This Dog Won’t Hunt

There are big Internet plays, and there are modest ones. We’re seeing
both this month.

On the grandiose side, iVillage is scheduled to go public this week . The women’s Web
network company on Tuesday boldly increased its offer price range from
$14-$16 to $22-$24 a share, increasing the amount it hopes to raise from
$51 million to $88 million – all in the wake of ill-timed publicity
regarding a lawsuit and alleged revenue padding.

And last week another company targeting a specific demographic group on
the Internet filed registration papers for a public offering. Two Dog
, a start-up planning to offer Web services for children ages 3 to
14, intends to offer 2 million shares at $10 each. The proposed Nasdaq
ticker symbol is DNET.

The key word here is “planning,” because Two Dog Net is still in beta
phase, a deadly place to be in a market with well-established or
higher-profile children’s content players such as America Online, Yahoo
(Yahooligans!) and Disney (Blast Online).

Two Dog Net also offers filtering software for parents, but there too it
faces formidable, better-positioned competitors such as Cyber Patrol,
Net Nanny and a dozen others.

Based in Livermore, Calif., Two Dog Net has been in business since 1997
as a small ISP. Financial statements show it has generated minimal
revenues ($50,400 in 1997 and $139,000 through Q3 ’98), though losses in
those same periods declined ($896,000 to $452,000). Accumulated debt
through Q3 ’98 was $3 million.

None of which is really relevant to this offering, since Two Dog Net is
making its belated play in the children’s content and security markets.
While those markets are large — a recent study estimates nearly 10
million children now have access to the Internet – and growing, Two Dog
Net has no track record and is miles behind in the most crucial
competitive category: brand recognition.

AOL and Disney, besides offering Web sites and services for children and
families, have taken a visible lead in the national discussion about
children and the Internet, working with the federal government to lobby
for safe, educational Web sites for kids. Sounds corny, but its free

Since its still in development stage, Two Dog Net has no revenue, only
anticipated revenue sources. And they are Web site subscription fees,
advertising revenues and “corporate sponsorships,” which are like
product placements in movies. Down the road the company hopes to add
e-commerce sales.

Two Dog Net’s strategy is the market itself onto the map, a costly
endeavor, and thus the planned IPO. Which, by the way, has no
underwriter and is a “minimum/maximum” offering, requiring the company
to sell at least 700,000 shares for the offer to be completed.

To recap: No product, no revenue, no brand recognition, no market share,
no underwriter, no guaranteed offering. We said it was modest.

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