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Give People What They Want

As the only large, publicly traded company focusing exclusively on investing in Internet firms, CMGI (CMGI) for a long time enjoyed a reputation among investors and analysts as a unique, one-stop 'Net portfolio service. Buy some shares of CMGI, it was often said, and you're buying a basket of Internet stocks.

But rival Internet Capital Group (ICGE) has stolen much of CMGI's spotlight since going public in August. In terms of positioning itself with investors, Internet Capital Group went CMGI one better by investing not in a range of Internet companies, but specifically in business-to-business e-commerce companies, arguably the hottest sector of the year.

The market's reaction speaks for itself. ICGE's stock has soared since its Aug. 5 IPO, trading Tuesday afternoon at 135, or 1005% above the first-day close and 2150% above the $6 per share offer price (both split-adjusted).

Clearly this has caught CMGI's attention, for the company recently has made some moves to carve out some space in the B2B e-commerce arena.

Late last month CMGI announced a new venture fund of up to $1 billion that will focused exclusively on B2B investments.

And on Tuesday the company formed a new unit, CMGI Solutions, which will sell e-business products and services.

Both moves have more to do with marketing and repackaging than substance. CMGI already invests in B2B start-ups. In fact, the new B2B fund is being spun out of the company's @Ventures unit, of which two-thirds of its portfolio is comprised of B2B investments.

And CMGI Solutions is little more than a bundling of products and services offered separately by CMGI companies. A good way to promote the companies and generate another revenue stream, but not a major initiative.

Still, I don't blame CMGI for trying to redefine itself in part as a B2B player. It has watched itself be eclipsed in value ($33.7 billion to $25.6 billion as of Tuesday afternoon) by a company with less than 10% of its revenue, even as CMGI's own stock price has more than doubled in the past month. There's some kind of lesson in that.

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