Early Thursday morning, news emerged that Yahoo (NASDAQ:YHOO) had agreed to
acquireGeoCities (NASDAQ:GCTY) in a stock deal valued at $3.6 billion. The
Yahooligans’ right to acquire
GCTY comes via its agreement with the Websteader that gives Yahoo first
look to buy.
At least that was what the documents said when Yahoo and
GeoCities inked a co-promotional agreement aquite some time ago where Yahoo
would point its users to GeoCities.
That agreement came about when Lycos
(NASDAQ:LCOS) first started buying community sites Angelfire and Tripod. We
recall that Lycos was also reportedly interested in GeoCities before it
acquired either of its community efforts but that talk was Lycos didn’t
want to pay what GeoCities thought it was worth.
Which leads to this
week’s look at value per unique user. As a group, these top Web sites
valuations gained nearly 12 percent on Yahoo, GeoCities and Excite’s deals or
rumored deals. Let’s see WEBDEX numbers:
Internet.com’s | December | Jan 20 | Jan 27 | Jan 20 | Jan 27 | Percent |
WEBDEX | Users | Market cap or PMV* | Market cap or PMV* | User | User | change |
(millions) | (millions) | (millions) | Value | Value | ||
AOL.com* | 31.0 | $6,800 | $7,200 | $220 | $233 | 5.9% |
Microsoft.com* | 27.5 | $8,300 | $9,500 | $302 | $346 | 14.5% |
Yahoo | 27.4 | $28,343 | $33,148 | $1,035 | $1,211 | 17.0% |
Lycos | 26.4 | $4,501 | $4,788 | $171 | $182 | 6.4% |
GeoCities | 19.0 | $2,045 | $2,359 | $108 | $124 | 15.4% |
Netscape.com* | 17.5 | $3,300 | $3,400 | $188 | $194 | 3.0% |
Excite | 16.5 | $4,985 | $5,547 | $301 | $335 | 11.3% |
Disney.com | 13.6 | $3,300 | $3,500 | $243 | $258 | 6.1% |
Infoseek | 12.3 | $2,098 | $2,252 | $170 | $183 | 7.3% |
Blue Mtn. Arts | 12.3 | NM | NM | NM | NM | NM |
TOTAL | 200.1 | $63,672 | $71,694 | $2,738 | $3,064 | 11.9% |
AVERAGE | 21.2 | $7,075 | $7,966 | $304 | $340 | 11.9% |
) 1999 internet.com *pmv=estimated private market value for website only;
users, media metrix
@Home agreed to acquire Excite (NASDAQ:XCIT) last week for $405 per
unique monthly user. While Excite and GeoCities are two different animals,
one a guide and the other a home page provider, let’s look at the value
range and see what possible valuations Yahoo may put on GeoCities.
If we carry GeoCities at an Infoseek-like level of WEBDEX, it implies a
valuation of about $3.5 billion. But carried at the average for the top
sites shown in the table — at $340 — then GeoCities at 19 million users
imputes $6.46 billion.
A “fair” valuation for GeoCities is always up to
the haggling and arm wrestling. But overall we think GeoCities ought to
command a premium somewhere in the middle. At $300 per unique user
GeoCities rings up at $5.69 billion.
Why does Yahoo need GeoCities? Six
words: AOL-Netscape; @Home-Excite; Disney-Infoseek. Also, we believe that
buyers could be also lining up for Lycos and that Yahoo doesn’t
want to miss out on one of the larger Web properties that complements its
index and guide.
Lycos has too many similar elements to make it as
attractive to Yahoo, in our view. Said another way: GeoCities may be about
the best way for Yahoo to make the reach into the new top tier players, the
40 percent overall Internet reach club.
On the downside, squeezing revenue from
GeoCities with pure ads won’t be easy. Overall though, if Jerry and Dave
don’t buy then someone probably will soon. And that’s one less property
Yahoo can add to its fold. Not the last property but a large one in one
swoop. On the other hand, several other community sites make headway in the
growth area: theglobe.com (NASDAQ:TGLO) and XOOM.com (NASDAQ:XMCM).
The
game now is bulk, big bulk. We expect a powerful round of consolidation to
occur this quarter leaving three or four mega players cutting a swath
across content, commerce, community and connectivity.
