GEOCITIES, 424B4, 1998-08-11

GEOCITIES
424B4, 1998-08-11
PREPACKAGED SOFTWARE

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<PAGE>

FILED PURSUANT TO RULE 424(B)(4)
REGISTRATION NUMBER 333-56659

4,750,000 SHARES

[LOGO OF GEOCITIES]

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)

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

All of the 4,750,000 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. For factors 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.

The Common Stock has been approved for quotation 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............................... $17.00 $1.19 $15.81
Total (3)............................... $80,750,000 $5,652,500 $75,097,500
</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 $1,200,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 712,500 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 $92,862,500, $6,500,375 and $86,362,125, 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 August 14, 1998, against payment therefor in immediately available
funds.

GOLDMAN, SACHS & CO.

DONALDSON, LUFKIN & JENRETTE

HAMBRECHT & QUIST

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

The date of this Prospectus is August 10, 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>

[Fold-Out Cover]

Come join the world's largest community of personal Web sites on the Internet.

GeoCities provides a platform for people to express themselves. To share
interests. To bond. GeoCities creates a sense of place and a sense of
belonging. With real community spirit and genuine pride.

So far, over two million Homesteads have been built in the GeoCities
community. Each Homesteader receives a free personal Web site and free e-mail.
Homesteaders engage in lively forums and chats. GeoCities offers powerful,
easy-to-use publishing tools and the support of knowledgeable, neighborly
volunteers and staff.

[GRAPHICS OF FACE PHOTOGRAPHS, SCREEN SHOTS OF WEB SITES, QUOTES AND GEOCITIES
LOGO](R)

"I thought Michelle's page was nice, so I dropped her an e-mail. The rest, as
they say, is history. She accepted my proposal of marriage on January 31st of
this year."
[http://www.geocities.com/SouthBeach/Boardwalk/1038]

Liz and Allen desperately wanted a child to call their own. They created a
site on GeoCities to help them in their search. The Web site caught the eye of
Helen, a mother-to-be who was willing to fulfill the couple's dreams. Their
daughter Emily was born in May 1998.

Come explore the avenues and neighborhoods of GeoCities.

GeoCities Homesteaders create diverse content within themed virtual
neighborhoods. Make a connection with the authors. Share in their passion.
Discover an opportunity. Make a new friend.

Find out why GeoCities is one of the fastest growing communities on the
Internet. GeoCities is active, with more than half a million page edits every
24 hours. And no matter what you're looking for on the Web, chances are good
you'll land on GeoCities during your search.

The personal content drives significant monthly visits and page views.
<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 two-for-one stock split
of the Company's capital stock effected in July 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. The mainstay of the Company's
community are its "Homesteaders," Internet users who create their own personal
Web sites or "Homesteads" 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 2.1 million in July
1998. Homesteaders have created an estimated 17 million pages of personalized
content, attracting over 14.8 million unique visitors to, and generating over
925 million page views on, the GeoCities Web site, according to Relevant
Knowledge in June 1998 and Nielsen I/Pro in May 1998 in a report prepared for
the Company, respectively. GeoCities was the third most trafficked Web site on
the Internet among home users in June 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 the first two quarters
of 1998. 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

3
<PAGE>

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.

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 six months ended June 30, 1998, the Company had
161 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
Corporation joint venture with SOFTBANK Corporation of Japan and
(v) establishing additional strategic relationships, such as its current
distribution relationship with Yahoo! Inc. 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 does not generate revenues from
general Internet access or subscription fees.

The Company was incorporated under the laws of California in December 1994
and reincorporated in Delaware in July 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... 4,750,000 shares
Common Stock to be outstanding after
the offering......................... 30,661,000 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".
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>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
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 $ 1,632 $ 5,542
Gross profit (loss)..... (57) (474) (52) 211 1,605
Loss from operations.... (479) (2,965) (9,019) (3,629) (7,739)
Net loss................ $ (482) $(3,006) $ (8,903) $(3,561) $ (7,253)
======== ======= ======== ======= ========
Basic and diluted net
loss per share (2)..... $ (3.40) $ (2.27)
Shares outstanding used
in basic and diluted
net loss per-share
calculation (2)........ 2,620 3,194
Pro forma basic and
diluted net loss per
share (3).............. $ (0.36) $ (0.29)
Shares outstanding used
in pro forma basic and
diluted net loss per
share calculation (3).. 24,850 25,425
<CAPTION>
JUNE 30, 1998
-------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
-------- ------------ --------------
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash
equivalents and short-
term investments....... $ 20,388 $20,388 $ 94,286
Working capital......... 17,706 17,706 91,604
Total assets............ 28,260 28,260 102,158
Debt and capital lease
obligations, less
current portion........ 780 780 780
Mandatory redeemable
convertible preferred
stock.................. 37,200 -- --
Total stockholders'
equity (deficiency).... (15,868) 21,332 95,230
</TABLE>
- --------
(1) Based on the number of shares of Common Stock outstanding as of June 30,
1998. Excludes (i) 6,531,000 shares of Common Stock issuable upon the
exercise of outstanding stock options, including stock options outstanding
under the Company's 1998 Stock Incentive Plan (the "1998 Stock Incentive
Plan"), at a weighted average exercise price of $1.97 per share; (ii)
2,671,000 shares of Common Stock reserved for future issuance under the
1998 Stock Incentive Plan (which includes an increase of 2,300,000 shares
in the reserve under the 1998 Stock Incentive Plan approved in July); (iii)
427,000 shares issuable upon the exercise of stock options granted under
the predecessor plan to the 1998 Stock Incentive Plan in July 1998, at a
weighted average exercise price of $10.88 per share; (iv) 300,000 shares of
Common Stock reserved for future issuance under the Company's Employee
Stock Purchase Plan (the "Purchase Plan"); (v) 20,304 shares of Common
Stock issuable upon the exercise of an outstanding warrant at an exercise
price of $4.695 per share and (vi) up to 35,294 shares of Common Stock to
be issued pursuant to a technology purchase agreement at the initial public
offering price of $17.00 per share. Includes 15,840 shares of Common Stock
to be issued to the Community Leaders and Liaisons under the 1998 Stock
Incentive Plan. See "Capitalization", "Management--Employee Benefit Plans",
"Description of Capital Stock" and Notes 2, 6, 8, 10 and 12 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 4,750,000 shares of Common Stock offered
hereby at the initial public offering price of $17.00 per share after
deducting the 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 six months ended June
30, 1998, the Company generated revenues of $4.6 million and $5.5 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, acceptance by Homesteaders of advertising on Homesteads, 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 the developing Internet 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 June 30, 1998, the Company had an accumulated deficit of $19.7
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

6
<PAGE>

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 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, 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. A substantial increase in
marketing expenditures will have a negative impact on the Company's results of
operations 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 predict revenues in relation to fixed-expense levels
could 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

7
<PAGE>

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 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 derived from 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 10% of the Company's net
revenues during 1997 and the six months ended June 30, 1998, respectively. The
Company's four largest customers during 1997 and the six months ended June 30,
1998, including Surplus Direct/Egghead, which were, other than Surplus
Direct/Egghead, different customers in both of such periods, accounted for
approximately 29% and 28%, 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, 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 revenues 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. In addition, under the terms of its
agreement with First USA, the Company is obligated to generate a certain
number of accepted credit-card applications, and, if the Company fails to
generate such applications, it is generally required to increase the amount of
advertising it provides to First USA on its site. There can be no assurance
that this provision will not 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

8
<PAGE>

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, the acceptance by its members of advertising and other
promotional programs of third parties and the Company, including the Company's
recently introduced watermark on Homesteads, 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 existed for only a
limited 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 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. There also can be no assurance that the Company's
business, results of operations and financial condition would not be
materially and adversely affected if a substantial number of Homesteaders
became dissatisfied with the Company's services or its focus on the
commercialization of those services. 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 significant 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 six
months ended June 30, 1998, advertising revenues represented 90.6% and 90.2%,
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

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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 IMGIS, Inc. ("IMGIS") its advertising management system
(the "AdForce service"). Under the license agreement, IMGIS provides the
Company an Internet advertising administration system to facilitate the
Company's management of advertising on its Web site. The Adforce service is
intended to permit the Company to generate ad tags, schedule advertising to
run in the online environments in which the Company places the ad tags and
generate reports on such advertising. The IMGIS agreement is for a term of two
years and will expire in May 2000, subject to the Company's right to terminate
the agreement with or without cause during the 30-day period following May 4,
1999. Additionally, the Company may terminate the agreement for IMGIS' non-
performance under the agreement. No assurance can be given that the Company
will not elect to terminate the agreement. If it elected to do so, the Company
believes that it could replace the Adforce service with other available
advertising management systems. However, any such termination and replacement
could disrupt the Company's ability to manage its advertising operations for a
period of time. In addition, to the extent that the Company encounters system
failures or material 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

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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 June 30, 1998, the Company had grown to 148 full-time
employees from 63 on June 30, 1997, and the Company anticipates that the
number of its employees will increase significantly in the next 12 months. The
Company has recently hired a substantial number of its existing executive
officers to establish a management infrastructure to manage the potential
growth of its business, 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), Vice
President, Business Development (May 1998) and Vice President, Human Resources
(June 1998). In certain cases, these executives replaced existing executive
officers, but in all other cases were added to fill newly-created positions in
response to the Company's expanding operations. 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 David Bohnett, the Company's Chairman and 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

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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 the foregoing companies, as
well as traditional forms of media such as newspapers, magazines, radio and
television, for advertisers and advertising revenues. 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.

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 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 maintains redundant systems for all critical operational areas. If
necessary, connectivity through a failed router or switch can be restored via
one of the hot standby systems maintained on site. Moreover, the Company
maintains redundant application servers and databases to ensure full
functionality in the event of a system failure. Disk storage is

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configured to survive multiple drive failures without risk of data loss. To
ensure backup and restoration of all production data, the Company's system is
comprised of several dedicated servers and tape libraries with the capacity to
backup the Web site every 24 hours. Backup media is rotated into offsite
archives to ensure data integrity should catastrophic events occur on site.
The Company maintains business interruption insurance to provide coverage due
to systems failures which it believes is adequate for its operations.

The Company entered into a one-year Web-hosting agreement with Exodus
Communications, Inc. ("Exodus") in November 1997. This agreement is
automatically renewed for subsequent one-year terms unless either party
provides notice at least 90 days prior to the expiration of any term. Pursuant
to the agreement, Exodus provides and manages power and environmentals for the
Company's networking and server equipment. Exodus also provides site
connectivity to the Internet via multiple DS-3 and OC-3 links on a 24 hour-a-
day, seven days per week basis. In the event that the Company's Internet
connectivity is interrupted due to reasons within Exodus' reasonable control,
Exodus must in general provide the Company with additional access at no
charge. Under the terms of the agreement, Exodus does not, however, guarantee
that the Company's Internet access will be uninterrupted, error-free or
completely secure. 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 could 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. Slowdowns or
system failures 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' servers 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 servers and network infrastructure are 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 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

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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, user
screening to prevent inappropriate uses of the Internet by, for example,
minors or convicted criminals, taxation, infringement, pricing, content
regulation, quality of products and services and intellectual property
ownership and infringement. 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, although substantial portions of the
Communications Decency Act (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. It is also possible that the Company's use of "cookies" to track
demographic information and user preferences and to target advertising may
become subject to laws limiting or prohibiting their use. A "cookie" is a bit
of information keyed to a specific server, file pathway or directory location
that is stored on a user's hard drive, possibly without the user's knowledge.
A user is generally able to remove cookies. Germany, for example, has imposed
laws limiting the use of cookies, and a number of Internet commentators,
advocates and governmental bodies in the United States and other countries
have urged the passage of laws limiting or abolishing the use of cookies.
Limitations on or elimination of the Company's use of cookies could limit the
effectiveness of the Company's targeting of advertisements, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, a number of legislative 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

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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. Moreover, it is likely that, once
such moratorium is lifted, some type of federal and/or state taxes will be
imposed upon Internet commerce, and there can be no assurance that such
legislation or other attempts at regulating commerce over the Internet will
not substantially impair the growth of commerce on the Internet and, as a
result, adversely affect the Company's opportunity to derive financial benefit
from such activities. In addition to the foregoing areas of recent legislative
activities, several telecommunications carriers are currently seeking to have
telecommunications over the Web regulated by the Federal Communications
Commission (the "FCC") in the same manner as other telecommunications
services. For example, America's Carriers Telecommunications Association has
filed a petition with the FCC for this purpose. In addition, because the
growing popularity and use of the Web have burdened the existing
telecommunications infrastructure and many areas with high Web use have begun
to experience interruptions in phone service, local telephone carriers 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 growth in use of the Web, which could in
turn decrease demand for the Company's services 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.

In addition, as the Company's services are available over the Internet in
multiple states and foreign countries, such jurisdictions may claim that the
Company is required to qualify to do business as a foreign corporation in each
such state or foreign country. The Company is qualified to do business only in
California and New York, and failure by the Company to qualify as a foreign
corporation in a jurisdiction where it is required to do so could subject the
Company to taxes and penalties and could result in the inability of the
Company to enforce contracts in such jurisdictions. Any such new legislation
or regulation, the application of laws and regulations from jurisdictions
whose laws do not currently apply to the Company's business, or the
application of existing laws and regulations to the Internet and other online
services could have a material adverse effect on the Company's business,
results of operations and financial condition.

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,

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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.

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.

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The Proposed Consent Order has been approved by the Director of Consumer
Protection for the FTC, but remains subject to 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 by the FTC. 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.

LIABILITY FOR INFORMATION RETRIEVED FROM THE WEB

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 for example 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 hosting the personal Web sites of 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 expose 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 that 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 its
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 in general 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 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.

17
<PAGE>

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 revenues 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 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. To date, none
of this activity has had a material adverse effect on the Company's business,
results of operations or financial condition. 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. In addition, in offering
certain payment services through its GeoShops program, the Company could
become increasingly reliant on encryption and authentication technology
licensed from third parties to provide the security and authentication
necessary to effect secure transmission of confidential information, such as
customer credit card numbers. Advances in computer capabilities, discoveries
in the field of cryptography and other discoveries, events, or developments
could lead to a compromise or breach of the algorithms that the Company's
licensed encryption and authentication technology uses to protect such
confidential information. If such a compromise or breach of the Company's
licensed encryption authentication technology occurs, it could have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company may be required to expend significant capital and
resources to protect against the threat of such security, encryption and
authentication technology 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

18
<PAGE>

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.

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, could
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 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 the Company 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

19
<PAGE>

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 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

20
<PAGE>

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
62.8% 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 73.2% 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 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.

21
<PAGE>

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
software that the Company has licensed from third parties will operate
properly in the year 2000 and beyond. 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 and, where necessary,
interoperate with the Company's server and networking hardware and software
infrastructure 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.

PUBLICITY

In March and April 1998 interviews with the New York Times, certain members
of the Company's management either disclosed or confirmed certain prospective
financial information regarding the Company. Such information was reported in
a July 13, 1998 article in the New York Times regarding the Company.
Specifically, the New York Times article included statements from a March
interview of the then President and Chief Executive Officer that the Company
was hoping to achieve revenues of between $20 million and $25 million in 1998,
and from an April interview of the Chief Financial Officer that the Company
expected to "break even" in 1999. These statements were made prior to the time
the Company began preparing for the offering and were not made in anticipation
of the offering. These statements were not intended to be relied upon by
potential investors in making an investment decision to purchase the Common
Stock offered hereby. The Company disclaims all such statements for purposes
of the offering and prospective investors should not rely on such statements
or any other information not contained in this Prospectus in making any
investment decision to purchase the Common Stock offered hereby. Revenue and
profitability forecasts of any company, especially in the rapidly evolving
Internet market, are forward-looking statements that involve numerous risks
and uncertainties. The Company's actual results could differ materially from
those stated in such forward-looking statements as a result of numerous
factors, including those set forth in these "Risk Factors" and elsewhere in
this Prospectus.

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 securities. Of
the 30,661,000 shares of Common Stock to be outstanding upon the closing of
the offering (assuming no exercise of the Underwriters' over-allotment option
and based on the number of shares outstanding as of June 30, 1998), the
4,750,000 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 16,000
shares of Common Stock to be issued to the Community Leaders and Liaisons
under the 1998 Stock Incentive Plan will also be eligible for immediate sale
in the public market without restriction. The remaining 25,895,000 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 June 30,
1998, and giving

22
<PAGE>

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 and officers,
and substantially all of its other 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 Goldman, Sachs & Co.
for a period of 180 days from the date of this Prospectus. Subject to the
provisions of Rules 144, 144(k) and 701, 25,895,000 shares will be eligible
for sale 180 days after the date of this Prospectus upon the expiration of
such lock-up agreements. However, one affiliate of the Company who is subject
to a lock-up agreement and the volume limitations of Rule 144 will be
permitted to sell up to $1.0 million of Common Stock commencing 91 days after
the date of this Prospectus. Any shares of Common Stock issued pursuant to the
technology purchase agreement will be restricted securities and will also be
subject to a 180 day lock-up agreement. In addition, as of June 30, 1998,
there were outstanding options to purchase up to 6,531,000 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 any lock-up agreements applicable thereto. There is also a warrant
outstanding to purchase up to 20,304 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 180-day lock-up agreement applicable
thereto. In addition, subject to the lock-up agreements, certain stockholders,
holding an aggregate of 26,160,128 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 22,230,128 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, David Bohnett
and 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 has filed, 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 certain individual stock option agreements and the
1998 Stock Incentive Plan, the shares of Common Stock that will be issued to
the Community Leaders and Liaisons thereunder immediately following the
execution of the Underwriting Agreement and shares of Common Stock issuable
under the Purchase Plan. Such registration statements became effective
immediately upon filing, and shares covered by those registration statements
will thereupon be eligible for sale in the public markets, subject to any
lock-up agreements applicable thereto 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 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

23
<PAGE>

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; PROVISIONS OF 1998 STOCK INCENTIVE PLAN

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. In addition,
certain provisions of the Company's 1998 Stock Incentive Plan which become
operative upon a hostile takeover, such as those involving acceleration of
vesting and required cash distributions upon surrender of options, could have
the effect of delaying, deferring or preventing a tender offer or takeover
attempt that might result in a premium over the market price for the Company's
Common Stock. See "Description of Capital Stock--Anti-Takeover Effects of
Certain Provisions of Delaware Law and the Company's Certificate of
Incorporation and Bylaws" and "Management--Employee Benefit Plans".

BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS

The existing stockholders of the Company will recognize significant benefits
from the offering. These benefits include the creation of a public market for
the Company's Common Stock which will afford existing stockholders the ability
to liquidate their investments, subject, in certain cases, to volume
limitations and other limitations and restrictions upon the sale of the Common
Stock, including any lock-up agreements applicable thereto. As of June 30,
1998, existing stockholders held 25,895,000 shares of outstanding Common Stock
(on an as-converted basis to give effect to the Preferred Stock Conversion)
which shares were originally purchased from the Company at prices ranging from
$0.01

24
<PAGE>

to $7.43 per share, with an aggregate consideration paid to the Company of
approximately $40,672,000. Based on the initial public offering price of
$17.00 per share, after the offering (assuming no exercise of the
Underwriters' over-allotment option) the aggregate value of the outstanding
shares owned by the Company's existing stockholders is approximately
$440,215,000 ($51,687,000 of which is held by current management), reflecting
unrealized gains of approximately $399,543,000 over the aggregate
consideration paid to the Company for such shares (assuming that such shares
continue to be held by the original purchasers thereof). Further, as of June
30, 1998, there were 6,531,000 shares of Common Stock issuable upon exercise
of outstanding options at a weighted average exercise price of $1.97. Such
options have an aggregate potential realizable gain of approximately
$98,161,000 following the offering, based on the initial public offering price
of $17.00 per share. Accordingly, after the offering, existing stockholders
and optionholders will have substantial unrealized gains on their shares and
options. See "Shares Eligible For Future Sale", "Dilution" and "Principal
Stockholders".

DILUTION; ABSENCE OF DIVIDENDS

Investors purchasing shares of Common Stock in the offering will incur
immediate and substantial dilution of $13.90 per share in net tangible book
value per share of the Common Stock from the initial public offering price per
share of $17.00. 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".

25
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 4,750,000 shares of
Common Stock offered hereby at the initial public offering price of $17.00 per
share and after deducting the underwriting discount and estimated offering
expenses payable by the Company are estimated to be $73,898,000 ($85,162,000
if the Underwriters' over-allotment option is exercised in full). 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.

26
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 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 4,750,000 shares of Common Stock offered hereby at the initial public
offering price of $17.00 per share.

<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term borrowings.......................... $ 301 $ 301 $ 301
======== ======== ========
Long-term debt, less current portion........... $ 780 $ 780 $ 780
-------- -------- --------
Mandatory Redeemable Convertible Preferred
Stock:
Series A through F, $0.001 par value,
26,526,000 authorized, actual and pro forma;
22,230,000 issued and outstanding, actual;
none issued and outstanding, pro forma and
as adjusted................................. 37,200 -- --
-------- -------- --------
Stockholders' equity:
Common Stock, $0.001 par value, 60,000,000
shares authorized; 3,665,000 shares issued
and outstanding, actual; 25,895,000 shares
issued and outstanding, pro forma; and
30,661,000 shares issued and outstanding, as
adjusted(1)................................. 253 26 31
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..................... 12,516 49,943 123,836
Unearned deferred compensation................. (8,983) (8,983) (8,983)
Accumulated deficit............................ (19,654) (19,654) (19,654)
-------- -------- --------
Total stockholders' equity (deficiency)........ (15,868) 21,332 95,230
-------- -------- --------
Total capitalization......................... $ 22,112 $ 22,112 $ 96,010
======== ======== ========
</TABLE>
- --------
(1) Based on the number of shares of Common Stock outstanding as of June 30,
1998. Excludes (i) 6,531,000 shares of Common Stock issuable upon the
exercise of outstanding stock options, including options outstanding under
the 1998 Stock Incentive Plan, at a weighted average exercise price of
$1.97 per share; (ii) 2,671,000 shares of Common Stock reserved for future
issuance under the 1998 Stock Incentive Plan (which includes an increase
of 2,300,000 shares in the reserve thereunder approved in July 1998);
(iii) 427,000 shares issuable upon the exercise of stock options granted
under the predecessor plan to the 1998 Stock Incentive Plan, at a weighted
average exercise price of $10.88 per share; (iv) 300,000 shares of Common
Stock reserved for future issuance under the Purchase Plan; (v) 20,304
shares of Common Stock issuable upon the exercise of an outstanding
warrant at an exercise price of $4.695 per share and (vi) up to 35,294
shares of Common Stock to be issued pursuant to a technology purchase
agreement at the initial public offering price of $17.00 per share.
Includes 15,840 shares of Common Stock to be issued to the Community
Leaders and Liaisons under the 1998 Stock Incentive Plan. See
"Management--Employee Benefit Plans", "Description of Capital Stock" and
Notes 2, 6, 8, 10 and 12 of Notes to Financial Statements.

27
<PAGE>

DILUTION

The pro forma net tangible book value of the Company's Common Stock as of
June 30, 1998, was $21.3 million, or $0.82 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 June 30, 1998. After giving effect to the sale by the
Company of 4,750,000 shares of Common Stock offered hereby at the initial
public offering price of $17.00 per share and the application of the estimated
net proceeds therefrom, the pro forma net tangible book value of the Company
as of June 30, 1998, would have been $95.2 million, or $3.10 per share of
Common Stock. This represents an immediate increase in pro forma net tangible
book value of $2.28 per share to existing stockholders and an immediate
dilution in pro forma net tangible book value of $13.90 per share to new
investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $17.00
Pro forma net tangible book value per share as of June 30,
1998....................................................... $0.82
Increase per share attributable to new investors............ 2.28
-----
Pro forma net tangible book value per share after the offer-
ing.......................................................... 3.10
------
Dilution per share to new investors........................... $13.90
======
</TABLE>

The following table summarizes, on a pro forma basis as of June 30, 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, at the initial public offering price of
$17.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 25,911,000 84.5% $ 40,672,000 33.5% $ 1.57
New investors.............. 4,750,000 15.5 80,750,000 66.5 17.00
---------- ----- ------------ -----
Total.................... 30,661,000 100.0% $121,422,000 100.0% $ 3.96
========== ===== ============ ===== ======
</TABLE>

The foregoing computations are based on the number of shares of Common Stock
outstanding as of June 30, 1998. These computations exclude (i) 6,531,000
shares of Common Stock issuable upon the exercise of outstanding stock
options, including options outstanding under the 1998 Stock Incentive Plan, at
a weighted average exercise price of $1.97 per share; (ii) 2,671,000 shares of
Common Stock reserved for future issuance under the 1998 Stock Incentive Plan
(which includes an increase of 2,300,000 shares in the reserve thereunder
approved in July 1998); (iii) 427,000 shares issuable upon the exercise of
stock options granted under the predecessor plan to the 1998 Stock Incentive
Plan, at a weighted average exercise price of $10.88 per share; (iv) 300,000
shares of Common Stock reserved for future issuance under the Purchase Plan;
(v) 20,304 shares of Common Stock issuable upon the exercise of an outstanding
warrant at an exercise price of $4.695 per share and (vi) up to 35,294 shares
of Common Stock to be issued pursuant to a technology purchase agreement at
the initial public offering price of $17.00 per share. These computations also
reflect the inclusion under "Existing Stockholders" of 15,840 shares of Common
Stock to be issued to Community Leaders and Liaisons under the 1998 Stock
Incentive Plan. See "Capitalization", "Management--Employee Benefit Plans",
"Description of Capital Stock" and Notes 2, 6, 8, 10 and 12 of Notes to
Financial Statements.

28
<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 PricewaterhouseCoopers
LLP, 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 six-month periods ended June 30, 1997 and
1998, and the balance sheet data at June 30, 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 SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------ -----------------
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 $ 1,632 $ 5,542
Cost of revenues.................. 103 788 4,634 1,421 3,937
------ ------- ------- -------- -------
Gross profit (loss).............. (57) (474) (52) 211 1,605
Operating expenses:
Sales and marketing.............. 117 764 5,045 2,130 5,072
Product development.............. 72 475 1,021 437 1,325
General and administrative....... 233 1,252 2,901 1,273 2,947
------ ------- ------- -------- -------
Total operating expenses....... 422 2,491 8,967 3,840 9,344
------ ------- ------- -------- -------
Loss from operations.............. (479) (2,965) (9,019) (3,629) (7,739)
Interest income (expense), net.... (2) (40) 117 69 487
------ ------- ------- -------- -------
Loss before provision for income
taxes............................ (481) (3,005) (8,902) (3,560) (7,252)
Provision for income taxes........ (1) (1) (1) (1) (1)
------ ------- ------- -------- -------
Net loss.......................... $ (482) $(3,006) $(8,903) $ (3,561) $(7,253)
====== ======= ======= ======== =======
Basic and diluted net loss per
share............................ $(0.11) $ (1.15) $ (3.40) $ (1.36) $ (2.27)
Weighted average shares
outstanding used in basic and
diluted net loss per-share
calculation...................... 4,431 2,617 2,620 2,617 3,194
Pro forma basic and diluted net
loss per share(1)................ $ (0.36) $ (0.29)
Weighted average shares
outstanding used in pro forma
basic and diluted per-share
calculation(1)................... 24,850 25,425
<CAPTION>
DECEMBER 31,
------------------------
1995 1996 1997 JUNE 30, 1998
------ ------- ------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and
short-term investments........... $ 1 $ 33 $ 3,785 $ 20,388
Working capital................... (135) (1,642) 26,451 17,706
Total assets...................... 105 1,448 32,868 28,260
Debt and capital lease
obligations, less current
portion.......................... -- 437 834 780
Mandatory redeemable convertible
preferred stock.................. -- 2,063 37,200 37,200
Total stockholders' equity
(deficiency)..................... (40) (3,046) (9,109) (15,868)
</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.

29
<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 began
focusing on generating advertising revenues in 1996 as a result of the
maturing advertising market on the Internet. Moreover, the Company determined
that it was generating sufficient traffic to support the efforts of a
dedicated advertising sales team. The Company reached one million Homesteads
in October 1997 and over 2.1 million Homesteads in July 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 90.2% of net revenues for
the six months ended June 30, 1998 and 90.6% 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.

30
<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. 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
June 30, 1998, had an accumulated deficit of approximately $19.7 million.
Also, in connection with the grant of certain stock options to employees
during 1997 and the six months ended June 30, 1998, the Company recorded
unearned deferred compensation of approximately $9.3 million through June 30,
1998 ($9.8 million through July 31, 1998 which takes into consideration
unearned deferred compensation for stock options granted during July 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, net of amortization, 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--$1.4 million;
1999--$2.0 million; 2000--$2.3 million; 2001--$2.4 million; 2002--$1.1
million; 2003--$444,000 and 2004--$148,000. Amortization of deferred
compensation was $290,000 and $24,000 for the six months ended June 30, 1998,
and for 1997, respectively.

The Company and the FTC staff attorneys executed the Proposed Consent Order
in June 1998, in connection with the FTC's investigation into certain past
business practices of the Company. The Proposed Consent Order has been
approved by the Director of Consumer Protection for the FTC, but is subject to
final FTC approval after a period of public comment. There can be no assurance
that the Proposed Consent Order ultimately will be approved. Based on the
scope of the Proposed Consent Order, the Company does not believe that its
compliance with the Proposed Consent Order will have a material adverse effect
on the Company's business, results of operations or financial condition.

31
<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>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------------------- ---------------
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 87 71
-------- ------ ------ ------ ------
Gross profit (loss)........ (124) (151) (1) 13 29
Operating expenses:
Sales and marketing........ 254 243 110 130 92
Product development........ 157 151 22 27 24
General and
administrative............ 507 399 63 78 53
-------- ------ ------ ------ ------
Total operating expenses.. 918 793 195 235 169
-------- ------ ------ ------ ------
Loss from operations........ (1,042) (944) (196) (222) (140)
Interest income (expense),
net........................ (4) (13) 2 4 9
-------- ------ ------ ------ ------
Loss before provision for
income taxes............... (1,046) (957) (194) (218) (131)
Provision for income taxes.. (2) -- -- -- --
-------- ------ ------ ------ ------
Net loss.................... (1,048)% (957)% (194)% (218)% (131)%
======== ====== ====== ====== ======
</TABLE>

SIX MONTHS ENDED JUNE 30, 1998 AND 1997

NET REVENUES

Net revenues increased 240% to $5.5 million for the six months ended June
30, 1998, from $1.6 million for the six months ended June 30, 1997. The
increase in net revenues was due primarily to an increase in the number of
advertisers, 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 and the addition of third-party content providers which
pay the Company for carrying their content within the GeoCities community.
Advertising revenues accounted for approximately 90.2% and 92.2% of net
revenues for the six months ended June 30, 1998 and 1997, respectively. The
Company's four largest customers accounted for approximately 28% and 30% of
net revenues in the six months ended June 30, 1998 and 1997, respectively.
During these periods, the Company's revenues from its GeoPlus and GeoShops
programs and revenue-sharing arrangements with commerce partners were non-
existent or individually insignificant as a percentage of net revenues. At
June 30, 1998, the Company had deferred revenues of $566,000. 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. During the six months ended June 30, 1998 and
1997, cost of revenues related to the Company's premium service programs were
individually and collectively insignificant. Cost of revenues increased to
$3.9 million or 71% of net revenues for the six months ended June 30, 1998,
from $1.4 million or 87% of net revenues for the six months ended June 30,
1997. The absolute dollar 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 Homesteads. Cost of revenues decreased as a percentage of
net revenues because of the growth in net revenues. 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.

32
<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 $5.1 million or 92% of net revenues for the six months
ended June 30, 1998, from $2.1 million or 130% of net revenues for the six
months ended June 30, 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 $1.3 million
or 24% of net revenues for the six months ended June 30, 1998, from $437,000
or 27% of net revenues for the six months ended June 30, 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 $2.9 million or 53% of net revenues for
the six months ended June 30, 1998, from $1.3 million or 78% of net revenues
for the six months ended June 30, 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 $487,000 for the six months ended
June 30, 1998, from $69,000 for the six months ended June 30, 1997. The
increase in absolute dollars was primarily due to a higher average investment
balance as a result of the receipt of the proceeds of the issuance of shares
of the Company's preferred stock in October and December 1997.

33
<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 90.6%, 89.7%, 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. For the years ended December 31, 1997 and
1996, the Company's other sources of net revenues, which included revenues
from premium services, were individually insignificant as a percentage of net
revenues. 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 as the Company transitioned its business model toward building
advertising revenues.

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 1997 and
1996 related to the Company's premium-service programs were individually
insignificant. 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.

34
<PAGE>

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.

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 under the tax laws. 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 June 30, September 30 and December 31, 1997, and March 31 and
June 30, 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
------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1997 1997 1997 1998 1998
-------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues................. $ 1,050 $ 1,271 $ 1,679 $ 2,173 $ 3,369
Cost of revenues............. 1,050 1,382 1,831 1,565 2,372
------- ------- ------- ------- -------
Gross profit (loss)......... -- (111) (152) 608 997
Operating expenses:
Sales and marketing......... 1,409 1,289 1,626 2,118 2,954
Product development......... 235 264 321 508 817
General and administrative.. 722 649 979 1,083 1,864
------- ------- ------- ------- -------
Total operating expenses... 2,366 2,202 2,926 3,709 5,635
------- ------- ------- ------- -------
Loss from operations......... (2,366) (2,313) (3,078) (3,101) (4,638)
Interest income, net......... 40 5 43 204 283
------- ------- ------- ------- -------
Loss before provision for
income taxes................ (2,326) (2,308) (3,035) (2,897) (4,355)
Provision for income taxes... -- -- -- (1) --
------- ------- ------- ------- -------
Net loss..................... $(2,326) $(2,308) $(3,035) $(2,898) $(4,355)
======= ======= ======= ======= =======
</TABLE>

35
<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1997 1997 1997 1998 1998
-------- --------- -------- --------- --------
(AS A PERCENTAGE OF NET REVENUES)
<S> <C> <C> <C> <C> <C>
Net revenues................... 100% 100% 100% 100% 100%
Cost of revenues............... 100 109 109 72 70
---- ---- ---- ---- ----
Gross profit (loss)........... -- (9) (9) 28 30
Operating expenses:
Sales and marketing........... 134 101 97 97 88
Product development........... 23 21 19 23 24
General and administrative.... 69 51 58 50 55
---- ---- ---- ---- ----
Total operating expenses..... 226 173 174 170 167
---- ---- ---- ---- ----
Loss from operations........... (226) (182) (183) (142) (137)
Interest income, net........... 4 -- 2 9 8
---- ---- ---- ---- ----
Loss before provision for
income taxes.................. (222) (182) (181) (133) (129)
Provision for income taxes..... -- -- -- -- --
---- ---- ---- ---- ----
Net loss....................... (222)% (182)% (181)% (133)% (129)%
==== ==== ==== ==== ====
</TABLE>

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, the expansion of the
Company's GeoPlus program. The increase in net revenues for the quarter ended
June 30, 1998, was due primarily to an increase in the number of advertisers,
an increase in revenues from the Company's premier commerce partners and the
addition of payments from third-party content providers.

Cost of revenues has increased in absolute dollars 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. The increase in
cost of revenues in absolute dollars for the quarter ended June 30, 1998, was
due to expansion of the Company's infrastructure to accommodate the increase
in the Company's Web site traffic and Homesteads and the costs associated with
increasing disk space available to Homesteads. The decrease in cost of
revenues as a percentage of net revenues for the quarter ended March 31 and
June 30, 1998, is a result of 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 sales and marketing expenses for the quarter ended June 30, 1998, was due
primarily to the addition of sales and marketing personnel, increased
commissions associated with higher sales and expenses related to increased
editorial content and community management and support. The increase in
general and administrative expenses for the quarter ended June 30, 1998,
primarily was due primarily to the expansion of the Company's corporate
infrastructure and legal expenses related to the Proposed Consent Order.
Operating expenses as a percentage of net revenues have decreased as a result
of the growth in net revenues.

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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.

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 June 30, 1998, the Company had approximately $1.2 million in
cash and cash equivalents and $19.2 million in short-term investments.

Net cash used in operating activities increased to $7.2 million for 1997
from $2.8 million for 1996, and increased to $6.3 million for the six months
ended June 30, 1998, compared to $3.7 million for the six months ended June
30, 1997. The increase in net cash used resulted primarily from increasing net
losses and accounts receivable, partially offset by increases in accrued
expenses.

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
$21.3 million for the six months ended June 30, 1998, compared to $258,000 for
the six months ended June 30, 1997, resulting primarily from the purchase of
investments with the proceeds received in January 1998 from the Company's
issuance of shares of its preferred stock. The Company invested these proceeds
in debt securities, primarily U.S. Government and corporate debt securities,
with maturities not exceeding one year. The Company intends to continue to
invest its surplus funds in such securities.

Net cash provided by financing activities increased to $12.3 million for
1997 compared to $2.9 million for 1996 resulting primarily from the $13.0
million of cash proceeds from the sale of shares of the Company's preferred
stock for $38 million. Approximately $25.0 million of such preferred stock
proceeds were not received at December 31, 1997. The resulting $25.0 million
subscription receivable included in the financial statements at December 31,
1997, was subsequently received in January 1998. See Note 8 of Notes to
Financial Statements.

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.

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In July 1998, the Company entered into an agreement to purchase certain Web-
page development technology for $850,000 in cash and, subject to the
technology being successfully installed and becoming operational on the
Company's servers to the Company's satisfaction within 90 days of the date of
the purchase agreement, $455,000 in Common Stock valued at the initial public
offering price. If the offering is not consummated within 90 days of the date
of the purchase agreement, such amount is payable in cash. In addition, if the
technology is successfully installed and becomes operational within an agreed-
upon period prior to the 90-day deadline, the Company will be required to pay
the seller an additional $145,000, payable in Common Stock or cash as set
forth above. If the technology is not successfully installed and does not
become operational on the Company's servers within 90 days of the date of the
agreement to the Company's satisfaction, the seller is obligated to refund to
the Company all but $300,000 of the cash payment.

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.

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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. The mainstay of the Company's
community are its "Homesteaders," Internet users who create their own personal
Web sites or "Homesteads" 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 the World Wide Web ("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 by the end of 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 the end of 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

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<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, worldwide commerce
revenue 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 create 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 2.1 million in
July 1998. Homesteaders have created an estimated 17 million pages of
personalized content, attracting over 14.8 million unique visitors to, and
generating over 925 million page views on, the GeoCities community, according
to Relevant Knowledge in June 1998 and Nielsen I/PRO in May 1998 in a report
prepared for the Company, respectively. GeoCities was the third most
trafficked Web site on the Internet among home users in June 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 the
first two quarters of 1998.

The Company believes that 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 (Uniform Resource Locator
that determines the particular location of a Web page on the Internet).
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 17 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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<PAGE>

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. The Company believes that a large and
growing base of committed Homesteaders organized on a contextual basis
provides advertisers and businesses with an attractive market to target
promotion of their products and services, thereby creating advertising and
commerce revenue opportunities for the Company.

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. The Company believes that a
well-recognized GeoCities brand will be attractive to existing and potential
advertising customers and commerce partners of the Company.

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 will also continue to provide
its members with enhanced Web-page publishing and communication tools to
enhance the community experience. The Company believes that continually-
enhancing site functionality and performance foster Homesteader and visitor
growth and affinity to the GeoCities community, thereby providing the Company
with an attractive platform for advertisers and for expansion of its
fee-generating premium membership services.

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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.

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. The Company
believes that the introduction of localized GeoCities Web communities in
international markets will present many of the same opportunities for
advertising and commerce revenue as those in the United States.

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 45 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

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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. 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. In recognition of this valued service, Community Leaders and Liaisons
will receive a stock grant under the Company's 1998 Stock Incentive Plan. 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.

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ADVERTISING, COMMERCE AND PREMIUM SERVICES

ADVERTISING

The Company has built a direct sales organization of 18 professionals as of
June 30, 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's direct sales organization is
organized regionally and is focused solely on selling advertising on the
GeoCities Web site. The Company also has arrangements with a number of third-
party advertising sales representatives pursuant to short-term agreements that
in general may be terminated by either party, without notice or penalty. 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
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 six months ended June 30, 1998,
advertising revenues represented 90.6% and 90.2%, respectively, of the
Company's net revenues.

ADVERTISING CUSTOMERS

During the six months ended June 30, 1998, 161 companies advertised on the
GeoCities Web site compared to approximately 80 advertisers for the same
six-month period in 1997. The following is a selected list of certain of the
Company's advertising customers for the 18-month period ended June 30, 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

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During 1997 and the six months ended June 30, 1998, the Company's four
largest customers accounted for approximately 29% and 28%, respectively, of
the Company's net revenues. During these same periods, Surplus Direct/Egghead
accounted for approximately 12% and 10%, 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 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. The Company does not generate revenues from general Internet
access or subscription fees.

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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 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 one-year distribution
relationship with Yahoo! which is renewable for subsequent one-year terms,
subject to the right of either party to terminate the relationship at the end
of any term upon 90-days' notice. In connection with the distribution
agreement, Yahoo! also made a minority equity investment in the Company. As of
June 30, 1998, Yahoo! held 2.6% of the Company's outstanding capital stock.
This agreement was designed to increase traffic and memberships of both
parties in addition to offering GeoCities' Homesteaders an array of free
personalized member services on Yahoo!. Under the terms of the agreement,
GeoCities agreed to provide its community-based, Web services for free to
registered users of Yahoo!. In addition, 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. There are no minimum marketing or advertising
requirements for either the Company or Yahoo! under the agreement. There can
be no assurance that the agreement with Yahoo! will be renewed.

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 17 million pages of user-created content that
generated over 925 million page views in June 1998, according to Nielsen
I/PRO.

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.

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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.

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 will likely also face
competition in the future from Web directories, search engines, shareware
archives, content sites, commercial online services, sites maintained by ISPs
and other entities that attempt to or establish communities on the Internet by
developing their own or purchasing one of the Company's competitors. In
addition, the Company could face competition in the future from traditional
media companies, a number of which, including Disney, CBS and NBC, have
recently made significant acquisitions of or investments in Internet
companies. 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 the foregoing companies, as well as
traditional forms of media such as newspapers, magazines, radio and
television, for advertisers and advertising revenue. 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.

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<PAGE>

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.

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.

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 copyrights, 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.

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<PAGE>

The Company currently licenses from third parties certain technologies
incorporated into the Company's Web site, including a site license for its
database software. The Company relies on the licensed software under this site
license to manage the storage and retrieval of Homesteader information,
including Homesteader names, e-mail addresses, passwords and usage
information. This site license remains in effect until it is terminated by
either party. The site license also terminates in certain other circumstances,
including in the event of a breach by either party. Although the Company
believes that it could obtain an alternative site license for its database
software should this site license terminate for any reason, any such
termination would have a disruptive effect on the Company's ability to manage
the storage and retrieval of Homesteader information for a period of time.

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.

EMPLOYEES

As of June 30, 1998, the Company had 148 full-time employees, including 45
in marketing and sales, 34 in editorial, 23 in finance and administration and
46 in operations and support. The Company's future success will depend, in
part, on its ability to continue to attract, retain and motivate highly
qualified technical and management personnel, 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 leased facility in Marina del Rey,
California, consisting of approximately 24,000 square feet of office space.
The new facility will be under a five-year lease and will have two renewal
options, each for an additional three years. 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.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the directors
and the executive and other officers of the Company as of June 30, 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.......... 35 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

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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-Capitol 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.

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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 1985 to 1995, 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.

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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.

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<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 3,108,000 shares of
Series A Preferred Stock of the Company at a purchase price of $0.3218 per
share. In July 1996, CMG@Ventures purchased 2,900,000 shares of Series B
Preferred Stock of the Company at a purchase price of $0.3793 per share. In
January and February of 1997, CMG@Ventures and certain other current
stockholders of the Company purchased 10,226,718 shares of Series D Preferred
Stock at a purchase price of $0.885 per share. In October 1997, CMG@Ventures
II, LLC, an affiliate of CMG@Ventures and certain other current stockholders
of the Company purchased 1,428,564 shares of Series E Preferred Stock of the
Company at a purchase price of $3.50 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
1,000,000 shares of Common Stock at an exercise price of $0.885 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

COMPENSATION SUMMARY

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 -- 600,000 $ 857
Chairman, President and Chief
Executive Officer
John C. Rezner................... 125,000 $22,672 200,000 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 his employment with the Company in
July 1997.

55
<PAGE>

(2) Mr. Evans, the Company's President and Chief Executive Officer, accepted
his employment with and began providing services to 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. In 1997, Mr.
Hansen received $33,333 for services rendered to the Company. 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 in general to receive certain commissions based on the Company's
net revenues, subject to certain conditions. In 1997, Mr. Barrett received
$50,974 for services rendered to the Company. 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........ 600,000 21.8% $0.885 1/12/04 $ 216,170 $ 503,769
John C. Rezner.......... 200,000 7.3 0.885 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 1,632,760 shares of Common Stock at an exercise price of
$2.28 per share. These options expire in April 2005. In November 1997, Mr.
Hansen was granted two options to purchase up to an aggregate of 450,000
shares of Common Stock at an exercise price of $0.825 per share. These
options expire in November 2004. In May 1998, Mr. Hansen was granted an
option to purchase 150,000 shares of Common Stock at an exercise price of
$9.00 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
280,000 shares of Common Stock at an exercise price of $0.75 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 2,754,560 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

56
<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........ -- 600,000 -- $9,669,000
John C. Rezner.......... 777,000 200,000 $13,201,000 3,223,000
Paul A. De Braccio(3)... -- -- -- --
</TABLE>
- --------
(1) Mr. Hansen had 450,000 shares of Common Stock underlying unexercisable
stock options at December 31, 1997. Mr. Barrett had 280,000 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
initial public offering price of $17.00 per share, less the applicable
exercise price per share, multiplied by the number of shares underlying
such options.
(3) Mr. De Braccio ceased his employment with 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. As of the date of this Prospectus, the Board of Directors of
the Company had not established the specific criteria for granting any bonus to
Mr. Bohnett. 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

57
<PAGE>

a stock option to purchase up to 300,000 shares of Common Stock at an exercise
price of $0.825 per share which becomes exercisable in four equal annual
installments commencing November 1998, and the second was a stock option to
purchase up to 150,000 shares of Common Stock at an exercise price of $0.825
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 150,000 shares of Common Stock at an exercise price
of $9.00 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
if Mr. Hansen is terminated other than for cause within 18 months of a change
of control of the Company, the Company, or any successor entity, must pay
Mr. Hansen his base salary for a period of six months and vesting in his
options for 450,000 shares granted in November 1997 shall be partially
accelerated.

In April 1998, Mr. Evans accepted his offer of employment with 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. The loan to Mr. Evans was made in July
1998 and is payable by Mr. Evans 270 days following the consummation of the
offering. The loan is unsecured and would be forgiven if the Company's net
revenues for 1998 are at or above a certain agreed-upon minimum amount. 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 979,656 shares of Common
Stock at an exercise price of $2.28 per share which becomes exercisable in
four equal annual installments commencing April 1999 and the second was an
option to purchase up to 653,104 shares of Common Stock at an exercise price
of $2.28 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 160,000 shares of Common Stock
at an exercise price of $0.75 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 120,000 shares of Common Stock at an exercise
price of $0.75 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,
including if Mr. Barrett is terminated other than for cause within 12 months
of a change of control of the Company, or if the Company elects not to
continue

58
<PAGE>

Mr. Barrett's employment beyond the one-year term of his agreement, the
Company, or any successor entity, must pay Mr. Barrett his base salary for a
period of six months.

EMPLOYEE BENEFIT PLANS

1998 STOCK INCENTIVE PLAN

In July 1998, the Company adopted the 1998 Stock Incentive Plan (the "1998
Stock Incentive Plan") as the successor equity incentive program to the
Company's 1997 Stock Option Plan (the "Predecessor Plan"). The 1998 Stock
Incentive Plan was adopted by the Board of Directors of the Company and
approved by the stockholders of the Company in July 1998. The Discretionary
Option Grant and Stock Issuance Programs under the 1998 Stock Incentive Plan
became 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 370,940 shares of Common Stock from the
Predecessor Plan and an additional 2,300,000 shares of Common Stock have been
authorized for issuance under the 1998 Stock Incentive Plan. In no event,
however, may any one participant in the 1998 Stock Incentive 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 granted under the Predecessor Plan will be incorporated
into the 1998 Stock Incentive 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, however, unless the Plan Administrator
elects to extend one or more features of the 1998 Stock Incentive Plan to
those options. Except as otherwise noted below, the incorporated options have
substantially the same terms as will be in effect for grants made under the
Discretionary Option Grant Program of the 1998 Stock Incentive Plan.

The 1998 Stock Incentive Plan is divided into five 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 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, (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 and (v) the Director Fee 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 non-employee Board members the
opportunity to apply a portion of the annual retainer fee otherwise payable to
them in cash each year to the acquisition of special below-market option
grants.

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

59
<PAGE>

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 or Director Fee Option Grant Program for the non-employee Board
members. All grants under those three 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 Incentive 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 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 of Directors of
the Company 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. Some of the options
incorporated from the Predecessor Plan will also vest on an accelerated basis
under certain circumstances. The Plan Administrator has the discretion to
extend one or more of the other acceleration provisions of the 1998 Stock
Incentive 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

60
<PAGE>

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 the offering,
whether by appointment by the Board of Directors or election of the
stockholders, will automatically receive an option grant for 10,000 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 of the Company 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 2,500 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 10,000-share automatic option grant
will vest over a four-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 2,500-share automatic option grant will vest upon the
individual's completion of one 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.

Should the Director Fee Option Grant Program be activated in the future,
each non-employee Board member will have the opportunity to apply all or a
portion of any annual retainer fee otherwise payable in cash to the
acquisition of a below-market option grant. The option grant will
automatically be made on the first trading day in January in the year for
which the retainer fee would otherwise be payable in cash. The option will
have an exercise price per share equal to one-third of the fair market value
of the option shares on the grant date, and the number of shares subject to
the option will be determined by dividing the amount of the retainer fee
applied to the program by two-thirds of the fair market value per share of
Common Stock on the grant date. As a result, the total spread on the option
(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
portion of the retainer fee 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 election is to be in effect. However, the
option will become immediately exercisable for all the option shares upon (i)
certain changes in the ownership or control of the Company or (ii) the death
or disability of the optionee while serving as a Board member.

The shares subject to each option under the Salary Investment Option Grant
and Automatic Option Grant and Director Fee 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.

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<PAGE>

Limited stock appreciation rights will automatically be included as part of
each grant made under the Automatic Option Grant, Salary Investment Option
Grant and Director Fee 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
Incentive Plan at any time, subject to any required stockholder approval. The
1998 Stock Incentive 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 Incentive 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.

The Board of Directors has approved an issuance of shares of Common Stock to
the Company's Community Leaders and Liaisons under the Company's 1998 Stock
Incentive Plan. Immediately following the execution of the Underwriting
Agreement, each of the Company's Community Leaders and Liaisons as of July 17,
1998, will be issued 10 fully vested shares of Common Stock (15,840 in the
aggregate), contingent upon the closing of the offering.

EMPLOYEE STOCK PURCHASE PLAN

The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board of Directors and approved by the stockholders of the Company in
July 1998, and 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, and a reserve of 300,000
shares of Common Stock has been established for this purpose.

The Purchase Plan will be implemented in a series of successive six-month
purchase periods.The first purchase period will begin on the date the
Underwriting Agreement is executed and will end on the last business day in
January 1999.

Individuals who are eligible employees (scheduled to work more than 20 hours
per week for more than five calendar months per year) on the start date of any
purchase 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 total compensation, 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 start date of the purchase period or (ii) the
fair market value on the semi-annual purchase date. In no event, however, may
any participant purchase more than the number of shares equal to $5,000
divided by the purchase price of the shares, nor may all participants in the
aggregate purchase more than 75,000 shares, on any 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
start date of the purchase period in which such acquisition occurs or (ii) the
fair market value per share of Common Stock immediately prior to such
acquisition.

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<PAGE>

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.

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
involve 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 provides that the Company shall, to the fullest extent permitted
by the DGCL, 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 attorneys'
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.

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<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 "--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 1,200,000 shares of Series C Preferred Stock to Mr. Bohnett in
consideration for $0.3217 per share in the form of the cancellation of shares
of Common Stock and a note payable. In January 1996, the Company sold
3,108,000 shares of Series A Preferred Stock to CMG@Ventures at a price of
$0.3218 per share. In July 1996, the Company sold 2,900,000 shares of Series B
Preferred Stock to CMG@Ventures at a price of $0.3793 per share. From January
1997 through February 1997, the Company sold an aggregate of 10,226,718 shares
of Series D Preferred Stock to CMG@Ventures, SOFTBANK Holdings Inc., Chase
Venture Capital Associates, L.P. ("Chase"), the Flatiron Fund, Innocal and
Intel Corporation ("Intel") at a price of $0.885 per share. In October 1997,
the Company sold an aggregate of 1,428,564 shares of Series E Preferred Stock
to CMG@Ventures II, LLC, SOFTBANK Holdings Inc., the Flatiron Fund, Innocal
and Intel at a price of $3.50 per share. In December 1997, the Company sold an
aggregate of 814,270 shares of Series E Preferred Stock to SOFTBANK Holdings
Inc. at a price of $7.4254 per share. Effective December 1997, the Company
sold an aggregate of 2,552,576 shares of Series F Preferred Stock to Yahoo!
and SOFTBANK Holdings Inc. at a price of $7.4254 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 reflects subsequent sales of preferred stock and
transfers of Common Stock among stockholders of the Company and among
stockholders and 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)........ -- 3,108,000 2,900,000 -- 2,259,888(2) 504,468 --
Peter H. Mills
David S. Wetherell
Jerry D. Colonna
Entities affiliated with
SOFTBANK Holdings
Inc.(3)................ -- -- -- 1,200,000 4,281,414(4) 1,064,998 2,552,556
Eric C. Hippeau
Entities affiliated with
Chase Venture Capital
Associates, L.P.(4).... -- -- -- -- 1,749,736 -- --
David C. Bohnett........ 2,333,000(5) -- -- 1,200,000(6) -- -- --
</TABLE>
- --------
(1) Represents shares purchased by CMG@Ventures or CMG@Ventures II, LLC, an
affiliate of CMG@Ventures. 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.

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<PAGE>

(2) Excludes 171,924 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 171,924 shares of Series D Preferred Stock purchased by the
Flatiron Fund.
(5) Mr. Bohnett originally purchased 4,906,200 shares of Common Stock in
January 1995. In connection with the issuance and sale to Mr. Bohnett of
1,200,000 shares of Series C Preferred Stock in December 1995, Mr. Bohnett
transferred 2,341,000 of Common Stock to the Company.
(6) Represents shares that were subsequently transferred to SOFTBANK Holdings
Inc.

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 and February of 1997, CMG@Ventures and certain other current
stockholders of the Company purchased 10,226,718 shares of Series D Preferred
Stock at a purchase price of $0.885 per share. The Company received an
aggregate of $2.0 million from CMG@Ventures in connection with its purchase of
2,259,888 shares of the Series D Preferred Stock. In January 1997, in
connection with the issuance of that preferred stock, the Company granted
CMG@Ventures an immediately exercisable option to purchase up to 1,000,000
shares of Common Stock at a price of $0.885 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. In addition, the Company and Engage Technologies ("Engage"), a
subsidiary of CMG@Ventures, have been in discussions for a number of months
regarding a potential consulting arrangement. In May 1998, the Company agreed
to pay Engage $100,000 as an advance on such arrangement. 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

65
<PAGE>

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.

In connection with his employment with the Company, the Company agreed to
loan Mr. Evans $100,000. The loan to Mr. Evans was made in July 1998 and is
repayable by Mr. Evans 270 days following the consummation of the offering.
The loan is unsecured and will be forgiven if the Company's net revenues for
1998 are at or above a certain agreed-upon minimum amount.

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.

For a description of certain options granted to the executive officers and
directors of the Company since January 1, 1995, see "Management--Executive
Compensation", "--Employment Agreements and Termination of Employment and
Change of Control Arrangements" and "--Employee Benefit Plans".

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.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of June 30, 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).......................... 9,772,356 36.3% 30.9%
Peter H. Mills
David S. Wetherell
Jerry D. Colonna
SOFTBANK Holdings Inc.(4)(5)............. 9,098,968 35.1 29.7
Eric C. Hippeau
Chase Venture Capital Associates, 1,749,736 6.8 5.7
L.P(5)..................................
David C. Bohnett(6)...................... 2,483,000 9.5 8.1
Jerry D. Colonna(7)...................... 171,924 * *
Paul A. De Braccio(8).................... -- * *
Thomas R. Evans(9)....................... -- * *
Harry D. Lambert(10)..................... 1,024,414 4.0 3.3
John C. Rezner(11)....................... 827,000 3.2 2.7
All directors and executive officers as a
group
(16 persons)(12)........................ 23,407,662 86.1% 73.2%
</TABLE>
- --------
*Less than one percent

(1) The shares beneficially owned and percentage of ownership are based on
(i) 25,895,000 shares of Common Stock outstanding and (ii) 30,660,864
shares of Common Stock outstanding upon consummation of the offering.
Gives effect to the shares of Common Stock issuable within 60 days of
June 30, 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
June 30, 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 1,000,000 shares of Common Stock issuable upon the exercise of a
stock option that is currently exercisable and 504,468 shares of Common
Stock held by CMG@Ventures II, LLC, an affiliate of CMG@Ventures. The
address of CMG@Ventures and CMG@Ventures II, LLC 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) 1,837,732 shares of Common Stock held by SOFTBANK Technology
Ventures IV L.P., an affiliate of SOFTBANK Holdings Inc. (which number
includes 100,000 shares of Common Stock held by SOFTBANK Holdings Inc.
and subject to an option held by Mr. Hippeau to purchase such shares from
SOFTBANK Holdings Inc., which option vests over a three-year

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<PAGE>

period commencing in January 1998) and (ii) 37,504 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 Chief Executive
Officer of Ziff-Davis, a subsidiary of SOFTBANK Holdings Inc., is a
director of the Company.
(5) Includes 171,924 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 150,000 shares of Common Stock issuable upon the exercise of
stock options that are currently exercisable.
(7) Consists of 171,924 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 1,632,760 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 June 30, 1998.
(10) Consists of 1,024,413 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 124,602 shares of Common Stock issuable upon the exercise of
stock options that are currently exercisable.
(12) Includes 1,299,602 shares of Common Stock issuable upon the exercise of
stock options that are currently exercisable or exercisable within 60
days of June 30, 1998.

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<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 60,000,000 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 June 30, 1998, there were 25,895,000 shares of Common Stock
outstanding (on an as-converted basis) and held of record by 29 stockholders.
Based upon the number of shares outstanding as of that date and giving effect
to the issuance of the 4,750,000 shares of Common Stock offered by the Company
hereby and the issuance of 16,000 shares of Common Stock to be issued to
Community Leaders and Liaisons under the 1998 Stock Incentive Plan, there will
be 30,661,000 shares of Common Stock outstanding (on an as-converted basis)
upon the closing of the offering.

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 without further stockholder approval. 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 June 30, 1998, the Company had an outstanding warrant to purchase
20,304 shares of Common Stock at an exercise price of $4.695 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,

69
<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 June 30, 1998, (i) options to purchase a total of 6,531,000 shares
("Option Shares") of Common Stock were outstanding and (ii) up to 797,000
shares of Common Stock were available for grant under the Predecessor Plan.
See "Underwriting" and "Management--Employee Benefit Plans".

TECHNOLOGY PURCHASE AND SALE AGREEMENT

In July 1998, the Company entered into a Technology Purchase and Sale
Agreement (the "Purchase Agreement") pursuant to which the Company purchased
certain Web-page development technology (the "Technology"). Under the terms of
the Purchase Agreement, in partial consideration for the Technology, the
Company agreed to issue $455,000 of its Common Stock to the seller at the
initial public offering price, if the Technology is successfully installed and
becomes operational on the Company's servers to the Company's satisfaction
within 90 days of the date of the Purchase Agreement. In addition, if the
Technology is successfully installed and is operational within an agreed upon
period prior to the 90-day deadline, the Company has agreed to issue the
seller an additional $145,000 of its Common Stock at the initial public
offering price. Any shares of the Company's Common Stock issued under the
provisions of the Purchase Agreement are subject to the restrictions on resale
imposed by Rule 144 under the Securities Act. The seller has also entered into
a lock-up agreement prohibiting any sales or transfers of such shares for a
period of 180 days after the date of this Prospectus without the prior written
consent of Goldman, Sachs & Co.

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 22,230,128 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 26,160,128 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

70
<PAGE>

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 registration
rights with respect to any holder thereof terminate when the shares held by
such holder may be sold under Rule 144 during any three-month period. 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 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, 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,

71
<PAGE>

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.

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.

LISTING

The Common Stock has been approved for quotation 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.

72
<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 30,661,000 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option. Of these shares, the 4,750,000 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 16,000 shares of Common Stock to be issued to
the Community Leaders and Liaisons under the 1998 Stock Incentive Plan will
also be eligible for immediate sale in the public market without restriction.
The 25,895,000 shares of Common Stock outstanding as of June 30, 1998, and
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 25,895,000 shares
which are deemed Restricted Shares will be available for sale in the public
market 180 days after the date of this Prospectus. Any shares of Common Stock
issued pursuant to the Purchase Agreement will be restricted securities and
will also be subject to a 180-day lock-up agreement. In addition, as of June
30, 1998, there were outstanding options to purchase up to 6,531,000 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 20,304 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 and directors, and substantially all other 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
307,000 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

73
<PAGE>

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 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.

Pursuant to the Registration Rights Agreement, after the closing of the
offering, subject to certain conditions, the holders of 22,230,128 shares of
outstanding Common Stock will be entitled to certain demand registration
rights and the holders of 26,160,128 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 1998 Stock Incentive 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 (deficiency) and cash flows for each of the
three years in the period ended December 31, 1997, included in this
Registration Statement have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.

74
<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 PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP 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.

75
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Balance Sheets at December 31, 1996 and 1997 and June 30, 1998
(unaudited).............................................................. F-3
Statements of Operations for the years ended December 31, 1995, 1996 and
1997 and the six months ended June 30, 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 six months ended June 30, 1998
(unaudited).............................................................. F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and the six months ended June 30, 1997 (unaudited) and 1998
(unaudited).............................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

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.

PricewaterhouseCoopers LLP

Woodland Hills, California
June 2, 1998, except for
the effects of the stock
split described in Note 2
as to which the date is
July 21, 1998

F-2
<PAGE>

GEOCITIES

BALANCE SHEETS

(ALL INFORMATION AS OF JUNE 30, 1998 IS UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1996 1997 1998 1998
------------ ------------ ------------ ------------
(PRO FORMA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 33,000 $ 3,785,000 $ 1,169,000 $ 1,169,000
Short-term
investments........... 19,219,000 19,219,000
Accounts receivable,
less allowance for
doubtful accounts of
$98,000 and $270,000
for 1997 and 1998,
respectively.......... 262,000 1,206,000 2,447,000 2,447,000
Prepaids and other
current assets........ 57,000 403,000 1,019,000 1,019,000
Subscription
receivable............ 25,000,000
----------- ------------ ------------ ------------
Total current
assets.............. 352,000 30,394,000 23,854,000 23,854,000
Property and
equipment, net........ 879,000 1,216,000 2,977,000 2,977,000
Deposits............... 217,000 613,000 862,000 862,000
Other assets........... 645,000 567,000 567,000
----------- ------------ ------------ ------------
Total assets......... $ 1,448,000 $ 32,868,000 $ 28,260,000 $ 28,260,000
=========== ============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Accounts payable....... $ 397,000 $ 1,036,000 $ 353,000 $ 353,000
Accrued expenses....... 199,000 2,289,000 4,928,000 4,928,000
Deferred revenue....... 110,000 225,000 566,000 566,000
Capital lease
obligations, current
portion............... 188,000 393,000 301,000 301,000
Note payable........... 1,100,000
----------- ------------ ------------ ------------
Total current
liabilities......... 1,994,000 3,943,000 6,148,000 6,148,000
Capital lease
obligations, net of
current portion....... 437,000 183,000 112,000 112,000
Related party note
payable............... -- 651,000 668,000 668,000
----------- ------------ ------------ ------------
2,431,000 4,777,000 6,928,000 6,928,000
Commitments and
contingencies (Note 7)
Series A, B, C, D, E and
F mandatory redeemable
convertible preferred
stock, $0.001 par
value; authorized
16,245,000 shares in
1996, 26,526,000 shares
in 1997 and 1998;
issued and outstanding
6,008,000 shares in
1996 and 22,230,000
shares in 1997 and
1998; liquidation
preference of
approximately
$2,100,000 and
$39,129,000 at 1996 and
1997, respectively, and
$40,457,000 at June 30,
1998................... 2,063,000 37,200,000 37,200,000 --
Stockholders' equity
(deficiency):
Convertible preferred
stock, $0.001 par
value; 1,200,000 shares
authorized, issued and
outstanding for 1996... 386,000 -- -- --
Common stock, par value
$0.001; authorized
40,000,000 shares for
1996 and 60,000,000
shares for 1997 and
1998; issued and
outstanding 2,617,000
and 2,641,000 shares
for 1996 and 1997,
respectively, 3,665,000
shares at June 30, 1998
and 25,895,000 shares
on a pro forma basis... 43,000 49,000 253,000 26,000
Additional paid-in
capital................ 23,000 3,903,000 12,516,000 49,943,000
Unearned deferred
compensation........... -- (660,000) (8,983,000) (8,983,000)
Accumulated deficit..... (3,498,000) (12,401,000) (19,654,000) (19,654,000)
----------- ------------ ------------ ------------
Total stockholders'
equity
(deficiency)........ (3,046,000) (9,109,000) (15,868,000) 21,332,000
----------- ------------ ------------ ------------
Total liabilities and
stockholders' equity
(deficiency)........ $ 1,448,000 $ 32,868,000 $ 28,260,000 $ 28,260,000
=========== ============ ============ ============
</TABLE>

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

F-3
<PAGE>

GEOCITIES

STATEMENTS OF OPERATIONS

(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS
UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------------------- ------------------------
1995 1996 1997 1997 1998
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues............ $ 46,000 $ 314,000 $ 4,582,000 $ 1,632,000 $ 5,542,000
Cost of revenues........ 103,000 788,000 4,634,000 1,421,000 3,937,000
--------- ----------- ----------- ----------- -----------
Gross profit (loss).. (57,000) (474,000) (52,000) 211,000 1,605,000
Operating expenses:
Sales and marketing... 117,000 764,000 5,045,000 2,130,000 5,072,000
Product development... 72,000 475,000 1,021,000 437,000 1,325,000
General and
administrative....... 233,000 1,252,000 2,901,000 1,273,000 2,947,000
--------- ----------- ----------- ----------- -----------
Loss from operations.... (479,000) (2,965,000) (9,019,000) (3,629,000) (7,739,000)
Other income (expense):
Interest income....... 19,000 238,000 131,000 540,000
Interest expense...... (2,000) (59,000) (121,000) (62,000) (53,000)
--------- ----------- ----------- ----------- -----------
Loss before provision
for income taxes.... (481,000) (3,005,000) (8,902,000) (3,560,000) (7,252,000)
Provision for income
taxes.................. (1,000) (1,000) (1,000) (1,000) (1,000)
--------- ----------- ----------- ----------- -----------
Net loss.............. $(482,000) $(3,006,000) $(8,903,000) $(3,561,000) $(7,253,000)
========= =========== =========== =========== ===========
Historical basic and
diluted net loss per
share.................. $ (0.11) $ (1.15) $ (3.40) $ (1.36) $ (2.27)
Historical weighted
average shares
outstanding used in
per-share calculation.. 4,431,000 2,617,000 2,620,000 2,617,000 3,194,000
Pro forma basic and
diluted net loss per
share.................. $ (0.36) $ (0.29)
Weighted average shares
outstanding used in pro
forma per-share
calculation............ 24,850,000 25,425,000
</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 SIX MONTHS ENDED JUNE 30, 1998 IS UNAUDITED)

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL UNEARNED STOCKHOLDERS'
CONVERTIBLE PAID-IN DEFERRED ACCUMULATED EQUITY
PREFERRED STOCK COMMON STOCK CAPITAL 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.... 4,906,000 $ 49,000 49,000
Issuance of
common stock for
services........ 52,000 17,000 17,000
Issuance of
Series C
convertible
preferred stock
in exchange for
common stock and
note payable.... 1,200,000 $ 386,000 (2,341,000) (23,000) $ 23,000 386,000
Net loss......... (482,000) (482,000)
---------- --------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at
December 31,
1995............ 1,200,000 386,000 2,617,000 43,000 23,000 -- (492,000) (40,000)
Net loss......... (3,006,000) (3,006,000)
---------- --------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at
December 31,
1996............ 1,200,000 386,000 2,617,000 43,000 23,000 -- (3,498,000) (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........... (1,200,000) (386,000) (386,000)
Exercise of stock
options......... 24,000 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............ -- -- 2,641,000 49,000 3,903,000 (660,000) (12,401,000) (9,109,000)
Repurchase of
common stock.... (10,000) (19,000) (19,000)
Exercise of stock
options......... 1,034,000 223,000 223,000
Unearned
compensation
related to stock
options
granted......... 8,613,000 (8,613,000) --
Compensation
related to stock
options
vesting......... 290,000 290,000
Net loss......... (7,253,000) (7,253,000)
---------- --------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at June
30, 1998
(unaudited)..... -- -- 3,665,000 253,000 12,516,000 (8,983,000) (19,654,000) (15,868,000)
Assumed
conversion of
mandatory
redeemable
convertible
preferred
stock........... 22,230,000 40,396,000 (3,196,000) 37,200,000
Delaware
reincorporation
and change in
par value of
common stock.... (40,623,000) 40,623,000 --
---------- --------- ---------- ------------ ----------- ----------- ------------ ------------
Balance at June
30, 1998,
pro forma
(unaudited)..... -- -- 25,895,000 $ 26,000 $49,943,000 $(8,983,000) $(19,654,000) $ 21,332,000
========== ========= ========== ============ =========== =========== ============ ============
</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 SIX MONTHS ENDED JUNE 30, 1998 AND 1997 IS
UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------ -------------------------
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) $(3,561,000) $ (7,253,000)
Adjustments to
reconcile net loss
to net cash used in
operating
activities:
Depreciation and
amortization...... 7,000 188,000 431,000 177,000 370,000
Issuance of common
stock for
services.......... 17,000
Issuance of warrant
related to note
payable........... 51,000
Deferred
compensation
earned............ 24,000 290,000
Bad debt reserve... 98,000 172,000
Changes in
operating assets
and liabilities:
Accounts
receivable....... (7,000) (255,000) (1,042,000) (735,000) (1,413,000)
Prepaids and other
current assets... 12,000 (56,000) (346,000) (339,000) (616,000)
Deposits and other
assets........... (214,000) (396,000) (166,000) (171,000)
Accounts payable.. 90,000 309,000 639,000 110,000 (683,000)
Accrued expense... 37,000 162,000 2,095,000 684,000 2,656,000
Deferred revenue.. 110,000 115,000 127,000 341,000
--------- ----------- ------------ ----------- ------------
Net cash used in
operating
activities...... (326,000) (2,762,000) (7,234,000) (3,703,000) (6,307,000)
Cash flows used in
investing activities:
Purchase of property
and equipment....... (69,000) (130,000) (674,000) (258,000) (2,131,000)
Investment in
affiliate........... (645,000)
Purchases of
investments......... (19,219,000)
--------- ----------- ------------ ----------- ------------
Net cash used in
investing
activities........ (69,000) (130,000) (1,319,000) (258,000) (21,350,000)
Cash flows from
financing activities:
Payments under
capital-lease
obligations......... (2,000) (239,000) (143,000) (114,000) (163,000)
Proceeds from
exercise of common
stock options....... 49,000 6,000 223,000
Repurchase of common
stock............... (19,000)
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 7,745,000 25,041,000
Increase (decrease)
in cash and cash
equivalents....... 32,000 3,752,000 3,784,000 (2,616,000)
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 $ 3,817,000 $ 1,169,000
========= =========== ============ =========== ============
Supplemental disclosure
of cash-flow
information:
Cash paid during the
period for:
Interest............. $ 1,000 $ 71,000 $ 89,000 $ 53,000 $ 52,000
Income taxes......... $ 1,000 $ 1,000 $ 1,000
Supplemental disclosure
of noncash
transactions:
Equipment under
capital leases...... $ 20,000 $ 844,000 $ 94,000
Conversion of Series
C convertible
preferred stock to
mandatory redeemable
convertible
preferred stock..... $ 386,000
Issuance of Series C
convertible
preferred stock
through conversion
of amount due to
officer............. $ 386,000
</TABLE>

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

F-6
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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 June 30, 1998.

Unaudited Interim Financial Information

The interim financial statements of the Company for the six months ended
June 30, 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 June 30, 1998, and the
results of its operations and its cash flows for the six months ended June 30,
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)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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 $348,000
at June 30, 1998.

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 six months ended June 30, 1998, does not include the effect of
options to purchase 777,000, 1,113,000, 4,605,000 and 6,531,000 shares of
common stock, respectively, 0, 0, 20,304 and 20,304 common stock warrants,
respectively, or 0, 6,008,000, 22,230,000 and 22,230,000 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)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

Pro forma net loss per share for the year ended December 31, 1997 and for
the six months ended June 30, 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 9% of revenues for the years ended December 31, 1996
and 1997, and the six months ended June 30, 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)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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 $386,000 for the six months ended June 30, 1998.

Product Development

Product development costs are expensed as incurred. Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," requires capitalization of certain
software development costs subsequent to the establishment of technological
feasibility. Based upon the Company's product development process,
technological feasibility is established upon completion of a working model.
Costs incurred by the Company between completion of the working model and the
point at which the product is ready for general release have been
insignificant.

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 July 1998, the Company authorized and
implemented 1,443-for-one, two-for-one and two-for-one 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.

F-10
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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.

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 six months ended June 30, 1998, one customer accounted for 10% of
all revenues generated by the Company and 3% of accounts receivable at June
30, 1998.

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
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 $3,653,000
Furniture and fixtures, including assets
under capital leases of $172,000,
$172,000 and $172,000 for 1996, 1997
and 1998, respectively................. 200,000 292,000 310,000
Leasehold improvements.................. 80,000 151,000 10,000
---------- ---------- ----------
1,074,000 1,842,000 3,973,000
Less, accumulated depreciation and
amortization, including amounts related
to assets under capital leases of
$145,000, $459,000 and $619,000 for
1996, 1997 and 1998, respectively...... (195,000) (626,000) (996,000)
---------- ---------- ----------
Total............................... $ 879,000 $1,216,000 $2,977,000
========== ========== ==========
</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.

F-11
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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.

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 six months ended June 30, 1998, was approximately $86,000.

Advertising revenues at December 31, 1997 and June 30, 1998, include
$107,000 and $51,000, respectively, in revenues received from an entity that
is controlled by a significant shareholder of the Company. At December 31,
1997 and June 30, 1998, $0 and $35,000, 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 one-year distribution and commerce agreement ("Agreement") with
Yahoo!, which is automatically renewable for subsequent one-year terms,
subject to the right of either party to terminate the relationship at the end
of any term up to 90-days' notice. In connection with the Agreement, Yahoo!
also made a minority equity investment in the Company. The Agreement was
designed to increase traffic and memberships of both parties in addition to
offering GeoCities' Homesteaders an array of free personalized member services
on Yahoo!. Under the terms of the Agreement, GeoCities agreed to provide its
community-based, Web site and other services for free to registered users of
Yahoo!. In addition, 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 Agreement did not involve any cash consideration; any
revenues related to the Agreement will be accounted for in accordance with the
Company's barter revenue recognition policy, as appropriate.

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 20,304
shares of the Company's common stock at the exercise price of $4.925, which
was higher than

F-12
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

the then estimated fair market value of a share of the Company's common stock.
The exercise price is subject to adjustment in limited situations involving
antidilution as defined in the agreement. As a result of such dilution, the
exercise price is $4.695 per share at June 30, 1998. The warrant may be
exercised at any time prior to September 22, 2004. The Company has no
obligations to repurchase the warrant from the bank.

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 June 30,
1998, there have been no borrowings under either agreement.

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.

F-13
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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 probable 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 or cash flows.

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 1,200,000 shares
of Convertible Preferred Stock Series C in consideration for $0.3217 per share
in the form of the cancellation of shares of common stock and conversion of a
note payable of $386,000 to 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 3,108,000 and
2,900,000 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
10,169,492 shares of Series D Stock for approximately $9,000,000. In October
and December 1997, the Company issued 1,428,564 and 814,270 shares of Series E
Stock at $3.50 and $7.4254 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 2,552,576 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.

F-14
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

Rights of Preferred Stock as of December 31, 1997

<TABLE>
<CAPTION>
DIVIDEND LIQUIDATION REDEMPTION
PREFERENCE PREFERENCE PREFERENCE
---------- ----------- ----------
<S> <C> <C> <C>
Series A Stock................................ $0.0225 $0.3218 $0.3218
Series B Stock................................ $0.0275 $0.3793 $0.3793
Series C Stock................................ $ -- $0.3217 $0.3217
Series D Stock................................ $0.0625 $0.885 $0.885
Series E Stock................................ $0.245 $3.50 $3.50
Series F Stock................................ $0.5195 $7.4254 $7.4254
</TABLE>

The shares of Series E Stock sold in December 1997 (814,270 shares at
$7.4254 per share) have a redemption preference of $3.50 per share. The
proceeds received in excess of the redemption preference ($3,196,000) have
been recorded as additional paid-in capital.

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 June 30, 1998, the Company has reserved
approximately 22,230,000 shares of common stock for the future conversion of
the Series A through F Stock.

Warrants

In connection with the Series D Stock issuance, the Company issued a warrant
to a bank to purchase 64,972 of the Company's Series D Preferred Stock at
$0.885 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 57,226 shares of Series D Preferred Stock. The Bank immediately
sold these shares in connection with the Series E and F Preferred Stock
issuances. Also see Notes 6 and 10 of Notes to Financial Statements for a
warrant issued in connection with a line of credit, and options issued to a
Series D Preferred stockholder and others pursuant to stock option agreements.

F-15
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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>

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 (See Note 8), the Company will 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 5,555,000 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 2,233,000 and 600,000,
respectively, increasing the total available to 8,388,000 at June 30, 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.

F-16
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

In connection with its Series D stock offering in early 1997, the Company
granted options to purchase 1,000,000 shares of its common stock at an
exercise price of $0.885 per share to CMG@Ventures; these options vested
immediately and are exercisable by January 13, 2004. The exercise price was in
excess of the then estimated fair market value of a common share. The Company
has no obligation to repurchase the option from CMG@Ventures. At that time,
the Company also granted an option to purchase 1,000,000 shares of its common
stock at an exercise price of $0.885 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.

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..... 777,000 $0.01 1,113,000 $0.16
Granted--price equals fair value... 364,000 $0.25 2,648,000 $0.74
Granted--less than fair value...... -- -- 1,307,000 $0.81
Exercised.......................... -- -- (25,000) $0.25
Canceled........................... (28,000) $0.25 (438,000) $0.35
--------- ---------
Outstanding at year-end.............. 1,113,000 $0.16 4,605,000 $0.66
========= =========
Options exercisable at year-end...... 1,939,000 $0.52
Options available for future grant... 925,000
</TABLE>

At December 31, 1997 and June 30, 1998, the Company had reserved a total of
5,530,000 and 7,329,000 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 $290,000 was expensed
during the year ended December 31, 1997 and the period ended June 30, 1998,
respectively.

For the six months ended June 30, 1998, the Company granted options to
purchase 3,169,000 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 $8,613,000 to be amortized over 48 to 72
months from the date of grant.

F-17
<PAGE>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

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>
$0.01 777,000 5.00 $0.01 777,000 $0.01
$0.25--$0.44 744,000 6.14 $0.32 47,000 $0.26
$0.75--$1.25 3,084,000 6.29 $0.88 1,115,000 $0.89
--------- ---------
4,605,000 1,939,000
========= =========
</TABLE>

The fair value of options granted during 1995, 1996 and 1997 is estimated as
$0, $0 and $47,000, 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.

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 $ (0.11) $ (1.15) $ (3.40)
========= =========== ===========
Pro forma $ (0.11) $ (1.15) $ (3.42)
========= =========== ===========
</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>

GEOCITIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(ALL INFORMATION WITH RESPECT TO JUNE 30, 1998 AND 1997 IS UNAUDITED)

12. SUBSEQUENT EVENTS (UNAUDITED):

In July 1998, the Company entered into an agreement to buy certain Web-page
development technology for a total consideration of up to $1.45 million
including $850,000 in cash and $455,000 in Common Stock, valued at the price
of the Common Stock upon the consummation of the Company's Initial Public
Offering. The final payment of $145,000 may be in cash or Common Stock. This
transaction is expected to be completed in August 1998, and is not material to
the financial position, results of operations and cashflows of the Company.

In July 1998, the Board adopted the 1998 Stock Incentive Plan and Employee
Stock Purchase Plan and reserved an additional 2,600,000 shares of Common
Stock for issuance thereunder.

In July 1998, the Company signed a lease for approximately 24,000 square
feet to relocate its corporate headquarters. Monthly lease payments will be
$23,700 commencing September 1, 1998.

F-19
<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........................................... 1,680,750
Donaldson, Lufkin & Jenrette Securities Corporation........... 1,027,125
Hambrecht & Quist LLC......................................... 1,027,125
BT Alex. Brown Incorporated................................... 140,000
BancAmerica Robertson Stephens................................ 140,000
Dain Rauscher Wessels
A Division of Dain Rauscher Incorporated..................... 65,000
E*Trade Securities............................................ 65,000
EVEREN Securities, Inc. ...................................... 140,000
Edward D. Jones & Co., L.P. .................................. 65,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated............ 140,000
Needham & Company, Inc. ...................................... 65,000
Sutro & Co. Incorporated...................................... 65,000
Tucker Anthony Incorporated................................... 65,000
Volpe Brown Whelan & Company, LLC............................. 65,000
---------
Total....................................................... 4,750,000
=========
</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 $.70 per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $.10 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 712,500
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 4,750,000 shares of Common
Stock offered.

The Company, its directors and officers, and substantially all of its other
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 the Purchase
Agreement related to the purchase of the Technology, or 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
representatives, except for the shares of Common Stock offered in connection
with the

U-1
<PAGE>

offering; provided, that one affiliate of the Company who is subject to a
lock-up agreement and the volume restrictions of Rule 144 will be permitted 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 was negotiated among the
Company and the representatives. Among the factors considered in determining
the initial public offering price of the Common Stock, in addition to
prevailing market conditions, were 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.

E*Trade Group, Inc., an affiliate of E*Trade Securities, has contracted to
purchase from the Company certain advertising and promotional services.

U-2
<PAGE>

[Inside Back Cover]

40 themed neighborhoods provide the home for millions

[GRAPHIC COLLAGE OF NEIGHBORHOOD SCREEN SHOTS]

Over 14 million unique visitors in one month*
*Relevant Knowledge June 1998

over 925 million page views in one month+
+Nielsen I/PRO May 1998

third most trafficked Web site on the Internet(degrees)
(degrees)Media Metrix Home Users June 1998

[GRAPHIC OF GEOCITIES LOGO](R)

- --------

<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.......................................................... 26
Dividend Policy.......................................................... 26
Capitalization........................................................... 27
Dilution................................................................. 28
Selected Financial Data.................................................. 29
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 30
Business................................................................. 39
Management............................................................... 51
Certain Transactions..................................................... 64
Principal Stockholders................................................... 67
Description of Capital Stock............................................. 69
Shares Eligible for Future Sale.......................................... 73
Legal Matters............................................................ 74
Experts.................................................................. 74
Additional Information................................................... 75
Change in Accountants.................................................... 75
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>

THROUGH AND INCLUDING SEPTEMBER 4, 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.

================================================================================

4,750,000 SHARES

[LOGO OF GEOCITIES]

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)

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

[LOGO OF GEOCITIES]

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

GOLDMAN, SACHS & CO.

DONALDSON, LUFKIN & JENRETTE

HAMBRECHT & QUIST

REPRESENTATIVES OF THE UNDERWRITERS

================================================================================