Excite’s (NASDAQ:XCIT) deal announced on May 4 to pay Netscape $70 million to provide search services caused XCIT to drop 8% to $66.75 per share on May 5 as Wall Street says “whoa” to the size of the deal for a company with waning browser share.
Excite expects to gain about 10 million page views a day from the deal.
Our snapshot analysis of the numbers: On a $25 CPM and 25% page
view sell-through (based on a net 10 million page views a day that Excite
expects to gain) that implies $22.5 million a year or $45 million in ad
sales over the two-year term of the deal for Excite.
But we believe that Excite can do better with marketing deals and targeted
CPMs, delivering the right ad to the right user at the right time for
better CPM (thanks to its MatchLogic acquisition).
And the gain it will have as a brand could be worth more than $50 million
alone in a space that depends on brand more than anything else to
In short, XCIT seems to be oversold while Wall Street applauded NSCP, who we think didn’t gain as much from the deal other than cash to build its Web site. To us Excite appears to be the real winner.
The real loser? Infoseek (NASDAQ:SEEK). Check our stats on which search
and navigation service benefitted the most from Netscape’s search button
link: Yahoo!, 10%; Excite, 11%; Lycos, 10%; Infoseek, 26% (company, percent overall traffic from Netscape).
To locate more news or analysis on Excite, visit our search page.