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About.com: A Recipe for Loyal Users

Offline it's nice to have everything in one place when we buy things or do research. Hence, the Wal-Marts and libraries of the world. We like to find our products and resources in one place, rather than spend our time driving all around looking to find those things.

The Internet acts as the Wal-Mart of all goods, services, and information. However, here, people still oppose driving, but welcome surfing. Everything you could want or need is only a click away. So online companies face a major dilemma; be everything to everyone (Amazon.com), or something special to a targeted group of people (eToys).

I'm an avid proponent of vertically focused Web content and e-commerce companies. It's clear that the in-depth, quality offering will attract loyal users, which of course attracts the end-all prize on the Internet - -commerce transactions and advertisers.

Indeed, Forrester Research media analyst, Charlene Li recently announced a "sea change" in online spending, noting that advertisers and marketers are showing a stronger affinity for vertical sites such as CNET Inc. and Sportsline. Li's report predicts that 57 percent of all online ad spending will flow to vertical sites and affiliate networks by 2004- - a nice piece of the pie considering eMarketer predicts $13.3 billion in Web advertising by 2003.

Still, investors can't and certainly don't argue with "critical mass," a term thrown around by "experts" in the Internet universe that signifies dominance or superiority. The basic idea is that an Internet property (or network of properties) at some point gathers enough users (it can be sellers, buyers, registered users, advertisers, etc.) where it becomes a liability for other users, advertisers and sponsors to not somehow be associated with that property. In our world, a critical mass is only justifiable if the company can create Internet market value (aka-sky high market value).

The leading independent destination on the Web, Yahoo! Inc. (YHOO), immediately comes to mind. The network hosted 46 million users during the month of February, reaching 61 percent of the Web's total audience. Yahoo's stock now trades at $201-1/2 with a $106 billion market capitalization. Aside from its strong growth rate (125% year-over-year) and high operating margins (35% +), critical mass is a huge reason for investor optimism and the resulting stock performance.

Internet stock investors are left with the same dilemma facing most online companies...breadth vs. depth- - volume vs. niche. Why fret though when you can have the best of both worlds?!

About.com (BOUT) offers users a portal-like interface with 28 main channels of content that are divided into 700 niche environments (sites). In addition, an expert guide who will help you find the information you need while providing unique research, analysis and services oversees every site. I clicked on About.com's "Finance/Investing" channel and was promptly presented with 22 niche sites that spanned "day trading" to "retirement planning." Click on "Investing for Women" and guide Lita Epstein provides the information, links, community events and shopping resources for this group.

What does this mean for investors? About.com offers investors what I like to call the "portal punch"... a large number of users. However, by breaking the site into niche verticals, users stop by, stay, and come back often because their specific needs are being addressed. Of course, advertisers enjoy the large base of users. The real value, though, is About's ability to target users in any of its 700 vertical sites with advertising and commerce offerings. 406 companies advertis



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