In June when Internet stocks kept going higher, and in July when they were on fire, Web site values soared along with the euphoria of being at the transition between the analog and digital eras. This past week analog won. Webdex (Website value per user index) dropped 13% to an average $106.
Among those headed south: Lycos (NASDAQ:LCOS), off 32%. Ouch! It ran on talk of a major media alliance coming out of the telecosm (with telegasm to follow). But even George Gilder (the telecosm prophet) or William Gibson (the guy who coined the term cyberspace) couldn’t help this one.
Far beyond sci-fi or friction-free business books, the new game on the Internet is buy traffic. Buy growth. Consolidate positions. Disney’s investment in Infoseek inspired an exodus in SEEK. We think it has to do with the deal structure and still believe DisneySeek may be a long-term player. Twelve months will tell.
Mecklermedia (producer of this report) has been a proponent of buying and building for some time, acquiring Internet sites for the past three years or so. It’s called a “roll up.” Some of the larger portals, guides, and search engines have made similar moves. Yahoo! acquired Viaweb. Lycos acquired Tripod. Excite bought Webcrawler and Magellan among others. Infoseek grabbed WBS.
And then there’s the wannabe newbie Zapata (NYSE:ZAP) who’s rumored to have faxed over a $400 million offer for WhoWhere just days ago. This is the ex-George Bush firm that owns fish processing plants. Those with a nose for deals may recall Zapata’s infamous fax to Excite offering to acquire it for $1.7 billion. Both times the offer was all stock. Would you exchange XCIT for ZAP stock? (see our report on ZAP tomorrow).
Meanwhile, back to reality:
Mecklermedia
Mecklermedia’s | June | July 22 | July 29 | July 22 | July 29 | Percent |
| WEBDEX | Users | Market cap or PMV* | Market cap or PMV* | User | User | change |
website value index | (millions) | (millions) | (millions) | Value | Value | |
Yahoo | 30.4 | $8,968 | $8,130 | $295 | $267 | -9.3% |
AOL.com* | 23.2 | $3,100 | $3,000 | $134 | $129 | -3.2% |
Excite | 18.9 | $2,416 | $1,774 | $128 | $94 | -26.6% |
Netscape.com* | 18.5 | $1,800 | $1,650 | $97 | $89 | -8.3% |
Microsoft.com* | 18.0 | $2,400 | $2,200 | $133 | $122 | -8.3% |
MSN.com/Hotmail | 15.2 | $1,400 | $1,250 | $92 | $82 | -10.7% |
GeoCities | 14.8 | $557 | $557 | $38 | $38 | 0.0% |
Lycos | 15.0 | $1,404 | $958 | $93 | $64 | -31.8% |
Infoseek | 12.0 | $992 | $742 | $82 | $62 | -25.3% |
Disney.com* | 10.0 | $1,200 | $1,100 | $120 | $110 | -8.3% |
TOTAL | 176.1 | $24,237 | $21,361 | $1,212 | $1,057 | -12.8% |
AVERAGE | 17.6 | $2,424 | $2,136 | $121 | $106 | -12.8% |
| notes: PMV=private market valuation estimates based on comparables including revenue, users, growth, page views, reach, mergers, acquisitions and public market factors (c) 1998 Mecklermedia | ||||||
One thing that Sun, Oracle, Novell, Borland and others have proven is that it’s hard to beat Microsoft (NASDAQ:MSFT). Having trounced Netscape (NASDAQ:NSCP) in the free browser and public relations war, it’s no wonder Netscape.com, despite its face lift, is like a Mrs. America applying for entry in the Miss Teen Universe pageant–it could be a bit late to be a portal. Be Netscape.com instead, something fresh and new. Nobody needs five flavors of vanilla.
Beauty in the Web space is more than skin deep, a problem the portals face as they’re a mile wide and inch deep.
The key to Web value is in creating meaningful user experiences, knowing how to use the space and not crowding it with link after link after link. We’re linked out. Meaningful experiences are in short supply.
Enter the vertical plays, the inch wide and mile deep sites. The model may be studio-network so that the best of the niche sites feed the best of the network sites exclusively. Content meets distribution. That’s media and how mediums work. Value to follow.
note: correction in July 24 Internet Stock Report should read -$0.17 loss per share second quarter estimate for MECK per consensus analyst estimates from Zack’s.
