Other financial highlights for the quarter include:

• Gross margins increased 3.1 percentage points to 81.5%.
• Bad debt expense was reduced to 4.6% from 9.7% in Q3.
• Balance sheet remains strong with $88 million in cash and short term investments and no long term debt.

InfoSpace is #1

For the month of December, InfoSpace was ranked as the number one directory site by a wide margin and the 19th most visited Web site, according to Media Metrix. "Being number one validates our leadership in the directory area, allowing us to now turn our focus to doing the same with the private label commerce solution we will be launching this year," said Jain.

Traffic on the InfoSpace affiliate network climbed to 318 million page views for the month of December 1998, up from the 86 million page views reported during December 1997, according to Nielsen I/PRO. Additionally, at an average of 23 page views per visit for December 1998, InfoSpace's page views per visit were four times the industry average of 4 to 6.

Growing the Syndication Network

InfoSpace increased its affiliate network to over 1500 sites at the end of the year, giving its network an unduplicated reach of over 83% of all Web users in the United States, according to Media Metrix. The increase resulted from signing key agreements with companies such as Sprint, Earthlink, The Microsoft Network, and OnRadio. For example, in the agreement with OnRadio, InfoSpace will provide local content to all radio station Web sites in OnRadio's extensive integrated media network of hundreds of radio stations.

Also during the quarter, InfoSpace expanded its relationship with both AOL and ABC to become the exclusive provider of white pages and classifieds solutions. In addition, TDL InfoSpace (Europe) Limited, the company's joint venture with Thomson Directories Limited in the United Kingdom, signed to become the exclusive yellow pages provider for AOL UK.

InfoSpace signed many significant advertising and promotion agreements in the quarter with companies such as Microsoft, Netscape, AT&T, Lucent, Compaq, Dell and iVillage. The company saw an influx of large advertisers due mainly to the sharp rise in traffic and the extensive unduplicated reach of the company's affiliate network.

Broadening the Service Offerings

During the quarter, the company made significant progress in developing its new ActiveShopper commerce solution. This solution will offer the ability to search online stores, catalogs, and auctions as well as find product reviews, discussion groups, and competitive prices. ActiveShopper is designed to change the way people shop on the Internet by providing an integrated service that offers online shoppers what they need to research and buy a product all in one place.

ActiveShopper is a private label commerce solution for any Internet portal, destination site, or Internet appliance. The company expects to launch this solution in the first half of 1999 and is currently in a pilot program with Lycos, CMP Media, Xoom.com, TechWave, and Catalog City. At launch, ActiveShopper will be immediately available to the company's 1500 affiliate Web sites and Internet appliances.

"We are leveraging the leadership and strength we have in aggregating and integrating content and extending that to the commerce area. Our affiliates will be able to offer their users an integrated commerce solution, as they do now with our content solution," said Jain.

Also in the Quarter:

• InfoSpace added to its executive management team by appointing Bernee D.L. Strom as President and Chief Operating Officer and Director in November 1998. Prior to joining InfoSpace, Ms. Strom was a member of the board at Walker Digital, whose first spin-off was Priceline.com, an Internet commerce company. She was also a founder and a principal of Gemstar International, the creator of VCRPlus+® Instant Programmer. In addition, Randy Massengale joined InfoSpace as Vice President of Human Resources. Mr. Massengale joined the company from Microsoft Corporation.
  
  
• Rufus W. Lumry III was appointed to the board of directors. Mr. Lumry was formerly a director and CFO of McCaw Cellular.
  
  
• InfoSpace successfully completed its Initial Public Offering on December 15, 1998. The company generated $86 million in proceeds from the sale of 5,750,000 shares of common stock.
  
  
• TDL InfoSpace (Europe) Limited, a joint venture between InfoSpace and Thomson Directories Limited in the UK, was launched during the quarter. This marks InfoSpace's first global expansion.

About InfoSpace, Inc.