AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1999

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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DIRECT HIT TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7375 04-3417999
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)

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

DIRECT HIT TECHNOLOGIES, INC.
888 WORCESTER STREET, SUITE 340
WELLESLEY, MASSACHUSETTS 02482
(781) 235-7570
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------

MICHAEL CASSIDY, PRESIDENT AND CHIEF EXECUTIVE OFFICER
DIRECT HIT TECHNOLOGIES, INC.
888 WORCESTER STREET, SUITE 340
WELLESLEY, MASSACHUSETTS 02482
(781) 235-7570
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------

COPIES TO:

MARK J. MACENKA, ESQ. MARK L. JOHNSON, ESQ.
JOHN M. MUTKOSKI, ESQ. RICHARD G. COSTELLO, ESQ.
DANIEL L. FURMAN, ESQ. FOLEY, HOAG & ELIOT LLP
TESTA, HURWITZ & THIBEAULT, LLP ONE POST OFFICE SQUARE
125 HIGH STREET BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02110 (617) 832-1000
(617) 248-7000

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.

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

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

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

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE

Common Stock, $.001 par value............................... $57,500,000.00 $15,180.00

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
Includes the offering price attributable to shares that the underwriters
have the option to purchase from the registrant solely to cover
over-allotments, if any.
--------------------------

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

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EXPLANATORY NOTE

This registration statement contains two forms of prospectus: (a) one
prospectus to be used in connection with an offering in the United States and
Canada and (b) one prospectus to be used in connection with a concurrent
offering outside of the United States and Canada. The U.S. prospectus and the
international prospectus are identical in all respects except for the front
cover page and the "Underwriting" section. The front cover page and the
"Underwriting" section of the international prospectus are included immediately
before Part II of this registration statement.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED DECEMBER 22, 1999

[DIRECT HIT TECHNOLOGIES, INC. LOGO]

COMMON STOCK

Direct Hit Technologies, Inc. is offering shares of its common stock.
This is our initial public offering and no public market currently exists for
our shares. We have applied to have our common stock approved for quotation on
the Nasdaq National Market under the symbol "DHIT." We anticipate that the
initial public offering price will be between $ and $ per share.

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

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.

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

PER SHARE TOTAL
--------- ---------

Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Direct Hit...................................... $ $

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------

ROBERTSON STEPHENS

THOMAS WEISEL PARTNERS LLC

SOUNDVIEW TECHNOLOGY GROUP

WIT CAPITAL CORPORATION

The date of this prospectus is , 2000

[DESCRIPTION OF ARTWORK]

[Inside front cover of prospectus:

The inside front cover includes a graphic representing our OEM
customers. Our logo appears in the center of the graphic. Emanating from our
logo are the logos of our OEM customers.]

[Inside gatefold:

The inside gatefold includes a graphic representing our technology and
its application. The graphic is comprised of a symbol depicting our
Popularity Engine with symbols for our three product categories layered
above the Popularity Engine. These three product categories are our
Popularity-based Search product, our Popularity-based Shopping product, and
other products. Within our Popularity-based Search product are depicted our
Internet Search Engine, Related Searches, Personalized Search, and
Directory-based Search. A graphic of the Web and Web users is depicted above
the product categories. We show a continuous circle of popularity data
emanating from the Web and feeding back to our Popularity Engine.

One statement appears with the graphic as follows:

Our Popularity Engine, which is the core of our solution, anonymously
compiles and automatically captures and processes the activity of online
users. We use our popularity-based technology to aggregate and organize
online content to enable users to quickly find relevant and accurate
information. We have targeted Internet search as the first application of
our Popularity Engine. We have launched a Popularity-based Search product,
including our Internet Search Engine, Related Searches, Personalized Search
and Directory-based Search components, and a Popularity-based Shopping
product. Our content-independent technology is well suited to provide
accurate and relevant information to users of large, dynamic collections of
information, such as the World Wide Web, and we intend to deploy our
technology across other applications as well.]

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, "DIRECT HIT,"
"WE," "US" AND "OUR" REFER TO DIRECT HIT TECHNOLOGIES, INC.

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

TABLE OF CONTENTS

PAGE
--------

Summary..................................................... 1
Risk Factors................................................ 5
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Capitalization.............................................. 15
Dilution.................................................... 16
Selected Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Business.................................................... 24
Management.................................................. 36
Certain Transactions........................................ 42
Principal Stockholders...................................... 44
Description of Capital Stock................................ 46
Shares Eligible for Future Sale............................. 49
Underwriting................................................ 51
Legal Matters............................................... 53
Experts..................................................... 53
Additional Information...................................... 54
Index to Financial Statements............................... F-1

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

Direct Hit, Personalized Search, Popularity-based Search, Popularity-based
Shopping, Popularity Engine, Related Searches, our slogan "One Search Engine.
Millions of Minds." and our logo are our trademarks. All other trademarks, trade
names and service marks appearing in this prospectus are the property of their
respective owners.

SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING "RISK FACTORS" AND
OUR FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS WILL NOT
EXERCISE THEIR OVER-ALLOTMENT OPTION AND REFLECTS THE CONVERSION OF ALL OF OUR
OUTSTANDING PREFERRED STOCK INTO COMMON STOCK, WHICH WILL OCCUR UPON THE CLOSING
OF THIS OFFERING.

DIRECT HIT TECHNOLOGIES

OUR BUSINESS

Founded on April 27, 1998, Direct Hit is a leading provider of technology
that aggregates and organizes online content to enable users to quickly find
relevant and accurate information, products and services. The core of our
solution, which we call our Popularity Engine, anonymously compiles information
collected from the online activity of users. By automatically capturing the
experience of online users and applying our popularity-based technology, our
solution provides users with a list of information, products or services ranked
according to the preferences of previous users. From online product catalogs to
the World Wide Web, our proprietary technologies can be applied to a variety of
online data sets either as stand-alone solutions or as core complements to
existing technology. We have targeted Internet search as our first application
for the Popularity Engine and we have launched an e-commerce product based on
the Popularity Engine. We intend to expand the application of our
popularity-based technology into such areas as corporate online databases, news
feeds and yellow pages.

OUR MARKET

While the Internet is attracting new users at a rapid pace, the volume and
diversity of information, products and services available over the Internet is
also increasing dramatically. International Data Corporation predicts that the
number of Web pages will grow from 925 million in 1998 to 13 billion by 2003,
including separate Web pages within individual Web sites. At the same time,
Internet users are increasingly seeking information from multiple online sources
such as e-commerce sites, news sites, corporate sites, archives and specialty
vertical sites. As a result, users are now spending more time at Web search
sites than at almost any other Web site category. According to Media Metrix, the
average Internet user spent approximately 90 minutes at search engine sites in
October 1999, second to 110 minutes at news, information and entertainment
sites.

Traditional methods for aggregating and organizing online information for
user navigation often fail to meet users' needs. Word-matching techniques, which
generally compare the keywords in the search request with words found in a
database, often yield an overwhelming volume of irrelevant search results and
are subject to manipulation by Web site authors. Editor-based methods, which
require a staff of editors to manually review and categorize online content in a
database, often result in incomplete and outdated information covering only a
small portion of the content available online. Even when used in tandem, these
methods often generate an unmanageably large set of irrelevant results or
incomplete and outdated information.

OUR PRODUCTS

We provide a popularity-based solution that enables users of online content
to find more relevant information, products and services more easily across a
wide variety of sources. Each of our products is powered by our proprietary
Popularity Engine to determine the relevancy ranking of online content. Our
Popularity Engine is:

- extremely responsive to new and changing information, keeping listings
current based on changing user preferences;

- content independent, enabling our products to organize many types of data,
including multiple languages, still images, video and music;

- scalable to accommodate large collections of online information and
millions of users;

- capable of reflecting user preferences based on age, gender and geographic
location; and

- easy to use, since it does not require users to acquire any new skills or
employ complex query techniques.

Our Popularity-based Search product was selected as FORBES' Favorite Search
Engine in September 1999. Our products have also earned recognition in industry
awards received by our OEM customers, including CNET 1999 Editors' Choice
awarded to HotBot in April 1999 and PC MAGAZINE 1999 Editors' Choice awarded to
HotBot in September 1999.

OUR CUSTOMERS

Our popularity-based solution may be found on our OEM customers' Web sites
and on our Web site. The following is a list of our 22 OEM customers as of
November 30, 1999:

About.com
Apple Computer
AT&T WorldNet
Catcha.com
GeneralSearch.com
Go2Net
HotBot (Wired Digital/Lycos)
ICQ (AOL)
Infoseek
InfoSpace.com
LookSmart

Lycos
mainCampus.com
Microsoft (MSN)
Pinault-Printemps-Redoute
Punto (Portal Srl)
SavvySearch
Scandinavia Online
SimpleSearch
UKMax.com (Hollinger Digital)
Zap
ZDNet

OUR ADDRESS

Our executive offices are located at 888 Worcester Street, Suite 340,
Wellesley, Massachusetts 02482, and our telephone number is (781) 235-7570. Our
Web site is located at WWW.DIRECTHIT.COM. The information on our Web site is not
part of this prospectus.

THE OFFERING

Common stock offered by Direct Hit........ shares
Common stock to be outstanding after the
offering................................ shares
Use of proceeds........................... For sales and marketing and research and
development expenditures, and for working
capital and other general corporate
purposes.
Proposed Nasdaq National Market symbol.... DHIT

The number of shares of common stock outstanding after this offering is
based on shares of common stock outstanding as of November 30, 1999. This
calculation:

- includes 10,942,676 shares of common stock to be issued upon the
conversion of our shares of preferred stock outstanding as of
November 30, 1999; and

- excludes 1,252,646 shares of common stock issuable upon exercise of all
options outstanding under our 1998-A Stock Option Plan as of November 30,
1999 with a weighted average exercise price of $1.60 per share.

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

The following tables set forth summary financial data for our company. The
summary balance sheet data as of September 30, 1999 are presented on:

- an actual basis,

- on a pro forma basis to give effect to the conversion of our preferred
stock upon completion of this offering, and

- on a pro forma as adjusted basis to give effect to our sale of
shares of common stock in this offering at an assumed initial public
offering price of $ per share, after deducting the estimated
underwriting discounts and commissions and offering expenses payable by
us.

You should read this information together with the financial statements and
the notes to those statements appearing elsewhere in this prospectus and the
information under "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

PERIOD FROM
INCEPTION
(APRIL 27, 1998) NINE MONTHS
THROUGH ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------

SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------

BALANCE SHEET DATA:
Cash and cash equivalents................................... $16,427 $16,427
Working capital............................................. 25,869 25,869
Total assets................................................ 28,049 28,049
Total convertible preferred stock........................... 29,651 --
Total stockholders' equity.................................. 27,037 27,037

RISK FACTORS

AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH
THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE WHETHER TO
BUY OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION WOULD LIKELY SUFFER. THIS
COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECLINE, AND COULD CAUSE YOU
TO LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.

RISKS RELATED TO OUR BUSINESS

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY AND FACE DIFFICULTIES ENCOUNTERED BY EARLY STAGE COMPANIES.

We were organized in April 1998 and first sold our products in August 1998.
Our limited operating history makes it difficult for investors to evaluate our
future prospects. Additionally, investors must consider the challenges, risks
and uncertainties frequently encountered by early-stage companies using new and
unproven business models in new and rapidly evolving markets. These challenges
include our ability to:

- generate sufficient revenues to achieve and maintain profitability;

- manage growth in our operations;

- attract and retain customers cost-effectively;

- attract and retain key personnel;

- develop and renew strategic relationships;

- access additional capital when required; and

- increase brand recognition.

We cannot be certain that we will successfully address these and other
challenges, risks and uncertainties or that our business model will be
successful.

WE ANTICIPATE OUR HISTORY OF LOSSES WILL CONTINUE, WHICH MAY DECREASE THE VALUE
OF OUR COMMON STOCK.

Since we began operations, we have incurred substantial operating losses in
every fiscal period. We believe that we will continue to incur operating losses
for the foreseeable future and that the rate at which we will incur such losses
will increase significantly from current levels. As of September 30, 1999, we
had an accumulated deficit of $3.7 million. We incurred net losses of
$2.9 million for the nine months ended September 30, 1999. We intend to
substantially increase our costs and operating expenses related to:

- employing additional personnel as our business expands;

- researching and developing new products;

- developing new and expanding existing customer relationships; and

- intensifying our brand development efforts through advertising and other
marketing activities.

Because we will spend these amounts before we receive any incremental
revenues from these efforts, our losses will be greater than the losses we would
incur if we developed our business more slowly. In addition, we may find that
these efforts are more expensive or less effective than we currently anticipate,
which would further increase our losses.

DISAPPOINTING QUARTERLY REVENUES OR OPERATING RESULTS COULD CAUSE OUR STOCK
PRICE TO FALL.

Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If our quarterly revenues
or operating results fall below the expectations of securities analysts or
investors, the price of our common stock could fall substantially. Our quarterly
revenues and operating results have fluctuated significantly in the past and may
fluctuate significantly in the future due to a variety of factors, including:

- fluctuations in the number of visitors to the Web sites of our customers
and our Web site;

- the uncertainty and timing of closing major new accounts;

- the timing and effectiveness of our advertising and promotions;

- the amount and timing of our operating costs and capital expenditures;

- introductions by our competitors of new or enhanced products, services or
Web sites; and

- changes in our management team and key personnel.

Most of our expenses, including employee salaries and rent, are relatively
fixed. In addition, our expense levels are based, in part, on our expectations
of future revenue increases. As a result, any shortfall in revenues in relation
to our expectations could cause a significant decline in our operating results
from quarter to quarter.

OUR CURRENT AND EXPECTED METHODS OF GENERATING REVENUES ARE RELATIVELY NEW AND
LARGELY UNTESTED.

Substantially all of our total revenues for the period from inception
(April 27, 1998) through December 31, 1998, and 93% of our total revenues for
the nine months ended September 30, 1999, were generated through revenues from
OEM customers, which include per-query fees and advertising revenue sharing
arrangements with OEM customers. In addition, although we have not generated any
revenues through the facilitation of e-commerce, we expect to generate a portion
of our future revenues through the facilitation of e-commerce. We facilitate
e-commerce by directing shoppers to e-commerce merchants, some of whom
compensate us for the referral. These methods of revenue generation are new and
untested.

Revenues from Internet advertising will make up a significant amount of our
revenues for the foreseeable future. Since the Internet advertising market is
new and rapidly evolving, we cannot yet gauge its effectiveness as compared to
traditional advertising media. Advertisers that have traditionally relied on
other advertising media may be reluctant to advertise on the Internet if they
believe that Internet advertising is less effective than traditional advertising
media for promoting their products and services. Consequently, they may allocate
only limited portions of their advertising budgets to Internet advertising. Our
business could be materially harmed if Internet advertising does not continue to
grow or if we are unsuccessful in increasing our advertising revenues.

WE MAY FAIL TO COMPETE EFFECTIVELY IN OUR MARKETS, WHICH COULD RESULT IN LOWER
REVENUES OR LOSS OF MARKET SHARE.

Our markets are new, rapidly evolving and intensely competitive, and we
expect competition to intensify in the future. If we fail to compete
effectively, our revenues could decline, we could lose market share and the
price of our stock could decline. Our ability to compete depends on many
factors, many of which are outside of our control. These factors include the
ease of use and performance of online services, the timing and market acceptance
of new and enhanced online services, and sales and marketing efforts by us and
our competitors.

Many of our existing competitors, as well as potential new competitors, have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
These competitors may engage in more extensive research and

development, adopt more aggressive pricing policies and make more attractive
offers to existing and potential employees, customers, advertisers and
e-commerce merchants and consumers. A more detailed discussion regarding the
competition we face is included in this prospectus under the heading
"Business--Competition."

IF WE DO NOT MANAGE GROWTH EFFECTIVELY, OUR BUSINESS WILL BE MATERIALLY HARMED.

We have experienced and may continue to experience rapid growth, which has
placed, and could continue to place, a significant strain on our managerial,
financial and operational resources. If we do not manage growth effectively, our
business will be materially harmed. The number of our employees increased from 9
on December 31, 1998 to 51 on November 30, 1999. We expect that the number of
our employees will continue to increase for the foreseeable future. We must
continue to improve our operations, financial systems and managerial controls
and procedures, and we will need to continue to expand, train and manage our
workforce. We cannot assure you that our systems, procedures or controls will be
adequate to support our operations or that we will be able to manage any growth
effectively.

IF WE ARE UNABLE TO ADAPT TO RAPID TECHNOLOGICAL CHANGE, OUR CUSTOMERS MAY
FOREGO THE USE OF OUR PRODUCTS AND USE THOSE OF OUR COMPETITORS.

To remain competitive, we must continue to enhance and improve the
functionality and features of our products. If our competitors introduce new
products and services embodying new technologies, or if new industry standards
and practices emerge, our products that are based on our existing proprietary
technology may be rendered obsolete. Our future success will depend on our
ability to:

- enhance our existing products;

- internally develop or license from third parties new products, services
and technologies; and

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

OUR ABILITY TO INCREASE OUR CUSTOMER BASE AND OUR REVENUES DEPENDS ON THE
CONTINUING CONTRIBUTION OF OUR KEY PERSONNEL.

If we were to lose the services of any of our executive officers or key
employees, many of whom joined us in 1999, we might not be able to increase our
customer base and our revenues. Any executive officer can terminate his or her
relationship with us at any time. We also do not have "key person" life
insurance policies covering any of our employees.

OUR ABILITY TO INCREASE OUR CUSTOMER BASE AND OUR REVENUES DEPENDS ON OUR
ABILITY TO ATTRACT AND RETAIN OTHER QUALIFIED EMPLOYEES IN THE FUTURE.

Competition for personnel is intense, and qualified technical personnel are
likely to remain a limited resource for the foreseeable future. Locating
candidates with the appropriate qualifications, particularly in the desired
geographic location, can be costly and difficult. We may not be able to hire the
necessary personnel to implement our business strategy, or we may need to
provide higher compensation to such personnel than we currently anticipate. If
we fail to attract and retain sufficient numbers of highly skilled employees, we
may be unable to attract customers and increase our revenues.

OUR FAILURE TO EXPAND OUR SALES FORCE AND THE NUMBER OF OUR OEM CUSTOMERS WOULD
ADVERSELY AFFECT OUR REVENUE GROWTH AND FINANCIAL CONDITION.

To increase our revenues, we must increase the size of our sales force and
the number of our OEM customers. We may be unable to increase the number of our
OEM customers. In addition, there is intense competition for sales personnel in
our business, and we cannot assure you that we will be

successful in attracting, integrating, motivating and retaining new sales
personnel. Moreover, we may need to resolve potential conflicts arising from
competition between our advertising sales force and those of our OEM customers.
If we fail to increase the size of our sales force or the number of our OEM
customers, or if we fail to adequately resolve conflicts between our advertising
sales force and those of our OEM customers, our revenues and our stock price
could decline.

THE LOSS OF OUR RELATIONSHIP WITH LYCOS OR ANY OTHER CUSTOMER THAT ACCOUNTS FOR
A SIGNIFICANT PORTION OF OUR REVENUES COULD ADVERSELY AFFECT OUR BUSINESS AND
CAUSE OUR STOCK PRICE TO DECLINE.

For the nine months ended September 30, 1999, Lycos, including its
subsidiary, HotBot, accounted for approximately 70% of our total revenues. In
addition, Lycos recently invested in Fast Search and Transfer, a provider of
Internet search technology. Our agreements with Lycos and our other OEM
customers are generally terminable upon short notice. A significant decline in
sales to Lycos or any other customer that accounts for a significant portion of
our revenues could adversely affect our business and cause our stock price to
decline.

IF OUR BRAND DOES NOT RAPIDLY ACHIEVE BROAD RECOGNITION, WE MAY LOSE THE
OPPORTUNITY TO BUILD A CRITICAL MASS OF INTERNET USERS NECESSARY TO ACHIEVE
INCREASED MARKET SHARE.

We believe that increasing the recognition of the Direct Hit brand is
important to our success. Accordingly, we have invested and intend to continue
to invest in our brand-enhancement strategy, which includes advertising,
promotional programs and public relations activities. Our brand promotion
efforts may not be successful or may not sufficiently increase our revenues to
cover our advertising and promotional expenses.

WE MAY EXPERIENCE LOST OR DELAYED SALES IF OUR SALES CYCLE LENGTHENS.

Our customers' purchasing decisions may be subject to delays over which we
may have little or no control, including budgeting constraints and internal
purchase approval review procedures. A longer sales cycle reduces our ability to
forecast revenue levels and may result in lost sales. Any delay or loss in sales
of our products could have a material adverse effect on our business, operating
results and financial condition, and could cause our operating results to vary
significantly from quarter to quarter.

EXPANSION OF OUR BUSINESS INTO INTERNATIONAL MARKETS COULD ADVERSELY AFFECT OUR
BUSINESS AND CAUSE OUR STOCK PRICE TO DECLINE.

As we continue to expand our business into international markets, we face
the risks associated with international operations, including unexpected changes
in regulatory requirements and tariffs, exchange rate fluctuations, difficulties
in staffing and managing foreign operations, potentially longer payment cycles
and problems in collecting accounts receivable. If we are unable to manage these
risks effectively, our revenues and our stock price could decline.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY ADEQUATELY, WE COULD LOSE
OUR COMPETITIVE ADVANTAGE.

Our trademarks, copyrights, trade secrets and similar intellectual property
are critical to our success. Our failure to protect our intellectual property
could materially harm our business. The infringement or misappropriation of our
trademarks or other intellectual property could diminish the value of our
proprietary rights or goodwill. We rely upon a combination of trademark, patent
and copyright law, trade secret protection and confidentiality or license
agreements with our employees, affiliates and others to protect our proprietary
rights. Effective patent, trademark, copyright and trade secret protection may
not be available, and the steps we have taken and may take in the future to
protect our proprietary rights may not be adequate. Gary Culliss, our co-founder
and Chief Technology Officer, owns the rights to one patent and three patent
applications relating to aspects of our core

technology, as to each of which we have an exclusive license. We have also filed
applications to register our trademarks and logos. However, we cannot assure you
that the one issued patent, or any patents or registered trademarks, if any,
that are issued under our current or any future applications, will be of
sufficient scope and strength to provide meaningful protection of our technology
or any commercial advantage to us, or that any such patents or trademarks will
not be challenged, invalidated or circumvented by our competitors. In addition,
we license our trademarks and other intellectual property to third parties, and
we cannot be certain that such licensees will not take actions that harm the
value of our proprietary rights.

CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
FORCE US TO REDESIGN OUR PRODUCTS OR OTHERWISE HURT OUR BUSINESS AND FINANCIAL
CONDITION.

If we were to discover that any of our products violated third-party
proprietary rights, we cannot assure you that we would be able to reengineer the
product or to obtain a license on commercially reasonable terms, if at all, to
continue offering the product. We do not conduct comprehensive patent searches
to determine whether the technology used in our products infringes patents held
by third parties. In addition, product development is inherently uncertain in a
rapidly developing technology environment in which there may be numerous patent
applications pending, many of which are confidential when filed, with regard to
similar technologies. Any claim of infringement could cause us to incur
substantial costs defending against the claim, even if the claim is invalid, and
could distract our management from running our business. Furthermore, a party
making such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that
could prevent us from selling our products or cause our customers to stop using
our products.

IF WE ARE UNABLE TO PREVENT THIRD PARTIES FROM ACQUIRING DOMAIN NAMES THAT ARE
SIMILAR TO, INFRINGE UPON OR OTHERWISE DECREASE THE VALUE OF OUR DOMAIN NAMES,
WE COULD LOSE OUR COMPETITIVE ADVANTAGE.

We currently hold several Web domain names relating to our brand, including
DIRECTHIT.COM. The acquisition and maintenance of domain names generally is
regulated by governmental agencies and their designees. The regulation of domain
names in the United States and abroad is expected to change in the near future.
Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we conduct business and other parties may use domain names
similar to ours.

IF OUR EXISTING TECHNICAL AND OPERATIONAL SYSTEMS FAIL, WE COULD EXPERIENCE
INTERRUPTIONS OR DELAYS IN OUR SERVICE OR DATA LOSS.

We have experienced periodic systems interruptions which we believe may
continue to occur. Our systems and operations are vulnerable to damage or
interruption from telecommunications failure, power loss, break-ins, vandalism,
fire, flood, earthquakes and similar events. Substantially all of our
information management systems are in leased facilities in Massachusetts. In
addition, substantially all of our computer and communications hardware systems
are located at third-party facilities in California, Massachusetts, New York,
Virginia and the United Kingdom. We have no formal disaster recovery plans, and
our insurance may not adequately compensate us for losses that may occur. The
occurrence of a natural disaster or other unanticipated problems at our
facilities in Massachusetts, or at the third-party facilities described above,
could cause interruptions or delays in the service provided by our products or
data loss. In addition, any failure by the third-party facilities to provide the
data communications capacity we require could result in interruptions in the
service provided by our products.

WE FACE RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS OF COMPLEMENTARY COMPANIES,
PRODUCTS OR TECHNOLOGIES.

We may make investments in or acquire complementary companies, products or
technologies. We may not realize the anticipated benefits of these investments
or acquisitions, and these transactions could be detrimental to our business. If
we buy a business, we could have difficulty assimilating its personnel and
operations, or the key personnel of the acquired business may decide not to work
for us. We could also have difficulty assimilating acquired technology or
products into our operations. These difficulties could disrupt our ongoing
business, distract our management and employees and increase our expenses.
Furthermore, to pay for any future acquisitions or investments, we may have to
incur debt or issue equity securities, the issuance of which could be dilutive
to our existing stockholders.

WE ARE LIKELY TO REQUIRE ADDITIONAL FINANCING AND MAY NOT BE ABLE TO RAISE
ADDITIONAL FINANCING ON FAVORABLE TERMS OR AT ALL.

We currently anticipate that the net proceeds of this offering, together
with current cash and cash equivalents, will be sufficient to meet our
anticipated needs through the next 12 months. However, we may need additional
financing sooner to execute on our business model if we need to respond to
business contingencies. Such contingencies may include the need to:

- fund additional advertising and marketing expenditures;

- hire additional sales personnel;

- develop new or enhance existing products, site features or services;

- enhance our operating infrastructure;

- respond to competitive pressures; or

- acquire complementary businesses or necessary technologies.

If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
and these newly issued securities may have rights, preferences or privileges
senior to those of existing stockholders, including those acquiring shares in
this offering. We cannot assure you that additional financing will be available
on terms favorable to us, or at all. If adequate funds are not available or are
not available on acceptable terms, our ability to fund our operations, take
advantage of unanticipated opportunities, develop or enhance our products, site
features or services, or otherwise respond to competitive pressures would be
significantly limited.

MANY MEMBERS OF OUR CURRENT MANAGEMENT TEAM DO NOT HAVE EXPERIENCE MANAGING A
PUBLIC COMPANY.

Many members of our management team do not have experience managing a public
company. We cannot assure you that the management team as currently configured
will be able to successfully handle the additional burdens of public company
status. The failure of the management team to adequately handle this challenge
could materially harm our business and could cause the market price of our
common stock to decline.

WE DO NOT EXPECT TO PAY DIVIDENDS, AND INVESTORS SHOULD NOT BUY OUR COMMON STOCK
EXPECTING TO RECEIVE DIVIDENDS.

We have never declared or paid any cash dividends on our capital stock. We
presently intend to retain future earnings, if any, to finance the expansion of
our business and do not expect to pay any cash dividends in the foreseeable
future. Consequently, you only will realize an economic gain on your investment
in our common stock if the price appreciates. You should not purchase our common
stock with the expectation of receiving cash dividends.

WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS IN OUR CHARTER, BYLAWS AND DELAWARE
LAW THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR COMPANY, EVEN IF THE
ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.

Certain provisions of our certificate of incorporation, our bylaws and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders. Because of these
provisions, you might not be able to receive a premium on your investment. For
additional information on these anti-takeover provisions, please refer to the
information in this prospectus under the heading "Description of Capital Stock."

RISKS OF DOING BUSINESS OVER THE INTERNET

IF USE OF THE INTERNET AND GROWTH OF ONLINE SEARCH SERVICES AND ELECTRONIC
COMMERCE DO NOT CONTINUE TO INCREASE, WE MAY NOT ACHIEVE THE CRITICAL MASS OF
CUSTOMERS NECESSARY FOR SUSTAINING REVENUES AND ACHIEVING PROFITABLE OPERATIONS.

Our future revenues and profits, if any, substantially depend upon the
widespread acceptance and use of the Internet as an effective medium for
information retrieval, business and commerce. Rapid growth in the use of and
interest in the Internet has occurred only recently. As a result, acceptance and
use may not continue to develop at historical rates, and a sufficiently broad
base of consumers may not use the Internet and other communications networks. In
addition, the Internet may not be accepted as a viable long-term commercial
marketplace for a number of reasons, including inadequate development of
necessary network infrastructure or delayed development of enabling technologies
and performance improvements. Our continued growth will depend, in large part,
upon third parties maintaining and developing the Internet infrastructure to
provide a reliable network backbone with the speed, data capacity, security and
hardware necessary for reliable Internet access and services.

WE FACE POTENTIAL LIABILITY FOR INFORMATION RETRIEVED FROM THE INTERNET.

Because we link users to information which is downloaded, indexed and
distributed from Web pages published by content providers outside of our
control, we face potential claims 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 us for copyright infringement based on the improper
dissemination of information. Although we carry general liability insurance, our
insurance may not cover potential claims of this type, or may not be adequate to
indemnify us for all liability that may be imposed.

PRIVACY CONCERNS MAY LIMIT THE INFORMATION WE CAN GATHER, WHICH COULD LIMIT THE
EFFECTIVENESS OF OUR PRODUCTS AND CAUSE US TO INCUR SIGNIFICANT ADDITIONAL
EXPENSES.

Web sites typically place software files, called cookies, on a user's hard
drive without the user's knowledge or consent. Although some companies refuse to
use cookies, we use them for a variety of reasons, such as the storage of
anonymous demographic data. We use this demographic data for the Personalized
Search component of our Popularity-based Search product to provide more accurate
and relevant search results. Accordingly, any reduction or limitation in the use
of cookies could limit our ability to provide accurate and relevant search
results. Most currently available Web browsers allow users to remove cookies at
any time or to prevent cookies from being stored on their hard drives. In
addition, some commentators, privacy advocates and governmental bodies have
suggested limiting or eliminating the use of cookies. For example, the European
Union recently adopted a directive addressing data privacy that may limit the
collection and use of certain information regarding Internet users. This
directive may limit our ability to collect and use information in certain
European countries. In addition, the Federal Trade Commission and several state
governments have investigated the use by certain Internet companies of personal
information. We could lose significant market share or incur

significant additional expenses if new regulations regarding the use of personal
information are introduced or if our privacy practices are investigated.

OUR BUSINESS IS SUBJECT TO GOVERNMENT REGULATION OF THE INTERNET AND OTHER LEGAL
UNCERTAINTIES WHICH COULD PREVENT OUR BUSINESS FROM GROWING OR EXPOSE US TO
UNANTICIPATED LIABILITIES.

Existing or future legislation could limit growth in use of the Internet,
which would curtail our revenue growth. Statutes and regulations directly
applicable to Internet communications, commerce and advertising are becoming
more prevalent. Congress recently passed laws regarding children's online
privacy, copyrights and taxation. The law remains largely unsettled, even in
areas where there has been legislative action. It may take years to determine
whether and how existing laws governing intellectual property, privacy, libel
and taxation apply to the Internet, e-commerce and online advertising. In
addition, the growth and development of e-commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad.

RISKS ASSOCIATED WITH THIS OFFERING

OUR MANAGEMENT HAS BROAD DISCRETION OVER THE USE OF PROCEEDS FROM THIS OFFERING.

Presently, we intend to use the proceeds from this offering for increased
sales and marketing and research and development expenditures, and for working
capital and other general corporate purposes. We also may use a portion of the
proceeds to expand our business through strategic alliances and acquisitions. We
have not yet determined the amount of net proceeds to be used specifically for
any of the foregoing purposes. As a result, investors in this offering will be
relying on management's judgment with only limited information about its
specific intentions regarding the use of proceeds. We cannot assure you that the
proceeds will be invested to yield a favorable return.

OUR OFFICERS AND DIRECTORS WILL CONTROL % OF OUR COMMON STOCK AND WILL BE ABLE
TO CONTROL CORPORATE ACTIONS.

After this offering, our executive officers, directors and entities
affiliated with them will control approximately % of our common stock. As a
result, these stockholders, acting together, will be able to control all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions. This
concentration of ownership may have the effect of delaying or preventing a
change of control of our company, and might hurt the market price of our common
stock.

THERE IS NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND YOU MAY NOT BE ABLE TO
RESELL SHARES OF OUR COMMON STOCK FOR A PROFIT.

There has not been a public market for our common stock. We cannot predict
the extent to which investor interest in our company will lead to the
development of an active, liquid trading market. Active trading markets
generally result in a more efficient execution of buy and sell orders for
investors. The initial public offering price for the shares of common stock
offered by us will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of prices that
will prevail in the trading market. The market price of the common stock may
decline below the initial public offering price.

MARKET PRICES OF EMERGING INTERNET COMPANIES HAVE BEEN HIGHLY VOLATILE, AND THE
MARKET FOR OUR STOCK MAY EXHIBIT VOLATILITY AS WELL.

The stock market has experienced significant price and trading volume
fluctuations, and the market prices of technology companies, particularly
Internet companies, have been extremely volatile. Recent initial public
offerings by Internet companies have been accompanied by exceptional share price
and trading volume changes in the first days and weeks after the public
offering. Investors may not be

able to resell their shares at or above the initial public offering price. In
the past, following periods of volatility in the market price of a public
company's securities, securities class action litigation has often been
instituted against that company. Such litigation could result in substantial
costs and a diversion of management's attention and resources.

THE RELIABILITY OF THE MARKET DATA INCLUDED IN THIS PROSPECTUS IS UNCERTAIN.

Since we are a relatively new company and operate in a new and rapidly
changing market, we have included market data in this prospectus from industry
publications, including International Data Corporation and Media Metrix. These
data include projections that are based on a number of assumptions, including
increasing worldwide business use of the Internet, the growth in the number of
Web access devices per user, the absence of any failure of the Internet and the
continued improvement of security on the Internet. Industry publications
generally state that the information contained in these publications has been
obtained from sources believed to be reliable, but that its accuracy and
completeness is not guaranteed. Although we believe market data used in this
prospectus is reliable, it has not been independently verified and we cannot
assure you of its reliability.

The Internet related markets may not grow at rates projected by
International Data Corporation. The failure of these markets to grow at
projected rates may seriously harm our business and may cause the price of our
common stock to decline.

NEW INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NET TANGIBLE
BOOK VALUE OF THEIR SHARES.

We expect the initial public offering price to be substantially higher than
the net tangible book value per share of the common stock. Therefore, you will
incur immediate dilution in net tangible book value of $ per share,
assuming an initial public offering price of $ per share. You may incur
additional dilution if holders of stock options exercise their options to
purchase common stock.

THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD
CAUSE OUR STOCK PRICE TO DECLINE.

The market price of our common stock could decline as a result of market
sales by our existing stockholders of a large number of shares of our common
stock after this offering or the perception that such sales could occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and price that we deem appropriate. Please see the information
in this prospectus under the heading "Shares Eligible for Future Sale" for a
description of sales that may occur in the future.

FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT BE REALIZED.

This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are often accompanied by words
such as "anticipate," "believe," "could," "expect," "future," "intend," "plan"
and similar expressions. These statements include assertions about our business
strategy, competition and expected expense levels. You should consider any
forward-looking statements we make in this prospectus in light of the risk
factors described above. Our actual results could differ materially from those
expressed or implied by these forward-looking statements as a result of various
factors, including the risk factors described above and elsewhere in this
prospectus.

USE OF PROCEEDS

Our net proceeds from the sale of shares of common stock offered by us are
estimated to be $ million, assuming an initial public offering price
of $ per share, and after deducting estimated underwriting discounts and
commissions and offering expenses payable by us. If the underwriters'
over-allotment option is exercised in full, we estimate that our net proceeds
will be $ million.

We intend to use the proceeds from this offering for sales and marketing and
research and development expenditures, and for working capital and other general
corporate purposes.

We believe opportunities may exist from time to time to expand our current
business through strategic alliances or acquisitions with complementary
companies, products or technologies. We may use a portion of the proceeds for
these purposes.

We have not yet determined the amount of net proceeds to be used
specifically for any of the foregoing purposes. Accordingly, our management will
have significant flexibility in applying the net proceeds of the offering.
Pending any use, as described above, we intend to invest the net proceeds in
high-quality, short-term, interest-bearing securities.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock since
inception (April 27, 1998) and do not expect to pay any cash dividends for the
foreseeable future. We intend to use future earnings, if any, to finance
expansion of our business for the foreseeable future. Investors should not
purchase our common stock with the expectation of receiving cash dividends.

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 1999:

- on an actual basis;

- on a pro forma basis to give effect to the conversion of our preferred
stock upon completion of this offering; and

This information should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operation" and our financial
statements and the notes to those statements appearing elsewhere in this
prospectus.

SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)

Preferred stock, $0.001 par value:

Series A--5,187,501 shares authorized; 5,187,501 shares
issued and outstanding actual; no shares issued and
outstanding pro forma and pro forma as adjusted........... $ 1,378 -- $

Series B--1,323,912 shares authorized; 1,323,912 shares
issued and outstanding actual; no shares issued and
outstanding pro forma and pro forma as adjusted........... 1,993 -- --

Series C--4,431,265 shares authorized; 4,431,263 shares
issued and outstanding actual; no shares issued and
outstanding pro forma and pro forma as adjusted........... 26,280 -- --

Common stock, $0.001 par value: 35,000,000 shares
authorized; 9,722,048 shares issued and outstanding
actual; 20,664,724 shares issued and outstanding pro
forma; and shares issued and outstanding pro forma
as adjusted............................................... 10 $ 21

Additional paid-in capital.................................. 5,602 35,242

Deferred compensation....................................... (4,504) (4,504)

Accumulated deficit......................................... (3,722) (3,722)
------- ------- ---------

Total capitalization.................................... $27,037 $27,037 $
======= ======= =========

DILUTION

Our pro forma net tangible book value as of September 30, 1999 was $27.0
million, or $1.31 per share of common stock. Pro forma net tangible book value
per share represents the amount of total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding, after giving effect
to the conversion of our preferred stock upon completion of this offering. After
giving effect to our sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share, and after deducting
estimated underwriting discounts and commissions and offering expenses payable
by us, our pro forma net tangible book value as of September 30, 1999 would have
been $ , or $ per share. This represents an immediate increase in
pro forma net tangible book value of $ per share to existing stockholders
and an immediate dilution of $ per share to new investors purchasing
shares of common stock in this offering. The following table illustrates this
dilution:

Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of
September 30, 1999...................................... $1.31
Increase per share attributable to this offering..........
--------
Pro forma net tangible book value per share after this
offering..................................................
--------
Net tangible book value dilution per share to new investors
in this offering.......................................... $
========

The following table summarizes, on a pro forma basis as of September 30,
1999, the total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid to us by existing
stockholders and by new investors purchasing shares in this offering:

SHARES PURCHASED TOTAL CONSIDERATION
-------------------------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------------------------- -------- -------------- -------- -------------

Existing stockholders.............. 20,664,724 % $29,734,912.55 % $1.44
New investors......................
--------------------------- ------ -------------- ------
Total.......................... 100.0% 100.0%
=========================== ====== ============== ======

The foregoing tables and calculations are based on shares outstanding on
September 30, 1999 and:

- include 10,942,676 shares of common stock issuable upon the conversion of
all of our outstanding preferred stock as of September 30, 1999; and

- exclude 1,204,646 shares of common stock issuable upon exercise of all
options outstanding under our 1998-A Stock Option Plan as of
September 30, 1999 with a weighted average exercise price of $1.43 per
share.

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with our
financial statements and the notes to those satements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The statement of operations data for the
period from inception (April 27, 1998) through December 31, 1998 and the balance
sheet data at December 31, 1998 are derived from our financial statements which
have been audited by Deloitte & Touche LLP, our independent auditors, and are
included in this prospectus. The statement of operations data for the nine
months ended September 30, 1999 and the balance sheet data at September 30, 1999
have been derived from our unaudited financial statements included elsewhere in
this prospectus that include, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, that we consider necessary for the
fair presentation of our financial position and results of operations for that
period. The historical results are not necessarily indicative of the operating
results to be expected in the future.

PERIOD FROM
INCEPTION
(APRIL 27, 1998) NINE MONTHS
THROUGH ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Revenues:
OEM....................................................... $ 175 $ 805
Advertising............................................... -- 57
------- -------
Total revenues.......................................... 175 862
Cost of revenues............................................ 51 361
------- -------
Gross profit................................................ 124 501
------- -------
Operating expenses:
Sales and marketing....................................... 90 948
Research and development.................................. 472 1,502
General and administrative................................ 150 413
Equity-related compensation............................... 232 827
------- -------
Total operating expenses................................ 944 3,690
------- -------
Operating loss.............................................. (820) (3,189)
Interest income............................................. 28 259
------- -------
Net loss.................................................... $ (792) $(2,930)
======= =======
Pro forma basic and diluted net loss per share.............. $(0.12) $(0.26)
======= =======
Weighted average shares outstanding used in computing pro
forma basic and diluted net loss per common
share..................................................... 6,705 11,092
======= =======

DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents................................... $2,558 $16,427
Working capital............................................. 2,641 25,869
Total assets................................................ 2,924 28,049
Total convertible preferred stock........................... 3,371 29,651
Total stockholders' equity.................................. 2,823 27,037

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

THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF OUR COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES.

OVERVIEW

Direct Hit is a leading provider of solutions that aggregate and organize
online content to enable users to quickly find relevant and accurate
information, products and services. We were incorporated in April 1998, and sold
our Popularity-based Search product to our first customer in August 1998.

Revenues are comprised of OEM revenues and advertising revenues. Through
September 30, 1999, substantially all of our OEM revenues have been derived from
our Popularity-based Search product. OEM revenues are generated through a
variety of contractual arrangements, which include per-query fees and
advertising revenue sharing arrangements with OEM customers. Per-query fees are
recognized in the period earned, and revenues from advertising revenue sharing
arrangements are recognized in the period that the advertisement is displayed
through the OEM customer's Web site. When the OEM contract calls for payments
based on per-query fees, revenues are recognized based on the number of Web
pages accessed as reported by the OEM customer or as determined by us, depending
on the contract. When the OEM contract provides for minimum monthly fees, such
fees are recognized monthly as earned.

Advertising revenues are derived principally from arrangements with third
parties in which we provide advertising on our Web site. The advertising
contracts are primarily sold as: (1) "run-of-site" contracts in which a customer
purchases the right to advertise within rotation through our entire Web site and
some of our customers' sites for all categories and non-specific keywords;
(2) "run-of-category" contracts in which a customer purchases the right to
advertise in connection with a specific category (e.g., sports, music, news,
education, etc.); (3) "keyword" contracts in which a customer purchases the
right to advertise in connection with specified word searches; and (4) text
sponsorships in which a customer purchases link descriptions based on a bid
system and rotation is based on the highest bid.

We are still developing the business model for our Popularity-based Shopping
product and anticipate that revenues will be generated by revenue sharing
arrangements with online merchants, and by per-query fees and advertising fees
from Internet portals and other Web site customers. We also anticipate that we
will generate revenues at our Web site from our Popularity-based Shopping
product through advertising and revenue sharing arrangements with online
merchants. However, we cannot assure you that we will generate any revenues from
our Popularity-based Shopping product.

Cost of revenues consist primarily of expenses associated with the ongoing
maintenance and support of our products, including compensation and
employee-related expenses, consulting fees, equipment costs, networking,
bandwidth and other related indirect costs. Sales and marketing expenses consist
primarily of advertising and other marketing-related expenses, compensation and
employee-related expenses, sales commissions and travel costs. Research and
development expenses consist primarily of compensation and employee-related
expenses, equipment costs, and fees for professional services related to the
continued development and enhancement of our product offerings. General and
administrative expenses consist primarily of compensation and employee-related
expenses, fees for professional services and other general corporate overhead
costs. Interest income is derived primarily from interest earned on our cash
balances and short-term investments.

We will incur a non-cash expense over the vesting period of certain
outstanding options, generally four years, for the amortization of unearned
stock-based compensation resulting from granting stock options to employees
since the inception of our company. These deferred compensation costs represent

the difference between the exercise price of the options and the deemed fair
market value of the underlying common stock at the time of grant of the options.

We have experienced substantial losses in each fiscal period since our
inception (April 27, 1998). As of September 30, 1999, we had an accumulated
deficit of $3.7 million. These losses and our accumulated deficit have resulted
from our lack of substantial revenues, as well as the significant costs incurred
in the development of our products and in the preliminary establishment of our
infrastructure. We expect to increase our expenditures in all areas in order to
execute our business plan, particularly in sales and marketing and research and
development. The planned increase in sales and marketing and research and
development expenses will result principally from the hiring of additional
personnel and from marketing programs. Accordingly, we expect to experience
additional losses for the foreseeable future. Although we have experienced
revenue growth in recent periods, our recent rate of revenue growth may not be
sustainable. We may not be able to continue to increase our revenues or to
attain profitability and, if we do achieve profitability, we may not be able to
sustain profitability for any period. We believe that period-to-period
comparisons of our historical operating results may not be meaningful, and you
should not rely upon them as an indication of our future financial performance.

Since inception, we have financed our operations primarily from the proceeds
of the sale of equity securities. Net proceeds from inception through
September 30, 1999 totaled approximately $29.7 million. In May 1998, Draper
Fisher Jurvetson and high net worth individuals provided us initial equity
capital of $1.4 million. In November 1998, an additional $2.0 million was
invested by Draper Fisher Jurvetson, Mosaic Venture Partners and a high net
worth individual. In July 1999, we received approximately $26.3 million in
financing from investors including Commonwealth Capital, Cornerstone Capital
Group, Draper Fisher Jurvetson, Hikari Tsushin, McCloskey, Mercury Investors,
Mosaic Venture Partners, TA Associates and Viventures Partners.

RESULTS OF OPERATIONS

The following table sets forth operating data expressed as a percentage of
total revenues for each period indicated. We were organized in April 1998 and
first sold our products in August 1998. Accordingly, comparisons with prior
periods are not meaningful.

PERIOD FROM
INCEPTION
(APRIL 27, 1998)
THROUGH NINE MONTHS
DECEMBER 31, ENDED
1998 SEPTEMBER 30, 1999
---------------- ------------------

STATEMENT OF OPERATIONS DATA:
Revenues:
OEM....................................................... 100% 93%
Advertising............................................... -- 7
----- -----
Total revenues.......................................... 100 100
Cost of revenues............................................ 29 42
----- -----
Gross margin................................................ 71 58
----- -----
Operating expenses:
Sales and marketing....................................... 51 110
Research and development.................................. 269 174
General and administrative................................ 86 48
Equity-related compensation............................... 132 96
----- -----
Total operating expenses................................ 538 428
----- -----
Operating loss.............................................. (467) (370)
Interest income............................................. 16 30
----- -----
Net loss.................................................... (451)% (340)%
===== =====

NINE MONTHS ENDED SEPTEMBER 30, 1999

REVENUES

Total revenues for the nine months ended September 30, 1999 were $862,000.
OEM revenues were $805,000, or 93% of total revenues. Advertising revenues were
$57,000, or 7% of total revenues.

COST OF REVENUES. Cost of revenues for the nine months ended September 30,
1999 totaled $361,000, or 42% of total revenues.

SALES AND MARKETING. Sales and marketing expenses for the nine months ended
September 30, 1999 totaled $948,000, or 110% of total revenues.

RESEARCH AND DEVELOPMENT. Research and development expenses for the nine
months ended September 30, 1999 totaled $1.5 million, or 174% of total revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
nine months ended September 30, 1999 totaled $413,000, or 48% of total revenues.

EQUITY-RELATED COMPENSATION. Equity-related compensation expense for the
nine months ended September 30, 1999 totaled $827,000, including $602,000 of
amortization of deferred stock-based compensation relating primarily to stock
options and restricted stock issued to employees and independent consultants.
Deferred stock-based compensation is amortized on a straight-line basis over the
vesting period based on either the difference between the fair value of our
stock on the date of grant and the exercise price or the value of a particular
grant as determined by a Black-Scholes model. Also included in equity-related
compensation expense for the nine months ended September 30, 1999 is a $225,000
charge representing the fair value of the stock contributed to us by one of the
founders and then reissued by us to other employees. As of September 30, 1999,
we have recorded approximately $4.5 million in deferred compensation. As our
stock option plan has a four-year vesting requirement, the remaining deferred
compensation cost will be amortized ratably through the fourth quarter of 2003.
Stock-based compensation is a non-cash expense.

INTEREST INCOME. Interest income for the nine months ended September 30,
1999 totaled $259,000 and was derived primarily from interest earned on our cash
balances and short-term investments.

INCOME TAXES. We have not recorded an income tax expense or benefit because
we have incurred net operating losses since inception.

PERIOD FROM INCEPTION (APRIL 27, 1998) THROUGH DECEMBER 31, 1998

REVENUES

Total revenues for the period from inception (April 27, 1998) through
December 31, 1998 were $175,000. Revenues were derived solely from OEM revenues.
In August 1998, we recognized revenues from our first OEM customer contracts.

COST OF REVENUES. Cost of revenues for the period from inception
(April 27, 1998) through December 31, 1998 totaled $51,000, or 29% of total
revenues.

SALES AND MARKETING. Sales and marketing expenses for the period from
inception (April 27, 1998) through December 31, 1998 totaled $90,000, or 51% of
total revenues.

RESEARCH AND DEVELOPMENT. Research and development expenses for the period
from inception (April 27, 1998) through December 31, 1998 totaled $472,000, or
269% of total revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
period from inception (April 27, 1998) through December 31, 1998 totaled
$150,000, or 86% of total revenues.

EQUITY-RELATED COMPENSATION. Equity-related compensation expense for the
period from inception (April 27, 1998) through December 31, 1998 totaled
$232,000 of amortization of deferred stock-based compensation relating primarily
to stock options and restricted stock issued to employees and independent
consultants.

INTEREST INCOME. Interest income for the period from inception (April 27,
1998) through December 31, 1998 totaled $28,000 and was derived primarily from
interest earned on our cash balances.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth unaudited quarterly statements of operations
data in dollars for the period from inception (April 27, 1998) through June 30,
1998 and for each of the five quarters from July 1, 1998 through September 30,
1999, and as a percentage of total revenues for each of the four quarters ended
September 30, 1999. The percentage of revenues analysis for the period from
inception (April 27, 1998) through September 30, 1998 is not presented since
revenues during this period were insignificant. This unaudited quarterly
information has been derived from our unaudited financial statements but, in the
opinion of management, includes all adjustments necessary for a fair
presentation of such information. Results for any quarter are not necessarily
indicative of the operating results for any future period.

PERIOD FROM
INCEPTION
(APRIL 27,
1998) THREE MONTHS ENDED
THROUGH ---------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1998 1998 1999 1999 1999
----------- --------- --------- --------- --------- ---------
(IN THOUSANDS)

STATEMENT OF OPERATIONS DATA:
Revenues:
OEM............................ -- $ 7 $ 168 $ 224 $ 225 $ 356
Advertising.................... -- -- -- -- -- 57
----- ----- ----- ----- ----- -------
Total revenues............... -- 7 168 224 225 413
Cost of revenues................. -- 23 28 80 100 181
----- ----- ----- ----- ----- -------
Gross profit..................... -- (16) 140 144 125 232
----- ----- ----- ----- ----- -------
Operating expenses:
Sales and marketing............ $ 7 29 54 176 151 621
Research and development....... 94 184 194 340 453 709
General and administrative..... 32 47 71 83 72 258
Equity-related compensation.... 145 42 45 78 126 623
----- ----- ----- ----- ----- -------
Total operating expenses..... 278 302 364 677 802 2,211
----- ----- ----- ----- ----- -------
Operating loss................... (278) (318) (224) (533) (677) (1,979)
Interest income.................. -- 14 14 34 27 198
----- ----- ----- ----- ----- -------
Net loss......................... $(278) $(304) $(210) $(499) $(650) $(1,781)
===== ===== ===== ===== ===== =======

THREE MONTHS ENDED
------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1999 1999 1999
-------- -------- -------- ---------

AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
OEM..................................................... 100% 100% 100% 86%
Advertising............................................. -- -- -- 14
---- ---- ---- ----
Total revenues........................................ 100 100 100 100
Cost of revenues.......................................... 17 36 45 44
---- ---- ---- ----
Gross margin.............................................. 83 64 55 56
---- ---- ---- ----
Operating expenses:
Sales and marketing..................................... 32 78 67 150
Research and development................................ 115 152 201 172
General and administrative.............................. 42 37 32 62
Equity-related compensation............................. 27 35 56 151
---- ---- ---- ----
Total operating expenses.............................. 216 302 356 535
---- ---- ---- ----
Operating loss............................................ (133) (238) (301) (479)
Interest income........................................... 8 15 12 48
---- ---- ---- ----
Net loss.................................................. (125)% (223)% (289)% (431)%
==== ==== ==== ====

We expect operating results to fluctuate significantly in the future as a
result of a variety of factors, many of which are outside of our control. See
"Risk Factors--Disappointing quarterly revenues or operating results could cause
our stock price to fall."

LIQUIDITY AND CAPITAL RESOURCES

Since our inception on April 27, 1998, we have financed our operations
primarily from the proceeds of the sale of equity securities. As of
September 30, 1999, cash and cash equivalents were $16.4 million.

For the nine months ended September 30, 1999, net cash used in operating
activities was $1.3 million, primarily attributable to net losses. Net cash used
in investing activities was $11.2 million, primarily related to the purchase of
short-term investments and other capital expenditures. Net cash provided by
financing activities was $26.3 million, resulting primarily from our sale of
series C preferred stock on July 16, 1999.

Our capital expenditures were $943,000 for the nine months ended
September 30, 1999. We anticipate that we will experience an increase in capital
expenditures consistent with future growth, if any, in operations,
infrastructure and personnel.

We currently anticipate that the net proceeds from this offering, together
with current cash and cash equivalents and marketable securities will be
sufficient to fund our working capital and capital expenditure requirements for
at least the next 12 months. However, we may need additional financing sooner to
execute our business plan if we need to respond to business contingencies such
as those identified in "Risk Factors--We are likely to require additional
financing and may not be able to raise additional financing on favorable terms
or at all." If we raise additional funds through the issuance of equity or
convertible debt securities, the percentage of ownership of our stockholders
would be diluted. We cannot assure you that we will be able to obtain additional
financing when needed on favorable terms or at all.

YEAR 2000 READINESS

We have evaluated the Year 2000 readiness of our hardware and software
products (including products currently under development), the information
technology systems used in our operations ("IT Systems"), and our non-IT
Systems, such as voice mail and other systems. Our evaluation covered the
following phases:

- identification of all products, IT Systems, and non-IT Systems;

- assessment of repair or replacement requirements;

- repair or replacement;

- testing; and

- contingency planning in the event of Year 2000 failures.

Based on our evaluation, we believe that all of our products (including
products currently under development) will record, store, process and calculate
and present calendar dates falling on and after January 1, 2000, and will
calculate any information dependent on or relating to such dates in the same
manner and with the same functionality, data integrity and performance as the
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates. To our knowledge, none of our material products will lose
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000 and all of our internal computer systems are
Year 2000 compliant.

However, the assessment of whether a complete system or device in which our
product is embedded will operate correctly for an end-user depends in large part
on the Year 2000 compliance of the product's or system's other components, many
of which are supplied by parties other than us. The supplier of our current
financial and accounting software has informed us that such software is Year
2000 compliant. Further, we rely upon various vendors, utility companies,
telecommunications service companies and other service providers who are outside
of our control. There can be no assurance that such parties will not suffer a
Year 2000 business disruption, which could have a material adverse effect on our
financial condition and results of operations.

To date, we have not incurred any material expenditures in connection with
identifying or evaluating Year 2000 compliance issues. We have not developed a
Year 2000-specific contingency plan. If Year 2000 compliance issues are
discovered, we will at that time evaluate the need for contingency plans
relating to such issues.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The Statement, as amended, is effective for fiscal years
beginning after June 15, 2000. The Company has evaluated the impact of adopting
SFAS No. 133 and, based on its current business activities, believes that it
will not have a material effect on its financial statements.

BUSINESS

OVERVIEW

Direct Hit is a leading provider of technology that aggregates and organizes
online content to enable users to quickly find relevant and accurate
information, products and services. Our Popularity Engine, which is the core of
our solution, anonymously compiles information collected from the activity of
users, automatically capturing and processing the selections made by online
users to organize online information. Our technology is well suited to provide
accurate and relevant information to users of large, dynamic collections of
information such as the World Wide Web. We have targeted Internet search as the
first application of our Popularity Engine and we have launched an e-commerce
product based on the Popularity Engine. We intend to expand the application of
our popularity-based technology into such areas as corporate online databases,
news feeds and yellow pages. As of November 30, 1999, we had 22 OEM customers,
including AT&T WorldNet, HotBot, Lycos, Scandinavia Online and ZDNet.

INDUSTRY BACKGROUND

The emergence of the Internet has enabled millions of people worldwide to
obtain information, conduct commerce and communicate online. The number of
Internet users is expected to increase from approximately 142 million at the end
of 1998 to approximately 502 million by the end of 2002, according to
International Data Corporation.

The Internet's accessibility and growth make it an attractive resource to
users for a wide variety of information, products and services in areas as
diverse as e-commerce, complex corporate sites and special-interest
informational sites. For example, IDC estimates that business-to-business and
business-to-consumer e-commerce will collectively grow from approximately $51
billion in 1998 to $1.4 trillion by 2003.

Internet users are increasingly seeking specific information, products and
services from multiple sources such as e-commerce sites, news sites, corporate
sites, archives and specialty vertical sites. As a result, users are now
spending more time at Web search sites than at almost any other category of Web
sites. According to Media Metrix, the average Internet user spent approximately
90 minutes at search engine sites in October 1999, second to 110 minutes at
news, information and entertainment sites. Effective online navigation, however,
does not end with finding a desired Web site. Once a Web site is located, users
are still faced with the difficult task of locating relevant information within
a Web site which may contain thousands of pages.

The growing complexity of the Internet in terms of both the volume and the
diversity of information, products and services available, combined with users'
increasing reliance on these sources for their diverse needs, has heightened the
importance of effective solutions for aggregating and organizing online
information to aid users in identifying the best information, products and
services.

TRADITIONAL METHODS FOR AGGREGATING AND ORGANIZING ONLINE INFORMATION FOR USERS

Users have typically relied on products and services such as search engines
and directories to locate online information. Companies that provide these
navigation capabilities to users have traditionally used word-matching and
editor-based methods for aggregating and organizing online information.
Techniques which rely on word-matching methods search for keywords in a database
to

locate potentially relevant information. Editor-based methods generally rely on
a staff of human editors to manually review and categorize online information.

WORD-MATCHING TECHNIQUES

Word-matching techniques generally compare the keywords in the search
request with words found in a database. For a collection of information as vast
as the World Wide Web, the word-matching techniques rely on computers to spider
Web sites from link to link, feeding information into a database. A user's
keywords are then matched to words found in the database to generate a list of
Web sites on which those keywords appear. Typical word-matching search engines
prioritize results found in connection with a particular search according to the
number of times the search terms occur in each document, the position of the
search terms within the document or the number of links pointing to the document
and the text surrounding those links.

Although word-matching techniques may be used to aggregate and organize a
large amount of online information, such as that found on the Internet, they
often yield an overwhelming volume of irrelevant search results. Many
collections of information, such as proprietary online databases, online product
catalogs and the World Wide Web, share similar words that confuse word-matching
search technology. Moreover, the word-matching method is not well suited to the
complexity of meaning and context in human language. A user who searches for the
word "bond" may be looking for information about corporate bonds, savings bonds
or James Bond. Word-matching techniques do not differentiate among these
different meanings.

In addition, word-matching search engines deployed on the Internet often
rely on invisible Web site descriptions, called meta-tags. Web site authors
place meta-tags on their sites, in some cases using misleading search terms to
attract user attention to the site. This problem is exacerbated when the user is
searching for types of online information which do not typically contain textual
elements, such as still images, video and music, because of the word-matching
method's increased reliance on meta-tags to locate relevant content.

EDITOR-BASED METHODS

Editor-based methods require a staff of editors to manually review and
categorize online content in a database. To facilitate accessibility to
particular content found within the database, an editor will typically assign
keywords which the editor believes are most relevant to that content. Ranking
algorithms will then utilize the assigned keywords to promote relevant content
to the top of a search results list, mitigating the efforts of content authors
to mislead searchers by placing hidden keywords within the content.

Because of their manual nature, editor-based directories often have
incomplete and outdated information covering only a small portion of the content
available online. Editor-based directories have generally catalogued less than
1% of Web pages, and the review process for submission of a site can take up to
several months. Moreover, the process of assembling a directory is
time-consuming and expensive. For a collection of information as vast as the
Web, some directory providers have assigned nearly 200 editors to the task. The
fundamental drawback of editor-based directories is that they are difficult to
scale to accommodate growing and dynamic collections of information like the Web
and large corporate and e-commerce databases.

Increasingly, due to the shortcomings of editor-based directories,
substantially all Internet directories rely upon word-matching search techniques
to provide users with the ability to search beyond the Web sites covered by the
directories. While this hybrid solution overcomes some of the failings of the
editor-based directory method, it brings with it the problems typically
associated with word-matching techniques. For example, while editor-based
directories by themselves may reduce the ability of content authors to mislead
users through meta-tagging, editor-based directories which are

supplemented with word-matching techniques nevertheless often generate a large
number of irrelevant results.

THE NEED FOR A BETTER METHOD OF AGGREGATING AND ORGANIZING ONLINE INFORMATION
FOR USERS

Traditional methods for aggregating and organizing online information often
fail to meet users' needs. These methods, even when used in tandem, often
generate an unmanageably large set of irrelevant results or incomplete and
outdated information. As the amount and diversity of information available
online continues to expand, users continue to demand easier, more effective
access to more relevant content, products and services. In the rapidly evolving
and increasingly complex online environment, an effective solution must be
equipped to capture a high percentage of available content and prioritize
information in accordance with users' needs to enable users to quickly find
relevant and accurate information, products and services.

THE DIRECT HIT SOLUTION

Direct Hit provides a popularity-based solution that enables users of online
content to find more relevant information, products and services more easily
across a wide variety of sources. The core of our solution, which we call our
Popularity Engine, anonymously compiles and uses information collected from the
activity of users, automatically capturing and processing the selections made by
online users to organize online information. From online product catalogs to
live news feeds, and from proprietary corporate databases to the World Wide Web,
our proprietary technologies for organizing information according to its
popularity with users can be applied to a variety of online data sets.

We have targeted Internet search as our first application for the Popularity
Engine. In this context, our Popularity Engine is used to track the Web sites
that Internet searchers actually select from various lists of search results,
the amount of time searchers spend at these sites and a number of other user
activity-based metrics. The Popularity Engine uses this data and our proprietary
algorithms to rank search results according to the experiences of previous
Internet searchers. Our database of over one billion Internet user relevancy
records serves as the foundation of our Popularity-based Search product. The
database is currently growing at the rate of over 100 million user searches per
month, allowing our Popularity-based Search product to provide increasingly
accurate and relevant results.

The key benefits of our popularity-based solution are as follows:

MORE ACCURATE AND RELEVANT INFORMATION. By automatically capturing the
experience of Internet users and their satisfaction or dissatisfaction with
online content, our solution provides users with a list of information, products
or services ranked according to the preferences of previous users. As a result,
users can find what they want quickly and easily. The Popularity Engine is
extremely responsive to new and changing information, keeping listings current
based on changing user preferences.

CONTENT INDEPENDENCE AND FLEXIBILITY. The Popularity Engine can organize
many types of data, including still images, video and music. Today, the
Popularity Engine is organizing Internet search results in many different
languages, and is also organizing product and merchant databases through our
Popularity-based Shopping product. The Popularity Engine can be readily deployed
to work with other data, such as multi-media content and corporate site-specific
data. The Popularity Engine's modular architecture also simplifies deployment as
either a stand-alone solution or as a core complement to existing technology.

SCALABILITY. Through our robust proprietary architecture, the Popularity
Engine can scale to accommodate large and expanding collections of information
like the Internet and millions of users. For example, our Popularity-based
Search product is currently answering over 100 million Internet search requests
each month. As a result, the Popularity Engine is able to organize a greater
amount of online information than editor-based directories that are dependent
upon a staff of human editors.

RESPONSIVENESS TO DEMOGRAPHIC PREFERENCES. The Popularity Engine can
collect and use anonymous, demographic information voluntarily submitted by
users to provide results that are based on information collected from users
sharing similar demographic traits. Today, our solution can reflect user
preferences based on age, gender and geographic location. The ability to reflect
demographic preferences enhances the ability of the Popularity Engine to provide
more accurate and relevant information.

EASE OF USE. Our solution does not require users to acquire any new skills
or employ complex search techniques such as Boolean queries to generate highly
relevant and accurate search results.

THE DIRECT HIT STRATEGY

Our objective is to be the leading provider of solutions that aggregate and
organize online content to enable users to quickly find relevant and accurate
information, products and services. Key elements of our strategy include the
following:

BECOME THE TECHNOLOGY STANDARD FOR INTERNET SEARCH. We believe that we can
leverage our Popularity Engine to establish our Popularity-based Search product
as the standard for Internet search. To date, we have 22 OEM customers,
including companies such as AT&T WorldNet, HotBot, Lycos and ZDNet, who have
elected to use our Popularity-based Search product, either as a stand-alone
solution or as a core complement to their current search engine. We intend to
continue to increase the number of Web sites which use our Popularity-based
Search product.

EXTEND OUR TECHNICAL LEADERSHIP. We intend to continue to devote
significant resources to the development of new and innovative products,
capitalizing on our extensive experience with popularity-based technology and
our understanding of customer needs. We believe that we are the first company to
introduce popularity-based technology for aggregating and organizing online
content, products and services. As use of online information continues to expand
and evolve, we intend to continue to develop new technologies to enable users to
find what they need online.

CONTINUE TO BUILD OUR E-COMMERCE SOLUTION. We believe that we can
capitalize on the growth of e-commerce by using our popularity-based technology
to better meet the needs of online merchants and shoppers. By applying our core
technology solution to e-commerce, we believe we will be able to improve users'
shopping experiences by providing access to more relevant product listings than
those achieved by traditional methods. We are currently supplying shopping
technology to AT&T WorldNet and are managing a growing online commerce database
spanning more than one million products from merchants across the Internet. We
intend to further leverage our Popularity Engine and integrate complementary
services and products into our shopping solution to establish it as a complete
resource for shopping online.

LEVERAGE CORE TECHNOLOGY TO DEVELOP ADDITIONAL APPLICATIONS. As the volume
and breadth of information available online grows, we continue to explore new
applications for our core technology. For example, we are currently supplying a
product based on our Popularity Engine to ZDNet to facilitate accurate searches
of its proprietary database of news and feature articles. Future potential
product applications incorporating our Popularity Engine may include products
for other corporate online databases, news feeds and yellow pages. The
content-independence and flexibility of our core technology allows us to
facilitate development of additional applications and promote rapid response to
marketplace changes. We intend to leverage our proprietary technology and
skilled personnel to develop dynamic, new products.

BUILD THE DIRECT HIT BRAND. We believe that establishing Direct Hit as the
best available technology will help us expand our market share in the Internet
search and e-commerce search markets and support the introduction of additional
applications based on our Popularity Engine. To foster

awareness and demand for our Popularity Engine among Internet users, merchants
and potential customer Web sites, we are pursuing a brand development campaign
through targeted advertising and marketing.

EXPAND OUR INTERNATIONAL PRESENCE. We intend to leverage our leadership
position in aggregation, organization and navigation solutions to further
penetrate the global marketplace. We believe that the scalable and flexible
features of our solution, including its ability to accommodate foreign
languages, will facilitate our global expansion. Having developed customer
relationships with international Internet portals such as Catcha.com (Asia),
UKMax.com (UK), Punto (Italy) and Scandinavia Online (Denmark, Norway and
Sweden), we intend to leverage the strength of our technology to widen our
presence in major international markets.

PRODUCTS

Our products today consist of our Popularity-based Search product and our
Popularity-based Shopping product. Our Popularity-based Search product is
comprised of separate components, including our Internet Search Engine, Related
Searches, Personalized Search and Directory-based Search. These products and
components are powered by our proprietary Popularity Engine to determine the
relevancy ranking of online content. Our Popularity-based Shopping product and
many of the components comprising our Popularity-based Search product may be
found deployed on the Internet on our OEM customers' Web sites, and all of our
products and components are available on our Web site. Our Popularity-based
Search product was selected as FORBES' Favorite Search Engine in
September 1999. In addition, our products have also earned recognition in
industry awards received by our OEM customers, including CNET 1999 Editors'
Choice awarded to HotBot in April 1999 and PC MAGAZINE 1999 Editors' Choice
awarded to HotBot in September 1999.

POPULARITY-BASED SEARCH PRODUCT

INTERNET SEARCH ENGINE

Our scalable Internet Search Engine, utilizing our core technology,
anonymously and transparently compiles information collected from the searching
activity of millions of Internet users, automatically capturing and processing
the selections made by previous Internet searchers to determine the ranking of
search results. To date, we have processed more than one billion relevancy
records from Internet searches.

The Internet Search Engine consists of a word-matching spider, our
Popularity Engine and search engine servers. The spider, which we can deploy
with the Popularity-based Search product as an option for customers, is capable
of spidering, indexing or refreshing millions of Web sites per day. The Internet
Search Engine runs our Popularity Engine across a database that is growing at
the rate of over 100 million Internet user relevancy records per month, allowing
our Popularity Engine to provide increasingly accurate and relevant results.

RELATED SEARCHES

Related Searches help users narrow or broaden their search by presenting a
list of relevant search terms related to the original search request. These
related terms are key words that previous searchers have found helpful in
refining or enlarging similar search requests. For example, a user who types
"California wine" may be presented with such related terms as "Wine,"
"California Red Wine" and "California Wine Tours." Users may easily explore a
related search topic by clicking on the related search term.

PERSONALIZED SEARCH

Personalized Search refines the ranking of search results by prioritizing
results according to their relevancy as determined by previous searchers who
share similar demographic traits. To enable Personalized Search, we solicit
anonymous demographic information such as the age, gender, and geographic
location of searchers. If the searcher elects to supply this information, it is
then used by our Popularity Engine to further improve upon the relevancy of
search results for that user and subsequent users who share similar demographic
traits. For example, a person located in the Boston area searching on the topic
of restaurants could receive popularity-based results selected by other
Boston-area users, while a person located in the San Francisco area could
receive popularity-based results selected by other Bay Area users. Personalized
Search is currently available for certain search topics on our Web site, and we
expect to continue to expand the breadth of its coverage.

DIRECTORY-BASED SEARCH

Directory-based Search leverages our Popularity Engine to provide a highly
scalable Internet directory that provides categorized listings of Web sites.
Unlike many editor-based directories, category listings generated by
Directory-based Search can be ranked according to their popularity with previous
users. In addition, Directory-based Search can also rank Web sites presented
within categories by their popularity with previous users in addition to
presenting the sites alphabetically.

Although currently deployed only for Internet applications, Directory-based
Search can be readily applied to any online directory data set. As a default
data set for our Internet application of the product, we use the open-source Web
site data provided by Netscape Communications called Open Directory. Open
Directory is a publicly available database currently comprising over one million
sites, classified into over 140,000 categories and updated by over 15,000
volunteer editors.

POPULARITY-BASED SHOPPING PRODUCT

Popularity-based Shopping allows online consumers to leverage the experience
of previous shoppers looking for similar products. Powered by our Popularity
Engine, our Popularity-based Shopping product automatically captures and
processes the selections made by previous shoppers to prioritize products
according to user demand.

Our Popularity-based Shopping product, now in an early stage of release,
currently aggregates over one million products from online merchants across the
Web to facilitate comparison shopping. Online shoppers utilizing
Popularity-based Shopping are able to organize product listings in the manner
best suited to their needs, by relevancy, category, price or merchant.

The Popularity-based Shopping product's scalable architecture easily
accommodates new products and category listings. We update our database of
products by spidering and indexing merchant sites or by receiving periodic
updates of product listings directly from the merchants. Regular product updates
ensure that such information as pricing, product descriptions and availability
remains current.

In addition to providing more relevant and accurate product listings,
popularity-based rankings for products may also:

- IDENTIFY CONSUMER TRENDS. For similar products, those experiencing the
greatest consumer demand are prioritized higher.

- ACT AS IMPLIED PRODUCT RECOMMENDATIONS. Shoppers may view popularity-based
rankings as implicit recommendations from fellow shoppers and may feel
more comfortable with their buying decision.

- REFLECT CONSUMER SATISFACTION WITH THE ONLINE MERCHANT. An important
factor for consumers in buying over the Internet is the reputation of the
merchant. For similar products from different merchants, the merchants
experiencing the greatest consumer demand are prioritized higher.

TECHNOLOGY

Our Popularity Engine technology and proprietary software, which we call our
Bifurcated-Systems architecture, have been designed to serve as the foundation
for a variety of scalable information organization and aggregation applications.
The Popularity Engine can be readily deployed to work with various data, such as
multi-media content and corporate site-specific data. Our Popularity-based
Search product anonymously monitors the activity of millions of daily Internet
users to systematically organize large volumes of information according to user
demand. Our Bifurcated-Systems architecture enables large volumes of data to be
processed in the background on a cluster of dedicated processing servers. The
data is then compressed into highly scalable applications supported on separate
and geographically dispersed clusters of distribution servers available to users
via the Internet. The Popularity Engine's modularity simplifies deployment as
either a stand-alone solution or as a core complement to existing technology.

Our Popularity Engine technology provides a foundation for building
applications that leverage the activity of users to systematically organize
large volumes of data according to user demand. The Popularity Engine captures
and processes the anonymous activity of users as they locate and access
information, products or services. To deploy the service, our OEM customers
utilize a software utility provided by us which tags universal resource
locators, or URLs, with a special redirect code. The redirect code operates to
create a data file of relevancy records identifying the information, products or
services that users found useful in satisfying their requests for information.
Our systems process these relevancy records and use our proprietary mathematical
algorithms to rank the information, products or services according to user
demand. These rankings are then incorporated into the Popularity Engine and
utilized in satisfying requests of subsequent users.

Our Bifurcated-Systems architecture is a two-part system employing a
dedicated cluster of "processing servers" that utilize sophisticated data mining
techniques to analyze the millions of relevancy records we process each day.
This cluster of processing servers applies our proprietary mathematical
algorithms and compresses the data into highly scalable data files. These files
are then propagated to geographically-dispersed clusters of "distribution
servers" that operate to resolve customer requests. The distribution server
clusters comprise redundant arrays of inexpensive servers that cooperate to
provide incrementally scalable support for OEM customer traffic loads. By adding
servers to each cluster, we can quickly and efficiently increase capacity for
our own Web site and our OEM customer sites.

CUSTOMERS

Our popularity-based solution may be found at our Web site and at our OEM
customers' Web sites. The following is a list of our 22 OEM customers as of
November 30, 1999:

About.com Lycos
Apple Computer mainCampus.com
AT&T WorldNet Microsoft (MSN)
Catcha.com Pinault-Printemps-Redoute
GeneralSearch.com Punto (Portal Srl)
Go2Net SavvySearch
HotBot (Wired Digital/Lycos) Scandinavia Online
ICQ (AOL) SimpleSearch
Infoseek UKMax.com (Hollinger Digital)
InfoSpace.com Zap
LookSmart ZDNet

For the nine months ended September 30, 1999, Lycos, including its
subsidiary HotBot, accounted for approximately 70% of our total revenues. A
significant decline in sales to Lycos or any other customer that accounts for a
significant portion of our revenues could adversely affect our business and
cause our stock price to decline.

CASE STUDIES

The following are customer case studies that describe the various ways in
which our OEM customers use our products.

AT&T WORLDNET

AT&T WorldNet is an Internet service provider that delivers reliable, easy
Internet access, email addresses, chat, free Web space, online communities and
games. The AT&T WorldNet Web site, located at WWW.ATT.NET, is the default page
for nearly 1.7 million AT&T WorldNet customers and is the 47th most visited Web
site on the Internet with more than four million unique visitors in October
1999, according to Media Metrix. AT&T WorldNet required a new, user-friendly
search technology which would enable customers to navigate more effectively from
the AT&T WorldNet site to find the information they were looking for. AT&T
WorldNet saw this as a crucial step in order to increase customer satisfaction
and loyalty, as well as to reduce customer help desk costs for the users on the
site who could not easily find information. At the same time, AT&T WorldNet was
also looking for an integrated technology solution that could be applied across
its many applications within its Web site, including corporate information,
Internet search and e-commerce.

In October 1999, AT&T WorldNet launched our Popularity-based Search product
as its default search technology, and subsequently added our Popularity-based
Shopping product as a complement to its existing e-commerce offerings. Our
technology is deployed across the portal site and AT&T WorldNet's various
applications to provide accurate and relevant information for AT&T WorldNet
customers and employees.

ZDNET

ZDNet is a leading technology content network and source for computing and
Internet content and commerce. ZDNet combines interactive technology and its own
editorial team with Ziff-Davis' worldwide network of journalists to produce
original content and create communities of common interests in computing. ZDNet
sought a technology that could organize search results of its proprietary

data and online content according to previous user preferences, as well as
provide relevant and accurate search results from across the entire Web.

ZDNet began using our Popularity-based Search product in April 1999,
including our Internet Search Engine. A link to our popularity-based search
results appears at the top of every ZDNet search results page, allowing visitors
to view the top 10 most visited pages for the search term they have requested.
The ZDNet search service provides visitors with relevant and accurate results
from across ZDNet and the entire Web.

PUNTO

Punto is a new Italian Web portal which features a local Italian
perspective, with a focus on lifestyle, ease-of-use and quality content. It
provides multiple services to its users including directories, chat and online
merchants' special offers, as well as daily news and weather reports for 360
Italian cities. Punto seeks to make the Internet experience easier and more
useful for the millions of users connecting to the Internet in Italy, and was
looking for a search product that could accommodate multiple languages.

Punto launched its portal site in October 1999 featuring components of our
Popularity-based Search product, including our Internet Search Engine and
Related Searches. Punto features both our general results as well as results
tailored to the Italian market. We are also collecting relevancy-results data
for the Italian market.

SALES AND MARKETING

Our Popularity-based Search product is accessible at our OEM customers' Web
sites and at our Web site. Popularity-based search results that we provide at
our OEM customers' Web sites generally have the look and feel of the host site,
but include results ranked by our Popularity Engine. We deploy our
Popularity-based Search product on customer sites usually through either our
default model, where we usually provide the first page view or first set of
search results for the user's request, or our button model, where we provide a
hyperlinked option by which users can select the ten most popular results for
their search query. Our default model may be found at a number of sites
including AT&T WorldNet, HotBot, Lycos, SimpleSearch and Zap. Our button model
can be found at such Web sites as AOL's ICQ, LookSmart and MSN.

We have a sales team dedicated to marketing our products to OEM customers.
Our OEM sales team targets highly trafficked Web sites including portals and
destination sites. The sales cycle for OEM sales usually takes approximately one
to three months. Our OEM sales team also participates in sales support and
account management for our OEM customers. We have one OEM sales person, located
in Paris, who is dedicated to the international market. In addition, we have
personnel targeting online merchant acquisition for our Popularity-based
Shopping product.

We also have a direct sales force that sells advertising. Our internal
advertising sales force generates the majority of advertising sales on our own
Web site. We also offer self-service text sponsorship advertising on our Web
site that allows advertisers to create keyword targeted text ads using our
automated auction-based system. This advertising initiative targets small to
medium advertisers since sponsorship accounts can be created for as little as
$25. Advertisements, which appear next to search results, are sold on an
impression basis. Our self-service text sponsorship product leverages our
popularity data to help with better ad placement, making it easy for vendors to
advertise on search results pages for exact keywords that best fit their target
audience.

We believe that a brand promotion campaign will increase usage of our
products. All of our current OEM customer relationships allow us to co-brand our
products with the our OEM customer.

To further build the Direct Hit brand, we currently focus on reaching Internet
users through advertising media, as well as through an active public relations
campaign.

Our sales and marketing organization consisted of 13 individuals as of
November 30, 1999.

RESEARCH AND DEVELOPMENT

We believe that strong research and development capabilities are essential
to maintaining the competitiveness of our product offerings, enhancing our core
technology and developing additional applications incorporating that technology.
We have actively recruited key engineers and software developers with expertise
in the areas of information retrieval and massively scalable databases. In
addition, we strive to create and maintain an environment of rapid innovation
and product release.

Since inception, we have focused our research and development efforts on
developing and enhancing our core technologies, and on applying these
technologies to our Internet Search Engine and our Popularity-based Shopping
product. We are currently working to add features and new functionality to our
existing products and to develop new products and services. Our research and
development expenses totaled $1.5 million for the nine months ended
September 30, 1999 and $472,000 for the period from inception (April 27, 1998)
through December 31, 1998. As of November 30, 1999, we had 24 individuals
engaged in research and development.

BOARD OF ADVISORS

We have assembled a Board of Advisors comprised of experts in the fields of
information retrieval and networking technology. Members of our Board of
Advisors provide guidance to our management about technology developments and
marketplace needs to assist us with our business strategy. Periodically, we seek
feedback and guidance on technology applications and business market focus. The
members of the Board of Advisors are:

- Louis Monier, former Chief Technology Officer of AltaVista and the creator
of its technology;

- Mark Nitzberg, a co-founder of Viaweb and current managing director of
Twine, a venture capital firm;

- David Douglas, the former Director of Advanced Hardware of Thinking
Machines and currently Chief Technologist of the Network Service Provider
division at Sun Microsystems; and

- Ilene Lang, former Chief Executive Officer of AltaVista and current Chief
Executive Officer of Individual.com.

COMPETITION

The markets we compete in are new, rapidly evolving and intensely
competitive, and we expect competition to intensify in the future. Many of our
current and potential competitors have significantly greater financial,
technical, marketing and other resources than we do.

In the market for private-labeled search engine solutions, we compete on the
basis of results relevancy, performance, scalability, speed of deployment,
ease-of-use and price. We believe we compete favorably on these factors. We
compete primarily against companies such as Inktomi. We also are aware of
smaller companies that are focusing resources on developing and marketing
products and services that may compete with our Popularity-based Search product.
In the market for consumer-direct search services, we compete on the basis of
results relevancy, performance and ease-of-use. We believe we compete favorably
on these factors. We compete primarily with companies offering search-specific
Internet sites directly to consumers.

In the market for providing shopping engine solutions, we expect to compete
on the basis of results relevancy, number of merchants, number of products,
performance, scalability, speed of deployment, ease-of-use and price. We expect
to compete favorably on these factors. We compete with a number of companies to
provide product shopping engine services, many of whom have operated services in
the market for a longer period, have greater financial resources, have
established marketing relationships with leading on-line services and
advertisers, and have secured greater presence in distribution channels.
Competitors who offer shopping engine services include Inktomi and mySimon. We
also are aware of smaller companies that are focusing resources on developing
and marketing products and services that may compete with our Popularity-based
Shopping product.

We cannot assure you that we will be able to compete successfully against
current and future competitors. Any inability to compete successfully could have
a material adverse effect on our business, financial condition and results of
operations.

INTELLECTUAL PROPERTY

Our success and ability to compete are dependent on our ability to develop
and maintain the proprietary aspects of our technology and operate without
infringing the proprietary rights of others. We rely on a combination of patent,
copyright, trademark, and trade secret laws and confidentiality and license
agreements with our employees, customers, partners and third parties to protect
our proprietary rights. These legal protections afford only limited protection
for our technology. We have applied for the registration of certain of our
trademarks and service marks in the United States and internationally. We cannot
predict whether any registered trademarks or service marks will issue from these
applications, or, if issued, whether such registered trademarks or service marks
will provide any meaningful protection.

Gary Culliss, our co-founder, Chief Technology Officer and Chairman, is the
owner of one patent covering certain of our technology. Mr. Culliss also has
filed, and is the owner of, three U.S. patent applications covering certain of
our technology. To date, Mr. Culliss has received notices of allowance on two of
these patent applications. We have entered into a patent license agreement with
Mr. Culliss pursuant to which we have been given exclusive and fully paid-up
rights to all of the technology covered by Mr. Culliss' patent and patent
applications. Other parties to the agreement include entities affiliated with
our directors Rob Chandra, Jonathan Goldstein, Vernon Lobo and Warren Packard;
such entities have no current rights in the patent or patent applications, but
will be granted certain rights by Mr. Culliss if we file for bankruptcy or cease
to do business for sixty days. We cannot predict whether any patents will issue
from Mr. Culliss' patent applications. In addition, we cannot predict whether
the issued patent or any subsequently issued patents will provide any meaningful
protection.

We have licensed in the past, and expect that we may license in the future,
certain of our proprietary rights, such as trademarks, technology or copyrighted
material, to third parties. Due to rapid technological change, we believe that
factors such as the technological and creative skills of our personnel, new
product developments and enhancements to existing products are more important
than the various legal protections of our technology to establishing and
maintaining a technology leadership position.

Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. The laws of many countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our rights under Mr. Culliss' patent and any subsequently
issued patents, and our copyrights, trademarks and trade secrets, to determine
the validity and scope of the proprietary rights of others or to defend against
claims of infringement or invalidity. Any such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business, operating

results and financial condition. There can be no assurance that our means of
protecting our proprietary rights will be adequate or that our competitors will
not independently develop similar technology. Any failure by us to meaningfully
protect our property could have a material adverse effect on our business,
operating results and financial condition.

EMPLOYEES

As of November 30, 1999, we had a total of 51 full-time employees. We also
employ independent contractors to support our operations.

Our future success will depend, in part, on our ability to continue to
attract, integrate, retain and motivate highly qualified technical and
managerial personnel, for whom competition is intense. We have never had a work
stoppage and our employees are not represented by any collective bargaining
unit. We consider our relations with our employees to be good.

FACILITIES

Our headquarters are currently located in approximately 10,000 square feet
of leased office space in Wellesley, Massachusetts. The lease expires on
December 31, 2001.

We have entered into a lease for approximately 22,000 square feet of space
located in Natick, Massachusetts. We plan to relocate our entire office and
operations to the new location. The lease commenced in November 1999 and expires
on October 31, 2002. We have begun efforts to sublease the Wellesley office
space.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the names, ages and positions of our
executive officers and directors as of November 30, 1999:

NAME AGE POSITION
- ---- -------- -------------------------------------------------------

Michael Cassidy............. 36 Chief Executive Officer, President and Director
Gary Culliss................ 29 Chief Technology Officer, Secretary and Chairman
John McDonough.............. 39 Executive Vice President, Chief Operating Officer,
Chief
Financial Officer and Treasurer
David Andre................. 39 Vice President of Engineering
Maurice Casey............... 42 Vice President of Sales
Tom Harrison................ 37 Vice President of Product Development
Meredith McPherron.......... 32 Vice President of Marketing
David Parker................ 36 Vice President of Business Development
Rob Chandra................. 33 Director
Jonathan Goldstein(1)(2).... 38 Director
Vernon Lobo(1).............. 34 Director
Warren Packard(2)........... 32 Director
Michael Santullo(2)......... 38 Director

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

(1) Member of the audit committee.

(2) Member of the compensation committee.

MICHAEL CASSIDY, a co-founder of our company, has served as our Chief
Executive Officer, President and a member of the board of directors since
April 1998. From May 1997 to December 1997, Mr. Cassidy studied at the Berklee
College of Music. From 1991 to February 1996, Mr. Cassidy was Chief Executive
Officer of Stylus Innovation, a telephony software company he co-founded. Stylus
was acquired by Artisoft, a computer telephony and communications software
company, in February 1996. After Stylus' acquisition by Artisoft, Mr. Cassidy
served as a Senior Vice President at Artisoft from February 1996 to December
1996. Mr. Cassidy holds a B.S. and M.S. in aerospace engineering from MIT and an
M.B.A. from Harvard University.

GARY CULLISS, a co-founder of our company, has served as our Chief
Technology Officer, Secretary and Chairman of our board of directors since
April 1998. Before co-founding Direct Hit, Mr. Culliss attended Harvard Law
School, graduating in May 1998. During law school Mr. Culliss worked with the
law firms Sullivan & Cromwell and Kaye, Scholer, Fierman, Hays & Handler, LLP.
From 1993 to September 1995, Mr. Culliss was a registered Patent Agent and
worked with the Law Office of Michael J. Colitz, Jr. Mr. Culliss holds his B.S.
in mechanical engineering from the University of South Florida and received his
J.D. from Harvard University. Mr. Culliss has been registered to practice before
the United States Patent and Trademark Office since 1993.

JOHN MCDONOUGH has served as our Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Treasurer since September 1999. From June
1997 to September 1999, Mr. McDonough was President and Chief Executive Officer
of Workgroup Technology Corporation, a software development company. From June
1995 to June 1997, Mr. McDonough was a consultant to several start-up technology
companies. From 1985 to June 1995, Mr. McDonough held several positions with
Easel Corporation, a client/server software tools company, where he served as
Chief Financial Officer and Senior Vice President, Operations from 1986 to 1992,
Chief Operating Officer from 1992 to 1994, and Chief Executive Officer from 1994
to June 1995. Mr. McDonough holds his B.S. in business administration, MAGNA CUM
LAUDE, from Stonehill College and is a CPA.

DAVID ANDRE has served as our Vice President of Engineering since October
1999. From March 1997 to October 1999, Mr. Andre was first Director of Product
Development, then Vice President of Engineering, at Lycos. From November 1995 to
March 1997, Mr. Andre was Director of Internet Development at SQA, a test
automation software company. From 1990 to November 1995, Mr. Andre was Product
Line Manager at Object Design, an object-oriented database software company.
Mr. Andre holds his B.S.E.E. from MIT and his M.S.C.S. from the University of
Maryland.

MAURICE CASEY has served as our Vice President of Sales since September
1999. From July 1997 to September 1999, Mr. Casey was first a Vice President,
Eastern Sales Director, then Vice President, National Sales Director, at
Switchboard.com, a yellow pages and white pages directory on the Web. From
October 1996 to July 1997, Mr. Casey was New York Regional Manager with the
NewsPage division of Individual, an information services company. From 1989 to
October 1996, Mr. Casey held sales and sales management positions with the
Smithsonian Institution for its Smithsonian Magazine and its Air and Space
Magazine.

TOM HARRISON has served as our Vice President of Product Development since
May 1998. From May 1997 to May 1998, Mr. Harrison was the Director of Software
Development at Cambridge Systematics, a planning, policy and management
solutions consulting company. From 1993 to May 1997, Mr. Harrison was President
of Sublime Software, a consulting firm specializing in large-scale client server
architecture, distributed database design and early Internet applications
development. Mr. Harrison holds his B.A. in economics from Princeton University.

MEREDITH MCPHERRON has served as our Vice President of Marketing since
August 1999. From July 1997 to August 1999, Ms. McPherron served as a senior
marketing manager and then a director for Guinness Import Company. From January
1997 through June 1997, Ms. McPherron worked as a private consultant. From 1993
to December 1996, Ms. McPherron held a variety of brand management positions at
General Mills within the cereal and yogurt categories. Ms. McPherron holds her
B.A. and M.B.A. from Harvard University.

DAVID PARKER has served as our Vice President of Business Development since
August 1998. From July 1997 to August 1998, Mr. Parker was the General Manager
of the New Media Group at Viaweb, a company providing software and reporting
tools for building and operating online commerce Web sites. From October 1995 to
July 1997, Mr. Parker was Vice President, Marketing for Delphi Inc./Knowledge
Factory, a business information company. From 1993 to October 1995, Mr. Parker
was Vice President, Circulation for Community Newspaper Company, an owner and
operator of regional newspapers. Mr. Parker holds his B.A. and M.B.A. from
Harvard University.

ROB CHANDRA joined our board of directors in July 1999. Mr. Chandra is a
General Partner with Commonwealth Capital, a venture capital firm that he joined
in January 1996. From 1993 to December 1995, Mr. Chandra was a consultant with
McKinsey. Mr. Chandra holds his B.A. from University of California at Berkeley
and his M.B.A. from Harvard University.

JONATHAN GOLDSTEIN joined our board of directors in July 1999.
Mr. Goldstein has been with TA Associates, a venture capital firm, since 1986,
serving as Vice President from September 1990 to December 1996 and as a
Principal since January 1997. Mr. Goldstein currently serves on the board of
directors of Andover.net. Mr. Goldstein holds his B.S. in biology, his B.S. in
chemical engineering and his M.S. in biochemical engineering from MIT, and his
M.B.A. from Harvard University.

VERNON LOBO joined our board of directors in November 1998. Since October
1997, Mr. Lobo has been a Managing Director of Mosaic Venture Partners, a
venture capital firm he co-founded. Mr. Lobo is also currently Chairman of
CYBERplex, a professional service organization focused on developing electronic
commerce solutions for the Internet. From September 1995 to September 1997,
Mr. Lobo was a partner with Quorum Growth, a venture capital firm. From 1991 to
August 1995, Mr. Lobo was a

consultant with McKinsey. Mr. Lobo holds his B.A.Sc. in engineering from the
University of Waterloo, and his M.B.A. from Harvard University, where he was a
Baker Scholar.

WARREN PACKARD joined our board of directors in May 1998. Since June 1997,
Mr. Packard has been with Draper Fisher Jurvetson, a venture capital firm, most
recently serving as Director. From January 1996 until June 1997, Mr. Packard was
Vice President of Business Development of Angara Database Systems, a main-memory
database technology company which he co-founded. From June 1996 to January 1997,
Mr. Packard was an Associate at Institutional Venture Partners, a venture
capital firm. From 1991 to August 1995, Mr. Packard served as a Senior Principal
Engineer in the New Business and Advanced Product Development Group at Baxter
International. He currently serves as a director of Digital Impact and FogDog
Sports. Mr. Packard is a Phi Beta Kappa graduate of Stanford University and
holds a B.S. and M.S. in mechanical engineering. He also holds his M.B.A. from
Stanford University, where he was an Arjay Miller Scholar.

MICHAEL SANTULLO joined our board of directors in November 1998. Since April
1998, Mr. Santullo has been an active investor with and advisor to early stage
Internet companies. From 1994 to October 1997, Mr. Santullo was the Chief
Executive Officer of Four11, an email and white pages directory on the Web which
he co-founded. Four11 was acquired by Yahoo! in October 1997. After Four11's
acquisition by Yahoo!, Mr. Santullo served as Vice President at Yahoo! from
October 1997 to April 1998. Mr. Santullo holds his B.S. in electrical
engineering from MIT.

BOARD COMMITTEES

The board of directors has established an audit committee and a compensation
committee. The audit committee reviews, acts on and reports to the board of
directors with respect to various auditing and accounting matters, including the
selection and performance of our independent auditors, the scope of the annual
audits, fees to be paid to the independent auditors, and our internal accounting
and financial control policies and procedures. The members of the audit
committee are presently Messrs. Goldstein and Lobo.

The compensation committee has the power to create our executive
compensation policy and determines the salaries and benefits for our employees,
consultants, directors and other individuals compensated by us. The committee
also administers our stock option and stock purchase plans. The members of the
compensation committee are presently Messrs. Goldstein, Packard and Santullo.

DIRECTOR COMPENSATION

Directors are reimbursed for reasonable out-of-pocket expenses incurred in
attending meetings of the board of directors and for meetings of any committees
of the board of directors on which they serve. No director employed by us will
receive separate compensation for services rendered as a director. Directors are
also eligible for participation in our 2000 Stock Option and Incentive Plan. See
the description of that plan under the section of this prospectus called
"Management--Stock Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between the board of directors or
compensation committee and the board of directors or compensation committee of
any other company, nor has any interlocking relationship existed in the past.

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer for services rendered in all capacities from
inception (April 27, 1998) through December 31, 1998. We may refer to this
officer as our named executive officer in other parts of this

prospectus. No other executive officer or employee had compensation in excess of
$100,000 during 1998.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
----------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ---------- --------- ---------------- ------------ ----------------

Michael Cassidy,
Chief Executive Officer and
President.................. $ 51,173 $ 10,000 -- -- --

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth specified information regarding options
granted to the named executive officer during 1998. We have not granted any
stock appreciation rights. The options listed were granted under our 1998-A
Stock Option Plan. In general, options granted under the plan vest over four
years, with 25% of the option shares granted vesting on the one-year anniversary
of the grant date and the remainder vesting in 36 equal monthly installments,
and expire on the tenth anniversary of the date of grant, subject to earlier
termination in certain situations related to resignation or termination of
employment. The percentage of total options granted to employees in 1998 shown
in the table below is based on options to purchase an aggregate of 1,824,696
shares of common stock granted during 1998. Potential realizable values are net
of exercise prices and before taxes, and are based on an assumed initial public
offering price of $ per share and the assumption that our common stock
appreciates at the annual rate shown, compounded annually, from the date of
grant until the expiration of the option term. These numbers are calculated
based on Securities and Exchange Commission requirements and do not reflect our
projection or estimate of future stock price growth. The amounts shown in this
table represent hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. Actual gains, if any, on
stock option exercises will depend on the future performance of the common
stock, the optionholders' continued employment through the option period and the
date on which the options are exercised.

POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------- ANNUAL RATES OF
NUMBER OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED 1998 SHARE DATE 5% 10%
- ---- ---------- --------------- --------- ---------- ---------- ----------

Michael Cassidy...................... -- -- -- -- -- --

1998 OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table sets forth certain information concerning the number and
value of options exercised by the named executive officer as of December 31,
1998 and the number and value of any unexercised options held by the named
executive officer at December 31, 1998. The value of unexercised in-the-money
options represents the total gain which would be realized if all in-the-money
options held at December 31, 1998 were exercised, determined by multiplying the
number of shares underlying the options by the difference between an assumed
initial public offering price of $

per share and the per share option exercise price. An option is in-the-money if
the fair market value of the underlying shares exceeds the exercise price of the
option.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
NUMBER OF ----------------------------- ---------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ------------ -------------- ----------- -------------

Michael Cassidy............ -- -- -- -- -- --

STOCK PLANS

1998-A STOCK PLAN. Our board of directors and stockholders adopted the
Direct Hit Technologies, Inc. 1998-A Stock Plan in June 1998. The aggregate
number of shares of common stock which may be issued under the 1998-A plan is
2,462,815. Under the 1998-A plan, we are authorized to grant incentive stock
options and non-qualified stock options, as well as awards of common stock and
opportunities to make direct purchases of common stock to employees,
consultants, directors and officers. The 1998-A plan is administered by the
board of directors and the compensation committee. The 1998-A plan provides that
the board of directors and the compensation committee has the authority to
select the participants and determine the terms of the stock options granted
under the plan. An incentive stock option is not transferable by the recipient
except by will or by the laws of descent and distribution. Non-qualified stock
options and other awards are transferable only to the extent provided in the
agreement relating to such option or award or in response to a valid domestic
relations order. Generally, no incentive stock options may be exercised more
than thirty days following termination of employment. However, in the event that
termination is due to death or disability, the stock option is exercisable for a
maximum of six months after such termination. As of November 30, 1999, we had
outstanding under the 1998-A plan incentive stock options exercisable for
1,166,146 shares of common stock and non-qualified stock options exercisable for
86,500 shares of common stock.

2000 STOCK OPTION AND INCENTIVE PLAN. Our 2000 Stock Option and Incentive
Plan was adopted by our board of directors in December 1999 and has not yet been
approved by our stockholders. The 2000 plan provides for the grant of
stock-based awards to employees, officers and directors of, and consultants or
advisors to our company and our subsidiaries, including incentive stock options
and non-qualified stock options and other equity-based awards. Incentive stock
options may be granted only to our employees. A total of 2,000,000 shares of
common stock may be issued upon the exercise of options or other awards granted
under the 2000 plan. The maximum number of shares that may be granted to any
employee under the 2000 plan shall not exceed 1,000,000 shares of common stock
during any calendar year.

The 2000 plan is administered by the board of directors and the compensation
committee. The 2000 plan provides that the board of directors and the
compensation committee have the authority to select the persons to whom awards
are granted and determine the terms of each award, including the number of
shares of common stock to be granted. Payment of the exercise price of an award
may be made in cash, shares of common stock, a combination of cash or stock or
by any other method approved by the board or compensation committee, consistent
with Section 422 of the Internal Revenue Code and Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. Unless otherwise permitted by us,
awards are not assignable or transferable except by will or the laws of descent
and distribution.

The board of directors or the compensation committee may amend, modify or
terminate any award granted or made under the 2000 plan, so long as such
amendment, modification or termination would not materially and adversely affect
the participant. The board of directors or the compensation committee may also
accelerate or extend the date or dates on which all or any particular option or

options granted under the 2000 plan may be exercised. No options or other
equity-based awards have been granted to date under the 2000 plan.

2000 EMPLOYEE STOCK PURCHASE PLAN. The 2000 Employee Stock Purchase Plan
was adopted by our board of directors in December 1999 and has not yet been
approved by our stockholders. The 2000 purchase plan provides for the issuance
of a maximum of 500,000 shares of common stock.

The 2000 purchase plan is administered by the board of directors and the
compensation committee. All of our employees whose customary employment is for
more than 20 hours per week and for more than three months in any calendar year
and who have completed more than 90 days of employment with us on or before the
first day of any six-month payment period are eligible to participate in the
2000 purchase plan. Outside directors and employees who would own 5% or more of
the total combined voting power or value of our stock immediately after the
grant may not participate in the 2000 purchase plan. To participate in the 2000
purchase plan, an employee must authorize us to deduct an amount not less than
one percent nor more than 10 percent of a participant's total cash compensation
from his or her pay during each six-month payment period. The first payment
period will commence on a date to be determined by the board of directors and
end on December 31, 2000. Thereafter, the payment periods will commence on the
first day of January and July and end on the last day of the following June and
December, respectively, of each year, but in no case shall an employee be
entitled to purchase more than 500 shares in any one payment period. The
exercise price for the option granted in each payment period is 85% of the
lesser of the average market price of the common stock on the first or last
business day of the payment period, in either event rounded up to the nearest
cent. If an employee is not a participant on the last day of the payment period,
such employee is not entitled to exercise his or her option, and the amount of
his or her accumulated payroll deductions will be refunded. Options granted
under the 2000 purchase plan may not be transferred or assigned. An employee's
rights under the 2000 purchase plan terminate upon his or her voluntary
withdrawal from the plan at any time or upon termination of employment. No
options have been granted to date under the 2000 purchase plan.

CERTAIN TRANSACTIONS

We believe that all of the transactions set forth below were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. We intend that all future transactions between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested members of the board of directors, and be on terms no less
favorable to us than those that could be obtained from unaffiliated third
parties.

SALES OF STOCK

SERIES A PREFERRED STOCK FINANCING.

In May 1998, we issued and sold an aggregate of 5,187,501 shares of
series A preferred stock at a price of $0.2667 per share. Investors who
participated in this transaction include:

INVESTOR NUMBER OF SHARES
- -------- ----------------

Draper Fisher Associates Fund IV, L.P....................... 4,475,625
Draper Fisher Partners IV, LLC.............................. 336,876
Michael Santullo............................................ 187,500

Warren Packard, one of our directors, is a director of Draper Fisher
Associates Fund IV, L.P. and Draper Fisher Partners IV, LLC. Michael Santullo is
one of our directors.

SERIES B PREFERRED STOCK FINANCING.

In November 1998, we issued and sold an aggregate of 1,323,912 shares of
series B preferred stock at a price of $1.51067 per share. Investors who
participated in this transaction include:

INVESTOR NUMBER OF SHARES
- -------- ----------------

Mosaic Venture Partners, LP I............................... 866,061
Draper Fisher Associates Fund IV, L.P....................... 395,022
Draper Fisher Partners IV, LLC.............................. 29,733
Michael Santullo............................................ 16,548

Vernon Lobo, one of our directors, is a managing director of Mosaic Venture
Partners, LP I.

SERIES C PREFERRED STOCK FINANCING.

In July 1999, we issued and sold an aggregate of 4,431,263 shares of
series C preferred stock at a price of $5.9351 per share. Investors who
participated in this transaction include:

INVESTOR NUMBER OF SHARES
- -------- ----------------

Entities associated with TA Associates...................... 1,684,892
Draper Fisher Associates Fund IV, L.P....................... 313,389
Draper Fisher Partners IV, LLC.............................. 23,588
Entities associated with Commonwealth Capital Ventures...... 336,979
Mosaic Venture Partners, LP I............................... 168,488

Jonathan Goldstein, one of our directors, is a principal of each of the
entities associated with TA Associates. Rob Chandra, one of our directors, is a
general partner of each of the entities associated with Commonwealth Capital
Ventures.

In connection with the sale of the series C preferred stock, we entered into
a voting agreement with the holders of our preferred stock and our founders
which requires these stockholders and our

founders to elect the following directors: the President or Chief Executive
Officer; a nominee designated by the common stockholders, initially Michael
Santullo; a nominee designated by TA Associates, initially Jonathan Goldstein; a
nominee designated by Gary Culliss, initially Gary Culliss; a nominee designated
by Draper Fisher Jurvetson, initially Warren Packard; and a nominee designated
by Mosaic Venture Partners, initially Vernon Lobo. The voting agreement will
terminate upon the closing of this offering.

REGISTRATION RIGHTS. In connection with the preferred stock financings, we
granted registration rights to the preferred stockholders. For a description of
these registration rights, see "Description of Capital Stock--Registration
Rights."

NON-COMPETITION AGREEMENTS

We have entered into noncompetition agreements with each of Michael Cassidy,
Gary Culliss and David Parker. Each agreement imposes a prohibition on competing
with us for 12 months following termination of employment.

PATENT LICENSE

We have entered into an exclusive patent license agreement with Gary
Culliss. Other parties to the agreement include entities affiliated with our
directors Rob Chandra, Jonathan Goldstein, Vernon Lobo and Warren Packard. Under
the license agreement, we have been given rights to all technology covered by
one patent and three patent applications owned by Mr. Culliss. For a description
of this patent license, see "Business--Intellectual Property."

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership of
our common stock as of November 30, 1999, and as adjusted to reflect the sale of
the shares of common stock offered in this prospectus, by:

- our named executive officer;

- each of our directors;

- each person known by us to be the beneficial owner of more than 5% of our
common stock; and

- all executive officers and directors as a group.

Unless otherwise noted below, the address of each beneficial owner listed on
the table is c/o Direct Hit Technologies, Inc., 888 Worcester Street, Suite 340,
Wellesley, Massachusetts 02482, and each beneficial owner has sole voting and
investment power over the shares shown as beneficially owned except to the
extent authority is shared by spouses under applicable law and except as set
forth in the footnotes to the table.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares of common stock issuable by us to a
person or entity listed in the table pursuant to options that may be exercised
within 60 days after November 30, 1999 are deemed to be beneficially owned and
outstanding for purposes of calculating the number of shares and the percentage
beneficially owned by that person or entity. However, these shares are not
deemed to be outstanding for purposes of computing the percentage beneficially
owned by any other person or entity.

For purposes of calculating the percentage of common stock beneficially
owned by any person, the number of shares deemed outstanding before the offering
gives effect to the conversion of our outstanding preferred stock into
10,942,676 shares of common stock that will occur upon the closing of this
offering.

PERCENTAGE OF COMMON
NUMBER OF STOCK OUTSTANDING
SHARES ---------------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------ ------------ -------- -------------------

EXECUTIVE OFFICERS AND DIRECTORS:
Gary Culliss............................................. 4,840,248 23.4%
Michael Cassidy.......................................... 2,943,750 14.2
Rob Chandra(1)........................................... 336,979 1.6
Vernon Lobo(2)........................................... 1,030,549 5.0
Jonathan Goldstein(3).................................... 1,684,892 8.2
Warren Packard(4)........................................ 5,574,233 27.0
Michael Santullo......................................... 204,048 *
All executive officers and directors as a group (13
persons)(5)............................................ 17,791,574 83.9

OTHER FIVE PERCENT STOCKHOLDERS:
Entities affiliated with Draper Fisher Jurvetson(6)...... 5,574,233 27.0
400 Seaport Court, Suite 250
Redwood City, CA 94063
Entities associated with TA Associates(7)................ 1,684,892 8.2
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110

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

* Less than 1%

(1) Consists of 321,104 shares held by Commonwealth Capital Ventures II L.P. and
15,875 shares held by CCV II Associates L.P. Mr. Chandra is a General
Partner of Commonwealth Capital Ventures II L.P. and CCV II Associates L.P.
and may be deemed to share voting and investment power with respect to all
shares held by Commonwealth Capital Ventures II L.P. and by CCV II
Associates L.P. Mr. Chandra disclaims beneficial ownership of such shares.

(2) Consists of 1,030,549 shares held by Mosaic Venture Partners, LP I.
Mr. Lobo is a Managing Director of Mosaic Venture Partners, LP I and may be
deemed to share voting and investment power with respect to all shares held
by Mosaic Venture Partners, LP I. Mr. Lobo disclaims beneficial ownership of
such shares.

(3) Consists of 1,123,318 shares held by TA/Advent VIII L.P., 22,409 shares held
by TA Investors LLC, 21,398 shares held by TA Executives Fund LLC and
517,767 shares held by Advent Atlantic and Pacific III Limited Partners.
Mr. Goldstein is a Managing Director of TA/Advent VIII L.P., TA Investors
LLC, TA Executives Fund LLC and Advent Atlantic and Pacific III Limited
Partners and may be deemed to share voting and investment power with respect
to all shares held by those entities. Mr. Goldstein disclaims beneficial
ownership of such shares, except to the extent of 4,996 shares of preferred
stock which he owns through TA Investors LLC.

(4) Consists of 5,184,036 shares held by Draper Fisher Associates Fund IV, LP,
and 390,197 held by Draper Fisher Partners IV, LLC. Mr. Packard is a
Director for Draper Fisher Associates Fund IV, LP and Draper Fisher Partners
IV, LLC and may be deemed to share voting and investment power with respect
to all shares held by those entities. Mr. Packard disclaims beneficial
ownership of such shares.

(5) Includes 535,000 shares subject to options exercisable within 60 days of
November 30, 1999. Also includes 8,621,657 shares deemed to be beneficially
owned by certain of our directors, and as to which such directors disclaim
beneficial ownership. See notes 1, 2, 3 and 4 above.

(6) Consists of 5,184,036 shares held by Draper Fisher Associates Fund IV, LP,
and 390,197 shares held by Draper Fisher Partners IV, LLC.

(7) Consists of 1,123,318 shares held by TA/Advent VIII L.P., 517,767 shares
held by Advent Atlantic & Pacific III L.P., 22,409 shares held by TA
Investors LLC and 21,398 shares held by TA Executives Fund LLC.

DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock and certain provisions of our
restated certificate of incorporation and bylaws are summaries. Copies of these
documents have been filed with the Securities and Exchange Commission as
exhibits to our registration statement, of which this prospectus forms a part.
The descriptions of the common stock and preferred stock reflect changes to our
capital structure that will occur upon the closing of this offering.

Upon the closing of this offering, our authorized capital stock will consist
of 60,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of preferred stock, par value $0.001 per share.

COMMON STOCK

As of November 30, 1999, there were 20,796,568 shares of common stock
outstanding and held of record by 49 stockholders, assuming conversion of all
outstanding shares of preferred stock.

The holders of common stock are entitled to one vote for each share of
common stock held of record on our books for the election of directors and on
all matters submitted to a vote of stockholders. The holders of common stock are
entitled to receive ratably dividends, if any, when, as and if declared by the
board of directors out of assets legally available therefor, subject to any
preferential dividend rights of any outstanding preferred stock. Upon our
dissolution, liquidation or winding up, the holders of common stock are entitled
to receive ratably our net assets available after the payment of all debts and
other liabilities, subject to the preferential rights of any outstanding
preferred stock. Holders of the common stock have no preemptive, subscription,
redemption or conversion rights. The rights, preferences and privileges of
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.

PREFERRED STOCK

Upon the closing of this offering, the board of directors will be
authorized, without further vote or action by the stockholders, to issue from
time to time up to an aggregate of 1,000,000 shares of preferred stock in one or
more series and to fix or alter the designations, rights, preferences and
privileges and any qualifications, limitations or restrictions of the shares of
each such series of preferred stock, including the dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption including sinking
fund provisions, redemption price or prices, liquidation preferences and the
number of shares constituting any series or designations of such series, any or
all of which may be greater than the rights of common stock. The issuance of
preferred stock could adversely affect the voting power of holders of common
stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control. We have no present plans to issue any shares of
preferred stock.

REGISTRATION RIGHTS

Pursuant to the terms of a rights agreement, after this offering, the
holders of approximately 18,726,674 shares of common stock, including 7,783,998
shares of common stock owned by our founders, will be entitled to certain rights
with respect to the registration of such shares under the Securities Act. Under
the terms of the rights agreement, if we propose to register any of our
securities under the Securities Act for our own account, the holders, including
the founders, are entitled to notice of such registration and are entitled to
include shares of their common stock therein. If we propose to register any of
our securities under the Securities Act for the account of our non-founder
security holders exercising registration rights, such holders are entitled to
notice of such registration and are entitled to include shares of their common
stock therein. Additionally, the non-founder holders are also

entitled to certain demand registration rights pursuant to which they may
require us to file a registration statement under the Securities Act at our
expense with respect to their shares of common stock, and we are required to use
our best efforts to effect that registration. We are not required to effect more
than four of these demand registrations. In addition, the non-founder holders
are entitled to demand registration rights pursuant to which they may require us
to file a registration statement under the Securities Act on Form S-3 at our
expense with respect to their shares of common stock, and we are required to use
our best efforts to effect that registration. We are not required to effect more
than three of these Form S-3 demand registrations in any twelve-month period.
All of these registration rights are subject to conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares included in such registration and our right not to effect a requested
registration within six months following any offering of our securities,
including this offering. In addition, our obligation to register shares of
common stock terminates immediately with respect to any security holder,
provided that all shares held by the holder may be publicly sold within a
three-month period pursuant to the Securities Act. In any event, all
registration rights terminate five years from the date of this prospectus.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF
INCORPORATION AND BYLAWS

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

In addition, some provisions of our restated certificate of incorporation
and restated bylaws may be deemed to have an anti-takeover effect and may delay,
defer or prevent a tender offer or takeover attempt that a stockholder might
deem to be in his or her best interest. The existence of these provisions could
limit the price that investors might be willing to pay in the future for shares
of our common stock. These provisions include:

STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. The restated
certificate of incorporation provides that stockholders may not take action by
written consent, but only at a duly called annual or special meeting of
stockholders. The certificate of incorporation further provides that special
meetings of our stockholders may be called only by the chairman of the board of
directors, and in no event may the stockholders call a special meeting. Thus,
without approval by the board of directors or chairman, stockholders may take no
action between meetings.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The restated bylaws provide that a stockholder seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice of this intention in writing. To be timely, a stockholder's notice must
be delivered to or mailed and received at our principal executive offices not
less than 120 days prior to the first anniversary of the date of our notice of
annual meeting provided with respect to the previous year's annual meeting of
stockholders. However, if no annual meeting of stockholders was held in the
previous year or the date of the annual meeting of stockholders has been changed
to be more than 30 calendar days from the time contemplated at the time of the
previous year's proxy statement, then a proposal shall be received no later than
the close of business on the 10(th) day following the date on

which notice of the date of the meeting was mailed or a public announcement was
made, whichever first occurs. The restated bylaws also include a similar
requirement for making nominations at special meetings and specify requirements
as to the form and content of a stockholder's notice. These provisions may
preclude stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an annual or special
meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to certain limitations imposed by the Nasdaq
National Market. These additional shares may be utilized for a variety of
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of us by means of a proxy
contest, tender offer, merger or otherwise.

SUPER-MAJORITY VOTING. Delaware law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or bylaws, unless a
corporation's certificate of incorporation or bylaws, as the case may be,
require a greater percentage. We have provisions in our certificate of
incorporation and bylaws which require a super-majority vote of the stockholders
to amend, revise or repeal anti-takeover provisions.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Our restated certificate of incorporation provides that, to the extent
permitted by Delaware law, our directors shall not be personally liable to us or
our stockholders for monetary damages for any breach of fiduciary duty as a
director. Under Delaware law, the directors have a fiduciary duty to us that is
not eliminated by this provision of the certificate and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to us, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or that involve
intentional misconduct or knowing violations of law, for action leading to
improper personal benefit to the director and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by Delaware
law. This provision also does not affect the directors' responsibilities under
any other laws, such as the federal securities laws.

Our restated certificate of incorporation further provides for the
indemnification of our directors and officers to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, provided that this
provision shall not eliminate or limit the liability of a director:

- for any breach of the director's duty of loyalty to the corporation or its
stockholders;

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

- arising under Section 174 of the Delaware General Corporation Law; or

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

TRANSFER AGENT AND REGISTRAR

Upon the closing of this offering, the transfer agent and registrar for our
common stock will be American Stock Transfer and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been any public market for our common
stock, and we make no prediction as to the effect, if any, that market sales of
shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of common stock in the public market,
or the perception that such sales could occur, could adversely affect the market
price of the common stock and could impair our future ability to raise capital
through the sale of equity securities.

Upon the closing of this offering, we will have an aggregate of shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of the outstanding
shares, all of the shares sold in this offering will be freely tradable, except
that any shares purchased by "affiliates" (as that term is defined in Rule 144
under the Securities Act), may only be sold in compliance with the limitations
described below. The remaining 20,796,568 shares of common stock will be deemed
"restricted securities" as defined in Rule 144. Restricted securities may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rule 144, including Rule 144(k), or Rule 701 promulgated
under the Securities Act, which rules are summarized below. Giving effect to the
lock-up agreements described below and the provisions of Rule 144, including
Rule 144(k), and Rule 701, 20,796,568 shares will be available for sale in the
public market as follows:

NUMBER OF SHARES DATE
---------------- ----

180 days from the date of this prospectus (subject in some
cases to volume limitations)

At various times after 180 days from the date of this
prospectus (subject to vesting provisions)

In general, under Rule 144, as currently in effect, a person, or persons
whose shares are required to be aggregated, including an affiliate of ours, who
has beneficially owned shares for at least one year is entitled to sell, within
any three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of common stock, approximately shares immediately after this
offering, or the average weekly trading volume in the common stock during the
four calendar weeks preceding the date on which notice of such sale is filed,
subject to restrictions. In addition, a person who is not deemed to have been an
affiliate at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of ours, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.

All of our directors, officers and stockholders have agreed that they will
not offer, sell or agree to sell, directly or indirectly, or otherwise dispose
of any shares of common stock without the prior written consent of FleetBoston
Robertson Stephens Inc. for a period of 180 days from the date of this
prospectus.

Any of our employees or consultants who purchased his or her shares pursuant
to a written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus. As of November 30, 1999, the holders of options exercisable for
approximately 1,318,646 shares of common stock, all of whom are bound by a
180-day

lock-up obligation, will be eligible to sell their shares on the expiration of
the 180-day lock-up period, subject in some cases to vesting of the shares
underlying such options.

We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issued or issuable under our stock plans. We
expect to file a registration statement covering shares offered pursuant to the
1998-A Stock Plan, the 2000 Stock Option and Incentive Plan and the 2000
Employee Stock Purchase Plan 180 days after the date of this prospectus,
permitting the resale of such shares by nonaffiliates in the public market
without restriction under the Securities Act.

We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except
that we may issue, and grant options to purchase, shares of common stock under
the 1998-A Stock Plan, the 2000 Stock Option and Incentive Plan and the 2000
Employee Stock Purchase Plan. In addition, we may issue shares of common stock
in connection with any acquisition of another company if the terms of issuance
provide that such common stock shall not be resold prior to the expiration of
the 180-day period referenced in the preceding sentence.

Following this offering, holders of 18,726,674 shares of outstanding common
stock will have demand registration rights with respect to their shares of
common stock, subject to the 180-day lock-up arrangement described above, to
require us to register their shares in any future registration of our
securities. See "Description of Capital Stock--Registration Rights."

UNDERWRITING

UNDERWRITING AGREEMENT

The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Thomas Weisel Partners LLC, SoundView
Technology Group, Inc. and Wit Capital Corporation, have severally agreed with
us, subject to the terms and conditions of the underwriting agreement, to
purchase from us the number of shares of common stock set forth below opposite
their respective names. The underwriters are committed to purchase and pay for
all shares if any are purchased.

NUMBER
UNDERWRITER OF SHARES
- ----------- ---------

Total.....................................................
===

The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to dealers at that price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After the initial offering, the public offering
price, concession and reallowance to dealers may be reduced by the
representatives. No reduction in the price will change the amount of proceeds to
be received by us as set forth on the cover page of this prospectus.

OVER-ALLOTMENT OPTION. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have agreed
to purchase. To the extent that the underwriters exercise this option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage of additional shares that the number of shares of common stock to be
purchased by it shown in the above table represents as a percentage of the
shares offered by this prospectus. If purchased, the additional shares
will be sold by the underwriters on the same terms as those on which the
shares are being sold. We will be obligated, under this option, to sell
shares to the extent the option is exercised. The underwriters may exercise the
option only to cover over-allotments made in connection with the sale of the
shares of common stock offered by this prospectus.

UNDERWRITING DISCOUNTS AND COMMISSIONS. The following table shows the
estimated per share and total underwriting discounts and commissions to be paid
by us to the underwriters. This information is

presented assuming either no exercise or full exercise by the underwriters of
their over-allotment option.

WITHOUT WITH
PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTION OPTION
-------- -------------- --------------

Assumed public offering price.............
Estimated underwriting discounts and
commissions.............................
Estimated proceeds, before expenses, to
us......................................

The expenses of the offering payable by us are estimated at $ .
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.

NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for the common stock. Consequently, the public offering price for the
common stock offered by this prospectus has been determined through negotiations
among the representatives and us. Among the factors considered in such
negotiations were prevailing market conditions, certain of our financial
information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.

The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.

INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters and us against civil liabilities, including liabilities under
the Securities Act, and liabilities arising from breaches of representations and
warranties contained in the underwriting agreement.

FUTURE SALES. All of our executive officers, directors and stockholders
have agreed, during the period of 180 days after the date of this prospectus,
subject to specified exceptions, not to offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to any
shares of common stock or any options or warrants to purchase any shares of
common stock, or any securities convertible into or exchangeable for shares of
common stock owned as of the date of this prospectus or thereafter acquired
directly by those holders or with respect to which they have the power of
disposition, without the prior written consent of FleetBoston Robertson
Stephens Inc. However, FleetBoston Robertson Stephens Inc. may, in its sole
discretion and at any time or from time to time, without notice, release all or
any portion of the securities subject to lock-up agreement providing consent to
the sale of shares prior to the expiration of the lock-up period.

In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to certain exceptions, consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the
lock-up period, or issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable for
shares of common stock other than our sale of shares in this offering, the
issuance of our common stock upon the exercise of outstanding options or
warrants, and the issuance of options under existing stock option and incentive
plans. See "Shares Eligible for Future Sale."

LISTING. We have applied for approval for the quotation of our common stock
on the Nasdaq National Market under the symbol "DHIT."

number of shares of common stock available for sale to the general public will
be reduced to the extent these individuals purchase reserved shares. Any
reserved shares which are not purchased will be offered by the underwriters to
the general public on the same basis as the other shares offered in this
offering.

STABILIZATION. The representatives have advised us that, pursuant to
Regulation M under the Securities Act of 1933, some persons participating in the
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the shares of common
stock at a level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price of
the common stock. A "syndicate covering transaction" is the bid for or purchase
of common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid" is
an arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by such underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised us that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

SERIES C PREFERRED STOCK INVESTMENT. On July 16, 1999, two limited
partnerships affiliated with FleetBoston Robertson Stephens Inc. purchased an
aggregate of 84,245 shares of our series C preferred stock for aggregate
consideration of $500,003. Each share of series C preferred stock will convert
into one share of our common stock upon completion of this offering.

THOMAS WEISEL PARTNERS LLC. Thomas Weisel Partners LLC, one of the
representatives of the underwriters, was organized and registered as a
broker-dealer in December 1998. Since December 1998, Thomas Weisel Partners LLC
has been named as a lead-manager or co-manager on 100 filed public offerings of
equity securities, of which 79 have been completed, and has acted as a syndicate
member in an additional 54 public offerings of equity securities. Thomas Weisel
Partners LLC does not have any material relationship with us or any of our
officers, directors or controlling persons, except with respect to its
contractual relationship with us under the underwriting agreement entered into
in connection with this offering.

WIT CAPITAL CORPORATION. Wit Capital Corporation, a member of the National
Association of Securities Dealers, Inc., will participate in the offering as one
of the underwriters. The National Association of Securities Dealers, Inc.
approved the membership of Wit Capital on September 4, 1997. Since that time,
Wit Capital has acted as an underwriter, e-Manager or selected dealer in over
170 public offerings. Except for its participation as a manager in this
offering, Wit Capital has no relationship with us or any of our founders or
significant stockholders.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Legal
matters in connection with this offering will be passed upon for the
underwriters by Foley, Hoag & Eliot LLP, Boston, Massachusetts.

EXPERTS

The financial statements as of December 31, 1998 and for the period from
inception (April 27, 1998) through December 31, 1998 included in this prospectus
and elsewhere in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report

appearing herein and elsewhere in the registration statement, and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

In February 1999 our board of directors approved a change in accountants and
our former accountants were dismissed. We subsequently engaged the independent
accounting firm of Deloitte & Touche LLP. The former accountants' review report
on our financial statements for the fiscal period ended December 31, 1998 did
not contain an adverse opinion or disclaimer opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. In addition,
we had no disagreements with our former accountants on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure during the fiscal period ended December 31, 1998 and subsequent
interim periods.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including the exhibits, schedules and amendments thereto)
under the Securities Act with respect to the shares of common stock to be sold
in this offering. As permitted by the Securities Exchange Commission's rules and
regulations, this prospectus does not contain all the information set forth in
the registration statement. For further information regarding our company and
the shares of common stock to be sold in this offering, please refer to the
registration statement and the contracts, agreements and other documents filed
as exhibits to the registration statement.

You may read and copy all or any portion of the registration statement or
any other information that we file at the Securities Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Securities Exchange Commission. Please call the SEC at 1-800-732-0330 for
further information on the operation of the public reference rooms. Our SEC
filings, including the registration statement, are also available to you on the
Securities Exchange Commission's Web site WWW.SEC.GOV.

As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act used above, and, in accordance
therewith, will file periodic reports, proxy statements and other information
with the Securities and Exchange Commission.

We intend to furnish to our stockholders annual reports containing financial
statements audited by an independent public accounting firm.

DIRECT HIT TECHNOLOGIES, INC.

INDEX TO FINANCIAL STATEMENTS

PAGE
--------

Report of Independent Auditors.............................. F-2
Balance Sheets as of December 31, 1998 and September 30,
1999 (unaudited).......................................... F-3
Statements of Operations for the Period from Inception
(April 27, 1998) through December 31, 1998 and the Nine
Months Ended September 30, 1999 (unaudited)............... F-4
Statements of Stockholders' Equity for the Period from
Inception (April 27, 1998) through December 31, 1998 and
the Nine Months Ended September 30, 1999 (unaudited)...... F-5
Statements of Cash Flows for the Period from Inception
(April 27, 1998) through December 31, 1998 and the Nine
Months Ended September 30, 1999 (unaudited)............... F-6
Notes to Financial Statements............................... F-7

F-1

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Direct Hit Technologies, Inc.
Wellesley, Massachusetts

We have audited the accompanying balance sheet of Direct Hit Technologies, Inc.
(the "Company") as of December 31, 1998 and the related statements of
operations, stockholders' equity, and cash flows for the period from inception
(April 27, 1998) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1998, and the
results of its operations and its cash flows for the period from inception
(April 27, 1998) to December 31, 1998 in conformity with generally accepted
accounting principles.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Boston, Massachusetts
December 17, 1999

F-2

DIRECT HIT TECHNOLOGIES, INC.

BALANCE SHEETS

PRO FORMA
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1999
------------ ------------- -------------
(UNAUDITED) (UNAUDITED)

ASSETS
Current Assets:
Cash and cash equivalents............................ $2,557,673 $16,427,389
Short term investments............................... -- 10,059,351
Accounts receivable, less allowances of $5,100 in
1998 and $44,100 in 1999........................... 162,846 357,238
Prepaid expenses and other current assets............ 20,830 37,311
---------- -----------
Total current assets............................. 2,741,349 26,881,289
---------- -----------
Property and equipment, Net............................ 170,046 991,475
Restricted cash........................................ -- 150,000
Other assets........................................... 12,535 26,610
---------- -----------
Total Assets........................................... $2,923,930 $28,049,374
========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................... $ 7,558 $ 150,377
Accrued expenses..................................... -- 166,661
Accrued professional fees............................ 31,805 55,907
Accrued compensation................................. 28,646 357,176
Other liabilities.................................... -- 37,445
Deferred revenue..................................... 32,500 245,135
---------- -----------
Total current liabilities........................ 100,509 1,012,701
---------- -----------

Commitments (Note 3)

Stockholders' Equity:
Convertible Preferred Stock:
Series C $.001 par value, 4,431,265 shares
authorized, 4,431,263 shares issued and outstanding
(liquidation preference, $26,299,980).............. -- 26,279,468 --
Series B $.001 par value, 1,323,912 shares
authorized, issued and outstanding (liquidation
preference, $2,000,000)............................ 1,993,110 1,993,110 --
Series A $.001 par value, 5,187,501 shares
authorized, issued and outstanding (liquidation
preference, $1,383,334)............................ 1,378,334 1,378,334 --
Common stock, $.001 par value, 35,000,000 shares
authorized, 9,624,684 and 9,722,048 shares issued
and outstanding; 20,664,724 pro forma.............. 9,625 9,722 20,665
Additional paid-in capital........................... 733,319 5,602,058 35,242,027
Deferred compensation................................ (498,727) (4,504,145) (4,504,145)
Accumulated deficit.................................. (792,240) (3,721,874) (3,721,874)
---------- ----------- -----------
Total stockholders' equity....................... 2,823,421 27,036,673 $27,036,673
---------- ----------- ===========
Total Liabilities and Stockholders' Equity............. $2,923,930 $28,049,374
========== ===========

See notes to financial statements.

F-3

DIRECT HIT TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

PERIOD FROM
INCEPTION
(APRIL 27,
1998) NINE MONTHS
THROUGH ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)

Revenues:
OEM....................................................... $ 175,420 $ 805,044
Advertising............................................... -- 57,159
---------- -----------
Total revenues........................................ 175,420 862,203
Cost of revenues.......................................... 51,595 360,524
---------- -----------
Gross profit.............................................. 123,825 501,679
---------- -----------

Operating expenses:
Sales and marketing....................................... 90,332 948,123
Research and development.................................. 471,598 1,502,224
General and administrative................................ 150,260 412,855
Equity-related compensation............................... 231,775 826,927
---------- -----------
Total operating expenses................................ 943,965 3,690,129
---------- -----------
Operating loss.............................................. (820,140) (3,188,450)
Interest income............................................. 27,900 258,816
---------- -----------

Net loss.................................................... $ (792,240) $(2,929,634)
========== ===========
Net loss per share--basic and diluted....................... $ (0.45) $ (0.88)
========== ===========
Shares used in per share calculation--basic and diluted..... 1,772,864 3,330,290
========== ===========
Net loss per share--pro forma basic and diluted
(unaudited)............................................... $ (0.12) $ (0.26)
========== ===========
Shares used in per share calculation--pro forma basic and
diluted (unaudited)....................................... 6,705,378 11,091,546
========== ===========

See notes to financial statements.

F-4

DIRECT HIT TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (APRIL 27, 1998) THROUGH DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)

PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ----------------------- PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
---------- ----------- ---------- ---------- ---------- ------------- ------------

BALANCE AT INCEPTION (APRIL 27,
1998).............................. -- -- -- -- -- -- --
Issuance of common stock to
founders....................... -- -- 7,849,998 $7,850 $542,150 $(550,000) --
Issuance of Series A preferred
stock, net of issuance costs of
$5,000......................... 5,187,501 $1,378,334 -- -- -- -- --
Issuance of Series B preferred
stock, net of issuance costs of
$6,890......................... 1,323,912 1,993,110 -- -- -- -- --
Exercise of stock options........ -- -- 1,774,686 1,775 10,667 -- --
Deferred compensation related to
grant of stock options......... -- -- -- -- 180,502 (180,502) --
Amortization of deferred
compensation................... -- -- -- -- -- 231,775 --
Net loss......................... -- -- -- -- -- -- $(792,240)
---------- ----------- ---------- ---------- ---------- ------------ -----------
BALANCE, DECEMBER 31, 1998......... 6,511,413 3,371,444 9,624,684 9,625 733,319 (498,727) (792,240)

UNAUDITED:
Repurchase and retirement of
common stock, net.............. -- -- (22,500) (23) (577) -- --
Exercise of stock options........ -- -- 119,864 120 36,971 -- --
Issuance of Series C preferred
stock, net of issuance costs of
$20,512........................ 4,431,263 26,279,468 -- -- -- -- --
Deferred compensation related to
grant of stock options......... -- -- -- -- 4,607,345 (4,607,345) --
Transfer of shares to
employees...................... -- -- -- -- 225,000 -- --
Amortization of deferred
compensation................... -- -- -- -- -- 601,927 --
Net loss......................... -- -- -- -- -- -- (2,929,634)
---------- ----------- ---------- ---------- ---------- ------------ -----------

BALANCE, SEPTEMBER 30, 1999
(Unaudited)........................ 10,942,676 $29,650,912 9,722,048 $9,722 $5,602,058 $(4,504,145) $(3,721,874)
========== =========== ========== ========== ========== ============ ===========

TOTAL
STOCKHOLDERS'
EQUITY
-------------

BALANCE AT INCEPTION (APRIL 27,
1998).............................. --
Issuance of common stock to
founders....................... --
Issuance of Series A preferred
stock, net of issuance costs of
$5,000......................... $1,378,334
Issuance of Series B preferred
stock, net of issuance costs of
$6,890......................... 1,993,110
Exercise of stock options........ 12,442
Deferred compensation related to
grant of stock options......... --
Amortization of deferred
compensation................... 231,775
Net loss......................... (792,240)
-----------
BALANCE, DECEMBER 31, 1998......... 2,823,421
UNAUDITED:
Repurchase and retirement of
common stock, net.............. (600)
Exercise of stock options........ 37,091
Issuance of Series C preferred
stock, net of issuance costs of
$20,512........................ 26,279,468
Deferred compensation related to
grant of stock options......... --
Transfer of shares to
employees...................... 225,000
Amortization of deferred
compensation................... 601,927
Net loss......................... (2,929,634)
-----------
BALANCE, SEPTEMBER 30, 1999
(Unaudited)........................ $27,036,673
===========

See notes to financial statements.

F-5

DIRECT HIT TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

PERIOD FROM
INCEPTION
(APRIL 27, 1998) NINE MONTHS
THROUGH ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
---------------- -------------
(UNAUDITED)

Cash flows from operating activities:
Net loss.................................................. $ (792,240) $ (2,929,634)
----------- ------------

Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 21,665 121,390
Equity-related compensation............................. 231,775 826,927
Changes in operating assets and liabilities:
Accounts receivable................................... (162,846) (194,392)
Prepaid expenses and other current assets............. (20,830) (16,481)
Accounts payable and accrued expenses................. 68,009 699,557
Deferred revenue...................................... 32,500 212,635
----------- ------------
Total adjustments................................... 170,273 1,649,636
----------- ------------
Net cash used in operating activities............... (621,967) (1,279,998)
----------- ------------

Cash flows from investing activities:
Increase in other assets.................................. (12,535) (14,075)
Purchase of short term investments........................ -- (10,059,351)
Restricted cash deposits.................................. -- (150,000)
Purchases of property and equipment....................... (191,711) (942,819)
----------- ------------

Net cash used in investing activities............... (204,246) (11,166,245)
----------- ------------

Cash flows from financing activities:
Issuance of common stock upon exercise of stock options... 12,442 37,091
Repurchase and retirement of common stock................. -- (600)
Issuance of Series A preferred stock...................... 1,278,334 --
Issuance of Series B preferred stock...................... 1,993,110 --
Issuance of Series C preferred stock...................... -- 26,279,468
Proceeds from issuance of note payable.................... 100,000 --
----------- ------------

Net cash provided by financing activities........... 3,383,886 26,315,959
----------- ------------

Increase in cash and cash equivalents....................... 2,557,673 13,869,716

Cash and cash equivalents, beginning of period.............. -- 2,557,673
----------- ------------

Cash and cash equivalents, end of period.................... $ 2,557,673 $ 16,427,389
=========== ============

Supplemental cash flow information
Conversion of note payable to Series A preferred stock.... $ 100,000 $ --
=========== ============

See notes to financial statements.

F-6

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS--Direct Hit Technologies, Inc. (the "Company") provides
technology that aggregates and organizes online content to enable users to
quickly find relevant and accurate information, products and services. The
Company was incorporated on April 27, 1998.

The Company has a single operating segment, aggregation and organization of
online content. The Company has no organizational structure dictated by product
lines, geography or customer type. Revenues have been primarily derived from
popularity-based search products.

The Company has experienced net losses since its inception and, as of
September 30, 1999, had an accumulated deficit of approximately $3.7 million.
Such losses and accumulated deficit resulted from both the Company's lack of
substantial revenue and costs incurred in the development of the Company's
service and in the establishment of the Company's Web site. For the foreseeable
future, the Company expects to continue to experience significant growth in its
operating expenses in order to execute its current business plan, particularly
those related to sales and marketing and research and development.

INTERIM FINANCIAL STATEMENTS (UNAUDITED)-- The financial statements as of
September 30, 1999 and for the nine months then ended are unaudited. In the
opinion of management, such unaudited interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation. The results of operations for interim periods are not
necessarily indicative of the results which may be expected for any other
interim period or for the full year.

PRO FORMA BALANCE SHEET (UNAUDITED)--Upon the closing of the Company's
public offering, all of the outstanding shares of convertible preferred stock as
of September 30, 1999, will automatically convert into approximately
10,942,676 shares of common stock. The unaudited pro forma presentation of the
balance sheet has been prepared assuming the conversion of all shares of
convertible preferred stock into common stock at September 30, 1999. All
references to pro forma information in the notes to the financial statements are
unaudited.

STOCK SPLIT--On July 9, 1999, prior to the Series C investment, the
Company's Board of Directors approved a three-for-one stock split of the
Company's common and preferred stock. Shareholders of record on July 14, 1999
(the record date) received two additional shares for every share held on that
date. All share and per share amounts in these financial statements and notes
hereto for all periods presented have been adjusted to reflect the three-for-one
stock split.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES--The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS--The Company invests its
cash in money market accounts and in debt securities of U.S. Government agencies
and commercial paper from high quality corporate issuers. All highly liquid
instruments with an original maturity of ninety days or less are considered cash
equivalents and those with original maturities greater than ninety days and less
than

F-7

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

one year are considered short term investments. The Company's short term
investments in marketable securities are classified as available-for-sale and
are reported at fair value, with unrealized gains and losses, if any, net of
tax, recorded in stockholders' equity. Such unrealized gains and losses to date
have been immaterial. Realized gains or losses and permanent declines in value,
if any, on available-for-sale securities will be reported in income as incurred.
At September 30, 1999, all of the Company's available-for-sale debt securities
mature within one year.

RESTRICTED CASH--The Company is required to maintain a $150,000 compensating
balance with a bank to support an outstanding letter of credit which is issued
in favor of the Company's landlord in lieu of a deposit on leased office space.

REVENUE RECOGNITION--Revenues are comprised of OEM revenues and advertising
revenues. OEM revenues are generated through a variety of contractual
arrangements, which include per-query fees and advertising revenue sharing
arrangements with OEM customers. Per-query fees are recognized in the period
earned, and revenues from advertising revenue sharing arrangements are
recognized in the period that the advertisement is displayed through the OEM
customer's Web site. When the OEM contract calls for payments based on per-query
fees, revenues are recognized based on the number of Web pages accessed as
reported by the OEM customer or as determined by the Company, depending on the
contract. When the OEM contract provides for minimum monthly fees, such fees are
recognized monthly as earned.

Advertising revenues are derived primarily from the sale of banner
advertisements on Web pages. Revenues are recognized over the term the
advertisements are displayed.

Deferred revenue is primarily comprised of payments and billings in excess
of recognized revenue relating to customer contracts.

CONCENTRATION OF CREDIT RISK. Financial instruments that potentially
subject the Company to significant concentration of credit risk consist
primarily of cash and cash equivalents, short term investments and accounts
receivable. Substantially all of the Company's cash and cash equivalents are
managed by two financial institutions. At December 31, 1998 and September 30,
1999, the Company had cash balances at certain financial institutions in excess
of federally insured limits. However, the Company does not believe that it is
subject to unusual credit risk beyond the normal credit risk associated with
commercial banking relationships.

Accounts receivable are typically unsecured and are derived from revenues
earned from customers primarily located in the United States. The Company
performs ongoing credit evaluations of its customers. The Company maintains an
allowance for potential credit losses. Accordingly, the Company has provided for
$5,100 and $39,000 for such allowances in 1998 and 1999, respectively. The
Company has not recorded any write-offs in 1998 or 1999.

For the period from inception (April 27, 1998) through December 31, 1998,
two customers accounted for 78% and 22% of total revenues and 82% and 18% of
total receivables, at December 31, 1998, respectively. One customer accounted
for 70% of total revenues for the nine months ended September 30, 1999. Three
customers accounted for 69%, 13% and 13% of total receivables at September 30,
1999, respectively.

F-8

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

DEPRECIATION AND AMORTIZATION--Property and equipment, including leasehold
improvements, are stated at cost and depreciated using the straight-line method
over the estimated useful lives of the assets. The Company periodically
evaluates the recoverability of its long-lived assets based on expected
undiscounted cash flows and recognizes impairments, if any, based on expected
discounted future cash flows.

INCOME TAXES--Deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that,
based on currently available evidence, are not expected to be realized.

COST OF REVENUES--Cost of revenues consist primarily of expenses associated
with the ongoing maintenance and support of our products, including compensation
and employee-related expenses, consulting fees, equipment costs, networking,
bandwidth and other related indirect costs. The Company enters into contracts
for bandwidth with third-party network providers.

RESEARCH AND DEVELOPMENT--Research and development expenses consist
primarily of compensation and employee-related expenses, equipment costs, and
fees for professional services related to the continued development and
enhancement of our product offerings.

Costs incurred in the engineering and development of the Company's product
are expensed as incurred, except for certain software development costs. Costs
associated with the development of computer software are expensed prior to the
establishment of technological feasibility (as defined by SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed") and capitalized thereafter.

The Company also has incurred expenditures on software used to both
facilitate internal processes and create and maintain its Web site. The Company
has adopted Statement of Position ("SOP") 98-1, which requires computer software
costs associated with internal use software to be charged to operations as
incurred until certain capitalization criteria are met. Costs eligible for, and
capitalized under SFAS No. 86 and SOP 98-1, have been insignificant to date.

ADVERTISING COSTS--Advertising costs are recorded as sales and marketing
expense as incurred. Advertising expenses for the period from inception
(April 27, 1998) through December 31, 1998 and for the nine months ended
September 30, 1999 were $0 and $183,696, respectively.

STOCK-BASED COMPENSATION--The Company accounts for stock-based employee
compensation arrangements in accordance with the provisions of Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Under APB No. 25, compensation cost is recognized on a straight
line basis over the vesting period based on the difference, if any, on the date
of grant between the fair value of the Company's stock and the exercise price.

EARNINGS PER SHARE--Basic net loss per share is computed using the weighted
average number of common shares outstanding during the period adjusted for those
restricted shares that are contingently returnable. Diluted net loss per share
is computed using the weighted average number of common

F-9

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

shares outstanding during the period, plus the dilutive effect of potential
common stock. Potential common stock consists of convertible preferred stock,
restricted common stock that is contingently returnable, and stock options. For
the period from inception (April 27, 1998) to December 31, 1998 and for the nine
months ended September 30, 1999, options to purchase 72,510 and 1,204,646 shares
of common stock, respectively, restricted common stock of 7,071,093 and
5,498,565 shares, respectively, that is contingently returnable and preferred
stock convertible into 6,511,413 and 10,942,676 shares of common stock,
respectively, were excluded from the calculation since their inclusion would be
antidilutive.

Pro forma basic and diluted net loss per share have been calculated assuming
the conversion of all outstanding shares of preferred stock into common stock,
as if the shares had converted immediately upon their issuance.

The following is a calculation of pro forma net loss per share (unaudited):

PERIOD FROM
INCEPTION NINE MONTHS
(APRIL 27, 1998) ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
1998 1999
-------------------- -------------

Basic and diluted:
Net loss..................................... $ (792,240) $ (2,929,634)
========== ============
Weighted average number of common shares..... 1,772,864 3,330,290
Weighted average assumed number of common
shares upon conversion of preferred
stock...................................... 4,932,514 7,761,256
---------- ------------
Total weighted average number of shares used
in
computing pro forma net loss per share..... 6,705,378 11,091,546
========== ============
Basic and diluted pro forma net loss per
common share............................... $ (0.12) $ (0.26)
========== ============

FINANCIAL INSTRUMENTS--The Company's financial instruments include cash,
accounts receivable, accounts payable and accrued expenses. At December 31, 1998
and September 30, 1999, the fair values of these instruments approximated their
financial statement carrying amounts.

COMPREHENSIVE INCOME--Comprehensive loss is the same as net loss for all
periods presented.

NEW ACCOUNTING PRONOUNCEMENTS--In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The Statement, as amended, is
effective for fiscal years beginning after June 15, 2000. The Company has
evaluated the impact of adopting SFAS No. 133 and, based on its current business
activities, believes that it will not have a material effect on its financial
statements.

F-10

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

2. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

ESTIMATED
USEFUL DECEMBER 31, SEPTEMBER 30,
LIVES 1998 1999
---------- ------------ -------------

Property and equipment:
Computer equipment and software....... 3 years $149,298 $1,010,172
Furniture and fixtures................ 7 years 39,788 82,907
Office equipment...................... 5 years 2,625 28,163
Leasehold improvements................ lease term -- 13,288
---------- -------- ----------

Total............................... 191,711 1,134,530
Less accumulated depreciation........... (21,665) (143,055)
-------- ----------

Property and equipment, net............. $170,046 $ 991,475
======== ==========

3. COMMITMENTS

The Company leases office space under operating leases expiring through
October 2002. Certain of the leases contain renewal options. Some of the leases
provide for increasing rents over the terms of the leases; total rent under
these leases is being spread ratably over the lease terms. The Company has
sublet certain office space over the remainder of its lease term at an amount
that approximates the Company's obligation under the lease.

Total rent expense was $32,417 for the period from inception (April 27,
1998) through December 31, 1998, and $154,421 for the nine months ended
September 30, 1999. Rental income from the sublease amounted to $15,424 for the
nine months ended September 30, 1999 and is recorded, net of expense, in general
and administrative expense.

Future minimum annual lease payments under noncancelable operating leases,
net of sublease income, as of September 30, 1999 are as follows:

1999 (Remainder of year).................................... $119,986
2000........................................................ 747,173
2001........................................................ 752,846
2002........................................................ 406,195

4. PREFERRED STOCK

CONVERTIBLE PREFERRED STOCK--The authorized preferred stock of the Company
consists of 10,942,678 shares of preferred stock with a par value of $0.001, of
which 5,187,501 shares are designated as Series A convertible preferred stock
("Series A preferred stock"), 1,323,912 shares are designated as Series B
convertible preferred stock ("Series B preferred stock"), and 4,431,265 shares
are designated as Series C convertible preferred stock ("Series C preferred
stock").

F-11

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

4. PREFERRED STOCK (CONTINUED)

SERIES A CONVERTIBLE PREFERRED STOCK--On May 22, 1998, the Company issued
5,187,501 shares of Series A preferred stock at $0.2667 per share to investors
for total consideration, including the conversion of two 8% promissory notes
amounting to $100,000, of $1,378,334 (net of offering costs of $5,000). The
Series A preferred stock is convertible into common stock, on a one-for-one
basis, at any time by the holders. The holders of the Series A preferred stock
have voting rights equivalent to the number of shares of common stock into which
their shares of Series A preferred stock convert. The Series A preferred stock
earns non-cumulative dividends when and if declared in the amount of $0.0213 per
share. Upon liquidation, after setting apart or paying in full the preferential
amounts due the holders of Series C preferred stock, holders of Series A
preferred stock are entitled to receive, out of funds then generally available,
in conjunction with holders of Series B preferred stock and prior to any payment
with respect to the holders of common stock, $0.2667 per share, plus any
declared and unpaid dividends thereon. Following payment to holders of all other
classes of preferred stock to which the Series A preferred stock is subordinate,
holders of Series A preferred stock are then entitled to share in remaining
available funds on an "as-if converted" basis with holders of common stock.

SERIES B CONVERTIBLE PREFERRED STOCK--On November 12, 1998, the Company
issued 1,323,912 shares of Series B preferred stock at $1.51067 per share to
investors for total consideration of $1,993,110 (net of offering costs of
$6,890). The Series B preferred stock is convertible into common stock, on a
one-for-one basis, at any time by the holders. The holders of the Series B
preferred stock have voting rights equivalent to the number of shares of common
stock into which their shares of Series B preferred stock convert. The Series B
preferred stock earns non-cumulative dividends when and if declared in the
amount of $0.121 per share. Upon liquidation, after setting apart or paying in
full the preferential amounts due the holders of Series C preferred stock,
holders of Series B preferred stock are entitled to receive, out of funds then
generally available, in conjunction with holders of Series A preferred stock and
prior to any payment with respect to the holders of common stock, $1.51067 per
share, plus any declared and unpaid dividends thereon. Following payment to
holders of all other classes of preferred stock to which the Series B preferred
stock is subordinate, holders of Series B preferred stock are then entitled to
share in remaining available funds on an "as-if converted" basis with holders of
common stock.

In addition, as long as any shares of Series B preferred stock are
outstanding, the Company shall not, without first obtaining approval by vote or
written consent of the holders of at least a majority of the total number of
shares of Series B preferred stock outstanding, voting together as a class,
undertake or effect any reorganization event (as defined) in which the value of
the consideration to be received per share of Series B preferred stock in such
transaction is less than 150% percent of the original Series B issue price of
$1.51067 per share.

SERIES C CONVERTIBLE PREFERRED STOCK--On July 16, 1999, the Company issued
4,431,263 shares of Series C preferred stock at $5.9351 per share to investors
for total consideration of $26,279,468 (net of offering costs of $20,512). The
Series C preferred stock is convertible into common stock, on a one-for-one
basis, at any time by the holders. The holders of the Series C preferred stock
have voting rights equivalent to the number of shares of common stock into which
their shares of Series C preferred stock convert. The Series C preferred stock
earns non-cumulative dividends when declared in the amount of $0.4748 per share.
Upon liquidation, holders of Series C preferred stock are entitled to receive,
out of funds then generally available, dividends previously declared or accrued
and a per share

F-12

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

4. PREFERRED STOCK (CONTINUED)

amount as follows: i) $8.90265 per share if the consideration received in a
liquidation is $2.99 per fully diluted share of common stock or less;
ii) $10.386425 per share if the consideration received in a liquidation is
between $3.00 and $8.96 per fully diluted share of common stock; iii) $11.8702
per share if the consideration received in a liquidation is between $8.97 and
$11.96 per fully diluted share of common stock or; iv) $5.9351 per share if the
consideration received in a liquidation is over $11.96 per fully diluted share
of common stock.

AUTOMATIC CONVERSION--The preferred stock will automatically be converted
into shares of common stock upon the closing of a public offering of common
stock at an offering price of at least $11.8702 per share that values the
Company at not less than $253 million and results in gross proceeds to the
Company of at least $20 million.

5. COMMON STOCK

The Company's Certificate of Incorporation was amended on July 14, 1999 to
increase the number of authorized shares of common stock from 10,000,000 to
35,000,000 shares.

The Company's Certificate of Incorporation precludes the payment of
dividends to shareholders of common stock so long as any shares of Series A, B
or C preferred stock are issued and outstanding.

FOUNDERS SHARES--On April 28, 1998, the Company issued to the two founders
of the Company 2,943,750 and 4,906,248 shares of restricted common stock (the
"Founders Shares"), respectively, at a per share price of $0.0003.

The Founder Stock Purchase Agreement relating to 2,943,750 shares of common
stock provided for vesting of 10% of the shares upon the issuance of the
Series A Preferred Stock and the remaining 90% vest ratably over four years.

The Founder Stock Purchase Agreement relating to 4,906,248 shares of common
stock were issued to a founder as part of the initial capitalization of the
Company including his contribution and development of certain technology
pursuant to the terms of an Exclusive Patent License Agreement. Upon issuance of
the Series A Preferred Stock 25% of his shares became immediately vested. The
remaining balance of these Founders Shares vest ratably over four years. On
July 6, 1999, the founder transferred 60,000 of his restricted Founders Shares
to two employees for past services rendered. The fair value of these shares,
approximating $225,000, was charged to expense.

The Company has determined that the measurement date for the Founders Shares
coincided with the issuance of the Series A preferred stock. The Company has
recognized deferred compensation of $550,000, based on the fair value of the
common shares on that day, to be amortized over the vesting period. Accordingly,
the Company has recorded compensation expense of approximately $174,000 and
$83,000 for the period from inception (April 27, 1998) through December 31, 1998
and the nine months ended September 30, 1999, respectively.

The Company has the right to repurchase unvested shares at the amount paid.
The Company's right to repurchase the unvested shares terminates if the founder
is terminated by the Company without cause, upon a change in control or upon the
effectiveness of the Company's initial public offering.

F-13

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

5. COMMON STOCK (CONTINUED)

Restricted shares include the Founders Shares and shares purchased pursuant
to the Company's 1998 and 1998-A Stock Option Plans (the "Option Plans").

Restricted shares activity since inception follows:

WEIGHTED
AVERAGE
NUMBER OF PURCHASE
SHARES PRICE
---------- --------

Outstanding at inception (April 27, 1998).............. -- --
Issued for Founders Shares and stock option
exercises.......................................... 9,624,684 $0.001
Repurchased.......................................... -- --
Lapse of restriction due to vesting.................. (2,553,591) 0.001
----------

Outstanding at December 31, 1998....................... 7,071,093 0.001
Issued for stock option exercises.................... 119,864 0.291
Repurchased.......................................... (45,000) (0.027)
Issued from treasury shares.......................... 22,500 0.027
Lapse of restriction due to vesting.................. (1,669,892) 0.003
----------

Outstanding at September 30, 1999...................... 5,498,565 $0.005
========== ======

STOCK OPTIONS--The Company's Option Plans initially provided for the
granting of stock options to purchase up to 1,962,501 shares of the Company's
common stock. In 1998, the Company's shareholders ratified and approved to
increase the number of shares available for grant by 225,000 to a total of
2,187,501 for the Option Plans. In 1999 the Company's shareholders ratified and
approved to increase the number of shares available for grant by 1,600,000, to a
total of 3,787,501 for the Option Plans. Options may be granted to employees,
officers, directors and consultants of the Company with terms of up to
10 years. The options can be granted at such prices and vesting schedules as the
Board of Directors (the "Board") may determine; however ISO's cannot be granted
at less than 100% and nonqualified options cannot be granted at less than 85% of
the stock's fair market value at the date of grant.

Options generally vest over 48 months as follows: (i) 25% 12 months from the
date of grant and (ii) the remaining 75% thereafter at 2.0833% per month. In the
event of a change of control of the Company (as defined in the Option Plan), the
vesting of 25% of the remaining unvested shares will automatically be
accelerated.

Generally, the Option Plans provide that the Option holders may exercise
their stock options immediately. Shares issued upon exercise of such options are
restricted and continue to vest under the terms of the option agreement.

F-14

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

5. COMMON STOCK (CONTINUED)

Stock option activity since inception is as follows:

WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- --------

Outstanding at inception............................... -- --
Granted.............................................. 1,929,373 $0.02
Exercised............................................ (1,774,687) 0.01
Canceled, forfeited or expired....................... (82,176) 0.27
---------- -----

Outstanding and exercisable, December 31, 1998......... 72,510 0.10
Granted.............................................. 1,274,500 1.37
Exercised............................................ (142,364) 0.25
Canceled, forfeited or expired....................... -- --
---------- -----

Outstanding and exercisable, September 30, 1999........ 1,204,646 $1.43
========== =====

Included in options granted for the period from inception (April 27, 1998)
through December 31, 1998, and the nine months ended September 30, 1999 are
109,062 and 86,000 options, respectively, granted to consultants. Compensation
expense is being recognized over the vesting period based on fair value pursuant
to SFAS No. 123 and EITF No. 96-18. Total expense for the period from inception
(April 27, 1998) through December 31, 1998, and the nine months ended
September 30, 1999 related to these options is approximately $36,000 and
$322,000, respectively.

For financial reporting purposes, the deemed fair value of the common stock
at the dates of stock option grants to employees resulted in deferred
compensation of approximately $122,000 for the period from inception (April 27,
1998) through December 31, 1998 and approximately $3,789,000 for the nine months
ended September 30, 1999. These charges are being recognized ratably over the
vesting period. Compensation expense for options to employees was approximately
$22,000 for the period from inception (April 27, 1998) through December 31, 1998
and approximately $197,000 for the nine months ended September 30, 1999.

The weighted average fair value of options granted for the period from
inception (April 27, 1998) through December 31, 1998 and the nine months ended
September 30, 1999 was $0.07 and $2.85, respectively.

F-15

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

5. COMMON STOCK (CONTINUED)

The following table summarized information about stock options outstanding
at September 30, 1999:

VESTED
WEIGHTED -------------------------
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE AVERAGE
EXERCISE OF OPTIONS CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE OF OPTIONS PRICE
----------------- ----------- ----------- -------- ---------- --------

$0.03 3,000 8.76 $0.03 3,000 $0.03
0.17 229,500 9.36 0.17 4,835 0.17
0.30 112,500 9.59 0.30 -- --
0.45 108,000 9.76 0.45 -- --
1.78 325,646 9.85 1.78 8,135 1.78
2.30 338,000 9.92 2.30 -- --
2.82 88,000 9.96 2.82 -- --
----------------- --------- ------- ------- ------- -------
$0.03--2.82 1,204,646 9.75 $1.43 15,970 $0.96
================= ========= ======= ======= ======= =======

The weighted average remaining contractual life of the options at
December 31, 1998 was 9.75 years.

Under SFAS No. 123, the fair value of stock-based awards to employees is
calculated through the use of option pricing models. For purposes of determining
the disclosure required by SFAS No. 123, the minimum value method was used with
the following assumptions: expected life, 5 years and a risk-free rate of return
of 5.5%. If the computed fair values of the 1999 and 1998 awards had been
amortized to expense over the vesting period, pro forma net loss would have been
as follows:

PERIOD FROM
INCEPTION
(APRIL 27, 1998) NINE MONTHS
THROUGH ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
---------------- -------------

Net loss as reported.............................. $(792,240) $(2,929,634)
Net loss pro forma................................ $(811,187) $(3,071,890)

F-16

DIRECT HIT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)

6. INCOME TAXES

The components of the Company's net deferred tax assets consisted of the
following:

DECEMBER 31,
1998
------------

Current assets:
Deferred compensation..................................... $ 95,028
Research and development credits.......................... 30,553
---------
125,581
---------

Long-term assets (liabilities):
Net operating loss carryforwards.......................... 319,035
Depreciation.............................................. (2,499)
---------
316,536
---------

Net deferred tax assets before valuation allowance.......... 442,117

Less: valuation allowance................................... (442,117)
---------

Net deferred tax assets..................................... $ --
=========

A valuation allowance is established if it is more likely than not that all
or a portion of the deferred tax asset will not be realized. Accordingly,
because of the Company's limited operating history, management has provided a
valuation allowance for the full amount of the deferred tax asset due to the
uncertainty of realization.

The Company has available for future periods federal and state tax net
operating loss carryforwards and research and development credits of
approximately $792,000 and $31,000, respectively, as of December 31, 1998. The
net operating loss carryforwards expire beginning in 2013 and 2003 for federal
and state tax purposes, respectively. The federal research and development
credits begin to expire in 2013. The Company did not pay any income taxes in
1998.

Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may have limited, or may limit in the future,
the amount of net operating loss carryforwards which could be utilized annually
to offset future taxable income and income tax liabilities. The amount of any
annual limitation is determined based upon the Company's value prior to an
ownership change.

7. BENEFIT PLAN

The Company maintains a 401(k) Profit Sharing Plan (the "Plan") for its
full-time employees. Each participant in the Plan may elect to contribute from
1% to 20% of his or her annual compensation to the Plan. The Company does not
match employee contributions. Under the Plan, all participants are fully vested
and all benefits and accounts can not be forfeited for any reason.

* * * * *

F-17

[DESCRIPTION OF ARTWORK]

[Inside back cover of Prospectus:

The inside back cover includes a number of screen shots depicting the
application of our products and services at our OEM customer Web sites and
at our own destination site at www.directhit.com.

Screen shot of default popularity-based search results at an OEM
customer Web site highlighting the default popularity-based, Direct
Hit-branded search results.

Screen shot of button-model popularity-based search results at an OEM
customer Web site highlighting the Direct Hit-branded "Top 10 Results" link.

Screen shot of Related Searches at an OEM customer Web site highlighting
the Direct Hit-branded Related Searches.

Screen shot of Personalized Search at our own destination site.

Screen shot of Directory-based Search at an OEM customer Web site
highlighting the Direct Hit-branded Directory-based Search.

Screen shot of our Popularity-based Shopping Product at an OEM customer
Web site highlighting the Direct Hit-branded Popularity-based Shopping
Product.]

[Logo outside back cover of prospectus: Company logo.]

DIRECT HIT TECHNOLOGIES, INC.
(LOGO)

UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN
ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

SUBJECT TO COMPLETION, DATED DECEMBER 22, 1999

[DIRECT HIT TECHNOLOGIES, INC. LOGO]

COMMON STOCK

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

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.

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

PER SHARE TOTAL
--------- ---------

Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Direct Hit...................................... $ $

We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------

ROBERTSON STEPHENS INTERNATIONAL

THOMAS WEISEL PARTNERS LLC

SOUNDVIEW TECHNOLOGY GROUP

WIT CAPITAL CORPORATION

The date of this prospectus is , 2000

UNDERWRITING

UNDERWRITING AGREEMENT

NUMBER
U.S. UNDERWRITERS OF SHARES
- ----------------- ---------

FleetBoston Robertson Stephens Inc..........................
Thomas Weisel Partners LLC..................................
SoundView Technology Group, Inc.............................
Wit Capital Corporation.....................................
INTERNATIONAL UNDERWRITERS
BancBoston Robertson Stephens International Limited.........
Thomas Weisel Partners LLC..................................
SoundView Technology Group, Inc.............................
Wit Capital Corporation.....................................
Total.....................................................
=======

underwriters may exercise the option only to cover over-allotments made in
connection with the sale of the shares of common stock offered by this
prospectus.

UNDERWRITING DISCOUNTS AND COMMISSIONS. The following table shows the
estimated per share and total underwriting discounts and commissions to be paid
by us to the underwriters. This information is presented assuming either no
exercise or full exercise by the underwriters of their over-allotment option.

WITHOUT WITH
PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTION OPTION
-------- -------------- --------------

The expenses of the offering payable by us are estimated at $ .
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.

The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.

LISTING. We have applied for approval for the quotation of our common stock
on the Nasdaq National Market under the symbol "DHIT."

DIRECTED SHARE PROGRAM. At our request, the underwriters have reserved up
to five percent of the common stock to be issued by us and offered for sale in
this offering, at the initial public offering price, to directors, officers,
employees, business associates and persons otherwise connected to Direct Hit.
The number of shares of common stock available for sale to the general public
will be reduced to the extent these individuals purchase reserved shares. Any
reserved shares which are not purchased will be offered by the underwriters to
the general public on the same basis as the other shares offered in this
offering.

SERIES C PREFERRED STOCK INVESTMENT. On July 16, 1998, two limited
partnerships affiliated with FleetBoston Robertson Stephens, Inc. purchased an
aggregate of 84,245 shares of our series C preferred stock for aggregate
consideration of $500,003. Each share of series C preferred stock will convert
into one share of our common stock upon completion of this offering.

PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Estimated expenses, other than underwriting discounts and commissions,
payable by us in connection with the sale of the common stock being registered
under this registration statement are as follows:

SEC registration fee........................................ $ 15,180*
NASD filing fee............................................. 6,250*
Nasdaq National Market listing fee.......................... 75,000*
Printing and engraving expenses............................. 125,000*
Legal fees and expenses..................................... 400,000*
Accounting fees and expenses................................ 275,000*
Blue Sky fees and expenses (including legal fees)........... 10,000*
Transfer agent and registrar fees and expenses.............. 10,000*
Miscellaneous............................................... 83,570*
----------
Total................................................... $1,000,000*
----------

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

* Estimated

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Delaware General Corporation Law and our charter and bylaws provide for
indemnification of our directors and officers for liabilities and expenses that
they may incur in such capacities. In general directors and officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, our best interests and, with respect to
any criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. Reference is made to our charter and bylaws
filed as Exhibits 3.1 through 3.4 to this registration statement.

The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify our directors, officers and
controlling persons against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of underwriting agreement filed as
Exhibit 1.1 to this registration statement.

In addition, we have an existing directors and officers liability insurance
policy.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since our inception on April 27, 1998, we have issued the following
securities that were not registered under the Securities Act:

(A) ISSUANCES OF CAPITAL STOCK.

In April 1998, we issued and sold 7,849,998 shares of common stock to two
investors for an aggregate purchase price of $2,617.

In May 1998, we issued and sold 5,187,501 shares of series A preferred stock
to four investors for an aggregate purchase price of $1,383,334.

In November 1998, we issued and sold 1,323,912 shares of series B preferred
stock to five investors for an aggregate purchase price of $1,999,997.

II-1

In July 1999, we issued and sold 4,431,263 shares of series C preferred
stock to 20 investors for an aggregate purchase price of $26,299,981.

No underwriters were used in the foregoing transactions. All sales of
securities described above were made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act (and/or
Regulation D promulgated thereunder) for transactions by an issuer not involving
a public offering.

(B) GRANTS AND EXERCISES OF STOCK OPTIONS.

Since the inception of our company on April 27, 1998, we have granted stock
options to purchase 3,345,696 shares of common stock with exercise prices
ranging from $0.001 to $3.34 per share, to employees, directors and consultants
pursuant to our 1998 Stock Option Plan and 1998-A Stock Option Plan. Of these
options, 1,996,894 have been exercised for an aggregate consideration of
$335,737.56 as of November 30, 1999. The issuance of common stock upon exercise
of the options was exempt either pursuant to Rule 701, as a transaction pursuant
to a compensatory benefit plan, or pursuant to Section 4(2), as a transaction by
an issuer not involving a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS:

EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------

1.1* Form of Underwriting Agreement.
3.1 Second Amended and Restated Certificate of Incorporation of
the Registrant (currently in effect).
3.2* Form of Third Amended and Restated Certificate of
Incorporation of the Registrant (to be filed upon the
closing of the offering).
3.3 Amended and Restated Bylaws of the Registrant (currently in
effect).
3.4 Form of Second Amended and Restated Bylaws of the Registrant
(to take effect as of the effective date of the registration
statement).
4.1* Specimen Certificate for shares of the Registrant's Common
Stock.
4.2 Description of Capital Stock (contained in the Certificate
of Incorporation filed as Exhibits 3.1 and 3.2).
5.1* Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1+ 1998-A Stock Option Plan.
10.2*+ 2000 Stock Option and Incentive Plan.
10.3*+ 2000 Employee Stock Purchase Plan.
10.4 Lease Agreement dated April 30, 1998 with Wellplay
Associates Limited Partnership or office space located at
386 Washington Street, 2(nd) Floor, Wellesley,
Massachusetts.
10.5 Lease Agreement dated October 3, 1998 with Wayne Realty
Trust for office space located at 888 Worcester Street,
Wellesley, Massachusetts.
10.6 Sublease Agreement with The Mathworks, Inc. dated November
5, 1999, for office space located at 24 Prime Parkway,
Natick, Massachusetts.
10.7 Second Amended and Restated Rights Agreement dated as of
July 16, 1999.
10.8 Exclusive Patent License Agreement with Gary Culliss and
Draper Fisher Associates Fund IV, LP dated May 22, 1998.
10.9 First Amendment, dated November 11, 1998, to the Exclusive
Patent License Agreement with Gary Culliss and Draper Fisher
Associates Fund IV, LP dated May 22, 1998.

II-2

EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------

10.10 Second Amendment, dated July 16, 1999, to the Exclusive
Patent License Agreement with Gary Culliss and Draper Fisher
Associates Fund IV, LP dated May 22, 1998.
10.11 Noncompetition Agreement with Michael Cassidy dated as of
July 16, 1999.
10.12 Noncompetition Agreement with Gary Culliss dated as of July
16, 1999.
10.13 Noncompetition Agreement with David Parker dated as of July
16, 1999.
23.1* Consent of Testa, Hurwitz & Thibeault, LLP (contained in
Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (contained on page II-4).
27.1 Financial Data Schedule.

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

* TO BE FILED BY AMENDMENT.

+ INDICATES A MANAGEMENT CONTRACT OR ANY COMPENSATORY PLAN, CONTRACT OR
ARRANGEMENT.

(B) FINANCIAL STATEMENT SCHEDULES.

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; and (3) that for the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Wellesley,
Massachusetts on December 22, 1999.

DIRECT HIT TECHNOLOGIES, INC.

By: /s/ MICHAEL CASSIDY
-----------------------------------------
Michael Cassidy
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR

POWER OF ATTORNEY

We, the undersigned officers and directors of Direct Hit Technologies, Inc.
(the "Company"), hereby severally constitute and appoint Michael Cassidy and
John McDonough, and each of them individually, with full powers of substitution
and resubstitution, our true and lawful attorneys, with full powers to them and
each of them to sign for us, in our names and in the capacities indicated below,
the registration statement on Form S-1 filed with the Securities and Exchange
Commission, and any and all amendments to said registration statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of the Company, and to file or cause to be filed the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby ratifying and
confirming all that said attorneys, and each of them, or their substitute or
substitutes, shall do or cause to be done by virtue of this Power of Attorney.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below:

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

/s/ MICHAEL CASSIDY President, Chief Executive Officer
- ------------------------------------ and Director December 22, 1999
Michael Cassidy

/s/ JOHN MCDONOUGH Executive Vice President, Chief
- ------------------------------------ Operating Officer, Chief December 22, 1999
John McDonough Financial Officer, and Treasurer

/s/ GARY CULLISS Chief Technology Officer,
- ------------------------------------ Secretary and Chairman December 22, 1999
Gary Culliss

II-4

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

/s/ ROB CHANDRA Director
- ------------------------------------ December 22, 1999
Rob Chandra

/s/ JONATHAN GOLDSTEIN Director
- ------------------------------------ December 22, 1999
Jonathan Goldstein

/s/ VERNON LOBO Director
- ------------------------------------ December 20, 1999
Vernon Lobo

/s/ WARREN PACKARD Director
- ------------------------------------ December 19, 1999
Warren Packard

/s/ MICHAEL SANTULLO Director
- ------------------------------------ December 20, 1999
Michael Santullo

II-5

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------

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

* TO BE FILED BY AMENDMENT.

+ INDICATES A MANAGEMENT CONTRACT OR ANY COMPENSATORY PLAN, CONTRACT OR
ARRANGEMENT.