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WEBDEX: Leading Web Site User Values Go North

Buying the market leader seems to be the trend with the rise in this week's WEBDEX, Web site user value index, as Yahoo (NASDAQ:YHOO), AOL.com (NYSE:AOL), Microsoft (NASDAQ:MSFT) find more than a 10% gain since December 16. Fueling the rise are new all-time highs for more than a handful of these stocks.

At $959 per user Yahoo! leads the pack by a wide margin, as it has all year. We expect AOL.com -- valued separately from AOL in our analysis here -- to rise in value as 1999 draws upon us and AOL shifts its strategy more to embrace the Web as part of the "AOL experience."

Internet.com's October Dec 16 Dec 22 Dec 16 Dec 22 Percent
WEBDEX Users Market cap or PMV* Market cap or PMV* User User change
  (millions) (millions) (millions) Value Value  
Yahoo 25.21 $20,244 $24,179 $803 $959 19.4%
AOL.com* 24.38 $4,400 $5,300 $180 $217 20.5%
Microsoft.com* 20.55 $3,000 $3,400 $146 $165 13.3%
Lycos 18.31 $2,297 $2,394 $125 $131 4.2%
MSN.com/Hotmail* 17.84 $2,900 $3,300 $163 $185 13.8%
Netscape.com* 15.71 $2,350 $2,600 $150 $165 10.6%
Excite 15.52 $2,583 $2,548 $166 $164 -1.4%
GeoCities 14.87 $1,069 $1,242 $72 $84 16.2%
AltaVista 11.13 $500 $450 $45 $40 -10.0%
Infoseek 10.87 $1,432 $1,529 $132 $141 6.8%
TOTAL 174.4 $40,775 $46,942 $1,982 $2,252 13.6%
AVERAGE 17.4 $4,078 $4,694 $198 $225 13.6%
AVG. without Yahoo 16.6 $2,281 $2,529 $131 $144 9.7%
) 1998 internet.com *PMV=estimated private market value for Website only; users, media metrix

With its pending $4.2 billion acquisition of Netscape (NASDAQ:NSCP), AOL could prove to be by far the most dominating force on the Internet with its AOL.com property if it can mesh the properties and user experiences into revenue and earnings growth.

If so, we could see a combined AOL.com-Netscape.com valuation that exceeds $10 billion rather quickly, and that's just holding the pro forma entity at the WEBDEX average.

Part of the benefit in this case is that we think 1+1=3, that the synergy of >AOL.com and Netscape.com provides compelling e-commerce and marketing opportunities -- all hinging on the observation that together they appear to be the #1 Web site(s) in overall user and audience reach.

Netscape.com puts AOL way over the top in that regard in a lead that may force Yahoo to go out and buy big traffic unlike anything it's done so far.

Lycos (NASDAQ:LCOS) has been a buyer all year, turning itself into a network of Web properties that gives it a reach of 45% according to Media Metrix, just 3 points behind Yahoo's sites. Excite sits at 30% Web reach and Infoseek, 20%.

Speaking of Infoseek, as we mentioned the $50 options Disney has to exercise its warrants, it has three years to do so and those options are just that--options.

Disney may never exercise them and SEEK may be better off if it doesn't. Although if Go.com becomes successful then investors will have a way to invest in DisneySeek through SEEK. We await signs of Disney's legendary marketing muscle that has yet to be flexed here.

Compaq's (NYSE:APQ) AltaVista search engine loses some luster again in our view since the search space is crowded and AltaVista is in need of some marketing muscle of its own amid the Compaq machine. Side note: and maybe Compaq would perhaps do better making sure its PCs work--since the one we just bought doesn't print (perhaps we should have bought a DELL or Gateway).

This week we're also slicing the WEBDEX analysis to bring you a comparison of how each in the top 10 compares to the average in its value per user. Some interesting numbers pop up that show the relative disparity in how each firm is valued on a per user basis. All users are not created equal but some are more equal than others:

Firms compared to Percentage
WEBDEX average of avg. value
Yahoo 426%
AOL.com* 97%
Microsoft.com* 73%
Lycos 58%
MSN.com/Hotmail* 82%
Netscape.com* 73%
Excite 73%
GeoCities 37%
AltaVista 18%
Infoseek 62%

Through December 21, Steve Harmon's top 10 Internet stocks to watch in 1998 were up 350%...for 1999 Steve Harmon's Hot Stock Watch will be available as a monthly e-newsletter. It will feature analysis on the Hot Stocks, with a heads up about new movers who could do some shaking on Wall Street -- interested? put "HotWatch" in subject header and e-mail us now --yes, tell me more about Steve Harmon's HotWatch '99