Updated 15-Jan-99
More Notes From the DLJ Internet Conference
The Donaldson, Lufkin & Jenrette Internet Conference is currently being held in San Francisco.
Nearly every major Internet company is presenting to the major institutional investors. Here are
some more notes from presentations given on Wednesday and Thursday. The bulleted items
represent points made by presentators at the conference. Briefing.com comments on those points
are presented in italics.
Venture Capitalists Panel
Here are some overall impressions from a question and answer panel with representatives from
some of the leading internet venture capital firms: Bessemer Venture Partners, Benchmark Capital,
Capital Research, Draper Fisher, idealab!, and Softbank Holdings.
Best opportunities online are those that can't be done in the real world (from Benchmark
Capital)
Draper Fisher: prefer to invest in information technology in its earliest stages, not revenue
generating companies
Idealab!: investing only in early stage companies, they generate the ideas 70% in house, with
only one-third coming from outside the company
Briefing.com: This is similar to CMGI, which invests heavily in companies whose idea
starts within CMGI
Softbank: Traditional media and commerce will collapse because of the Internet. Investing in
the internet involves a real learning curve, nobody really understands what content will be
on the internet
Briefing.com: note, you are reading content right now. Also, everyone politely refuse to
acknowledge that pornography is one of the most successful "content" segements of the
Internet currently. No one understands content on the Internet? Guaranteed to be at least
the following: Sex, Gambling, Sports, Stocks, probably in that order.
Softbank: Bandwidth increases will cause another great boom
Briefing.com: This contrasts with AOL's statement yesterday that increased usage will lag
behind bandwidth capabilities.
E-stores built around very specific produc segments are the next wave. Blending of
media/commerce will create a completely different set of companies than we see today.
(Expressed by Bessemer Venture)
Briefing.com: If true, the Amazon.com vision of becoming a single site for purchase of all
consumer items will be frustrated.
Draper: Internet access will eventually be free. A second wave of usage is coming which
will be driven by lower cost, not greater bandwidth. However, greater bandwidth will
encourage more impulse buying.
Vertical applications are the next wave (expressed by idealabs!)
Briefing.com: This means more specialized sites dedicated to single purposes, not
one-site-for-everything type businesses.
Content is not what people do online: person-to-person (chat rooms and email) is
predominant usage (90%) (Expressed by Capital Research)
Draper: Business-to-business commerce is the untouched wave in Internet technology
Briefing.com: Broadcast.com emphasized their direction in this area in their presentation
BVP: Procurement models will change dramatically. License oriented businesses (software)
will become service oriented businesses.
Softbank Holdings: invested in an internet phone company, believe that voice over the
internet will be free in 2-3 years
The panel also discussed valuations of Internet Companies:
Valuations of Internet companies are unimportant in the public market: Put money in
leaders in categories and stay put. (Bessemer Capital)
Briefing.com: You need to remember that this is a venture capitalist speaking: ultimately
he is the one you are buying your stock from...
Excite.com
Excite.com's (XCIT) presentation was on Wednesday.
Focuses on letting users solve problems, believe they are an application, not a magazine
4 million daily users, more than MTV
Briefing.com: comparison of raw numbers with TV audiences is very misleading. TV
controls the user's time, the user controls internet time.
Personalization: Heavy emphasis on personalized experience on the internet. Every part of
the service offers personalization, including front page. People who personalize come back
25 times more than those who do not.
More content per page with fewer clicks
Briefing.com: fine line between clutter and just enough info, more not always better
Revenue efficient: Have 80% of Yahoo's revenue on 1/3 the page views
Briefing.com: This only means Yahoo has more pages, therefore more things to do.
Brand association important: doing deals with Dell, IBM, Micron, RealNetworks. Have
international distribution, sponsoring national events and promotions
Data collection is key to advertisers, track behavorial approaches of users,
34 million profiles created by users, good demographics for advertisers
Briefing.com: So what, little meaningful info is in those profiles; many people lie
People spend 30% more time per page on XCIT than on other search engines
Briefing.com: Source for this data point? We know of no public data for all search engines
on page usage and user habits
Have 31% operating margin target for year 2001
Briefing.com: This is an extremely aggressive target
DoubleClick
Doubleclick (DCLK) is both a technology company, providing technology for target web
advertising, and distributing ads. Doubleclick sells ads for the content provider, acting as a
representative agent, and then controlling display of all ads. The content provider only ads the
technology to their site. The ads are chosen by servers at Doubleclick, based on data collected by
usage at the content provider, and then displayed across the network.
Plan to use proprietary DART technology to dominate advertising methodology on Web.
DART technology targets an ad based upon the users IP address and stored data, Targeted
advertising is unique to the Web
Briefing.com: This is like a search engine giving you a golf ball ad when you type in
"golfing" But we don't think DART is the only technology that does this
AltaVista is the largest customer, delivering 44% of all revenues, contract with AltaVista
expired Dec 99
Project total Web advertising spending to rech 7 billion in 3 years.
Doubleclick is not competitive with ad agencies, because the content provider is their client,
not the ad creator
DART Revenues: $3.3 million in Q3 from 8 billion ads. DART ads make up 16% of total
revenues, 38% of profit
Amazon.com
Amazon.com (AMZN) has been telling analysts for over a year that they are not a bookstore, they
will eventually sell all types of consumer products.
Online customer care about: selection, ease of use, price, in that order, but it must also be
fun
Promotions can be adjusted instantly and continously to improve response
Asked about Customer acquistion costs: do not disclose
Briefing.com: Obviously would be a frightening number if calculated. Take total
marketing expense, divide by number of total customers. We'll do it later if we can find
total cumulative registered customers. Also, by this time if you knew level of repeat
business from a customer, you could project a trend of future spending per customer, to be
compared with acquisition cost. AOL has calculated these numbers, show that acquistion
costs are recouped in less than a year. The fact that Amazon does not brag about acquistion
costs and projected future value means the number can't be good yet.
Role as a portal: Has a lot of advertising space which it uses for itself. May use advertising
space for additional revenue in the future.
Shop The Web: Amazon realizes it will need partners to provide all items, it can't
warehouse everything. Shop The Web is the first step in that direction.
Operational parts of business need to be improved: Christmas rush greatly overloaded
existing capabilities.
Looking forward to broadband because it allows demo of products
Amazon worries about competitors who specialize in particular areas. Amazon dedicates
itself to being the best in every category it chooses.
Briefing.com: Talk about hubris. "we will sell everything, and we will be best at each"
Note that Bessemer Venture felt the future was specialized retailers, not supermalls like
Amazon.
Percentage of revenue which were gifts: questioned not answered because in quiet period
before earnings release
Briefing.com: This will be the most important single item in Amazon's revenue numbers.
If the gift percentage, which cannot be counted on in Q1, is too high, Q1 will show a
sequential decline from Q4, a real possibility, and one which would scare many internet
investors. Revenue growth will slow eventually, but everyone assumes it is still years off.
If its closer than we think, all assumptions will be readjusted. When Amazon.com reports,
look for this number. Percentage of revenue that was gifts. If they don't report it, and
avoid the question in a conference call, its bad news. If they report it, calculate the Q4
revenues without the gifts, then use previous sequential figures to project Q1.
Projects total online retail spending to be 10-15% of all retail spending by 2010.
Amazon will not become a publisher, only distributor.
Reaction to Buy.com's strategy of selling all items at cost, and making money on
advertising: Its the wrong thing to do.
Briefing.com: Of course, it's wrong. The question is whether its wrong for Buy.com, or
wrong for Amazon.com...
We will post more here on the Stock Brief page from the DLJ conference after it winds up later
today, Friday. |
