uf: How would you classify CMGI...??
It sure has provided some 'Gorilla Sized Returns' for investors. IMO, David Weatheral and his team have turned CMGI into the clear leader in the internet investing and incubation arena. The CMGI companies form an Eco-Net and are stronger because they feed off of each other. I continue to have CMGI as a core position in my online IRA (actually I bought more at $110 recently). Prudential's current 2-year price target on CMGI is $500 (they have been quite conservative on this stock). One of my major investing mistakes in the last few years was buying way too much DELL and not enough CMGI <VBG>...then again, we have to have a few learning experiences so we can become wiser....Here is a great new Boston Globe article on the founder of CMGI...
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<<Riding the Creature
CMGI's Wetherell saw Net's wild potential and tamed it
By Aaron Zitner, Globe Staff, 2/7/2000
ANDOVER - The Nasdaq closing bell was still two hours away when the Creature began marching up the stock ticker. Big leaps and scary tumbles are common for the Creature - that is why devotees use its nickname instead of its bland, formal name, CMGI Inc. But on Jan. 3, the beast was making an awesome run, and one group of CMGI investors who talk on line was thrilled.
The first word came from Jon Simmons, a computer programmer in Fullerton, Calif. ''Something tells me I'll be a millionaire after I add everything up tonight,'' he wrote to other CMGI fans on an Internet message board. ''YeeEEEhhHHHHAAAAA!!!!''
Then Roger Dikon of Vermont weighed in. ''I'm there buddy!!! Millionaire!!!'' wrote the retired chef. ''GO CREATURE!!!''
''Whew, just busted firmly into the 'multi' arena!'' wrote David Kaiser, signaling his new status as a multimillionaire. At 36, Kaiser had already retired as an oil company geologist and bought his dream home on 20 acres in Colorado.
By the closing bell, no fewer than eight of the 50 or so regulars on the CMGI board announced they had reached the Promised Land of million-dollar portfolios, thanks to CMGI's 49-point leap that day to an all-time high.
After congratulating one another, some of the new paper millionaires began typing notes to the man who had created all the wealth: David Wetherell. ''You're making us all rich!'' wrote Simmons. ''Thank you, thank you, THANK YOU.''
David Wetherell is the man you wished you had paid more attention to a year ago.
The founder and driving spirit of Andover-based CMGI, he has quietly built a small and unsteady marketing company into an Internet powerhouse. Riding the mania for high-tech stocks, CMGI now equals FleetBoston Financial Corp. in market value and towers over such old-line stalwarts as Raytheon Co. Since CMGI went public in 1994, its shares have increased an eye-popping 71,000 percent, more than any other Nasdaq stock of the past six years. Last year alone, shares rose 940 percent.
A one-time farm boy of modest means, Wetherell, at age 45, is worth an estimated $3 billion, though the volatility of CMGI stock - it is the Creature, after all - has boosted him closer to $4 billion at times and can change his net worth by $250 million in a single day. Still, he is one of the four or five wealthiest people in Massachusetts, on par with cable pioneer Amos Hostetter and Fidelity Investments magnate Ned Johnson.
At a time when only academics and computer techies had embraced the Internet, Wetherell figured out what kinds of businesses were likely to make money on line, then started buying or building them all at once. It was as if he saw the untamed American West and decided to build, in one swoop, all the towns, railroads, and factories needed to make it grow - while everyone else was still wondering if the place was even habitable.
Today, Web surfers often start their on-line travels at CMGI's AltaVista search engine, or at Lycos, the fourth most-visited site on the Web, in which CMGI is the largest shareholder. The ads they see are often created by CMGI companies, which have become a force in the burgeoning field of on-line advertising.
A dozen CMGI-related companies sell specialty items on line, from vitamins to art to auto parts. Others help companies launch Web sites. Still others are developing the infrastructure needed to deliver more sophisticated graphics and video on the Web.
In all, CMGI now owns or has major stakes in more than 60 companies, which often aid one another like a Japanese keiretsu, or business network. CMGI already employs more than 1,260 people in Massachusetts at its own companies, while hundreds more work at companies it has backed with millions in venture capital.
And the network is still growing. Each month, Wetherell gets as many as 2,000 business plans from Internet wannabes anxious to join the CMGI fold. He plans to start two to four companies this year and invest in four to six each month.
The Internet, he says, is ''absolutely the most fundamental change in the economy since the history of the economy. It's as significant as the Industrial Revolution ... and it's happening in a far shorter period of time.''
To many who have followed CMGI's rise, Wetherell is nothing less than a visionary.
''He single-handedly put Massachusetts on the Internet bandwagon,'' said Hemang Dave, who helped start five companies at CMGI before leaving for the less ''lunatic'' pace of running a single Internet start-up. ''You can't point to a second person in Massachusetts who has that much influence on the Internet.''
But CMGI, like the Internet itself, is a work in progress, and some former employees say that certain units have adopted and shed business strategies so quickly that they are left in chaos. Like many other on-line ventures, CMGI has also built a spectacular share price before its Internet start-ups have turned a profit - a high-wire act that could produce an unhappy ending.
''Without an element of faith, you can't make these numbers add up,'' says technology analyst Scott Lundstrom of AMR Research in Boston. ''If it doesn't play out that these companies are worth what they're valued at, people may well look at [Wetherell] as a con artist. He'd be in good company, but in 10 years we could be writing books about this massive group delusion. And he'd be a chapter in that book.''
Modest beginnings
Wetherell, the youngest of six children, was born in Hartford. His father worked for hire on nearby farms, tried potato farming in Vermont, and construction in Florida. It was a life of tiny homes and hand-me-downs.
''We didn't have money, but I didn't know that,'' says Wetherell during a recent interview in his office. Sensitive to bright light, he keeps the modest space dark. There is no wood paneling, no trophy model of his Martha's Vineyard vacation home or his new jet, a Bombardier Challenger, which seats 10.
Wetherell saw his first computer in high school. He was a strong math student and signed up for a programming class, only to end up with a C-minus and a bruised ego. But he was hooked and continued to study programming at Ohio Wesleyan University.
After graduating in 1976, he worked in several computer jobs and in a few years had saved more than $20,000 - enough seed money to start his own company. But he decided to wait. ''I didn't know how to hire people,'' he says. ''I didn't know anything about equity. I didn't know much about how to put together a business plan.'' So he worked as a technical recruiter for 16 months to learn more about the software industry and how to spot talent.
When Wetherell did make his move, in 1982, it turned into a major disappointment. The company he started, Softrend, designed software that allowed users of desktop computers to pull information from mainframe computers. Just as he was ready to launch the product, however, the venture capital firm backing him had a staff shakeup and pulled the plug on his funding.
''It was the hardest thing I've ever had to encounter,'' he says, still sounding bitter. ''But I'm grateful. It made me realize there's a niche in the world for venture capitalists who had vision and ethics. And more than anything it made me want to be a venture capitalist one day.''
But he took a decidedly low-tech detour. He managed to sell Softrend, earning ''a few hundred thousand dollars,'' and used that money in a leveraged buyout of the College Marketing Group, later called CMG, which compiled lists of professors and their courses and sold them to textbook publishers.
Sleepy CMG, based in Wilmington, hardly seemed a platform for launching a high-tech empire. But by the early 1990s, after a few years with CMG, Wetherell grew to understand direct marketing as well as software. And he began thinking about how to link his marketing business with a new medium he had been tracking for years: the Net.
''It looked to me like a better channel for direct marketing, and that was our business,'' he says. The Internet was still crude, though, carrying only text and no graphics. Arguing that CMG had to move college professors on line before the publishers did, Wetherell persuaded his board to spend nearly $1 million to develop software to make the Internet more user-friendly.
Wetherell put together a team that created InternetWorks, one of the first Web browsers. He planned to give the software away to professors to lure them onto the Internet, then ''monetize the eyeballs'' - sell that audience to advertisers. But only 10 months after work began, the browser was considered so valuable America Online bought it for stock eventually worth $70 million.
Wetherell had no browser, but he had plenty of capital. ''It was like I lost my one true love,'' he says. ''What do I do?''
A legend is born
What Wetherell did is now the stuff of Internet legend. He funded dozens of on-line ventures, taking advantage of a new economic order in which high-tech companies that often have no profits are nonetheless awarded stratospheric market values on the promise that they might be the next big thing.
His bet on Waltham-based Lycos cemented his reputation and illustrates the art of the Internet deal. CMGI paid only $2 million for an 80 percent stake in Lycos in 1995. The 15 percent CMGI still owns is now worth $900 million.
Today, Wetherell enjoys cult-like status. At CMGI's last annual meeting, investors lined up for his autograph. If he was not well known at Ohio Wesleyan during his college years (his picture does not appear in his class yearbook), he is now. A private man, he will say little about his family, except that he and his wife, Celeste, have three children. But he clearly enjoys getting out and taking in the view from the top. An avid golfer with a six handicap, he played last week in the AT&T Pebble Beach National Pro-Am, hobnobbing with corporate titans.
Wetherell is also a strong advocate for the view that Internet companies need no lifeline from the old-media world. When Barry Diller, a veteran television and movie executive, sought to merge his USA Network with Lycos last year, Wetherell, after tentatively blessing the deal, led the charge to kill it. He argued that placing old media borders around a new media company could limit its potential as a pure Internet concern. The deal with Diller ultimately collapsed.
''That day [Wetherell] became a little bit bigger than life,'' says Jack Connors, the Boston advertising executive, who serves on the Lycos board of directors. ''How many guys successfully stand up to the Barry Dillers of the world?''
Given his reputation and the capital at his command, Wetherell can move quickly into new areas. He sleeps only about five hours a night, rising around 3 a.m. to begin work at home. CMGI executives say it is not unusual to get a call from him by 6. Just before his first meeting at 10, he makes the four-mile drive to CMGI headquarters in one of Andover's renovated mills.
At the moment, he is betting heavily on Internet advertising. One set of statistics that ''motivates me every day,'' he says, is that North Americans spend 9 percent of their media time on the Web, but only 2 percent of advertising revenues have followed. In time, he believes 70 percent of media time and 80 percent of ad dollars will be spent on ''interactive'' media.
Another big bet is iCast, an Internet company that some say is an example of the best and worst of the CMGI culture.
When an idea does not work, CMGI often changes business models and tries again, a strategy that has produced several winning firms. But some former employees say the constant reshuffling, including changes at iCast, creates confusion.
Wetherell predicts iCast, based in Woburn, will become ''the premier entertainment destination on the Web.'' He has pledged to spend as much as $100 million on the site, and he hired former NBC president Neil Braun to run the company.
But according to some former executives, Wetherell kept changing his vision of what iCast should be. ''We had $100 million and the business plan kept changing,'' says Jonathan Cropper, a former iCast executive brought in by Braun. ''We changed our business strategy several times, so that it was difficult to execute things.''
According to Cropper, Braun believed iCast could distinguish itself by cutting deals with top celebrities to draw the initial traffic to the site. He says Wetherell signed off on part of that strategy by authorizing iCast's purchase of the on-line licensing rights to a stable of pop stars, including Bruce Springsteen, Celine Dion, and Britney Spears.
But Wetherell changed his mind, Cropper says, making iCast more of an entertainment guide. Braun was ultimately forced out last year.
Braun declined to comment, citing a lawsuit he has filed over his compensation. Wetherell says only that he laid out some ideas for iCast but that Braun went another way. He also says Braun never took to the culture of the Internet. ''This is Internet time, and you can't wait forever,'' Wetherell says.
And on the Internet, change is a fact of life. ''The Internet is chaos management by definition,'' he says. ''It's fast paced. It's running a marathon at the speed of a 100-yard dash. It really is.''
This story ran on page D01 of the Boston Globe on 2/7/2000.
© Copyright 2000 Globe Newspaper Company. >>
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