04/24/2001

GoTo Reports Outstanding First Quarter Results

PASADENA, Calif., April 24, 2001 - GoTo (Nasdaq:GOTO):

First Quarter Highlights:

-- First quarter revenue increases 31% to $52 million from the fourth quarter of 2000.

-- Net loss decreases from $16.8 million in the fourth quarter of 2000 to $6.4 million in the first quarter of 2001.

-- Number of paid introductions increases to 314 million.

-- Number of U.S. advertisers increases to more than 42,000.

-- Average price per paid introduction on target at $0.16.

GoTo (Nasdaq:GOTO), the leading provider of Pay-For-Performance search to Web sites across the Internet, today announced strong financial results for the quarter ended March 31, 2001. GoTo reported first quarter 2001 revenue of $52.0 million, a more than 200% increase over revenue of $17.2 million in the first quarter of 2000, and a 31% increase over revenue of $39.8 million in the fourth quarter of 2000.

GoTo reported a first quarter 2001 pro forma net loss of $6.4 million, or $0.13 per basic and diluted share, compared to a pro forma net loss of $9.0 million, or $0.20 per basic and diluted share, in the first quarter of 2000. In the fourth quarter of 2000, GoTo reported a pro forma net loss of $16.8 million, or $0.34 per basic and diluted share. All amounts exclude acquisition-related charges.

"Our terrific results demonstrate that we are successfully capturing the significant market opportunity presented by Pay-For-Performance search," said Ted Meisel, president and CEO, GoTo. "GoTo's leadership position in this market has never been stronger and I believe that we will continue to build on that position."

At the end of the first quarter of 2001, GoTo's unrestricted cash and liquid investment position was approximately $53 million, with less than $1 million of debt on its balance sheet.

Revenue Drivers/Key Metrics

The key metrics that drive GoTo's revenue are paid introductions, or paid clicks, and the average price per introduction paid by GoTo's advertisers. In the first quarter of 2001, GoTo made 314 million paid introductions. GoTo reported 88 million paid introductions in the first quarter of 2000 and 228 million paid introductions in the fourth quarter of 2000.

As anticipated, advertisers paid GoTo an average of $0.16 for each paid introduction during the quarter ended March 31, 2001. This compares with an average of $0.19 for each paid introduction in the first quarter of 2000 and $0.17 in the fourth quarter of 2000. Average price per introduction has trended upward since February.

GoTo's Pay-For-Performance Search

GoTo is the Internet's leading Pay-For-Performance search engine. GoTo Search generates highly relevant search results by allowing advertisers to bid for placement in the company's search results only on keywords that are relevant to their Web sites. These results are then distributed across the Internet to some of the world's most popular and well-known Web sites. GoTo's ongoing commitment to relevance provides affiliate partners with a high quality and revenue generating search capability, and ensures advertisers receive highly targeted, qualified traffic.

At the end of the first quarter of 2001, GoTo's advertisers had crafted a database of 7.5 million custom search listings, up from 7 million at the end of the fourth quarter of last year, each of which is reviewed by GoTo editors for quality and relevance. GoTo's recent alliances with such leading companies as America Online, Terra Lycos, and AltaVista, demonstrate the company's value in providing an effective and relevant search experience to its affiliates' users and validate the company's successful business model.

Continued Expansion of the Internet's Leading Pay-For-Performance Network

GoTo enables Web sites to enhance revenues and user functionality by offering Pay-For-Performance search to their users. More than 95% of GoTo's paid introductions are generated through its tens of thousands of affiliates. A recent Media Metrix network report showed that GoTo reached 64.1 million unique users in the month of March, or nearly 75% of the total U.S. Internet audience.

During the first quarter of 2001, GoTo announced or implemented new affiliate deals with Direct Hit, NetZero, iWon, and Go.com. In February, GoTo added its Premium Listings product to Direct Hit's search results and began providing its full set of search results to NetZero. In March, iWon added the top seven GoTo search listings to their search results. Unlike the majority of iWon's other affiliate deals, iWon's users are not rewarded for selecting the GoTo listings, which ensures highly qualified leads for GoTo's advertisers.

Subsequent to the end of the first quarter, GoTo also announced a one-year renewal of its agreement with Microsoft to provide search results to the users of Microsoft's Internet Explorer.

More than 42,000 Advertisers

At the end of March 2001, GoTo had more than 42,000 active, paying advertisers in the U.S., up from approximately 37,000 at the end of the fourth quarter in 2000, and up from approximately 25,000 at the end of March 2000. During the first quarter of 2001, the average spend per advertiser also increased to $1,277 from $1,120 in the fourth quarter of 2000, a 14% increase.

"Search clickthroughs, or leads, represent a unique opportunity for marketers," explained Meisel. "There are few advertising vehicles where the target customer comes looking for your business, as opposed to the other way around. And at our current price of $0.16 per lead, GoTo remains well under the price of similarly qualified and targeted alternatives generally costing $1 to $5 per lead."

GoTo's advertisers comprise some of the best brands doing business on the Web. GoTo brings these advertisers together with consumers by allowing advertisers to bid for search terms that are relevant to their Web sites. Once it is determined that these search terms meet GoTo's stringent relevancy guidelines, bidding takes place in an open auction marketplace for placement in GoTo's results -- with the highest bidder appearing first in GoTo's results. Since advertisers pay for every qualified lead, represented by a click on one of their listings, they have an incentive to bid only on search terms for which they have a relevant, quality offering.

GoTo's unique business model offers three benefits to advertisers: 1) it enables advertisers to target millions of consumer and business searchers who are specifically interested in what they are offering; 2) it gives advertisers complete control over their placement in search results, subject to relevance guidelines; and 3) it allows advertisers to pay exactly the amount they decide for each search-qualified lead, or click-through.

To ensure GoTo's ability to continue providing a high level of customer service to its rapidly expanding base of advertisers, the company increased its minimum price per lead to $0.05 for new bids and initiated a minimum monthly spend of $20 per account for new advertisers. During the first quarter, GoTo also made numerous enhancements to its online customer support center, including several enhancements that make it easier for advertisers to manage their accounts and interact with GoTo.

Momentum in Europe

Since its launch of the first overseas marketplace in November 2000, GoTo UK has grown rapidly. The growth in the UK marketplace can be measured both in terms of its quickly expanding advertiser base as well as the number of affiliate partners that distribute GoTo's UK search results to their users.

During the first quarter of 2001, GoTo UK's advertiser base grew to more than 2,000 active, paying advertisers, including leading brands such as British Airways, Tesco and Cheltenham & Gloucester. The sign up rate for new advertisers in the U.K. is running at approximately 300 per month. These advertisers are not included in the 42,000 U.S. advertisers referenced above.

GoTo UK currently reaches approximately 40% of the UK's online population through its affiliate partnerships, which include, among others, Freeserve, the UK's largest Internet Service Provider, and Ask Jeeves (UK). In the first quarter of 2001, GoTo UK signed a new agreement to become the default search provider to LibertySurf, co-branded as LibertySearch. GoTo UK has also partnered with Infospace UK for a one-year deal to provide search results on Infospace's `Net Search' as well as on their various partners' sites including, Egg, Global Network and Thomson Web Directories.

As announced previously, GoTo is seeking an investment by one or more financial and/or strategic partners to assist in the expansion of its European operations. However, as a result of GoTo's success in the UK to date, and the current environment in Europe for funding Internet companies, the company is reevaluating its approach to financing GoTo Europe, which could include retaining a 100% interest in the entity. Based on the strength of its U.S. and UK results, the company is now targeting launch of GoTo Germany in the first quarter of 2002.

GoTo Auctions

ChannelFusion, GoTo Auctions' premier product line, continues to demonstrate its value to customers. In the first quarter of 2001, GoTo Auctions signed 15 new contracts, including the addition of Sun Microsystems, West Marine, IT Parade and Logic Blast as customers in recent weeks. Gross merchandise sold through the ChannelFusion Network increased approximately 265 percent from the fourth quarter of 2000 to the first quarter of 2001. In addition, the company began charging for the powerseller version of ChannelFusion, and has signed up more than 2,500 customers.

As previously announced, GoTo is seeking to sell or spin-off GoTo auctions. The company continues to evaluate strategic alternatives and expects to have an announcement in this regard during the quarter.

GoTo Shopping

As announced last quarter, GoTo has decided to exit the comparison shopping business. The company has been unable to locate a suitable buyer and, as a result, plans to close its consumer shopping site and redeploy members of the Shopping team against its core search business.

Business Outlook

The following discussion contains forward-looking information intended solely to provide management's current expectations for 2001. This forward-looking information is subject to risks and uncertainties and, as a result, actual results may differ materially from these expectations. Even though the guidance provided herein might change after April 24, 2001, GoTo undertakes no obligation to revise or update this information and may not provide this type of information in press release format in the future. All numbers are approximate.

As a result of the company's strong first quarter 2001 results, GoTo is estimating higher revenues for the full year 2001 as well as reducing its estimated losses by approximately 50%.

Revenue
Full year 2001:            $227 million
Second quarter 2001:       $54 million
Third quarter 2001:        $57 million
Fourth quarter 2001:       $64 million

Traffic Acquisition Costs as a Percentage of Revenue
Full year 2001:            61%
Second quarter 2001:       63%
Third quarter 2001:        58%
Fourth quarter 2001:       56%

Net Loss
Full year 2001:            $(20) million
Second quarter 2001:       $(8) million
Third quarter 2001:        $(5) million
Fourth quarter 2001:       $0 million

                                 GOTO
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                 (In thousands, except per share data)


                                         March 31,     December 31,
                                           2001           2000
                                        (unaudited)


            ASSETS


Current assets:
  Cash and cash equivalents               $  8,659      $ 12,986
  Short-term investments                    43,848        41,694
  Accounts receivable, net                   6,490         5,365
  Prepaid expenses and other                 1,981         1,970
  Prepaid marketing expenses                20,467        23,605
Total current assets                        81,445        85,620


Property and equipment, net                 31,789        26,076


Intangible assets, net                       2,917         3,234
Restricted  investments                      5,712         5,564
Long-term investments                          765           293
Other assets                                   624           626
Total assets                             $ 123,252      $121,413


            LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
  Accounts payable                       $  29,035      $ 23,284
  Accrued expenses                           4,278         4,148
  Deferred revenue                           6,158         4,441
  Current portion of capital lease
   obligations                                 663           791
Total current liabilities                   40,134        32,664


Other long-term liabilities                    461           576
Long-term capital lease obligations             13            78


Stockholders' equity:
  Common Stock, $0.0001 par value,
   200,000 shares authorized:
    Shares issued and outstanding -- 52,873
    and 52,566 for March 31, 2001 and
    December 31, 2000, respectively              5             5
   Additional paid-in capital              592,485       591,239
   Deferred compensation, net               (1,394)       (1,128)
   Accumulated deficit                    (508,725)     (502,026)
   Accumulated other comprehensive income      273             5
Total stockholders' equity                  82,644        88,095
Total liabilities and stockholders'
 equity                                  $ 123,252     $ 121,413



                                 GOTO
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          (In thousands, except per share amounts; unaudited)


                                            Three Months Ended
                                                  March 31,
                                             2001          2000


Revenue                                   $ 51,959      $ 17,215
Cost of revenue                              4,713         2,605
Gross profit                                47,246        14,610


Operating expenses:
  Marketing, sales and service              41,575        16,314
  General and administrative                 9,065         6,267
  Product development                        3,699         2,201
  Amortization of deferred compensation        236           425
  Write-off of acquired in-process research
    and development                             --         7,550
  Amortization of intangible assets            317        13,954
                                            54,892        46,711
Loss from operations                        (7,646)      (32,101)


Other income:
  Interest income, net                         955         1,547
  Other income (expense)                        (8)           45
Net loss                                  $ (6,699)     $(30,509)


Net loss excluding acquisition-related
 charges                                  $ (6,382)     $ (9,005)


Pro forma basic and diluted net loss, excluding
 acquisition-related charges per share    $  (0.13)     $  (0.20)


Basic and diluted net loss per share      $  (0.13)     $  (0.67)


Weighted average shares used to compute
 pro forma basic and diluted net loss,
  excluding acquisition-related charges
   per share                                50,217        45,323


Weighted average shares used to compute
  basic and diluted net loss per share      50,217        45,323

Al Duncan, 626/685-5714 (Media)
al@goto.com