HJM:
Just in case this hasn't been here yet.
When to sell?
Oates says his recent sale of the fund's $1.5 million position in
Amazon.com (AMZN) is illustrative. "We held it for a seven month period
and we had more than doubled our money," says Oates, but "one of the
reasons I sold it is, that I suddenly felt, that while they were working on a
new business paradigm, others were going to come into their business and
basically take business away and drive margins down and I didn't see that
these people could continue making it grow."
Besides, he notes: "It was making no money, so it sold at a huge multiple
of nothing." And worse, his wife and children had used Amazon.com a
couple of times, but weren't re-using it.
cbs.marketwatch.com
and, i'm assumign that this has already been discussed
interactive.wsj.com
September 14, 1998
Time Warner Sets Ambitious Plan
To Build an Internet Superstore
By EBEN SHAPIRO
Staff Reporter of THE WALL STREET JOURNAL
Time Warner Inc. is laying ambitious plans to become a Web retailer, a big
strategic shift after years of trying to pump the Internet for advertising
revenue.
The media giant, joining Internet merchants such as Amazon.com Inc. and
CDnow Inc., plans to sell an array of Madonna compact disks, Batman
videos, Time-Life history books and Tweety Bird boxers on the Net. The
venture is expected to be open for business in six to 12 months.
At first, Time Warner plans to sell chiefly its own products, including the
spaghetti-strap tank tops ($16) favored by the star of television's "Buffy
the Vampire Slayer." Eventually, the as-yet-unnamed business plans to sell
entertainment merchandise of rivals.
Time Warner had invested heavily to develop Pathfinder, a Web site
offering on-line versions of Time Inc. magazines and other fare. Pathfinder
was launched in 1994 with high hopes that advertisers would clamor for
spots and that consumers eventually might pay for access.
But the clamor didn't come; and consumers, while flocking to Pathfinder,
showed no interest in paying for the privilege. In 1995, Don Logan,
chairman and chief executive of the company's Time Inc. division, said at
the American Magazine Conference that Pathfinder had given new
meaning to the term "black hole."
Although Pathfinder has become one of the most-visited sites on the Web,
the disappointment continues. Summing up the frustration of other
corporate giants finding Internet profit elusive, Richard Bressler, Time
Warner's chief financial officer, says when it comes to sites such as
Pathfinder, "We can't exactly see what the formula is for making money."
Meanwhile, various units of Time Warner -- Warner Bros. Studio Stores
and Atlantic Records among them -- have established their own Web sites
and use them to sell their products. The new corporate retailing initiative
won't supplant these sites but will instead coordinate them and promote
them as part of the overall effort.
Time Warner already is boldly asserting it will quickly transform on-line
retailing into a profitable business by bringing a new level of marketing
skills and sophistication to retailing on the Web. If so, it would prove
savvier than Amazon.com and CDnow. Both the bookseller and the music
seller are spending heavily to drive traffic to their sites but have yet to
make a profit. (Analysts expect Amazon to start posting profits by the year
2000.)
Time Inc.'s Mr. Logan, who is in charge of the new retailing initiative, says
what is lacking on the Web is the type of aggressive marketing that creates
impulse buys. Using television advertisements and toll-free numbers, Time
Warner is expert in driving viewers to the phones to buy products that in
Mr. Logan's words, "they didn't know they wanted or needed." Last year,
for instance, Time-Life sold 700,000 copies of the seven-CD "Dick
Clark's Rock and Roll Era," at $100 each.
"We've got to sell, as opposed to taking orders efficiently," Mr. Logan
says. He believes Amazon and other on-line marketers are too passive.
"Amazon does a good job of shipping books," he says. "I wouldn't
consider what they do active selling."
Jeffrey Bezos, Amazon.com's chief executive, retorts, "Our focus is to give
customers what they want and we think we do that better than anyone
else."
Other on-line merchants say preaching the hard-sell approach points out
Time Warner's naivete about the Internet and its users. "You can't reach
out and grab people," says Rod Parker, a former Time Warner new media
executive who is currently senior vice president of marketing at CDnow.
On the Net, he says, the soft sell rules. "You want to invite customers in
and be of service to them," he says.
Time Warner is starting its new venture with considerable advantages. One
of the nation's largest postal customers, Time Warner already sells more
than $2 billion of mailed merchandise -- books, videos, and CDs --
through its Book-of the-Month Club, Time-Life operations and Columbia
House record club, which it owns jointly with Sony Corp.
Taking advantage of similarities between Internet selling and running a
mail-order business, the company already is redirecting its mail-order
infrastructure to selling on-line. Time Warner has a database of 60 million
customers and thousands of workers in huge warehouses in Virginia,
Pennsylvania and Indiana.
Time Warner insists its stepped-up on-line retailing efforts won't
cannibalize its 185 Warner Bros. Studio Stores or its current direct-mail
business. The company will continue to operate its direct-mail business and
its Pathfinder Web site.
Pathfinder, in fact, could prove an asset to the new venture. The dozens of
Web sites that make up Pathfinder get one billion page-views a month,
giving Time Warner a powerful means of driving traffic to its virtual
shopping mall. Other vendors must pay millions of dollars to be promoted
on popular Web sites, one of the chief reasons profit has been so elusive
for on-line merchants.
Time Warner is searching for a prominent marketing executive to run the
new business. The company is studying how to combine the separate
warehousing and order-processing operations of its Book-of-the-Month
Club, Time-Life and Columbia House operations.
Insiders say the companywide retailing initiative is one of the top priorities
of Time Warner Chairman Gerald Levin, who declined to be interviewed
for this article. If so, it may be in hopes of giving Time Warner a stock
boost: Although the shares of Internet-related businesses have gyrated in
recent weeks, there is no doubt that e-commerce remains a tantalizing
arena for investors looking for the Wal-Mart of the digital age.
For an investor, "Time Warner is a very cheap way to play the new media
world," Mr. Bressler says, noting that its Road Runner high-speed
Internet-access service will soon become profitable.
As information about Time Warner's retailing ambitions have trickled out,
Morgan Stanley Dean Witter & Co. analyst Richard Bilotti added $4.4
billion to his Time Warner valuation based solely on the anticipated
benefits of Internet retailing.
Time magazine's editors presented their view of times to come in a July 20
cover story that declared: "Kiss Your Mall Goodbye -- On-line shopping
is faster, cheaper and better."
Uh -- is Bill Harmond (or Mark Fowler) still around? Their views are needed now more than ever.
LP |
