eMailbag Monday: Clicking, B-2-B, Y@home, Amazon
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First reader up this week writes:
"As a physician, I'm not supposed to know about investing (that's what "they" tell us....people like stockbrokers, colleagues, friends). But I discovered the Internet two years ago. And Internet stocks. And your analysis. The combination has done very well for me (to which the new condo in Kona can attest). Not for the faint of heart, but rewarding beyond expectations, and my thanks are in part to your insightful thoughts and advice. Now my question: What to you know about Topclick, Inc. (OTC:TOCK)?"
Reply: Don't confuse a meta-link generator service with a search engine. Topclick launches you to other sites, not its own. At this point I think Topclick needs to keep clicks to be tops, or at least start having a business model at the bottom level. Very speculative and volatile stock trading in Vancouver. I don't recommend it.
Playing It Safe In B-2-B?
Reply: I've been watching all of these and think anyone of them holds potential to various levels. Of the group I like Safeguard Scientific's (NYSE:SFE) ability to invest across the spectrum and new Internet focus. I think Safeguard's cash and investing position gives it a hedge against exposure to just one product or service as the others have. I like CheckFree (NASDAQ:CKFR) leadership in the e-payment space more than BottomLine (NASDAQ:EPAY). RoweCom (NASDAQ:ROWE) needs some more story to tell in my view.
"I was struck by your recent reply to an @Home user who wonders what the fuss is all about with open access and why you think Yahoo and AOL will need broadband guarantee of carriage. Your explanation seemed to be rather crude and hypothetical, in terms of a possibility that a broadband provider might say include Excite and exclude Yahoo. I don't feel this is possible or the critical issue. It is not a binary carry or don't carry decision. Rather the issue is one of speed, as broadband pipes inevitably will carry more sticky multimedia bytes. In this multimedia future it is crucial that these content aggregators (AOL, broadcast.com, etc.) have their servers co-located at the broadband POP. If they are not co-located, it will not matter that the residential last mile is fiber rich. Content that is not co-located will simply die of a speed disadvantage. I would appreciate your comments."
Reply: That's exactly the point, @Home has the co-location across its parallel Internet. Users won't care what "brand" it is if the content and commerce is fast and compelling in multimedia. Service wins long term, not brand. Service creates brand. Cable firms have traditionally controlled the content on cable wires.
Right now cable Internet looks very nascent so the models being used that allow anyone to get any Web site may be shortlived. If @Home provides a compelling navigation then the default nature of that offering gives it an advantage.
"Hello Steve. I decided to invest in your Hot Watch 99 Stock picks early this year and have had a great return from them. I'm very interested in knowing your pick procedure and investing system, if you have any seminar or books that might help me please send me the info?"
Reply: Investing system is research intensive, 5 years experience as perhaps the first or one of the first Internet stock analysts, a genuine passion for the Internet, and an understanding of the Internet's strengths and weaknesses, how the hundreds of companies fit into this digital space. See me next month at Spring Internet World in Los Angeles, March 15. Capital Connections and Startup Live! Venture Showcase. Click here for details
A River Runs Through It
"Dear Mr. Harmon, I'm trying to determine if Amazon.com can obliterate Digital River by targeting the on-line software distribution business. It seems like a natural fit for Amazon.com. I see that you are very positive on Digital River. Are you not concerned with that possibility? Also, do you believe Beyond.com is a threat to Digital River?"
Reply: I think Amazon.com (NASDAQ:AMZN) is trying to be the all-in-one shopping service, no matter what the category. Rather than try and sell everything and touch the merchandise (incur cost of handling, shipping, ordering, etc.) I believe Amazon is getting into the product referral business.
You may type in a product and it suggests certain matches and allows you to buy that item through Amazon as commission agent.
Why else did Amazon acquire Junglee? Amazon's future, if it wants to ever generate earnings, is as a shopping reminder/referral service--an "affiliate" so to speak of all the retailers on the Web. I could be wrong. We'll see.
On Digital River (NASDAQ:DRIV) vs. Beyond.com (NASDAQ:BYND) I think they all become software sales networks with downloading from the Web the core operation. Digital river has the edge there so far I believe although Beyond.com's acquisition of Buydirect could yield some top line growth fast.
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