Rockstar Consortium US LP et al v. Google Inc

Filing 263

RESPONSE in Opposition re 220 MOTION to Amend/Correct Invalidity Contentions filed by NetStar Technologies LLC, Rockstar Consortium US LP. (Attachments: # 1 Declaration of Meng Xi, # 2 Exhibit A - Google.com search re InfoSeek IPO filing, # 3 Exhibit B - Part 1 of 3 InfoSeek Corporation's S-1, # 4 Exhibit B - Part 2 of 3 InfoSeek Corporation's S-1, # 5 Exhibit B - Part 3 of 3 InfoSeek Corporation's S-1, # 6 Exhibit C - Zimmerman's Research Guide, # 7 Exhibit D - 11/5/2014 email between ThomsonReuters and Meng Xi, # 8 Exhibit E - 11/5/2014 email between Intelligize and Meng Xi, # 9 Text of Proposed Order)(Xi, Meng)

Exhibit B

SEC Info

~

~

My Interests

&hi

User Info

Men, Xi

Infoseek Corp ' IPO: S-I/A' On 6/10/96
Filed On ~ . Accession Number 891618-96-819 . SEC File 333-04142

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Initisl Public Offering (/PO): Pre-Effective Amendment to Registration Statement (General Form) Filiog Table of Contents
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Amendment No.4 to Form 5-1
Specimen of Common Stock Certificate
Series E Preferred Stock Purchase Agreement
Internet Search Access Agreement August 23, 1995
Xsoft/lnfoseek Distribution & License Agreement
Letter of Agreement WI Hnc Software 4/2/96
Agreement In Principle WI Hnc 3/21/96
Infoseek/Nynex Agreement 3/29/96
Software License Agreement WI Nynex 3/29/96
Agreement WI Verity Dated March 31, 1996
Memorandum of Understanding WI Kanematsu 3/19/96
Marketing Alliance Agreement WI Kanematsu 4/11/96
Relationship Agreement WI Reuters Newmedia 4/19/96
Memorandum of Understanding WI Idg Communications
License & Software Distribution Agreement WI Hnc
Software License Agreement W/Hnc Dated May 8, 1996
License Agreement A-0492 Dated April 39, 1996
License Agreement A-0493 Dated April 39, 1996
Permission Letter to the Registrant and Fortune

Form S-l

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8
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34
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8K
264K
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42K
46K
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187K
101K
12K
12K
9K

S-l/A -

Amendment No.4 to Form S-1
Document Table of Contents

(sequential)
I 1"t Page
FjIing Submission
" Robert E L Johnson III
5 Prospectus Summmy
" The Company
6 The Offering
7 Risk Factors
" Extremely Limited Operating Histo!)': Anticipation of Continued
Losses
" Potential Fluctuations in Future Results
8 Develonirur Market: Unproven Acceptance of Internet
Advertising and of the Company's Products and Services
9 ReHance on Advertising Reyenues
10 Change in Netscape Relationship and Dependence on Other
Third Party Distribution Relationships
" TechnoloidcaJ QWUge and New Products and Services
11 Dependence on TecbnolQgy SUPPliers
14 Intellectual Pronerty and Proprietary Rights
" Capacity Constraints and System Failure
15 Dependence on Key Persnpnel
'I Gnyernment Regulation and Legal Uncertainties
16 Liability for Information Retrieved from the Internet
17 Dilution

(alphabetic)
•
•
•
•
•
•
•
•
•

•
•
•
•
•
•
•
•
•
•
•

Alternatiye Formats CWord et a1)
Additional Information
Bulance Sheets
Business
Capacity Constraints and System FailurJ;
Capitalization
Cash Cash equivalents and short-term investments
Certain Transactions
Change in Netscape Relationship and Dependence on Other
Third party Distribution Relationships
Company The
Competition
Convertible preferred stock
Cost of revenues
Dependence on Key Personnel
Dependence on Technology Suppliers
Description of Capital Stock
Developing Market" Unproven Acceptance of Internet
Adyertising and of the Company's Products and Services
Dilution
Dividend Policy
Employees

" No Specific lIse of Proceeds
II
Futur~ Capital Needs· Uncertainty of Additional Financing

19 Use of proceeds

• Employee Stock Purchase Plan
• Employment ContractS and Qwnge ofCon1ro1 Arrangements
• Exhibits and Financial Statement Scbedules

" Djyidend PoJicy
20 Capitalization

• futremely Limited Qperatin'l Wstoxy· Anticipation of

o

22 Selected Financial Data
23 Management's Discussion and Analysis of Financial Condition
and Results of Operations
24 Total revenues
25 Cost of revenueS
" Research and develgpment
26 Sales and marketing

" GenernJ and administrative
" Liquidity and Capital Resources

29 Business
" Industry Background
34 Infoseek Nayigational Services
36 Technology
40 Marketing and Distribution oCthe InCoseek Braud
41 Competition
43 Employees

44 Msmagement
Option Grants in Last Fiscal Year
1996 Stock Option/Stock ISsuaoce Plao
Employee Stock Purchase Plan
Employment Contracts aod Change of Control Arraogements
53 Certain Tmnsactions
56 Principal Shareholders
58 Description of Capital Stock
" ReWstratjon Ri'lhts
59 ShareS Eli'libJe for Future Sale
61 Underwriting
62 Legal Matters

47
48
50
51

" Elwla:Ia
" Additional Information

• General and administrative
• Government Regulation and Legal Uncertainties
o

Indemnification of Directors aod Officers

•
•
•
•
•
•
•
•
•

Index to Financial Statements
Industry Background
Jnfoseek Navigational Setyices
Intellectual PrOPerty and Proprietaty Rights
Legal Matters
LiahiJity for Iprowation Retrieved from the Internet
Liquidjty and Capital Resources
Management
Management's DiScussion and Ana1ysis of Financial Condition
and Results of Operations
• Marketin'l and Distribution of the !nrOSe" Bmvd
o
o

o
•
o
o

•

No Specific Use of Proceeds
Notes to Financial Statements
Offering. The
Ootion Grants in Last Fiscal Year
Other Expenses of Issuance and Distribution
Potential Fluctoations in Future Results
Principal Shareholders
Prospectus Summary

• Recent Sales of Unregistered Securijies

• Registration Rights
•
•
•
•
•

ReJiapce on Advertising Revenues
Research apd development
Risk Factors
Robert E L Johnson ill
Sales and marketing

Selected Financial Data
Shares Eligihle for Future Sale
o Statements of Cash Flows
o Statements of Operations
o Statements of Shareholders' Equity lDeficitl
o Technological Chaoge aod New Products and Services
o

63 Index to Financial Statements
65 Balance Sheets
66
67
68
69

Continued Losses
• Facilities
o Future Capital Needs; Uncertainty of Additional Financing

o

" Facilities

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o

Statements of Operations

Statements of Shareholders' Eouity lDeficitl
Statements of Cash Flows

NoteS to Financial Statemenls
" Cash cash equivalents and short-teon investments

73 Convertible preferred stock
74 Warrants
80 Item J3 Other Expenses of Issuance and Distribution
" Item 14 Indemnification of Directors and Officers

81 Item IS. Recent Sales of Unregistered Secorities
82 Item 16. Exhihits and Financial Statement Schedules
"

J J III Form ofUnderwrjting Agreement (preliminary form)
" 10 15* Stock Purchase Agreements dated January 24 1996
between the Registrant and Robert E L lnhnson ill
83 J0 22* Stondard Form of Office Lease dated April J996 the
ReWstrant and Ricbfield Investment Company

•
•
•
•
•
•
•

Technology
The Company
The Offering
Total revenueS
Undertakings
Underwriting
Use of proceeds

• Warrants
o

10 IS· Stock Purchase Agreements dated January 24 1996

between the Registrant and Robert E L Johnson ill
• 10 22111 Standard FOOP of Office I&sse dated April 1996 the
Registrant apd Ricbfield Investment Company
• 1 1III Foop oflJndmajting Agreement (we1iminary fonn)
• ] 996 Stock QptionlStocJc JsSlHDCe Plan

84 Item 17 Undertakings
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00

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19. 1'9&.
REGISTRATION NO. 333-4142

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 28549
AMENDMENT NO. 4
TO
FORM S-l
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INFOSEEK CORPORATION
(Exact name of Registrant as specified in its charter)
[ Enlarge/Download Table]
CALIFORNIA
ill1
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)

77-8353458

(I.R.S. Employer

Identification Number)

2628 AUGUSTINE DRIVE, SUITE 2S8
SANTA CLARA.. CALIFORNIA !a5!
(!Il!l!) 567-2788

(Address, including zip code, and telephone number, including area code, of the
Registrant's principal executive offices)
ROBERT E. L. JOHNSON, III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INFOSEEK CORPORATION
2628 AUGUSTINE DRIVE, SUITE 258
SANTA CLARA, CALIFORNIA 95854

( 488 ) 567-2788

(Name and address, including zip code, and telephone
code~ of agent for service)

number~

including area

Copies to:
[Download Tabl@ ]
EDWARD M. LEONARD~ ESQ.
JEFFREY D. SAPER, ESQ.
JACQUELINE E. COWDEN, ESQ.
HOWARD S. ZEPRUN, ESQ.
FRANKLIN P. HUANG, ESQ.
JAN-MARC VAN DER SCHEE, ESQ.
MIRIAM RIVERA, ESQ.
WILSON SONSINI GOODRICH a ROSATI,
BROBECK, PHLEGER a HARRISON LLP
PROFESSIONAL CORPORATION
TWO EMBARCADERO PLACE
6Se PAGE MILL ROAD
PALO ALTO, CALIFQRNIA '4~84-115B
2288 GENG ROAD
PALO ALTQ., CALIFQRNIA ~
(ill) 493-9388
(ill) 424-0168

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the NSecurities Act"), check the following box. I I
If this Form is filed to register additional securities for an offering

pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. I I
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. I I
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION SeA) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION SeA), MAY DETERMINE.

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INFOSEEK CORPORATION
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-l
[ Enlarge/Download Table ]
FORIf S-1 REGISTRATION STATEMENT
ITEM AND HEADING

HEADING OR LOCATION IN PROSPECTUS

1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus .... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus ..............•••••••••...... Inside Front Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges ••...... Prospectus Summary; The Company; Risk
Factors
4. Use of Proceeds ••••••••••••••••••••••••••• prospectus Summary; Use of Proceeds
5. Determination of Offering Price •••••...... Outside Front Cover Pages; Underwriters
6. Dilution ...................•••••••••...... Dilution
7. Plan of Distribution .......•••••••••...... Outside Front Cover Page; Underwriters
8. Description of Securities to be
Registered •••••••••••••••••••••••••••••••• prospectus Summary; Capitalization;
Description of Capital Stock
9. Interests of Named Experts and Counsel .... Experts; Legal Matters
18. Information with Respect to
the Registrant .............•••••••••...... Outside and Inside Front Cover Pages;
Prospectus Summary; The Company; Risk
Factors; Use of Proceedsj Dividend Policy;
Capitalization; Dilution; Selected
Financial Data; Management·s Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal Shareholders; Description of
Capital Stock; Shares Eligible for Future
Sale; Experts; Financial Statements
11. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ................•••••••••...... Not Applicable
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

Just 3rd

SUBJECT TO COMPLETION
JUNE 18. 1996
3J 888 J ee8 SHARES
LOGO

COMMON STOCK
All of the shares of (ammon Stock offered hereby are being sold by Infoseek
Corporation ("Infoseek" or the "~ "). Prior to this Offering J there has
been no public market for the Common Stock of the Company . It is currently
estimated that the initial public offering price will be between $19.99 and
$12.00 per share. The (ommon Stock has been approved for quotation on the Nasdaq
National Market under the symbol "SEEK." See "Underwriting " for a discussion of
the factors to be considered in determining the initial public offering price.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACrpRS " BEGINNING ON PAGE S.
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.
[ Enlarge/Downlpad Table]

I.JrI)ERWRITING

PRICE
TO
PUBLIC

DISCOUNTS AND
COfIIIIIIISSIONS

PROCEEDS
TO

Per Share .•••••••••••••..•..

$

$

$

Total(2) ••••••••••••••••••••

$

$

$

COMPANY(l)

(1) Before deducting expenses of this Offering estimated at $850,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
450 J 099 additional shares of Common Stock solely to cover over-allotments J
if any. To the extent that the option is exercised J the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full J the total Price to Public, Underwriting
Discounts and Commissions J and Proceeds to Company will be $
$
and $
J
respectively. See "Underwriting ."

The shares of (ommon Stock are offered by the several Underwriters J subject
to prior sale J when J as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of (ommon Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
1996.

MERRILL LYNCH & CO.

ALEX. BROWN & SONS
INCORPORATED
THE DATE OF THIS PROSPECTUS IS
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3 PAGES OF ARTWORK
INCORPORATED BY REFERENCE
TO AMENDlilENT NO. 1

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANJ AT A LEVEL ABOVE THAT WHICH PlIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKETJ IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING J IF COMMENCEDJ MAY BE
DISCONTINUED AT ANY TIME.

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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. It is the Company 's belief that this Prospectus may contain
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (NSecurities Act"), and Section 2iE of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). Actual results and
the timing of certain events could differ materially from those projected 1n the
forward-looking statements as a result of certain factors described under rr~
~ rr commencing on page 5 and described elsewhere in this Prospectus.
THE COMPANY
Infoseek develops and provides branded~ comprehensive Web-based
navigational services that help users access and personalize the vast resources
of the Internet. The Company 's primary service offering~ Infoseek Guide~ is a
free service targeted at individual users. The Company believes that Infoseek
Guide goes beyond the functionality offered by other search engines and
directory services, by aggregating and packaging the resources of the Internet
to serve individuals' unique and personal interests and create rich Internet
experiences. The Company believes that Infoseek Guide has been well received by
consumers and has achieved a strong brand presence among Web users.
Th@ Company 's objective is to establish itself as the dominant, branded
navigational service provider on the Internet in order to reach the greatest
audience. Th@ Company seeks to build a high volume of traffic on its services to
provide a preferred platform for content providers and advertisers to reach
their target audiences. To achieve its objective, the Company intends to:
enhance the attractiveness of its service to users through the addition of new
features and functionalitYj develop and license innovative technologies which
can differentiate its service and scale with the growth of the Internetj offer
advertisers high impact, innovative advertising productsj distribute its service
widely through software companies J access providers and othersj and form
relationships with leading third party content providers.
The Company 's service is differentiated by its underlying search
technology, which is noted for its high accuracy and fast searching capability.
Based on this technology, Infoseek Guide has won a number of industry awards
including"Number 1 Rated Search Engine" (PC Computing Sept 95), "Best of the
Test" (Internet World May 96) and "MVP: Internet TooLs" (PC Computing Dec 95).
The Company is currently working on its next generation search engine,
Ultraseek, which the Company plans to release in the second half of 1996.
Ultraseek will enable the searching of a much greater number of Web sites at
even faster speeds with the same level of accuracy for which Infoseek Guide is
currently known.
Th@ Company believes that Infoseek Guide is also differentiated through its
design, which integrates the capabilities of a search engine and a directory to
combine specific responses to search queries with communities of related Web,
USENET and branded third party content and targeted, related advertising. By
creating communities of context-specific information in real-time for users,
Infoseek Guide addresses the needs of consumers for relevant and related
information, enables content providers to reach interested audiences J and allows
advertisers to deliver advertisements to a target group of potential buyers.
The Web is emerging as an important new advertising medium. According to
Forrester Research, Inc.~ the market for Internet-based advertising will reach
approximately $799 million by 1998, from $37 million in 1995. The Company
believes it is well positioned to take advantage of this growth by serving the
needs of advertisers. By creating communities where users' interests are matched
with advertisements, by tracking impressions and by offering a significant
volume of Web traffic, Infoseek Guide enables advertisers to undertake
measurable, targeted, cost-effective and interactive advertising. During the
quarter ended March 31. 1996, over 129 advertisers placed advertisements on
Infoseek Guide. The Company is actively exploring new technologies which will
allow it to track user behavior and interests, and therefore even more closely
match the interests of audience and advertisers.
Th@ Company believes that distributing and marketing its services widely is
key to successfully growing its audience. Th@ Company was able to gain access to
a large audience and build early brand awareness through its initial
relationship with Netscape Communications Corporation ("Netscape") as the sole
premier nNet Search" navigational service on the Netscape Web page. Beginning
April 11. 1996, Netscape implemented a new nNet Search" display, in which

Jy5t 5th

several navigational service providers are rotated through the most visible
position on the page. In order to maximize its exposure, the Company has also
broadened its channels of distribution through other entities including
Microsoft Corporation, NETCOM On-Line Communication Services, Inc., NYNEX
Information Technologies Company (NNYNEXN), Quarterdeck Corporation, and Verity,
Inc. and will continue to broaden its channels of distribution through
additional entities. The Company has also established key strategic alliances
with leading media companies including Reuters NewMedia Inc. and IDG Holdings,
Inc. for content provisions and with distribution companies including NYNEX and
Kanematsu Corporation for further national and international distribution.
3

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THE OFFERING
[ Enlarge/Download Table]
Common Stock offered by the Cgmpany •••••••.. 3,000,000 shares
Common Stock to be outstanding
after the Offering .............•••••••••.. 24,946,228 shares(1)
Use of prgceeds ..................•••••••••.. For general corporate purposes, including capital
expenditures and working capital.
Nasdaq National Market symbol ••••••••••••••• SEEK
SUMMARY FINANCIAL OATA
(in thousands, except per share data)
[ Enlarge/Dgwnlpad Table]
INCEPTION

(AUGUST 38. 1993)
TO DECEIfBER 31,
11193

YEARS ENDED
DECEIfBER 31,

------------------ -----------------19. .
1995
1995
1996

STATEMENTS OF OPERATIONS DATA:

Total revenues ••••••••............
Gross profit ••••••••••••••••••••••
Operating loss ••••••••............
Net 1055 ••••••••••••••••••••••••••
Pro forma net loss per share

$

$

THREE JIIIONTHS ENDED
JllARCH 31,

S 1,032

$

$

S

418
(3,393)

S 1,731
1,041
(3,568)

$ (9.92)

$ (0.14)

25,863

(2) ....•••••••••••••............

Shares used in computing pro forma
net loss per share (2) ......... .

(3,296)
$ (9.13)

(1,520)
$(1,510)

(27)
(27)

(74)
(426)
(422)

25,966

25,914

(3,509)

[ Enlarge/Download Table]
84RCH 31. 1996

AC11IAL

BALANCE SHEET DATA:

Cash and cash equivalents...................... S 10,114
Working capital •••••••..........•...•...•......
7,131
Total assets ••••••••••......................... 15,747
Total shareholders' equity •••••••••••••••••••••
8

PRO FOIIJIA(3)

S 18,202
15,219
23,835
5,203

PRO FORJIIA
AS NJJUSTEO(3)(4)

S 48,042
45,059
53,675
46,890

(1) Based on the number of shares outstanding as of March 31. 1996 and the
issuance of 673,500 shares of Convertible Preferred Stock and 375,001 shares
of Redeemable Convertible Preferred Stock in April 1996. Excludes 4,440,876
options and warrants outstanding at March 31. 1996, of which 311,537 were
exercisable as of such date. See N
Mgnaaement--1996 Stock Optipn/Stpck
IssYance pLan " and Notes S, 7 and 10 of Notes to Financial Statements.
(2) See Note 1 of Notes to Financial Statements.
(3) Reflects the issuance of 673,500 shares of Convertible Preferred Stock and
375,001 shares of Redeemable Convertible Preferred Stock for net proceeds of
$8,088,000 in April 1996.
(4) Adjusted to reflect the sale to the public of 3,OOO,OOO shares of Common
Stock offered by the Company at an assumed initial public offering price of
$11.99 per share and the application of the estimated net proceeds
therefrom. See "Use gf Prqceeds " and N
Qqpitgtizatign .N

Just 6th

Except as set forth in the financial statements or as otherwise indicated~
all information in this Prospectus (i) reflects the automatic conversion upon
the closing of the Offering of all of the Company 's outstanding shares of
Preferred Stock into shares of Common Stock~ and the associated conversion of
outstanding warrants to purchase Preferred Stock into warrants to purchase
Common Stock~ (ii) does not reflect exercises of options or warrants after ~
31. 1996, (iii) reflects a 3-for-4 reverse stock split to be effected prior to
the effectiveness of this Offering, and (iv) assumes that the Underwriters'
over-allotment option is not exercised.
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RISK FACTORS
It is the Company 's belief that this Prospectus may contain certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results and the timing of certain events could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below and other factors discussed elsewhere in this Prospectus. In
addition to the other information contained in this Prospectus~ investors should
carefully consider the following risk factors:
Extremely Limited Operating Histo~j Anticipation of Continued Losses. The
Company has an extremely limited operating history~ which makes it difficult to
manage future operations or predict future operating results. The Company was
formed in August 1993~ did not commence generating revenues until January 1995
and has generated limited revenues to date. The Company has incurred significant
net losses since inception and expects to continue to incur significant losses
on a quarterly and annual basis for the foreseeable future. As of March 31.
l222, the Company had an accumulated deficit of $8.4 million. The Company and
its prospects must be considered in light of the risks, costs and difficulties
frequently encountered by companies in their early stage of development,
particularly companies in the new and rapidly evolving Internet market. In order
to be successful, the Cpmpany must, among other things, continue to attract,
retain and motivate qualified personnel, successfully implement its advertising
program, continue to upgrade its technologies and commercialize products and
services incorporating such technologies, respond to competitive developments
and successfully expand its internal infrastructure. Moreover, due to the
intense competition in the emerging markets addressed by the Company, the
Company must seek to expand all aspects of its business rapidly~ which increases
the challenges facing the Company making it more difficult for the Company to
recover from business errors. The Company has achieved only limited revenues to
date~ and its ability to generate significant revenues is subject to substantial
uncertainty. There can be no assurance that the Company will be able to address
any of these challenges or will be able to sustain revenue growth or achieve
profitability. See "SeLected FinanciaL Pata n and "Management's Discussion and
AnaLysis of FinqnciaL Gqndition qnd ResuLts of gpergtions . n
Potential Fluctuations in Future Results. As a result of the Company 's
extremely limited operating history as well as the very recent emergence of the
market addressed by the Company, the Company has neither internal nor
industry-based historical financial data for any significant period of time upon
which to base planned operating expenses. The Company has incurred significant
net losses to date. Substantially all of the Company 's revenues have been
generated from the sale of advertising, and the Company expects revenue for the
foreseeable future to continue to be derived substantially from advertising
sales. Moreover, most of the Company 's contracts with advertising customers have
terms of three months or less, with options to cancel at any time. Accordingly,
future sales and operating results are difficult to forecast. In addition~
significant portions of the Company 's revenues to date have been derived from
sales to a limited number of customers~ and the Company currently anticipates
that future quarters will continue to reflect this trend. Therefore, the
cancellation or deferral of a small number of advertising contracts or license
agreements could have a material adverse effect on the Company 's business~
results of operations and financial condition. The Company 's expense levels are
based in part on its expectations as to future revenues and to a large extent
are fixed. The Company may not be able to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in relation to the Company 's expectations would have an immediate
adverse impact on the Company 's business, results of operations and financial
condition. Moreover, the Cgmpany plans to significantly increase its operating
expenses to fund greater levels of research and development, increase its sales
and marketing operations (including payments to Netscape of up to $5 million),
develop new distribution channels and broaden its customer support capabilities.
To the extent that any expenses in 1996 precede or are not subsequently and
timely followed by increased revenues, the Company 's business, results of
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The Company expects that its results of operations may also fluctuate
significantly in the future as a result of a variety of factors, including: the
continued rate of growth, usage and acceptance of the Internet; the rate of
acceptance of the Internet as an advertising medium; demand for the Company 's
products and services; the advertising budgeting cycles of individual
advertisers; the introduction and acceptance of new or enhanced products or
services by the Company or by its competitors; the Company 's ability to
anticipate and effectively adapt to a developing market and to rapidly changing
technologiesj thg Company 's ability to effectively expand its operations and
manage such expansion; the Company 's ability to attract, retain and motivate
qualified personnel; initiation, renewal or expiration of significant cpntracts
such as the Company 's distribution relationship with NYNEX; pricing changes by
the Company or its competitors; specific economic conditions in the Internet
market; general economic conditions and other factors. In addition, the Company
may elect from time to time to make certain pricing, service or marketing
decisions or acquisitions that could have a short-term material adverse effect
on the Company 's business, results of operations and financial condition and may
not generate the long-term benefits intended. Due to all of the foregoing
factors J it is likely that in some future period, the Company 's operating
results may be below the expectations of public market analysts and investors.
In such event, the price of the Company 's Common Stock would likely be
materially adversely affected. See "Management's Discussion and AnaLysis of
FinancjaL Cqnditjon and ResuLts of Operations ."
The Company 's revenues in the near term will also be dependent to a
material degree on the Company 's relationship with NYNEX. In March 1996 J the
Company and NYNEX entered into a one year agreement, which provides thatJ
beginning in May 1996, the Company will prominently display the BigYellow logo,
which represents NYNEX's interactive shopping directory (N8igYeLLowN), as the
exclusive comprehensive shopping directory within Infoseek Guide. In exchange
for such exclusivity, NYNEX will pay to the Company up to an aggregate of $4.6
million in monthly payments, which amount will be decreased proportionately if
the number of impressions of the BigYellow logo is below a specified number.
NYNEX may extend the term of the agreement for additional one year periods, with
the fee to be determined based upon Infoseek's then current advertising rate
structure. In addition, NYNEX has the right to cancel or renegotiate the
agreement based upon certain relative traffic volumes on the BigYellow and
Infoseek Guide sites. There can be no assurance that the NYNEX arrangement will
prove to be mutually beneficial or that it will be continued after its initial
term. Furthermore, the current traffic levels are below those required in order
for the Company to receive the maximum payment from NYNEX J and there can be no
assurance that the Company will be able to produce the levels of traffic that
NYNEX has negotiated. See N
Manqgement's Discussion and AnaLysis of FinanciqL
Condjtjon qnd ResuLts of Operatjons .N N
Business -- Marketing qnd Djstrjbutjon of
the Infoseek 8rqnd N and R __ Infoseek Products and Services. R
Developing Market; Unproven Acceptance of Internet Advertising and of the
Company's Products and Services. The market for the Company 's products and
services has only recently begun to develop, is rapidly evolving and is
characterized by an increasing number of market entrants with products and
services for use on the Internet. The Cpmpany 's future success is highly
dependent upon the increased use of the Internet for information publication,
distribution and commerce. In particular, because the Company expects to derive
substantially all of its revenues in the foreseeable future from sales of
Internet advertising, the future success of the Company is highly dependent on
the development of the Internet as an advertising medium. 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. In
additionJ most of the Company 's current advertising customers have limited or no
experience using the Internet as an advertising medium J have not devoted a
significant portion of their advertising expenditures to such advertising and
may not find such advertising to be effective for promoting their products and
services relative to advertising in traditional media. Also J certain advertising
filter software programs are available that limit or remove advertising from an
Internet user's desktop. Such software J if generally adopted by users, may have
a material adverse effect upon the viability of advertising on the Internet.
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In addition, the Company 's success will depend in large part upon the
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Internet for commercial purposes. There can be no assurance that Internet usage
and commerce will become widespread or that extensive content (such as Web pages
and USENET News groups) will continue to be provided over the Internet. Issues
concerning the commercial use of the Internet such as security~ reliability~
cost, ease of access and use, quality of service and acceptance of advertising,
remain unresolved and may negatively impact the growth of Internet usage or the
acceptance of the Internet as an advertising medium. To the extent that the
Internet continues to experience growth in the number of users and amount of
traffic, there can be no assurance that the Internet infrastructure will
continue to be able to support the demands placed on it by such growth. In
addition, the Internet could lose its viability due to delays in the development
or adoption of new standards and protocols to handle increased levels of
Internet activity, or due to increased governmental regulation. There can be no
assurance that the infrastructure or complementary services necessary to make
the Internet a viable commercial marketplace will be developed~ or, if
developed, that the Internet will become a viable commercial marketplace for
products and services such as those offered by the Company and its advertising
customers.
The Company is in a new and rapidly evolving industry~ with demand for and
market acceptance of recently introduced products and services being subject to
a high level of uncertainty. Accordingly~ it is difficult to predict its size~
stability and the extent of its growth~ if any. There can be no assurance that
the market for the Company 's products and services will develop or that demand
for the Company 's products or services by Internet users or by advertisers will
emerge or become sustainable. If the market fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if the Company 's
products and services do not achieve or sustain acceptance by Internet users or
advertisers, the Cpmpany 's business, results of operations and financial
condition will be materially adversely affected. See N
Bysiness -- Industry
Bqckgrqynd. "
Reliance on Advertising Revenues. The Company has derived substantially
all of its revenues to date from the sale of advertisements, and expects such
dependence on advertising revenue to continue. The Company 's current business
model to generate revenues through the sale of advertising on the Internet is
unproven. The Company 's advertising revenues to date have been derived from a
limited number of advertising customers. In addition, substantially all of the
Company's advertising contracts to date have been for terms of three months or
less~ with options to cancel at any time. These contracts generally guarantee a
minimum of impressions (displays of the advertisement to the user) per month~
most typically~ one million impressions. There can be no assurance that current
advertisers will continue to purchase advertising space and services from the
Company or that sufficient impressions will be achieved or available~ or that
the Company will be able to successfully attract additional advertisers. The
Company's ability to generate significant advertising revenues will depend,
among other things, on advertisers' acceptance of the Internet as an attractive
and sustainable medium, the development of a large base of users of the
Company's products and services with demographic characteristics attractive to
advertisers, the successful expansion of the Company 's advertising capabilities
and advertising sales force, and strong acceptance of the Company 's services by
Internet users. Furthermore, there is intense competition among sellers of
advertising space on the Internet, and a variety of pricing models offered by
different vendors for a range of advertising services, making it difficult to
project future levels of advertising revenues and pricing models that will be
adopted by the industry or individual companies. In addition, certain
advertising filter software programs are available that limit or remove
advertising from an Internet user's desktop. Such software~ if generally adopted
by users~ may have a material adverse effect upon the viability of advertising
on the Internet. Accordingly~ there can be no assurance that the Company will be
successful in generating significant future advertising revenues~ and failure to
do so will have a material adverse effect on the Company 's business, results of
operations and financial condition. See N
Manqqemgnt's DiscussiQn and AnaLysis of
FinanciaL Condition and ResuLts Qf OperatiQns .- "Business -- Industry
BackgrQund- and "-- Advertising SaLes and Services."
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Change in Netscape Relationship and Dependence on other Third Party
Distribution Relationships. From March 1995 through March 1996, the Company 's
service was listed as the sole premier navigational service on the Netscape Web
page accessible via the NNet Search" button. As of March 31. 1996, approximately
85% of the traffic to the Company 's Infoseek Guide service was derived through
the Netscape Web page. In March 1996, Infoseek entered into a new agreement with
Netscape, which provides that Infoseek will be listed as a non-exclusive premier
provider of navigational services on Netscape's Web page for the period 82L1l
19. 1996 to March 31. 1997 . Currently, Netscape's Web page displays four
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19. 1996, the Company 's average daily traffic was approximately 47X of its
average daily traffic for the 30 day period immediately prior to the change from
being Netscape's sole premiere provider to one of five premier providers. There
can be no assurance that the Company will be able to maintain or increase its
current level of traffic and any failure to do so could materially and adversely
impact advertising revenues. In addition, the Company cannot anticipate the
impact on Infoseek traffic of any changes Netscape may make to this service, to
its Web page or its other services, or the effect on advertising revenues that
may be generated from such traffic. Infoseek's agreement with Netscape provides
for payments of up to an aggregate of $5 million to Netscape over the term of
the agreement. The Company has the right to terminate the agreement at the end
of six months, in which case the payment to Netscape would be reduced to an
aggregate of approximately $2.5 million. Furthermore, if traffic is decreased
significantly as a result of these or other changes in the Netscape relationship
and the Company is unable to develop alternative viable distribution channels,
advertising revenues would probably be adversely affected, while the $5 million
Netscape obligation would not be reduced, unless the Company determines to
terminate the relationship at six months, the result being that the Company 's
business, results of operations and financial condition would be materially and
adversely affected.
The Company has also entered into distribution agreements and informal
relationships with other software vendors and operators of online networks and
Web sites . Although none of these relationships currently represents a
significant portion of the Company 's traffic, the Company expects that they will
become more important, in part, due to the change in the Netscape relationship.
The Company 's business relationships with these other companies consist of
cooperative marketing programs and licenses to include the Company 's products
and services in online networks or services offered by these parties, which are
intended to increase the use and visibility of thg Company 's products and
services. These distribution arrangements, including the arrangement with
Netscape, typically are not exclusive, and are terminable upon little or no
notice. There is no assurance that Netscape or any of these other companies will
not terminate their relationship with the Company or develop their own product
offerings competitive with those of the Company. If Netscape or any of these
other companies were to terminate or reduce their joint marketing activities
with the Company, increase the fees or otherwise change the terms on which the
Company's products and services are accessed through such companies' Web sites,
develop and market their own competitive products and services, or promote
competing products and services from other third parties, or if these
relationships do not result in high-level usage of the Company 's services, the
Company's business, results of operations and financial condition could be
materially and adversely affected.
Technological Change and New Products and Services. The market for
Internet products and services is characterized by technological change,
changing customer needs, frequent new product introductions and evolving
industry standards. These market characteristics are exacerbated by the emerging
nature of this market and the fact that many companies are expected to introduce
new Internet products and services in the near future. Thg Company 's future
success will depend in significant part on its ability to continually and on a
timely basis introduce new products, services and technologies and to continue
to improve the performance, features and reliability of the Company 's products
and services in response to both evolving demands of the marketplace and
competitive product offerings.
The Company currently employs information retrieval technology licensed
from the Applied Computing 5ystems Institute of Massachusetts, Inc. (NACSIOH R ) ,
an entity related to the University of Massachusetts. The Company is developing
a new search engine technology, Ultra seek, which is
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being designed to significantly improve retrieval and Web page indexing
capabilities beyond the AC5IOM technology. The Company has also recently
licensed certain software technologies from X50ft, a division of XEROX
Corporation ("XEROX"), which technology will be licensed to the Company on a
partially exclusive basis for the first year of the contract . Infoseek has
entered into a software license agreement with HNC Software Inc. ("HNC") to
license certain technology from HNC to automate the development of the Company 's
Web Directory (DDirectoryR) feature. It is not yet clear that these technologies
and services under development, and many of the Company 's new products and
product enhancements which have been only recently introduced will achieve
significant market acceptance.
There can be no assurance that any new or proposed product or service will
attain market acceptance. Failure of the Company to successfully design,
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Ultraseek or any enhancements of the Company 's current search
or the failure of the Company 's recently introduced products and
services to achieve market acceptance could have a material adverse effect upon
the Company 's business~ operating results and financial condition. There can be
no assurance that the Company will not experience difficulties that could delay
or prevent the successful development, introduction or marketing of new or
enhanced technologies~ products and services, or that the Company 's new or
recently introduced products and services will adequately meet the requirements
of the marketplace and achieve significant market acceptance. Due to certain
market characteristics, including technological change, changing customer needs,
frequent new product and service introductions and evolving industry standards,
timeliness of introduction of these new products and services is critical.
Delays in the introduction of new products and services may result in customer
dissatisfaction and may delay or cause a loss of advertising revenue. There can
be no assurance that the Company will be successful in developing new products
or services or improving existing products and services that respond to
technological changes or evolving industry standards, that the Company will not
experience difficulties that could delay or prevent the successful development~
introduction and marketing of new or improved products and services~ or that its
new products and services will adequately meet the requirements of the
marketplace and achieve market acceptance. In addition~ new or enhanced products
and services introduced by the Company may contain undetected errors that
require significant design modifications. This could result in a loss of
customer confidence and user support, thus adversely affecting the use of the
Company's products and services, which in turn would have a material adverse
effect upon the Company 's business, results of operations or financial
condition. If the Company is unable to develop and introduce new or improved
products or services in a timely manner in response to changing market
conditions or customer requirements, the Cpmpany 's business, operating results
and financial condition will be materially adversely affected. In addition~ if
the Cpmpany is unable to remain competitive with its competitors, its business,
operating results and financial condition may be materially adversely affected
as well.
See
Dependence on TechnoLogy SuppLiers N and "Business -- TechnoLogy .n
particular~

technology~

N __

Dependence on Technology Suppliers. The Company is dependent currently
upon several suppliers for the integral components of its current and future
technologies. The Company has a non-exclusive, perpetual license to certain
technology from ACSIOM relating to text indexing and retrieval. The ACSIOM
technology is currently the core technology used by the Company in its search
engine. Although the Company is currently developing its own proprietary core
search engine technology~ there can be no assurance that Ultraseek will be
successfully designed~ developed, tested~ marketed and introduced or accepted by
the marketplace in a timely manner. In the event that Ultra seek, or an
alternative technology~ is not successfully introduced and accepted in a timely
manner, the Company will continue to be dependent upon its license from ACSIOM.
Given the technological changes occurring in the industry, there is no assurance
that the ACSIOM technology will remain a competitive technology in the future.
In addition, in April 1996, thg Company licensed certain software
technology from HNC. Th@ Company intends to utilize the software technology to
develop an advertising and audience
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management system to optimize the matching of advertisements with the
appropriate audience. The software will be modified according to the Company 's
specifications to integrate it into the Company 's advertisement placement
system. This technology will be licensed to the Company for an initial five year
term beginning upon the initial acceptance of the software by the Company . The
Company expects that the proposed technology will provide significant
technological improvements to the Company 's advertising and audience management
systems.
Furthermore, in May 1996~ the Company licensed certain additional software
technology from HNC that is intended to allow the Company to enhance the
Company's Web Directory feature.
Infoseek expects to use this technology to automate the construction of
Directory categories, assignment of Web pages to each Directory category and the
creation of abstracts for each Web page included in the Directory. All of these
processes are currently being performed manually. Accordingly, the Company is
depending upon the proposed technology to reduce the cost of expanding its
Directory feature. This technology will be licensed to the Company for an
initial five year term beginning upon the initial acceptance of the software by
thg Company . There can be no assurance that the HNC technology will function as
anticipated or will provide the intended benefits which could require the
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Th@ Company has also licensed certain software technologies from XEROX to
be used for the linguistic analysis of search terms. This technology will be
licensed to the Company on a partially exclusive basis for the first year. In
addition, the Company may develop other technology alliances and enter into
other license arrangements with technology vendors.
There can be no assurance that the HNC or XEROX technologies will be
successfully designed, developed and tested, or, that if the technologies are
successfully developed, any product or service into which the technologies are
incorporated will be successfully accepted by the marketplace. Any failure of
HNC, XEROX, ACSIOM or any future technology vendor to provide prompt and
effective support and maintenance to the Company, or to continue to upgrade
their respective technologies in order to continue to be competitive, could have
a material adverse effect on the Company 's business, results of operations and
financial condition.
See
TechnoLogicaL Change and New Products and Services N and
"Business -- TechnoLogy .N
N __

Dependence Upon Third Party Content Development. A key element of the
Company's strategy involves the use of unique content developed by third parties
exclusively for Infoseek. A significant majority of the Company 's relationships
with such third parties, however, have only recently been developed and are
contracted on three month trial bases. There can be no assurance that these
content sponsors will continue to provide content that is unique to Infoseek,
that they will not seek to charge the Company a significant fee for the supply
of such content, that they will not enter into similar arrangements with or
provide similar content to the Company 's competitors, that they will continue
their relationship with the Company, or that they will not establish their own
services to compete against the Company for advertising revenue. Nor can there
be any assurance that the Company 's current or future third-party content
providers will provide content that is attractive to Web users or that their
efforts will result in significant revenue to the Company . Any failure of these
parties to develop and maintain high-quality and attractive content could result
in dilution to the Infoseek brand and could have a material adverse effect on
the Company 's business, results of operations and financial condition. See
"Business -- Infoseek NavigationaL Services . N
Intense Competition. The market for Internet products and services is
highly competitive, with no substantial barriers to entry, and the Company
expects that competition will continue to intensify. In addition, the market for
the Company 's products and services has only recently begun to develop, is
rapidly evolving and is characterized by an increasing number of market entrants
with competing products and services. The Company does not believe this market
will support the increasing number of competitors and their products and
services. Although the Company believes that the diverse segments of the
Internet market may provide opportunities for more than one supplier of products
and services similar to those of the Company, it is possible that a single
supplier may
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dominate one or more market segments. Accordingly, any failure of the Company to
provide product and service offerings that achieve success in the short-term
could result in an insurmountable loss in marketshare and brand acceptance, and
could, therefore, have a material adverse and long-term effect upon the
Company's business, results of operations and financial condition.
A number of companies offer competitive products and services addressing
certain of the Company 's target markets. These companies include America Online,
Inc., Digital Equipment Corporation, Excite, Inc., Lycos, Inc., The McKinley
Group, Open Text Corporation, CompuServe Corporation, Prodigy Services Company
and Yahool Corporation. In addition, the Company competes with metasearch
services that allow a user to search the databases of several catalogs and
directories simultaneously. The Company also competes indirectly with database
vendors that offer information search and retrieval capabilities with their core
database products. In the future, the Company may encounter competition from
providers of Web browser software, including Netscape and Microsoft Corporation
(NMicrosoft"), online services and other providers of other Internet products
and services who elect to incorporate their own search and retrieval features
into their offerings.
Many of the Company 's existing and potential competitors have significantly
greater financial, technical and marketing resources than the Company . The
Company may also be adversely affected by competition from licensees of its
products and technology, current and future advertisers, as well as from its
current, future and former content providers. There can be no assurance that the
Company's competitors will not develop Internet products and services that are
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the Company 's offerings. Mor@ov@r, a number of the Company 's current advertising
customers, licensees and licensors have also established relationships with
certain of the Company 's competitors and future advertising customers, licensees
and licensors may establish similar relationships. In addition, the Company
competes with online services and other web site operators as well as
traditional offline media such as print and television for a share of
advertisers' total advertising budgets. There can be no assurance that the
Company will be able to compete successfully against its current or future
competitors or that competition will not have a material adverse effect on the
Company's business, results of operations and financial condition. See
N
Bus1ness __ Cgmpet1t1pn.n

Management of Growthj Need to Establish Infrastructurej Recent Management
Additions. The rapid growth that the Company believes is necessary to
successfully offer its products and services has placed, and is expected to
continue to place, a significant strain on the Company 's managerial, operational
and financial resources. The Company continues to expand its operations and
increase its dependence and reliance on computer generated information. This
evolution necessitates continuous reassessment of the appropriateness of the
Company's computerized data and systems. The Company 's current management
information system is cumbersome and inefficient and requires a significant
amount of manual effort using personal computer spreadsheets in order to process
and analyze information. This situation makes it difficult for management to
obtain timely and accurate information. The Company is evaluating a number of
new financial and management controls, reporting systems and procedures, as well
as its information systems and technology. Such expansion efforts will create
significant strain upon the Company 's existing resources. In addition, during
the 12 month period from March 31. 1995 to March 31. 1996, the Company hired its
President and Chief Executive Officer, Executive Vice President and Chief
Financial Officer, Vice President-Engineering, Vice President-Worldwide
Advertising, Vice President Chief Marketing Officer, Vice President-Product
Management and Editor. Moreover, the Company grew from 11 employees to 71
employees during that same period, and the Company expects the number of
employees to continue to grow over the next 12 months.
There can be no assurance that the Company will be able to effectively
manage the expansion of its operations, that the Company 's new management team
will work together effectively, that the Company will be able to attract and
retain qualified personnel, that the Company 's systems, procedures or controls
will be adequate to support the Company 's operations or that Company
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management will be able to achieve the rapid execution necessary to fully
exploit any potential market opportunity for the Company 's products and services
and media properties. In addition, the Company intends to establish at least one
mirror, or duplicate, site in another geographic location, which will create
additional operational and management complexities, including the need for
continual updating and maintenance of directory listings among geographically
dispersed network servers. Any inability to effectively manage growth could have
a material adverse effect on the Company 's business, results of operations and
financial condition. See nBusiness -- EmpLqvees " and N
Mgngqement."
Intellectual property and proprietary Rights . The Company 's success
depends significantly upon its proprietary technology. The Company currently
relies on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company generally enters into confidentiality agreements with its
employees and consultants. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection. In addition, the Company currently has six
United States patent applications pending. There can be no assurance that any
pending applications will be approved, that if issued any such patent will not
be challenged, and that if challenged, any such patent(s) will not be
invalidated. There can be no assurance that any issued patent will provide the
Company with any competitive advantages or will not be challenged by third
parties. The Company has registered and applied for registration for certain
service marks and trademarks, and will continue to evaluate the registration of
additional service marks and trademarks as appropriate. Despite the Company 's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company 's products or services or to obtain and use
information that the Company regards as proprietary. In addition, the laws of
some foreign countries do not protect proprietary rights to as great an extent
as do the laws of the United States. Litigation may be necessary to protect the
Company's proprietary technology. Any such litigation may be time-consuming and
costly. There can be no assurance that the Company 's means of protecting its
proprietary rights will be adequate or that the Company 's competitors will not
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services or design around patents or other intellectual property rights of the
Company.
There have been substantial amounts of litigation in the information
technology industry regarding intellectual property rights. There can be no
assurance that the Company will develop proprietary products or services or
technologies that are patentable or that the patents of others will not have a
material adverse effect on the Company 's ability to do business. In addition,
there can be no assurance that third parties will not in the future claim
infringement by the Company with respect to current or future products or
services, trademarks or other proprietary rights, or that the Company will not
counterclaim against any such parties in such actions. Any such claims or
counterclaims could be time-consuming, result in costly litigation, cause
product release delays, require the Company to redesign its products or services
or require the Company to enter into royalty or licensing agreements, any of
which could have a material adverse effect upon the Company 's business,
operating results and financial condition. Such royalty or licensing agreements,
if required, may not be available on terms acceptable to the Company or at all.
See N Government ReguLation and LegaL Uncertainties . N N LiabiLity fOr
__
__
InfOrmation Retrieved from the Internet and "Business -- InteLLectuaL Property
and Proprietary Rights . N
N

Capacity Constraints and System Failure. A key element of the Company 's
strategy is to generate a high volume of traffic to its products and services.
Accordingly, the performance of the Company 's products and services is critical
to the Company 's reputation, its ability to attract advertisers to the Company 's
Web sites and market acceptance of these products and services. Any system
failure that causes interruptions or that increases response time of the
Company's products and services would result in less traffic to the Company 's
Web sites and, if sustained or repeated, would reduce the attractiveness of the
Company's products and services to advertisers and customers. In addition, an
increase in the volume of searches conducted through the Company 's products and
services could strain the capacity of the software, hardware or
telecommunications lines
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deployed by the Company, which could lead to slower response time or system
failures. As the number of Web pages and users increase, there can be no
assurance that the Company 's products, services and systems will be able to
scale appropriately. The Company is also dependent upon Web browser companies
and Internet and online service providers for access to its products and
services, and users have experienced and may in the future experience
difficulties due to system or software failures or incompatibilities not within
the Company 's control. The Company is also dependent on hardware suppliers for
prompt delivery, installation and service of servers and other equipment and
services used to provide its products and services. Any disruption in the
Internet access and service provided by the Company or its service providers
could have a material adverse effect upon the Company 's business, results of
operations and financial condition.
The process of managing advertising within large, high traffic Web sites
such as the Company 's is an increasingly important and complex task. The Company
relies on internal advertising inventory management and analysis systems to
provide enhanced internal reporting and customer feedback on advertising. To the
extent that any extended failure of the Company 's advertising management system
results in incorrect advertising insertions, the Company may be exposed to Nrnake
good N obligations with its advertising customers, which, by displacing
advertising inventory, could have a material adverse effect on the Company 's
business, results of operations and financial condition.
In addition, the Company 's operation depends upon its ability to maintain
and protect its computer systems located in Santa Clara, California. This system
is vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events. The Company does not
currently have a disaster recovery plan in effect. Despite the implementation of
network security measures by the Company, its servers are also vulnerable to
computer viruses, break-ins and similar disruptive problems. Computer viruses,
break-ins or other problems caused by third parties could lead to interruptions,
delays in or cessation of service to users of the Company 's products and
services. The occurrence of any of these risks could have a material adverse
effect on the Company 's business, results of operations and financial condition.
See N
Business -- EgciLities . n
Dependence on Key Personnel. The Company 's future performance depends in
significant part upon the continued contributions of its key technical and
senior management personnel including, in particular, Robert E.L. Johnson. III,
the Company 's President and Chief Executive Officer and Steven T. Kirsch, a

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founder and the Chairman of the Board of the Company, none of whom is bound by
an employment agreement. The Company provides incentives such as salary,
benefits and option grants (which are typically subject to vesting over four
years) to attract and retain qualified employees. The loss of the services of
Mr. Johnson or Mr. Kirsch or any of the Company 's officers or other key
employees could have a material adverse effect on the Company 's business,
operating results and financial condition. The Company 's future success also
depends on its continuing ability to attract and retain highly qualified
technical and management personnel. Competition for such personnel is intense,
and there can be no assurance that the Cpmpany can retain its key technical and
management employees or that it can attract, assimilate or retain other highly
qualified technical and management personnel in the future. See
"Business -- EmpLoyees N and n
MQnaqement . N
Govern.ent Regulation and Legal Uncertainties. The Company is not
currently subject to direct regulation by any government agency, other than
regulations applicable to businesses generally, and there are currently few laws
or regulations directly applicable to access to or commerce on the Internet. It
is possible that a number of laws and regulations may be adopted with respect to
the Internet, covering issues such as user privacy, pricing and characteristics
and quality of products and services. For example, the recently enacted
Telecommunications Reform Act of 1996 imposes criminal penalties on anyone who
distributes obscene, lascivious or indecent communications on the Internet. The
adoption of any such laws or regulations may decrease the growth of the
Internet, which could in turn decrease the demand for the Company 's products,
increase the Company 's cost of doing business, or otherwise have an adverse
effect on the Company 's business, results of operations or financial condition.
Moreover, the applicability to the Internet of existing laws governing issues
such as property ownership, copyright, trade secret, libel and personal privacy
is uncertain. Any such new legislation or regulation could have a material
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adverse effect on the Cpmpany 's business, results of operations or financial
condition. See" InteLLectugL property gnd proprietary Rights ."
Liability for Information Retrieved from the Internet. Because Internet
services provided by the Company require the Company to link users to
information which is downloaded, indexed and distributed from Web pages
published by a large number of Internet Web sites and content providers, there
is potential that claims will be made against the Company on theories such as
defamation, negligence, copyright or trademark infringement, distribution of
obscene, lascivious or indecent communications or other theories of liability
based on the nature and content of such materials. Such claims have been
brought, and sometimes successfully pressed, against online services in the
past. Additionally, claims could be made against the Company for copyright
infringement based on the improper dissemination of information. Although the
Company carries general liability insurance, the Company 's insurance may not
cover potential claims of this type, or may not be adequate to indemnify the
Company for all liability that may be imposed. Any imposition of liability that
is not covered by insurance or is in excess of insurance coverage could have a
material adverse effect on the Company .
No Prior Public Marketj Determination of Public Offering Pricej Potential
Volatility of Stock Price. Prior to this Offering there has been no public
market for the Cpmpany 's Common Stock, and there can be no assurance that an
active public market for the Common Stock will develop or be sustained after the
Offering. The initial offering price will be determined by negotiation among the
Company and the Underwriters based upon several factors and may not be
indicative of future market prices. See N
Underwritinq N for information relating
to the method of determining the initial public offering price. The trading
price of the Company 's Common Stock could be subject to wide fluctuations in
response to a number of factors, including quarterly variations in operating
results, announcements of technological innovations or new products and
services, applications or product enhancements by the Company or its
competitors, changes in financial estimates by securities analysts and other
events. In addition, the stock markets in general, and the market prices for
Internet-related companies in particular, have historically experienced extreme
volatility that at times has been unrelated to the operating performance of such
companies. The trading price of the Common Stock could also be subject to
significant fluctuations in response to variations in quarterly results of
operations, announcements of new products or acquisitions by the Company or its
competitors, governmental regulatory action, other developments or disputes with
respect to proprietary rights, general trends in the industry and overall market
conditions and other factors. These broad market fluctuations may adversely
affect the market price of the Company 's Common Stock. See N
Underwritinq .N
Shares Eligible for Future Sale; Registration Rights.

Sales of a

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substantial number of shares of Common Stock in the public market following this
Offering could adversely affect the market price for the Common Stock. The
number of shares of Common Stock available for sale in the public market is
limited by restrictions under the Securities Act of 1933~ as amended (the
"Securities Act"), and lock-up agreements under which the holders of such shares
have agreed that they will not directly or indirectly offer~ sell, contract to
sell~ grant an option to purchase, grant a security interest in, hypothecate or
otherwise sell or dispose of any of their shares of Common Stock of the Company
for a period of 180 days after the date of this Prospectus~ which lockups may
not be released without the prior written consent of Alex. Brown & Sons
Incorporated. However~ Alex. Brown & Sons Incorporated may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. As a result of the lock-up agreements
with the Underwriters on the date of this Prospectus, no shares other than the
3,000~000 shares offered hereby will be eligible for sale. Upon the expiration
of the lock-up agreements 180 days after the date of this Prospectus, an
aggregate of approximately 13~514,626 shares will first become eligible for sale
into the public market immediately following the Offering ~ based on shares
outstanding at March 31. 1996 and including the issuance of 1~048~501 shares of
Convertible Preferred Stock in April 1996. In addition~ the Company intends to
register~ on the effective date of this Offering, a total of 187,500 shares of
Common Stock reserved for issuance under the Company 's
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Employee Stock Purchase Plan and, after the effective date of this Offering~ a
total of 5,625,000 shares of Common Stock subject to outstanding options or
reserved for issuance under the Company 's 1996 Stock Option Plan/Stock Issuance
Plan. All shares issued under such benefits plans will also be subject to
lock-up agreements until 180 days following the date of this Prospectus. In
addition, upon expiration of the lock-up agreements referred to above, holders
of approximately 21,579,512 shares of Common Stock and warrants and options to
purchase 1,345,000 shares of Common Stock will be entitled to certain
registration rights with respect to such shares. If such holders, by exercising
their registration rights, cause a large number of shares to be registered and
sold in the public market, such sales could have an adverse effect on the market
price for the Company 's Common Stock. See nShares ELigibLe for Future Sale . n
Control by Existing Shareholders; Certain Anti-Takeover Provisions
Affecting Shareholders. Upon completion of this Offering, the present directors,
executive officers and principal shareholders of the Company and their
affiliates will beneficially own approximately 63% of the outstanding Common
Stock~ and will be able to control all matters requiring shareholder approval~
including approval of significant corporate transactions. Under the General
Corporations Law of California, the Company 's shareholders are currently
entitled to cumulate their votes for the election of directors. The Company 's
Amended and Restated Articles of Incorporation and ~ provide, however, that
cumulative voting will no longer be permitted at such time as the Company 's
stock is publicly traded in a manner that meets certain standards established by
the General Corporations Law of California. The Company expects that the
requirements shall have been met and cumulative voting shall have been
eliminated by the record date for its next annual meeting of shareholders.
Accordingly, the principal shareholders of the Company, who collectively hold
approximately 15,891,140 of the Company 's outstanding stock, will be able to
control election of all directors of the Company . Thg Company 's Board of
Directors has the authority to issue up to 5,000,000 shares of Preferred Stock
and to determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the shareholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock 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 . These provisions along
with the provisions of the Company 's Bylaws described above~ could delay or make
more difficult a proxy contest involving the Company, which could adversely
affect the market price of the Company 's Common Stock. See nDescription of
Capital Stock -- Preferred Stock and -- Certain Provisions of the Company 's
ArticLes of Incorporation and ByLaws ."
Dilution . Purchasers in this Offering will suffer an immediate and
substantial dilution in the net tangible book value of the Common Stock from the
initial public offering price. Additional dilution is likely to occur upon
exercise of options granted by the Company . See N
DiLutjqu. n
No Specific Use of Proceeds. Thg Company expects that it will use the net
proceeds of this Offering for general corporate purposes, including working
capital, payment of the Company 's one year obligation to Netscape of up to $5
million for the listing as a non-exclusive premier provider of navigational

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services on the Netscape Web page and approximately $6 million in 1996 for
capital expenditures in connection with the Company 's business expansion. The
Company has no other specific plans as to the use of the net proceeds from this
Offering. Pending use~ the Company plans to invest the net proceeds in
investment-grade~ interest-bearing securities. Accordingly, management will have
significant flexibility in applying the net proceeds of this Offering. See n~
qf prqceeds . "
Future Capital Needs; Uncertainty of Additional Financing. The Company
currently anticipates that the net proceeds of this Offering and its recently
completed $18,138,000 Series E Preferred Stock financing, together with
available funds and cash flows generated from advertising revenues, will be
sufficient to meet its anticipated needs for working capital, capital
expenditures and business expansion for at least the next 12 months. Thereafter,
the Company may need to raise
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additional funds. The Company may need to raise additional funds sooner in order
to fund more rapid expansion, to develop new or enhanced services or products,
to respond to competitive pressures or to acquire complementary products~
businesses or technologies. If additional funds are raised through the issuance
of equity or convertible debt securities, the percentage ownership of the
shareholders of the Company will be reduced, shareholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the holders of the Company 's Common Stock. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available or are
not available on acceptable terms, the Company may not be able to fund its
expansion, take advantage of unanticipated acquisition opportunities, develop or
enhance services or products or respond to competitive pressures. Such inability
could have a material adverse effect on the Company 's business, results of
operations and financial condition. See "Use of Proceeds " and "Mgnqqement's
Discussipn and AnaLysis pf FinanciaL Gpndition and ResuLts pf
Operations -- Liquidity and CapitaL Resources ."

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COMPANY

The Company was incorporated in California in August 1993. The Company 's
principal executive office is located at 2620 Augustine Drive, Suite 250~ Santa
Clara ~ California 95054 and its telephone number at such location is (408)
567-2700.

Infoseek is a registered service mark of the Company and the Infoseek logo,
Infoseek Guide, Infoseek Professional, and Ultraseek are trademarks of the
Company. This Prospectus also includes trademarks of companies other than
Infoseek.
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,ee0,888 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$29~848,8ee ($34,443,588 if the Underwriter's overallotment option is exercised
in full), at an assumed initial public offering price of $11.09 per share to the
public and after deducting estimated underwriting discounts and commissions and
estimated offering expenses. The primary purposes of this Offering are to create
a public market for the Common Stock, to facilitate future access to public
markets and to obtain additional equity capital. The Company expects that it
will use the net proceeds of this Offering for general corporate purposes,
including working capital, payment of a portion of the Company 's one year
obligation to Netscape of up to $5 million for the listing as a non-exclusive
premier provider of navigational services on the Netscape Web page and capital
expenditures, including approximately $6 million in 1996 currently budgeted for
the purchase of computer equipment and improvements to the Company 's management
information systems in connection with the Company 's business expansion. The
Company has no other specific plans as to the use of the net proceeds from this
Offering. A portion of the net proceeds may also be used for the acquisition of
businesses, products and technologies that are complementary to those of the
Company. The Company has no present plans, agreements or commitments and its not
currently engaged in any negotiations with respect to any such transaction.
Pending use, the Company plans to invest the net proceeds in investment-grade,
interest-bearing securities. See "Risk Factprs -- Nq Specific Use of Prqceeds ."

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DIVIDEND POLICY

Th@ Company has never declared or paid any cash dividends on its capital
stock, and does not expect to pay cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business.
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CAPITALIZATION

The following table sets forth the capitalization of the Company (i) at
March 31, 1996, (ii) pro forma as of such date, to give effect to the net
proceeds from sale of 673,599 shares of Convertible Preferred Stock and 375,001
shares of Redeemable Convertible Preferred Stock for $8,088,009 in April 1996,
and (iii) pro forma as adjusted to give effect to (a) the automatic conversion
of all outstanding shares of Preferred Stock into Common Stock upon the closing
of this Offering and (b) the receipt by the Company of the estimated net
proceeds from the sale of 3,090,000 shares of Common Stock pursuant to this
Offering at an assumed initial public offering price of $11,09 per share:
[ Enlarge/Download Table]
MARCH 31. 1996

PRO F0/11111

ACTU4L

PRO FORJIfA
AS ADJUSTED

(IN THOUSANDS, EXCEPT SHARE DUA)

Short-term obligations .................... """""""
Long-term obligations""""""""""""""""",
Redeemable convertible preferred stock, no par value;
1,125,000 shares issued and outstanding, actual;
1,500,091 shares issued and outstanding, pro forma;
and no shares issued and outstanding, pro forma as
adjusted"""""""""""""""""""""", ,
Shareholders' equity:
Preferred stock, no par value; 5,999,999 shares
authorized; no shares issued or outstanding ••••••••
Convertible preferred stock, no par value; 27,890,378
shares authorized, no shares authorized, pro forma
as adjusted; 15,394,175 shares issued and
outstanding, actual; 16,967,675 shares issued and
outstanding, pro forma; and no shares issued and
outstanding, pro forma as adjusted ................ .
Common stock, no par value; 45,999,999 shares
authorized, actual and pro forma; 69,999,999 shares
authorized, pro forma as adjusted; 4,378,552 shares
issued and outstanding, actual; 4,378,552 shares
issued and outstanding, pro forma; and 24,946,228
shares issued and outstanding, pro forma as
adjusted(l) •••••• """""" ..................... .
Accumulated deficit •..................................
Deferred compensation ................................ .
Notes receivable from shareholders"",""""' ••••••

$

914

$

914

$

914

$ 2,499

11,847

7,441

12,636

6,399
(8,491)

6,399
(8,491)

60,713

(4,796)
(626)

(4,796)
(626)

(4,796)
(626)

(8,401)

Total shareholders' equity",......................

8

5,293

46,890

Total capitalization..........................

$11,452

$19,549

$49,380

(1) Excludes, as of March 31. 1996: (i) 4,340,876 shares of Common Stock
issuable upon exercise of stock options outstanding under the Company 's
Stock Option Plan and an additional 1,067,408 shares reserved for issuance
under such plan; and (ii) 100,000 shares of Convertible Preferred Stock
issuable upon exercise of outstanding warrants (convertible into warrants to
purchase 100,000 shares of Common Stock upon the closing of this Offering).
Subsequent to March 31. 1996, the Company : (i) adopted, subject to
shareholder approval, the 1996 Stock Option/Stock Issuance Plan to replace
the Stock Option Plan and approved an increase in the total number of shares
authorized for issuance thereunder from 5,437,500 to 5,625,000; (ii) granted
options to purchase a total of 125,250 shares of Common Stock at a weighted
average exercise price of $7.67 per share; and (iii) adopted, subject to
shareholder approval, the Employee Stock Purchase Plan and reserved a total
of 187,590 shares for future issuance thereunder. See N
Manaqement -- 1996

Stqck Optiqn/Stqck Issuance PLan N and Notes 5, 7 and 10 of Notes to

Financial Statements.
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DILUTION

The pro forma net tangible book value of the Company 's Common Stock as of
March 31. 1996 was $17,012,922, or approximately $0.78 per share. Pro forma net
tangible book value per share represents the amount of the company 's
shareholders' equity, less intangible assets, divided by the shares of Common
Stock outstanding after giving pro forma effect to (i) the sale of $8,088,000 of
Preferred Stock in April 1996 and (ii) the conversion of all outstanding shares
of Preferred Stock into Common Stock upon completion of this Offering.
Dilution per share represents the difference between the amount per share
paid by purchasers of shares of Common Stock in this Offering made hereby and
the as adjusted net tangible book value per share of Common Stock immediately
after completion of this Offering. After giving effect to the sale of 3,000,0ee
shares of Common Stock offered by the Company hereby at an assumed offering
price of $11.00 per share to the public and after deducting the estimated
underwriting discounts and estimated offering expenses, the as adjusted net
tangible book value of the Company as of March 31. 1996 would have been
$46,852,922 or $1.88 per share. This represents an immediate increase in net
tangible book value of $1.10 per share to existing shareholders and an immediate
dilution in net tangible book value of $9.12 per share to purchasers of Common
Stock in this Offering, as illustrated in the following table:
[Download Table]
Assumed public offering price per share...........................
Net tangible book value per share at March 31. 1996 ••••••••••••• $0.78
Increase in net tangible book value per share attributable to
new investors................................................ 1.10

$11.00

Pro forma net tangible book value per share after the Offering ..••

1.88

Dilution per share to new investors •••••........••••••••........••

$ 9.12

The following table sets forth on a pro forma basis, as described above, as
of March 31. 1996 the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
the existing shareholders and by new public investors (assuming an initial
public offering price of $11.00 per share to the public and before deduction of
estimated underwriting discounts and commissions and offering expenses):
[ Enlarge/Downlqad Table]
SHARES PURCHASED
----------------------HUNBER
PERCENT

TOTAL CONSIDERATION
AVERAGE
----------------------PRICE
_1
PERCENT PER SHARE

----------Existing shareholders(l) .............. . 21,946.228
New shareholders(1) •••••••••••••••••••• 3,eee.eee
Total.........................

24,946.228

88X
12

1_

$25,667,784-

33,eee,eee
-----------

$58,667,784-

56

$ 1.17
$ 11.ee

leeS

"''''''''''''''''''''''''''''

(1) Assumes no exercise of the following stock options and warrants outstanding
as of March 31. 1996: (i) options to purchase a total of 4.340.876 shares of
Common Stock at a weighted average exercise price of $0.80 per share; and
(ii) warrants to purchase 100,000 shares of Convertible Preferred Stock at
an exercise price of $0.80 per share (convertible into warrants to purchase
100,0ee shares of Common Stock at an average exercise price of $0.80 upon
the closing of this Offering). Subsequent to March 31. 1996, the Company :
(i) adopted, subject to shareholder approval, the 1996 Stock Option/Stock
Issuance Plan to replace the Stock Option Plan and approved an increase in
the total number of shares authorized for issuance thereunder from 5,437,500
to 5,625,000, (ii) granted options to purchase a total of 125,250 shares of
Common Stock at a weighted average exercise price of $7.67 per share; and
(iii) adopted, subject to shareholder approval, the Employee Stock Purchase
Plan and reserved a total of 187,500 shares for future issuance thereunder.
To the extent options or warrants are exercised, there will be further
dilution to new investors in the Offering . See "Management -- 1996 Stqck

Option/Stock Issuance PLqn " and Notes 51 7 and 10 of Notes to Financial

Statements.
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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 statements of operations data for the
period from inception (Aygyst 39. 1993 ) to pecembgr 31. 1993 and for the years
ended pecember 31, 1994 and 1222 and the balance sheet data at December 31, 1994
and 1995 1 are derived from and qualified by reference to the financial
statements of the Company which have been audited by Ernst & Young LLP I
independent auditors. The statements of operations data for the three month
periods ended March 31. 1995 and 1996 and the balance sheet data as of March 31.
1996 are derived from unaudited financial statements included elsewhere herein
and are prepared on a basis consistent with the Company 's audited financial
statements and I in management's opinion I fairly state the Company 's financial
position and results of operation as of such dates and for the periods then
ended I and include all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the information.
[ Enlarge/Download Table]
INCEPTION

YEARS ENDED
DECE1IfBER 311

(AJJtiUST H· 1993 )

THREE IfONTHS ENDED
MARCH 311

TO DECEltBER 31,

1993

1994

1995

(IN THOlJSANDSI

STATEMENTS OF OPERATIONS DATA:
Revenues:
Advertising ••••••••••••••••••••••••
Subscription ...................... .

$

$

1995

1996

EXCEPT PER SHARE lMTA)

849
184

$

$
5

$ 1 1 656
75

Total reVenyes •••••••••••••
Cost of revenues .................... .

1,933

5
79

1,731

615

Gross profit .....................•...
Operating expenses:
Research and developmgnt •••••••••••
Sales and marketing ............... .
General and administrative ........ .

41.

(74)

1,941

8

1,063

1,175
1,488
1,148

177
77
98

2,757

19

97
369

Total operating expenses ...

27

1,529

3,811

352

4,551

(27)

(1,529)
19

(3,393)
98

(426)
4

(3,519)
(58)

(27)

$(1,519)

$(3,296)

$

(422)

$(3,568)

$ (9.13)

$ (9.92)

$ (9.14)

25,863

25,966

25,914

Operating 1055 •••••••••••••••••••••••
Interest income (expense) net ....... .
Net

1055 •••••••••••••••••••••••••••••

Pro forma net

1055

$

per share(1) ••••••

Shares used in computing pro forma
net 1055 per share(l) ............. .

699

934
869

[ Enlarge£Download Table]

...

DECEIfBER 311

,

1""3

BALANCE SHEET DATA:
Cash. cash equivalents and short-term investments .... $
Working capital (deficit) ........................... .
Total assets ..................... """", .......... .
Long-term obligations ••••••••••••••••••••••••••••••••
Total shareholders' equity .............. , ••...•...•..

177
(99)
318

27

$

568
45.
859
219
529

/lARCH

1995

$ 1,626

92
5,123
838
2,142

(1) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the shares used in computing pro forma net income (loss)
per share.
29

31,
1996

$19,114
7,131
15,747
2,640
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
It 1s the Company 's belief that this Prospectus may contain certain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 2iE of the Exchange Act. Actual results could differ materially
from those projected in the forward-looking statements as a result of the risk
factors commencing on page 5 as well as other factors described below and
elsewhere in this Prospectus.
OVERVIEW
Infoseek was formed in August 1993 to develop and provide Internet and
World Wide Web (DHeb navigational services. From inception (August 39. 1993)
to March 31. 1995, the Company 's operations were limited and consisted primarily
of start-up activities~ including recruiting personnel~ raising capital~
research and development, and the negotiation and execution of an agreement with
ACSIOM to license an information retrieval search engine developed at the
University of Massachusetts.
N

)

The Company introduced its first products and services in 1995. During 1995
and for the first quarter of 1996, the Company derived its revenues
substantially from the sale of advertisements on its Web pages and, to a lesser
extent, from subscription fees for the Company 's services. During these periods,
advertising revenues accounted for approximately 821 and 961, respectively, of
total revenues. The Company expects to continue to derive substantially all of
its revenues for the foreseeable future from selling advertising space on its
Web sites . Advertising revenues are derived principally from short-term
advertising contracts in which the Company guarantees a minimum number of
impressions (displays of an advertisement to the user) for a fixed fee.
Advertising revenues are recognized ratably over the term of the contract during
which services are provided, and are stated net of customer discounts. Also
included in advertising revenues is the exchange by the Company of advertising
space on the Company 's Web sites for reciprocal advertising space in other media
publications or other Web sites or receipt of applicable goods and services.
Revenues from these exchange transactions are recorded as advertising revenues
at the estimated fair value of the goods and services received and are
recognized when both the Cgmpany 's advertisements and reciprocal advertisements
are run or applicable goods or services are received. Although such revenues
have been insignificant to date, the Cgmpany believes these exchange
transactions are of value, particularly in the marketing of the Infoseek brand,
and expects to continue to engage in these transactions in the future. The
Company has also derived revenues during 1995 and the first quarter of 1996 from
fees related to a premium subscription service offered to business and
professional users. Revenues from this service are recognized over the period
the service is provided. The Company 's current business model to generate
revenues through the sale of advertising on the Internet is unproven. There can
be no assurance that current advertisers will continue to purchase advertising
space and services from the Company or that the Company will be able to
successfully attract additional advertisers. See "Risk Factors -- ReLiance on
Advertising Revenues ."
The Company has an extremely limited operating history, which makes it
difficult to manage future operations or predict future operating results. The
Company did not commence generating revenues until 1995 and has generated
limited revenues to date. The Company has incurred significant net losses since
inception and expects to continue to incur significant losses on a quarterly and
annual basis for the foreseeable future. As of March 31. 1996, the Company had
an accumulated deficit of $8.4 million. The Company and its prospects must be
considered in light of the risks, costs and difficulties frequently encountered
by companies in their early stage of development, particularly companies in the
new and rapidly evolving Internet market. In order to be successful, the Company
must, among other things, continue to attract, retain and motivate qualified
personnel, successfully implement its advertising program, continue to upgrade
its technologies and commercialize products and services incorporating such
technologies, respond to competitive developments and successfully expand its
internal infrastructure. As a result of the Company 's extremely limited
operating history as well as the very recent emergence of the market addressed
by

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the Company. the Company has neither internal nor industry-based historical
financial data for any significant period of time upon which to base planned
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customers have terms of three months or less, with options to cancel at any
time. Accordingly, future sales and operating results are difficult to forecast.
In addition, significant portions of the Company 's revenues to date have been
derived from sales to a limited number of customers, and the Company currently
anticipates that future quarters will continue to reflect this trend. Therefore,
the cancellation or deferral of a small number of advertising contracts or
license agreements could have a material adverse effect on the Company 's
business, results of operations and financial condition. The Company 's expense
levels are based in part on its expectations as to future revenues and to a
large extent are fixed. The Company may not be able to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. Accordingly,
any significant shortfall in relation to the Company 's expectations would have
an immediate adverse impact on the Company 's business, results of operations and
financial condition.
The Company expects that its results of operations may also fluctuate
significantly in the future as a result of a variety of factors, including the
continued rate of growth, usage and acceptance of the Internet; the rate of
acceptance of the Internet as an advertising medium; demand for the Company 's
products and services; the advertising budgeting cycles of individual
advertisers; the introduction and acceptance of new or enhanced products or
services by the Company or by its competitors; the Company 's ability to
anticipate and effectively adapt to a developing market and to rapidly changing
technologies; the Company 's ability to effectively expand its operations and
manage such expansion; the Company 's ability to attract, retain and motivate
qualified personnel; initiation, renewal or expiration of significant contracts
such as the Company 's distribution relationship with NYNEX; pricing changes by
the Company or its competitors; specific economic conditions in the Internet
market; general economic conditions and other factors. In addition, the Company
may elect from time to time to make certain pricing, service or marketing
decisions or acquisitions that could have a short-term material adverse effect
on the Company 's business, results of operations and financial condition and may
not generate the long-term benefits intended. Due to all of the foregoing
factors, it is likely that in some future period, the Company 's operating
results may be below the expectations of public market analysts and investors.
In such event, the price of the Company 's Common Stock would likely be
materially adversely affected. See "Risk Factors -- Extremely Limited Operating
History; Anticipation of Continued Losses . n n - - Potential Fluctuations in
Future Results " and
Developing Market; Unproven Acceptance of Internet
Advertising and of the Company's Products and Services . N
N

--

RESULTS OF OPERATIONS
From inception through the first quarter of 1995, the Company 's operations
were limited and consisted primarily of start-up activities. Accordingly, the
Company believes that year-to-year comparisons of 1993 against 1994,
year-to-year comparisons of 1994 against 1995, and period-to-period comparisons
of the first quarter of 1996 against the comparable period in 1995, are not
meaningful. Accordingly the Company has not included such comparisons in the
following discussion. Likewise, because of the Company 's limited operations in
1995, the Company believes that future period-to-period comparisons against 1995
may also not be meaningful. See N
Risk Factors -- Extremely Limited Operating
History; Anticipation of Continued Losses . n
Total Revenues
For 1995 and the first quarter of 1996, total revenues were $1,932,299 and
$1,739,995, respectively. In the second quarter of 1995, the Company began
selling advertising space on its Web sites . For 1995 and the first quarter of
1996, advertising revenues were $848,659 and $1,655,691, respectively,
representing 821 and 96% of total revenues in such respective periods. The
balance of total revenues during these periods was derived from subscription
fees for a premium service offered to business and professional users.
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In March 1996, the Company and NYNEX entered into a one year agreement,
which provides that, beginning in May 1996, the Company will prominently display
the BigYellow logo, which represents NYNEX's interactive shopping directory, as
the exclusive comprehensive shopping directory within Infoseek Guide. In
exchange for such exclusivity, NYNEX will pay to the Company up to an aggregate
of $4.6 million in monthly payments, which amount will be decreased
proportionately if the number of impressions of the BigYellow logo is below a
specified number. NYNEX may extend the term of the agreement for additional one
year periods, with the fee to be determined based upon Infoseek's then current
advertising rate structure. In addition, NYNEX has the right to cancel or
renegotiate the agreement based upon certain relative traffic volumes on the
BigYellow and Infoseek Guide sites. There can be no assurance that the NYNEX

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arrangement will prove to be mutually beneficial or that it will be continued
after its initial term or that the Company will be able to produce the levels of
traffic that NYNEX has negotiated. See N
Risk Factors -- PotentiaL FLuctuations
in Future ResuLts .N
ReLiance on Advertising Revenues N and "-- DeveLoping
Mqrket; Unproyen Acceptqnce pf Internet Advertising gnd pf the Cqmpgny's
PrPducts gad $eryices . N
Chqnge in Netscqpe ReLgtipnship gad Dependence pn
other Third pqrty Distribution ReLgtipnships w and "Business
Marketing gnd
Distribution pf the Infqsee& Brqnd."
N

--

N __

Cost of Revenues
For 1995 and the first quarter of 1996 J cost of revenues were $614,622 and
$689 J480 J respectively, representing 6ex and 40% of total revenues in such
respective periods. Cost of revenues consist primarily of expenses associated
with the enhancement, maintenance and support of the Company 's Web sites,
including telecommunications costs and equipment depreciation. Cost of revenues
also includes expenses associated with the licensing of certain third-party
technologies, consisting in 1995 and the first quarter of 1996 primarily of
amortization of the initial license fee for the ACSIOM search engine, as well as
on-going royalties based on usage of the product. The initial license fee is
amortized at a rate of $37,316 per quarter, commencing with the first quarter of
1995 and ending in the second quarter of 1996. Royalty fees to ACSIOM were paid
commencing in the first quarter of 1995 and will continue as long as the Company
utilizes the subject technology.
Operating Expenses
The Company 's operating expenses have increased significantly in absolute
dollar amounts each quarter in 1995 and 1996 J as the Cpmpany has transitioned
from the product development stage to the marketing of its services and products
and expansion of its business. Thg Cpmpany expects operating expenses will
continue to increase in the future as the Company continues to seek to expand
its business.
The Company recorded aggregate deferred compensation of $5,226,400 during
the fourth quarter of 1995 and first quarter of 1996 in connection with certain
stock options granted in the fourth quarter of 1995 and the first quarter of
1996. The amortization of such deferred compensation is being charged to
operations over the vesting periods of the options, which are typically four
years. For 1995 and the first quarter of 1996, the amortized expenses were
$43,900 and $386,650, respectively. The amortization of this deferred
compensation will continue to have an adverse effect on the Company 's results of
operations. See Note 6 of Notes to Financial Statements.
Research and Development . For 1995 and the first quarter of 1996, research
and development expenses were $1,174,849 and $933,988, respectively,
representing 114% and 54% of total revenues in such respective periods. Research
and development expenses consist principally of personnel costs and equipment
depreciation. Costs related to research J design and development of products and
services have been charged to research and development expense as incurred. See
Note 1 of Notes to Financial Statements. The Company believes that a significant
level of product development expenses is required to remain competitive.
AccordinglYJ the Cpmpany anticipates that it will continue to devote substantial
resources to product development and that these costs will substantially
increase in absolute dollars in future periods.
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Sales and Marketing. For 1995 and the first quarter of 1996 J sales and
marketing expenses were $1,488,492 and $2,756,579, respectively, representing
144% and 159% of total revenues in such respective periods. Sales and marketing
expenses consist primarily of compensation of sales and marketing personnel and
promotional expenses. Sales and marketing expenses in the first quarter of 1996
also included payments made to Netscape pursuant to an advertising revenue
sharing arrangement for the listing of the Company 's product on the Netscape Web
page. Historically a large portion of the Company 's traffic was derived through
Netscape's Web page. During 1995, the Company paid no fees to appear on
Netscape's Web page. The Company recorded $290,000 to sales and marketing
expense as the estimated fair value of the services received from Netscape
during 1995. From January 1. 1996 to March 31. 1996, the Company was listed as
the sole premier "Net Searchw partner on the Netscape Web page for which the
Company paid Netscape 59% of the related net advertising revenue. In March 1996,
Infoseek entered into an agreement with Netscape, which provides that Infoseek
will be listed as a non-exclusive premier provider of navigational services on
Netscape's Web page for the period April 19. 1996 to March 31. 1997 . During the
30 day period from April 11 through May 19. 1996, thg Cpmpany 's average daily
traffic was approximately 47% of its average daily traffic for the 30 day period
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one of five premier providers. There can be no assurance that the Company will
be able to maintain or increase its current level of traffic. This agreement
with Netscape provides for payments of up to an aggregate of $5 million to
Netscape over the course of the term of the agreement. The Company has the right
to terminate the agreement at the end of six months, in which case payments to
Netscape would be reduced by an aggregate of approximately $2.5 million. The
Company expects to continue hiring additional sales and marketing personnel and
to increase promotional and advertising expenses, and anticipates that these
costs will substantially increase in absolute dollars in future periods. See
"Risk Eqctors -- (bange in HetaCape ReLgtionship and Dependence gn ather Third
pgrty Distributign ReLgtiqnships .N
General and Administrative. For 1995 and the first quarter of 1996,
general and administrative expenses were $1,147,597 and $869,111, respectively,
representing 1111 and 5ax of total revenues in such respective periods. General
and administrative expenses consist primarily of compensation of administrative
and executive personnel, occupancy costs and fees for professional services. The
Company anticipates that its general and administrative expenses will continue
to increase significantly in absolute dollar amounts as the Company expands its
administrative and executive staff, relocates to new facilities, adds
infrastructure and incurs additional costs related to being a public company,
such as expenses related to directors' and officers' insurance, investor
relations programs and increased professional fees.
Income Taxes
Due to the Company 's loss position, there was no prOVISIon for income taxes
for any of the periods presented. At pecember 31. 1995, the Company had federal
and state net operating loss carryforwards of approximately $4 million and
$699,999, respectively. The federal net operating loss carryforwards will expire
beginning in 2998 through 2919, if not utilized, and the state net operating
loss carryforwards will expire in the years 1998 through 2999. Certain futUre
changes in the share ownership of the Company, as defined in the Tax Reform Act
of 1986 and similar state provisions, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the realization of the asset
due to the lack of earnings history of the Company . See Note 8 of Notes to
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
From inception through March 31. 1996, the Company financed its operations
and met its capital expenditure requirements primarily through cash proceeds
from private sales of stock totaling $15,887,392. The Company had $1,625,967 and
$19,124,923 in cash and cash equivalents and short term investments at December
31. 1995 and March 31. 1996, respectively. In April 1996, the Company raised
additional net proceeds of $8,988,999 from private sales of Preferred Stock.
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In 1995 and the first quarter of 1996, operating activities used cash of
$1,468,184 and
$2,974,896, respectively. The net cash used during these periods was primarily
due to net losses and increases in accounts receivable, partially offset by
increases in accrued liabilities and in 1995 an increase in accounts payable. In
1995 and the first quarter of 1996, investing activities used net cash of
$3,325,522 and $759,993, respectively, primarily associated with the purchase of
property and equipment and net short-term investments. Financing activities
generated cash of $5,354,692 and $11,819,726 in 1995 and the first quarter of
1996, respectively, primarily from preferred stock sales and equipment loans.
Following is a summary of the Company 's commitments for the next five
years:
[ Enlarge/Download Table]

COMMITMENT

AMOUNT

- Facilities leases and equipment loans at
March 31. 1996 .
- Amortization of initial fees for license
of technology from Acsiom.
Support fees and royalty payments in
connection with license of technology from
Acsiom.

$37,316 per quarter, ending second quarter
of 1996.
$10,000 per quarter plus 4X of certain
related revenues as long as Company
continues to utilize the subject technology.

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- Amounts payable to Netscape pursuant to
March 1996 Agreement.
Customization~

installation, sub-license
start-up and monthly license fees in
connection with the license of certain
software technology from HNC.

Approximately $180,000 in the aggregate
through 1997.

Royalty fee based on a percentage of
certain future related revenues in
connection with the license of certain
software technology from HNC.

In order to maintain the exclusivity of the
arrangement, certain annual minimum
royalties are required, which are expected
to be approximately $60,090 in the aggregate
through 1997.

Installation, license and maintenance fees
in connection with the license of certain
additional software technology from HNC.

Approximately $259,999 in the aggregate
through 1997.

Royalty payments to XEROX in connection
with license of certain linguistic
analysis technology from XEROX.

Up to $20e~eee per year in 1996 and 1997.
and $399,eee in 1998.

payments for certain technology previously
licensed by the Company and fully
expensed~ that the Company has determined
subsequently not to include in its
products and services.

$69,999 per year through 1999.

The Company has no other material commitments and expects to incur
significant capital expenditures to support expansion of the Company 's business.
The Company expects to use the net proceeds of this Offering for the uses
referenced in the previous paragraph as well as general corporate purposes,
including the expansion of the Company 's product development and sales and
marketing organizations and working capital. Furthermore, from time to time the
Company expects to evaluate the acquisition of products, businesses and
technologies that complement the Company 's business, for which a portion of the
net proceeds may be used. The Company does not, however, currently have any
understandings, commitments or agreements with respect to any such acquisitions.
Management expects that cash in excess of current requirements will be invested
in investment grade, short-term interest-bearing securities. See B
Risk
Factors -- No Specific Use of Proceeds .2S
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The Company currently anticipates that the net proceeds of this Offering
and its recent Series E Preferred Stock financing, together with available funds
and cash flows generated from advertising revenues, will be sufficient to meet
its anticipated needs for working capital~ capital expenditures and business
expansion for at least the next 12 months. Thereafter, the Company may need to
raise additional funds. The Company may need to raise additional funds sooner,
however, in order to fund more rapid expansion, to develop new or enhanced
services or products, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of the shareholders of the Company will be reduced,
shareholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, it would limit the
Company's ability to fund expansion, take advantage of acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures. Such limitation could have a material adverse effect on the Company 's
business, results of operations and financial condition. See -Risk
Factors -- Future Capital Needs: Uncertainty of Additional Financinq .N
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BUSINESS

Infoseek develops and provides branded~ comprehensive Web-based
navigational services that help users access and personalize the vast resources
of the Internet. The Company 's primary service offering, Infoseek Guide, is a

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free service targeted at individual users. The Company believes that Infoseek
Guide goes beyond the functionality offered by other search engines and
directory services, by aggregating and packaging the resources of the Internet
to serve individuals' unique and personal interests and create rich Internet
experiences. The Company believes that Infoseek Guide has been well received by
consumers and has achieved a strong brand presence among Web users. Infoseek
Guide has won a number of industry awards including "Number 1 Rated Search
Engine" (PC Computing Sept 95), "Best of the Test" (Internet World May 96) and
"MVP: Internet Tools " (PC Computing Dec 95). The Company is currently working
on its next generation search engine, Ultra seek, which the Cgmpany plans to
release in the second half of 1996. Ultraseek will enable the searching of a
much greater number of Web sites at even faster speeds with the same level of
accuracy for which Infoseek Guide is currently known.
INDUSTRY BACKGRDUND
The Internet was originally created by the U.S. government to facilitate
the exchange of information and electronic mail ("email") between a limited
number of academic institutions, defense contractors and government agencies.
The Internet was commercialized in the late 1980s and 1990s and technological
enhancements have since extended the Internet's reach to consumers and
businesses. The most important technological enhancement to the Internet was the
creation of the World Wide Web (the Nueb") in the early 1990s. The Web is an
interactive environment, which facilitates the exchange of multimedia-rich
information and entertainment resources among users worldwide. In addition,
recent technological developments have enabled consumers and businesses to use
the Web for buying and selling products and services. As a result, the Web has
changed, and will continue to change the way in which people exchange
information, communicate with each other and distribute products worldwide.
According to a February 1996 issue of Business Week, there were
approximately 200,000 Web sites in January 1996. A number of factors have
contributed to the growth of the Web. The open nature of the Web enables any
individual or organization to publish a Web site . New software-based authoring
tools have lowered the cost of publishing content on the Web relative to
conventional publishing methods and enabled new, exciting forms of multimedia
content. The cost of delivering content to a large audience is lower than that
of conventional media, consisting only of the cost of maintaining and operating
computer equipment. In addition, the interactive nature of the Internet provides
an environment in which content providers can track the appeal of their content
by measuring the number of visits to a Web site and can respond quickly to
consumers' changing tastes and needs.
The dramatic increase in Web-based information and entertainment has
increased the appeal of the Web to consumers and has driven the high growth in
traffic on the Web. Continued enhancement to the Internet, such as support for
secured transactions, multimedia offering technology and new compression
technologies, should continue to attract new content providers to this medium.
According to International Data Corporation, the number of Internet users is
forecasted to increase from 56 million at the end of 1995 to 200 million by the
end of 1999.
Navigating the Web
The rapid growth in content on the Web combined with the Web's unindexed
nature presents significant challenges for consumers seeking Internet-based
information and resources. Until the emergence of navigational tools, users had
to know a lengthy Web address for each specific site, or had to move from Web
site to Web site using hypertext links, searching for relevant information.
Content providers and advertisers also faced difficulties in making the
existence and location of their Web sites widely known and available to their
target audiences.
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A number of tools have emerged to assist users in locating information on
the Web, including Web directories and search engines. Web directories are
typically compiled manually and list Web sites by specific topics of interest.
Directories generally list Web sites by their hypertext address, enabling a user
to go directly to the listed site by clicking on the address. Entries in a
directory also may contain Web site descriptions or reviews. Search engines
offer users the ability to search Web sites based upon specific word or phrase
queries. Search engines typically use automated software that "crawls the Web
to continuously capture and store updated Web sitg information. The information
is then indexed in a database in order to provide immediate retrieval of
relevant Web site listings in response to a query.
N

Although search engines and directories help users navigate the Web, the

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Company believes that these tools have certain limitations and that there is an
opportunity to provide added value to the consumer experience. One of the
problems not solved by most search engines and directories is that once
consumers have found specific Web sites of interest, the services do not place
that information in a broader context of other related and relevant Web
resources. Consumers must often make iterative searches or move from Web site to
Web site in order to achieve a complete response to their search, find related
information and feel that they have fully explored the Internet resources
available to them.
The Company believes that there is an opportunity to provide more
comprehensive services that not only provide specific and relevant responses to
consumer searches, but also aggregate and package the rich content resources of
the Web in order to serve a consumer's unique and personal interests and create
a rich Internet experience. The Company believes that consumers will respond to
services that aggregate specific and relevant responses to queries with other
relevant and related Web sites, targeted advertising, personalized news
services, discussion groups, and other resources. The Company believes that
services which bring together relevant content from among the vast resources on
the Internet will enhance the consumer's Internet experience, attract a high
volume of traffic and build brand loyalty.
Advertising on the Web
with the growth in the number of Internet users and content providers, the
Internet has begun to develop the attributes of a conventional mass medium,
where advertising subsidizes content delivered to users. Forrester Research,
Inc. estimates that spending on Web-based advertising will increase from $37
million in 1995 to approximately $700 million by 1998. Moreover, the 1995
Commerce Net/Nielsen Internet Demographics Survey indicates that on average, Web
users are upscale, professional and educated, providing an attractive
demographic profile for advertisers.
Advertisers have recognized that the interactive nature of the Internet can
provide an environment where advertising may become more effective than it is in
other more conventional print and broadcast media. The interactive and global
nature of the Internet has the potential to enable advertisers to target
specific audiences, measure the popularity of advertising content and make
timely changes in response, reach worldwide audiences cost-effectively, and
create innovative and interactive advertisements. The Company believes that
increases in transmission bandwidth through higher speed Internet connections,
and wider multimedia enabling technologies for the Web, such as Java, VRML and
others, will also increase the appeal and effectiveness of advertisements and
make the Web an even more attractive platform for advertising.
Advertisers currently face difficulties, however, in placing their
advertisements strategically on the Web. It is difficult for advertisers to
understand the volume and demographics of traffic patterns on Web sites . As a
result, advertisers can find it difficult to make the existence and location of
their advertisements widely known and target their audiences effectively. The
Company believes that, in the near term, advertisers will migrate to sites which
can offer a high number of impressions per day. The Company also believes that,
over time, advertisers will be attracted to those services that experience a
high volume of traffic, track consumers carefully and deliver advertisers
audiences that
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fit specific buying profiles. In order to provide such audiences to advertisers,
services and sites must develop technologies to enable them to conduct complex
demographic and psychographic profiling of their consumers. By understanding
their audiences, services and sites will be able to match advertisements with
buyers, resulting in targeted, high impact advertising (NnarrowcastingN or
"microcasting"). The Company believes that those sites and services which both
garner a high volume of traffic and offer advertisers the ability to target
specific audiences effectively will be in the best position to take advantage of
the advertising opportunity on the Web.
THE INFOSEEK SOLUTION
Infoseek develops and provides branded, comprehensive Web-based
navigational services that help users access and personalize the vast resources
of the Internet. Infoseek's primary service offering, Infoseek Guide, not only
provides specific and relevant responses to consumer searches, but also
aggregates and packages the resources of the Internet in order to serve a
consumer's unique and personal interests. By integrating the capabilities of a
search engine and a directory, Infoseek packages specific responses to search
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and targeted~ related advertising. By creating communities of related
information in real-time for users~ Infoseek Guide satisfies the needs of
consumers to access relevant and related information~ the needs of content
providers to reach interested audiences~ and the needs of advertisers to deliver
advertisements to a targeted group of potential buyers.
With every search on Infoseek Guide, the consumer receives some or all of
the following: specific and relevant Web site listings in response to the query,
a directory of other related Web sites, related and appropriate advertising,
unique editorials on related subjects by well-known third party content
providers, links to relevant discussion groups and other resources. For example,
a user who enters the query nrock music concerts in San Francisca D would find
not only a listing of relevant Web pages, but would also find a link to the
Billboard Online section of the iZone (a third-party sponsored editorial feature
related to popular music) and a directory of related topics including regional
music~ alternative music~ music stores~ and jazz that would be linked to other
related Web sites . The user may also see advertising appropriate to the user's
interests in rock music. The Company believes that the creation of real-time
content enhances a user's Internet experience by immediately linking the user to
an environment of relevant and related content and information. The Company also
believes that its service has the following advantages:
State-of-the-Art Searching. The search engine underlying Infoseek Guide~
which has been licensed from ACSIOM, is noted for its high accuracy and
ability to quickly perform complex searches. The Company 's search engine
has won a number of industry awards, including DNumber 1 Rated Search
Engine" (PC Computing Sept 95), "Best of the Test .. (Internet World May
96) and "MVP: Internet Tools" (PC Computing Dec 95). The Company is
currently working on its next generation search engine, Ultra seek, which
the Company plans to release in the second half of 1996. Ultra seek will
enable the searching of a much greater number of Web sites at even faster
speeds with the same level of accuracy for which Infoseek Guide is
currently known.
Search-in-Context. Infoseek Guide integrates search and directory
functions, providing not only specific responses to user queries~ but
also direct links in real-time to areas of content of interest that
contain relevant content related to the specific request. Through this
approach~ consumers can either find specific answers to a search query or
access a broader environment of other relevant and related information on
the Internet.
Co-branded third party content. Infoseek Guide incorporates timely and
unique third party content created exclusively for Infoseek by leading
media publishers. The range and breadth of material on the Web is often
confusing for consumers, which makes branded, credible information
providers more visible and valuable. Infoseek believes it adds value to
the consumer experience by including editorial material from these
branded content providers in
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response to user searches. Current third party content providers include:
Conde Nast Publications, MacWorld, PC World and SportsLine.
The Company plans to continue to enhance the attractiveness of its service to
users through additional features and functionality. Infoseek is currently
developing several enhancements to Infoseek Guide, which will allow for
personalization of content and advertising according to user interests. These
enhancements are expected to be released by fall 1996, and will allow users to
create permanent filters for Internet-based information such as newswires~ stock
quotes~ USENET listings and other Internet resources.
The Company believes that by matching the interests of users with
appropriate content and advertisements and by offering the significant traffic
generated by Infoseek's services, it delivers better value to content providers
and advertisers seeking to reach larger or more targeted audiences. The Company
believes that through its service, content providers gain increased exposure to
interested users since these users are linked to broader communities of related
content when undertaking search requests. For example, Billboard Online, one of
the Company 's third-party providers, would be listed in response to most queries
regarding music related items.
Infoseek's services provide advertisers with an increased ability to
undertake measurable, targeted, cost-effective and interactive advertising on
the Internet. The Company 's services provide advertisers with the flexibility to
target the mass audience of the Internet by advertising on the Company 's general
search pages, to target special interest groups by placing advertisements on

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directory pages, or, to narrowcast advertisements to specific audiences by
placing advertising only when the user's query contains a specific word that has
been designated as a key word for a particular advertiser. Th@ Company believes
that each of these types of advertising can provide significant value to
advertisers. While larger, mass market campaigns increase brand awareness,
narrower campaigns through directory ads or keyword ads provide opportunities to
engage in high response, product specific advertising. Th@ Company is also
actively exploring new technologies which will allow compilation of anonymous
profiles of user behavior and interests, to more closely match the interests of
audiences and advertisers.
BUSINESS STRATEGY
The Company 's objective is to establish itself as the dominant branded
media navigation and content aggregation service provider on the Internet. The
Company seeks to build a high volume of traffic on its services to provide a
preferred platform for content providers and advertisers to reach their target
audiences. At the core of the Company 's strategy, the Company seeks to provide
real-time, content rich Web communities that create value for the user and
establish the Company 's platform as an attractive medium for advertisers. The
Company's strategy contains the following key elements:
Create Brand Recognition and Consumer Loyalty. The Company believes that,
as with many conventional media, branding and consumer loyalty on the Internet
are highly dependent on the aggregation and packaging of content into innovative
and appealing products and the effective marketing of such products to
consumers. To this end, the Company developed Infoseek Guide, a navigation and
content aggregation service that differentiates the Company 's service and
enhances a user's Internet experience through the real-time creation of Web
communities. Th@ Company intends to build upon its technical and media expertise
to develop innovative new services, as well as enhance and expand existing
service offerings. The Company also promotes its brand through online and print
advertising and other promotional activities. The Company believes that these
promotional campaigns are an important component in building brand awareness in
the emerging Internet market.
Create Innovative Solutions for Advertisers. The Company seeks to provide
advertisers with innovative solutions to effectively reach their target
audiences through the Internet. The Company currently offers a broad range of
customized alternatives for advertisers, providing advertisers with the
flexibility to target mass audiences or specific communities, or link
advertisements to keyword
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searches. In addition, the Company is actively exploring new technologies which
will enable advertisers to utilize user demographic, profile, and psychographic
information. For example, the Company has entered into an agreement with HNC
which provides that the Company and HNC will jointly develop an advertising and
management system to anonymously track individual usage behavior that is based
upon technology developed by HNC. Th@ Company believes that these innovative
advertising approaches, which will allow advertisers to microcast advertisements
to specific user types based on sophisticated analysis of searching behavior,
will significantly differentiate the Company 's services.
Utilize Leading-edge Search and Directory Technologies. Th~ Company
believes that technology is an important component in differentiating its
services. Accordingly, the Company develops and licenses from third parties
leading-edge technologies which aid the Company in providing Internet users with
quick, precise and thorough search results, and comprehensive state-of-the art
directory services. For example, the Company is currently working on its next
generation search engine, Ultraseek, which the Company plans to release in the
second half of 1996. Ultraseek will enable the searching of a much greater
number of Web sites at even faster speeds with the same level of accuracy for
which Infoseek Guide is currently known. The Company also intends to develop,
through its relationship with HNC, leading-edge, proprietary technology for the
automated abstracting and categorization of Web sites .
Create and Expand Branded Content Partnerships. The Company seeks to
co-brand its service offerings with recognized third-party content in order to
enhance the value of the Infoseek brand. Th@ Company believes that the use of
third party branded content may lead to higher perceived editorial value and
provide incremental distribution outlets and cross-promotion opportunities. In
addition, by not developing content in-house, the Company is able to lower
editorial costs. The Company has developed a series of third-party sponsored
editorial Web pages, called iZones, that cover special interest group topics,
such as music, sports or travel. The sponsors are companies with either product
or publishing brands relevant to the category, such as Sports Line, a sports news

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and information service. Th@ Company intends to aggressively build and extend
the branded content available through Infoseek Guide by continuing to develop
alliances with leading media companies and content providers.
Maximize Audience Reach through Distribution Relationships. Th@ Comoanv
seeks to form relationships that maximize audience reach and create alternate
distribution channels to the Company 's services. Th@ Company established as one
of its earliest and primary distribution channels an initial relationship with
Netscape to be the sole premier NNet Search w navigational service on the
Netscape Web page. This relationship enabled the Company to gain access to a
large audience and build early brand awareness. Netscape has since implemented a
new "Net Search" display, in which several navigational service providers are
rotated through the most visible position on the page. In order to maximize
exposure, the Company has broadened and will continue to broaden its
distribution channels through other relationships, such as with Microsoft,
NETCOM, NVNEX, Verity and Quarterdeck. The Company intends to continue to
aggressively expand its distribution relationships.
Leverage Media and Technical Expertise. The Company believes that the
Internet represents a technology-driven mass medium in which advertising will
subsidize content. As a result, in-depth knowledge and understanding of
publishing, advertising, technology and media will be critical elements to
success for any navigational service company. To this end, the Company has
assembled a management team with a depth of experience in these areas. The
Company's executive officers have experience at Time, McGraw-Hill, Cahners
Publishing, Foote Cone & Belding, US News & World Report, Frame Technology,
3COM, Apple, NetFRAME, Mastercard International and The Wall Street Journal. The
Company also believes that directly establishing and maintaining relationships
with advertisers will become increasingly important in maintaining and capturing
incremental advertising market share. Accordingly, the Cpmpany has assembled a
highly experienced, direct sales force to promote and accelerate advertising
sales.
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INFOSEEK NAVIGATIONAL SERVICES
Infoseek's primary service offering, Infoseek Guide, is a navigation and
content aggregation service targeted towards individuals and offered free to
users. In addition to Infoseek Guide, the Company offers Infoseek Professional,
a subscription-based service featuring premium content from commercial
information databases and targeted to business and professional users. The
Company plans to continue to introduce new services for individual and
organizational markets over time. The Company 's current and future service
offerings are described below:
Infoseek Guide
Infoseek Guide, the Company 's primary navigation and content aggregation
service, assists users in locating relevant information on the Internet.
Infoseek Guide provides to the user fast and relevant search results in response
to the user's query. Moreover, Infoseek Guide's integrated search and browse
functions guide the user to a real-time generated, personalized, Web community
related to the area of inquiry. Infoseek Guide is offered free of charge to
Internet users. Introduced in January 1996, Infoseek Guide is a successor to the
Company's initial search service launched in April 1995.
Infoseek Guide integrates multiple methods of obtaining information from
the Internet. Users are presented with four principal resources -- Search,
Directory, iZones and Toolbar -- from which they can launch specific queries,
browse or access proprietary content.
Search: The Search function allows the user to effect query-based
searches of the Web, USE NET News and other premium content databases or
the Directory. To perform a search, a user types a query in the search
box and is then presented a highly specific response from a search of the
entire database. A search can be effected using either simple keywords,
full text (natural languages) or more formalogic formats such as boolean.
For example, a user can search for "OLympics and AtLanta" or type in
"TeLL Me About the AtLanta OLympic Games. N The Search function utilizes
sophisticated techniques to allow users to obtain specific results for
queries, such as "AT&T", NNeXT," "4gers" or "Vitamin C," which can pose
significant challenges to other search services, due to the case
sensitive, numerical or singular letter aspect of the query. Infoseek
Guide has won a number of industry awards including wNumber 1 Rated
Search Engtne N (PC Computing Sept 95), "Best of the Test" (Internet
World May 96) and nMVP: Internet Tools" (PC Computing Dec 95). In
addition, the Cpmpany is currently working on its next generation search

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