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April Showers in May: Top 10 Web Sites Soften in Value

The euphoria driving search and directory Web service stocks the past eight weeks seems to have subsided for the time being as Wall Street's attention deficit disorder kicks back in.

Mecklermedia's WebSite Value Index shown below, which gauges the public and estimated private value of the top 10 consolidated Web sites, dropped more than 7% since May 13 to an average $71 value per unique monthly user.

The commerce and high-profile marketing bonanza of February and April fueled the phenomenal highs recently. But now that these agreements have been discounted ahead and factored, investors need to see tangible sellthrough of the firms doing the deals in order to fulfill the promise paid for.

Excite's recent $70 million commitment to play in Netscape's garden provides the most recent example of how new wrinkles in deals get done. The search firm will co-brand search results in a preferred relationship with the Internet pioneer.

Mecklermedia's WebSite Value Index

WEBSITE

Monthly

May 13

May 28

May 13

May 28

VALUE

Unique

Market cap

Market cap

Percent

Value

Value

Percent

INDEX

Users

or est. PMV *

or est. PMV *

change

Per

Per

change

(sorted by users)

(millions)

(millions)

(millions)

User

User

Yahoo

32.9

$ 5,683

$ 5,092

-10.40%

$ 172.87

$ 154.89

-10.40%

Netscape.com*

21.1

$ 1,600

$ 1,500

-6.25%

$ 75.79

$ 71.06

-6.25%

AOL.com*

19.7

$ 1,600

$ 1,750

9.38%

$ 81.12

$ 88.72

9.38%

Excite

19.2

$ 1,375

$ 1,280

-6.91%

$ 71.61

$ 66.66

-6.91%

Microsoft.com*

18.8

$ 2,000

$ 1,950

-2.50%

$ 106.29

$ 103.63

-2.50%

Infoseek

16.2

$ 999

$ 724

-27.47%

$ 61.65

$ 44.72

-27.47%

Lycos

15.0

$ 1,065

$ 834

-21.65%

$ 71.19

$ 55.78

-21.65%

MSN.com/Hotmail

14.9

$ 785

$ 725

-7.64%

$ 52.66

$ 48.63

-7.64%

GeoCities*

14.2

$ 365

$ 375

2.74%

$ 25.73

$ 26.44

2.74%

Disney.com*

9.0

$ 400

$ 425

6.25%

$ 44.33

$ 47.10

6.25%

TOTAL

181.0

$ 15,872

$ 14,656

-7.66%

$ 763

$ 708

-7.29%

AVERAGE

18.1

$ 1,587

$ 1,466

-7.66%

$ 76

$ 71

-7.29%

* = private market valuation, what the Web asset may fetch at auction. Consolidated Web site numbers from Relevant Knowledge; all other data, Mecklermedia, Internet.com's Internet Stock Report - www.isdex.com

Investors don't understand the math and XCIT shares suffered as a result, off 6.91% since May 13. While this is nothing to get excited about, a May 21 $72 per share ($1.7 billion) stock swap from fish processor Zapata (NASDAQ:ZAP) did cause a few chuckles on Wall and Web Street. The guppy capitalization company, about a fifth the size of Excite, wanted to swallow the whale of a media firm. ZAP shares were treated more like fish wrap as Excite promptly said no.

While we think the acquisitive wannabe was a bad match, the move indicates what could be stirrings of mergers brewing.

The new kids on the block, emerging from the PC shadows, may be the old kids on the block, the PC box makers (see ISR May 28 Morning Report). Perhaps some of this week's value evaporation has to do with the news that Gateway (NYSE:GTW) is a gateway to the Web. Box makers can become the new "Internet dashboards" or portal providers with a few tweaks of the GUI/desktop.

Compaq already has one in AltaVista pro forma its Digital acquisition, if Compaq recognizes this fact. We bet Compaq saw AltaVista as a liability before the merger, wondering what to do with it. Ironic that it could be the Internet front end for all new Compaqs if they position it as such. While AltaVista isn't shown in the top 10, it's largely because Relevant Knowledge (the firm that estimates users) bases its figures on U.S. surveys.

Disney.com's inclusion here, as with all the sites shown, results from the counting of all of its Web site users in consolidated numbers. That means ESPN.SportsZone.com and the other Disney sites (remember Disney owns ABC which owns Starwave which owns ESPN).

Large media companies take note: the longer you wait, the more you pay or lose out on the Web networks. AOL's an $18 billion market cap company. That's more than CBS TV Network sold for and about what Disney paid for ABC/CapCities.

Audience reach is audience reach whether that be broadcast, cable, print or Internet. The medium isn't the message, the people are.



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