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Technology Stocks : InfoSpace (INSP): Where GNET went! -- Ignore unavailable to you. Want to Upgrade?

To: Charles W. Breaux, Jr. who wrote (16828)	2/11/2000 1:21:00 PM
From: KLP	Respond to of 28311

Have cc'd below the really good TMF interview with Russell Horowitz that Chuck just brought to our attention... Thanks Chuck for finding it! KLP fool.com TMF Interview With Go2Net CEO Russ Horowitz With Brian Graney (TMF Panic) February 7, 2000 The last time we talked with Go2Net (Nasdaq: GNET) CEO Russ Horowitz in the autumn of 1998, the Seattle-based company was primarily known as a collection of community-oriented websites. That really isn't the case anymore as Go2Net has evolved since then into a provider of services in three online areas: consumer services, business services, and enabling technologies. We talked with Mr. Horowitz about the company's evolution and the opportunities that lie ahead. TMF: How does your recent deal with National Discount Brokers (NYSE: NDB) fit into the consumer services segment, and specifically with your Silicon Investor site? Horowitz: This is one that really cuts across both the consumer services and the enabling technology spaces. With the relationship with National Discount Brokers, a couple of things happen. One, on the consumer services side, Silicon Investor as a product has significantly improved as the first in the space to have an integrated traded platform where users can now have all of the benefits that they've historically had with Silicon Investor. [They] are going to be able to trade in a co-branded environment without feeling like they ever left the site. On National Discount Broker's side, they now have access -- through our licensing of the technology platform and the database on Silicon Investor -- to the richest discussion community around stocks, so their product gets a whole lot better. So you have the consumer element of it in terms of Silicon Investor as a product getting much better. Then in the enabling technology segment, you have a contribution by taking this technology platform and licensing it to a strategic partner. One of the key differentiators that we would really distinguish with our enabling technologies is these are really mission-critical sorts of functions that we formalize partnerships with. If you look at Hasbro (NYSE: HAS), clearly games.com is their Internet initiative and is really strategic to them and Go2Net is the provider. In the broadband space, Paul Allen and Vulcan Ventures and Charter Communications (Nasdaq: CHTR) could have gone anywhere, but they came to Go2Net for the broadband services and content. We provide a corporate portal to Allegiance Telecom (Nasdaq: ALGX), a multibillion-dollar CLEC. And now with NDB, we're giving them the foundation for a community that they can offer to their account holders and we're benefiting as well by having a leading commerce platform in the investing space to bring to our members. The difference is there are a lot of people out there that kind of offer licensing of services, but the key thing with us that these are mission-critical technologies and functions that these companies are coming to Go2Net for. TMF: Do you see these exclusive relationships replacing the broad-based ad revenues that have traditionally been driving your consumer sites? Horowitz: In these deals, some elements are exclusive and some aren't, but we haven't done any deals that really limit our ability to go out and further license these technologies. We are continuing to rapidly grow our advertising revenue streams, although we are making a conscious and concerted effort to balance that with recurring revenue streams like licensing. So I don't necessarily think it will replace it. That's the last thing we want it to do. What we want it to do is supplement our growth by it being an even faster revenue stream in terms of the revenue contribution, and with that, have balance across our various segments. To the extent that we're able to accomplish that, it adds great visibility to our operating results, which makes us as a management more comfortable and we think Wall Street pays a premium for [that]. TMF: Turning to the broadband initiative, how do you see that opportunity evolving? And is there any chance for a company like Go2Net to build dominance in that area or do you think it's a market that is destined to be made up of several competing players? Horowitz: I think that there are very few segments on the Internet where there will just be one dominator and you're going to continue to see segments with a couple. Clearly, being number one in any space commands a premium. But if you look forward to broadband and the implications of that, when you have multiple Internet appliances and various forms of broadband, I do think there's going to be a few different leading players and that Go2Net will be one of them. The nature of distribution through broadband is a lot different than it has been historically on the Internet, where a lot of the growth and usage has gone through kind of a general public Internet on narrowband, to sites like Yahoo! (Nasdaq: YHOO) or to sites that are part of the Go2Net network. But in broadband, it's a lot more similar to the AOL (NYSE: AOL) model, where based on having an integrated experience or an integrated broadband portal, you have an opportunity to get much closer to your users. And unlike on the public Internet and narrowband, these cable companies are able to exert some level of control as to what their users are able to see and not see. So, for us to be in a position that we're a provider to one of the leading cable companies [Charter Communications] and at the same time to other broadband providers such as an RCN (Nasdaq: RCNC) or even an Allegiance Telecom, we think that puts us in a position to be a leader. The other component of that is we are currently focused through our broadband partners on delivering a broadband TV set-top box portal to the marketplace this year and we think we have an opportunity to be a first-to-market. So to the extent that we've been able to build a meaningful distribution channel by virtue of this strategic relationship with Vulcan Ventures and with Charter in the formation of broadband partners, we think that's a great first step. The second is you've got to deliver the product and we're also in a position to do that now. The combination of that I think does position us to be a leader as we continue to move toward broadband. TMF: What's it like to work with a partner like Paul Allen? Horowitz: It's been a tremendously positive relationship. I think that today's announcement with NDB is a perfect example where Go2Net and NDB are able to formalize a real key strategic relationship between the companies. And we can also co-invest alongside Paul Allen and Vulcan Ventures and in some sense show that we're working in tandem. And we can benefit through their expertise and their commitments as well. We've done that previously where we invested in Commtouch Software (Nasdaq: CTCH), which is a leader in the e-mail and communications space. That has worked out really well for us. But to have a partner that can step in and help us further our strategic initiatives and bring resources that we otherwise would not have access to as well as intellectual capital is a pretty unique and special thing. TMF: Your HyperMart small business-to-business unit has been growing very fast. Does the growth in that market surprise you in any way? Horowitz: Not really. We made what we felt was a definitive move into the small business space when we acquired HyperMart in August 1998. At the time, the industry was not yet focused on the opportunity associated with small businesses coming online. We felt that it was one of the major next waves and it's done nothing but fulfill our expectations. Incredibly, now the perceptions of this category is substantially different than it was in December of 1998 and people realize that this one of the major opportunities on the Internet. That's been consistent with our belief from almost two years ago. What we are continuing to do is look to extend our position in that space and be benefactors of being one of the early movers into it. So, you have a company like Go2Net that's been able to build a rapidly growing business and at the same time couple it with a highly profitable and scalable business model. We wouldn't be able to make that statement if it weren't for seeing opportunities like HyperMart and the small business phase before a lot of other people may have. We further that decision in terms of the small business space with our acquisition of Authorize.Net in this most recent summer, which gives us a base of 60,000 transacting merchants. Right now, we're looking at a bundled solution to take to our small business members that allows them to commerce-enable their businesses on the Web by virtue of our hosting storefront, the Authorize.Net gateway, and also merchant services. So this is an area that we've been focused on for a long time and we recognize that HyperMart is a tremendous platform to leverage by virtue of the magnitude of the audience. Now with Authorize.Net and with other partnerships and acquisitions we'll be making going forward, we want to leverage the value of that distribution. The interesting thing about distribution is that it transcends any industry. Whether you're in the Internet or any other industry, once you've got critical mass in distribution, incrementally unlocking the value is a function of figuring what products and services to bring into it. We've got critical mass in distribution and now it's a function of just bringing more products and services into that marketplace. TMF: Speaking of critical mass, you've often talked before about scale and the importance of scale for Internet companies. You're now a Media Metrix top 10 company. I think the market is finally waking up to the importance of scale with valuing Internet companies. What are your thoughts on what we've been seeing in terms of scale and how Web companies are being valued? Horowitz: I agree. It's really important in any industry, but particularly in one that moves and is continuing to evolve as quickly as the Internet is. This is something that we recognized in early 1999. We continued to be an independent company without any real strategic relationships and we wanted to be able to compete for a first-tier position. And that's what led us to formalize a relationship with Paul Allen and Vulcan Ventures, which gave us the resources so that we could achieve scale both through internal growth and continued acquisitions. Clearly, achieving a top 10 position gives you some initial benefits of scale, but this is not an industry where you can rest on your laurels or take anything for granted. And so we're continuing to look at each of the businesses we're in, each of the segments that we have positioned ourselves in for ways to achieve greater scale. Anybody that's not taking that focus, aside from not being in a position to really incrementally create value, is putting whatever value exists today at risk. TMF: What scares you the most about doing business in this environment? What is Go2Net's greatest worry? Horowitz: There isn't necessarily a specific worry. This is a case where there is an industry evolving right now from what I'd characterize as the second generation. The first generation was 1994, 1995 when you had some first movers and really what emerged as portals whether that was Yahoo! or Lycos (NYSE: LCOS) or Amazon (Nasdaq: AMZN) as a shopping portal. The second generation has largely been characterized by growth of Internet companies that have some greater level of specialization. When you talk about vertical destinations and things along those lines, I think that's largely been the greatest growth. I feel like we're approaching an inflection point where now you're going from the first two generations, which were characterized by Internet usage for the PC and a narrowband environment, to one where you're going to see a third generation characterized by multiple Internet appliances and broadband access. And if that means TV set-top boxes, PDAs, cell phones, other Internet appliances in addition to the PC, everybody needs to figure out what that means to them. If you've got content services that have been created for a narrowband environment but you haven't really thought about the implications of broadband, you, again, have some significant risks in your business. Go2Net has been proactive about going out and positioning ourselves with distribution and thinking about our content services and how they'll thrive in an environment with multiple Internet appliances and broadband access. I think that's allowed us to start to position ourselves to take a step forward as it relates to being a leader. But I think if there's a worry for companies in general -- and ours included -- it's thinking about what the evolution of the industry toward the environment I just described means to them. And I think there's a lot of companies that have been narrowband winners that face similar risks to what offline companies did when the Internet emerged. We look back now on companies that were successful pre-Internet and we wonder, "What happened?" Their market share was taken away, the profile of their business was radically changed with the emergence of the Internet. Well, what it took to be a narrowband winner isn't necessarily the same profile that will cause you to be a winner in the broadband environment with multiple Internet appliances rather than just the PC. And I think we're at a similar point to the extent of narrowband companies may face those similar risks. And some will come through and a whole lot of them won't. So, if there's a worry, it's that. But I do feel like we have our eye on the ball in terms of what this means. TMF: Some interesting thoughts. Thank you very much for sharing them with us today. Horowitz: It's been a pleasure to be with you. Related Links: Go2Net website Go2Net message board Go2Net StockTalk, 11/23/98