Wall Street Misses Mark On Excite-Netscape Deal
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Excite's (NASDAQ:XCIT) deal announced on May 4 to pay Netscape $70 million to provide search services caused XCIT to drop 8% to $66.75 per share on May 5 as Wall Street says "whoa" to the size of the deal for a company with waning browser share.
Excite expects to gain about 10 million page views a day from the deal.
Our snapshot analysis of the numbers: On a $25 CPM and 25% page view sell-through (based on a net 10 million page views a day that Excite expects to gain) that implies $22.5 million a year or $45 million in ad sales over the two-year term of the deal for Excite.
But we believe that Excite can do better with marketing deals and targeted CPMs, delivering the right ad to the right user at the right time for better CPM (thanks to its MatchLogic acquisition).
In short, XCIT seems to be oversold while Wall Street applauded NSCP, who we think didn't gain as much from the deal other than cash to build its Web site. To us Excite appears to be the real winner.
The real loser? Infoseek (NASDAQ:SEEK). Check our stats on which search and navigation service benefitted the most from Netscape's search button link: Yahoo!, 10%; Excite, 11%; Lycos, 10%; Infoseek, 26% (company, percent overall traffic from Netscape).
To locate more news or analysis on Excite, visit our search page.