Wrong! Rear Echelon Revelations: Cramer Can't Hold Back Any Longer on Consultants [in particular, check out the bottom section]
archive.thestreet.com
By James J. Cramer
7/29/98 6:15 AM ET
Who will win on the Internet? Who will triumph as a new
brand name and who will just spend a whole lot of money
and wish they had never heard of the darn thing?
I'm not sure, beyond America Online (AOL:NYSE) and
Yahoo! (YHOO:Nasdaq), who will emerge from the Net's
cacophony. As someone who has spent the better part of
the last three years trying to figure out the winners and
losers in order to profit from their stocks, I can tell you that
NOBODY knows for sure who will triumph in the end.
But I do know this: Anybody who thinks he has a crystal
ball, anybody who thinks he can arrive at a thesis and stick
with it about winners and losers -- some sort of magic
divining rod to sort out wheat and chaff -- is a charlatan. A
quack. A phony.
Which brings me to the point of this article. I write to right a
wrong that has been visited upon TheStreet.com by some
outfit in Cambridge called Forrester Research, which
claims to have a crystal ball that shows our pending demise.
In this business it is not enough to be judged successful by
your business or journalism peers, your readers or your
investors. Like municipalities that pay to get rated by the
bond agencies, all of us who try something new online end
up getting rated by the consultants at Forrester. I always
believed that these guys were irrelevant. Heck, if they were
any good, I would think they would be out there doing
instead of grading. That's just probably my predilection for
builders and disdain for critics. No matter.
One of the ranking members of our business side said that
Forrester mattered, though, so a bunch of TheStreet.com'ers
took a pilgrimage to Forrester about a year ago and made
what I guess was an entirely unfavorable impression. They
could have made the best impression possible, but still it
would not have mattered to these guys. Forrester already
had established its universal thesis: Paid content sites are
doomed.
Ever since then we have had to live with the indignities of
their indictment that TheStreet.com won't make it, that it will
fold, or vanish or wither away. Initially, I was going to write
an article simply blasting them for not understanding us and
why we were simply offering something that Bloomberg,
Dow Jones and Reuters offer for a tiny fraction of the cost
to the consumer. The at-home BDJR for 10 bucks a month
instead of $1,500. My wife suggested that I just blowtorch
the s.o.b's to teach 'em a lesson. But TheStreet.com
hierarchy told me, "No can do, you can't take these guys
on, they can make life miserable for you. They speak to the
press, get quoted all of the time. They can hurt us." There's
some priceless wisdom. I bought it, figuring I will just go out
and show them how wrong they are and that they would
come to their senses and eventually see how TheStreet.com
was a winner, not a loser. Let the marketplace prove our
worth. Like it mattered to these guys and their crystal balls.
So the dance began. I began to cultivate their analysts. I
would say, "Hey, we got off on the wrong foot, here, let me
tell you why we are going to succeed." They were always a
bit skeptical, but polite. With each new milestone in ads or
circ I would fill them in about out achievements. They
listened, and from what I could tell, might have even taken
notes!
I listened too. One of their suggestions was that I get a
big-name writer at TheStreet.com, someone who would
show it wasn't just me. I found this line of thought incredibly
offensive, because we have built an organization of 30
journalists who by and large are the envy of the industry we
picked them from. Almost every hire we have made is one
that my buddies in the journalism business have asked me
not to take. But Dave Kansas, our editor, will not be denied
putting together the best business newsroom around.
No matter, Forrester wasn't hearing. So we went out and
recruited Herb Greenberg from the San Francisco
Chronicle, because in my real business, the hedge fund
business, he was the only must-read business journalist on
the entire planet. He still is, as his articles are more read
than mine on most weeks (yes, we have that kind of
information on the Net).
I remember proudly calling the same critics at Forrester to
relay the good news that we had cinched Greenberg. I called
them ahead of everybody save my wife! I got the distinct
sense that they had never heard of Greenberg, typical, in
retrospect, of what I see as their lack of knowledge and
judgment about the press and stocks. I spent a lot of time
telling them why Greenberg would be an immediate boost to
circulation, which, from what I could tell, they wanted
TheStreet.com to stop charging for, even though it brought in
a million dollars in revenue. (I remember thinking, why give it
away for free if people would pay? But dare I try to convince
them of that?)
Anyway, I thought I pretty much had budged their
intransigence after we started building one of the biggest
revenue-generating circulation departments on the Net, and
started taking in nice six-figure ad revenues per month. I
thought this change was important, because Forrester
analysts have an uncanny habit of showing up in the
newspapers all of the time alternately slamming and praising
businesses they allegedly have examined. I wanted that
head-slap stuff to stop.
And then a month ago, I learned my efforts were all for
naught. The New York Times, in a silly, embarrassing article
about me and TheStreet.com, dredged up all of the usual
canards about how TheStreet.com is just me and there isn't
anything else to it worth paying for. Anybody who had read
us in the last year, anybody who had a *&^$*^$^ password,
for Pete's sake, knew that we had become much more than
that. Certainly the investors and the bankers got it, not to
mention the subscribers.
But there, right smack in the middle of the article, was a
gratuitously negative quote about our dim prospects, from
some guy named Mike Gazala, a Forrester analyst I have
never spoken to. He lent his firm's "credibility" to the notion,
so much sought after by the Times' Business Section, that
there was nothing to TheStreet.com except Cramer.
I picked up the phone and called the guy.
I asked him if he knew about all of the other information now
available on TheStreet.com and how there was much more
to us. You know what he said? He responded that he
accurately represented the "thesis" that TheStreet.com was
just Jim Cramer and nothing else worth paying for and then
he asked me if he hadn't gotten that right. Yeah, he wanted
to know whether I thought he had accurately represented
Forrester's negative thesis.
"Sure, Mikey, you got it. Way to go." crossed my mind amid
a sea of expletives.
I could barely speak. We are pouring our heads and hearts
into this thing everyday, generating real cash, and he wants
to know if I thought he got Forrester's thesis about
TheStreet.com right?
That got me hopping mad. So, for the last four weeks I have
assigned a researcher to find everything I can out about how
Forrester's consultants have done in divining winners and
losers on the Net. I have read their clippings, their reports
and their quotes. I wish I could tell you that they were 100%
wrong about everything. I wish I could tell you they are
corrupt and write up their highest-paying clients
enthusiastically and slam the others. (I know Bill Miller, who
runs the highly acclaimed Legg Mason Value Trust, took
pains to point out that Forrester would have kept you out of
AOL's unprecedented runup because it has a closed
system!)
Instead, I have a far more damning conclusion. They might
as well roll dice or flip coins. I see no pattern to their stuff,
right or wrong, predictive or not. As its annual report states,
"You might agree or disagree with our analysis and
conclusions. You might or might not believe our predictions.
But one thing we do guarantee. You will always [emphasis
added] know where Forrester stands." Nothing could be
more true. To put it in the parlance of the business I am in,
you could just as well be throwing darts and then defend
those dart picks to the bitter end. But you can throw darts a
lot more cheaply than you can buy Forrester's research.
The Forrester mob does love to have a thesis, like "content
sites will not get cash from users," or some other nonsense.
And then they like to stick to their thesis regardless of the
facts. They do love to speak to the press, and the lap dogs
in the press are more than willing to let them play the arbiter
role, for who knows what reason. It has been suggested that
Forrester pays its people if they get quoted, but they deny
that. (The press should ask whom they are being paid by
instead of assuming they are "neutral.") I am sure that going
forward they will now go out of their way to say we won't
make it, but that's fine, at least now they have a reason to
be pissed off at me.
But now I will tell you why they are wrong. Their thesis about
TSC presumes that no individual or individuals will ever try to
surmount incredible odds to make a great thing work. Their
thesis presumes that our team is not dedicated or
hard-working enough to pull it off. After we have made it I am
sure they will say it is an aberration and that we are the
exception to the rule.
My response: Trying to figure out who will beat the
insurmountable odds is what investing is all about. Most
businesses fail. Most businesses need a huge partner to
make it. Most businesses can't survive the cutthroat world of
capitalism.
But some, motivated by the need to succeed and the belief
in themselves, do succeed. Which is why you can't just
have a thesis -- "no one will ever develop a successful chain
of low-cost hardware stores," or "no one will ever be able to
afford the power of a mainframe computer at home" -- and
stick by it.
So, now I have done the deed. I have stood up to the
equivalent of this protection racket of consultants who rate
us. I have taken on the critics, fully knowing that if I were in
the movie business I would never get a good review again.
And all I can say is I wish I had done it when my wife first
suggested, instead of playing the same bend-over game that
everyone else plays. As is so often the case, when common
sense and not sucking up is called for, my wife was dead
right all along.
James J. Cramer is manager of a hedge fund and
co-chairman of TheStreet.com. At the time of publication
the fund was long America Online and Yahoo!, though
positions can change at any time. Under no circumstances
does the information in this column represent a
recommendation to buy or sell stocks. Cramer's writings
provide insights into the dynamics of money management
and are not a solicitation for transactions. While he cannot
provide investment advice or recommendations, he invites
you to comment on his column by sending a letter to
TheStreet.com at letters@thestreet.com.
c 1997 TheStreet.com, All Rights Reserved. |
