Major FUD
Finally, someone with investing skill (post #2076). After just reading 30 or 40 posts, i'm amazed by the amount of FUD on this thread. These people obviously have no idea what a network effect is and how it creates barriers to entry that are almost impossible to stop. Just ask how Microsoft has done against Aol or RealNetworks's network effect? Aol with over 25 million users strong. RealNetworks continues to maintain 85% marketshare for the past 2 years and has over 135 million client software installed (adding 200k per day).
Many of the FUD posts remind me of the early days of the internet. Back when i invested in Amazon in 97 and Aol in mid 98.
Let's see...what were some of the common excuses of why AMZN and AOL would go out of business.
1.) AMZN and AOL are overvalued.
2.) Banner ads can't make for a viable business. Hmm..Forrester Research now says internet advertising will surpass TV advertising and become the biggest medium! What a change in just 4 years.
3.) Most people just seem to ignore the fact that Yahoo had over 50 million register users. Instead they focused on increasing competition, lower ASP for banner ads, ect..
HELLO! 50 million users. Even a dumb management team would figure out a way to monazite that user base. Duh!
4.) FreeISPs would put aol out of business. Hmm..actually, it's the FreeISPs that are more likely to go out of business, because they had no business plan! Gezz..talk about FUD.
5.) During the early days...NBC, ABC, and others were predicted to rule the internet. Nop. It was the start-ups. Yahoo, Excite, and Aol are predicted to rule wireless web? I ask why? It seems like carriers rather go with INSP's private label solution rather than letting their users go off to yahoo or aol (8 of the 9 carriers use INSP). So far, only Sprint has gone with the brand approach and decided to let Yahoo OWN the users.
How does this relate to Infospace?
1.) INSP is overvalued, however, if you try to estimate future cash flow, Infospace has more potential. Although, Spytrdr would say otherwise. I would like to point out that analyst figured that INSP did around 3.7 million in revenue from wireless this quarter, which increased 100%. They expect INSP to do around 14 million in the fourth quarter. Any more hypergrowth, and i think Spytrdr might have to admit he's wrong and buy shares in this future 800lb gorilla. ;)
2.) People claim the screen size on a cell phone is too small for ads or for buying books or anything. That's true, but look to the future. Millions of people will have wireless web. Infospace will find a way to make money off them.
3.) Just like Yahoo had the first mover advantage, the user base, ect.. Infospace has partnerships with 8 of the top 9 carriers. Just cause new competition comes, doesn't mean Infospace will be out of a business in 3 years. I don't know about you, but i will ALWAYS buy the leader in an emerging industry. Even with increasing competition. However, that industry must have barriers to entry and/or a network effect of some kind.
4.) people say no one will want to receive promotions on their cell phone. People are too busy, ect.. I, however, would like to point out that there isn't a time limit to when you have to use your promotions. The promotion might be to wireless web as the banner ad was to the internet. This could be the way wireless web companies make a profit?
5.)In 5 years, i can imagine a world where millions of Americans have a 3G cell phone which can connect to the internet. It's most likely that the wireless carriers will give their users access to wireless web for free, because they make more money from getting a cut of any commerce, ect..
Anyhow, as cell phones become better and faster, people will do research in real-time. When your standing in BestBuy, you'll be able to get some quick stats on which brand is better or which processor you should buy. Infospace already allows you to find the cheapest price. If i was in BestBuy and i was about to buy a new TV. I could easily type in the UPC code and see if i can get it cheaper at Cuitut City or online. With just a few simple clicks of the button i could save my self 30, 50 or even 70 bucks. Oh, and i'm sure INSP will get a cut of this somehow.
What are some of INSP barriers?
1.) They provide content and services under a private label solution. It basically comes down to whether you believe this to be an advantage or not. It seems like the carriers rather use their own brand than allow Yahoo to be the first thing a user sees on his cell phone. This is why it's so appealing to the carriers to go with Infospace rather than Yahoo or Aol. Untill, Yahoo wakes up and sees they can't compete with INSP private label solution, they have the advantage. Just like Dell had a advantage by using built-to-order.
2.) Infospace is continuing to add more features. Just like Yahoo has upgraded it's services (email, calendar, ect..) Infospace continues to do the same. Sure, basic content like maps, stock quotes and other stuff can be copied easily, but Infospace is more than just this. Infospace is providing the whole suit of portal features under a private label solution. It would be like saying Yahoo is a bad investment in 1997 because some one could easily copy a search engine. Matter of fact, i could probably find some free scripts on the internet and start my own search engine website, but we all know there is more to Yahoo than just basic crap like quotes, maps, and search engines.
3.) Network effect in the local merchant business. The more carriers INSP has, the more likely a merchant will use Infospace for their merchant services. Over 3.7 trillion is done with the local merchant yearly, i believe. The company with the most relationships will be able to get the biggest piece of this action. If i was a carrier, i would most likely want to go with Infospace, since they will have the most (or at lest a big number of merchants) merchants, which means the carriers will get a bigger piece of that 3.7 trillion.
4.) More competition is a threat or is it? I haven't receive a response from INSP investor relations, but i don't think a carrier like ATT or VodaFone could switch
easily to another company for content and services, hence i believe Infospace also has high switching costs. Just like switching from say Aol to a freeISP has lots of unseen costs. You have to change your email address, ect..
The carrier signs a check and mails it off to INSP. Infospace handles the rest from what i understand. What if a carrier decide to switch to another company for content, would ATT's wireless web user lose their settings, old emails, unused promotions, ect..? I mean, Infospace is the one handling the back-end (server, storge) then they are the ones with the database?
For all you INSP bears, don't worry...there's plenty of time to get on the INSP bandwagon. Just as investors will realize INSP potential during 2001 from wireless, there will be a whole another wave with the cable MSOs, as they will want content and services to offer to their cable users.
P.S. I think many investors are asking themselves how wireless web will play out (will promotions be successful..how much marketshare does INSP really have). I suggest most people should just watch INSP and look at the revenues. If revenues begin to take off, then usually concern over this type of stuff goes away cause numbers don't lie. I, however, have faith in wireless web and am willing to bet on it's future and that Infospace will come out a winner. |
