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About.com: What About a Buyout?

In a column I wrote called "Lycos: Jumping On the Wireless Bandwagon" (5/5/2000), I talked about how there is no need to have a plethora of portals and that consolidation is very likely. Of course, yesterday Terra Networks agreed to purchase Lycos in a blockbuster deal. Oh, there was also the deal with Verio, which was purchased by Nippon Telegraph & Telephone. It was for $5.5 billion. All cash.

The fact is that, while the U.S. is saturated with dot-coms, the global marketplace is not. Rather, the world is lagging behind the U.S. With dot-com valuations substantially lower, acquisitions look like a smart way for foreign companies to catch-up.

The natural inclination is to look for other prospective buyout targets. A portal that could be a target is About.com . The site is a group of more than 700 targeted verticals. Each section has a professional manager, who makes sure everything runs smoothly. The site is ranked #9 in traffic by Media Metrix.

However, it is never wise to buy a company simply because it may be a target. As always, look for companies with a strong future. As for About.com, it definitely has strength. In the past two quarters, the company has been able to exceed quarterly numbers.

Revenues were $15.8 million in the latest quarter, which compares to $2.4 million in the same period a year ago. The company has a healthy balance sheet, with about $164 million in cash.

Profits? Okay, not yet. But according to the management of the company, it is expected in the second quarter of 2001. Then again, it is typical for managements to be conservative on forecasts. So, it would not be surprising to see profits come sooner.

To this end, the company is establishing a variety of revenue streams other than advertising. The company, for example, has launched its online auction system called Sprinks. It will integrate seamlessly with the About.com verticals.

The company has been making synergistic acquisitions. It purchased Sombasa, which is an online marketer. The technology allows for targeting of opt-in e-mail notifications. Opt-in email has substantially higher response rates compared to banner ads.

What will also be attractive to an acquirer is the reach of About.com. In March, the company had 14.4 million unique visitors and 12.8 million page views per day.

But, even if the company is not purchased, it still has a promising future. Either way, the company looks good.



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