This Dog Won't Hunt
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There are big Internet plays, and there are modest ones. We're seeing both this month.
On the grandiose side, iVillage is scheduled to go public this week . The women's Web network company on Tuesday boldly increased its offer price range from $14-$16 to $22-$24 a share, increasing the amount it hopes to raise from $51 million to $88 million - all in the wake of ill-timed publicity regarding a lawsuit and alleged revenue padding.
And last week another company targeting a specific demographic group on the Internet filed registration papers for a public offering. Two Dog Net, a start-up planning to offer Web services for children ages 3 to 14, intends to offer 2 million shares at $10 each. The proposed Nasdaq ticker symbol is DNET.
The key word here is "planning," because Two Dog Net is still in beta phase, a deadly place to be in a market with well-established or higher-profile children's content players such as America Online, Yahoo (Yahooligans!) and Disney (Blast Online).
Based in Livermore, Calif., Two Dog Net has been in business since 1997 as a small ISP. Financial statements show it has generated minimal revenues ($50,400 in 1997 and $139,000 through Q3 '98), though losses in those same periods declined ($896,000 to $452,000). Accumulated debt through Q3 '98 was $3 million.
None of which is really relevant to this offering, since Two Dog Net is making its belated play in the children's content and security markets. While those markets are large -- a recent study estimates nearly 10 million children now have access to the Internet - and growing, Two Dog Net has no track record and is miles behind in the most crucial competitive category: brand recognition.
AOL and Disney, besides offering Web sites and services for children and families, have taken a visible lead in the national discussion about children and the Internet, working with the federal government to lobby for safe, educational Web sites for kids. Sounds corny, but its free advertising.
Since its still in development stage, Two Dog Net has no revenue, only anticipated revenue sources. And they are Web site subscription fees, advertising revenues and "corporate sponsorships," which are like product placements in movies. Down the road the company hopes to add e-commerce sales.
Two Dog Net's strategy is the market itself onto the map, a costly endeavor, and thus the planned IPO. Which, by the way, has no underwriter and is a "minimum/maximum" offering, requiring the company to sell at least 700,000 shares for the offer to be completed.
To recap: No product, no revenue, no brand recognition, no market share, no underwriter, no guaranteed offering. We said it was modest.