An Excite AtHome Rumor Update Kevin Prigel
Oct 6 1999
America Online NYSE:AOL
Internet | Technology | Quote | News | Research
AT&T NYSE:T
Communications | Quote | News | Research
Excite AtHome NASDAQ:ATHM
Communications | Internet | Quote | News | Research
Microsoft NASDAQ:MSFT
Technology | Quote | News | Research
Yahoo NASDAQ:YHOO
Internet | Quote | News | Research
The Excite AtHome story is now entering its second
week at StreetAdvisor.com. In order to keep readers
informed of the situation, we will provide a brief
overview of what we believe is occurring:
Excite AtHome admitted that discussions have
taken place with three companies. These
companies are America Online, Microsoft, Yahoo.
Both Microsoft and Yahoo see the asking price for
Excite as exorbitant. Why? Excite largely
duplicates the services offered by Microsoft at
MSN.com, making value creation questionable.
Yahoo is in a similar position, with Excite
representing a weaker version of the Yahoo
concept, and duplicating a large portion of the
existing audience. The transaction would help both
companies in one key area: ad revenues. Excite's
ad targeting technology is far superior to Microsoft
and Yahoo's current solutions.
America Online is largely missing the components
of Excite in its web properties. Netscape
Netcenter is a half-hearted attempt at a portal.
AOL.com provides users with a clunky web
interface at best. Redirecting the millions of users
that hit these two sites by default (from
Netscape's browser, or AOL's service) to
Excite.com could create significant value.
Broadband provides significantly more upside in the
America Online model, thus justifying a higher deal
price. Why? America Online captures users,
creating advertising and marketing opportunities
that Yahoo and Microsoft never see. The kicker on
the Yahoo side is Broadcast.com, whose business
model would wholly improve with significant
broadband penetration.
Overall, America Online is the company that makes
sense for this transaction. However, they are in
the position of power and not willing to give up the
profits (from advertising and marketing) in their
business model. Given the rumor that we are
hearing (that AT&T insists on sharing AOL's ad
revenue), it looks like the only way to make this
deal happen is for something (perhaps the MCI
Worldcom and Sprint deal?) to break Ma Bell. |
