Avenue A Announces Financial Guidance and Cost Savings Initiatives; Sets Profitability Target.

Business Editors

SEATTLE--(BUSINESS WIRE)--Jan. 22, 2001

Avenue A, Inc. (Nasdaq:AVEA), a digital marketing and technology company, today announced that it is undertaking a cost reduction program in response to current market conditions for Internet advertising.

The company also provided financial guidance for 2001.

Avenue A confirmed that its revenues for the fourth quarter of 2000 would be consistent with its most recent guidance, or approximately flat with the prior quarter's revenues of $47.2 million.

In assessing its near-term business outlook, the company noted the impact of the continuing shakeout among pure-play dot-coms on its revenues. In the first half of 2001, the company will continue to eliminate smaller clients whose ad spending has been too small or too sporadic to enable Avenue A to serve them profitably. The company's outlook also reflects a decline in ad spending from some of its larger clients due to softness in their businesses. Avenue A expects the greatest impact of these market conditions to be felt in the first half of 2001.

Avenue A announced that, as a result of this market softness, it expected revenues for Q1 of 2001 to be 30-35% below revenues for Q1 of 2000, which were $46.8 million. It also projected that full-year revenues for 2001 would be about 15% below revenues for 2000.

In response to these current market conditions and its drive to achieve profitability, Avenue A announced that it would immediately reduce its work force by 15%, or about 60-70 positions, as part of a cost reduction program. It will take an earnings charge to reflect severance costs and other expenses associated with its cost reduction program during Q1. Avenue A will continue its focus on making digital marketing effective through client service and investment in its leading analytics and technology platform, the Atlas(TM) Digital Marketing Technology Suite.

Avenue A expects that its cost reduction program and its shift away from pure-play dot-coms to fewer, but more profitable clients, will assist its drive to profitability. The company announced that it expects to become profitable on a pro forma basis in the first half of 2002. Pro forma earnings exclude the effects of amortization of intangible assets and deferred stock compensation.

At the end of September 2000, Avenue A had $136 million in cash and short-term investments. The company believes that it has sufficient cash to reach profitability.

Brian McAndrews, CEO of Avenue A, commented, "This cost reduction program is a difficult but necessary step in light of the current softness in the Internet advertising market and our focus on profitability. However, I feel strongly that the company is very well-positioned to take advantage of the inevitable growth in our markets, once the impacts of the dot-com shakeout diminish and industry conditions improve. With our dedication to customer service, our superior analytics and technology platform and strong balance sheet, Avenue A will continue to be a leader in our industry."

Avenue A will report 2000 fourth quarter and year-end results on Tuesday, Jan. 30. The company will provide further financial guidance during its quarterly conference call, which will be held on Jan. 30 at 5:30 pm EST. The call will be Webcast and can be accessed through the investor relations portion of the company's Website at www.avenuea.com.

About Avenue A

Avenue A, a digital marketing and technology company, enables marketers to acquire, retain, and grow customers across digital media. Using the Atlas(TM) Digital Marketing Technology Suite and a unique process of continuous testing, analysis, and optimization, Avenue A focuses on achieving the best possible results and the highest possible return on investment for their clients' digital marketing efforts. Clients include Microsoft, Gateway, Household Finance and TicketmasterOnline-CitySearch. Avenue A was founded in 1997, and is headquartered in Seattle with offices in London, Paris, Chicago and New York. Avenue A also offers digital marketing services through iballs, a wholly owned subsidiary based in New York. Avenue A and iballs adhere to the NAI privacy principles that have been endorsed by the FTC. These principles are designed to ensure Internet user privacy.

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as 'aims, anticipates, believes, estimates, expects, intends, plans, predicts, projects or targets' or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be evaluated by events that will occur in the future. The forward-looking statements in this release include, among others, all statements about the expected impact of market conditions on the first half of 2001, expected revenues for the first quarter of 2001 and for the year 2001, expectations regarding the Avenue A's drive to profitability and timing of profitability, and Avenue A's belief that it has sufficient cash to reach profitability. Forward-looking statements are based on the opinions and estimates of the management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect Avenue A's actual results include, among others, the potential failure to attract new clients, to maintain current, desired client relationships or to achieve effective advertising campaigns for existing clients, to achieve projected revenues and gross margins, delays in reaching profitability, insufficient funds to reach profitability, quarterly and seasonal fluctuations in operating results, fluctuating or declining demand for our advertising services, timing variations on the part of advertisers to implement advertising campaigns, costs related to any possible future acquisitions of technologies or businesses, the short term nature of Avenue A's contracts with clients which are cancelable on 90 days' or less notice, the fact that many of our clients have limited operating histories, are unprofitable and may not be able to pay for our services, and the uncertainties, potential costs, and possible business impacts of unfavorable rulings in the previously-announced class action lawsuit. More information about factors that potentially could affect Avenue A's financial results is included in Avenue A's Form 10-Q, as amended, for the fiscal quarter ended Sept. 30, 2000 filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. Except as required by law, Avenue A undertakes no obligation to update any forward-looking or other statements in this press release, whether as a result of new information, future events or otherwise.