eMailbag: RealNetworks, Yahoo, AOL, Showcase Votes

First reader up this week writes: “Dear Steve, most of my portfolio is in
Internet stocks and I like the concept of melding the Internet with the
office PC user. My question: does RealNetwork have a true corner on the
market?”


Reply: RealNetworks (NASDAQ:RNWK) commands the lead in
audio-video streaming with a reported 35 million registered users of
RealPlayer. The firm also says that since debuting three months ago its
newest player, G2, has been downloaded eight million times.


Real also
just announced three key distribution deals: AOL, Lotus and Netscape.
Combined we estimate that could extend Real’s reach to perhaps 50 million
or more non-duplicated users over time. However, when you say “market”
please remember that this is a dynamic place and not static. In a dynamic
market firms can “corner” it but it’s like saying in the 4th inning of a
baseball game “who won?” with five innings to go.


Internet firms have to
keep cornering the market in order to succeed–especially software markets,
which are only as good as the last upgrade.


Software firms must
continually innovate, acquire or invent better software, foresee the
future, make the key alliances. Every upgrade of every software introduces
a choice in the mind of the upgrader: upgrade or switch? If a rival product
becomes available and offers the same functionality and is free then it can
become a powerful competitor quickly.


Real’s biggest danger is Microsoft,
which has rights to Real’s technology that powers, in part, its Media
Player, has more than 100 million Windows users, deep pockets, desktop
leverage, can acquire just about anything it desires, and has a proven
record of coming out with products that eventually sometimes grab dominant
market share. We believe Real has a chance and good head start, that its
alliances will help its exposure but that more such alliances are needed.
So far AOL and Intuit have been the only firms we’ve seen to ever beat
Microsoft at one of its ventures. Real’s CEO Rob Glaser came from Microsoft
so he knows the routine well.


Born On Dating


“Could I request, please, an inception date for the ISDEX? A birthday for
the index will enable me to set up
a gorgeous chart that I can use for personal investing, as well as in
capacity as advisor to
those I advise on Internet investing.”


Reply: ISDEX first began in April, 1996 on the debut of The
Internet Stock Report. ISDEX valuation is set to a benchmark of 100 on
December 31, 1996, is limited to 50 representative stocks in the Internet
industry, and calculated as an arithmetic average to best reflect the often
volatile trading nature of this diverse group.


World Wide Web Indeed


“The Dubai investment
group has an Internet portfolio which is tailored regularly by myself
following the usual Net research which you will be pleased to know includes
analysis of your ISR. Shukran (Arabic for Thanks).


You could help me
with this query: we’ve held Yahoo (NASDAQ:YHOO) since May and
have a tidy 100%+ . Would you help me decide whether to stay or go as
aggressive growth is the mission? Also, I hold Net2phone (NASDAQ:IDTC),
CDnow (NASDAQ:CDNW) and ETRADE (NASDAQ:EGRP) and would appreciate a 6-month
outlook. Finally, what do you guys have to say on the effect of Y2K upon
Internet stocks.”


Reply: Dear Dubai, we don’t get into the “buy, sell or hold” game
but always make our goal of informing you of the ups and downs, pluses and
minuses, yins and yangs that constantly engage each other in the Internet
investment sphere. Informed investing is our goal, helping you decide for
your own return on investment (and return on risk) which best suits
you.


So here’s our opinion on the above: we expect Yahoo to get heavy
competition from AOL, Microsoft and Netscape in the coming year, especially
AOL which begins carpet bombing new sign ups disks via mail and whatever
other method it can soon. The number one reason people try anything on the
Internet is if it’s free. FREE trial usage sucks people in to AOL. AOL also
understands better than most how to market itself and uses TV
effectively.


Yahoo faces the same tough choice that every Internet
company does: how to grow and meet growth. So far it’s made the right
moves.


Intel’s Andy Grove says “only the paranoid survive.” On the
Internet we say “only the paranoid schizophrenic” have half a chance. For
only here do competitors ally, rivals cooperate and “competition”
proliferates.


On IDTC we think Internet telephony remains a niche that
could explode; CDnow has a chance to move beyond music (but probably needs
to acquire or be acquired, say by a barnesandnoble.com type); ETRADE’s plan
of being a financial destination site (rather than just trading site) may
take some time. The skill set for content differs from software zapping
out a trade confirmation.


On Y2K we think e-commerce sites (retail,
banking, marketing, inventory) may suffer if the computer systems that run
the sites aren’t updated to reflect the year 2000 digit increase. We think
the weakest link could be in the shipping of goods bought over the Internet
if those shipping systems aren’t up to date (literally). And nobody should
fly on December 31, 1999; they may find themselves transported “back to the
future” landing in the year 1900 as the last two digits of the computers
reset. The air traffic control system has us more worried than Internet
stocks and Y2K.

And The Votes Go To…


All last week we brought you the dozen
or so firms that presented at Fall Internet World’s hugely successful
Internet Startup Live! Venture Showcase and asked you to vote for a
favorite. Those receiving the most votes: DeskGate, InsureSeek and
Jumpmusic. Are you an Internet entrepreneur startup firm? Send us your
company bio and maybe we’ll feature you in an upcoming showcase.

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