The major flaw in your comparison is future growth potential. The other companies you mentioned are involved in traditional, relatively stagnant forms of generating internet revenue. GOTO is in a rapidly expanding segment that is proving to be much more resilient than the others. Remember - GOTO beat expectations while everyone else was falling short. Because stock price is based upon future earnings, GOTO should command a higher price.
From an advertiser's point of view, GOTO is invaluable as it provides a measurable way to purchase highly qualified traffic at a great price. I know this first hand as I spend over $1,000 per day on various bid-per-link engines (Goto, Findwhat, etc.) to send traffic to my various affiliate sites. I have used these companies since inception and I have seen the volume and quality of traffic as well as the advertiser interfaces and tools rapidly improve on a consistent basis. GOTO may be overvalued on a short-term basis, but I am absolutely convinced that their business model represents the future of internet advertising because it is truly the most efficient method out there by a long shot. It will continue to catch on as more and more companies realize this. As far as valuations are concerned, I think that #2 in the industry, FWHT, is extremely undervalued. They just announced positive cash flow and they will be profitable as soon as next quarter. They have no plans to raise more capital, as they have no need. They have better management and a more streamlined operation than GOTO, and most importantly I think their advertiser interface and customer service is far superior. Accordingly, I picked up a few thousand shares at $1.75 a couple weeks ago and have been pleased with the 35% or so runup since then. Any other opinions on the comparison of these two companies, #1 and #2 in their field? Does anyone else agree that FWHT is highly undervalued relative to GOTO, possibly in part because of a lack of recognition (35K avg volume)? |
