Yippee City:
Will Yahoo Make A Bid For GeoCities?
By Steve Harmon
Senior Investment Analyst
Internet.com
"Where Wall Street Meets The Web"
As we go to Web with this report news emerges that Yahoo (NASDAQ:YHOO - news) may be in talks to acquire GeoCities
(NASDAQ:GCTY - news) . The Yahooligans' right to acquire GCTY comes via its agreement with the Websteader that gives
Yahoo first look to buy.
At least that was what the documents said when Yahoo and GeoCities inked a co-promotional agreement aquite some time
ago where Yahoo would point its users to GeoCities.
That agreement came about when Lycos (NASDAQ:LCOS - news) first started buying community sites Angelfire and Tripod.
We recall that Lycos was also reportedly interested in GeoCities before it acquired either of its community efforts but that talk
was Lycos didn't want to pay what GeoCities thought it was worth.
Which leads to this week's look at value per unique user. As a group these top Web sites valuations gained nearly 12% on
Yahoo, GeoCities and Excite's deals or rumored deals. Let's see WEBDEX numbers:
Internet.com's
December
Jan 20
Jan 27
Jan 20
Jan 27
Percent
WEBDEX ™
Users
Market cap or PMV*
Market cap or PMV*
User
User
change
(millions)
(millions)
(millions)
Value
Value
AOL.com*
31.0
$6,800
$7,200
$220
$233
5.9%
Microsoft.com*
27.5
$8,300
$9,500
$302
$346
14.5%
Yahoo
27.4
$28,343
$33,148
$1,035
$1,211
17.0%
Lycos
26.4
$4,501
$4,788
$171
$182
6.4%
GeoCities
19.0
$2,045
$2,359
$108
$124
15.4%
Netscape.com*
17.5
$3,300
$3,400
$188
$194
3.0%
Excite
16.5
$4,985
$5,547
$301
$335
11.3%
Disney.com
13.6
$3,300
$3,500
$243
$258
6.1%
Infoseek
12.3
$2,098
$2,252
$170
$183
7.3%
Blue Mtn. Arts
12.3
NM
NM
NM
NM
NM
TOTAL
200.1
$63,672
$71,694
$2,738
$3,064
11.9%
AVERAGE
21.2
$7,075
$7,966
$304
$340
11.9%
© 1999 internet.com *pmv=estimated private market value for website only; users, media metrix
@Home agreed to acquire Excite (NASDAQ:XCIT - news) last week for $405 per unique monthly user. While Excite and
GeoCities are two different animals, one a guide and the other a home page provider, let's look at the value range and see what
possible valuations Yahoo may put on GeoCities (if indeed a deal happens).
If we carry GeoCities at an Infoseek-like level of WEBDEX, it implies a valuation of about $3.5 billion. But carried at the
average for the top sites shown in the table -- at $340 -- then GeoCities at 19 million users imputes $6.46 billion.
A "fair" valuation for GeoCities is always up to the haggling and arm wrestling. But overall we think GeoCities ought to
command a premium somewhere in the middle. At $300 per unique user GeoCities rings up at $5.69 billion.
Why would Yahoo need GeoCities? Six words: AOL-Netscape; @Home-Excite; Disney-Infoseek. Also, we believe that
buyers could be lining up for GeoCities and Lycos and that Yahoo doesn't want to miss out on one of the larger Web
properties that complements its index and guide.
Lycos has too many similar elements to make it as attractive to Yahoo, in our view. Said another way: GeoCities may be about
the best way for Yahoo to make the reach into the new top tier players, the 40% overall Internet reach club.
On the downside, squeezing revenue from GeoCities with pure ads won't be easy.
Overall though if Jerry and Dave don't buy then someone probably will soon. And that's one less property Yahoo can add to its
fold.
Not the last property but a large one in one swoop. On the other hand, several other community sites make headway in the
growth area: theglobe.com (NASDAQ:TGLO - news) and XOOM.com (NASDAQ:XMCM - news) .
The game now is bulk, big bulk. We expect a powerful round of consolidation to occur this quarter leaving three or four mega
players cutting a swath across content, commerce, community and connectivity. |
