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Beyond Eyeballs, It's Commerce That Matters Now

It's why the domain suffix term is ".com" and not ".ahem" (a rather throaty sound sales people make when window shoppers don't buy anything). Said another way, it's the difference between a buyer and a browser.

Now that Amazon.com (NASDAQ:AMZN) finally cracked the top 10 Web sites in the world the value per potential customer/user illustrates the premium investors pay for buyers/sellers vs. browsers. (.com vs. .ahem).

Remember, the total users on Amazon.com are not all buying. But the center of the Amazon experience rests on that.

So let's invent another new word series in the Harmon Web Finance lexicon: etail Internet service provider or ESP (sounds prescient even).

An ESP is a rare beast and shares certain attributes with ISPs (Internet Service Providers such as Earthlink) and OSPs (Online Service Providers such as AOL). The common bond between these lies in user draw and retention.

ESPs may have certain advantages over ISPs or OSPs in one powerful way: anyone going to Amazon.com at a very basic level may be interested in buying something, probably a book.

That same user on Mindspring or Rocky Mountain Internet or one of thousands of ISPs globally may be only using the ISP or OSP as an access point to destinations beyond.

This week's WEBDEX shows that to me quite clearly:

Internet.com's March 4-21-99 4-28-99 4-21-99 4-28-99 Percent
WEBDEX Users Market cap or PMV* Market cap or PMV* User User change
  (millions) (millions) (millions) Value Value  
AOL.com* 47.0 $25,000 $22,250 $532 $473 -11.0%
Microsoft.com* 32.0 $8,750 $8,500 $273 $266 -2.9%
Lycos 31.9 $4,384 $4,184 $137 $131 -4.6%
Yahoo 31.3 $35,064 $34,789 $1,121 $1,112 -0.8%
GO Network (SEEK) 23.8 $3,601 $3,238 $152 $136 -10.1%
GeoCities 21.3 $3,753 $3,737 $176 $175 -0.4%
Excite 18.9 $7,375 $7,906 $391 $419 7.2%
Time Warner web sites 13.3 $2,000 $1,850 $151 $140 -7.5%
Blue Mtn Arts 11.1 $1,250 $750 $113 $68 -40.0%
Amazon.com 10.7 $28,877 $31,172 $2,690 $2,904 7.9%
TOTAL 241.2 120,054 118,376 5,736 5,824 1.5%
AVERAGE 24.1 12,005 11,838 574 582 1.5%
MEDIAN 22.5 5,880 6,045 225 221 -1.9%
1999 internet.com *pmv=estimated private market value for website only; users, media metrix; valuation estimates, Steve Harmon

On that observation the value per Amazon user exceeds all the others in the top 10 by far, to the tune of 160% greater than longtime user value king Yahoo (NASDAQ:YHOO). Certainly etail drives some of Yahoo's valuation also. Investors aren't paying $1,100 per user for simple searchers.

Yahoo has auctions, stores, etc. but the focus is not buying and selling. Similarly, AOL.com (and AOL online) provides a mixture of services including etail but that wider focus dilutes user valuations.

While not in the top 10 in user volume to further the point consider that personal trading community eBay (NASDAQ:EBAY) trades at $2,878 per unique user--in line with Amazon. Like Amazon, eBay's users are there for commerce, not idle chatting.

The other new drive of value that I see is broadband. I won't debate cable vs. DSL here. The important part for these firms is in being on all mass platforms from dial up to cable to wireless. "Technology agnostic" best describes what the smarter firms in this space will be.

In broadband you begin to see separation from those with a strategy and those without. Yahoo's pending acquisition of Broadcast.com (combined with its Turbo Yahoo) has garnered some attention.

Excite's merger with cable Internet service provider @Home (NASDAQ:ATHM), which just received anti-trust approval, provides another example of fat strategies.

Note XCIT value per user rise of 7.2% against a general downturn for user values. The combo of content (Excite) with service (@Home) appeals to investors owed to @Home's multitude of agreements with cable operators for carriage.

On Blue Mountain Arts (the e-greetings firm), I show a drop of 40% based on Amazon adding greetings to its service. E-greetings are more of a feature, one part of a larger full-service Web suite. Note also in the above group that Lycos (NASDAQ:LCOS) hasn't recovered its pre-USA Network deal announcement value.

Part of that belongs to a deal premium that may have pushed Lycos too far too fast this year. Shareholders vote on the proposed deal soon. Meanwhile, Lycos' moves in Web radio, new ways of indexing, strong revenue results and reach I see as positive signs of business as usual for growth.


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Accolades:

"Fresh and provocative" -CBS Marketwatch, who named Steve Harmon one of the top Internet stock analysts and only independent one honored

"I am a huge fan of Steve Harmon's analysis" -Kleiner Perkins' John Doerr



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