Give People What They Want

As the only large, publicly traded company focusing exclusively on
investing in Internet firms, CMGI (CMGI)
for a long time enjoyed a reputation among investors and analysts as a
unique, one-stop ‘Net portfolio service. Buy some shares of CMGI, it was
often said, and you’re buying a basket of Internet stocks.

But rival Internet Capital Group (ICGE)
has stolen much of CMGI’s spotlight since going public in August. In
terms of positioning itself with investors, Internet Capital Group went
CMGI one better by investing not in a range of Internet companies, but
specifically in business-to-business e-commerce companies, arguably the
hottest sector of the year.

The market’s reaction speaks for itself. ICGE’s stock has soared since
its Aug. 5 IPO, trading Tuesday afternoon at 135, or 1005% above the
first-day close and 2150% above the $6 per share offer price (both
split-adjusted).

Clearly this has caught CMGI’s attention, for the company recently has
made some moves to carve out some space in the B2B e-commerce arena.

Late last month CMGI announced a new venture fund of up to $1 billion
that will focused exclusively
on B2B investments.

And on Tuesday the company formed a new unit, CMGI Solutions, which will
sell e-business products and services.

Both moves have more to do with marketing and repackaging than
substance. CMGI already invests in B2B start-ups. In fact, the new B2B
fund is being spun out of the company’s @Ventures unit, of which
two-thirds of its portfolio is comprised of B2B investments.

And CMGI Solutions is little more than a bundling of products and
services offered separately by CMGI companies. A good way to promote the
companies and generate another revenue stream, but not a major
initiative.

Still, I don’t blame CMGI for trying to redefine itself in part as a B2B
player. It has watched itself be eclipsed in value ($33.7 billion to
$25.6 billion as of Tuesday afternoon) by a company with less than 10%
of its revenue, even as CMGI’s own stock price has more than doubled in
the past month. There’s some kind of lesson in that.


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