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Technology Stocks : GoTo.com, promising Internet search engine -- Ignore unavailable to you. Want to Upgrade?

To: Topannuity who wrote (226)	7/4/1999 11:03:00 AM
From: Mike Fredericks	Respond to of 977

You can't compare Goto to the other search engines. Ok, that's not quite accurate, I can't stop you from making the comparisons. But they're apples and oranges. The SEEK's, Altavista's, and LYCOS's of the world make money through traditional banner ads and affiliate-style revenue programs (the same affiliate programs that you or I or anyone could put on our web sites.) Selling banner ads in this way is expensive as you have to have ad people managing accounts and you never have all your ad space sold. Not just that, but have you ever noticed that if you took the logos off the portal sites, they all look the same? A friend of mine (I've never found a cite for this so it could be complete fiction) told me that he read of a study where a group took the top non-Yahoo portal sites, made them all greyscale and took the logos off and asked people which site they were visiting and they couldn't tell. Since they're all the same they have to spend huge amounts of money on marketing to try to win customers. Goto makes money in a completely different way. Rather than pay per banner impression, people pay per clickthrough. If you refer to a previous post of mine, I estimate that for the 5% of their traffic (the 30 most-popular search terms) generate an average of 50 cents per query. This average was based off of late-April bids. For example, average bid of the top 10 "Casino" advertisers was only $3.45 back then, it's much higher now. As Goto increases traffic, they don't have to try to sell ad impressions for the increased traffic, it's all automatic. In fact they get paid more for the advertising as people jockey to be #1 on the hit list. At their current rate of traffic, I estimate Goto will get $28MM in revenues over the next 12 months, and that's if their traffic level stays flat and the bids stay flat. If the traffic level increases or the bids increase, then it could go much higher. I posted the details for this in a past post (just click on my name and look for my Friday afternoon posts). In summary, I counted the number of queries for the top 30 search terms, found that it was 5% (actually 5.6%) of current traffic, estimated each user would click on one item in the top 10, then adjusted that to the current traffic. The numbers are all there for you to see. The author below, when he "annualized" Goto's sales, did so by merely multiplying 1Q numbers times four and not accounting for any growth. If you use my numbers, rather than 167x sales, it's only about 40x sales. Last point: Why does Yahoo warrant a higher valuation than the others? Because it turns a profit. I think that Goto has an excellent chance of turning a profit in the very near future. Goto's advertising model is very different from the other search engines - no expensive TV ads are necessary. I think that their expenses will stay pretty flat at 7MM/quarter while revenues increase dramatically. I think that there is an excellent chance of a quarter that's right close to break even - anything from $0.01 loss to $0.01 gain - by 1Q '00. They just got a huge infusion of cash from the IPO and I don't think they need all that money. Meaning that they could do what NSCP did back in '95 and basically stick the money in the bank, earn interest, and use the interest from that money to "turn a profit." Some money will go to upgrading their software/hardware to handle enhanced loads but I still don't see them needing to spend much more than $7mm/quarter. So, there you have it. Using the same valuation model on Goto that you use on other search engines is like comparing apples to oranges. People who write articles and "annualize" growth by multiplying 1 quarter four times should know better - the author is trying to sell copies of his/her newsletter/newspaper/magazine/whatever. And one last thing - CMGI underpaid for Altavista. I was a CPQ shareholder earlier in the Spring and the CPQ thread had valued AV at $5BB and was hoping for an IPO that assigned that sort of value. But CPQ is completely mismanaged. -Mike

To: Topannuity who wrote (226)	7/4/1999 11:07:00 AM
From: ChinuSFO	Read Replies (3) \| Respond to of 977

Topa, your post mentions GOTO. Should you not run that post through a wordprocessor and replace all instances of GOTO with "Internet stocks" I mean for the past 6 months I see analysts shouting from rooftops that Inets are way way overvalued. Yes AMZN, EBAY, PCLN, DCLK all keep going up and up inspite of negative earnings. That has befuddled and bemused some of the investors. The Internet is a milestone event similar in nature to the invention of the printing press, the automobile, the airplane, the telegraph, radio, the microchip and now the Internet. All this does one thing, move information/data faster. And that is what has caught the fancy of the investors. Notice one thing though. These are extremely interest rate sensitive stocks and will be the first to tumble on even a faint sign of money tightening. And what is noteworthy is that people are using the Internet (daytrading) to cause the wild gyrations in the Internet stocks. So quit wearing your classical investing theory hat for a minute and you will see the potential to make a quick buck in Internet stocks and also the potential to make a money in the Interent in the long run (AOL, YHOO and maybe GOTO, if they have patented their model)

To: Topannuity who wrote (226)	7/4/1999 2:40:00 PM
From: Stephen	Respond to of 977

Topannuity, Notwithstanding Mike's excellant reply ... I have to ask how professional people can write this stuff ??.. Are they really that simple ??. People buy growth stocks and pay a price based upon the rate of that companies EXPONENTIAL growth. The multiple applied to mature companies is less because the bigger they get, the slower the increase in their absolute growth. GOTO will grow much faster that Lycos or Yahoo et al, because they are starting from a smaller base figure. This isn't rocket science .... (but I have found that the quality (intelligence ??) of the people writing published material leaves a lot to be desired). Stephen