Record Falls, With Days To Spare
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Yet another milestone has been reached in this precedent-shattering year for Internet IPOs.
The crop of public offerings unleashed Friday enabled June to set a new monthly record with 29 'Net IPOs, topping the 26 that hit the street in May.
With three trading days left, we should see at least 30 Internet IPOs this month, though the trend in recent weeks has been toward lighter action through Thursday, followed by a flurry of Friday offerings. (In fact, 16 of the 29 Internet IPOs in June have gone out on Fridays.)
And given this week's heavy docket of expected pricings, it is not inconceivable that 35 Internet companies will have gone public by the time June comes to a close -- all this despite a demonstrably soft, overloaded market heading into its traditional summer slowdown.
Based in Berkeley, Calif., the company hopes to raise $30 million in an offering of 3 million shares to be priced between $9 and $11 each. The stock will trade under the Nasdaq ticker symbol ASKJ.
This IPO is being touted as one of the week's most promising by some analysts, primarily because the underwriter is Morgan Stanley Dean Witter. But in a market that has generously rewarded infrastructure plays while greeting many content IPOs with stony indifference, this strikes me as odd.
Despite having unveiled its service in April 1997, Ask Jeeves had only $593,000 in revenue in 1998, most of which came from site advertising. (Though revenues in this year's first quarter were $1.1 million, up from about $15,000 in Q1 '98.) Net loss in '98 was $4.3 million, growing to $4.9 million in the recent first quarter.
None of which makes Ask Jeeves stand out one way or another from other content plays. If anything, the company is, like Netivation.com, barely past development stage.
For example, the company says it plans to generate revenues through the "facilitation of electronic commerce" by referring users who ask shopping questions to certain vendors, some of whom will pay Ask Jeeves. But it hasn't yet generated any revenues from this method, which it calls "relatively new and largely untested." (Both AltaVista and GoTo.com are charging vendors for search referrals.)
Ask Jeeves also says it expects to make money by licensing its search services to corporations. But through Q1, the company had only five corporate customers, all of whom have just begun to implement the service on their sites. Again, no track record.
Which leaves advertising dollars as the main fuel for Ask Jeeves' growth in the foreseeable future. That too is a tough proposition. Competition among search service vendors is fierce, and Ask Jeeves doesn't have the extras that the full-fledged portals have to attract traffic.
It must instead rely on the attractiveness and effectiveness of its question-and-answer search format. And while the notion of typing in questions and getting plain-English answers is enticing, the reality is that it isn't suited for many, even most, specific queries.
In other words, while Ask Jeeves offers an interesting alternative to finding information in cyberspace, it will never be a savvy users' search workhorse. Bottom line: Lots of curious visitors, lots of churn.
None of which is to say that Ask Jeeves' stock won't do well when shares begin trading. Another search service provider, GoTo.com, closed its first day of trading on June 18 at $22.38 -- or 49% above its $15 price - and was trading Monday afternoon at $21.38.
It's just that as a long-term investment proposition, Ask Jeeves leaves too many questions unanswered.
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