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Net Perceptions Targets Relevance

In the fuzzy logic world of the Web the marketing gurus often come down from the mountains every so often with a few snippets of a burning bush or chips of stone tablets. Etched as commandment number one on the Internet is this: one-to-one marketing. Has Net Perceptions fulfilled the slogan?

Net Perceptions calls its service/software "realtime marketing solutions." Using recommendation engines Net Perceptions technology targets offers and content to users as they click on a Web site. As users click on and come back to the site Net Perceptions tracking software gets smarter about the likes of the user and edits and filters marketing to them based on that.

For example, a buyer on a book site may begin to get more targeted book titles or authors based on interests expressed by usage patterns.

The newly public firm debuted with its IPO April 23 at $14 per share, has traded as high as $35 and closed May 13 at $26.375. The low was $19.375. On a market value basis NETP trades at $562 million market cap or 124x 1998 revenue, which seems a little frothy to me at this juncture.

However, let's give the firm four years of growth and I feel comfortable calling this a 14x discounted multiple with high risk, high expectations built in. If executed properly I forecast positive earnings by third quarter 2001 as losses this year remained in check with 1998 at about $5 million.

The real question I have at this juncture is this: the landscape looks fairly lean for these sorts of solutions. Broadvision (NASDAQ:BVSN) is one leader in the genre and it has cut a deal with HP. Open Market (NASDAQ:OMKT) is another targeted marketing solution provider, although its revenue for 1998 was basically flat and seems to be so for 1999 also. Open Market's growth looks like in consulting.

The short answer then for Net Perceptions in my mind is a deal or alliance with a larger Web business solutions provider along the lines of Microsoft, Intel, Compaq, DELL, DoubleClick (NASDAQ:DCLK). On the latter, DoubleClick may find that being an advertising solution AND marketing solution along these lines might be a good move.

The key draw to the Web for the coming mass usage not only in the U.S. but globally may rely more on targeted offers, making the Web experience more relevant.

Consider that as more than a billion pages are created perhaps daily and added to the Web that finding what you want is becoming more difficult, especially if you don't know what you want but the software can draw it out for you. That's perception that should affect net (income) for all sites.


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