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

To: PeterR1700 who wrote (45)	4/23/1998 11:13:00 AM
From: Bobo	Read Replies (1) \| Respond to of 28311

I really do not have a good handle on whether the valuation for the search engine companies is too big or small. My intuition says that they are too big and the little guys like go2net will ultimately be squeezed out in the consolidation of the industry and entry of new participants. At current (and sinking) price levels I view investments in all the players as either speculative (CNet or Go2Net) or having little margin of safety (Yahoo and AOL). I would look more on the short than long side at this point. With that being said, the industry will likely consolidate thru acquisition rather than the little players withering away. So at some point I can see a media company such as CBS or Fox saying "we really need to get better established on the web so who can we buy?" They would naturally look at a 2nd or 3rd tier player such Lycos or Infoseek (2nd tier) or CNet or Go2Net (3rd tier). I am not sure though that they would pay $500mm for CNet or $120mm for Go2Net but this inflated market they just might. Current forecasts for internet advertising call for the market to go from $900 mm in 1997 to $4bb in 2000. In 1997 the search engine companies collectively garnered about 25% or total advertising revenue. That says that if the search engines can maintain their market share, they will collectively do $1bb in rev in 2000. With a collective market cap of $10bb something is a bit out of whack. Collectively, I do not think the group will trade at 10X sales 3 years from now. Furthermore, I do not think the group will maintain its market share so that makes the group's valuation even dicier. Specifically for Go2Net, I do not know the management team. It does seem thin but the move to acquire SI was a pretty nice coup. Remember the game is still to aggregate traffic and not worry about profitability. And do it while the stock currencies are quite rich.