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The Art Of Extraction: Beyond Traffic, "Walletizing" The User

Imagine if you had 1 million people walk through the lobby of your restaurant, take a free dinner mint, toothpick, ask for a glass of water, and then leave. During that brief interlude your business model is to hold up as many ad flyers in front of their faces as they chew the mint, ponder the flavor, ignore the menu and flyers (and any other gesture you come up with), leave after the freebie is over.

Your marketing guru pats you on the back with expressions like "great job, we have them now."

Internet.com's

August

Oct 7

Oct 14

Oct 7

Oct 14

Percent

WEBDEX

Users

Market cap or PMV*

Market cap or PMV*

User

User

change

(millions)

(millions)

(millions)

Value

Value

Yahoo

26.1

$10,715

$10,481

$410

$401

-2.2%

AOL.com*

21.8

$3,000

$2,850

$138

$131

-5.0%

Microsoft.com*

19.6

$2,500

$2,600

$127

$133

4.0%

Lycos

17.6

$1,005

$1,059

$57

$60

5.4%

Excite

16.6

$1,727

$1,762

$104

$106

2.0%

Netscape.com*

16.3

$1,400

$1,500

$86

$92

7.1%

MSN.com/Hotmail*

15.6

$875

$1,000

$56

$64

14.3%

GeoCities

15.5

$506

$560

$33

$36

10.6%

Infoseek

11.0

$645

$647

$59

$59

0.3%

Disney.com*

10.4

$900

$1,000

$86

$96

11.1%

TOTAL

170.5

$23,273

$23,458

$1,156

$1,178

1.9%

AVERAGE

17.1

$2,327

$2,346

$116

$118

1.9%

) 1998 Internet.com *PMV=Steve Harmon's estimated private market value for Web site only

Your ad guru touts that you frantically got before their eyeballs a record 10 flyers, including the new "eat at joes" flip-it animated one--that's surely gonna get their attention.

I'm going to call this the "raccoon" business model. For anyone who's ever seen the lifestyle pattern of a raccoon knows they're very habitual in their daily routine and they are fond especially of free food. Flash as many flyers in front of a raccoon while it's eating the free-for-all and the best you'll get is an amused raccoon.

Said another way, on the Internet, the business model of advertising is but 1/20th of the true value extraction of the user relationship, if that.

While we are confident that advertising alone on the Internet may be a $10 billion arena within a few short years (in a $200 billion ad universe across all mediums), what the Web offers that no other medium in the history of media can do is monetize the user with the universe of offers.

This is not "personalization" in the hackneyed lexicon of Flycast or match and marry marketing. It is the development of a "relationship" with the Internet experience.

No more than the relationship we have with the movie experience. None of us goes to the movie house with the express intent of buying popcorn for $7 dollars a bucket, a soda for $3 and a dose of sugar candy with a thick coating of red dye #2 spewed into it for $2.50 a box.

But economically we've spent $8 for the movie ticket and $12.50 on the associated "experience." So is United Artists in the movie or popcorn business? And it's no accident that when you walk into the movie house you must pass the snack bar, the "relationship" has begun, the commerce opportunity is immediate and almost invisible we're so "used" to it. There are no banners or posters on the walls of the movie house that say "check out the snacks" across the street, go now."

Since most of the top sites shown in Internet.com's WEBDEX (web site value index) depend a majority or entirely on advertising let's focus on the experience.

On the Internet we would posit that that's just what banner ads do, take the commerce AWAY from the site and not INTO the site. The experience is not seamless or blended as the popcorn/movie example. So we'll look at Web site valuations today, movie houses with nothing but posters pointing to other people's commerce opportunities and say what if the commerce opportunity was as user-friendly as the ransom we pay for popcorn because the commerce opportunity is convenient, now, and part of the "relationship" we accept from the movie house.

We suspect that integrated commerce on the Internet, and it doesn't exist on the Web today truly since the services, software, user-interface are not there yet, has the ability to increase the potential value of a user as seen in the WEBDEX, 10x or more. Today's $10 billion top-end valuation for a Yahoo (NASDAQ:YHOO), or $560 million for a GeoCities (NASDAQ:GCTY) pales in comparison.

These aren't "media" companies as in ABC TV or CNN. These are media companies with the potential to place real commerce at every click. The future value of all of the above Web sites relies on the ability for them to "walletize" users. Showing soon on a Web site near you?



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