Do Internet companies prop up the balance sheet today (window dressing EPS) for the sake of showing Wall Street that the training wheels are off? Or do they invest in building marketshare at the expense of earnings today in order to have better earnings tomorrow? Can a firm have its earnings and eat its earnings too?
Another way of looking at earnings potential or the expectation of earnings is through Mecklermedia’s WEBDEX, WebSite Value Index. We take the market cap and divide by unique users (as defined by Relevant Knowledge) to arrive at the WEBDEX. This is one way of gauging how Wall Street discounts ahead earnings potential for each of the companies shown.
| Mecklermedia’s | July | Aug 12 | Aug 19 | Aug 12 | Aug 19 | Percent |
|---|---|---|---|---|---|---|
| WEBDEX | Users | Market cap or PMV* | Market cap or PMV* | User | User | change |
| website value index | (millions) | (millions) | (millions) | Value | Value | |
| Yahoo! | 26.6 | $8,935 | $8,923 | $336 | $335 | -0.1% |
| AOL.com* | 22.0 | $3,000 | $3,100 | $136 | $141 | 3.3% |
| Excite | 17.3 | $2,281 | $2,201 | $132 | $127 | -3.5% |
| Netscape.com* | 17.6 | $1,800 | $1,900 | $102 | $108 | 5.6% |
| Microsoft.com* | 18.6 | $2,400 | $2,500 | $129 | $135 | 4.2% |
| MSN.com/Hotmail* | 16.3 | $1,400 | $1,500 | $86 | $92 | 7.1% |
| GeoCities | 14.2 | $1,395 | $1,054 | $98 | $74 | -24.4% |
| Lycos | 14.5 | $1,221 | $1,286 | $84 | $89 | 5.3% |
| Infoseek | 12.2 | $893 | $875 | $73 | $72 | -2.0% |
| Disney.com* | 9.7 | $1,250 | $1,300 | $129 | $135 | 4.0% |
| TOTAL | 169.0 | $24,575 | $24,639 | $1,306 | $1,307 | 0.1% |
| AVERAGE | 16.9 | $2,457 | $2,464 | $131 | $131 | 0.1% |
| (c) 1998 Mecklermedia, Internet.com; *PMV=private market valuation; total may include duplicate users using more than one site; user tallies per www.rkinc.com | ||||||
Obviously there’s a lot of high hopes for Yahoo! (NASDAQ:YHOO) at $335 per user. Too much perhaps. We think anything above $150 per user for any of these is too high.
The biggest decliner of the week was home page rodeo king GeoCities (NASDAQ:GCTY) which went public against a falling market and soared before gravity grabbed some of it. WEBDEX shows GCTY per user down 24% to $74 per Websteader since August 12.
As a group the values maintained last week’s position. The biggest percentage gainer was Netscape (NASDAQ:NSCP) which proves its Netcenter may be a power in the making. The second-best riser was Lycos (NASDAQ:LCOS), up 5.3% to $89 per user.
But the real story here could be completed mergers that are not factored into the stocks. We ran the unduplicated unique users via Relevant Knowledge and the top 10 actually equals 8 consolidated Web sites which bumps some of them to places you wouldn’t suspect:
| Mecklermedia | July | Market cap | Market cap | Value per |
|---|---|---|---|---|
| Internet.com’s WEBDEX | Users | 12-Aug | 19-Aug | unique |
| Pro forma mergers | Or PMV* | Or PMV* | user^ | |
| & consolidation | (millions) | (millions) | (millions) | 19-Aug |
| Yahoo!/Four11 | 26.6 | $ 8,935 | $ 9,111 | $ 342.21 |
| Microsoft.com/HotMail/MSN* | 24.1 | $ 3,800 | $ 4,000 | $ 165.98 |
| AOL.com/Mirabilis-ICQ* | 23.9 | $ 3,000 | $ 3,000 | $ 125.52 |
| Infoseek/Disney/ABC/Starwave | 18.8 | $ 2,143 | $ 2,175 | $ 115.71 |
| Lycos/Tripod/Angelfire/WhoWhere | 18.5 | $ 1,221 | $ 1,286 | $ 69.51 |
| Netscape.com* | 17.6 | $ 1,800 | $ 1,900 | $ 107.80 |
| Excite/Webcrawler | 17.3 | $ 2,281 | $ 2,201 | $ 126.91 |
| GeoCities | 14.2 | $ 1,395 | $ 1,054 | $ 74.02 |
| *unduplicated users; Infoseek value = SEEK plus our PMV for Disney’s Web assets | ||||
As you can see in the table with Infoseek (NASDAQ:SEEK), if we add Disney.com’s Web asset private market valuation estimate of $1.3 billion, it implies more than $2 billion for the consolidated Web sites pro forma Disney’s investment-merger. Still, it’s probably going to take two or three home runs emerging from the deal to make believers out of Wall Street.
Another notable site is the new Lycos. With Angelfire, Tripod and WhoWhere, WEBDEX lists it at $69 per user, half the other large Web network players. Yet Lycos’ consolidated unduplicated reach exceeds Excite, Netscape and GeoCities. Investors apparently haven’t digested Lycos’ fast moves yet.
| Internet Startup Live! Venture Showcase The Internet investment world’s mountaintop, got a startup |
|---|