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GoTo.com Tries to Reverse Slide

"Pay for position" Internet search engine GoTo.com last Friday said it has had more than 20 million unique visitors in March and now has more than 25,000 paying advertisers.

If the announcement was intended to boost the company's sagging stock, it worked (at least in the short-term). After closing Thursday at 36 1/8 the lowest closing price in six months and 68 percent below GOTO's all-time high price of 114-1/2 set last Nov. 15 -- shares zoomed up more than 30 percent on Friday, ending at 48-3/32. Shares inched up to 49 by noon Monday.

The March traffic figure given by GoTo.com is nearly three times the 7.2 million unique visitors ascribed to the search service in February by Web audience measurement company MediaMetrix (MMXI).

So how to explain the discrepancy? According to GOTO (GOTO) Chairman Jeffrey Brewer, "Media Metrix measures visitors to a given Web site. Our usage is much broader because we're a syndicated service that's used at tens of thousands of Web sites."

In other words, Web users can access GoTo.com's search service from more than 150,000 other sites in the company's network. Because GOTO is pushing its affiliate program as the key to growth, Brewer says he expects the disparity between MediaMetrix's traffic numbers and GoTo.com's to widen. (It probably has been for some time, too, given that MediaMetrix reports show no increase in monthly unique visitors to GoTo.com from last July, when the site was credited with 7.3 million visitors.)

I'll reserve judgment on which traffic figure is more reflective of reality, though 20 million unique visitors would make GoTo.com the seventh most-visited site on the Web as measured by MediaMetrix, instead of No. 23, as it was in February. That would put it ahead of heavyweights such as Amazon.com (AMZN), Go2Net (GNET), NBC Internet (NBCI) and Time Warner Online. A dubious proposition to me, if not to many investors.

Still, GoTo.com's revenue growth in the past year is clear and indisputable. The company had $26.8 million in revenues in 1999, compared to $822,000 in the previous year. Sales in the fourth quarter were up 58 percent over Q3.

However, the company's progress toward profitability slowed in Q4, with the 17 cents per share loss barely better than Q3's 18 cents per share loss. That's probably what sent GOTO shares down from their closing price of $92 per share on Feb. 14, when the quarterly report was issued.

And with several weeks to go before the Q1 report, the company needed something to reverse the ticker slide. That's what I think Friday's announcement was all about. Indeed, the fact that GoTo.com made the announcement about March traffic even before the month ended should tell investors something.


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