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Women.com: A Marriage of Bricks and Clicks

LIFETIME Entertainment Services announced plans to grab a 4.6% interest in Women.com in exchange for running $10 million worth of television ads on its Lifetime Television network, the largest women's cable network on the planet. With roughly 47 million WOMN shares outstanding, my fingers and toes' math puts a little over 2 million shares valued at $7 million into Lifetime's investment portfolio.

Is it a good deal? Sure is. LIFETIME Entertainment Services is a 50-50 joint venture between Mickey Mouse and Hearst Corporation. Not-so-coincidentally, Hearst already owns a 46% equity stake in Women.com; and if you add yesterday's 4.6% ads-for-equity stake with the 238,500 shares Hearst Communications bought on the open market in April and May of this year, the publishing giant would appear to indirectly own 51% of Women.com, or a majority stake for those of you decimally challenged.

Together with its stable of subsidiaries, Hearst weighs in as one of the world's largest content producers and distributors, with interests in newspapers, magazines, cable television, radio, and a handful of new media activities. And yes, Hearst is the same company founded by William Randolph Hearst, whose infamous privileged granddaughter, Patty, was kidnapped by the Symbionese Liberation Army, robbed a bank, and served a couple of years in the slammer before Jimmy Carter pardoned her.

Despite Hearst's exhaustive list of investments, the company's track record has been what you'd call so-so when it comes to the new economy. With once-promising stakes in start-ups like Drugstore.com , Talk City , Quokka Sports , and Medscape, a recent shift in the public markets' landscape has left Hearst with a saggy diaper of portfolio companies. But when you size up the potential leverage between Hearst's lucrative magazine empire and Women.com's expansive target demographic, one can see why the Web's leading women's Web site might appear relatively undervalued to the offline publisher.

I've maintained since Women.com's twice-stalled IPO debut last year that the business model of women-centric Web properties was fundamentally flawed. Women's surfing habits just aren't all that different, and no more lucrative, than the rest of the population. Most sites that staked their futures on serving the women's niche are starting to find that out the hard way. In reality, publicly-traded Internet companies like iVillage and Women.com will likely never hold any genuine value to retail investors. But to a deep-pocketed brick-and-mortar company like Hearst, it's a one-stop way to solidify its Web presence while promoting its offline interests for dirt-cheap.

Women.com has traditionally jockeyed for pole position with iVillage in a catfight to see who will end up the queen of eyeballs. If you subscribe to Media Metrix' curious Nielsen-esque ratings, Women.com served 7.5 million unique visitors last month, while iVillage managed 7.3 million. Women.com earned a respectable $12 million in mostly ad revenues on losses of $16 million in its latest quarter. At last count, the company boasted $54 million remaining under its pillow, which it says will be plenty to see it through until next year.

IVillage matches up favorably in most categories except two. First, iVillage is a pig when it comes to the loss column. The company loses twice what it brings in, and it has only enough money in the bank to last two quarters. Far more importantly, iVillage is lacking the sugar daddy that Women.com has in Hearst, unless you count a pair of minority stakes by America Online and NBC. But because both are little more than passive investors, don't look for either company to throw a life vest in the water should iVill