>>> Why would any software developer (Netscape) pay 50 times revenues (not earnings)for a search engine. They could develop their own for a lot less than $1B. <<< Ron
>>1. They buy additional visibility.
2. They take out a potential future competitor.
3. They believe they're paying less for something than it's worth. >> SOWBUG
Response for #1 above. Seek gets half of their traffic from Netscape so NSCP would get very little visibility from the deal.
"" #2 If Netscape develops their own search engine that also takes out the competition.
"" #3 Netscape lost $88M in the fourth quarter, according to an earlier post. Seek lost 1.5M. If netscape pays $1B for seek, to get another company that is losing money. They will both go down the tube.
Exerpt from: Reuters, Friday, April 24, 1998 at 13:36
(Recasts, adds quotes, background)
By Marcel Michelson
begin...more
. " Netscape would rely on its partners for content, he said,
naming deals with big U.S. newspapers and added-value databases.
Like Yahoo!, Netscape wants to add "communities" -- special
interest groups on the Internet who have their own chat groups,
mailing lists and sites, generating Internet traffic and
creating a focus for target marketing by advertisers"
more...
end
Netscape and Microsoft are at the top of the food chain and all business flows through them due to new surfers arriving at these homesites when they sign on for the first time. I believe Netscape is going to start charging more for business's to advertise on their sites, search engines are just that. They do not offer value to Netscape. Netscape attracts 24M unique visitors a month. People don't get to Netscape from a search engine, they get there from the browser they use.
Since SEEK had $16M of revenues last year and half of their traffic came from Netscape, what do you think SEEK is willing to pay Netscape to continue to include them as a search engine?
Ron |
