A touch of irony in the slew of Internet IPOs that have withdrawn lately
even as ISDEX, The Internet Stock Index, soared nearly 30% since October 13
with 49 of the 50 stocks headed up, while the broad market also showed signs
of bullishness. The reason? We believe that eBay (NASDAQ:EBAY) raised the
bar on IPOs which can be boiled down to this: e-commerce is king.
Some IPOs may make it through the narrow window, but they have to have a
e-commerce angle up front. That means a path to bottom line must be clear
and the notion that “hope floats” only plays in Hollywood. Recent
blockbuster, EBAY shares led ISDEX with 181% rise in two weeks. Also
fueling the ISDEX run, earnings season, with better-than-expected results
popping up.
ISDEX ® | 27-Oct-98 | % change | Point change | % change | |
The Internet Stock Index | close | from | from | from | |
www.isdex.com | 13-Oct-98 | 13-Oct-98 | 31-Dec-97 | ||
or from IPO* | |||||
ISDEX Average | 160.78 | 28.9% | 36.05 | 61.0% | |
NASDAQ | 1,717.63 | 13.7% | 206.80 | 9.4% | |
DJIA | 8,366.04 | 7.9% | 615.34 | 5.8% | |
eBay* | EBAY | $82.50 | 181% | $53.13 | 358% |
GeoCities* | GCTY | $32.88 | 80% | $14.56 | 93% |
USWeb | USWB | $14.75 | 69% | $6.00 | 57% |
Sportsline USA | SPLN | $15.38 | 68% | $6.25 | 43% |
Network Solutions | NSOL | $49.63 | 61% | $18.88 | 278% |
Infoseek | SEEK | $31.31 | 59% | $11.56 | 191% |
24/7 Media* | TFSM | $10.00 | 57% | $3.63 | -29% |
CKS Group | CKSG | $19.00 | 52% | $6.50 | 35% |
Axent | AXNT | $23.38 | 51% | $7.94 | 36% |
Onsale | ONSL | $20.00 | 48% | $6.50 | 11% |
CheckPoint Software | CHKPF | $23.25 | 47% | $7.44 | -43% |
Mindspring | MSPG | $39.88 | 46% | $12.63 | 256% |
Doubleclick | DCLK | $25.13 | 46% | $7.94 | 48% |
Egghead.com | EGGS | $7.13 | 39% | $2.00 | 10% |
Lycos | LCOS | $38.13 | 39% | $10.63 | 84% |
Security First Technologies | SONE | $17.25 | 38% | $4.75 | 138% |
E*TRADE | EGRP | $17.88 | 38% | $4.88 | -22% |
Netscape | NSCP | $23.81 | 34% | $6.06 | -2% |
Broadvision | BVSN | $16.69 | 34% | $4.19 | 157% |
CMG Info | CMGI | $55.00 | 33% | $13.50 | 264% |
America Online | AOL | $122.00 | 32% | $29.75 | 170% |
ISS Group* | ISSX | $26.94 | 28% | $5.94 | 22% |
IDT Corp | IDTC | $16.63 | 28% | $3.63 | -18% |
Amazon.Com | AMZN | $116.31 | 27% | $24.94 | 286% |
Network Associates | NETA | $39.06 | 25% | $7.81 | -26% |
PSINet | PSIX | $14.69 | 25% | $2.94 | 187% |
Concentric | CNCX | $24.50 | 25% | $4.88 | 176% |
Security Dynamics | SDTI | $10.13 | 22% | $1.84 | -72% |
Broadcast.com* | BCST | $45.13 | 22% | $8.13 | 151% |
Spyglass | SPYG | $13.00 | 22% | $2.31 | 163% |
CNET | CNWK | $42.00 | 20% | $7.06 | 178% |
Cisco | CSCO | $60.75 | 20% | $10.06 | 63% |
Open Market | OMKT | $6.13 | 17% | $0.88 | -36% |
CyberCash | CYCH | $8.25 | 16% | $1.13 | -35% |
Excite | XCIT | $37.75 | 15% | $4.81 | 152% |
Broadcom* | BRCM | $77.75 | 14% | $9.81 | 224% |
Yahoo! | YHOO | $123.75 | 13% | $13.81 | 257% |
Exodus* | EXDS | $26.25 | 12% | $2.88 | 75% |
@Home Network | ATHM | $46.13 | 11% | $4.63 | 84% |
Open Text | OTEXF | $12.38 | 10% | $1.13 | -7% |
RealNetworks | RNWK | $36.69 | 10% | $3.31 | 164% |
Earthlink Network | ELNK | $39.00 | 8% | $2.75 | 203% |
CDnow | CDNW | $8.19 | 7% | $0.50 | -49% |
VocalTec | VOCLF | $6.88 | 6% | $0.38 | -66% |
Verisign* | VRSN | $30.00 | 6% | $1.63 | 114% |
Mecklermedia | MECK | $28.06 | 5% | $1.44 | 13% |
Inktomi* | INKT | $83.19 | 5% | $3.94 | 362% |
N2K | NTKI | $5.69 | 5% | $0.25 | -61% |
Verio* | VRIO | $18.06 | 3% | $0.56 | -21% |
Beyond.com | BYND | $7.25 | 0% | $0.00 | -19% |
* change from IPO 1998 | |||||
TOTAL | 1,688.19 | 28% | 372.03 | 84% | |
SIMPLE AVERAGE | 34.45 | 28% | 7.59 | 84% |
Said another way, those Web firms that center around buying and selling of
goods in “zero gravity” (without getting into the shipping business or
land-based warehousing bottleneck), represent a truly Web-innovated
solution to commerce. Result: phenomenal net income margins if that model
can sustain critical mass.
The solely brand-dependent, let’s plaster an icon on your pet’s collar,
T-shirt waving, TV-ad buying, let’s create a Web
brand and see what happens, Internet notions are dead. Anecdotal evidence
comes via theglobe.com, an IPO that decided not to go.
Sometimes a cool
logo design is a design and does not a business make. More than ever it’s
the business model that matters. Buying and selling (AKA “business”).
Advertising is still the number one revenue generator for the Web but
retail and auctions, direct marketing and sales will soon dwarf ads as the
primary revenue stream (and earnings), if they already haven’t as you read
this.
For those sites with business models in flux (which are about 85%
of ALL Web businesses) the move to e-commerce-enabled functionality is as
close as matching users with truly great values, time savers, pairing
content with related goods and services.
That’s the promise of something
like GeoCities (NASDAQ:GCTY), which gathers more people under one site than
just about anyone. Now it must turn on the e-commerce juice, which we
believe it may do soon.
Among the moves and news:
million or $0.05 EPS, beating the Street’s $0.03 expectations. After
charges eBay posts $663k, up from $199k 3Q97. Now the challenge is
controlling costs as marketing scales up. Rival auctioneer Onsale
(NASDAQ:ONSL) had a similar net income trajectory before investing in
growth kicked in.
65% jump in revenue to $858 million and $108 million net income (with tax
credits), or $0.39 EPS, beating the Street handily. Subs grow about 1
million to 13.5 million and AOL announces a 2-for-1 stock split, its fifth
since IPO in 1992. Related news, AOL’s new buy, ICQ, has signed up more
than 20 million users, 7 million more since AOL acquired it in June.
Untapped user
relationships. It adds 65,000 more per day. As we’ve said before, AOL looks
the closest to being the “Microsoft” of the Internet in every way.
of $25.4 million, up 109% vs. 3Q98. Net income climbs 144% to 3 million or
$0.18 EPS. That’s the benefit of inheriting a monopoly on domain
registrations: grow your business as the default .com registrar.
hiring some of its former employees to try and duplicate the retail giant’s
powerful information systems network that ties customers and commerce with
supplies, orders and preferences. Wal-Mart’s fear is that Amazon will try
and match Amazon’s acquisition of shopping engine Junglee with a commerce
network that mimics Wal-Mart’s proprietary system, citing trade secret
infringement.
If that happened then Amazon would be closer to becoming
the “Wal Mart” of the Web in many ways. We think this could be Amazon’s
most awesome challenge yet. In our opinion, building a data-inventory-supply
chain-warehousing-shipping network is absolutely critical to it becoming a
huge retailer.
Without an ordering system that can effortlessly move
merchandise of all stripes from manufacturer, distributor to buyer, then
there’s always just books. Wal Mart may be just venting sour grapes. The
lawyer fees and legal entanglement, however, are exactly what any Internet
firm doesn’t need–distractions from hyper growth.
