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WEBDEX: Value Per User Climbs 11 Percent In Week

Lycos (NASDAQ:LCOS) went back into the possible deal-flow salad bowl causing its shares and value per user to lead the WEBDEX gainers with a 24% rise since March 2.

Fueling the rekindled interest was Lycos board member David Wetherell, chairman of CMGI (NASDAQ:CMGI), which owns 20% of LCOS and was its original investor, resigning from the board to protest the proposed USA Network deal. Speculation has a possible new bidder or reworked structure on tap.

The one thing old media heads don't see (aka the TV and radio execs) is that the Internet has become more important than broadcast or cable. A few reasons: the Internet rides the world's telecommunications infrastructure. Any Web site is available to anyone with a Web connection anywhere.

Broadcast and cable can't do that. The Web is also asynchronous, meaning you can get what you want when you want. Broadcast and cable are chronologically and program director driven. Time and the person picking the lineup dictate.

On the Web you can buy what you want when you want, 24/7/365, click.

Only the phone system connects more people. Broadcast doesn't connect people, neither does cable per se (the traditional kind). Those are one way experiences.

Despite the slow speeds and lack of video-audio quality, taken for what it is I think the Internet is a far deeper medium and the stats show it's growing faster than any medium in history. That's owed to the two-way flow and dynamic nature. The Web can be used for communicating, shopping, publishing, broadcasting, narrowcasting, banking, etc. Deep diversity.

Depth = value.

The e-commerce explosion (and promise) helps explain the 11% gain in overall top 10 Web site valuations according to the public and private markets. Let's take a look at the top 10 Web sites, ranked by unique user (see Media Metrix for definition).

Internet.com's January Mar 3 Mar 10 Mar 3 Mar 10 Percent
WEBDEX Users Market cap or PMV* Market cap or PMV* User User change
  (millions) (millions) (millions) Value Value  
AOL.com* 38.0 $8,450 $8,500 $223 $224 0.6%
Microsoft.com* 30.1 $9,000 $9,250 $299 $307 2.8%
Yahoo 29.5 $30,766 $34,814 $1,043 $1,180 13.2%
Lycos 28.5 $3,822 $4,724 $134 $166 23.6%
GO Network (SEEK) 22.8 $4,118 $5,024 $181 $221 22.0%
GeoCities 19.3 $3,079 $3,531 $160 $183 14.7%
Netscape.com* 18.0 $4,000 $4,750 $222 $264 18.8%
Excite 18.2 $5,740 $6,244 $315 $343 8.8%
Time Warner web sites 12.2 $1,800 $1,850 $148 $152 2.8%
AltaVista* 11.2 $1,350 $1,400 $120 $125 3.7%
TOTAL 200.1 $72,125 $80,087 $2,844 $3,164 11.2%
AVERAGE 25.5 $7,213 $8,009 $284 $316 11.2%
MEDIAN 21.0 $4,059 $4,887 $202 $222 11.0%

) 1999 internet.com *pmv=estimated private market value for Web site only; users, media metrix; estimates by Steve Harmon

I allocate $4.75 billion of Netscape's (NASDAQ:NSCP) public value to its Web site partly based on the pending AOL (NYSE:AOL) merger. The pro forma combined entity will have what appears to be a favorable mix of consumer (AOL) and corporate (Netscape.com) reach.

Having spent last Friday afternoon talking with Marc Andreessen, it's clear that software is critical to the success of any media effort going forward, from Web to TV. I think AOL could play in both arenas some day, although we didn't discuss that.

News March 10 had Netscape and Net2Phone (NASDAQ:IDTC) in a pact to provide telephone calls from PCs. A perfect example of the dynamic nature of the Web vs. other mediums.

AOL's deal with business host provider Verio (NASDAQ:VRIO) also foreshadows in my mind the impending leverage AOL-Netscape-Compuserve could have in reaching the small and medium business market with services.

Another big gainer in WEBDEX was GO Network-Infoseek (NASDAQ:SEEK), up 22% in value per unique user, as the newly launched effort makes moves into ecommerce and investors start to believe Disney's cross media reach may actually work in generating growth.

GO has risen in the top 10 ranking rather quickly since the two companies Web efforts were combined. Also under the hood here is ESPNSportszone.com, and Starwave. While the Disney deal caused SEEK shareholders some confusion, and looked cheap by any other comparable at the time, so far it's been good for SEEK holders.

Having been a non-believer in the deal until the fruit of it could be ascertained, it appears Disney-Infoseek have a good start. I think eventually Disney takes a larger role here after GO gets really going. If so, I think SEEK value per user could start to approach Excite (NASDAQ:XCIT) levels.

Between Barry Diller from USA Networks and Mickey Mouse from the Magic Kingdom, the valuation trail across media is being re-written as the Web takes center stage in every way.

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Accolades for Internet Stock Report:

"Fresh and provocative" -CBS Marketwatch, who named Steve Harmon one of the top Internet stock analysts and only independent one honored

"I am a huge fan of Steve Harmon's analysis" -Kleiner Perkins' John Doerr