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Valuations Of Top 10 Web Sites

My valuations of the top 10 Web sites shows they lost 2.1% as a group this past week as interest rate concerns and mergers drive or derail valuations.

For the public firms the market capitalization appears but for the Web assets of larger technology companies such as Microsoft (NASDAQ:MSFT) I list my estimated private market value for the ".com" side of the firm. Not Web sales or Web software, only the Web asset itself.

Note that GeoCities merged with Yahoo (NASDAQ:YHOO) largely the fuel behind YHOO shares rising I believe. Since user ranking firm Media Metrix hasn't combined GeoCities with Yahoo in terms of reach/users, I continue to highlight GeoCities as a separate line item in the table until then.

Basically with the comparables, growth, reach, revenue and potential (and now with the synergy of Yahoo marketing) I would place GeoCities at 10% of Yahoo valuation. Given the market's weakness the past two months in Internet stocks, YHOO was a $219 stock in April.

WEBDEX April 5-27-99 6-10-99 5-27-99 6-10-99 Percent
website user valuation Users Market cap or PMV* Market cap or PMV* User User change
  (millions) (millions) (millions) Value Value  
AOL.com* 46.4 $17,500 $15,000 $377 $323 -14.3%
Microsoft.com* 32.4 $8,200 $8,500 $253 $263 3.7%
Lycos 28.9 $4,406 $3,890 $152 $135 -11.7%
Yahoo 31.2 $28,791 $29,583 $923 $948 2.8%
GO Network (SEEK) 21.5 $2,603 $2,904 $121 $135 11.6%
GeoCities * 19.5 $3,106 $3,250 $159 $166 4.6%
Excite* 17.4 $7,167 $7,000 $411 $402 -2.3%
Time Warner web sites 13.5 $1,750 $1,825 $130 $136 4.3%
Blue Mtn Arts 11.5 $625 $650 $54 $56 4.0%
Amazon.com 10.4 $19,539 $18,731 $1,873 $1,796 -4.1%
TOTAL 232.7 93,687 91,333 4,455 4,360 -2.1%
AVERAGE 23.3 9,369 9,133 445 436 -2.1%
MEDIAN 20.5 5,787 5,445 206 214 4.0%
(valuations by Steve Harmon) 1999 internet.com *pmv=estimated private market value for Web site only; users, media metrix

For the longest time I've been calling Infoseek (NASDAQ:SEEK) the GO Network and it appears Disney agrees. Disney has expressed an interest in acquiring the 57% of SEEK it doesn't own. User values for SEEK jump 11% to $135 on the news. If Disney can maintain Go.com as a Web enterprise (and not a media division) then I can see more value creation.

What's the difference? A Web enterprise would have the ability to act independently and its stock should echo a more pure play level, which has commanded a premium.

Time Warner's (NYSE:TWX) Web sites stay in the top 10 but clearly to me the lack of brand value hurts the overall valuation of the asset. Time Warner's faceless Web effort at $136 per unique monthly user in my book ought to be worth about the same as a Lycos on a per user basis, maybe even less. I think Time Warner may be in the process of changing that, even Road Runner is a better brand than none at all. 'Pathfinder' doesn't blaze any trails in brand at all.

When e-card sender Blue Mountain Arts first cracked the top 10 in January I thought it was a fluke owed to the Christmas season. The staying power of its user base impresses me. A lot of work to do though on that one.

Amazon.com (NASDAQ:AMZN) got hammered by a Barron's article recently that called it "Amazon.bomb" and a $10 stock. Regardless, Amazon's value per user at $1800 dwarfs the others here. I believe some of that may be justified by the "customer" or "commerce" nature of Amazon's users. No coincidence to me that Amazon lists 10 million registered customers while its monthly user base is about the same.

With its $1.5 billion debt sold and $2 billion shelf filed, I can get to an AMZN "intrinsic" price per share far different than Barron's AMZN target price of $10. With the cash per share more than double $10, the strong sales, the move into toys (already had music and video), I believe Amazon's valuation at this point seems "fairly valued" to me.


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