist primarily of salaries of sales and
marketing personnel, commissions, advertising and other marketing related
expenses. Sales and marketing expenses also include personnel costs related to
editorial content and community management and support. Sales and marketing
expenses increased to $2.1 million or 97% of net revenues for the three months
ended March 31, 1998, from $721,000 or 124% of net revenues for the three
months ended March 31, 1997. The absolute dollar increase in sales and
marketing expenses was primarily due to increases in the number of sales
personnel, increased sales commissions and increased expenses associated with
promotion and marketing efforts. Sales and marketing expenses as a percentage
of net revenues decreased because of the growth in net revenues. The Company
expects that sales and marketing expenses will grow significantly in absolute
dollars for the foreseeable future as it pursues an aggressive branding
strategy and hires additional sales and marketing personnel.

PRODUCT DEVELOPMENT EXPENSES

Product development expenses consist primarily of salaries of certain
software development and operations personnel and expenditures related to
third party software. Product development expenses increased to $508,000 or
23% of net revenues for the three months ended March 31, 1998, from $201,000
or 34% of net revenues for the three months ended March 31, 1997. The absolute
dollar increase in product development expenses was primarily attributable to
increased personnel and associated software costs related to enhancing the
functionality of the Company's Web site. Product development expenses
decreased as a percentage of net revenues because of the growth in net
revenues. To date, all product development expenditures have been expensed as
incurred. The Company believes that significant investments in product
development are required to remain competitive. Therefore, the Company expects
that its product development expenses will continue to increase in absolute
dollars for the foreseeable future.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist primarily of salaries and
related costs for general corporate functions, including finance, accounting,
facilities and legal, and fees for professional services. General and
administrative expenses increased to $1.1 million or 50% of net revenues for
the three months ended March 31, 1998, from $551,000 or 95% of net revenues
for the three months ended March 31, 1997. The absolute dollar increase in
general and administrative expenses was primarily due to increases in the
number of personnel to support the growth of the Company's business, and
increases in recruiting costs related to filling key senior executive
positions. General and administrative expenses decreased as a percentage of
net revenues because of the growth in net revenues. The Company expects that
it will incur additional general and administrative expenses in absolute
dollars as the Company hires additional personnel and incurs additional
expenses related to the growth of the business and its operations as a public
company.

INTEREST INCOME (EXPENSE), NET

Interest income (expense), net includes income from the Company's cash and
investments and expenses related to the Company's financing obligations.
Interest income (expense), net increased to $204,000 for the three months
ended March 31, 1998, from $29,000 for the three months ended March 31, 1997.
The increase in absolute dollars was primarily due to a higher average
investment balance as a result of capital received from the issuance of shares
of the Company's preferred stock in October 1997 and January 1998.

30
<PAGE>

YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995

NET REVENUES

Net revenues were $4.6 million, $314,000 and $46,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. The absolute dollar increases
from year to year were due primarily to an increase in the number of
advertisers, increase in traffic on the Company's Web site and, to a lesser
extent, increase in revenues from expansion of GeoPlus memberships.
Advertising revenues accounted for approximately 91%, 90%, and 0% of net
revenues in 1997, 1996 and 1995, respectively. The Company's four largest
advertising customers accounted for 29% and 40% of net revenues for the years
ended 1997 and 1996, respectively. Prior to 1996, the Company's revenues were
derived from commercial Web site set-up and maintenance operations which were
de-emphasized in early 1996.

COST OF REVENUES

Cost of revenues were $4.6 million or 101% of net revenues, $788,000 or 251%
of net revenues and $103,000 or 224% of net revenues for the years ended
December 31, 1997, 1996 and 1995 respectively. Cost of revenues in 1995
consisted primarily of salaries of design personnel and Internet connection
charges. The absolute dollar increases from year to year in cost of revenues
were primarily due to the costs of building the Company's server and
networking infrastructure in response to the growth in Homesteader membership.
Cost of revenues as a percentage of net revenues has decreased because of the
growth in net revenues.

OPERATING EXPENSES

SALES AND MARKETING EXPENSES

Sales and marketing expenses were $5.0 million or 110% of net revenues,
$764,000 or 243% of net revenues and $117,000 or 254% of net revenues for the
years ended December 31, 1997, 1996 and 1995, respectively. The absolute
dollar increases from year to year in sales and marketing expenses were
primarily due to the addition of a direct sales force which the Company began
building in the second half of 1996 and increases in marketing expenses. Sales
and marketing expenses as a percentage of net revenues have decreased because
of the growth in net revenues.

PRODUCT DEVELOPMENT EXPENSES

Product development expenses were $1.0 million or 22% of net revenues,
$475,000 or 151% of net revenues and $72,000 or 157% of net revenues for the
years ended December 31, 1997, 1996 and 1995, respectively. The absolute
dollar increases from year to year in product development expenses were
primarily attributable to increases in the number of personnel and related
costs to support enhancement to the Company's products. Product development
expenses as a percentage of net revenues have decreased because of the growth
in net revenues.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $2.9 million or 63% of net
revenues, $1.3 million or 399% of net revenues and $233,000 or 507% of net
revenues for the years ended December 31, 1997, 1996 and 1995, respectively.
The absolute dollar increases from year to year in general and administrative
expenses were primarily due to increases in the number of general and
administrative personnel, professional services and facility expenses to
support the growth of the Company's operations. General and administrative
expenses as a percentage of net revenues have decreased because of the growth
in net revenues.

INTEREST INCOME (EXPENSE), NET

Interest income (expense), net was $117,000 for the year ended December 31,
1997. Interest income (expense), net was ($40,000) and ($2,000) for the years
ended December 31, 1996 and 1995, respectively. The increase in interest
income (expense), net for the year ended December 31, 1997 was primarily due
to a higher average investment balance as a result of preferred stock proceeds
from the first quarter and third quarter of 1997.

31
<PAGE>

INCOME TAXES

As of December 31, 1997 the Company had approximately $11.3 million and
$10.7 million of federal and state net operating loss carryforwards,
respectively, for tax reporting purposes available to offset future taxable
income. The Company's federal and state net operating loss carryforwards
expire beginning 2010 and 2002, respectively. Due to the change in the
Company's ownership interests in 1996 and 1997, future utilization of the
Company's net operating loss carryforwards will be subject to certain
limitations or annual restrictions. See Note 9 of Notes to Financial
Statements.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data and such
statement of operations data as a percentage of net revenues for the three
months ended March 31, June 30, September 30 and December 31, 1997 and March
31, 1998. The information for each of these quarters has been prepared on
substantially the same basis as the audited financial statements included
elsewhere in this Prospectus and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations for such periods. Historical
results are not necessarily indicative of the results to be expected in the
future, and results of interim periods are not necessarily indicative of
results for the entire year.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998
--------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues............ $ 582 $ 1,050 $ 1,271 $ 1,679 $ 2,173
Cost of revenues........ 371 1,050 1,382 1,831 1,565
------- ------- ------- ------- -------
Gross profit (loss).... 211 -- (111) (152) 608
Operating expenses:
Sales and marketing.... 721 1,409 1,289 1,626 2,118
Product development.... 201 235 264 321 508
General and
administrative........ 551 722 649 979 1,083
------- ------- ------- ------- -------
Total operating
expenses............. 1,473 2,366 2,202 2,926 3,709
------- ------- ------- ------- -------
Loss from operations.... (1,262) (2,366) (2,313) (3,078) (3,101)
Interest income, net.... 29 40 5 43 204
------- ------- ------- ------- -------
Loss before provision
for income taxes....... (1,233) (2,326) (2,308) (3,035) (2,897)
Provision for income
taxes.................. (1) -- -- -- (1)
------- ------- ------- ------- -------
Net loss................ $(1,234) $(2,326) $(2,308) $(3,035) $(2,898)
======= ======= ======= ======= =======
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998
--------- -------- --------- -------- ---------
(AS A PERCENTAGE OF NET REVENUES)
<S> <C> <C> <C> <C> <C>
Net revenues............ 100% 100% 100% 100% 100%
Cost of revenues........ 64 100 109 109 72
------- ------- ------- ------- -------
Gross profit (loss).... 36 -- (9) (9) 28
Operating expenses:
Sales and marketing.... 124 134 101 97 97
Product development.... 34 23 21 19 23
General and
administrative........ 95 69 51 58 50
------- ------- ------- ------- -------
Total operating
expenses............. 253 226 173 174 170
------- ------- ------- ------- -------
Loss from operations.... (217) (225) (182) (183) (142)
Interest income, net.... 5 4 -- 2 9
------- ------- ------- ------- -------
Loss before provision
for income taxes....... (212) (222) (182) (181) (133)
Provision for income
taxes.................. -- -- -- -- --
------- ------- ------- ------- -------
Net loss................ (212)% (222)% (182)% (181)% (133)%
======= ======= ======= ======= =======
</TABLE>

32
<PAGE>

The Company's net revenues have increased in all quarters presented as a
result of an increase in the number of advertisers, the increase in the
Company's Web site traffic and, to a lesser extent, expansion in GeoPlus
memberships. In addition, from the quarter ended December 31, 1997 to the
quarter ended March 31, 1998, the Company's net revenues increased in part due
to the addition of the Company's premier commerce partners.

Cost of revenues has increased in absolute dollars and as a percentage of
net revenues for each quarter presented other than the quarter ended March 31,
1998. The increases in cost of revenues in absolute dollars are the result of
expanding the Company's server and networking infrastructure to accommodate
the growth in Homesteads and increased traffic to the Company's Web site. The
increase in cost of revenues in absolute dollars for the quarter ended
December 31, 1997 resulted from the decision to change the Company's Internet
service provider which resulted in increased expenses during the transition
period, but lower expenses beginning in the quarter ended March 31, 1998. The
decrease in cost of revenues as a percentage of net revenues for the quarter
ended March 31, 1998 is a result of the Company's new Internet service
provider relationship and the growth in the Company's net revenues.

Operating expenses have increased in each of the quarters presented
reflecting the growth of the Company's operations. In addition, the increase
in operating expenses for the quarter ended June 30, 1997 was primarily due to
an increase in sales and marketing expenses related to the opening of a new
sales office in San Francisco and a one-time expense related to a promotional
campaign. The increase in general and administrative expenses for the quarter
ended June 30, 1997, was primarily due to recruiting expenses for several key
employees. Operating expenses as a percentage of net revenues have decreased
as a result of the growth in net revenues.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations primarily
through the private placement of its preferred stock and equipment lease
financing. As of March 31, 1998, the Company had approximately $2.0 million in
cash and cash equivalents and $23.3 million in short-term investments.

33
<PAGE>

Net cash used in operating activities increased to $7.2 million for 1997
from $2.8 million for 1996, and increased to $1.9 million for the three months
ended March 31, 1998 compared to $1.8 million for the three months ended
March 31, 1997. The increase in net cash used resulted primarily from
increasing net losses and accounts receivable, partially offset by increases
in accrued expenses related to issuance costs for the Company's financing
activities, and accounts payable.

Net cash used in investing activities increased to $1.3 million for 1997
from $130,000 for 1996, resulting from increased purchases of property and
equipment and the $645,000 investment in 40% of GeoCities Japan, a joint
venture with SOFTBANK. Net cash used in investing activities increased to
$25.0 million for the three months ended March 31, 1998, compared to $56,000
for the three months ended March 31, 1997, resulting primarily from the
purchase of investments with the proceeds from the Company's issuance of
shares of its preferred stock.

Net cash provided by financing activities increased to $12.3 million for
1997 compared to $2.9 million for 1996 resulting primarily from the issuance
of shares of the Company's preferred stock for $38 million, offset by a $25.0
million subscription receivable related to the issuance of shares of the
Company's preferred stock, which was received in January 1998.

The Company has a bank line of credit for $10.0 million. To date there have
been no borrowings under this line of credit. This credit facility includes a
$7.0 million revolving facility for working capital and a $3.0 million lease
facility. This facility bears interest at the bank's prime rate for the
revolving facility and the bank's prime rate plus 0.75% for the lease
facility. Any borrowings under this line of credit will be collateralized by
substantially all of the Company's assets.

The Company's capital requirements depend on numerous factors, including
market acceptance of the Company's services, the amount of resources the
Company devotes to investments in the GeoCities community, the resources the
Company devotes to marketing and selling its services and its brand promotions
and other factors. The Company has experienced a substantial increase in its
capital expenditures and operating lease arrangements since its inception
consistent with the growth in the Company's operations and staffing, and
anticipates that this will continue for the foreseeable future. Additionally,
the Company will continue to evaluate possible investments in businesses,
products and technologies, and plans to expand its sales and marketing
programs and conduct more aggressive brand promotions. The Company currently
anticipates that the net proceeds of the offering, together with its existing
line of credit and available funds will be sufficient to meet its anticipated
needs for working capital and capital expenditures for at least the next 12
months. See "Risk Factors--Future Capital Needs; Uncertainty of Additional
Financing".

The Company is in the process of working with its software vendors to ensure
that the Company's systems are prepared for the year 2000. In addition, the
Company is working with its external suppliers and service providers to ensure
that they and their systems will be able to support the Company's needs in
preparation for the year 2000. Management does not anticipate that the Company
will incur significant operating expenses or be required to invest heavily in
computer systems improvements to be year 2000 compliant. However, significant
uncertainty exists concerning the potential costs and effects associated with
any year 2000 compliance. Any year 2000 compliance problems of either the
Company, its customers or vendors could have a material adverse effect on the
Company's business, results of operations and financial condition.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 1997, Statement of Financial Accounting Standards ("SFAS") 128
"Earnings Per Share", was issued and effective for the Company's year ended
December 31, 1997. As a result, the Company's earnings per share ("EPS") data
for all periods has been presented in accordance with SFAS 128. In March 1997,
SFAS 129, "Disclosure of Information About Capital Structure", was issued and
will be effective for 1998. In June 1997, SFAS 130, "Comprehensive Income" and
SFAS 131, "Disclosure about Segments of an Enterprise", were issued and will
be effective for 1998. The Company is evaluating additional disclosures, if
any, which may result from these pronouncements. See Note 2 of Notes to
Financial Statements.

34
<PAGE>

BUSINESS

OVERVIEW

GeoCities offers the world's largest and one of the fastest growing
communities of personal Web sites on the Internet. The Company pioneered the
first large-scale, Web-based community for Internet users to express
themselves, share ideas, interests and expertise, and publish content
accessible to other users with common interests. To attract members to its
community, the Company enables Internet users to become "Homesteaders" by
creating their own personal Web sites in themed "neighborhoods" on the
GeoCities Web site. These neighborhoods provide a context for Web users to
publish content, to share experiences and ideas with other users and to access
a centralized and easy-to-navigate destination for user-published content.

INDUSTRY BACKGROUND

THE INTERNET AND WORLD WIDE WEB

The Internet and Web have emerged as mass communications and commerce
mediums enabling millions of people worldwide to share information,
communicate and conduct business electronically. International Data
Corporation ("IDC") estimates that the number of Web users worldwide will
exceed 95 million in 1998 and will grow to over 170 million users by the end
of 2000. Jupiter Communications estimates that the number of Internet-
connected households worldwide will grow from approximately 45 million at the
end of 1998 to approximately 66 million by 2000. The relatively lower costs
required to publish content on the Web compared to traditional media and the
availability of powerful new tools for the development and distribution of
multimedia-rich content, including video and audio, have led to a
proliferation of more useful and engaging information and services on the
Internet. As the amount of content and services on the Internet continues to
grow at a rapid pace, greater numbers of Internet users are attracted, fueling
a cycle of growth wherein more users demand more content and more content
attracts more users.

THE NEED FOR ONLINE COMMUNITIES

As the Internet continues to grow, users seek from the Web the same
opportunity for expression, interaction, sharing, support and recognition they
seek in the everyday world. To date, a typical Internet user's experience
surfing the Web has been essentially one-way--searching and viewing Web sites
containing professionally created content on topics of general interest such
as current events, sports, finance, politics and weather. However, the Web in
general does not provide a context for users to publish, promote, search and
view personal Web pages. As a result, users publishing personal Web sites have
had limited means of attracting visitors to their sites or interacting with or
receiving recognition from visitors. Internet search and navigational sites
serve a valuable function for users seeking to navigate the Internet for
aggregated Web content; however, these sites are not primarily focused on
providing a platform for publishing and aggregating the rapidly increasing
volume of personalized content created by users or enabling such users to
interact with each other--unique characteristics that distinguish the Internet
from traditional print, radio and television media. As a result, there is a
significant growing demand by Web users for an online community site in which
they can publish easy-to-find, context-based content for, interact with, and
be recognized by, other Web users.

Similarly, Web users engaged in passive browsing are increasingly seeking
ways of interacting and communicating with other individuals with similar
interests and accessing unique, personalized content. While users are
generally able to obtain relevant professionally created content through
traditional navigational sites such as Web directories and search engines, the
source of such content is usually the media and not fellow Web users. Often,
the most relevant content for a user is generated by other users who share an
interest in what is published; however, most Web sites are not dedicated to
providing a platform for aggregating and accessing user-created content.
Online communities, unlike

35
<PAGE>

traditional Web navigational or content sites, provide the user with the
ability to directly interact with the author of such personalized content. As
a result, there is a significant and growing demand among users surfing the
Internet for an online community site that offers a centralized means of
accessing diverse, personally created content in an easy-to-navigate
contextual manner.

Online communities also provide advertisers and businesses an attractive
means of promoting and selling their products and services. According to
Jupiter Communications, the amount of advertising dollars spent on the Web is
expected to increase 67% annually over the next three years, reaching
approximately $4.3 billion by 2000. According to IDC, commerce on the Internet
is expected to increase from approximately $32 billion in 1998 to
approximately $130 billion in 2000. To date, advertisers and businesses have
typically used traditional navigational sites and professionally created
content sites to promote their products and services online. However, online
communities allow advertisers and businesses to reach highly targeted
audiences within a more personalized context, thus providing the opportunity
to increase advertising efficiency and improve the likelihood of a successful
sale.

THE GEOCITIES SOLUTION

Founded by David Bohnett, GeoCities pioneered the first large-scale, Web-
based community for users to express themselves, share ideas, interests and
expertise and publish content accessible to other users with common interests.
The Company believed that user affinity to the Web occurs when users relate
personally to their online experience, and the more active users are in the
creation of that experience, the more personal the experience becomes. To
attract members to its community, the Company established a service enabling
Internet users to become "Homesteaders" in the GeoCities community by creating
their own Web sites in themed "neighborhoods" on the GeoCities Web site. These
neighborhoods provide a context for Web users to publish content, to share
experiences and ideas with other users and to access a centralized and easy-
to-navigate destination for user-created content.

Since its inception, GeoCities has become the world's largest and one of the
fastest growing communities of personal Web sites on the Internet. With
thousands of Homesteaders joining each day, the GeoCities community has grown
from approximately 10,000 Homesteads in October 1995 to over 1.9 million in
May 1998. Homesteaders have created an estimated 15 million pages of
personalized content, attracting over 14 million unique visitors to, and
generating over 850 million page views on, the GeoCities community in April
1998, according to Relevant Knowledge and Nielsen I/PRO, respectively.
GeoCities was the fourth most trafficked Web site on the Internet among home
users in April 1998, according to Media Metrix, and, based on this
information, the Company believes it was the most popular community of
personal Web sites on the Internet during April.

The Company believes its success to date is attributable to its focus on
Homesteaders, visitors and advertising and commerce partners. This focus is
highlighted by the following distinguishing characteristics of the GeoCities
community:

LARGE WEB-BASED COMMUNITY WITH BROAD RANGE OF NEIGHBORHOODS. Homesteaders
are able to join one of 40 themed GeoCities neighborhoods, which are organized
topically, based on themes associated with well-known places. By providing
this broad range of neighborhoods for Homesteaders, GeoCities fosters a
virtual "greenhouse" for a wide range of individual self-expression and
interaction. Web users interested in finance and investing, for example,
Homestead in and create content for WallStreet and those interested in
politics Homestead in and support CapitolHill. Moreover, as the Internet's
largest community of personal Web sites, GeoCities offers on average over
40,000 Homesteads within each of its neighborhoods, providing Homesteaders
with the critical mass and platform to interact with and be recognized by
others.

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ACTIVE OWNERSHIP AND COMMUNITY PARTICIPATION. GeoCities encourages active
participation in its community and offers a number of programs to increase
levels of participation. When Homesteaders first apply to join a GeoCities
neighborhood, they agree to abide by the GeoCities community guidelines.
Homesteaders also agree to begin creation of their Web sites within two weeks
of joining a GeoCities neighborhood or relinquish their Homesteads.
Additionally, the Company welcomes suggestions from its Homesteaders and
implements those ideas that improve the community. As a result, the Company's
Homesteaders develop a keen sense of personal involvement in and ownership of
the GeoCities community, and actively encourage others to join and
participate. Homesteaders seeking greater involvement in their neighborhoods
are given the opportunity to join the active ranks of 40 Community Liaisons
and over one thousand Community Leaders. The Community Liaison and Community
Leaders within each neighborhood welcome new Homesteaders, provide assistance
to other Homesteaders, actively provide GeoCities with suggestions for
improvements and monitor sites. The Company believes that the greater the
involvement of its Homesteaders, the greater the loyalty and affinity of those
Homesteaders to the GeoCities site, and the more successful the GeoCities
community.

FOCUS ON CONTINUALLY IMPROVING THE HOMESTEADER EXPERIENCE. GeoCities
continually strives to improve the online experience of its members.
Homesteaders are provided free of charge with disk space for personal Web
sites, powerful Web-page publishing and communication tools to create their
own fully customized, multimedia-rich content and e-mail, chat and bulletin
board services. The Company offers premium memberships for Homesteaders who
want more utilities, disk space and a personal URL. GeoCities holds a monthly
conference call with its Community Liaisons in order to proactively determine
what improvements and suggestions are important to its GeoCities community. By
supplementing this call with a weekly newsletter for Community Leaders,
GeoCities maintains close interaction with its community on issues and
suggestions of a broader group of Homesteaders. In addition, the Company
offers a comprehensive online help function and encourages volunteerism among
its Community Leaders and Liaisons and other Homesteaders in helping their
GeoCities neighbors.

INTUITIVE MEANS OF FINDING PERSONALIZED CONTENT. While Internet users can
generally find Web content aggregated by subject area, aggregated user-created
content is much more challenging to find. GeoCities' topical categorization of
user-created content provides visitors with a central online site for quickly
accessing a critical mass of an estimated 15 million pages of personalized
content. Given their strong affinity for their Homestead and the GeoCities
community, Homesteaders actively promote their Web sites throughout the
Internet with hyperlinks located on other individual sites as well as through
listings on Internet directories and search engines, thereby resulting in
millions of Internet users visiting the GeoCities community site.

UNIQUE PERSONALIZED COMMUNITY ENVIRONMENT FOR ADVERTISING AND
COMMERCE. Online communities of members with common interests and demographics
constitute attractive opportunities for advertisers seeking to promote their
products and services online and businesses desiring to conduct commerce on
the Internet. The combination of GeoCities' unique community context,
intuitive topical organization, high volumes of traffic and Homesteaders'
acceptance of the role of advertising in the community provides an attractive
platform for targeted and cost-effective Web advertising and Web commerce.

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THE GEOCITIES STRATEGY

The Company's objective is to be the world's leading member-created online
community for people on the Web. The Company's strategies to achieve this
objective include:

FOCUS ON HOMESTEADER GROWTH AND AFFINITY. The Company intends to continue to
increase the number of its Homesteaders and concentrate on member affinity to
maintain its position as a leading community of personal Web sites. The
Company intends to continue to grow its membership base by: (i) introducing
additional classes of membership that appeal to a broader range of Internet
users; (ii) offering easier-to-use Web-page publishing tools, allowing
Homesteaders to easily create and enhance personal Web sites; (iii) promoting
GeoCities as a destination point on the Web by augmenting its existing
distribution alliances with Yahoo! and other partners and (iv) launching
brand- name promotional campaigns to drive both growth in membership and
traffic to its members' personal Web sites. In addition, the Company intends
to introduce more value-added member services and strengthen and expand the
number of affinity programs offered by the Company, including its GeoRewards
affinity program. Similar to airline frequent-flyer bonus point programs, the
GeoRewards affinity program is designed to reward Homesteaders with points
based on their level of participation, which they can later redeem for
discounts on purchases within the GeoCities community. The Company believes
that its focus on the needs of its Homesteaders and enhancing their experience
within the GeoCities community will produce continued growth in, and foster
loyalty among its membership base.

BUILD THE GEOCITIES BRAND. The Company intends to increase its focus on
building the GeoCities brand. Historically, the Company's growth has been
primarily by word of mouth and the informal promotional efforts of its
members. Following the offering, the Company intends to launch an aggressive
promotional campaign to increase awareness of the GeoCities brand through
traditional media, including print, radio, billboard and television. In
addition, the Company intends to pursue additional distribution arrangements
to increase its reach on the Internet and introduce a number of additional
brand awareness programs on the GeoCities site to leverage its large and
growing Homesteader base and visitor traffic.

CONTINUE TO ENHANCE SITE FUNCTIONALITY AND PERFORMANCE. The Company believes
continually providing Homesteaders and visitors with greater functionality and
performance is critical to its continued leadership. The Company introduced a
new user interface in May 1998, which offers substantially improved
presentation of member-generated content in an intuitive topical format and
has been well received by the Company's Homesteaders and visitors to the
GeoCities community. The Company recently integrated third-party news and
editorial content into its site, allowing side-by-side interaction of personal
and professionally published content. In addition, the Company will utilize
proceeds from the offering to continue to upgrade and expand its server and
networking infrastructure, improving its ability to provide fast and reliable
access to the GeoCities community. The Company also will continue to provide
its members with enhanced Web-page publishing and communication tools to
enhance the community experience.

ESTABLISH NEW STRATEGIC ALLIANCES. The Company has formed a number of
strategic relationships, including a distribution and equity relationship with
Yahoo! intended to increase traffic and memberships of both partners, in
addition to offering GeoCities' Homesteaders an array of free personalized
member services on Yahoo!. The Company has also formed four premier commerce
relationships with Amazon.com for books, CDnow for compact discs, First USA
for credit cards and Surplus Direct/Egghead for software and computer
hardware, making the products and services of these leading Internet vendors
available throughout the GeoCities community. These relationships provide an
opportunity for the Company to receive monthly payments and share in any
ongoing revenue streams from sales of products and services by these partners.
The Company intends to seek additional strategic relationships with commerce
and distribution partners.

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EXPAND GLOBALLY. The Company believes that the anticipated growth of
Internet usage internationally presents significant opportunities to extend
GeoCities globally. According to Jupiter Communications, the number of online
households in the Asia/Pacific Rim and Europe is expected to reach
approximately 15 million at the end of 1998 and is expected to grow to
approximately 26 million by 2000. GeoCities is focused on establishing the
GeoCities community and brand in Japan, a market which, according to Jupiter
Communications, is second only to the United States in terms of Internet use.
Accordingly, the Company has entered into a joint venture with SOFTBANK to
form GeoCities Japan, which is 40% owned by the Company. The Company intends
to pursue additional opportunities for international expansion.

BUILD MULTIPLE REVENUE STREAMS. The Company's large and growing Web
community offers a scalable business platform from which the Company plans to
generate revenue from multiple sources, including advertising, commerce and
premium membership service fees. The Company intends to achieve its revenue
objectives by: (i) increasing its advertising revenues through expansion of
its customer base, increasing the rates it charges advertisers by continuing
to improve its ability to target advertisements to more demographically
distinct groups, increasing its page views, increasing the average size and
length of its advertising contracts, increasing the number of its direct sales
representatives and continuing to invest in improving ad serving and ad
targeting technology; (ii) expanding its revenue-sharing commerce
relationships and its relationships with third-party content providers that
pay the Company for access to its site; (iii) promoting its GeoShops program,
which is designed to provide an effective means for small and home business
owners to leverage the reach of the Internet through a commercial presence
within the GeoCities community and (iv) expanding the number and scope of its
fee-based premium membership services.

HOMESTEADING ON GEOCITIES

GeoCities distinguishes itself from other Web sites by offering Homesteaders
a diverse range of neighborhoods and a critical mass of neighbors with whom to
interact. The Company also promotes active Homesteader participation through
its member-focused editorial philosophy--millions of personal Web pages
created and maintained by the community members themselves--providing Internet
users with a platform for contributing their talents and ideas, meeting and
interacting with others with similar interests and creating their own "home on
the Web". Supporting the editorial efforts of its Homesteaders are
approximately 42 GeoCities employees dedicated exclusively to community
organization, content management and community interaction. GeoCities provides
disk space, powerful Web-page publishing tools, customer support, high-speed,
high-quality site performance and e-mail, chat and bulletin-board services,
all free of charge.

The Company emphasizes a sense of responsibility among community members by
leveraging the characteristics of the Web that users find most attractive--
connection, expression, communication, entertainment and utility. GeoCities
Homesteaders abide by the community values--respect for the individual, open
and honest communication, encouragement of ethical behavior and respect for
diverse points of view--reflected in the Company's content guidelines and
rules of conduct. GeoCities appeals to people's interest in others by inviting
users to move in, meet their neighbors, share ideas, communicate, shop, check
e-mail and join its growing community.

HOW HOMESTEADERS JOIN

GeoCities' 40 themed neighborhoods--virtual communities of people with
common interests--are based on familiar themes and provide Web users with a
place to connect on the Internet. Homesteading is analogous to moving to a new
community, picking a neighborhood to live in and designing and building a new
home to reflect one's own style and tastes. Each Homesteader is able to join
the neighborhood that most closely matches his or her interests. For example,
Homesteaders interested in music join and contribute to SunsetStrip and those
interested in wine support NapaValley.

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Homesteading in the GeoCities community is designed to be easy and fun. After
choosing a neighborhood, Homesteaders find a vacant address, fill out an
application, move-in and commence developing their personal Web site.
Homesteaders agree to abide by the community guidelines and begin construction
of their home within two weeks of moving into a neighborhood. The Homesteading
experience makes a user's online experience expressive, interactive and
personal.

PARTICIPATING IN THE GEOCITIES COMMUNITY

After joining a neighborhood, Homesteaders are encouraged to become active
in the community. Members can interact with their neighbors, support community
building initiatives, participate in chat sessions with their neighbors and
collaborate on editorial content. The Company believes that the more
Homesteaders participate, the more attachment they feel to the community and
the higher the quality of their content. Homesteaders seeking greater
involvement apply to become Community Leaders and Community Liaisons.
GeoCities currently has over one thousand Community Leaders, who are elected
by Homesteaders, and 40 Community Liaisons, who represent a neighborhood and
are elected by Community Leaders. The Community Leaders and Community Liaisons
are highly valued community builders who greet and assist new Homesteaders,
mentor other Homesteaders, coordinate neighborhood activities, interface with
the Company's in-house editorial staff and work to foster core community
values. The Company intends to introduce additional community leadership
positions in the future to increase levels of community participation. The
Company also encourages greater Homesteader involvement through its GeoRewards
affinity program. Homesteaders accrue bonus points based on their level of
participation which they can later redeem for discounts on purchases within
the GeoCities community.

HOW TO SURF THE GEOCITIES COMMUNITY

The Company believes that it provides users surfing the Web with a
comprehensive, high-quality concentration of personal Web sites on the
Internet. The Company strives to improve its site for such users by upgrading
the look and feel of its Web site to provide easier navigation of and to
direct greater levels of traffic to Homesteaders' Web sites. In May 1998, the
Company introduced its new user interface designed to be easier to use and
highly intuitive. The new user interface presents the GeoCities Web site to
visitors in a topical format to facilitate the aggregation of categories of
interests. This format allows easier and more intuitive access to content on
the GeoCities Web site and enhances the integration of Homesteaders' content
with the Company's e-mail, chat, bulletin-board services and selected third-
party content such as news and editorial feeds from Reuters, Women.com and
ZDNet.

ADVERTISING, COMMERCE AND PREMIUM SERVICES

ADVERTISING

The Company has built a direct sales organization of 18 professionals as of
May 31, 1998, located in New York, San Francisco and Los Angeles, which is
dedicated to maintaining close relationships with top advertisers and leading
advertising agencies nationwide. The Company also has arrangements with a
number of third-party advertising sales representatives. The Company's sales
organization is organized regionally and is focused solely on selling
advertising on the GeoCities Web site. The Company's sales organization
consults regularly with advertisers and agencies on design and placement of
their Web-based advertising, provides customers with advertising measurement
analysis and focuses on providing a high level of customer service and
satisfaction.

Currently, advertisers and advertising agencies enter into short-term
agreements, on average one to two months, pursuant to which they receive a
guaranteed number of impressions for a fixed fee. Advertising in GeoCities
currently consists primarily of banner-style advertisements that are

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prominently displayed at the top of pages on a rotating basis throughout the
GeoCities community, including members' personal Web sites. From each banner
advertisement, viewers can hyperlink directly to the advertiser's own Web site,
thus providing the advertiser an opportunity to directly interact with an
interested customer. The Company's standard cost per thousand impressions
("CPM") for banner advertisements currently ranges from $15 to $40, depending
upon location of the advertisement and the extent to which it is targeted for a
particular audience. Discounts from standard CPM rates may be provided for
higher volume, longer-term advertising contracts.

The Company intends to increase its advertising revenues by focusing on a
number of key strategies, including expanding its advertising customer base,
increasing the CPM it charges advertisers by continuing to improve its ability
to target advertisements to demographically distinct groups, increasing page
views, increasing the average size and length of its advertising contracts,
increasing the number of its direct sales representatives and continuing to
invest in improving ad serving and ad targeting technology.

The Company also offers special sponsorship and promotional advertising
programs, such as contests, sampling and couponing opportunities to build brand
awareness, generate leads and drive traffic to an advertiser's site. The
Company also sells sponsorships of special interest pages where topically
focused content is aggregated on a permanent area within a neighborhood. The
Company has also recently entered into relationships with third-party Internet
content providers, many of whom pay GeoCities for integrating their content
within the GeoCities community. The Company will also seek to expand its third-
party content-provider relationships.

The Company has derived a substantial majority of its revenues to date from
the sale of advertisements. For 1997 and the three months ended March 31, 1998,
advertising revenues represented 91% and 88%, respectively, of the Company's
net revenues.

ADVERTISING CUSTOMERS

During the three months ended March 31, 1998, approximately 90 companies
advertised on the GeoCities Web site compared to approximately 40 advertisers
for the same three-month period in 1997. The following is a selected list of
certain of the Company's advertising customers for the 15-month period ended
March 31, 1998:

Amazon.com Hewlett-Packard Surplus
American Express Honda Direct/Egghead
AT&T IBM Toyota
CDnow Microsoft USA Net
Dell Computers SkyTel Visa
General Motors Sony ZDNet

During 1997 and the three months ended March 31, 1998, the Company's four
largest customers accounted for approximately 29% and 30%, respectively, of the
Company's net revenues. During these same periods, Surplus Direct/Egghead
accounted for approximately 12% and 13%, respectively, of the Company's net
revenues. No other customer accounted for more than 10% of the Company's net
revenues during either of such periods.

COMMERCE PARTNERS

GeoCities believes Web commerce fits naturally into the Company's community
model. Through Web commerce, the Company partners with merchants and service
providers to integrate their products and services into the GeoCities
community, making them available for sale to the Company's Homesteaders and
visitors. In its premier commerce arrangements, the Company generally receives
a

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fixed monthly fee and a share of the proceeds from any online sales. In
addition, certain of the Company's premier commerce partners pay GeoCities
fees for Homesteader participation in vendor-sponsored sales programs after a
minimum level of participation has been achieved. To date, the Company has
entered into four premier alliances with commerce partners that are given
access to GeoCities' community platform and are provided with premier banner
and other space in permanent locations on select community Web pages. These
premier commerce arrangements typically have one-year terms and, subject to
the payment of certain fees, are renewable at the option of the Company's
commerce partners.

The Company has established premier commerce relationships with the
following entities:

. Amazon.com--providing GeoCities' Homesteaders and visitors with the
opportunity to purchase books throughout the Company's Web site;

. CDnow--providing GeoCities' Homesteaders and visitors with the
opportunity to purchase compact discs and other music-related items;

. Surplus Direct/Egghead--providing GeoCities' members and visitors with
the opportunity to purchase software and computer hardware; and

. First USA--providing GeoCities' members and visitors with an opportunity
to apply for a First USA credit card.

GEOSHOPS

In March 1998, GeoCities introduced GeoShops, its member-focused Web
commerce solution designed to provide a range of services which commerce-
enable Homesteaders' personal Web sites. Homesteaders are able to choose
between two GeoShops options: (i) for a $24.95 monthly fee, GeoShops allows
GeoCities members to sell products and services from their personal Web sites
within the GeoCities community and (ii) for a set-up fee of $120, a per
transaction fee and an additional monthly amount equal to the greater of $80,
or $40 plus a 5% commission on sales, GeoCities provides Homesteaders with a
transaction authentication and processing solution for their Web-based
businesses. With its GeoShops program, the Company enables home-based
businesses to leverage a fast, effective, easy-to-use program for commerce,
and the Company intends to actively promote this service in the future.

GEOPLUS

In addition to its free services, the Company offers a fee-based premium
service for its Homesteaders. For a fee of $4.95 per month, the Company's
GeoPlus service provides enhanced Web-page publishing tools for creating more
robust content, a personalized URL and up to 25 megabytes of disk space for
Homesteaders' personal Web sites. GeoCities intends to introduce additional
features and premium service levels to appeal to a broader range of
Homesteaders.

MARKETING AND BRAND AWARENESS

Historically, the Company's marketing has been primarily by word of mouth
and the informal promotional efforts of Homesteaders. The Company believes
initiating a formal, aggressive brand promotional campaign will provide the
Company with a significant opportunity for growing its Homesteader membership
base as well as attracting additional advertisers and commerce partners. The
Company intends to use a portion of the net proceeds from the offering to
launch a number of promotional campaigns in traditional media, including
print, radio, billboard and television, all designed to increase traffic and
brand awareness and an understanding of the Company's community model. The
Company also intends to introduce a number of other brand awareness programs
on its own site to leverage its large and growing Homesteader base and visitor
traffic. In addition, the Company plans

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to launch a number of grassroots marketing efforts, including, for example,
augmenting its existing GeoRewards affinity program with additional membership
affinity programs, as well as continuing the promotion of its GeoPlus and
GeoShops programs.

DISTRIBUTION AGREEMENT WITH YAHOO!

In December 1997, the Company entered into a distribution relationship with
Yahoo!. In connection with the distribution agreement, Yahoo! also made a
minority equity investment in the Company. This alliance was designed to
increase traffic and memberships of both partners in addition to offering
GeoCities' Homesteaders an array of free personalized member services on
Yahoo!. Under the arrangement, GeoCities became Yahoo!'s premier personal
publishing services partner. Yahoo! agreed to market GeoCities' branded
personal publishing programs on select areas throughout Yahoo!, as well as
provide a GeoCities-specific programming module on My Yahoo! for GeoCities'
Homesteaders. The Company believes this arrangement is important for the
promotion of GeoCities, particularly among Web users who may first access the
Internet through this popular Web site.

The Company intends to seek additional strategic alliances with distribution
partners to increase the number of gateways into the GeoCities community and
Homesteader Web sites, thus increasing its overall visibility on the Web.

INFRASTRUCTURE AND OPERATIONS

The Company has developed an open standard hardware and software system that
is designed to be reliable and responsive. The Company's third-generation
architecture is a scalable system which includes over five terabytes of raw
disk space and supports over 170 million hits per day, has a peak bandwidth of
over 340 megabits per second and transfers 1.7 terabytes of data each day. The
Company provides its Homesteaders and visitors with a robust content platform
containing an estimated 15 million pages of user-created content that
generated over 850 million page views in April 1998.

The Company provides an efficient, responsive user experience through
network servers housed in Santa Clara, California, third-party and public
domain server software optimized internally by the Company and internally
developed tools and utilities. Requests for files to GeoCities are distributed
to the appropriate servers using Resonate Dispatch load distribution and
balancing software. Member-generated content is stored on a redundant array of
independent disks, is backed up to long-term tape storage devices on a daily
basis and copied on a weekly basis to be stored offsite. User profile
information is stored on multiple disk arrays using Informix Dynamic Server
database software and backed up to long-term tape storage devices on a semi-
hourly basis. The Company will continue to upgrade and expand its server and
networking infrastructure in an effort to improve its fast and reliable access
to the Company's community.

Site connectivity to the Internet is provided via multiple DS-3 and OC-3
links on a 24 hour-a-day, seven days per week basis by Exodus. Exodus also
provides and manages power and environmentals for the Company's networking and
server equipment. The Company manages and monitors its servers and network
remotely from its headquarters in Santa Monica, California. The Company
strives to rapidly develop and deploy high-quality tools and features into its
system without interruption or degradation in service. Any disruption in the
Internet access provided by Exodus, or any interruption in the service that
Exodus receives from other providers, or any failure of Exodus to handle
higher volumes of Internet users to the GeoCities' site could have a material
adverse effect on the Company's business, results of operations and financial
condition.

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COMPETITION

The market for members, visitors and Internet advertising is new and rapidly
evolving, and competition for members, visitors and advertisers is intense and
is expected to increase significantly in the future. Barriers to entry are
relatively insubstantial. The Company believes that the principal competitive
factors for companies seeking to create community on the Internet are critical
mass, functionality, brand recognition, member affinity and loyalty, broad
demographic focus and open access to visitors. Other companies who are
primarily focused on creating Web-based community on the Internet are
Tripod/Lycos, Angelfire, Xoom and theglobe. The Company could also face
competition in the future from Web directories, search engines, shareware
archives, content sites, commercial online services, sites maintained by ISPs,
traditional media companies and other entities that attempt to or establish
communities on the Internet by developing their own or purchasing one of the
Company's competitors. Further, there can be no assurance that the Company's
competitors and potential competitors will not develop communities that are
equal or superior to those of the Company or that achieve greater market
acceptance than the Company's community. The Company also competes for
visitors with many Internet content providers and ISPs, including Web
directories, search engines, shareware archives, content sites, commercial
online services and sites maintained by ISPs, as well as thousands of Internet
sites operated by individuals and government and educational institutions.
These competitors include free information, search and content sites or
services, such as AOL, CNET, CNN/Time Warner, Excite, Infoseek, Lycos,
Netscape, Microsoft and Yahoo!, some of whom, such as Yahoo! and Lycos, also
have relationships with GeoCities. The Company also competes with many
companies for advertisers, including those companies with whom the Company
competes for visitors as well as traditional forms of media such as
newspapers, magazines, radio and television. The Company believes that the
principal competitive factors in attracting advertisers include the amount of
traffic on its Web site, brand recognition, customer service, the demographics
of the Company's members and viewers, the Company's ability to offer targeted
audiences and the overall cost-effectiveness of the advertising medium offered
by the Company. The Company believes that the number of Internet companies
relying on Web-based advertising revenue will increase greatly in the future.
Accordingly, the Company will likely face increased competition, resulting in
increased pricing pressures on its advertising rates which could in turn have
a material adverse effect on the Company's business, results of operations and
financial condition.

Many of the Company's existing and potential competitors, including Web
directories and search engines and large traditional media companies, have
longer operating histories in the Web market, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than the Company. Such competitors are able to undertake more
extensive marketing campaigns for their brands and services, adopt more
aggressive advertising pricing policies and make more attractive offers to
potential employees, distribution partners, commerce companies, advertisers
and third party content providers. There can be no assurance that Internet
content providers and ISPs, including Web directories, search engines,
shareware archives, sites that offer professional editorial content,
commercial online services and sites maintained by ISPs will not be perceived
by advertisers as having more desirable Web sites for placement of
advertisements. In addition, substantially all of the Company's current
advertising customers and strategic partners also have established
collaborative relationships with certain of the Company's competitors or
potential competitors, and other high-traffic Web sites. Accordingly, there
can be no assurance that the Company will be able to grow its memberships,
traffic levels and advertiser customer base at historical levels or retain its
current members, traffic levels or advertiser customers, or that competitors
will not experience greater growth in traffic than the Company as a result of
such relationships which could have the effect of making their Web sites more
attractive to advertisers, or that the Company's strategic partners will not
sever or will elect not to renew their agreements with the Company. There can
also be no assurance that the Company will be able to compete successfully
against its current or future competitors or that competition will not have a
material adverse effect on the Company's business, results of operations and
financial condition.

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INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any proprietary rights of the Company or other companies
within this market. There can be no assurance that the steps taken by the
Company will prevent misappropriation or infringement of its proprietary
information. Any such infringement or misappropriation, should it occur, might
have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, litigation may be necessary
in the future to enforce the Company's intellectual property rights, to
protect the Company's trade secrets or to determine the validity and scope of
the proprietary rights of others. Such litigation might result in substantial
costs and diversion of resources and management attention and could have a
material adverse effect on the Company's business, results of operations and
financial condition. Furthermore, there can be no assurance that the Company's
business activities will not infringe upon the proprietary rights of others,
or that other parties will not assert infringement claims against the Company.
From time to time, the Company has been, and expects to continue to be,
subject to claims in the ordinary course of its business including claims of
alleged infringement of the trademarks, service marks and other intellectual
property rights of third parties by the Company and the content generated by
its members. Although such claims have not resulted in significant litigation
or had a material adverse effect on the Company's business to date, such
claims and any resultant litigation, should it occur, might subject the
Company to significant liability for damages and might result in invalidation
of the Company's proprietary rights and even if not meritorious, could be time
consuming and expensive to defend and could result in the diversion of
management time and attention, any of which might have a material adverse
effect on the Company's business, results of operations and financial
condition.

EMPLOYEES

As of March 31, 1998, the Company had 114 full-time employees, including 34
in marketing and sales, 29 in editorial, 16 in finance and administration and
35 in operations and support. The

45
<PAGE>

Company's future success will depend, in part, on its ability to continue to
attract, retain and motivate highly qualified technical and management
personnel, for whom competition is intense. From time to time, the Company
also employs independent contractors to support its research and development,
marketing, sales and support and administrative organizations. The Company's
employees are not represented by any collective bargaining unit, and the
Company has never experienced a work stoppage. The Company believes its
relations with its employees are good.

FACILITIES

The Company's headquarters are currently located in a leased facility in
Santa Monica, California, consisting of approximately 13,000 square feet of
office space, a majority of which is under a five-year lease, and has a
renewal option for an additional three years. The Company intends to relocate
its headquarters in the near future to a larger facility and is currently
evaluating a number of locations in the greater Los Angeles area. The Company
has also leased approximately 5,500 square feet of office space in New York
and approximately 1,700 square feet of office space in San Francisco for its
East and West Coast sales offices, respectively.

46
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the directors
and executive officers of the Company as of May 31, 1998.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
David C. Bohnett(1)..... 42 Chairman of the Board and Secretary
Thomas R. Evans......... 43 Chief Executive Officer, President and Director
Stephen L. Hansen....... 42 Chief Operating Officer and Chief Financial Officer
Michael G. Barrett...... 36 Vice President, Advertising Sales
Kelly L. Boyer.......... 32 Vice President, Human Resources
James G. Glicker........ 44 Vice President, Marketing
Robert K. Kalok......... 33 Vice President, Business Development
William E. Losch........ 37 Vice President, Finance
Edward J. Pierce........ 46 Vice President, Legal Affairs and General Counsel
John C. Rezner.......... 34 Vice President, Operations and Chief Technical Officer
Richard H. Rygg......... 41 Vice President, General Manager
Jerry D. Colonna(2)..... 34 Director
Eric C. Hippeau(1)...... 46 Director
Harry D. Lambert(3)..... 59 Director
Peter H. Mills(1)(3).... 46 Director
David S. Wetherell(2)... 43 Director
</TABLE>
- --------
(1) Member of Nominating Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee

DAVID C. BOHNETT has served as the Company's Chairman of the Board and
Secretary since he founded the Company in November 1994. From November 1994 to
April 1998, Mr. Bohnett also served as the Company's Chief Executive Officer
and President. From November 1994 to November 1997, Mr. Bohnett also served as
the Company's Chief Financial Officer. Prior to founding the Company, from
February 1990 to May 1994, Mr. Bohnett served as Director of Product Marketing
at Goal Systems, which merged with LEGENT, a software company. From 1988 to
1990, Mr. Bohnett was Chief Financial Officer of Essential Software, which
merged with Goal Systems. Mr. Bohnett received his B.S. degree in Business
Administration from the University of Southern California and his M.B.A.
degree in Finance from the University of Michigan.

THOMAS R. EVANS has served as the Company's Chief Executive Officer and
President since April 1998. From 1991 to April 1998, Mr. Evans served as
President and Publisher of U.S. News & World Report, a magazine that reports
on domestic and international current events. From January 1997 to April 1998,
Mr. Evans also served as President and Publisher of The Atlantic Monthly, a
magazine that features articles on art, literature, politics and technology.
In addition, from May 1995 to April 1998, Mr. Evans also served as President
and Publisher of Fast Company, a magazine that showcases business people and
ideas. From 1990 to 1991, Mr. Evans served as Vice President, Advertising
Director of U.S. News & World Report. Mr. Evans received his B.S. degree in
Business Administration from Arizona State University.

STEPHEN L. HANSEN has served as the Company's Chief Operating Officer since
May 1998 and Chief Financial Officer since November 1997. From November 1997
to May 1998, Mr. Hansen also served as the Company's Chief Administrative
Officer. From September 1992 to January 1994, Mr. Hansen served as Senior Vice
President and Chief Financial Officer for Universal Studios Hollywood. From
January 1994 to November 1997, Mr. Hansen served as Senior Vice President and

47
<PAGE>

Chief Financial Officer for the Recreation Group of Universal Studios, a
studio that produces and distributes films, videos, television shows and
music. From 1979 to 1992, Mr. Hansen was with KPMG Peat Marwick, most recently
as a partner in the Entertainment, Media and Technology Group. Mr. Hansen
received his B.S. degree in Accounting from the University of Southern
California and is a Certified Public Accountant.

MICHAEL G. BARRETT has served as the Company's Vice President, Advertising
Sales since September 1997. From November 1995 to September 1997, Mr. Barrett
served as Vice President, Advertising for Disney Online, the online division
of The Walt Disney Company. From February 1994 to September 1995, Mr. Barrett
served as Associate Publisher at Family PC, a magazine that advises parents on
home computing. Mr. Barrett received his B.A. degree in Economics from College
of the Holy Cross.

KELLY L. BOYER has served as the Company's Vice President, Human Resources
since June 1998. From February 1997 to May 1998, Ms. Boyer was Senior
Director, Human Resources for the strategic catalog marketing start-up
division of EMI-Capital Music Group. From July 1995 to January 1997, Ms. Boyer
served as Director for the Human Resources/Organizational Development team for
the Coach Leatherware/Personal Products subsidiary of the Sara Lee Corporation
in New York. From August 1993 to July 1995, Ms. Boyer served as Senior
Manager, Employee Relations for The Walt Disney Company's Specialty
Retail/Consumer Products division. Ms. Boyer received her M.S. degree in
Organizational Development from Northwestern University and her B.A. degree in
Advertising/Communications from Michigan State University.

JAMES G. GLICKER has served as the Company's Vice President, Marketing since
May 1998. From November 1997 to May 1998, Mr. Glicker served as Vice
President, Sales & Marketing for 1-800-FLOWERS, an online florist. From 1991
to June 1997, Mr. Glicker held various positions at BMG (music subsidiary of
the Bertelsmann Music Group), including Chief Executive Officer and Managing
Director, BMG Australia/New Zealand and Senior Vice President, WorldWide
Marketing and Sales with BMG Classics. Mr. Glicker received his B.A. degree in
English from Yale University and his M.B.A. degree in Finance/Marketing from
the University of Michigan.

ROBERT K. KALOK has served as the Company's Vice President, Business
Development since May 1998. From 1995 to May 1998, Mr. Kalok was Vice
President, Brand Management and Direct Marketing for Charles Schwab Corp., a
discount brokerage company. From 1988 to 1995, Mr. Kalok was employed by MCI,
a telecommunications company, where he last served as Director of Partnership,
Marketing. Mr. Kalok received his B.A. degree in Marketing and his M.B.A.
degree in Finance from George Washington University.

WILLIAM E. LOSCH has served as the Company's Vice President, Finance since
March 1998. From October 1997 to February 1998, Mr. Losch served as Vice
President, Finance and Planning for Universal City Hollywood, the operations
of Universal CityWalk, Universal Studios and Hollywood theme park. From
November 1995 to October 1997, Mr. Losch served as Vice President, Controller
of Universal City Hollywood. From December 1988 to October 1995, Mr. Losch
served as the Chief Financial Officer of MCA Development, the real estate
division of MCA. From March 1984 to November 1988, Mr. Losch served as a
manager with KPMG Peat Marwick. Mr. Losch received his B.A. degree in
Economics from the University of California, Los Angeles, and is a Certified
Public Accountant.

EDWARD J. PIERCE has served as the Company's Vice President, Legal Affairs
and General Counsel since October 1997. From June 1997 to October 1997, Mr.
Pierce served as General Counsel for the Company. From 1987 through April
1997, Mr. Pierce was a partner with the law firm of Seyfarth, Shaw,
Fairweather & Geraldson. From 1982 through 1987, Mr. Pierce was affiliated
with the law firm of Pollard, Bauman, Slome & McIntosh, as an associate from
1982 through 1984, and as a partner from 1985 through 1987. Mr. Pierce
received his B.A. degree in French literature from Yale University, his M.A.T.
degree in English from Brown University and his J.D. degree from Harvard
University.

48
<PAGE>

JOHN C. REZNER has served as the Company's Vice President, Operations and
Chief Technical Officer and co-founder since January 1995. From 1986 to
January 1995, Mr. Rezner served in various capacities at McDonnell Douglas, an
aerospace company, last serving as the Head of Information Systems of the AISF
Group. Mr. Rezner received his B.S. degree in Computer Science from California
State Polytechnic University, Pomona and his M.S. degree in Computer Science
from the University of Southern California.

RICHARD H. RYGG has served as the Company's Vice President, General Manager
since March 1997. In April 1996, Mr. Rygg founded Digital City of Los Angeles,
a joint venture of America Online, an online service provider, and the Tribune
Company, a newspaper publisher and owner of television stations. From April
1996 to March 1997, Mr. Rygg served as the General Manager and "Mayor" of
Digital City of Los Angeles. From January 1995 to April 1996, Mr. Rygg served
as President of the Entertainment Communication Network. Mr. Rygg received his
B.S. degree in Engineering Geology from Brigham Young University and his
M.B.A. degree in Finance with an emphasis on management-information systems
from Pennsylvania State University.

JERRY D. COLONNA has served as a director of the Company since January 1998.
In July 1996, Mr. Colonna founded Flatiron Partners LLC ("Flatiron Partners"),
a venture investment program affiliated with Chase Capital Partners and
SOFTBANK Technology Ventures IV L.P. In February 1995, Mr. Colonna joined
CMG@Ventures as a founding partner and currently remains as a profit partner.
From 1985 to 1993, Mr. Colonna served in a variety of positions at
InformationWeek, a technology magazine, including three years as its Editor.
From 1975 to 1985, Mr. Colonna served in various capacities at CMP Media Inc.,
a technology publishing firm, last serving as its Editorial Director,
Interactive Media Group. Mr. Colonna received his B.A. degree in English
Literature from Queens College, CUNY.

ERIC C. HIPPEAU has served as a director of the Company since January 1997.
Since 1993, Mr. Hippeau has served as Chairman of the Board and Chief
Executive Officer of Ziff-Davis Inc. ("Ziff Davis"), an integrated media and
marketing company focused on computing and internet-related technology. Ziff
Davis is a subsidiary of SOFTBANK Holdings, Inc. From 1989 to 1993, Mr.
Hippeau served in a variety of positions at Ziff-Davis, Inc., including
Executive Vice President, President and Chief Operating Officer. Mr. Hippeau
currently serves as a Director of Yahoo! Inc., an Internet media company. Mr.
Hippeau attended The Sorbonne in Paris.

HARRY D. LAMBERT has served as a director of the Company since January 1997.
Mr. Lambert is a General Partner of InnoCal, L.P. ("InnoCal"). Prior to
joining InnoCal, Mr. Lambert was a General Partner of the Edison Venture Fund.
Prior to that, Mr. Lambert was a General Partner of InnoVen. Mr. Lambert
currently serves as a Director of Motiva Software, SalesLogix, a developer of
sales and support automation software, Thinque Systems, a mobile
communications company, and Trega Biosciences, a biotechnology company.
Mr. Lambert received his B.S. degree from the United States Military Academy
at West Point, and he is a graduate of the Columbia University Graduate
Business Administration, Executive Program in Business Administration and the
Harvard Graduate School of Business Administration Advanced Management
Program.

PETER H. MILLS has served as a director of the Company since January 1996.
Since March 1995, Mr. Mills has been a General Partner of CMG@Ventures. Prior
to joining CMG@Ventures, Mr. Mills served as the Chief Executive Officer of
the United States Display Consortium, a non-profit consortium established to
develop and organize the U.S. manufacturing infrastructure required to support
world-class manufacturing of flat panel displays. Prior to that, Mr. Mills
served as Chief Administrative Officer of SEMATECH, a research and development
consortium of U.S. semiconductor manufacturers. In 1982, Mr. Mills co-founded
Softtrend Inc., a microcomputer software publisher, and, after its merger with
BPI Systems, served as Vice President of BPI Systems. Mr. Mills received his
B.S. degree in Communications from Ithaca College and his M.B.A. degree in
Marketing from the Graduate School of Business at Columbia University.

49
<PAGE>

DAVID S. WETHERELL has served as a director of the Company since June 1996.
Mr. Wetherell serves as the Chairman of the Board, Chief Executive Officer,
President and Secretary of CMG Information Services, Inc. In January 1995, Mr.
Wetherell founded CMG@Ventures, a venture capital firm. In 1994, Mr. Wetherell
founded BookLink Technologies, which was later acquired by America Online. In
1982, Mr. Wetherell co-founded Softtrend Inc., a microcomputer software
publisher. Mr. Wetherell is Chairman of the Board of SalesLink Corporation, a
literature fulfillment business, and is a director of Lycos, Inc.
Mr. Wetherell received his B.S. degree in Mathematics and Education from Ohio
Wesleyan University.

There are no family relationships among any of the Company's directors or
executive officers. Currently, all directors hold office until the next annual
meeting of stockholders or until their successors have been duly elected and
qualified.

BOARD COMMITTEES

The Audit Committee of the Board of Directors reviews and monitors the
corporate financial reporting and the internal and external audits of the
Company, including, among other things, the Company's control functions, the
results and scope of the annual audit and other services provided by the
Company's independent accountants, and the Company's compliance with legal
matters that have a significant impact on the Company's financial condition.
The Audit Committee also consults with the Company's management and the
Company's independent accountants prior to the presentation of financial
statements to stockholders and, as appropriate, initiates inquiries into
aspects of the Company's financial affairs. In addition, the Audit Committee
has the responsibility to consider and recommend the appointment of, and to
review fee arrangements with, the Company's independent accountants. The
current members of the Audit Committee are Messrs. Lambert and Mills.

The Compensation Committee of the Board of Directors reviews and makes
recommendations to the Board regarding the Company's compensation policies and
all forms of compensation to be provided to executive officers and directors
of the Company, including, among other things, annual salaries and bonuses and
stock option and other incentive compensation arrangements of the Company. In
addition, the Compensation Committee reviews bonus and stock compensation
arrangements for all other employees of the Company. The current members of
the Compensation Committee are Messrs. Colonna and Wetherell.

The Nominating Committee of the Board of Directors makes recommendations to
the Board of Directors regarding nominees for the Board of Directors. The
current members of the Nominating Committee are Messrs. Bohnett, Hippeau and
Mills.

DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS

The Company does not currently compensate its directors for attending Board
of Directors or committee meetings, but reimburses directors for their
reasonable travel expenses incurred in connection with attending meetings of
the Board of Directors or committees of the Board of Directors.

EXECUTIVE OFFICERS

Executive officers of the Company are appointed by the Board of Directors on
an annual basis and serve until the next annual meeting of the Board of
Directors or until their successors have been duly appointed and qualified.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee consists of Messrs. Colonna and
Wetherell, neither of whom has been an officer or employee of the Company at
any time since the Company's inception.

50
<PAGE>

No executive officer of the Company 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 the Company's Board of Directors or
Compensation Committee. Prior to the formation of the Compensation Committee
in September 1996, the Board of Directors of the Company as a whole made
decisions relating to compensation of the Company's executive officers.

Mr. Colonna is a partner of the Flatiron Fund, a stockholder of the Company
("Flatiron Fund"). The Flatiron Fund is a venture investment program
affiliated with Chase Capital Partners and SOFTBANK Technology Ventures, both
of which are stockholders of the Company. Mr. Colonna is a profit partner and
Mr. Wetherell is a general partner of CMG@Ventures, one of the Company's
stockholders. In January 1996, CMG@Ventures purchased 2,331,000 shares of
Series A Preferred Stock of the Company at a purchase price of $0.429 per
share. In July 1996, CMG@Ventures purchased 2,175,000 shares of Series B
Preferred Stock of the Company at a purchase price of $0.5057 per share. In
January and February of 1997, CMG@Ventures and certain other current
stockholders of the Company purchased 7,670,038 shares of Series D Preferred
Stock at a purchase price of $1.18 per share. In October 1997, CMG@Ventures
and certain other current stockholders of the Company purchased 1,071,423
shares of Series E Preferred Stock of the Company at a purchase price of $4.67
per share. All outstanding shares of Preferred Stock will convert into Common
Stock in connection with the Preferred Stock Conversion upon the closing of
the offering. In January 1997, in connection with the issuance of shares of
its preferred stock, the Company granted CMG@Ventures an immediately
exercisable option to purchase up to 750,000 shares of Common Stock at an
exercise price of $1.18 per share. In May 1997, the Company entered into a
list line management agreement with CMG Information Services, Inc. ("CMGI"),
an affiliate of CMG@Ventures. See "Principal Stockholders" and "Certain
Transactions".

EXECUTIVE COMPENSATION

The following table sets forth for the year ended December 31, 1997, all
compensation received for services rendered to the Company in all capacities
by the Company's Chief Executive Officer and each of the other executive
officers of the Company whose salary and bonus exceeded $100,000 in 1997
(collectively, the "Named Executive Officers"). No executive who would
otherwise have been includable in such table on the basis of salary and bonus
earned for 1997 has resigned or otherwise terminated employment during 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
---------------- ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITIONS(1)(2) SALARY BONUS OPTIONS COMPENSATION(3)
------------------------- -------- ------- ------------ ---------------
<S> <C> <C> <C> <C>
David C. Bohnett................. $160,000 -- 450,000 $ 857
Chairman, President and Chief
Executive Officer
John C. Rezner................... 125,000 $22,672 150,000 1,945
Chief Technical Officer
Paul A. De Braccio............... 172,848 -- -- --
Vice President, Sales
</TABLE>
- --------
(1) Mr. Bohnett resigned from his positions as President and Chief Executive
Officer of the Company in April 1998 upon the appointment of Mr. Evans to
such positions. Mr. De Braccio ceased to be employed by the Company in
July 1997.

51
<PAGE>

(2) Mr. Evans, the Company's President and Chief Executive Officer, joined the
Company in April 1998. His 1998 annual base salary is $200,000, and his
bonus for 1998 is $100,000. Mr. Hansen, the Company's Chief Operating
Officer and Chief Financial Officer, joined the Company in November 1997.
His 1998 annual base salary is $200,000, and his bonus for 1998 is
$50,000. Mr. Barrett, the Company's Vice President, Advertising Sales,
joined the Company in September 1997. His 1998 annual base salary is
$200,000 and he was paid a $25,000 bonus in January 1998. In addition,
during the term of his employment agreement which expires in September
1998, Mr. Barrett is eligible to receive certain commissions based on the
Company's net revenues. See "--Employment Agreements and Termination of
Employment and Change of Control Arrangements".
(3) Consists of the Company's matching contribution under its 401(k) Plan.

OPTION GRANTS IN LAST YEAR

The following table sets forth certain information concerning options
granted to the Named Executive Officers during 1997.

OPTION GRANTS DURING YEAR ENDED
DECEMBER 31, 1997

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------
POTENTIAL REALIZATION VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------------
NAME(1) GRANTED(2) IN 1997(3) PER SHARE DATE 5% 10%
------- ---------- ---------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
David C. Bohnett........ 450,000 21.8% $1.18 1/12/04 $ 216,170 $ 503,769
John C. Rezner.......... 150,000 7.3 1.18 1/12/04 72,057 167,923
Paul A. De Braccio...... -- -- -- -- -- --
</TABLE>
- --------
(1) In April 1998, Mr. Evans was granted two options to purchase up to an
aggregate of 1,224,570 shares of Common Stock at an exercise price of
$3.04 per share. These options expire in April 2005. In November 1997, Mr.
Hansen was granted two options to purchase up to an aggregate of 337,500
shares of Common Stock at an exercise price of $1.10 per share. These
options expire in November 2004. In May 1998, Mr. Hansen was granted an
option to purchase 112,500 shares of Common Stock at an exercise price of
$12.00 per share. This option expires in May 2005. In September 1997, Mr.
Barrett was granted two stock options to purchase up to an aggregate of
210,000 shares of Common Stock at an exercise price of $1.00 per share.
These options expire in September 2004.
(2) Each option represents the right to purchase one share of Common Stock.
The options shown in this column are all nonqualified stock options. The
options become exercisable in four equal annual installments commencing
one year after the date of grant. To the extent not already exercisable,
all of these options will become exercisable in the event of a merger in
which the Company is not the surviving corporation or upon the sale of
substantially all the Company's assets. In addition, upon the termination
of Mr. Bohnett's employment for any reason, his options will, to the
extent not already exercisable, accelerate and become immediately
exercisable.
(3) During 1997, the Company granted employees options to purchase an
aggregate of 2,065,920 shares of Common Stock.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices. These amounts represent certain assumed rates of
appreciation in the value of the Company's Common Stock from the exercise
price of such options (which was in excess of the

52
<PAGE>

fair market value of the Common Stock on the date of grant as determined by
the Company's Board of Directors), as determined by the Company's Board of
Directors. Actual gains, if any, on stock option exercises are dependent on
the future performance of the Common Stock and overall stock market
conditions. The amounts reflected in the table may not necessarily be
achieved.

OPTION EXERCISES AND YEAR-END VALUES

The following table sets forth certain information with respect to the Named
Executive Officers concerning the exercise of options during 1997 and
unexercised options held as of December 31, 1997. No options or stock
appreciation rights were exercised by any Named Executive Officer during such
year, and no stock appreciation rights were outstanding on December 31, 1997.

AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1997
AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
------------------------------ -------------------------
NAME(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
David C. Bohnett........ -- 450,000 -- $220,500
John C. Rezner.......... 582,750 150,000 $965,384 73,500
Paul A. De Braccio(3)... -- -- -- --
</TABLE>
- --------
(1) Mr. Hansen had 337,500 shares of Common Stock underlying unexercisable
stock options at December 31, 1997. Mr. Barrett had 210,000 shares of
Common Stock underlying unexercisable stock options at December 31, 1997.
(2) There was no public trading market for the Common Stock as of December 31,
1997. Accordingly, these values have been calculated on the basis of the
fair market value of the Common Stock at December 31, 1997 ($1.67), as
determined by the Board of Directors of the Company, less the applicable
exercise price per share, multiplied by the number of shares underlying
such options.
(3) Mr. De Braccio ceased to be employed by the Company in July 1997, as a
result of which his options terminated unexercised.

EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

None of the Named Executive Officers of the Company, other than Mr. Bohnett,
has an employment agreement with the Company.

In January 1996, the Company entered into an employment agreement with Mr.
Bohnett which, as amended, continues until December 31, 1998, unless terminated
earlier by the Company, either for cause, death or certain other circumstances.
Mr. Bohnett served as the Company's President and Chief Executive Officer from
the Company's inception to April 1998, and he currently holds the position of
Chairman of the Board. Effective May 1998, Mr. Bohnett voluntarily reduced his
annual base salary under this agreement to $1.00. Mr. Bohnett is eligible to
receive a bonus of up to $199,999 at the discretion of the Board of Directors
of the Company. Upon the termination of Mr. Bohnett's employment, the options
he holds as of the date of this Prospectus will, to the extent not already
exercisable, become immediately exercisable. In addition, to the extent not
already exercisable, all of such options will become exercisable in the event
of a merger in which the Company is not the surviving corporation or in the
event of a sale of substantially all of the Company's assets.

In November 1997, the Company entered into a two-year employment agreement
with Mr. Hansen providing for his employment as Chief Financial Officer of the
Company. The employment agreement provides for an annual base salary of
$200,000 and an annual bonus of $50,000, payable semi-annually. In connection
with his employment, Mr. Hansen was granted two stock options, the first was a
stock

53
<PAGE>

option to purchase up to 225,000 shares of Common Stock at an exercise price
of $1.10 per share which becomes exercisable in four equal annual installments
commencing November 1998, and the second was a stock option to purchase up to
112,500 shares of Common Stock at an exercise price of $1.10 per share which
becomes exercisable in four equal annual installments commencing on the first
anniversary date of the consummation of the offering. Mr. Hansen was appointed
the Company's Chief Operating Officer in May 1998, and, in connection with
such appointment, was granted an additional stock option to purchase up to
112,500 shares of Common Stock at an exercise price of $12.00 per share, which
option becomes exercisable in four equal annual installments commencing May
1999. If Mr. Hansen's employment is terminated by the Company during the term
of his agreement other than for cause, including in connection with a change
of control of the Company, the Company must pay Mr. Hansen his base salary for
a period of six months and vesting in his options for 337,500 shares granted
in November 1997 shall be partially accelerated.

In April 1998, Mr. Evans joined the Company as President and Chief Executive
Officer. Mr. Evans is paid an annual base salary of $200,000 and, so long as
he remains employed by the Company, will receive a $100,000 bonus on the first
anniversary of his employment. So long as he remains employed by the Company,
Mr. Evans will also be eligible to receive future annual bonuses of up to
$100,000 subject to the Company achieving certain financial results and
certain other conditions. The Company also agreed to loan Mr. Evans $100,000
upon joining the Company. The loan to Mr. Evans is payable six months
following the consummation of the offering. The loan is unsecured and would be
forgiven upon the achievement by the Company of certain financial results for
1998. This loan was approved by a majority of the stockholders of the Company
in May 1998. In connection with his employment, Mr. Evans was also granted two
stock options. The first was an option to purchase up to 734,742 shares of
Common Stock at an exercise price of $3.04 per share which becomes exercisable
in four equal annual installments commencing April 1999 and the second was an
option to purchase up to 489,828 shares of Common Stock at an exercise price
of $3.04 per share which becomes exercisable in four equal annual installments
commencing April 2001; provided, that the commencement of the exercisability
of this option will be accelerated if the Company achieves certain financial
results for 1998. If the Company is acquired during his first year of
employment, Mr. Evans will receive credit for one year of accelerated vesting
in his first option and, subject to the Company's achievement of certain
financial results, in his second option as well. In addition, if Mr. Evans'
employment is terminated by the Company prior to the first anniversary of his
employment, other than for cause, the Company must pay Mr. Evans his base
salary for a period of six months and Mr. Evans will receive credit for one
year of accelerated vesting in his first option and, subject to the Company's
achievement of certain financial results, in his second option as well.

In September 1997, the Company entered into a one-year employment agreement
with Mr. Barrett providing for his employment as Vice President, Advertising
Sales of the Company. The employment agreement provides for an annual base
salary of $200,000 and an annual bonus of $25,000, which was paid in January
1998. In addition, for the one-year term of the agreement, Mr. Barrett is
eligible to receive certain commissions based on the Company's net revenues.
In connection with his employment, Mr. Barrett was granted two stock options.
The first was a stock option to purchase up to 120,000 shares of Common Stock
at an exercise price of $1.00 per share which becomes exercisable in four
equal annual installments commencing in September 1998, and the second was a
stock option to purchase up to 90,000 shares of Common Stock at an exercise
price of $1.00 per share which becomes exercisable in four equal annual
installments commencing September 1999; provided, that the commencement of the
exercisability of the second option will be accelerated if the Company
achieves certain financial results. If Mr. Barrett's employment is terminated
by the Company during the term of his agreement other than for cause, or if
the Company elects not to continue Mr. Barrett's employment beyond the one-
year term of his agreement and subject to the achievement of the financial
milestones, the Company must pay Mr. Barrett his base salary for a period of
six months.

54
<PAGE>

EMPLOYEE BENEFIT PLANS

1997 STOCK OPTION PLAN

The Company's 1997 Stock Option Plan was adopted by the Board of Directors
effective as of March 1997, and was subsequently approved by the stockholders.
As of May 31, 1998, a total of 3,953,820 shares were reserved for issuance
under the 1997 Stock Option Plan. Employees, officers, directors, and
consultants of the Company are eligible to participate in the 1997 Plan. The
1997 Stock Option Plan provides for the grant of both incentive stock options
that may qualify under Section 422 of the Internal Revenue Code and
non-statutory stock options. The Board of Directors, or a committee appointed
by the Board of Directors, has the authority to set the terms of the options
granted under the 1997 Stock Option Plan, subject to certain statutory and
other limitations in the 1997 Stock Option Plan. Incentive stock options must
be granted at an exercise price not less than 100% of the fair market value
per share on the grant date, and non-statutory options may be granted at a
price not less than 85% of the fair market value per share on the grant date.
Options generally become exercisable in four equal annual installments
measured from the grant date. In addition, options granted under the 1997
Stock Option Plan may not have a term in excess of ten years, and generally
have a term of seven years, subject to earlier termination upon the optionee's
cessation of service with the Company. The 1997 Stock Option Plan will be
terminated upon the effective date of the 1998 Stock Option Plan, which will
become effective upon the execution of the Underwriting Agreement for the
offering. As a result, no further options may be granted under the 1997 Stock
Option Plan following the effective date of the 1998 Stock Option Plan.
However, any options outstanding on the termination date of the 1997 Stock
Option Plan will continue in full force and effect in accordance with the
terms of the documents evidencing such options.

1998 STOCK INCENTIVE PLAN

The Company intends to adopt the 1998 Stock Incentive Plan (the "1998 Stock
Option Plan") as the successor equity incentive program to the Company's 1997
Stock Option Plan (the "Predecessor Plan"). The Company intends to adopt the
1998 Stock Option Plan in June 1998. The Discretionary Option Grant and Stock
Issuance Programs under the 1998 Stock Option Plan will become effective
immediately upon the Board's adoption of the plan (the "Plan Effective Date").
The Automatic Option Grant Program will become effective immediately upon the
execution of the Underwriting Agreement for the offering.

The Common Stock share reserve of 3,953,820 shares of Common Stock from the
Predecessor Plan has been authorized for issuance under the 1998 Stock Option
Plan. In no event, however, may any one participant in the 1998 Stock Option
Plan receive option grants, separately exercisable stock appreciation rights
or direct stock issuances for more than 500,000 shares of Common Stock in the
aggregate per calendar year.

On the date of the execution of the Underwriting Agreement for the offering,
outstanding options and unvested shares issued under the Predecessor Plan will
be incorporated into the 1998 Stock Option Plan, and no further option grants
will be made under the Predecessor Plan. The incorporated options will
continue to be governed by their existing terms, unless the Plan Administrator
elects to extend one or more features of the 1998 Stock Option Plan to those
options.

The 1998 Stock Option Plan is divided into four separate components: (i) the
Discretionary Option Grant Program under which eligible individuals in the
Company's employ or service (including officers and consultants) may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock at an exercise price equal to not less than the fair market value
of the Common Stock on the date of grant (ii) the Stock Issuance Program under
which such individuals may, in the Plan Administrator's discretion, be issued
shares of Common Stock directly, through the

55
<PAGE>

purchase of such shares at a price not less than their fair market value at
the time of issuance or as a bonus tied to the performance of services, (iii)
the Salary Investment Option Grant Program which may, in the Plan
Administrator's sole discretion, be activated for one or more calendar years
and, if so activated, will allow executive officers and other highly
compensated employees the opportunity to apply a portion of their base salary
to the acquisition of special below-market stock option grants and (iv) the
Automatic Option Grant Program under which option grants will automatically be
made at periodic intervals to eligible, non-employee members of the Board of
Directors to purchase shares of Common Stock at an exercise price equal to
their fair market value on the grant date.

The Discretionary Option Grant Program and the Stock Issuance Program will
be administered by the Compensation Committee. The Compensation Committee as
Plan Administrator will have the discretion to determine which eligible
individuals are to receive option grants or stock issuances under those
programs, the time or times when such option grants or stock issuances are to
be made, the number of shares subject to each such grant or issuance, the
status of any granted option as either an incentive stock option or a non-
statutory stock option under the federal tax laws, the vesting schedule to be
in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. The Compensation Committee
will also have the authority to select the executive officers and other highly
compensated employees who may participate in the Salary Investment Option
Grant Program in the event that program is activated for one or more calendar
years, but neither the Compensation Committee nor the Board of Directors will
exercise any administrative discretion with respect to option grants made
under the Salary Investment Option Grant Program or under the Automatic Option
Grant Program. All grants under those two latter programs will be made in
strict compliance with the express provisions of each such program.

The exercise price for the shares of Common Stock subject to option grants
made under the 1998 Stock Option Plan may be paid in cash or in shares of
Common Stock valued at fair market value on the exercise date. The option may
also be exercised through a same-day sale program without any cash outlay by
the optionee. In addition, the Plan Administrator may provide financial
assistance to one or more optionees in the exercise of their outstanding
options or the purchase of their unvested shares by allowing such individuals
to deliver a full-recourse, interest-bearing promissory note in payment of the
exercise price and any associated withholding taxes incurred in connection
with such exercise or purchase.

Stock appreciation rights are authorized for issuance under the
Discretionary Option Grant Program which provide the holders with the election
to surrender their outstanding options for an appreciation distribution from
the Company equal to the excess of (i) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (ii) the
aggregate exercise price payable for such shares. Such appreciation
distribution may be made in cash or in shares of Common Stock. None of the
incorporated options from the Predecessor Plan contain any stock appreciation
rights.

In the event that the Company is acquired by merger or sale of substantially
all of its assets or securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities, each outstanding option
under the Discretionary Option Grant Program which is not to be assumed by the
successor corporation or otherwise continued in effect will automatically
accelerate in full, and all unvested shares under the Discretionary Option
Grant and Stock Issuance Programs will immediately vest, except to the extent
the Company's repurchase rights with respect to those shares are assigned to
the successor corporation or otherwise continued in effect. The Plan
Administrator will have complete discretion to grant one or more options under
the Discretionary Option Grant Program which will become exercisable on an
accelerated basis for all of the option shares upon (i) an acquisition or
other change in control of the Company, whether or not those options are
assumed or continued in effect, or (ii) the termination of the optionee's
service within a designated period (not to exceed 18 months) following an
acquisition or other change in control in which those options are

56
<PAGE>

assumed or continued in effect. The vesting of outstanding shares under the
Stock Issuance Program may be accelerated upon similar terms and conditions.
The Plan Administrator is also authorized under the Discretionary Option Grant
and Stock Issuance Programs to grant options and to structure repurchase
rights so that the shares subject to those options or repurchase rights will
immediately vest in connection with a change in the majority of the Board by
reason of one or more contested elections for Board membership, with such
vesting to occur either at the time of such change in control or upon the
subsequent termination of the individual's service within a designated period
following such change in control. The Plan Administrator has the discretion to
extend one or more of the other acceleration provisions of the 1998 Stock
Option Plan to options incorporated from the Predecessor Plan.

In the event the Plan Administrator elects to activate the Salary Investment
Option Grant Program for one or more calendar years, each executive officer
and other highly compensated employees of the Company selected for
participation may elect, prior to the start of the calendar year, to reduce
his or her base salary for that calendar year by a specified dollar amount not
less than $10,000 nor more than $50,000. If such election is approved by the
Plan Administrator, the individual will automatically be granted, on the first
trading day in January of the calendar year for which that salary reduction is
to be in effect, a non-statutory option to purchase that number of shares of
Common Stock determined by dividing the salary reduction amount by two-thirds
of the fair market value per share of Common Stock on the grant date. The
option will be exercisable at a price per share equal to one-third of the fair
market value of the option shares on the grant date. As a result, the total
spread on the option shares at the time of grant (the fair market value of the
option shares on the grant date less the aggregate exercise price payable for
those shares) will be equal to the amount of salary invested in that option.
The option will become exercisable for the option shares in a series of 12
equal monthly installments over the calendar year for which the salary
reduction is to be in effect and will be subject to full and immediate vesting
upon certain changes in the ownership or control of the Company.

Under the Automatic Option Grant Program, each individual who first becomes
a non-employee Board member at any time after the completion of this offering,
whether by appointment by the Board or election of the stockholders, will
automatically receive an option grant for shares as of the date such
individual joins the Board, provided such individual has not been in the prior
employ of the Company. In addition, on the date of each Annual Stockholders
Meeting held after the Plan Effective Date, each non-employee Board member who
is to continue to serve as a non-employee Board member will automatically be
granted an option to purchase shares of Common Stock, provided such
individual has served on the Board for at least six months.

Each automatic grant for the non-employee Board members will have a term of
10 years, subject to earlier termination following the optionee's cessation of
Board service. Each automatic option will be immediately exercisable for all
of the option shares; however, any unvested shares purchased under the option
will be subject to repurchase by the Company, at the exercise price paid per
share, should the optionee cease Board service prior to vesting in those
shares. The shares subject to each initial -share automatic option grant
will vest over a -year period in successive equal annual installments upon
the individual's completion of each year of Board service measured from the
option grant date. Each -share automatic option grant will vest over a -
year period in successive equal annual installments upon the individual's
completion of each year of Board service measured from the option grant date.
However, the shares subject to each automatic grant will immediately vest in
full upon certain changes in control or ownership of the Company or upon the
optionee's death or disability while a Board member.

The shares subject to each option under the Salary Investment Option Grant
and Automatic Option Grant Programs will immediately vest upon (i) an
acquisition of the Company by merger or asset sale, (ii) the successful
completion of a tender offer for more than 50% of the Company's outstanding
voting stock or (iii) a change in the majority of the Board effected through
one or more contested elections for Board membership.

57
<PAGE>

Limited stock appreciation rights will automatically be included as part of
each grant made under the Automatic Option Grant and Salary Investment Option
Grant Programs and may be granted to one or more officers of the Company as
part of their option grants under the Discretionary Option Grant Program.
Options with such a limited stock appreciation right may be surrendered to the
Company upon the successful completion of a hostile tender offer for more than
50% of the Company's outstanding voting stock. In return for the surrendered
option, the optionee will be entitled to a cash distribution from the Company
in an amount per surrendered option share equal to the excess of (i) the
highest price per share of Common Stock paid in connection with the tender
offer over (ii) the exercise price payable for such share.

The Board of Directors of the Company may amend or modify the 1998 Stock
Option Plan at any time, subject to any required stockholder approval. The
1998 Stock Option Plan will terminate on the earliest of (i) 10 years after
the Plan Effective Date, (ii) the date on which all shares available for
issuance under the 1998 Stock Option Plan have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with
certain changes in control or ownership of the Company.

EMPLOYEE STOCK PURCHASE PLAN

The Company intends to adopt an Employee Stock Purchase Plan (the "Purchase
Plan") which will become effective immediately upon the execution of the
Underwriting Agreement for the offering. The Purchase Plan will be designed to
allow eligible employees of the Company and participating subsidiaries to
purchase shares of Common Stock, at semi-annual intervals, through their
periodic payroll deductions under the Purchase Plan.

The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration for 24 months.

Individuals who are eligible employees (scheduled to work more than 20 hours
per week for more than 5 calendar months per year) on the start date of any
offering period may enter the Purchase Plan on that start date or on any
subsequent semi-annual entry date.

Payroll deductions may not exceed 10% of base salary, and the accumulated
payroll deductions of each participant will be applied to the purchase of
shares on his or her behalf on each semi-annual purchase date at a purchase
price per share equal to 85% of the lower of (i) the fair market value of the
Common Stock on the participant's entry date into the offering period or (ii)
the fair market value on the semi-annual purchase date.

In the event the Company is acquired by merger or asset sale, all
outstanding purchase rights will automatically be exercised immediately prior
to the effective date of such acquisition. The purchase price will be equal to
85% of the lower of (i) the fair market value per share of Common Stock on the
participant's entry date into the offering period in which such acquisition
occurs or (ii) the fair market value per share of Common Stock immediately
prior to such acquisition.

The Purchase Plan will terminate on the earlier of (i) the last business day
of July 2008, (ii) the date on which all shares available for issuance under
the Purchase Plan shall have been sold pursuant to purchase rights exercised
thereunder or (iii) the date on which all purchase rights are exercised in
connection with an acquisition of the Company by merger or asset sale.

After adoption, the Board may at any time alter, suspend or discontinue the
Purchase Plan. However, certain amendments to the Purchase Plan may require
stockholder approval.

58
<PAGE>

CERTAIN TRANSACTIONS

Since January 1, 1995, other than as described elsewhere in this Prospectus
there has not been any transaction or series of similar transactions to which
the Company was or is a party in which the amount involved exceeded or exceeds
$60,000 and in which any director, executive officer, holder of more than 5%
of any class of the Company's voting securities, or any member of the
immediate family of any of the foregoing persons had or will have a direct or
indirect material interest, other than the transactions described below. See
"Management--Employment Agreements and Termination of Employment and Change of
Control Arrangements" and "Description of Capital Stock--Limitation of
Liability and Indemnification Matters."

TRANSACTIONS WITH DIRECTORS, OFFICERS AND 5% STOCKHOLDERS

Since the Company's inception, the Company has raised capital primarily
through the sale of shares of its preferred stock. In December 1995, the
Company issued 900,000 shares of Series C Preferred Stock in consideration for
$0.8567 per share in the form of the cancellation of shares of Common Stock
and a note payable. In January 1996, the Company sold 2,331,000 shares of
Series A Preferred Stock at a price of $0.4290 per share. In July 1996, the
Company sold 2,175,000 shares of Series B Preferred Stock at a price of
$0.5057 per share. From January 1997 through February 1998, the Company sold
7,670,038 shares of Series D Preferred Stock at a price of $1.18 per share. In
October 1997, the Company sold 1,071,423 shares of Series E Preferred Stock at
a price of $4.667 per share. In December 1997, the Company sold 610,702 shares
of Series E Preferred Stock at a price of $9.90 per share. Effective December
1997, the Company sold 1,914,432 shares of Series F Preferred Stock at a price
of $9.90 per share.

The following table summarizes the shares of Common Stock and Preferred
Stock purchased by executive officers, directors, and 5% stockholders of the
Company and persons associated with them since January 1995. All share numbers
reflect the number of shares of Common Stock purchased by the respective party
on an as-converted basis, and include certain sales of preferred stock among
stockholders of the Company.

<TABLE>
<CAPTION>
PREFERRED STOCK
EXECUTIVE OFFICERS, COMMON ---------------------------------------------------------------
DIRECTORS AND 5% STOCKHOLDERS STOCK SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F
- ----------------------------- --------- --------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Entities affiliated with
CMG@Ventures(1)........ -- 2,331,000 2,175,000 -- 1,694,916(2) 378,351 --
Peter H. Mills
David S. Wetherell
Jerry D. Colonna
Entities affiliated with
SOFTBANK Holdings
Inc.(3)................ -- -- -- 900,000 3,211,060(4) 798,748 1,914,417
Eric C. Hippeau
Entities affiliated with
Chase Venture Capital
Associates, L.P.(4).... -- -- -- -- 1,312,302 -- --
David C. Bohnett........ 1,749,750 -- -- 900,000(5) -- -- --
</TABLE>
- --------
(1) Represents shares purchased by CMG@Ventures and CMG@Ventures II, LLC.
Messrs. Mills and Wetherell, general partners of CMG@Ventures, and Mr.
Colonna, a profit partner of CMG@Ventures, are directors of the Company.
Messrs. Mills, Wetherell and Colonna disclaim beneficial ownership of such
shares except to the extent of their pecuniary interest therein.
(2) Excludes 128,943 shares of Series D Preferred Stock purchased by the
Flatiron Fund, of which Mr. Colonna is a partner. The Flatiron Fund is a
venture investment program affiliated with Chase Capital Partners and
SOFTBANK Technology Ventures IV L.P.
(3) Represents shares purchased by SOFTBANK Holdings Inc., SOFTBANK Technology
Advisors Fund L.P. and SOFTBANK Technology Ventures IV L.P. Mr. Hippeau,
Chairman of the Board and Chief Executive Officer of Ziff-Davis, a
subsidiary of SOFTBANK Holdings Inc., is a director of the Company. Mr
Hippeau disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein.
(4) Includes 128,943 shares of Series D Preferred Stock purchased by the
Flatiron Fund.
(5) Represents shares that were subsequently transferred to SOFTBANK Holdings
Inc.

59
<PAGE>

The Company entered into a Joint Venture Agreement in November 1997 (the
"Joint Venture Agreement") with SOFTBANK to form GeoCities Japan, a joint
venture in Japan. SOFTBANK, which owns 60% of GeoCities Japan, is a greater
than five percent stockholder in the Company. Under the terms of the
agreement, the Company purchased a 40% interest in GeoCities Japan for (Yen)80
million or approximately $645,000. SOFTBANK and the Company further agreed not
to engage in any business activities in Japan, other than services or products
in languages other than Japanese, which compete with GeoCities Japan. In
connection with this agreement, the Company agreed to enter into a 20-year
licensing agreement with GeoCities Japan under which the Company is eligible
to receive royalties. In connection with the Joint Venture Agreement, the
Company has entered into a Loan Agreement with SOFTBANK, whereby SOFTBANK
loaned the Company (Yen)80 million or approximately $645,000 for the sole
purpose of purchasing its 40% interest in GeoCities Japan. The loan bears
interest of 5.5% each year and shall be repaid upon GeoCities Japan's non-U.S.
initial public offering or private placement of at least (Yen)1.5 billion. If
neither event occurs by March 31, 2000, then SOFTBANK will forgive the loan on
April 1, 2000. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" and Note 5 of Notes to Financial
Statements.

The Company's 20-year license agreement with GeoCities Japan, entered in
November 1997, grants GeoCities Japan the exclusive right to use the Company's
software, content and trademarks (collectively, the "Materials") to provide
services in Japan. The Company also grants GeoCities Japan a license to
translate the Materials into the Japanese language. In consideration of the
license grant, GeoCities Japan will pay the Company a royalty of three percent
of its total revenue.

In January 1997, in connection with the issuance of shares of its preferred
stock, the Company granted CMG@Ventures an immediately exercisable option to
purchase up to 750,000 shares of Common Stock at a price of $1.18 per share.

In May 1997, the Company entered into a list line management agreement with
CMGI providing for the sharing of certain marketing data between the Company
and CMGI. This agreement may be terminated by either party on 30 days notice.
CMGI is an affiliate of CMG@Ventures, a greater than five percent stockholder
in the Company. Messrs. Mills and Wetherell, directors of the Company, are
general partners of CMG@Ventures. Mr. Colonna, a director of the Company, is a
profit partner of CMG@Ventures and a partner of the Flatiron Fund.
CMG@Ventures is a greater than five percent stockholder in the Company and the
Flatiron Fund is a stockholder of the Company. Mr. Hippeau, a director of the
Company, is the Chairman of the Board and Chief Executive Officer of Ziff-
Davis, a subsidiary of SOFTBANK Holdings Inc. SOFTBANK Holdings Inc. is a
greater than five percent stockholder in the Company.

Mr. Losch, the Company's Vice President, Finance, has entered into an
agreement with the Company which, subject to certain limitations, provides for
a severance payment equal to six months of his base salary in the event his
employment with the Company is terminated without cause during the first two
years of his employment. Mr. Pierce, the Company's Vice President, Legal
Affairs and General Counsel, has entered into an agreement with the Company
which provides for partial acceleration of his options if the Company is
acquired and a severance payment equal to six months of his base salary in the
event his employment with the Company terminates following the acquisition of
the Company. In addition, Mr. Glicker, the Company's Vice President,
Marketing, has entered into an agreement with the Company which provides for
partial acceleration of his options if the Company is acquired.

All future transactions, including loans (if any), between the Company and
its officers, directors and principal stockholders and their affiliates will
be approved by a majority of the Board of Directors, including a majority of
the independent and disinterested outside directors of the Board of Directors,
and will be on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.

60
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of May 15, 1998,
regarding beneficial ownership of the Company's Common Stock, by (i) each
person (or group of affiliated persons) known by the Company to own
beneficially more than five percent of the outstanding shares of the Company's
Common Stock, (ii) each of the Company's directors and Named Executive
Officers and (iii) the Company's directors and executive officers as a group.
Unless otherwise indicated, the address for each of the following stockholders
is 1918 Main Street, Suite 300, Santa Monica, California 90405.

<TABLE>
<CAPTION>
PERCENT OF OWNERSHIP(1)
SHARES ------------------------
BENEFICIALLY PRIOR TO THE AFTER THE
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING(2)
- ------------------------ ------------ ------------ -----------
<S> <C> <C> <C>
CMG@Ventures(3).......................... 7,329,267 36.7% %
Peter H. Mills
David S. Wetherell
Jerry D. Colonna
SOFTBANK Holdings Inc.(4)(5)............. 6,824,226 35.5
Eric C. Hippeau
Chase Venture Capital Associates, 1,312,302 6.8
L.P(5)..................................
David C. Bohnett(6)...................... 1,862,250 9.6
Jerry D. Colonna(7)...................... 128,943 *
Paul A. De Braccio(8).................... -- *
Thomas R. Evans(9)....................... -- *
Harry S. Lambert(10)..................... 768,310 4.0
John C. Rezner(11)....................... 620,250 3.2
All directors and executive officers as a
group (16 persons)(12).................. 10,731,520 52.7% %
</TABLE>
- --------
*Less than one percent

(1) The shares beneficially owned and percentage of ownership are based on
(i) 19,237,594 shares of Common Stock outstanding as of May 15, 1998, and
(ii) shares of Common Stock outstanding upon consummation of the
offering. Gives effect to the shares of Common Stock issuable within 60
days of May 15, 1998, upon the exercise of all options beneficially owned
by the indicated stockholders on that date. Shares of Common Stock
subject to options which are currently exercisable or exercisable within
60 days of May 15, 1998, are deemed outstanding for computing the
percentages of the person holding such options, but are not deemed
outstanding for computing the percentages of any other person. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission and includes voting and investment power with
respect to shares. Unless otherwise indicated, the persons named in the
table have sole voting and sole investment control with respect to all
shares beneficially owned.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Includes 750,000 Shares of Common Stock issuable upon the exercise of
stock options that are currently exercisable and 378,351 shares of Common
Stock held by CMG@Ventures II, LLC, an affiliate of CMG@Ventures. The
address of CMG@Ventures and the entities associated with CMG@Ventures is
2420 Sand Hill Road, Suite 101, Menlo Park, CA 94025. Messrs. Mills and
Wetherell, general partners of CMG@Ventures, and Mr. Colonna, a profit
partner of CMG@Ventures, are directors of the Company. Messrs. Mills,
Wetherell and Colonna disclaim beneficial ownership of such shares except
to the extent of their pecuniary interest therein.
(4) Includes (i) 1,378,299 shares of Common Stock held by SOFTBANK Technology
Ventures IV L.P., an affiliate of SOFTBANK Holdings Inc. and (ii) 28,128
shares of Common Stock held by SOFTBANK Technology Advisors Fund L.P., an
affiliate of SOFTBANK Holdings Inc. The address of SOFTBANK Holdings Inc.
and the entities associated with SOFTBANK Holdings Inc. is 10 Langley
Road, Newton Center, MA 02159-1972. Mr. Hippeau, Chairman of the Board
and

61
<PAGE>

Chief Executive Officer of Ziff-Davis, a subsidiary of SOFTBANK Holdings
Inc., is a director of the Company.
(5) Includes 128,943 shares of Common Stock held by the Flatiron Fund. The
Flatiron Fund is a venture investment program affiliated with Chase
Capital Partners, an affiliate of Chase Venture Capital Associates, L.P.,
and SOFTBANK Holdings Inc. The address of Chase Venture Capital
Associates, L.P. and the entities associated with Chase Venture Capital
Associates, L.P. is Chase Capital Partners, 380 Madison Avenue, New York,
NY 10017.
(6) Includes 112,500 shares of Common Stock issuable upon the exercise of
stock options that are currently exercisable.
(7) Consists of 128,943 shares of Common Stock held by the Flatiron Fund, of
which Mr. Colonna is a partner. Mr. Colonna disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein. See also note (3) above.
(8) Mr. De Braccio ceased to be employed by the Company in July 1997.
(9) Excludes options to purchase up to 1,224,570 shares of Common Stock that
were issued to Mr. Evans in connection with his employment and which are
not currently exercisable or exercisable within 60 days of May 15, 1998.
(10) Consists of 768,310 shares of Common Stock held by InnoCal, of which Mr.
Lambert is a General Partner. Mr. Lambert disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein.
(11) Includes 245,250 shares of Common Stock issuable upon the exercise of
stock options that are currently exercisable.
(12) Includes 1,126,500 shares of Common Stock issuable upon the exercise of
stock options that are currently exercisable or exercisable within 60
days of May 15, 1998.

62
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following description of the securities of the Company and certain
provisions of the Company's Certificate of Incorporation (the "Certificate")
and the Company's Bylaws ("Bylaws") are summaries thereof and are qualified by
reference to the Certificate and the Bylaws, copies of which have been filed
with the Commission as exhibits to the Company's Registration Statement, of
which this Prospectus forms a part. The descriptions of the Common Stock and
Preferred Stock reflect changes to the Company's capital structure that will
occur upon the closing of the offering in accordance with the terms of the
Certificate.

The authorized capital stock of the Company consists of 45,000,000 shares of
Common Stock, par value $0.001 per share and 5,000,000 shares of Preferred
Stock, par value $0.001 per share.

COMMON STOCK

As of May 31, 1998, there were 19,247,907 shares of Common Stock outstanding
and held of record by 19 stockholders. Based upon the number of shares
outstanding as of that date and giving effect to the issuance of the shares
of Common Stock offered by the Company hereby, there will be shares of
Common Stock outstanding upon the closing of the offering including the shares
of Common Stock issued upon the Preferred Stock Conversion.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and the Certificate provides that
they do not have cumulative voting rights. Accordingly, holders of a majority
of the shares of Common Stock entitled to vote in any election of directors
may elect all of the directors standing for election. Holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared by
the Board of Directors out of funds legally available therefor, subject to any
preferential dividend rights of any outstanding Preferred Stock. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities and subject to the prior
rights of any outstanding Preferred Stock. Holders of the Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Company in the
offering will be, when issued in consideration for payment thereof, fully paid
and nonassessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future. Upon the closing of the offering, there
will be no shares of Preferred Stock outstanding.

PREFERRED STOCK

Upon the closing of the offering, the Board of Directors will be authorized,
without further stockholder approval, to issue from time to time up to an
aggregate of 5,000,000 shares of Preferred Stock in one or more series and to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof,
including the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any series or designations of such series. The Company has no present plans to
issue any shares of Preferred Stock. See "--Anti-Takeover Effects of Certain
Provisions of Delaware Law and the Company's Certificate of Incorporation and
Bylaws".

WARRANTS

As of May 31, 1998, the Company had an outstanding warrant to purchase
15,228 shares of Common Stock at an exercise price of $6.17 per share. The
warrant is exercisable in whole or in part at any time on or before September
22, 2004. The warrant contains standard anti-dilution provisions,

63
<PAGE>

including anti-dilution protection if the Company issues any shares of Common
Stock at a price per share less than the exercise price of such warrant at the
time in effect or without consideration, subject to certain exceptions.

OPTIONS

As of May 31, 1998, (i) options to purchase a total of 5,162,304 shares
("Option Shares") of Common Stock were outstanding, and (ii) up to 508,080
shares of Common Stock may be subject to options granted in the future under
the 1997 Stock Option Plan. See "Underwriting" and "Management--1998 Stock
Incentive Plan".

REGISTRATION RIGHTS

Pursuant to the terms of the Third Amended and Restated Rights Agreement, as
amended (the "Registration Rights Agreement"), after the closing of the
offering, the holders of at least 30% of an aggregate of 16,672,596 shares of
Common Stock will be entitled to certain demand registration rights with
respect to the registration of such shares under the Securities Act, subject
to certain limitations, including the inclusion thereon of a minimum number of
shares held by the initiating holders of the demand registration. The Company
is not required to effect (i) more than two such registrations pursuant to
such demand registration rights; (ii) a registration within 90 days following
the determination of the Board of Directors of the Company to file a
registration statement; provided, that the Company is making a good faith
effort to cause such registration statement to become effective; (iii) a
registration for a period not to exceed 90 days, if the Board of Directors of
the Company has made a good faith determination that it would be seriously
detrimental to the Company or the holders of registration rights for a
registration statement to be filed or (iv) a registration within 270 days of
the effective date of any prior registered offering of the Company's
securities, subject to certain exceptions. In addition, pursuant to the terms
of the Registration Rights Agreement, after the closing of the offering, the
holders of 19,605,096 shares of Common Stock will be entitled to certain
piggyback registration rights in connection with any registration by the
Company of its securities for its own account or the account of other
securityholders. In the event that the Company proposes to register any shares
of Common Stock under the Securities Act, the holders of such piggyback
registration rights are entitled to receive notice of such registration and
are entitled to include their shares therein, subject to certain limitations.
In addition, in the event that the Company proposes to register any shares of
Common Stock under the Securities Act to the public in a firm commitment
underwritten public offering, Mr. Bohnett and Mr. Rezner, as well as any other
officer or director designated by the Company's Board of Directors by
unanimous vote shall be entitled to piggyback registration rights if such
persons who choose to include their shares in such registration shall continue
to serve the Company as an officer or director on the effective date of such
registration statement. Further, at any time after the Company becomes
eligible to file a registration statement on Form S-3, certain holders of
demand registration rights may require the Company to file registration
statements on Form S-3 under the Securities Act with respect to their shares
of Common Stock. The Company is not required to effect (i) more than two such
registrations in any 12-month period; (ii) a registration if the Company gives
notice of its bona fide intention to effect a registration within 60 days;
(iii) a registration within 180 days of the effective date of any prior
registered offering of the Company's securities (subject to certain
exceptions) or (iv) a registration for a period not to exceed 60 days, if the
Board of Directors of the Company has made a good faith determination that it
would be seriously detrimental to the Company or the stockholders for a
registration statement to be filed (subject to certain exceptions). Each of
the foregoing registration rights are subject to certain conditions and
limitations, among them the right of the underwriters in any underwritten
offering to limit the number of shares of Common Stock held by securityholders
with registration rights to be included in such registration. The Company is
generally required to bear all of the expenses of all such registrations,
except underwriting discounts and commissions. Registration of any of the
shares of Common Stock held by securityholders with registration rights would
result in such shares becoming freely tradable without restriction under the
Securities Act immediately upon

64
<PAGE>

effectiveness of such registration. The Registration Rights Agreement also
contains a commitment of the Company to indemnify the holders of registration
rights, subject to certain limitations.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (as amended from time to time, the "DGCL"). Subject to
certain exceptions, Section 203 prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
such status with the approval of the board of directors or unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, fifteen percent (15%) or more
of the corporation's outstanding voting stock. This statute could prohibit or
delay the accomplishment of mergers or other takeover or change in control
attempts with respect to the Company and, accordingly, may discourage attempts
to acquire the Company.

In addition, certain provisions of the Certificate and Bylaws, which
provisions will be in effect upon the closing of the offering and are
summarized in the following paragraphs, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that
a stockholder might consider in its best interest, including those attempts
that might result in a premium over the market price for the shares held by
stockholders.

STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. The Certificate provides
that stockholders may not take action by written consent, but only at duly
called annual or special meetings of stockholders. The Certificate further
provides that special meetings of stockholders of the Company may be called
only by the Chairman of the Board of Directors or a majority of the Board of
Directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company, not less than 120 days nor more than 150 days prior to the first
anniversary of the date of the Company's notice of annual meeting provided with
respect to the previous year's annual meeting of stockholders; provided, that
if no annual meeting of stockholders was held in the previous year or the date
of the annual meeting of stockholders has been changed to be more than 30
calendar days earlier than or 60 calendar days after such anniversary, notice
by the stockholder, to be timely, must be so received not more than 90 days nor
later than the later of (i) 60 days prior to the annual meeting of stockholders
or (ii) the close of business on the 10th day following the date on which
notice of the date of the meeting is given to stockholders or made public,
whichever first occurs. The Bylaws also specify certain requirements as to the
form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of Common
Stock and Preferred Stock are available for future issuance without stockholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued shares of Common Stock and Preferred Stock could render more
difficult or discourage an attempt to obtain control of the Company by means of
a proxy contest, tender offer, merger or otherwise.

65
<PAGE>

The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Certificate provides that, except to the extent prohibited by DGCL, the
Company's directors shall not be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as
directors of the Company. Under the DGCL, the directors have a fiduciary duty
to the Company which is not eliminated by this provision of the Certificate
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of nonmonetary relief will remain available. In addition, each
director will continue to be subject to liability under the DGCL for breach of
the director's duty of loyalty to the Company, for acts or omissions which are
found by a court of competent jurisdiction to be not in good faith or which
involves intentional misconduct, or knowing violations of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited
by DGCL. This provision also does not affect the directors' responsibilities
under any other laws, such as the Federal securities laws or state or Federal
environmental laws. The Company has obtained liability insurance for its
officers and directors.

Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out
of their capacity or status as directors and officers, provided that this
provision shall not eliminate or limit the liability of a director: (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. The DGCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any
other rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, a vote of stockholders or otherwise. The
Certificate eliminates the personal liability of directors to the fullest
extent permitted by Section 102(b)(7) of the DGCL and provides that the
Company shall fully indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative)
by reason of the fact that such person is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding.

The Company has entered into indemnification agreements with its directors
and certain of its officers containing provisions that may require the
Company, among other things, to indemnify such directors and officers against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' liability insurance if maintained for other directors
of officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted.

LISTING

An application has been made for quotation of the Common Stock on the Nasdaq
National Market under the trading symbol "GCTY".

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is U.S. Stock Transfer
Corporation. Its telephone number is (818) 502-1404.

66
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after the offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price of the Common Stock and the
ability of the Company to raise equity capital in the future.

Upon completion of the offering, the Company will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option. Of these shares, the shares
registered in the offering will be freely tradeable without restriction or
further registration under the Securities Act, unless such shares are
purchased by "Affiliates". The 19,247,907 shares of Common Stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Section 4(1) of the Securities Act or Rules
144, 144(k) or 701 promulgated under the Securities Act, which rules are
summarized below. As a result of the lock-up agreements described below, and
subject to the provisions of Rules 144, 144(k) and 701, the 19,247,907 shares
which are deemed Restricted Shares will be available for sale in the public
market 180 days after the date of this Prospectus. In addition, as of May 31,
1998, there were outstanding options to purchase up to 5,162,304 shares of
Common Stock which will be eligible for sale in the public market following
the offering from time to time subject to becoming exercisable and, in the
case of certain options, the expiration of the lock-up agreements. There is
also a warrant outstanding to purchase up to 15,228 shares of Common Stock
which will be eligible for sale in the public market following the offering
subject to the expiration of the lock-up agreement applicable thereto.

All officers, directors, stockholders and holders of options to purchase
Common Stock of the Company have agreed not to sell or otherwise transfer any
shares of Common Stock or any other securities of the Company for a period of
180 days after the date of this Prospectus without the prior written consent
of Goldman, Sachs & Co.; provided, that one affiliate of the Company who is
subject to a lock-up agreement and the volume restrictions of Rule 144 has
been authorized by the representatives of the Underwriters to sell up to $1.0
million of Common Stock commencing 91 days after the date of this Prospectus.
In addition, Goldman, Sachs & Co may, in their sole discretion, and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) 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: (i) one percent of the number of
shares of Common Stock then outstanding (which will equal approximately
shares immediately after the offering); or (ii) the average weekly trading
volume of the Common Stock on the Nasdaq national Market during the four
calendar weeks preceding the filing of a notice on 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 the Company. Under Rule 144(k), a person who is not deemed
to have been an Affiliate of the Company at any time during the 90 days
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; therefore, unless otherwise restricted, and subject to the lock-
up agreements, "144(k) shares" may be sold immediately upon the completion of
the offering. In general, under

67
<PAGE>

Rule 701 of the Securities Act as currently in effect, any employee,
consultant or advisor of the Company who purchases shares from the Company
pursuant to Rule 701 in connection with a compensatory stock or option plan or
other written agreement is eligible to resell such shares, unless
contractually restricted, 90 days after the effective date of the offering in
reliance on Rule 144, but without compliance with certain restrictions,
including the holding period, contained in Rule 144.

The Company is unable to estimate the number of shares that will be sold
under Rule 144, as this will depend on the market price for the Common Stock
of the Company, the personal circumstances of the sellers and other factors.
Prior to the offering, there has been no public market for the Common Stock,
and there can be no assurance that a significant public market for the Common
Stock will develop or be sustained after the offering. Any future sale of
substantial amounts of Common Stock in the open market may adversely affect
the market price of the Common Stock offered hereby.

The Company intends to file, as of the date of this Prospectus, Form S-8
registration statements under the Securities Act to register all shares of
Common Stock issuable under outstanding options, including options outstanding
under the Company's existing 1997 Stock Option Plan, the 1998 Stock Option
Plan and the Purchase Plan that the Company intends to adopt. Such
registration statements are expected to become effective immediately upon
filing, and shares covered by those registration statements will thereupon be
eligible for sale in the public markets from time to time, subject to the
lock-up agreements and Rule 144 limitations applicable to affiliates. See
"Management--Employee Benefit Plans", "Description of Capital Stock--
Registration Rights", "Shares Eligible for Future Sale" and "Underwriting".

Pursuant to the Registration Rights Agreement, after the closing of the
offering, subject to certain conditions, the holders of 16,672,596 shares of
outstanding Common Stock will be entitled to certain demand registration
rights and the holders of 19,605,096 shares of outstanding Common Stock
(including shares issuable upon the exercise of certain options to purchase
Common Stock) will be entitled to certain piggyback registration rights.
Registration of such shares under the Securities Act would result in such
shares becoming freely tradeable without restriction under the Securities Act
(except for shares purchased by Affiliates). During the 180-day period after
the date of this Prospectus, the Company has agreed not to file any
registration statement with respect to the registration of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
into Common Stock, other than registration statements on Form S-8 covering
securities issuable under the Company's 1997 and 1998 Stock Option Plan and
the Purchase Plan, without the prior written consent of Goldman, Sachs & Co.
See "Description of Capital Stock--Registration Rights".

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Brobeck, Phleger & Harrison LLP, Irvine, California.
Certain legal matters relating to the offering will be passed upon for the
Underwriters by Venture Law Group, A Professional Corporation, Menlo Park,
California.

EXPERTS

The balance sheets as of December 31, 1997 and 1996, and the statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997, included in this Prospectus and
Registration Statement have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.

68
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act (the "Registration
Statement") with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract of
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each statement being qualified in all
respects by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected without charge at the principal office
of the Commission in Washington, D.C., and copies of all or any part thereof
may be inspected and copied at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549
and at the Commission's Regional Offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material may be
obtained at prescribed rates by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the
Commission maintains an Internet site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants, including the Company, that file electronically with the
Commission. For further information pertaining to the Company and the Common
Stock offered by this Prospectus, reference is hereby made to the Registration
Statement.

The Company intends to furnish to its stockholders annual reports containing
financial statements audited by its independent auditors and to make available
to its stockholders quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.

CHANGE IN ACCOUNTANTS

On September 18, 1997, the Company requested and received the resignation of
Arthur Andersen LLP and engaged Coopers & Lybrand L.L.P. as its independent
accountants to audit its financial statements as of, and for the year ended,
July 31, 1997. The decision to change independent accountants from Arthur
Andersen LLP to Coopers & Lybrand L.L.P. was approved by the Company's Board
of Directors. Subsequently, the Company changed its fiscal year end from July
31 to December 31.

The Company believes, and has been advised by Arthur Andersen LLP that it
concurs in such belief, that, for the period from December 16, 1994
(inception) through July 31, 1996, and for the period from August 1, 1996
through September 18, 1997, the Company and Arthur Andersen LLP did not have
any disagreement on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Arthur Andersen LLP,
would have caused it to make reference in connection with its report on the
Company's financial statements to the subject matter of the disagreement.

The report of Arthur Andersen LLP on the Company's financial statements for
the period from December 16, 1994 (inception) through July 31, 1995, and the
year ended July 31, 1996, did not contain an adverse opinion or a disclaimer
of opinion, and was not qualified or modified as to uncertainty, audit scope
or accounting principles. During the period from December 16, 1994 to
September 18, 1997, there were no "reportable events" within the meaning of
Item 304(a)(1)(v) of Regulation S-K promulgated under the Securities Act.

69
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Coopers & Lybrand L.L.P., Independent Accountants............... F-2
Balance Sheets at December 31, 1996 and 1997 and March 31, 1998
(unaudited).............................................................. F-3
Statements of Operations for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 (unaudited) and 1998
(unaudited).............................................................. F-4
Statements of Stockholders' Equity (Deficiency) for the three years in the
period ended December 31, 1997 and the three months ended March 31, 1998
(unaudited).............................................................. F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 (unaudited) and 1998
(unaudited).............................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

The following report is in the form that will be signed upon the completion
of the three-for-two forward stock split and the reincorporation of the
Company in Delaware as described in Notes 1 and 2 to the financial statements.

COOPERS & LYBRAND L.L.P.

Woodland Hills, California
June 9, 1998

To the Board of Directors and Stockholders of GeoCities

We have audited the accompanying balance sheets of GeoCities (the "Company")
as of December 31, 1996 and 1997, and the related statements of operations,
stockholders' equity (deficiency) and cash flows for each of the three years
in the period ended December 31, 1997. 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 GeoCities as of December
31, 1996 and 1997, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.

Woodland Hills, California
June 2, 1998

F-2
<PAGE>

GEOCITIES

BALANCE SHEETS

(ALL INFORMATION AS OF MARCH 31, 1998 IS UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1996 1997 1998 1998
------------ ------------ ----------- -----------
(PRO FORMA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.............. $ 33,000 $ 3,785,000 $ 2,014,000 $ 2,014,000
Short-term investments.... 23,318,000 23,318,000
Accounts receivable, less
allowance for doubtful
accounts of $98,000 and
$174,000 for 1997 and
1998, respectively....... 262,000 1,206,000 1,448,000 1,448,000
Prepaids and other
current assets........... 57,000 403,000 200,000 200,000
Subscription receivable... 25,000,000
---------- ----------- ----------- -----------
Total current assets.... 352,000 30,394,000 26,980,000 26,980,000
Long-term investments..... 1,277,000 1,277,000
Property and equipment,
net...................... 879,000 1,216,000 1,511,000 1,511,000
Deposits.................. 217,000 613,000 668,000 668,000
Other assets.............. 645,000 550,000 550,000
---------- ----------- ----------- -----------
Total assets............ $1,448,000 $32,868,000 $30,986,000 $30,986,000
========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......... $ 397,000 $ 1,036,000 $ 742,000 $ 742,000
Accrued expenses.......... 199,000 2,289,000 3,301,000 3,301,000
Deferred revenue.......... 110,000 225,000 354,000 354,000
Capital lease
obligations, current
portion.................. 188,000 393,000 379,000 379,000
Note payable.............. 1,100,000
---------- ----------- ----------- -----------
Total current
liabilities............ 1,994,000 3,943,000 4,776,000 4,776,000
Capital lease
obligations, net of
current portion.......... 437,000 183,000 118,000 118,000
Related party note
payable.................. -- 651,000 660,000 660,000
---------- ----------- ----------- -----------
2,431,000 4,777,000 5,554,000 5,554,000
Commitments and
contingencies (Note 7)
Series A, B, C, D, E and F
mandatory redeemable
convertible preferred
stock, $0.001 par value;
authorized 12,184,000
shares in 1996, 19,895,000
shares in 1997 and 1998;
issued and outstanding
4,506,000 shares in 1996
and 16,672,000 shares in
1997 and 1998; liquidation
preference of
approximately $2,100,000
and $39,129,000 at 1996
and 1997, respectively,
and $39,890,000 at March
31, 1998.................. 2,063,000 37,585,000 37,585,000 --
Stockholders' equity
(deficiency):
Convertible preferred
stock, $0.001 par value;
900,000 shares authorized,
issued and outstanding for
1996...................... 771,000 -- -- --
Common stock, par value
$0.001; authorized
30,000,000 shares for 1996
and 45,000,000 shares for
1997 and 1998; issued and
outstanding 1,963,000 and
1,981,000 shares for 1996
and 1997, respectively,
2,553,000 shares at March
31, 1998 and 19,225,000
shares on a pro forma
basis..................... 54,000 744,000 1,508,000 19,000
Additional paid-in
capital................... -- 3,196,000 3,196,000 42,270,000
Unearned deferred
compensation.............. -- (660,000) (1,185,000) (1,185,000)
Accumulated deficit........ (3,871,000) (12,774,000) (15,672,000) (15,672,000)
---------- ----------- ----------- -----------
Total stockholders'
equity (deficiency).... (3,046,000) (9,494,000) (12,153,000) 25,432,000
---------- ----------- ----------- -----------
Total liabilities and
stockholders' equity
(deficiency)........... $1,448,000 $32,868,000 $30,986,000 $30,986,000
========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

GEOCITIES

STATEMENTS OF OPERATIONS

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------------- ------------------------
1995 1996 1997 1997 1998
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues
Advertising........... $ 282,000 $ 4,153,000 $ 528,000 $ 1,907,000
Premium services and
other................ $ 46,000 32,000 429,000 54,000 266,000
--------- ----------- ----------- ----------- -----------
46,000 314,000 4,582,000 582,000 2,173,000
Cost of revenues........ 103,000 788,000 4,634,000 371,000 1,565,000
--------- ----------- ----------- ----------- -----------
Gross profit (loss).. (57,000) (474,000) (52,000) 211,000 608,000
Operating expenses:
Sales and marketing... 117,000 764,000 5,045,000 721,000 2,118,000
Product development... 72,000 475,000 1,021,000 201,000 508,000
General and
administrative....... 233,000 1,252,000 2,901,000 551,000 1,083,000
--------- ----------- ----------- ----------- -----------
Loss from operations.... (479,000) (2,965,000) (9,019,000) (1,262,000) (3,101,000)
Other income (expense):
Interest income....... 19,000 238,000 62,000 232,000
Interest expense...... (2,000) (59,000) (121,000) (33,000) (28,000)
--------- ----------- ----------- ----------- -----------
Loss before provision
for income taxes.... (481,000) (3,005,000) (8,902,000) (1,233,000) (2,897,000)
Provision for income
taxes.................. (1,000) (1,000) (1,000) (1,000) (1,000)
--------- ----------- ----------- ----------- -----------
Net loss.............. $(482,000) $(3,006,000) $(8,903,000) $(1,234,000) $(2,898,000)
========= =========== =========== =========== ===========
Historical basic and
diluted net loss per
share.................. $ (0.15) $ (1.53) $ (4.52) $ (0.63) $ (1.37)
Historical weighted
average shares
outstanding used in
per-share calculation.. 3,323,000 1,963,000 1,968,000 1,963,000 2,111,000
Pro forma basic and
diluted net loss per
share.................. $ (0.48) $ (0.15)
Weighted average shares
outstanding used in pro
forma per-share
calculation............ 18,641,000 18,784,000
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

GEOCITIES

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 IS
UNAUDITED)

<TABLE>
<CAPTION>
TOTAL
UNEARNED STOCKHOLDERS'
CONVERTIBLE ADDITIONAL DEFERRED ACCUMULATED EQUITY
PREFERRED STOCK COMMON STOCK PAID-IN COMPENSATION DEFICIT (DEFICIENCY)
------------------ ------------------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994............ $ (10,000) $ (10,000)
Issuance of common
stock............... 3,680,000 $ 49,000 49,000
Issuance of common
stock for services.. 39,000 17,000 17,000
Issuance of Series C
convertible
preferred stock in
exchange for common
stock and note
payable............. 900,000 $771,000 (1,756,000) (12,000) (373,000) 386,000
Net loss............. (482,000) (482,000)
-------- -------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at December
31, 1995............ 900,000 771,000 1,963,000 54,000 -- -- (865,000) (40,000)
Net loss............. (3,006,000) (3,006,000)
-------- -------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at December
31, 1996............ 900,000 771,000 1,963,000 54,000 -- -- (3,871,000) (3,046,000)
Additional paid in
capital related to
issuance of Series E
mandatory redeemable
convertible
preferred stock for
cash................ $ 3,196,000 3,196,000
Conversion of Series
C convertible
preferred stock to
mandatory redeemable
convertible
preferred stock..... (900,000) (771,000) (771,000)
Exercise of stock
options............. 18,000 6,000 6,000
Unearned compensation
related to stock
options granted..... 684,000 $ (684,000) --
Compensation related
to stock options
vesting............. 24,000 24,000
Net loss............. (8,903,000) (8,903,000)
-------- -------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at December
31, 1997............ -- -- 1,981,000 744,000 3,196,000 (660,000) (12,774,000) (9,494,000)
Exercise of stock
options............. 572,000 199,000 199,000
Unearned compensation
related to stock
options granted..... 565,000 (565,000) --
Compensation related
to stock options
vesting............. 40,000 40,000
Net loss............. (2,898,000) (2,898,000)
-------- -------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at March 31,
1998 (unaudited).... -- -- 2,553,000 1,508,000 3,196,000 (1,185,000) (15,672,000) (12,153,000)
Assumed conversion of
mandatory redeemable
convertible
preferred stock..... 16,672,000 40,781,000 (3,196,000) 37,585,000
Delaware
reincorporation and
change in par value
of common stock..... (42,270,000) 42,270,000 --
-------- -------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at March 31,
1998, pro forma
(unaudited)......... -- -- 19,225,000 $ 19,000 $42,270,000 $(1,185,000) $(15,672,000) $ 25,432,000
======== ======== ========== ============ =========== =========== ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

GEOCITIES

STATEMENTS OF CASH FLOWS

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 IS
UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------------ -------------------------
1995 1996 1997 1997 1998
--------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............. $(482,000) $(3,006,000) $ (8,903,000) $(1,234,000) $ (2,898,000)
Adjustments to
reconcile net loss
to net cash used in
operating
activities:
Depreciation and
amortization...... 7,000 188,000 431,000 75,000 144,000
Issuance of common
stock for
services.......... 17,000
Issuance of warrant
related to note
payable........... 51,000
Deferred
compensation
earned............ 24,000 40,000
Bad debt reserve... 98,000 76,000
Changes in
operating assets
and liabilities:
Accounts
receivable....... (7,000) (255,000) (1,042,000) (272,000) (318,000)
Prepaids and other
current assets... 12,000 (56,000) (346,000) (529,000) 203,000
Deposits and other
assets........... (214,000) (396,000) (66,000) 40,000
Accounts payable.. 90,000 309,000 639,000 40,000 (295,000)
Accrued expense... 37,000 162,000 2,095,000 159,000 1,021,000
Deferred revenue.. 110,000 115,000 41,000 129,000
--------- ----------- ------------ ----------- ------------
Net cash used in
operating
activities...... (326,000) (2,762,000) (7,234,000) (1,786,000) (1,858,000)
Cash flows used in
investing activities:
Purchase of property
and equipment....... (69,000) (130,000) (674,000) (56,000) (438,000)
Investment in
affiliate........... (645,000)
Purchases of
investments......... (24,595,000)
--------- ----------- ------------ ----------- ------------
Net cash used in
investing
activities........ (69,000) (130,000) (1,319,000) (56,000) (25,033,000)
Cash flows from
financing activities:
Payments under
capital-lease
obligations......... (2,000) (239,000) (143,000) (29,000) (79,000)
Proceeds from
exercise of common
stock options....... 49,000 6,000 199,000
Proceeds from
issuance of
mandatory redeemable
convertible
preferred stock..... 2,063,000 37,897,000 8,959,000
Subscription
receivable.......... (25,000,000) 25,000,000
Due to officer....... 349,000
Proceeds from
related-party note
payable............. 645,000
Proceeds from note
payable............. 1,100,000
Repayment on note
payable............. (1,100,000) (1,100,000)
--------- ----------- ------------ ----------- ------------
Net cash provided
by financing
activities........ 396,000 2,924,000 12,305,000 7,830,000 25,120,000
Increase (decrease)
in cash and cash
equivalents....... 32,000 3,752,000 5,998,000 (1,771,000)
Cash and cash
equivalents, beginning
of period............. 1,000 33,000 33,000 3,785,000
--------- ----------- ------------ ----------- ------------
Cash and cash
equivalents, end of
period................ $ 1,000 $ 33,000 $ 3,785,000 $ 6,021,000 $ 2,014,000
========= =========== ============ =========== ============
Supplemental disclosure
of cash-flow
information:
Cash paid during the
period for:
Interest............. $ 1,000 $ 71,000 $ 89,000 $ 25,000 $ 29,000
Income taxes......... $ 1,000 $ 1,000 $ 1,000
Supplemental disclosure
of noncash
transactions:
Equipment under
capital leases...... $ 20,000 $ 844,000 $ 94,000
Issuance of Series C
convertible
preferred stock to
Series C mandatory
redeemable
convertible
preferred stock..... $ 771,000
Issuance of Series C
convertible
preferred stock
through conversion
of amount due to
officer............. $ 386,000
Conversion of common
stock to Series C
convertible
preferred stock..... $ 385,000
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS:

GeoCities (the "Company") was incorporated as a California corporation on
December 16, 1994, and began operations in 1995. In June 1998, the Board of
Directors approved the reincorporation of the Company in the State of Delaware
and changed the par value of the Company's common stock. The Company offers a
community of personal Web sites on the Internet within 40 themed
neighborhoods. The Company's main source of revenue is from advertising, along
with other revenue streams, including fee-based premium services and commerce.
The Company's business is characterized by rapid technological change, new
product development and evolving industry standards.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Initial Public Offering and Unaudited Pro Forma Balance Sheet

In June 1998, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission ("SEC") that would
permit the Company to sell shares of the Company's common stock in connection
with a proposed initial public offering ("IPO"). If the IPO is consummated
under the terms presently anticipated, upon the closing of the proposed IPO
all of the then outstanding shares of the Company's Mandatory Redeemable
Convertible Preferred Stock will automatically convert into shares of common
stock on a one-for-one basis. The conversion of the Mandatory Redeemable
Convertible Preferred Stock has been reflected in the accompanying unaudited
pro forma balance sheet as if it had occurred on March 31, 1998.

Unaudited Interim Financial Information

The interim financial statements of the Company for the three months ended
March 31, 1997 and 1998, included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations relating to interim financial statements. In the opinion
of management, the accompanying unaudited interim financial statements reflect
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company at March 31, 1997 and
1998, and the results of its operations and its cash flows for the three
months ended March 31, 1997 and 1998.

Use of Estimates

In the normal course of preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.

At December 31, 1997, certificates of deposit totaling approximately
$255,000 were used to collateralize certain of the Company's lease
obligations, and have been included in deposits on the balance sheet.

F-7
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Investments

Investments consist of debt securities, primarily U.S. government and
corporate debt securities. These investments are stated at cost as it is the
intent of the Company to hold these securities until maturity. The investments
are recorded at their amortized cost on the balance sheet which approximates
fair value. The unamortized discount on investments is approximately $620,000
at March 31, 1998. At March 31, 1998, 95% of the investments mature in one
year or less and the remainder within thirteen months.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method based
upon the estimated useful lives of the assets, ranging from three to five
years. Leasehold improvements and equipment under capital leases are amortized
over the shorter of the estimated useful life or the life of the lease. Useful
lives are evaluated regularly by management in order to determine
recoverability in light of current technological conditions. Maintenance and
repairs are charged to expense as incurred while renewals and improvements are
capitalized. Upon the sale or retirement of property and equipment, the
accounts are relieved of the cost and the related accumulated depreciation or
amortization, with any resulting gain or loss included in the Statement of
Operations.

Long-lived Assets

The Company identifies and records impairment losses on long-lived assets
when events and circumstances indicate that such assets might be impaired. To
date, no such impairment has been recorded.

Computation of Historical Net Loss Per Share and Pro Forma Net Loss Per Share

The Company adopted SFAS No. 128, "Computation of Earnings Per Share",
during the year ended December 31, 1997. In accordance with SFAS No. 128,
basic earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares consist of the incremental common shares issuable
upon the conversion of the Mandatory Redeemable Convertible Preferred Stock
(using the if-converted method) and shares issuable upon the exercise of stock
options and warrants (using the Treasury Stock method); common equivalent
shares are excluded from the calculation if their effect is anti-dilutive.
Pursuant to SEC Staff Accounting Bulletin No. 98, common stock and convertible
preferred stock issued for nominal consideration, prior to the anticipated
effective date of an IPO, are required to be included in the calculation of
basic and diluted net loss per share, as if they were outstanding for all
periods presented. To date, the Company has not had any issuances or grants
for nominal consideration.

Diluted net loss per share for the years ended December 31, 1995, 1996 and
1997, and the three months ended March 31, 1998, does not include the effect
of options to purchase 583,000, 835,000, 3,453,000 and 3,167,000 shares of
common stock, respectively, 0, 0, 15,000 and 15,000 common stock warrants,
respectively, or 0, 4,506,000, 16,672,000 and 16,672,000 shares of Mandatory
Redeemable Convertible Preferred Stock on an "as if converted" basis,
respectively, as the effect of their inclusion is antidilutive during each
period.

F-8
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Pro forma net loss per share for the year ended December 31, 1997 and for
the three months ended March 31, 1998, assumes that the common stock issuable
upon conversion of the outstanding Mandatory Redeemable Convertible Preferred
Stock had been outstanding during each such period.

Stock-based Compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") No. 25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." Under
APB No. 25, compensation cost, if any, is recognized over the respective
vesting period based on the difference, on the date of grant, between the fair
value of the Company's common stock and the grant price.

Income Taxes

The Company utilizes the liability method of accounting for income taxes.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and the tax bases of assets and
liabilities using enacted tax rates in effect for the period in which the
differences are expected to reverse. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be
realized.

Revenue Recognition

The Company's revenues are derived principally from the sale of banner
advertisements under short-term contracts; advertising rates are dependent on
whether the impressions are for general rotation throughout the Company's Web
site or premier targeted audiences and properties within specific areas of the
Company's Web site. To date, the duration of the Company's advertising
commitments has generally averaged from one to two months. In December 1997,
the Company also began selling a combination of sponsorship and banner
advertising campaign contracts to select premier commerce partners. In
general, these premier commerce partner contracts have longer terms than
standard banner advertising contracts (generally up to one year) and involve
some integration with the Company's Web site. Advertising revenues on both
banner and premier commerce partner contracts are recognized ratably in the
period in which the advertisement is displayed, provided that no significant
Company obligations remain and collection of the resulting receivable is
probable. Company obligations typically include the guarantee of a minimum
number of "impressions" or times that an advertisement appears in pages viewed
by the users of the Company's online properties.

In addition to advertising revenues, the Company derives revenues from its
GeoPlus program, a premium service for its members (introduced in late 1996)
and GeoShops, a commerce service for its members (introduced in March 1998).
These services require the payment of monthly fees by the customers; revenues
are recognized on a monthly basis as the fees become due. GeoPlus revenues
accounted for 4%, 7% and 12% of revenues for the years ended December 31, 1996
and 1997, and the three months ended March 31, 1998, respectively; to date,
the revenues from GeoShops have been immaterial. The Company also has revenue
sharing agreements with its premier commerce partners. These revenues are
recognized by the Company upon notification by the premier commerce partners
of revenues earned by the Company, and to date, have been immaterial.

Barter transactions are recorded at the lower of estimated fair value of the
goods or services received or the estimated fair value of the advertisements
given. To date, barter transactions have been immaterial.

F-9
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Advertising

Advertising costs are expensed as incurred, and amounted to approximately
$66,000, $196,000 and $1,742,000 for the years ended December 31, 1995, 1996
and 1997, respectively, and $293,000 for the three months ended March 31,
1998.

Product Development

Product development costs are expensed as incurred.

Recent Accounting Pronouncements

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income generally represents all changes in
shareholders' equity during the period except those resulting from investments
by, or distributions to, shareholders. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of earlier
periods presented. SFAS No. 130 had no impact on the Company's financial
statements

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that a public enterprise reports information about operating segments
in annual financial statements, and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997 and requires restatement of earlier periods presented.
Management is currently evaluating the requirements of SFAS No. 131.

Stock Split

In January 1996, September 1997 and June 1998, the Company authorized and
implemented 1,443-for-one, two-for-one and three-for-two stock splits,
respectively. The share information in the accompanying financial statements
has been retroactively restated to reflect the effect of these stock splits.

3. CONCENTRATION OF CREDIT RISK:

Financial instruments which subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents, short-term investments
and trade accounts receivable. The Company maintains cash and cash equivalents
with various domestic financial institutions. The Company performs periodic
evaluations of the relative credit standing of these institutions. From time
to time, the Company's cash balances with any one financial institution may
exceed Federal Deposit Insurance Corporation insurance limits.

The Company's customers are concentrated in the United States. The Company
performs ongoing credit evaluations, generally does not require collateral and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of customers, historical trends and other information; to
date, such losses have been within management's expectations.

F-10
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

For the year ended December 31, 1996, two customers accounted for
approximately 14% and 10%, respectively, of all revenues generated by the
Company and 18% and 0%, respectively, of accounts receivable at December 31,
1996.

For the year ended December 31, 1997, one customer accounted for 12% of all
revenues generated by the Company, and 12% of accounts receivable at December
31, 1997.

For the three months ended March 31, 1998, one customer accounted for 13% of
all revenues generated by the Company and 13% of accounts receivable at March
31, 1998.

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1997 1998
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment, including assets
under capital leases of $672,000,
$766,000 and $766,000 for 1996, 1997
and 1998, respectively................. $ 794,000 $1,399,000 $1,760,000
Furniture and fixtures, including assets
under capital leases of $172,000,
$172,000 and $172,000 for 1996, 1997
and 1998, respectively................. 200,000 292,000 339,000
Leasehold improvements.................. 80,000 151,000 181,000
---------- ---------- ----------
1,074,000 1,842,000 2,280,000
Less, accumulated depreciation and
amortization, including amounts related
to assets under capital leases of
$145,000, $459,000 and $539,000 for
1996, 1997 and 1998, respectively...... (195,000) (626,000) (769,000)
---------- ---------- ----------
Total............................... $ 879,000 $1,216,000 $1,511,000
========== ========== ==========
</TABLE>

5. RELATED-PARTY TRANSACTIONS:

On November 6, 1997, the Company and SOFTBANK Corporation of Japan
("SOFTBANK"), the parent company of an investor in the Company, formed a joint
venture called GeoCities Japan Corporation ("GeoCities Japan") to create and
manage a Japanese version of GeoCities. In accordance with the joint venture
agreement ("Agreement"), the Company purchased 40% of GeoCities Japan for
approximately $645,000 and licensed certain intellectual properties for the
purpose of localizing the Japanese version of GeoCities to GeoCities Japan.
The Agreement remains in effect perpetually, provided that, if as of April 1,
2001, or any April 1 thereafter; (i) GeoCities Japan has sustained net losses
for the four consecutive fiscal quarters, and (ii) GeoCities and SOFTBANK
differ with respect to the future business plan of GeoCities Japan, then each
party shall have the right to terminate the Joint Venture with 90-days notice.

The Company's investment of approximately $645,000 was funded through a loan
from SOFTBANK. Pursuant to the terms of the loan agreement, the loan bears
interest at 5.5 % per annum and is repayable upon occurrence of a Significant
Financing Event, which is defined as a non-U.S. IPO or private placement that
raises at least 1.5 billion yen for GeoCities Japan. In the event that
GeoCities Japan does not have a Significant Financing Event on or prior to
March 31, 2000, SOFTBANK will forgive the repayment of the loan. Interest
expense and accrued interest for the year ended December 31, 1997, were each
$6,000.

F-11
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

In consideration of the licenses granted, GeoCities Japan is required to pay
the Company an amount equal to 3% of total revenue obtained by GeoCities Japan
within 30 days of the end of each quarter. The license expires 20 years from
the date of the Agreement, unless the Agreement is terminated earlier. Upon
termination, GeoCities Japan will cease to use and distribute all licensed
properties. Royalty payments for the year ended December 31, 1997, were
insignificant.

The investment is being accounted for under the equity method and is
included in other assets at December 31, 1997. The loss on affiliate recorded
for the three months ended March 31, 1998, was approximately $95,000.

Advertising revenues at December 31, 1997 and March 31, 1998, include
$107,000 and $41,000, respectively, in revenues received from an entity that
is controlled by a significant shareholder of the Company. At December 31,
1997 and March 31, 1998, $0 and $33,000, respectively, of these amounts are
included in accounts receivable.

In April 1998, the Board of Directors also approved a loan of $100,000 to an
officer/director of the Company.

In December 1997, in conjunction with its financing activities, the Company
entered into a co-distribution and commerce agreement with Yahoo!, positioning
GeoCities as Yahoo!'s premier third-party provider of free, personal, non-
commercial Web page hosting services, and intended to increase traffic and
membership of both partners in addition to offering GeoCities Homesteaders an
array of free personalized services on Yahoo!.

6. LINE OF CREDIT:

In August 1997, the Company executed a $2,000,000 revolving line of credit
(the "Line") with a commercial bank. Pursuant to the agreement, the Line
matures on December 1, 1998, bears interest at the bank's prime rate of
interest, plus 0.50% (8.5% at December 31, 1997), and is collateralized by
substantially all of the Company's assets. The Company is required to comply
with certain financial covenants, as defined in the agreement, which include
tangible effective net-worth and quick-ratio agreements. In connection with
the Line, the Company issued a warrant to the bank to purchase up to 15,228
shares of the Company's common stock, the exercise price of which is currently
at $6.17 per share. The warrant may be exercised at any time prior to
September 22, 2004.

In May 1998, the Company negotiated an increase of the Line to $10,000,000,
including a $7,000,000 revolving facility for working capital and $3,000,000
lease facility, extended the maturity to December 31, 1999, and reduced the
interest rate to prime for the revolving facility and prime plus 0.75% for the
lease facility; all other terms substantially remained the same. In addition,
the commitment letter also includes a non-revolving line of credit for
$3,000,000, which bears interest at the bank's prime rate plus 0.75% per year,
and matures on May 12, 1999, if not renewed. At December 31, 1997 and March
31, 1998, there have been no borrowings under either agreement.

F-12
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. COMMITMENTS AND CONTINGENCIES:

Leases

The Company leases its facilities and certain computer and office equipment
under noncancelable leases for varying periods through 2002. The Company's
lease obligations are collateralized by certain assets at December 31, 1997.
The following are the minimum lease obligations under these leases at December
31, 1997:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
<S> <C> <C>
1998.................................................... $443,000 $1,442,000
1999.................................................... 172,000 1,038,000
2000.................................................... 10,000 297,000
2001.................................................... -- 207,000
2002.................................................... -- 50,000
-------- ----------
Minimum lease payments.................................... 625,000 $3,034,000
==========
Less: Amount representing interest........................ (49,000)
--------
Present value of minimum lease payments................... 576,000
Less: Current portion..................................... 393,000
--------
Long-term portion......................................... $183,000
========
</TABLE>

Rent expense pertaining to operating leases for the years ended December 31,
1995, 1996 and 1997, was approximately $28,000, $229,000 and $1,100,000,
respectively.

Employment Agreements

The Company maintains employment agreements with certain executive officers
of the Company. The employment agreements provide for minimum salary levels,
incentive compensation and severance benefits, among other items.

GeoRewards Program

During 1996, the Company created a marketing program to reward members of the
Company's online community ("Homesteaders") for various activities, allowing
them to earn GeoPoints. Homesteaders may redeem GeoPoints to upgrade their Web
site or purchase goods from the Company's GeoStore. At December 31, 1996 and
1997, the Company has accrued $38,000 and $463,000 for possible future
redemption of GeoPoints; these amounts are included in Accrued Expenses.

Contingencies

From time to time, the Company has been party to various litigation and
administrative proceedings relating to claims arising from its operations in
the normal course of business. Management believes that the resolution of these
matters will not have a material adverse effect on the Company's business,
results of operations, financial condition and cash flows.

F-13
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. CAPITALIZATION

As of December 31, 1997, the Company had six series of Mandatory Redeemable
Convertible Preferred Stock (collectively "Preferred Stock") authorized and
outstanding. The holders of the various series of Preferred Stock generally
have the same rights and privileges; significant differences are discussed
below.

The holders of the Preferred Stock are entitled to a discretionary
noncumulative dividend as specified below which is mandatory in the event of a
liquidation (not included in the liquidation preference below), and are
entitled to the number of votes equal to the number of shares of common stock
that could be converted on the date of the vote. Upon liquidation, the holders
of the Preferred Stock receive, prior and in preference to the holders of
common stock their liquidation preference plus accrued dividends at the stated
rate, from the date of issuance to the date payment is made available.
Redemption, at the option of the holders of Preferred Stock, may be elected
beginning on January 1, 2001 at which time, the redemption preference plus
seven percent per annum, on a cumulative basis is due. At the option of the
holders of Preferred Stock, each share of Preferred Stock is convertible at
the stated conversion price per share, subject to adjustment as defined in the
Certificate of Incorporation.

During the year ended December 31, 1995, the Company issued 900,000 shares
of Convertible Preferred Stock Series C in consideration for $0.8567 per share
in the form of the cancellation of shares of common stock and a note payable
by the Company's Chairman and Founder. In connection with the Series F Stock
issuance, the Convertible Preferred Stock Series C became Mandatory Redeemable
Convertible Preferred Stock.

During the year ended December 31, 1996 the Company issued 2,331,000 and
2,175,000 shares of Series A Stock and Series B Stock for $1,000,000 and
$1,100,000, respectively. During January and February 1997, the Company issued
7,627,119 shares of Series D Stock for approximately $5,085,000. In October
and December 1997, the Company issued 1,071,423 and 610,702 shares of Series E
Stock at $4.67 and $9.90 per share, respectively for total cash consideration
of $9,750,000 and 20,242 shares of Yahoo! stock valued at approximately
$1,300,000 which resulted in the recording of a subscription receivable for
approximately $6,000,000 at December 31, 1997. The subscription receivable was
collected in January 1998 and the Yahoo! stock was subsequently sold.

In December 1997, the Company sold 1,914,432 shares of Series F Stock for
approximately $19,000,000 which resulted in the recording of a subscription
receivable at December 31, 1997. The subscription receivable was collected in
January 1998.

Rights of Preferred Stock as of December 31, 1997

<TABLE>
<CAPTION>
DIVIDEND LIQUIDATION REDEMPTION
PREFERENCE PREFERENCE PREFERENCE
---------- ----------- ----------
<S> <C> <C> <C>
Series A Stock................................ $0.03 $0.429 $0.429
Series B Stock................................ $0.037 $0.5057 $0.5057
Series C Stock................................ -- $0.4283 $0.4283
Series D Stock................................ $0.083 $1.18 $1.18
Series E Stock................................ $0.33 $4.67 $4.67
Series F Stock................................ $0.69 $9.90 $9.90
</TABLE>

F-14
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

As of December 31, 1997, the holders of Series A through F Stock may, at
their option, on each of January 1, 2001, January 1, 2002 and January 1, 2003,
require the Company to redeem shares equal to one-third of the total number of
shares of all Preferred Stock outstanding as of January 1, 2001. Any shares of
Preferred Stock to be redeemed shall be redeemed ratably among all holders of
Preferred Stock, based upon the respective redemption price of such shares.
Additionally, the holders of not less than 80% of the Preferred Stock then
outstanding, voting as a single class, may, at any time on or after December
31, 1998, require the Company to redeem all of the shares of Preferred Stock
in the event that the Company has not by such time consummated (i) a
"Qualified Public Offering" of its securities (as defined in the Certificate
of Incorporation), or (ii) a sale of the Company that meets certain
requirements.

Each share of Series A through F Stock shall be converted into common stock
automatically upon the closing of the sale of the Company's securities in a
firm commitment underwritten public offering from which the Company receives
gross proceeds of not less than $20,000,000 and which is a Qualified Public
Offering as defined in the Certificate of Incorporation.

At December 31, 1997 and March 31, 1998, the Company has reserved
approximately 16,672,500 shares of common stock for the future conversion of
the Series A through F Preferred Stock.

Warrants

In connection with the Series D Stock issuance, the Company issued a warrant
to a bank to purchase 48,729 of the Company's Series D Preferred Stock at
$1.18 per share, exercisable at any time prior to January 12, 2002. On
December 31, 1997, the bank converted this warrant (on a net basis) and the
Company issued 42,919 shares of Series D Preferred Stock. The Bank immediately
sold these shares in connection with the Series E and F Preferred Stock
issuances.

9. INCOME TAXES:

The primary components of temporary differences which gave rise to deferred
taxes at December 31 are:

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................. $ 1,423,000 $ 4,639,000
Bad debt expense................................. -- 40,000
Accrued expenses................................. 7,000 321,000
Other............................................ -- 1,000
----------- -----------
Total deferred tax assets...................... 1,430,000 5,001,000
Valuation allowance.............................. (1,401,000) (4,958,000)
----------- -----------
Net deferred tax assets........................ 29,000 43,000
----------- -----------
Deferred tax liabilities:
Depreciation and amortization.................... (29,000) (43,000)
----------- -----------
Total deferred tax liabilities................. (29,000) (43,000)
----------- -----------
Net............................................ $ -- $ --
=========== ===========
</TABLE>

F-15
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

As a result of the Company's loss history, management believes a valuation
allowance for the entire net deferred tax assets, after considering deferred
tax liabilities, is required. The change in the valuation allowance was an
increase of $3,557,000 in 1997. As of December 31, 1997, the Company had
federal and state net operating loss carryforwards of approximately
$11,250,000 and $10,650,000, respectively. Federal and state net operating
loss expirations begin in 2010 and 2002, respectively. Due to changes in
ownership, the Company may be limited in the annual utilization of its net
operating loss carryforwards.

10. STOCK OPTIONS:

From inception through December 31, 1997, the Company has been authorized to
and has granted a total of 4,166,000 options to purchase its common stock; in
April and May 1998, the Board of Directors approved an increase in the total
number of shares issuable under the plan by 1,675,000 and 450,000,
respectively, increasing the total available to 6,291,000 at May 31, 1998.

In 1997, the Company adopted the 1997 Stock Option Plan (the "Plan"), which
provides for issuance of both non-statutory and incentive stock options to
employees, officers, directors and consultants of the Company. Incentive stock
options may be granted at no less than 100% of the fair market value of the
Company's common stock on the date of grant as determined by the Board of
Directors (110% if granted to an employee who owns 10% or more of the common
stock). Options granted to date generally vest ratably over a four-year period
from the date of grant and are generally exercisable for a period of no longer
than seven years from the date of grant (five years if granted to an
individual who owns 10% or more of the common stock). In the event option
holders cease to be employed by the Company, all unvested options are
forfeited and, provided that the employee's employment has not been terminated
for cause, all vested options may be exercised within a period of up to 90
days after termination; the Company and the Company's preferred stockholders
have rights to repurchase any shares purchased through the exercise of an
option.

In connection with its Series D stock offering in early 1997, the Company
granted options to purchase 750,000 shares of its common stock at an exercise
price of $1.18 per share to CMG@Ventures; these options vested immediately and
are exercisable by January 13, 2004. At that time, the Company also granted an
option to purchase 750,000 shares of its common stock at an exercise price of
$1.18 per share to certain officers, directors and consultants to the Company.
These options generally vest over a four year period from the date of grant
and are generally exercisable by January 13, 2004. In certain circumstances,
the vesting of these options may accelerate, and there are certain
participation rights in the event of a liquidation.

F-16
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

A summary of the status of the Company's stock options, as of December 31,
1996 and 1997, and the changes during the years ended on those dates is
presented below:

<TABLE>
<CAPTION>
1996 1997
------------------ --------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------- --------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year....... 583,000 $0.01 835,000 $0.21
Granted--price equals fair value..... 273,000 $0.33 1,986,000 $0.99
Granted--less than fair value........ -- -- 980,000 $1.08
Exercised............................ -- -- (18,000) $0.33
Canceled............................. (21,000) $0.33 (328,000) $0.47
------- ---------
Outstanding at year-end................ 835,000 $0.21 3,455,000 $0.88
======= =========
Options exercisable at year-end........ 1,454,000 $0.69
Options available for future grant..... 693,000
</TABLE>

At December 31, 1997 and May 31, 1998, the Company had reserved a total of
4,148,000 and 5,670,000 shares of common stock for issuance to its stock
option holders.

In connection with its grants of options, the Company has recognized
unearned deferred compensation expense of $684,000 for the year ended December
31, 1997. This amount will be amortized over the vesting periods ranging from
48 to 72 months from the date of grant; $24,000 and $40,000 was expensed
during the year ended December 31, 1997 and the period ended March 31, 1998,
respectively.

Between January and May 1998, the Company granted options to purchase
2,377,000 shares of its common stock to employees and officers of the Company.
In conjunction with these grants, the Company recognized unearned deferred
compensation expense of $6,674,000 to be amortized over 48 to 72 months from
the date of grant.

The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- -------------------------
WEIGHTED
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
-------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
$0.01 583,000 5.00 $0.01 583,000 $0.01
$0.33--$0.59 558,000 6.14 $0.42 35,000 $0.35
$1.00--$1.67 2,314,000 6.29 $1.17 836,000 $1.18
--------- ---------
3,455,000 1,454,000
========= =========
</TABLE>

The fair value of options granted during 1995, 1996 and 1997 is estimated as
$0, $0 and $50,000, respectively, on the dates of grants using the minimum
value method with the following assumptions: (i) dividend yield of 0%, (ii)
expected volatility of 0%, (iii) weighted-average risk-free interest rate
ranging from 6.04% to 6.8% for 1996 and 5.8% to 6.5% for 1997, (iv) weighted-
average expected life of five years for 1996 and 1997, and (v) assumed
forfeiture rate of 10% for 1996 and 1997.

F-17
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company applies APB No. 25 in accounting for its stock options granted to
employees and accordingly, no compensation expense has been recognized in the
financial statements (except for those options issued with exercise prices at
less than fair market value at date of grant). Had the Company determined
compensation expense based on the fair value at the grant date for its stock
options issued to employees under SFAS No. 123, the Company's net loss would
have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1995 1996 1997
--------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss..................... As reported $(482,000) $(3,006,000) $(8,903,000)
========= =========== ===========
Pro forma $(482,000) $(3,006,000) $(8,950,000)
========= =========== ===========
Basic net loss per common
share....................... As reported $ (0.15) $ (1.53) $ (4.52)
========= =========== ===========
Pro forma $ (0.15) $ (1.53) $ (4.55)
========= =========== ===========
</TABLE>

Pro forma net loss reflects compensation expense under SFAS No. 123 only for
options granted for the years ended December 31, 1995, 1996 and 1997. The
insignificant impact of applying SFAS No. 123 is not indicative of future
amounts.

11. RETIREMENT PLAN:

Effective July 1, 1997, the Company established a qualified 401(k) Profit
Sharing Plan (the "Plan") available to all employees who meet the Plan's
eligibility requirements. Employees may elect to contribute from 1% to 18% of
their eligible earnings to the Plan. This defined contribution plan provides
that the Company will, at its discretion, make contributions to the Plan on a
periodic basis. Additionally, the employer may match 33-1/3% of the first 6% of
the employees' contributions, which amounts vest over five years. Terminations
and forfeitures from the Plan are allocated to Plan participants at year-end.
The Company made contributions to the Plan of approximately $10,000 in 1997.

F-18
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters, for whom Goldman, Sachs & Co., Donaldson, Lufkin &
Jenrette Securities Corporation, and Hambrecht & Quist LLC are acting as
representatives, has severally agreed to purchase from the Company, the
respective number of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co...........................................
Donaldson, Lufkin & Jenrette Securities Corporation...........
Hambrecht & Quist LLC.........................................
--------
Total.......................................................
========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the initial public offering price and other selling terms
may from time to time be varied by the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the shares of Common Stock
offered.

The Company, its directors, officers, stockholders and holders of options to
purchase Common Stock have agreed that, subject to certain exceptions, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or of any other securities of the Company (other than, in the case of
the Company, pursuant to stock incentive and employee stock purchase plans
existing on the date of this Prospectus) which are substantially similar to
the shares of Common Stock or which are convertible or exchangeable into
securities which are substantially similar to the shares of Common Stock
without the prior written consent of the

U-1
<PAGE>

representatives, except for the shares of Common Stock offered in connection
with the offering; provided, that one affiliate of the Company who is subject
to a lock-up agreement and the volume restrictions of Rule 144 has been
authorized by the representatives of the Underwriters to sell up to
$1.0 million of Common Stock commencing 91 days after the date of this
Prospectus.

Prior to the offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be negotiated among the
Company and the representatives. Among the factors to be considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuations of companies in related businesses.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed 5% of the total number of shares of Common
Stock offered by them.

In connection with the offering, the Underwriters may purchase and sell
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the Underwriters in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Common Stock; and
syndicate short positions created by the Underwriters involve the sale by the
Underwriters of a greater number of shares of Common Stock than they are
required to purchase from the Company in the offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the securities sold in the
offering for their account may be reclaimed by the syndicate if such shares of
Common Stock are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that
might otherwise prevail in the open market in the absence of such activities.
These transactions may be effected on the Nasdaq National Market, in the over-
the-counter market or otherwise, and these activities, if commenced, may be
discontinued at any time.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act, subject to
certain limitations.

U-2
<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 23
Dividend Policy.......................................................... 23
Capitalization........................................................... 24
Dilution................................................................. 25
Selected Financial Data.................................................. 26
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business................................................................. 35
Management............................................................... 47
Certain Transactions..................................................... 59
Principal Stockholders................................................... 61
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 67
Legal Matters............................................................ 68
Experts.................................................................. 68
Additional Information................................................... 69
Change in Accountants.................................................... 69
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>

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

THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO-
SPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PRO-
SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.

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

GEOCITIES

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)

[GEOCITIES LOGO]

GOLDMAN, SACHS & CO.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

HAMBRECHT & QUIST

REPRESENTATIVES OF THE UNDERWRITERS

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale
and distribution of the securities being registered. All amounts are estimated
except the Securities and Exchange Commission and NASD fees. All of the
expenses below will be paid by the Company.

<TABLE>
<CAPTION>
ITEM
----
<S> <C>
Registration fee................................................. $21,373
NASD filing fee.................................................. 7,745
Nasdaq National Market listing fee............................... *
Blue sky fees and expenses....................................... *
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Transfer Agent and Registrar fees................................ *
Miscellaneous.................................................... *
-------
Total........................................................ $ *
=======
</TABLE>
--------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation (the "Certificate") provides
that, except to the extent prohibited by the Delaware General Corporation Law
(the "DGCL"), the Company's directors shall not be personally liable to the
Company or its stockholders for monetary damages for any breach of fiduciary
duty as directors of the Company. Under the DGCL, the directors have a
fiduciary duty to the Company which is not eliminated by this provision of the
Certificate and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the
DGCL for breach of the director's duty of loyalty to the Company, for acts or
omissions which are found by a court of competent jurisdiction to be not in
good faith or involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
prohibited by DGCL. This provision also does not affect the directors'
responsibilities under any other laws, such as the Federal securities laws or
state or Federal environmental laws. The Company has obtained liability
insurance for its officers and directors.

II-1
<PAGE>

criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Company, or is or was serving at
the request of the Company as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.

The Company, with the approval of the Board of Directors, intends to obtain
directors' and officers' liability insurance prior to the effectiveness of
this offering.

There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company in which indemnification will be
required or permitted. Moreover, the Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification. The Company believes that the foregoing indemnification
provisions and agreements are necessary to attract and retain qualified
persons as directors and executive officers.

The Underwriting Agreement (the form of which is filed as Exhibit 1.1
hereto) provides for indemnification by the Underwriters of the Company and
its officers and directors, and by the Company of the Underwriters, for
certain liabilities arising under the Securities Act or otherwise.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The following is a summary of transactions by the Company since January 1,
1995 involving sales of the Company's securities that were not registered
under the Securities Act:

(1) In January 1995, the Company issued and sold an aggregate of
3,679,650 shares of Common Stock to David C. Bohnett at a price per share
of $0.0134.

(2) In December 1995, the Company issued for services rendered an
aggregate of 39,000 shares of Common Stock to certain individuals at a
price per share of $0.214.

(3) In January 1996, the Company issued and sold an aggregate of
2,331,000 shares of Series A Preferred Stock to CMG@Ventures at a price per
share of $0.429. Each share of Series A Preferred Stock will convert into
one share of Common Stock upon consummation of the offering.

(4) In December 1995, the Company issued 900,000 shares of Series C
Preferred Stock in consideration for $0.8567 per share in the form of the
cancellation of shares of Common Stock and a note payable. Each share of
Series C Preferred Stock will convert into one share of Common Stock upon
consummation of the offering.

(5) In July 1996, the Company issued and sold an aggregate of 2,175,000
shares of Series B Preferred Stock to CMG@Ventures at a price per share of
$0.5057. Each share of Series B Preferred Stock will convert into one share
of Common Stock upon consummation of the offering.

(6) In January 1997, the Company issued a warrant to purchase 48,729
shares of Series D Preferred Stock at a price per share of $1.18 to
Cupertino Bank, of which 42,919 shares of Series D Preferred Stock were
subsequently issued. Each share of Series D Preferred Stock will convert
into one share of Common Stock upon consummation of the offering.

(7) In January 1997 and February 1997, the Company issued and sold an
aggregate of 7,627,119 shares of Series D Preferred Stock to CMG@Ventures,
SOFTBANK Holdings Inc., Chase Venture Capital Associates, L.P., the
Flatiron Fund LLC, InnoCal, L.P. and Intel Corporation at a price per share
of $1.18. Each share of Series D Preferred Stock will convert into one
share of Common Stock upon consummation of the offering.

(8) In September 1997, the Company issued a warrant to purchase 15,228
shares of Common Stock at a price per share of $6.57 (subsequently adjusted
to $6.17) to Comerica Bank-California.

II-2
<PAGE>

(9) In October 1997, the Company issued and sold an aggregate of
1,071,423 shares of Series E Preferred Stock to CMG@Ventures II, LLC,
SOFTBANK Holdings Inc., Chase Venture Capital Associates, L.P., the
Flatiron Fund LLC, InnoCal, L.P. and Intel Corporation at a price per share
of $4.67. Each share of Series E Preferred Stock will convert into one
share of Common Stock upon consummation of the offering.

(10) In December 1997, the Company issued and sold an aggregate of
610,702 shares of Series E Preferred Stock to SOFTBANK Holdings Inc. at a
price per share of $9.90. Each share of Series E Preferred Stock will
convert into one share of Common Stock upon consummation of the offering.

(11) Effective December 1997, the Company sold an aggregate of 1,914,432
shares of Series F Preferred Stock to Yahoo! Inc. and SOFTBANK Holdings
Inc. at a price per share of $9.90. Each share of Series F Preferred Stock
will convert into one share of Common Stock upon consummation of the
offering.

(12) Since January 1, 1995, the Company has issued incentive stock
options and nonqualified stock options to purchase Common Stock under
individual stock option agreements, the Predecessor Plan and its 1998
Incentive Plan to eligible officers, directors, consultants and employees
of the Company as described in the Prospectus. During the period referred
to above, the Company issued 620,437 shares of Common Stock pursuant to the
exercise of options, including options under each Plan.

(13) In connection with the reincorporation of the Company from
California to Delaware in June 1998, the Company intends to issue
shares of its Common Stock and , , , , , and
shares of its Series A, B, C, D, E and F Preferred Stock, respectively, in
exchange for the issued and outstanding capital stock of its predecessor
corporation. In addition, in connection with such reincorporation, all
options and warrants to purchase shares of Common Stock of the Company's
California predecessor will be converted into options or warrants to
purchase shares of Common Stock of the Company.

None of the foregoing transactions involved any public offering, and the
Company believes that each transaction was exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof,
Regulation D promulgated thereunder or Rule 701 pursuant to compensatory
benefit plans and contracts relating to compensation as provided under such
Rule 701, or with respect to paragraph (13) above, in reliance on Rule
145(a)(2) under the Securities Act. The recipients in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof,
and appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Company.

II-3
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

The following Exhibits are attached hereto and incorporated herein by
reference:

<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation.*
3.2 Amended and Restated Certificate of Incorporation of the Company.*
3.3 Amended and Restated Certificate of Incorporation of the Company to be
adopted as of the consummation of the offering.*
3.4 Bylaws of the Company.*
3.5 Amended and Restated Bylaws of the Company.*
4.1 Specimen certificate representing shares of Common Stock of the
Company.*
4.2 Warrant to purchase Common Stock of the Company dated September 22,
1997.*
5.1 Opinion of Brobeck, Phleger & Harrison LLP.*
10.1 Employment Agreement dated January 1, 1996, as amended, by and between
the Company and David C. Bohnett.*
10.3 Employment Agreement dated as of November 3, 1997, between the Company
and Stephen L. Hansen.*
10.4 Employment Offer Letter dated as of April 9, 1998, between the Company
and Thomas R. Evans.*
10.5 Employment Offer letter dated as of September 5, 1997, between the
Company and Michael G. Barrett.*
10.6 Advertising Agreement dated November 5, 1997, between the Company and
Amazon.com.*+
10.7 Advertising Agreement dated January 5, 1998, between the Company and
CDnow.*+
10.8 Advertising Agreement dated December 15, 1997, between the Company and
Egghead, Inc.*+
10.9 Advertising Agreement dated January , 1998, between the Company and
First USA.*+
10.10 Codistribution Agreement effective as of December 31, 1997, between
the Company and Yahoo! Inc.*+
10.11 Master Services Agreement dated November 7, 1997, between the Company
and Exodus Communications, Inc.*+
10.12 Joint Venture Agreement dated as of November 6, 1997, by and between
the Company and SOFTBANK Corporation.*
10.13 Third Amended and Restated Rights Agreement dated December 31, 1997,
among the Company and certain of its stockholders, as amended.*
10.14 Form of Indemnification Agreement for Officers and Directors of the
Company.*
10.15 1997 Stock Incentive Plan, together with Form of Stock Option
Agreement (and related Notice of Grant of Option) and Stock Purchase
Agreement.*
10.16 1998 Stock Option Plan, together with Form of Stock Option Agreement
(and related Notice of Grant of Option) and Stock Purchase Agreement.*
10.17 1998 Employee Stock Purchase Plan.*
10.18 Stock Option Agreement dated January 13, 1997 by and between the
Company and CMG@Ventures.*
10.19 Form of non-plan Stock Option Agreement.*
10.20 Revolving Credit Loan & Security Agreement dated August 6, 1997, as
modified.*
10.21 License Agreement with GeoCities Japan dated November 6, 1997.*
10.22 Promissory Note dated April 9, 1998.*
10.23 Preferred Stock Purchase Agreement dated as of January 10, 1997.*
10.24 Preferred Stock Purchase Agreement dated as of October 6, 1997.*
10.25 Stock Purchase Agreement dated as of December 31, 1997.*
10.26 Standard Office lease dated May 13, 1996 by and between the Company
and Maury Herman, as trustee of the Maury Herman Family Trust #1.*
11.1 Statement Regarding Computation of Earnings per Share.*
16.1 Letter from Arthur Andersen LLP dated June 5, 1998.
</TABLE>

II-4
<PAGE>

<TABLE>
<C> <S>
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.*
23.2 Consent of Brobeck, Phleger & Harrison LLP (contained in Exhibit 5.1).*
24.1 Power of Attorney (contained on signature page on page II-6).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment will be sought with respect to certain portions of
this agreement. Such portions will be omitted from this filing and will be
filed separately with the Securities and Exchange Commission.

(B) FINANCIAL STATEMENT SCHEDULES

All such Schedules have been omitted because the information required to
be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS

The Company hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreements certificates in such denominations
and registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned Company hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus as filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Monica, State of
California, on the 11th day of June, 1998.

GeoCities

/s/ Stephen L. Hansen
By: _________________________________
STEPHEN L. HANSEN
CHIEF OPERATING OFFICER AND
CHIEF FINANCIAL OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and
appoint David C. Bohnett and Stephen L. Hansen, and each of them, his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, or any related registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and
to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED:

SIGNATURE TITLE DATE
--------- ----- ----

/s/ David C. Bohnett Chairman of the June 11, 1998
- ------------------------------------- Board and Secretary
DAVID C. BOHNETT

/s/ Thomas R. Evans Chief Executive June 11, 1998
- ------------------------------------- Officer, President
THOMAS R. EVANS and Director
(principal
executive officer)

/s/ Stephen L. Hansen Chief Operating June 11, 1998
- ------------------------------------- Officer and Chief
STEPHEN L. HANSEN Financial Officer
(principal
financial and
accounting officer)

/s/ Jerry D. Colonna Director June 11,1998
- -------------------------------------
JERRY D. COLONNA

/s/ Eric C. Hippeau Director June 11, 1998
- -------------------------------------
ERIC C. HIPPEAU

/s/ Harry D. Lambert Director June 11, 1998
- -------------------------------------
HARRY D. LAMBERT

/s/ Peter H. Mills Director June 11, 1998
- -------------------------------------
PETER H. MILLS

/s/ David S. Wetherell Director June 11, 1998
- -------------------------------------
DAVID S. WETHERELL

II-6
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT DESCRIPTION PAGE
------- -------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation.*
3.2 Amended and Restated Certificate of Incorporation of
the Company.*
3.3 Amended and Restated Certificate of Incorporation of
the Company to be adopted as of the consummation of the
offering.*
3.4 Bylaws of the Company.*
3.5 Amended and Restated Bylaws of the Company.*
4.1 Specimen certificate representing shares of Common
Stock of the Company.*
4.2 Warrant to purchase Common Stock of the Company dated
September 22, 1997.*
5.1 Opinion of Brobeck, Phleger & Harrison LLP.*
10.1 Employment Agreement dated January 1, 1996, as amended,
by and between the Company and David C. Bohnett.*
10.3 Employment Agreement dated as of November 3, 1997,
between the Company and Stephen L. Hansen.*
10.4 Employment Offer Letter dated as of April 9, 1998,
between the Company and Thomas R. Evans.*
10.5 Employment Offer letter dated as of September 5, 1997,
between the Company and Michael G. Barrett.*
10.6 Advertising Agreement dated November 5, 1997, between
the Company and Amazon.com.*+
10.7 Advertising Agreement dated January 5, 1998, between
the Company and CDnow.*+
10.8 Advertising Agreement dated December 15, 1997, between
the Company and Egghead, Inc.*+
10.9 Advertising Agreement dated January , 1998, between
the Company and First USA.*+
10.10 Codistribution Agreement effective as of December 31,
1997, between the Company and Yahoo! Inc.*+
10.11 Master Services Agreement dated November 7, 1997,
between the Company and Exodus Communications, Inc.*
10.12 Joint Venture Agreement dated as of November 6, 1997,
by and between the Company and SOFTBANK Corporation.*
10.13 Third Amended and Restated Rights Agreement dated
December 31, 1997, among the Company and certain of its
stockholders, as amended.*
10.14 Form of Indemnification Agreement for Officers and
Directors of the Company.*
10.15 1997 Stock Incentive Plan, together with Form of Stock
Option Agreement (and related Notice of Grant of
Option) and Stock Purchase Agreement.*
10.16 1998 Stock Option Plan, together with Form of Stock
Option Agreement (and related Notice of Grant of
Option) and Stock Purchase Agreement.*
10.17 1998 Employee Stock Purchase Plan.*
10.18 Stock Option Agreement dated January 13, 1997 by and
between the Company and CMG@Ventures.*
10.19 Form of non-plan Stock Option Agreement.*
10.20 Revolving Credit Loan & Security Agreement dated August
6, 1997, as modified.*
10.21 License Agreement with GeoCities Japan dated November
6, 1997.*
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT DESCRIPTION PAGE
------- -------------------- ------------
<C> <S> <C>
10.22 Promissory Note dated April 9, 1998.*
10.23 Preferred Stock Purchase Agreement dated as of January
10, 1997.*
10.24 Preferred Stock Purchase Agreement dated as of October
6, 1997.*
10.25 Stock Purchase Agreement dated as of December 31,
1997.*
10.26 Standard Office lease dated May 13, 1996 by and between
the Company and Maury Herman, as trustee of the Maury
Herman Family Trust #1.*
11.1 Statement Regarding Computation of Earnings per Share.*
16.1 Letter from Arthur Andersen LLP dated June 5, 1998.
23.1 Consent of Coopers & Lybrand L.L.P., Independent
Accountants.*
23.2 Consent of Brobeck, Phleger & Harrison LLP (contained
in Exhibit 5.1).*
24.1 Power of Attorney (contained on signature page on page
II-6).
27.1 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment.

+Confidential treatment will be sought with respect to certain portions of
this agreement. Such portions will be omitted from this filing and will be
filed separately with the Securities and Exchange Commission.

<PAGE>

EXHIBIT 16.1

[LETTERHEAD OF ARTHUR ANDERSEN]

-------------------------------
ARTHUR ANDERSEN LLP

June 5, 1998 -------------------------------
633 West Fifth Street
Los Angeles CA 90071-2008
213 614 6500
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Dear Sir/Madam:

We have read the statements included on Page 69 in the Form S-1 Registration
Statement of GeoCities to be filed with the Securities and Exchange Commission
and are in agreement with the statements contained therein as they pertain to
our Firm.

Very truly yours,

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

JDP