The Internet Capitalist
SG Cowen Internet Research
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that (assumption of 7+ million subs against the
Street consensus of 6-6.5mm pre-XCIT), media
revenue (ad/commerce/content fees)
accounting for 40-45% (2/3rds
advertising/commerce and 1/3 content
licensing), and @Work accounting for the
remaining 10-20% of revenue.
All In, A Smart Move By @Home And A Great
Boon To Excite Shareholders…
As we have watched Excite develop over the
last handful of years, we have (sometimes)
struggled to keep the faith that their focus on
building a large and valuable online audience
would eventually create substantial
shareholder value and nice returns for
investors. Though we'll hate to see Excite the
entity retire from the capital markets, we think
it's important to note that the very big bets that
George Bell et al made over the last 18 months
have paid off handsomely. @Home has not
only been strengthened by the addition of
Excite's audience and advertising and
commerce skill sets, but also by the addition of
Bell to the @Home management team. And at a
time when most Internet investors' focus strays
from tried and true investing principles (like
solid management teams), we think it's key to
recognize the impact of a strong management
team.
December Quarter Earnings
Excite reported an essentially in-line Q4 last
night, posting an operating profit of $0.04 per
share, on $54 million in revenue (up 23% q/q
and $3mm ahead of our estimate). Though the
quarter wasn't a blow-out by any means (either
along traffic, registrations, or profitability
metrics), it was certainly a solid quarter that
saw real gains in “staying power”, a condition
we'd exalt if it mattered any longer; as it is, the
P&L becomes important to a combined
@Home model now.
Netcenter Seems To Be Back On Track…
Recall that last quarter, Netcenter under-delivered
against Excite's expectations on the
traffic and revenue front, showing just $3
million of revenue to Excite's top line in Q3. In
the December quarter, both Excite's and
Netscape's efforts to turn traffic around
resulted in about $5.5 million in revenue to
Excite, almost double the September quarter,
with visibility on sequential increases in this
line item for Q1:99.
And The Core Business Fundamentals Continue
To Chug, Not Scream, Along…
Page views grew to 58 million in December, up
16% sequentially (the same as Yahoo!); this
was a bit less than we had been thinking,
though the Street has started to come to terms
with the prospect that Excite is about revenue
generation, not simply page views. Registered
users shot up to 20 million (up 43% q/q from
14 million in September). Total advertisers
came in at 1,241, up 25% q/q, showing a 90%
retention rate. 84% represented non-technical
(i.e. consumer brand) advertisers; roughly the
same as Q3. Once again, both MatchLogic and
Classifieds 2000 were profitable in the quarter,
with MatchLogic producing $13 million (24%)
of Excite's revenue in Q4. As well,
management estimates that their e-commerce
focused properties tallied something like $244
million in gross revenue during the quarter.
It Looks Like Excite's Strategy Of Focusing On
Targeting, Not Page Views, Is Bearing Fruit…
Management shared anecdotal evidence that
their focus on targetability and not reach has
started to make some difference; their ability to
increase response rates and click-throughs,
when coupled with their ability to sell
“horizontally” across multiple content
categories (not simply sports or automobiles or
finance but, say, all three) has produced CPMs
in the $300 range (e.g. for opt-in emails).
…Unfortunately, It Just Happens To Be Small
Fruit |
