Prospectus Summary
You should read the following summary together with the more detailed information and Engage's financial statements and the notes to those statements appearing elsewhere in this prospectus.
This prospectus contains forward-looking statements based on our current expectations, assumptions, estimates and projections about Engage and our industry. These forward-looking statements involve risks and uncertainties. Engage's actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, as more fully described in the "Risk Factors" section and elsewhere in this prospectus. Engage undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
Engage Technologies, Inc.
Our Business
Engage is a leading provider of profile-driven Internet marketing solutions. Engage has developed proprietary technology that enables it and its customers to create Web user profiles providing detailed information about individual consumer preferences without personally identifiable user information. Based on this technology, Engage has built the Engage Knowledge database, which currently contains more than 30 million anonymous consumer profiles built with data drawn from multiple, diverse Web sites. When a user visits a Web site of any customer subscribing to the Engage Knowledge data service, Engage matches that visitor with his or her profile in the profile database. The Web site can then use the profile to target advertisements, content and e-commerce offerings to that visitor based on his or her particular preferences, demographic characteristics and geographic location.
Each Engage Knowledge profile contains interest codes that reflect a Web user's inferred preference level in hundreds of standard categories and subcategories, such as books, business, computers, fashion, sports and travel. Categories can be further customized to meet the needs of a specific customer or market. These profiles are continuously updated and refined based on a visitor's browsing behavior across multiple Web sites, including pages selected by the user, the duration of the user's visits and the responses of the user to specific advertisements and promotions. Engage Knowledge profiles are designed to protect the privacy of Web users because they do not contain information about the identity of an individual user, such as name, home or e-mail address or domain name.
Engage's products and services include:
. Engage Knowledge, a service that is currently being tested with customers and will allow real-time access to Engage's centralized database of anonymous global profiles of Web users;
. Engage ProfileServer, a software product used by customers to create and deliver site-specific profiles of Web users;
. Accipiter AdManager, an online advertising management system that automates the scheduling, targeting and delivery of ads on Web sites and the reporting of advertising campaign results;
. Accipiter AdBureau, an outsourced online advertising management service using AdManager technology;
. I/PRO services, which provide outsourced Web site traffic analysis and audits; and . Engage DecisionSupportServer, a software product that allows customers to perform sophisticated analyses of the behavior and interests of their Web site visitors.
As of April 30, 1999, Engage had sold its software and services to approximately 300 customers including CNET, Dell, Lycos, Microsoft and Sportsline USA.
Our Market Opportunity The Internet is capable of transforming the way businesses market and sell products. The interactive nature of the Web offers the potential for businesses to market to individuals on a one-to-one basis in real-time. Businesses are seeking to improve the effectiveness of their marketing campaigns by directing their advertisements and promotions toward the Web users they most want to reach. By targeting advertisements and promotions to the most relevant users, Internet marketers seek to improve their response rates and brand awareness and reduce costs by eliminating spending that is not directed to their desired audience.
While the growth and interactive nature of the Internet are generating a large volume of consumer data useful for targeted marketing, Web users are increasingly concerned about the potential for loss or abuse of their privacy. To balance the desires of Internet marketers and consumers, there is a need for a solution that enables marketers to tailor their offerings effectively to individual users, while also preserving the privacy and anonymity available to individuals on the Internet.
Our Strategy
Engage's strategy includes a number of elements designed to enhance its position as a leading provider of profile-driven Internet marketing solutions:
Exploit position as leader in profiling technology. We believe we have the opportunity to establish Engage as the recognized brand for audience targeting on the Internet by developing a family of "Engage-enabled" products and services that use our proprietary profiling technology.
Offer multiple solutions based on open Web architecture. To promote broad acceptance of Engage profiles, we plan to continue to design our products based on an open Web architecture to work both with our own applications and third-party applications.
Continue to enhance profiles. We intend to continue to improve the quality and usefulness of Engage Knowledge profiles by increasing our installed base of subscribers to the Engage Knowledge data service, improving our profiling algorithms and technology and refining our profile categories to provide broader, more detailed and market-specific information.
Focus on specific markets. We plan to tailor our profiling solutions for specific markets, including Web publishers and advertising networks and vertical markets such as automotive, retail and other industry-specific markets.
Leverage family of Engage solutions. We intend to cross-sell our products and services to our existing installed base of customers.
Maintain position as trusted leader in Internet privacy. We plan to maintain our commitment and leadership regarding issues of consumer privacy on the Internet.
Our Offices
Engage was incorporated in Delaware on July 18, 1995. Our principal executive offices are located at 100 Brickstone Square, Andover, MA 01810. Our telephone number at that location is 978-684-3884. Our Internet address is www.engage.com. The information contained on our Web site is not incorporated by reference in this prospectus.
The Offering
Shares offered by Engage...................... shares
Shares to be outstanding after this offering.. shares(1)
Proposed Nasdaq National Market symbol........ ENGA
Use of proceeds............................... For general corporate purposes,
including working capital
(1) Based on 19,679,569 shares of common stock outstanding as of April 30, 1999, plus shares of common stock issuable upon conversion of outstanding convertible notes and convertible preferred stock as of that date. Excludes 3,233,897 shares issuable upon the exercise of outstanding stock options as of April 30, 1999.
Engage, the Engage logo, Accipiter, AdBureau, AdManager, ProfileServer, DSServer, Engage Knowledge, Engage Technologies, I/AUDIT and I/PRO are trademarks of Engage. All other trademarks and service marks are the property of their respective owners.
Unless otherwise specifically stated, information throughout this prospectus assumes:
. the underwriters' over-allotment option is not exercised;
. the conversion of $ of indebtedness to CMGI into shares of convertible preferred stock prior to the closing of this offering;
. the conversion of all outstanding shares of our convertible preferred stock into shares of common stock upon the closing of this offering;
. the effectiveness of a -for- stock split immediately prior to the date of this prospectus; and . an initial public offering price of $ per share.
Summary Financial Data The following table summarizes our statement of operations data. This financial information reflects the results of operations of Accipiter since April 8, 1998 and does not reflect the results of operations of I/PRO, which was acquired in April 1999.
Six Months
Ended
July 18, 1995 Year Ended July 31, January 31,
(inception) -------------------- ----------------
to July 31, 1996 1997 1998 1998 1999
(unaudited)
(in thousands, except per share data)
Statement of Operations Data: Revenue................. $ $ 25 $ 2,217 $ 164 $ 4,265 Cost of revenue......... -- 31 2,242 438 3,064 Gross (loss) profit... -- (6) (25) (274) 1,201 Operating expenses: In-process research and development........... -- -- 9,200 -- -- Research and development........... 1,796 7,261 5,925 3,460 3,878 Selling and marketing.. 155 1,566 4,031 1,279 3,732 General and administrative........ 428 1,429 2,333 484 1,586 Amortization of goodwill and other intangibles........... -- -- 1,273 -- 1,909 Total operating expenses............. 2,379 10,256 22,762 5,223 11,105 Loss from operations.... (2,379) (10,262) (22,787) (5,497) (9,904) Gain on sale of product rights................. -- -- 9,240 9,240 -- Equity in loss of joint venture................ -- -- -- -- (160) Interest expense, net... -- -- (172) -- (339) Net (loss) income....... $(2,379) $ (10,262) $ (13,719) $3,743 $(10,403) Pro forma basic and diluted net loss per share.................. $ (1.64) $ (0.62) Weighted average shares of common stock used in computing pro forma basic and diluted net loss per share......... 8,375 16,824
The following table is a summary of our balance sheet at January 31, 1999 (1) on an actual basis, (2) on a pro forma basis after giving effect to the conversion of all debt to CMGI into shares of convertible preferred stock and the conversion of all outstanding convertible preferred stock into common stock and (3) on a pro forma as adjusted basis to reflect the sale of shares of common stock at an assumed initial public offering price of $ per share, after deducting the underwriting discount and estimated offering expenses.
January 31, 1999 Pro Forma Actual Pro Forma As Adjusted (in thousands)
Balance Sheet Data: Cash and equivalents............................. $ -- $ -- $ Working capital (deficit)........................ (14,754) (5,407) Total assets..................................... 22,782 22,782 Debt to CMGI..................................... 9,347 -- Stockholders' equity............................. 4,345 13,692