Women.com: A Marriage of Bricks and Clicks

LIFETIME Entertainment Services announced plans to grab a 4.6% interest in
Women.com in exchange for running $10 million
worth of television ads on its Lifetime Television network, the largest
women’s cable network on the planet. With roughly 47 million WOMN shares
outstanding, my fingers and toes’ math puts a little over 2 million shares
valued at $7 million into Lifetime’s investment portfolio.

Is it a good deal? Sure is. LIFETIME Entertainment Services is a 50-50
joint venture between Mickey Mouse and Hearst Corporation.
Not-so-coincidentally, Hearst already owns a 46% equity stake in Women.com; and if you add yesterday’s 4.6%
ads-for-equity stake with the 238,500 shares Hearst Communications bought
on the open market in April and May of this year, the publishing giant
would appear to indirectly own 51% of Women.com, or a majority stake for
those of you decimally challenged.

Together with its stable of subsidiaries, Hearst weighs in as one of the
world’s largest content producers and distributors, with interests in
newspapers, magazines, cable television, radio, and a handful of new media
activities. And yes, Hearst is the same company founded by William Randolph
Hearst, whose infamous privileged granddaughter, Patty, was kidnapped by
the Symbionese Liberation Army, robbed a bank, and served a couple of years
in the slammer before Jimmy Carter pardoned her.

Despite Hearst’s exhaustive list of investments, the company’s track record
has been what you’d call so-so when it comes to the new economy. With
once-promising stakes in start-ups like Drugstore.com , Talk City , Quokka Sports
, and Medscape, a recent shift in the public
markets’ landscape has left Hearst with a saggy diaper of portfolio
companies. But when you size up the potential leverage between Hearst’s
lucrative magazine empire and Women.com’s expansive target demographic, one
can see why the Web’s leading women’s Web site might appear relatively
undervalued to the offline publisher.

I’ve maintained since Women.com’s twice-stalled IPO debut last year that
the business model of women-centric Web properties was fundamentally
flawed. Women’s surfing habits just aren’t all that different, and no more
lucrative, than the rest of the population. Most sites that staked their
futures on serving the women’s niche are starting to find that out the hard
way. In reality, publicly-traded Internet companies like iVillage
and Women.com will likely never hold any genuine value
to retail investors. But to a deep-pocketed brick-and-mortar company like
Hearst, it’s a one-stop way to solidify its Web presence while promoting
its offline interests for dirt-cheap.

Women.com has traditionally jockeyed for pole position with iVillage in a
catfight to see who will end up the queen of eyeballs. If you subscribe to
Media Metrix’ curious Nielsen-esque ratings, Women.com served 7.5 million
unique visitors last month, while iVillage managed 7.3 million. Women.com
earned a respectable $12 million in mostly ad revenues on losses of $16
million in its latest quarter. At last count, the company boasted $54
million remaining under its pillow, which it says will be plenty to see it
through until next year.

IVillage matches up favorably in most categories except two. First,
iVillage is a pig when it comes to the loss column. The company loses twice
what it brings in, and it has only enough money in the bank to last two
quarters. Far more importantly, iVillage is lacking the sugar daddy that
Women.com has in Hearst, unless you count a pair of minority stakes by
America Online and NBC. But because both are
little more than passive investors, don’t look for either company to throw
a life vest in the water should iVill

age start to take on water.

On the other hand, with magazines like Cosmopolitan, Redbook, Marie Claire,
Good Housekeeping, and Town & Country, Hearst would sooner buy out
Women.com entirely than let its prized Internet promotional tool ever hit
the skids. I wouldn’t invest in iVillage or Women.com; but if I had to
guess, I’d say Women.com has already won the sack race to become the
leading women’s portal on the Internet, perhaps proving that in a maturing
new economy, you can’t overstate the importance of a marriage between
bricks and clicks.

Any questions or comments, love letters or hate mail? As always, feel
free to forward them to [email protected].

Want my daily missives delivered with your morning toast and coffee? Sign
up for my DealTracker newsletter.

News Around the Web