eMailbag Monday @ Net Stocks
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First e-mail up this week asks: "Steve, I'm an Italian investor and bought 1,000 shares of Lycos. What is your perspective?"
Reply: Since you're in Europe perhaps you've heard that Lycos (NASDAQ:LCOS) may be considering a public offering of Lycos Europe, a joint venture with German media giant Bertelsmann. And talk recently centered on perhaps CMGI buying Lycos, but that fell apart apparently, despite my analysis showing Lycos trading at a discount to Alta Vista on a per user basis. Alta Vista and CMGI are reportedly discussing a deal.
Overall, I think Lycos has one of the larger reaches on the Internet at #4 just behind Yahoo (according to Media Metrix). Lycos has about 30 million unique monthly users. AOL (NYSE:AOL) tops the list with 46 million.
With Disney making moves with Infoseek, NBC with SNAP/XOOM.com I think Lycos may need to find a merger partner to stay on the top five.
For example, I can easily see an Amazon.com/Lycos deal. Consider that Lycos was excited about the merger with USA Networks/Home Shopping (before CMGI and investors gave it a thumbs down).
But the basic appeal is there, finding a commerce element. Amazon.com has that. Similarly, Amazon.com must portalize itself to widen its customer base, provide it more leads in house. After that a deal with a TV property makes sense, but a broadcaster more than a cable network. Go wide. It's a 10-year battle ahead. TV and Web are becoming complementary mediums quickly.
Network Solution Or Unsolved Legal Mystery?
"Steve, what do you think about the short/long term growth of NSOL?"
Reply: Short term I see Network Solutions (NASDAQ:NSOL), the firm that inherited ".com" domain registrations from the U.S. government, battling it out as it has to compete. This former monopoly already picked a fight with ICANN, a body organized to oversee the transition of domain registrations to multiple providers. So short term I see NSOL trying to figure out its new role in a competitive environment when it was used to being a monopoly.
Longer term I think it all depends on the outcome of the wrangling going on between Network Solutions and ICANN comes to. On a pure business front I think Network Solutions could become a much more valuable firm if it can start to figure out what it can do besides register domains.
Doubleclick Or Clicked In 2? Abracadabra
"Steve, I'm very bullish on Doubleclick and have been for the last year. My question is how do you think this deal between CMGI and Compaq, if it goes through, will effect DoubleClick. As you know AltaVista accounts for a significant part of DoubleClick's revenue stream. I am wondering whether CMGI will sever the relationship if they purchase AltaVista once the market realizes this DoubleClick stock should fall. What do you think?"
Reply: According to DoubleClick's latest annual report, 46.5% of DoubleClick's revenue came from AltaVista in 1998. However, the contract between DoubleClick and AltaVista lasts until January, 2002, giving DoubleClick some time to diversify its revenue streams should CMGI acquire AltaVista and drop DoubleClick in favor of its own ad services. Relying so much on AltaVista has always been DoubleClick's biggest weakness and now it's paying the price.
Perhaps DoubleClick should acquire AltaVista, or should have a long time ago? Probably too late for that. I see DoubleClick's future relying more on targeted results across the Web and the new hybrid TV-Web. It's pending deal to acquire marketing firm Abacus for $1 billion stock may offset Alta Vista revenue loss somewhat.
Abacus reported $12.8 million first quarter revenue, on an annualized basis at that rate that could make Abacus an about even replacement in terms of revenue lost if AltaVista drops DoubleClick. The Abacus deal, though, is getting some flack from consumer privacy groups since it marries Abacus' credit card database with DoubleClick's targeted ad reach.
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