Press Release

Digital River Announces a 56 Percent Improvement in Q4 Results Over Q3; Beats Expectations with $0.11 Per Share Net Loss Prior to Goodwill Amortization
Achieves 82 Percent Year-Over-Year Growth in Revenue and Hits Profitability Milestone

MINNEAPOLIS, MN, January 23, 2001--Digital River, Inc. (NASDAQ: DRIV), a global Commerce Service Provider (CSP), today reported revenues of $10.1 million for the quarter ended December 31, 2000. This represents a sequential increase of 32 percent from revenue of $7.6 million in the third quarter, and a year-over-year increase of 82 percent from revenue of $5.5 million in the fourth quarter of 1999.

The net loss prior to goodwill amortization and acquisition-related costs was $2.4 million, or $0.11 per share, in the fourth quarter, a 56 percent improvement from the third quarter net loss of $5.5 million, or $0.25 per share, and significantly better than consensus analyst estimates of a loss of $0.21 per share. The net loss for the quarter, including goodwill amortization and acquisition-related costs, was $5.4 million, or $0.24 per share, compared with a net loss of $8.1 million, or $0.37 per share, in the third quarter.

For the twelve months ended December 31, 2000, revenues totaled $31.2 million, a 115 percent increase from $14.5 million in the same period last year. During the year, the net loss, prior to the amortization of goodwill and acquisition-related costs, totaled $22.7 million, or $1.06 per share. The net loss for the period, including the amortization of goodwill and acquisition-related costs, totaled $38.1 million, or $1.78 per share, compared with a net loss of $27.7 million, or $1.36 per share during 1999."

Digital River also reported that its Software and Digital Commerce Services Division showed positive earnings for the quarter before interest, taxes, depreciation and amortization (EBITDA). The Company is now focused on its goal of overall Company profitability, before goodwill amortization, in the fourth quarter of 2001.

"Achieving operational profitability in the Software Services Division was a major milestone for Digital River," said Joel Ronning, Digital River's chief executive officer. "This accomplishment combined with overall fourth quarter results are strong indicators that we are on a clear path to company-wide profitability. We have prudently managed our expenses while increasing revenue. We are well positioned for 2001."

Industry-Leading Software and Digital Commerce Services
The Software Services Division generated $7.7 million in revenue for the Company in the quarter, versus revenues of $5.9 million in the third quarter. The division had EBITDA of $229,000 for the quarter versus a loss of $1.5 million in the third quarter. New clients announced since the third quarter included Systran, Creative Planet, and Symantec, who launched 14 global commerce sites in January 2001 and has already become one of the Company's largest clients. The division continues to show substantial growth, increasing the number of client sites it hosts and manages.

"Digital River's Software Services Division continues to lead the software and digital content publishing services market," said Jay Kerutis, Digital River's president of its Software Services Division. "One of our primary objectives during 2000 was to help our clients increase e-marketing efforts and grow their revenues. As a result, approximately 25 percent of the revenues on our publisher sites were driven by Digital River's marketing efforts. We expect to see more growth in this area in 2001."

Execution of E-Business Services Strategy
The E-Business Services Division generated $2.3 million in revenue for the Company in the quarter, a sequential increase of 35 percent, from $1.7 million in the third quarter. The division's EBITDA loss was $2.0 million for the quarter versus $3.4 million in the third quarter.

Digital River's E-Business Services Division added six new client contracts in the fourth quarter, resulting in a total of 51 client contracts, at December 31, 2000. New contracts announced since the end of the third quarter included Nabisco, Polaris Industries and Mate Precision Tooling.

"We are seeing a shift in the Internet market as more and more of the growth is being fueled by the increasing presence of established brick-and-mortar companies," said Ronning. "It's these manufacturers, distributors and retailers that are looking to the Internet to solve complex business problems and automate traditional processes. This pattern is clearly emerging in our client base."

Future Expectations
Digital River expects to achieve overall Company profitability in the fourth quarter of 2001, when it expects to generate $0.01 of earnings per share, prior to the amortization of goodwill. For 2001, Digital River anticipates revenues to increase approximately 80 percent from the prior year, to between $56 and $57 million. The Company anticipates a seasonal pattern consistent with prior years, including a strong first quarter, followed by a seasonally slower second quarter, and strong growth during the remainder of the year. The Company expects a loss per share, prior to goodwill amortization, of $0.27 for 2001. Cash balances are anticipated to total in excess of $20 million at December 31, 2001.

In the first quarter, the Company expects to generate sequential revenue growth of approximately 20 percent, to $12.2 million. The Software Services Division revenue is projected to be strong, comprising approximately 79 percent of total revenue in the first quarter. Digital River anticipates that the first quarter loss per share, prior to goodwill amortization and acquisition-related expenses, will improve to $0.10.

About Digital River
Founded in 1994, Digital River is a global Commerce Service Provider (CSP), offering thousands of companies complete e-commerce systems and services. The Company's world-class infrastructure and professional services are proven to grow businesses quickly and profitably while reducing risk. Digital River's commerce services include e-commerce strategy, site development and hosting, order and transaction management, system integration, product fulfillment and returns, e-marketing and customer service. Digital River's clients include Symantec, Fujitsu, 3M, Siemens, Hewlett-Packard, Polaris, Novell, Autodesk, Adaptec, Block Financial and Staples. For more details about Digital River, visit the corporate Web site at www.digitalriver.com or call 952-253-1234.

Digital River will sponsor a fourth quarter conference call today at 4:45 p.m. Eastern Standard Time. Investors are invited to listen to the conference call via Digital River's Web site, www.digitalriver.com. Please go to the Investor page to access the call and install any necessary audio software.

Forward-Looking Statements
Except for the historical information contained herein, this press release contains forward-looking statements, including statements containing the words, "believes," "anticipates," "expects," and similar words. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others: the Company's limited operating history and variability of operating results; competition in the electronic commerce market; and other risk factors referenced in the Company's public filings with the Securities and Exchange Commission.


© 2001 Digital River, Inc. Digital River® is a registered trademark of Digital River, Inc. All other trademarks and registered trademarks are trademarks of their respective owners.

Give us a call at 1.952.253.1234. Or e-mail us at investorrelations@digitalriver.com.