First reader up this week writes: “Steve, what do you think of ebay’s
prospects now that Yahoo/Onsale have launched a site free of any costs to
post auctions?”
Reply: Bottom line: I think it may cost ebay some sizzle on its
planned IPO. And if it’s free from Yahoo/Onsale, then ebay’s revenue could
suffer if people use the Yahoo/Onsale offering. But ebay has a huge head
start and just because Yahoo flips a switch doesn’t mean it will be a
success.
It takes talent and execution to make it go and grow. Remember
Yahoo-MCI? Think of everything on a large traffic site as a freeway:
certain roads get more traffic than others while side streets may be dusty
and deserted. It’s not always possible to take traffic and divert it to
where the traffic cops want it to go, no more than trying to tame a river.
People decide where to go and what to do. Everything’s one click away from
a rival’s effort or a better one. If Yahoo/Onsale does a better job
then that’s a long-term threat. But ebay could probably be acquired by
somebody else eventually.
Many one-to-one auctions can exist, same as many
long-distance phone companies or colas or movie houses–the appetite for
them is bigger than any one entity.
Patent Business
“Steve, I’m interested in your opinion regarding the ability to
patent point of sale transactions on the Internet. The specific company I
have in
mind is e-data (otc:gift).”
Reply: I don’t know the particulars of that patent application.
But generally speaking, litigation to enforce patents can be quite
expensive and a full-time effort that detracts the company’s management
from operations, unless they are in the patent litigation business.
Some firms do nothing but dream up processes and patent them in the hopes that
infringement comes some day. If the license fee is not that expensive then
many large firms routinely pay it rather than waste their lawyers’ time
pushing papers back and forth. A court would best decide on any specific
patent ability of your question. And then the best lawyer may win.
Parting The Red Sea?
“I hope you may be
able to shed some light on the following: do you have any info about EXDS
(Exodus Communications)? Their stock has tanked, yet it seems as if they
keep growing and signing up more major accounts. A recent Boardwatch
Magazine (a Mecklermedia publication) article showed them to be rated #2 of
all the major ISPs.”
Reply: Internet.com’s IPO Index showed Exodus (NASDAQ:EXDS) up
just 13% from its IPO this year. Part of the concern may be EXDS’ June 26,
1998 agreement to sell $200 million of 11<% Senior Notes due 2008 in a
private offering. For its latest quarter (June) EXDS posted $14 million
loss on $10 million revenue.
Boardwatch/Keynote Systems performance and ranking of ISPs showed Exodus
#2 in only one category, 1.544 Mbps T-1 Average Monthly Cost ($1,199). But
on other performance measures–most important speed–Exodus ranked lower
than average or lower than the top 10. See BoardWatch
for more ISP news.
Gee Oh
“What’s happening with GeoCities? It was soaring at over 50 per share when
the IPO came out, and now it’s 21 per share. I know that stocks typically
will go down after the IPO, but do you think the GeoCities stock will
continue to sink into a black hole? Or will it start to slowly (or quickly)
go into some better values?”
Reply: Typically many IPOs trade at or below their IPO price or
first day euphoria after going out. It may happen one day, week, year or
whenever after going public. With the market focused on bearishness it’s no
surprise that GeoCities (NASDAQ:GCTY) has been volatile both ways.
GCTY could rise again if it translates its traffic into revenue/earnings,
or if it
consolidates its position to fend off a frontal attack from Lycos
(NASDAQ:LCOS) which has snapped up community sites, and if it can diversify
its revenue from just advertising, which GeoCities shows signs of doing.
Being a top 10 Web site and public (i.e. with stock) certainly helps
GeoCities since it can use stock to acquire other sites and services.
With acquisition also comes more top management that can help the firm
grow, etc. We’ll see where and what GeoCities as a firm does the next six
months.
Bumps And Jumps
“Steve, why the big, sudden move in the Net stocks today? It seemed to
coincide with the drop in the Dow during Greenspan’s speech. Program
buying? rotation? Any way we could have seen it coming?”
Reply: At times Internet stocks rise while blue chips fall and
this may simply be a debate by the big funds on where to park their cash:
tried and true blue (and little growth) or wild and just blue (lots of
potential growth).
Programs and computer-based buying may account for some
of it.
Internet
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