RealTime IT News

Where Are They Now? Search Engine Stocks, Three Years Later

If you imagine Internet companies as rock'n'roll stars, Netscape would have been Elvis. The company shocked the investment world in with a hip-swiveling IPO that soared to $78 on the first day of trading on Aug. 9, 1995.

Eight months later, in April 1996, three search engine companies--Lycos, Excite and Yahoo!--launched their own initial public offerings (followed a month later by a fourth, Infoseek).

And just as the British Invasion in 1964 heralded the beginning of a new era in rock music, so too did this group of IPOs mark the start of the Internet Era for investors.

Like The King, Netscape is no longer with us. But Lycos, Excite and Yahoo! live on, though as portals and not mere search engines. Today we'll take a quick look at Yahoo!, a company started by two Stanford University graduate students.

By nearly every measurement, Yahoo! is the most successful of the trio, which, to extend the music metaphor, probably makes it the Beatles of the Internet.

The company, based in Santa Clara, Calif., is on a huge roll right now. Unlike Excite and Lycos (and just about every other Internet company), Yahoo! has proven it can turn a profit. Last week it reported its third consecutive quarter in the black, with Q1 revenues of $86.1 million, an impressive $30 million higher than one year ago.

Yahoo's increasing financial strength has driven up its stock price dramatically since mid-December, and recently has traded in the $200 per share range. (The company's stock also has split three times since September 1997. For historical data, click here.)

The skyrocketing share price has left Yahoo! with an astounding market capitalization of $41.5 billion. The company is using this war chest to buy other companies, including GeoCities (in a $3.56 billion stock swap announced in January) and Broadcast.com (a $5.7 billion stock deal unveiled late last month).

While Yahoo! was one of the first search engine companies to mutate into a portal, perhaps the single most important factor in its success has been the establishment of the Yahoo! brand. It is a marketing achievement that every other Internet company strives for and only a few, such as AOL, attain.

It also should provide comfort and value for Yahoo! shareholders in the foreseeable future.

Friday we'll look at the Kinks, the Who and what's on tap in the Internet IPO market next week.