ROBERTSON STEPHENS
The Internet Stock Team
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October 29, 1999
The Web Report - Volume 2, Issue #43
Internetstocks.com Overview - Keith E. Benjamin -
mailto:keith@rsco.com
This week, the NETDEX index increased 1% to 606.75, compared with the
NASDAQ, which also increased 1% from last week.
While the NETDEX is up approximately 49% from its August lows, it is
still down about 24% from its all-time high of 801.41 on April 13. If
we look at percentage changes from low to high in previous quarters
(particularly last year's fourth quarter), the NETDEX was up 67.5% in
Q3:98, up 202.4% in Q4:98, up 66.0% in Q1:99, up 69.6% in Q2:99 and
up 47.1% in Q3:99.
Q3 REPORTS WARM AND FUZZY - We have been feeling like glowing fathers
as our stocks have exceeded expectations this reporting season.
Revenue upside has varied widely, from 3% (SportsLine) to 33%(eToys)
and 67% (AskJeeves), but has generally been quite high: 15% (Yahoo!),
18% (Ticketmaster Online-CitySearch), 24% (Homestore.com), 25%
(MapQuest & InfoSpace), 27% (LookSmart & StarMedia), 29%
(USSearch.com). In general, we have noticed that with no substantial
business model changes, revenue upside of 15% or less is viewed as a
slight disappointment, 15-25% is viewed as a very solid quarter, and
above 25% is viewed as a blowout. In addition to strong results this
quarter, we have modeled on average only 20% sequential revenue
growth for the December quarter, compared with actual sequential
growth in the September quarter of 37%. This leaves us confident
that as we move into the holiday season, these stocks are poised to
move higher.
eTail Update - Lauren Cooks Levitan - mailto:lauren@rsco.com
The eTailDEX fell for a third straight week to 1186.45, down 5.2%
from 1251.86 last week, which was down 1.5% from the prior week.
Added to the eTailDEX this week were 13 new companies, bringing the
total number of companies in the index to 43. New companies include
Ashford.com, BigStar Entertainment, Drugstore.com, 1-800-Flowers.com,
FragranceNet.com, Ftd.com, Garden.com, Gerald Stevens, iGo
Corporation, PlanetRx.com, Shop At Home, ShopNow.com and
VitaminShoppe.com. We will continue to add companies to the eTailDEX
on a quarterly basis as new eTailers emerge. The eTailDEX is
currently up 46% from its recent low of 812.5 on August 4 but still
down 34% from the 52-week high of 1807.45, in our opinion, suggesting
room for substantial moves in the group over the coming months.
INITIAL ONLINE SHOPPING CHALLENGE RESULTS - We recently launched a
new area on Internetstocks.com for our Online Shopping Challenge
(powered by BizRate.com), and the first set of results arrived this
week with some very interesting results. A majority of shoppers who
responded to date indicated general satisfaction with their online
shopping experiences and expect to do more shopping online soon.
Specifically, 60% of shoppers were highly likely to revisit the same
online merchant, while only 10% were highly unlikely to return. The
base of consumers responding were experienced online shoppers-only
2% of respondents have not made any online purchases in the last six
months, while 45% were making their first purchase at the sites they
reviewed. We believe this reflects shoppers are trying new Web sites
and have a basis for comparing their shopping experiences across the
spectrum of online merchants. Another noteworthy data point is that
only 1% of respondents returned their online orders and 1% canceled
them before they were shipped. While we expect product returns to
account for a greater percentage of orders, given the added product
information available online, we would look for return rates to be
flat to slightly below cataloger levels. We also note that 26% of
respondents contacted customer support. Across all sites,
satisfaction with customer service received the lowest ranking
relative to product representation, shipping, on-time delivery, and
privacy. We believe customer service is a significant differentiating
factor between Web sites, and while several eTailers have taken gross
margin hits lately as they ramp up infrastructure spending in advance
of demand, we believe the investments will pay off longer term.
Because we believe winners will be determined by who delivers the
best overall shopping experiences, we will closely monitor
satisfaction with customer service levels at individual sites
throughout the holiday season through the Online Shopping Challenge.
While drawing any conclusions from this early wave of results would
be premature, we nonetheless look forward to monitoring how traffic
patterns and customer experiences evolve as the holiday shopping
season heats up. If you shopped online recently or plan to in the
near future, we hope you'll fill out a brief survey regarding the
quality of your shopping experience. Maybe you'll be the lucky
winner of the $10,000 online shopping spree!
www.internetstocks.com.
internetstocks.com
OCTOBER SHORT INTEREST DATA RELEASED - Many of the stocks in our
eTailing coverage universe have small trading floats relative to
their short positions and, as such, are prime candidates for short
squeezes. A short squeeze can occur when covering shorts spike the
demand for shares that are relatively scarce given that the
availability of shares is limited by the small float of a recently
public company. Thus, we monitor the ratio of shorted shares to
shares actually trading as an indicator of stocks that we believe
have significant near-term appreciation potential. While October's
month-over-month position changes were mixed, short interest
increased in the companies we identify as eTailing Monsters (Amazon,
eBay, eToys, and Priceline) and in most of the smaller cap names we
have identified as up-and-coming (Alloy, Global Sports, Preview
Travel, and Value America). Specifically, we believe sharp gains in
short sellers of eToys (68% short/float ratio versus 61%), Preview
Travel (52% verses 46%), and Priceline (51% versus 42%) could fuel
near term gains after the group recovers from its expected sell-off
following this quarter's earnings season. While we expect many
investors took short positions in anticipation of a post-earnings
release sell-off, we believe the average daily trading volumes in
many of our names relative to their short positions are small, such
that it could take several days for shorts to buy back shares. In
such an environment, we believe excess demand could fuel sharp gains
in many eTailing stocks until equilibrium is achieved.
AMAZON STILL A CORE HOLDING, IN OUR VIEW, DESPITE OUTLOOK FOR WIDER
LOSSES- Almost as if it were a choreographed performance from recent
quarters, Amazon's management warned investors of wider near term
losses when it reported its strong Q3 results. While we, along with
other members of the investment community, are becoming increasingly
impatient with periodic shifts in expectations, we still have great
confidence in Amazon's business model and its potential to generate
impressive long-term returns on investment. We believe it is
important to differentiate between the drivers of Amazon's gross
margin declines (largely the inefficiency of the company's back-end
operations, which should show improvements as sales build) versus a
highly promotional environment used by other eTailers to acquire
customers. We are encouraged by management's decision to begin
sharing more granular category level information with investors going
forward. While we doubt Amazon will lift its shroud of secrecy on
newer businesses, we believe the extra data will likely indicate that
the company's investments are paying off in its more mature
businesses. Thus, we believe Amazon's plans to ramp up its marketing
spending during Q4 could further entrench its leadership position
while also exposing consumers to the broad-line retailer Amazon has
become, versus the online retailer of books, music, and video
products the company was as recently as a year ago. In addition, we
believe few eTailers new to the game will be able to breakout and
distinguish their brands amid the expected flood of .com advertising.
Thus, we believe the opportunity for eTailing brands that already
carry high awareness with consumers-best exemplified by Amazon, in
our view-to effectively market this holiday season is far greater, as
their branding messages can build off of previous campaigns rather
than attempting to stand out in a crowd. Given this environment, we
believe Amazon is positioned to dominate online holiday sales yet
again, and we would be aggressive buyers at these levels.
PRICELINE - FOCUS ON PROFITABILITY - Priceline.com reported Q3:99
revenues of $152.2 million exceeding our estimate of $140.0 million.
We believe this quarter's performance reflects the explosive growth
and scalability of the company's business model. In particular, we
believe early reads on Priceline's recently expanded mortgage service
and new auto buying service are indicative of consumer comfort with
the Priceline business method. While the travel business still
dominates the company's revenue base, we believe Priceline's robust
Q3 results and announcements regarding strong business trends in
recently launched ancillary businesses point to huge long-term growth
opportunities. The company remains committed to its stance of
demonstrating its path to profitability on a consistent basis. As
such, we are looking for only modest sequential growth in revenues in
Q4 as the company intends to put the emphasis on accepting more
profitable offers during what is typically a seasonally slow period
for travel bookings in tandem with tighter expense control. (Unlike
most companies, Priceline can effectively control its gross margin
rates by calibrating which customer offers it accepts). We note that
we expect revenue growth to accelerate again in Q1, coupled by
continued declines in per share losses. Given our investment thesis
that Priceline's business model could be even more effective in
several business-to-business product categories, we believe the
company's current valuation is highly attractive and offers investors
significant potential for appreciation.
EBAY'S Q3 RESULTS AND CUSTOMER USAGE MISUNDERSTOOD, IN OUR VIEW -
Shares of eBay were hit hard (declined 10% in two days) following its
Q3 earnings release. We believe pressure on the stock resulted from
Q3's lower-than-expected gross margin and revenue per user, a metric
that we view as an irrelevant indication of the company's health.
First on gross margin, we believe Q3's decline resulted from
investments in customer support and systems in advance of new product
rollouts and Q4/Q1 seasonal spikes in demand. We expect eBay to roll
out a new credit card payment solution in Q4, which given the
inconvenience of current payment options, we believe could
significantly accelerate auction transaction velocity and lower
barriers for new buyers and sellers to start trading online, which
could grow the overall market. Currently 90% of eBay's users pay by
check or money order (When is the last time you used a money order?),
which makes it amazing to us that the company was actually
responsible for more than $741 million in gross merchandise sales
during Q3. Second, on declining revenue per user, we have never
expected that incremental users would be as active as the company's
earliest participants. We believe new customer growth (which grew 38%
sequentially to 7.7 million) is a more compelling metric as we have
wanted eBay to take its service to the next level and demonstrate its
mass market service. In our view, eBay is well on its way, and we
recommend buyers take advantage of near-term weakness to create or
increase their positions.
WE BELIEVE ETOYS IS POISED TO SPREAD HOLIDAY CHEER TO INVESTORS -
eToys reported Q2:F99 revenues of $13.3 million, exceeding our
estimate of $10 million. In our opinion, these results coupled with
eToys' positive moves up the Media Metrix ranks in September point to
strong momentum leading into the holiday season. Last year, eToys
surprised most observers by becoming the leading online toy seller
during the holiday season. We believe eToys' hold on the top spot in
this category remains its to lose, and in our opinion, the company is
well positioned to reassert its leadership position. To that end,
the company announced a number of initiatives ultimately directed at
increasing its customer base, including increasing its planned
expenditures on augmenting its IT capabilities and on marketing
during the holiday season. Recently launched marketing efforts
include an advertising campaign that began on October 1, and a weekly
children's book recommendation feature on the Rosie O'Donnell show.
As the holiday shopping season approaches, we anticipate getting a
steady flow of incremental data indicating that eToys is continuing
to produce impressive results. We also suspect such indications of
positive momentum could drive further short covering, and therefore
we continue to rate shares of eToys as a Buy.
ALLOY ONLINE'S NEW SPONSORSHIP PARTNER REFLECTS MATURING AD MODEL -
While Alloy's Q3 will not be over until the end of October, the
company did make a significant announcement this week. Alloy entered
into a strategic marketing alliance with Personal Products Company
(part of consumer powerhouse Johnson and Johnson) to promote the
launch of PPC's itsmybody.com, a Web site focused on health and
self-image issues of teenage girls. In our view, this agreement
reflects a growing awareness among companies that Alloy is an ideal
marketing partner and direct connection to the increasingly
influential, but difficult to reach, Gen Y market. We believe this
news, coupled with Alloy's other recently announced sponsorship deals
with a range of retail and brand partners, including Nike, Pacific
Sunwear, Eastpak, Fossil and Guess, reflects the company's emerging
advertising revenue model, which could result in future upside
opportunities. Longer term, we expect advertising sales to contribute
significantly to Alloy's revenues and already high gross margins of
over 50%.
CDNOW OUTLINES NUMEROUS INITIATIVES TO GENERATE TRAFFIC AND SALES -
CDnow reported Q3:99 revenues of $36.6 million, below our estimate of
$42.0 million, with an operating EPS loss above our estimate due to
gross margins above and operating expenses below our projections. In
our view, the company's shortfall to our Q3 revenue projection
underscores our concerns regarding the highly competitive online
music environment faced by the company. That said, there are a
number of initiatives that CDNow is undertaking that we view
favorably, including the addition of custom CDs and digitally
downloadable music to its offerings and improvements to the
interactive news, content and community aspects of the site. We
expect these developments could increase traffic and, in turn, drive
multiple revenue streams of commerce and advertising, which, coupled
with indications that the Columbia House relationship is benefiting
the company's online initiatives, could serve as an opportunity for
us to become more aggressive with our rating.
eNetwork Update - Michael Graham - mailto:michael@rsco.com
THE BUTLER DID IT! ASK JEEVES REPORTS - After reporting a standout
quarter, Ask Jeeves announced plans to heavily increase its
investment in its corporate licensing business. In addition to
providing the foundation for a rapidly growing consumer navigation
site, Jeeves' technology helps businesses interact online with
customers at the appropriate level, judging from the nature of
questions and answers how valuable a potential customer is likely to
be. Jeeves can then guide appropriate customers to an interaction
with a live online customer service agent. Throughout the process,
Jeeves' database grows smarter, enabling faster and more effective
answers. We believe this was the breakout quarter for Ask Jeeve's
corporate licensing business as evidenced by big recent deals with
Microsoft and American Express. To reflect the increased investment
in the corporate business, we raised our revenue estimates
significantly, increased near term loss estimates, and substantially
raised long-term profit targets. We believe that this is just the
beginning of a huge opportunity for the company. However, we do note
that Ask Jeeves stock is up 137% in the past month, and therefore we
would not be surprised to see Jeeves let off some steam in the
near-term. But over the next six months we expect several positive
catalysts, including several large corporate licensing deals, which
we believe should help the Butler grow to a much higher valuation.
STAMPS.COM DECLARES GAME OVER - We believe Stamps.com has solidified
its role as the leader in the online postage and shipping market.
The company reported Q3 results yesterday, which consisted solely of
expenses (Stamps had not yet recognized any revenue) and a summary of
recent strategic partnerships and acquisitions. Earlier in the week,
Stamps announced the acquisition of iShip, which hosts an
Internet-based service allowing small businesses to choose shipping
agents like UPS and Federal Express based on cost, availability, etc.
iShip already has exclusive contracts with premier partners such as
eBay and Mailboxes, etc., and it essentially doubles the size of
Stamps.com's addressable market, from the $60 billion U.S. postage
market to include the $60 billion package shipping market. Stamps
also signed key distribution agreements in the quarter, most notably
an expanded deal with AOL, which should include the Stamps client
software on one billion AOL 5.0 CDs over the next three years.
Stamps also has an agreement in place with Microsoft to include the
software on Microsoft's Office Update Web site, which sees two
million visitors per month.
Since officially launching its service last Friday, the company added
10,000 customers in three days, a milestone we believe it took a
competitor six weeks to reach. We attribute this to the fact that
Stamps.com is expected to have the only software-based solution on
the market for the next nine months or so, and its product can roll
out much more quickly than its competitors' hardware-based solution,
in our view. Stamps has acheived this growth with very little
marketing, including no contribution from the AOL deal or the
Microsoft deal. We are almost frightened by the potential for these
marketing deals to explode Stamps' customer base well beyond our
estimates. We expect the company to increase its marketing spending
to capitalize on its software head start and believe this is the
right strategy given the potential to grab market share in the short
term. We believe Stamps has just begun to capitalize on its
opportunity to become a very large company with very high profit
margins.
HOMESTORE.COM, BUILDING THE FOUNDATION - Q3 revenues of $18.6 million
were well above our estimate of $15.0 million. When the recent
acquisition of Homebuilder.com closes, HomeStore.com will operate
three of the top five home and real estate Web sites on the Internet.
Last week, HomeStore.com, Inc. and Cendant Corporation settled
pending litigation between the two companies and reaffirmed their
previous alliance agreements. We believe the settlement helps to
clear the path for penetration across all platforms of the Internet
real estate market. We believe that HomeStore.com has significantly
completed the first step of its business model by gaining access to
an estimated 95% of property listings in the U.S., many of which we
believe are exclusive. This makes the company's sites a must-visit
for consumers searching for a home online. We believe that
HomeStore.com will begin to leverage its position and move toward
capturing a slice of the $150 billion U.S. real estate market,
resulting in an open-ended market opportunity. While the stock
sports a big market value relative to the company's current size, we
struggle to find another company with 60%-plus gross margins as
firmly positioned in such a big market.
TICKETMASTER ONLINE-CITYSEARCH REPORTS - TMCS reported Q3 revenues of
$27.4 million, well above our estimate of $23.3 million. Ticketing
sales of $16.6 million were above our estimate of $15.0 million.
Ticketmaster sold 15% of tickets online versus 13.5% in Q299 and our
estimated 14.0%. City Guide revenue growth also was ahead of
expectations. We believe the company is deliberately building a
high-end local eCommerce network. While City Guide growth is not as
fast as some Web models, we believe the resulting defensible business
is valuable. We believe there is room for two models of local
commerce, with City Guide's high-end approach complementing other
lower-priced options like pre-templated mini-sites for linking to
yellow pages advertisements. We believe CitySearch's approach will
yield a very defensible business longer term, while the stock is
appreciating slowly as inpatient investors yearn for more explosive
upside. We see prospects for accelerated growth and higher stock
values and believe TMCS will return to and move past previous highs
and will emerge as a leader in local content and commerce.
MAPQUEST DELIVERS THE ROUTE TO REVENUE UPSIDE - MapQuest reported Q3
revenues of $9.8 million, 23% above our estimate of $8.0 million.
Internet-related revenues grew to $ 5.9 million, up 183% from Q3:98,
representing 60% of total revenues, versus 53% last quarter. The
company added 219 new business customers, which is well above the
average of 100 from the first two quarters of the year. We believe
that a significant area of growth for MapQuest exists in the emerging
wireless market. The company recently signed partnerships or
alliances with Nokia, Sprint and SpeechWorks. We believe that the
wireless market will provide new subscription revenue streams for
MapQuest such as traffic updates delivered to customers via pagers,
cell phones, palm pilots and e-mails. We are maintaining estimates
and believe there is considerable upside to our model, specifically
in Internet-related and business to business revenue. We find
MapQuest stock attractive at current levels, relative to the size of
the opportunity it faces and comparable stocks.
INFOSPACE.COM REPORTS STRONG REVENUE & PROFITABILITY - Q3 revenues of
$10.1 million and EPS of $0.06, excluding amortization, were
significantly above our estimates of $8.3 million and ($0.03)
respectively. Earnings upside reflects lower-than-expected expense
levels, helped by gross margins of 85%, up 400 basis points
sequentially. Revenues reflected strong page view growth. Page views
across the InfoSpace affiliate network were up 16% sequentially to
1.6 billion. Revenue per page was up 30% sequentially to $6.25 per
page from $4.81. InfoSpace added 116 new affiliates as its network
now has unduplicated reach of over 86% of the Web. We estimate that
revenue backlog for the next five quarters exceeds $38 million,
giving us visibility and confidence to raise our estimates. We view
InfoSpace as a proxy for Web growth. We expect InfoSpace to grow as
fast, or faster, than the Web, allowing it to grow into a big
valuation.
LOOKSMART, LOOKING BETTER WITH EVERY QUARTER - LookSmart reported Q3
revenues of $13.3 million versus our estimate of $10.5 million, an
increased of 27% over revenues from the previous quarter. According
to Media Metrix, Looksmart received 9.3 million unique visitors in
September, reaching 14.6% of Internet users, ranking it as the 13th
most visited property in the month. Traffic across the site grew 58%
to 10.4 million average daily page views in Q3, up from an average of
6.6 million in the previous quarter. We find LookSmart's service to
be a natural outsourcing solution for other Internet brands lacking
time, energy or money to handle this type of service. Current
partners include Microsoft, Netscape, AltaVista, Excite@Home, and
Lycos. With a strong editorial support team, we believe LookSmart's
Network will continue to provide value to users trying to search the
Web. We believe LookSmart has the right strategy and management to
grow into both a leading Web brand and a leading outsourcer of
directory services, resulting in a versatile business model.
STARMEDIA LIVIN LA VIDA LOCA - Star Media reported Q3 revenues of
$5.6 million versus our estimate of $4.4 million. Enormous page view
growth fueled the revenue upside. Page views in the quarter were 1.1
billion, up 71% from 686 million in Q2. By being early to establish
the most recognized Internet brand in Latin America, we believe
StarMedia appears to have a favorable position over U.S.-based
competitors like AOL, Yahoo!, and Microsoft. We believe StarMedia can
grow into a substantial valuation based on its ability to reach the
majority of new Latin American Web users, yielding increasing
advertising and commerce revenues. We have been impressed with the
company's focus on partnering with local media companies to better
serve the diverse geographies found in Latin America, while also
integrating commerce with content from the start, most likely
resulting eventually in higher revenue per user.
EXCITE @HOME EXTENDING REACH - Excite @Home is acquiring
Bluemountain.com for $780 million. An additional $270 million stock
earn-out in ATHM stock can be issued if Bluemountain.com matches
performance targets. We believe the price is reasonable given
Bluemountain.com's surprisingly large size. Bluemountain.com, is the
Web's largest greeting cards publisher with more than 9.1 million
monthly users and 10 million average daily page views.
Bluemountain.com's combined home/work reach was 14.4% in September,
making it the 3rd most trafficked shopping site behind Amazon and
eBay, and the 14th most visited site on the Web. We believe
Bluemountain.com site has similar qualities to Hotmail and ICQ as
each have large user bases that have yet to be fully monetized and
therefore easliy extends the reach of Excite's network. We remain
confident that ATHM could easily reach 10 million subscribers in 2-3
years providing substantial potential upside to the stock.
LYCOS LAUNCHES SHOPPING UNIT - After 18 months of planning, Lycos
launched LYCOShop, which includes more than 1,000 merchants.
Although somewhat late to the game, we believe Lycos' emerging mall
introduces a large number of compelling features. We believe LYCOShop
is the first major network to offer 24x7 customer service,
value-based buying tools, a rewards program, and integrated consumer
reviews through a partnership with ePinions. On the merchant end,
Lycos offers a store building solution, a transaction-processing
solution and a universal-shopping cart. We believe LYCOShop could
help form additional revenue streams, including store hosting,
transaction, and slotting fees while providing additional inventory
for advertising and upside to our estimates.
eMarketing Update - Lowell J. Singer - mailto:lowell@rsco.com
MYPOINTS.COM REPORTS EXCEPTIONAL Q3 RESULTS: We believe that
MyPoints.com's Q3 results demonstrate the power of the direct
marketing model that the company is building. MyPoints.com reported
Q3 revenues of $7.0 million, well ahead of our $2.9 million estimate.
We believe that the results were driven by better-than-expected
growth in number of members, number of advertisers and revenue per
member. The company ended Q3 with 3.3 million members of MyPoints'
branded programs versus 2.1 million members at the end of Q2.
MyPoints.com ended Q3 with 224 advertisers versus 172 at the end of
Q2. We are raising our 1999 and 2000 revenue estimates to account
for the strength of the business and the company's recent increase in
advertising rates. We believe that investors have not paid attention
to the stock recently as they have been overwhelmed by the number of
new entrants in the direct marketing/loyalty program sector. We
continue to believe that MyPoints.com, with its intense focus on
direct marketing, has a unique business model versus many of the
other public companies in the sector. We expect MyPoints.com to grow
past its current $400 million market capitalization as investors
recognize the strength of the business.
Y2K DOUBLECLICK BEGINS TO EMERGE: DoubleClick began to reshape itself
for the millenium this week by completing its merger with NetGravity.
We believe that the combination rounds out DoubleClick's product
suite as it combines NetGravity's leading ad serving software
solution with DART, DoubleClick's leading outsourced ad serving
solution. In addition, we believe that DoubleClick will gain access
to NetGravity's strong client roster that includes CNN.com. We also
expect that DoubleClick's merger with Abacus Direct, which could be
completed by the end of November, will be the key building block in
developing the leading online transactional database. In our view,
DoubleClick is perfectly positioned to capitalize on the maturation
in Internet advertising. The company continues to execute
exceptionally well and is expanding its portfolio to maintain its
competitive advantage.
XOOM.COM'S MOMENTUM CONTINUES AS NBCi MERGER APPROACHES: Xoom.com
reported Q3 revenues of $9.0 million, which was $1.4 million ahead of
our $7.6 million estimate. The revenue upside was driven by
better-than-expected growth in both eCommerce and advertising
revenues. In addition, Xoom ended June with 10.3 million registered
members versus our 10.0 million estimate. We believe that the merger
of Xoom, Snap and NBC Internet's properties will close during Q4. We
expect that NBCi will invest heavily in the development of the Snap
brand to add to its value-added content, proven advertising model and
successful eCommerce strategy. Xoom.com's stock is still trading at
40% below its 1999 high. We believe that the stock will continue to
move higher with the impending closing of the merger followed by
announcements of further strategic partnerships and acquisitions.
eBusiness Update - Eric Upin - mailto:eric@rsco.com
VERTICALNET COVERS VIRTUALLY EVERY PROPERTY ON THE MONOPOLY BOARD,
leveraging its portfolio strategy and first mover advantage to
quickly build communities in 51-and-growing vertical industries. In
our opinion, the real story is converting these populations to
commerce-and so far so good. We are positive about the PaperExchange
deal as it accelerates VerticalNet's eCommerce strategy and serves as
a good example of ICG cousins working together. We believe
PaperExchange is a franchise player in the paper industry-a $300
billion market opportunity. In terms of the agreement, VerticalNet's
pulp and paper industry site and PaperExchange.com will share content
and give users of both sites access to PaperExchange's marketplace.
PaperExchange will get advertising space on VerticalNet's site, while
VerticalNet will receive a $500,000 up-front fee and 2-3% of
PaperExchange's commerce transactions over the next four years.
We like the VerticalNet story. We believe the B2B space does not
represent one mass market, but dozens of huge industry verticals. We
believe VerticalNet is well positioned to capture these verticals by
building a portfolio of industry-specific sites-and the company is
off to a strong start with the media model. The |
