Here's a pretty good piece on CMGI,
ISN Exclusive Interview With David Wetherell CEO of
CMGI
Thursday, December 02, 1999 2:16 PM
by Mike Ogburn
CMGI (NASDAQ: CMGI) is a venture capital firm, a business incubator, an online
advertising powerhouse and content, e-commerce and business-to-business provider
all rolled into one. In the past year, it has acquired seven companies, invested in 20
new ventures, had five of its holdings IPO, raised $280 million for @Ventures III and
announced plans to create a $1 billion venture fund for B2B enterprises. The value of
its publicly traded securities has soared from $195 million to more than $2.6 billion
over the past 12 months. When it comes to the Net, CMGI CEO David Wetherell is
one of the few leaders who gets it, according to Internet guru Steve Harmon.
Sometime between swapping shares with Hong Kong's Pacific Century Cyberworks
and buying instant messaging firm Tribal Voice, Wetherell took time from his frenetic
schedule to grant ISN an exclusive interview. Though his company generated the top
returns to investors for a five-year period through 1998, one gets the impression from
talking to the soft-spoken orchestrator of CMGI's many holdings that the best is yet to
come.
He pointed to CMGI Solutions' cumulative Net experience and technological tools as
what will set it apart from the consulting firms and others trying to provide turnkey
services to companies wanting to utilize the web. He mentioned thin-client servers and
application-based servers as examples of the new waves about to impact the Net. He
spoke of Pacific Century Cyberworks' importance as a gateway to the Chinese market
(which he says will have the most Net users by 2005) for CMGI's 50-plus companies.
And while non-committal on any possibility of a CMGI or Alta Vista merger with Lycos
(NASDAQ: LCOS), he expressed confidence that Alta Vista could leverage its
world-class search engine, free Net access and other CMGI add-ons to become a
super-portal.
Here are a few other excerpts from our conversation:
ISN: What determines whether a business is funded as part of CMGI's venture arm,
bought for its operational side or built from the ground up?
DW: Most companies we look at have a business plan and no interest in being
bought out. They want to maintain control of their own destiny. On occasion, we see
something that would be a great fit with CMGI, and we approach that company with
the intent of attaining a control position. Ultimately, the companies decide where they
fit, not us. And there's always a balance we have to try to keep to ensure a
venture-funded company isn't in conflict with any operating units. When Lycos bought
Tripod, for example, it was in competition with our community site, Geocities?
We develop companies ourselves typically in areas where no one is providing a service
– where there's a screaming need – or when the service is something
we have to have. For instance, we needed large-scale web hosting and access for our
range of companies, so we built something with the capacity we needed. We typically
develop two to three companies like this each year.
ISN: There's a lot of speculation about iCast. Could you shed some light on this
CMGI company – what services it will offer, how it will make money, when it will
debut, and when it might IPO?
DW: I can generalize about it. It will debut in January as a premier entertainment
destination, with video and audio content in an interactive environment? I can't really
predict when or whether it will IPO.
ISN: What prompted CMGI's sudden buying spree this summer to become a major
player in the online advertising business?
DW: We had reached a critical mass with Engage (NASDAQ: ENGA) and AdSmart.
We needed more eyeballs, more capabilities and more reach. Right now, the Web
accounts for 9 percent of media viewing in the U.S. but only 1 percent of advertising
dollars spent. We saw a potentially lucrative opportunity to bring these percentages in
line by leveraging AdSmart, our acquisitions, Engage's targetability and some of our
other companies.
ISN: You recently noted that @VenturesIII, through its sale of Promedix to Chemdex
(NASDAQ: CMDX), has already recouped its initial $280 million investment. Plus,
CMGI apparently has sold well over $100 million in Yahoo (NASDAQ: YHOO) stock in
the past quarter. Will CMGI be giving analysts some guidance as to this quarter's
earnings upside possibilities, as was done last quarter when the company showed a
profit of $4.60/share instead of a slight loss?
DW: We always try to give guidance to the market. We've given them some pretty
fantastic numbers, like quarter over quarter growth of over 100% and securities
available for sale that continue to grow much faster than expenses... Our goal is
certainly to be profitable on an annual basis and – as our companies grow
– on a quarterly basis.
ISN: Business 2.0's B2B Top 10 reads: 1. Cisco Systems (NASDAQ: CSCO) 2. Dell
(NASDAQ: DELL) 3. IBM (NYSE: IBM) 4. Intel (NASDAQ: INTC) 5. America Online
(NYSE: AOL) 6. Amazon.com (NASDAQ: AMZN) 7. Marshall Industries 8. 3Com
(NASDAQ: COMS) 9. Ingram Micro (NYSE: IM) 10. MCI Worldcom (NASDAQ:
WCOM). Does CMGI have any current B2B investments that might make a list like
this? Or is it the intention of the recently announced billion-dollar venture fund to invest
and develop such companies?
DW: Chemdex may have the best prospects to become a major B2B company? We
have several strong business-to-business companies and will invest in others in the
future. We're most concerned about finding the best business models and not worried
about making anyone's list.
ISN: How do you stay on top of what's happening and what's new in the Internet?
DW: I get several e-mail newsletters. I have a researcher dedicated to combing the
web. Of course, there are the business plans, which not only reveal interesting models
but also tip off what's coming down the road. I also use MyWay.com, which has a
good technology news digest. And, I surf a lot.
ISN: Regarding the untapped potential of the Net, a few months ago you commented
that anyone who couldn't make it in this explosive industry ought to pick oranges.
With the onslaught of IPOs and the movement of major corporations onto the Net, do
you still believe the sector is wide open for opportunity, or is it starting to become
overcrowded?
DW: Well, that's not exactly what I said [about the oranges]. But yes, it's definitely in
its infancy. You've got an industry that's re-inventing itself each year, and businesses
moving into that industry that continually re-invent themselves? We're a good 10-15
years from really knowing where it will take us.
ISN: You've spent a good part of this decade reviewing business plans, investing
millions into companies, and reaping astounding returns. Since you practice due
diligence for a living, do you also invest on the stock market?
DW: Sure, I invest. Without giving specific names or specifics of my portfolio, I'll tell
you that I invest in Internet stocks – they have the growth potential.
ISN: As CEO of CMGI, you are considered a visionary, you're a billionaire and your
shareholders have been richly rewarded. What keeps you from cashing in after one of
those 8 point days that nets you another $100 million or so? What drives you, what
are you trying to attain, and how long can we expect you to keep after it?
DW: I've got the best job I could imagine, in perhaps the most exciting time in history.
And I'm working in an industry that's changing everything? I couldn't think of anything
better to do. |
