"THEGLOBE.COM PREPARES STREET FIGHT WITH GEOCITIES"
redherring.com
Greta Mittner
Red Herring Online
July 29, 1998
Todd Krizelman and Stephan Paternot, founders of the
Web community Theglobe.com, have demonstrated that
sheer aggressiveness can take you far -- perhaps all the
way to Wall Street. But even with Theglobe's
GeoCities-like "cities," "districts," and topical channels,
will the founders' ambition be enough to push them into
GeoCities territory?
We may soon see. Theglobe filed last Friday for an IPO
valued at $50 million, just days after GeoCities set its
price for its own highly anticipated IPO sometime this
summer. GeoCities wants to raise up to $66.5 million by
offering 4.75 million shares.
Will it be a battle, or a rout? "The difference between
GeoCities and Theglobe.com is like the difference
between the Concorde jet and a commuter train," says
John Fitzgibbon, editor of the IPO Reporter.
Hitting heavy
Last year, Theglobe raised $20 million from Michael
Egan, founder of Alamo Rent-a-Car. Mr. Krizelman and
Mr. Paternot soon set out to make a name for Theglobe,
spending $8 million on print ads and expensive television
spots helped them boost their traffic numbers. The site
generated more than 100 million pageviews in June,
more than double the number in January. About 100,000
new members have signed up since last October.
Theglobe.com also followed GeoCities' example and
upgraded its management team. It named Frank Joyce,
the former Reed Elsevier PLC executive, as vice
president and chief financial officer. Mr. Egan took the
chairman's seat. H. Wayne Huizenga, founder of
Blockbuster Entertainment and Waste Management, was
named a director.
"Both [Theglobe.com and GeoCities] are also classic
examples of 'entrepreneur handoff' to more experienced
operating management," says Francis Gaskins, editor of
Gaskinss' IPO Desktop.
Worlds to conquer
If the two companies look so much alike, why do most
analysts agree that GeoCities will leave Theglobe.com in
its IPO dust? "Theglobe.com is riding the heels of the
tremendous Street success for Internet companies, but
the real measure for success has been traffic, and
Theglobe is not competing," says Patrick Keane, an
analyst at Jupiter Communications.
GeoCities has 2.1 million members compared to
Theglobe.com's 1.7 million, and it has made big
partnerships with Yahoo, Amazon, and CDNow. It has
also begun to move beyond Web-page hosting to include
new features like a search engine. Meanwhile,
Theglobe.com is still focusing on community building and
subscriptions. Members pay either $4.95 or $9.95 per
month, depending on what services they want.
GeoCities lost $8.9 million on revenues of $4.58 million
in 1997. Theglobe.com lost $3.58 million on revenues of
only $770,000. In the first quarter of 1998, GeoCities
reported a loss of $2.9 million on revenues of $2.17
million, while Theglobe.com lost $1.98 million on
revenues of $394,000. In a business that is judged more
by revenues than by profits -- or lack thereof --
GeoCities clearly comes out on top.
Mr. Gaskins notes that until recently GeoCities had been
focusing on building traffic, not making money. "Who
knows what they can accomplish now with seasoned
management?" he says. (GeoCities appointed former
U.S. News and World Report publisher Tom Evans
CEO earlier this year.)
The two companies may have some things in common
down the road, however. As Mr. Keane sees it, getting
advertisers to post ads on unedited amateur Web pages
isn't easy for either company. A little free advice from
Mr. Keane: "Sponsorship models can ultimately work."
Theglobe.com
1997 sales: $770,000
1997 income: -$3.58 million
Filing date: July 24, 1998
Offering amount: $50 million
Proposed symbol: TGLO
Proposed exchange: Nasdaq
Underwriters: Bear Stearns, Volpe Brown Whelan |
