SMARTMONEY.COM: Staying Excited
By ALEC APPELBAUM
Smartmoney.com
(This story was originally published Wednesday.)
NEW YORK -- If it's A thrill ride investing in Excite At Home (ATHM), there also seems to be
plenty of, well, excitement at home. CEO Tom Jermoluk spent much of his presentation at a Kagan
Seminars cable industry conference in New York on Wednesday conjuring new ways that the
company's high-speed Internet service would change consumers' lives. In his vision, users will be
able to find CDs and books without remembering their titles, check plane arrivals before dashing to
the airport and schedule home shopping whenever they please.
Like all Internet executives, Jermoluk has a lot of irons in the fire.
Tuesday night, his company inked a deal with part-owner AT&T (T) to make Excite At Home the
Internet-access provider on AT&T's digital TV set-top boxes. The deal promises a split of
subscriber revenues, and a new way of appealing to advertisers. At the same time, Jermoluk is
battling to make his current base of 620,000 subscribers so happy that they'll stick with the service
after 2005, when the cable companies that funded him from the beginning will be free to strike
deals with other access providers. He's fending off rumors that AT&T wants to offer America
Online's (AOL) services through its cable wires, and has little interest in protecting Excite At
Home's franchise. And he's talking about moving his brand beyond cable access into all sorts of
connections.
Preaching to the choir at the conference, Jermoluk told a couple hundred cable TV insiders that
cable would always hold greater promise than DSL, the comparable technology being offered by
phone companies. "You have to not compare DSL to the one cable channel we're using today, but
to the 150 channels [available on a cable service]," he said. And what should the cable industry do
with all those channels? Like his tag-team partner, Excite At Home President George Bell,
Jermoluk invoked an ordinary home with "100 times more bandwidth" in five years than it has
today. In that home, he said, consumers would order compilation CDs by clicking remote controls,
send greeting cards to their grandmothers' TVs and watch stock quotes around the clock.
What's this engineer doing talking about greeting cards? Trying to make his service indispensable --
and impervious to competitive threats from America Online and others currently locked out of
cable systems. "I'm not a marketing person,' Jermoluk demurred at one point. But in the Internet
business, everyone has to be a marketing person.
Before his presentation, Jermoluk talked with SmartMoney.com about some of his company's
marketing challenges.
Content and Its Discontents:
Jermoluk says his biggest challenge is to develop lasting relationships with subscribers. Content
defines those relationships. "We have always been an online service, so our customers are getting
used to our content. The page views of our own [Web sites] have increased every quarter," he
says.
"The majority of the content we get will be done through partnerships." So does that mean AT&T,
which has said it doesn't want to be in the content business, would bless Excite At Home's
acquisition of more content if the price were right? Jermoluk says it doesn't matter.
"They own 25% of the company and [only] have a certain [voting] majority on certain issues, such
as buying and selling the company" he says, noting that other equity owners of Excite At Home
haven't expressed hostility toward being in the content business. "There isn't a conflict of interest
between what AT&T desires to do and what we desire to do. We work to find them a way to
win." So it's full steam ahead for Excite At Home's plans to hook subscribers through compelling
services and snare advertisers with extensive demographic information. "We want to increase reach
and technology," says Jermoluk, citing software units of Excite that provide detailed information
about viewers of online ads. He also says the company might acquire "viral marketing" companies
that help ferret out potential subscribers.
Demographics:
Where are those 620,000 subscribers, and how can the company increase its subscriber base?
Right now, says Jermoluk, the company's demographic profile is "pretty reflective of the Internet."
The TV deal, he says, will hopefully bring the brand to a "much broader demographic.' Under the
agreement with AT&T, Excite At Home will provide exclusive Internet access but will not have
exclusive rights to software applications on Ma Bell's TV-top boxes. It will run trials of the service
beginning next spring in some of the same markets where AT&T tests the operating system it's
getting from Microsoft (MSFT). Jermoluk says he hopes to announce similar cable deals with
Excite At Home's other cable partners.
Convergence:
One of the most-invoked applications for high-speed Internet access is live video. What does
Jermoluk see happening to TV screens and PC screens as consumers balance their recreational
habits between the two devices, and what sort of balance would be best for his company? "I'm not
a believer in the convergence-of-device theory," he says. 'PCs will be PCs and TVs will be TVs [at
least for the next five years]. What converges is if people want the same information in different
places." In other words, couch potatoes will keep watching TV in their living rooms. They just
might want to read email and get stock quotes during commercial breaks. "We have to address the
all-device solution set," says Jermoluk (remember, he's an engineer). That means the company
needs to own, and manage, all kinds of programming for different technologies.
Rumor Mill:
Is Excite At Home dead set on remaining a single company, independent of anybody else? "We are
completely into our strategy right now, and the nice thing is that it's working extremely well,"
Jermoluk says. "Excite's registered user base rose from 19 million to 38 million since we
[announced] the merger. We have no intention of changing our strategy." So those rumors a couple
of weeks ago about Yahoo! (YHOO) bidding for Excite were just hogwash? "As a fiduciary to the
company, I'm always willing to discuss anything with anyone at the appropriate time," Jermoluk
says. 'In this Internet world, anything could happen. But saying [Excite is for sale] is as speculative
as saying, "Is anybody going to buy the whole thing?" or "Are we going to break the company into
eighths?"' Whatever conversations are or aren't going on, Excite At Home is being buffeted by the
high-level machinations of powerful corporate partners. No wonder Jermoluk wants to become
indispensable to consumers.
That would make Excite At Home a lot harder to blow away.
For more information and analysis of companies and mutual funds, visit SmartMoney.com at
smartmoney.com
|
