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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: H James Morris who wrote (22820)	10/24/1998 6:29:00 PM
From: Glenn D. Rudolph	Respond to of 164685

The Internet Capitalist SG Cowen Internet Research 5 the stocks. We believe both our top-line and bottom-line estimates are conservative for both AOL and AMZN, and should presage an even stronger fourth quarter, owing to seasonally strong advertising and commerce trends in Q4 (recall that 40% of all book sales off-line come during the holiday season). We expect AOL's backlog of Internet advertising and commerce revenue to approach $600 million, giving the Street nice visibility on the $150 million we are estimating in ad/commerce revenue for AOL's December quarter. We would be buying both stocks going into the quarterly announcements. Trend Watch It's The Relationship That Matters Certain human relationships transcend the boundaries of time and space; they have a tensile strength immutable by the passing of months, a distance of miles, or, for that matter, the confines of four new walls. Others, lamentably, do not transcend these boundaries, but rather wilt in the face of these pressures and take on a new profile, usually for reasons as wholly unique as the relationships themselves. For Internet investors, this truism is particularly germane, in light of the importance Internet users are attaching to their online relationships with portal companies like Yahoo!, “destination” sites like Amazon.com, and Internet online service providers like AOL. These companies, influencers, all, are commandeering an increasingly large portion of consumers' time and pocketbooks, and since 60 million or so Internet users call the Internet home for a few minutes to a few hours per day, that's a lot of extra minutes and stray dimes. The Street, however, has had only a few tools with which to properly measure the extent and strength of these online relationships, which has hampered our efforts to understand the differences in the long term value that these relationships will generate for those Internet companies that “own” them. After all, the entity valuations of these influencers will be a function of both the size of their user/customer/subscriber base and the strength of their relationship with these consumers. To this end, we were heartened to hear Yahoo! management indicate on their earnings conference call that they feel that the simple cost per thousand (CPM) and inventory utilization metrics are becoming less helpful to them and that, going forward, they would stop quantifying these measures for us. On its face, this may seem counterintuitive: an analyst heartened by the promise of fewer concrete data points from an Internet company? But for us, we see it as a tacit admission that these portal businesses have, like adolescents, outgrown the breezy fit and simple categorization of their youth. We eschew the relatively shop-worn view that these portal companies simply sell advertising and that they do so on a per-impression basis. Increasingly, the Yahoo!'s of the world are staring down multiple revenue opportunities, including commerce, merchandising, and sponsorships, that can't be properly understood (and valued) solely using a measure like CPM. Our own frustrations notwithstanding, this has tended to create confusion among merchants, advertisers, and shareholders as these constituents contemplate partnering with or investing in any of these businesses. We on the sell-side have been steadfastly quoting CPM and inventory utilization (sometimes combined into one “effective CPM” figure) statistics for the last few years. These measures became useful because they were both simple and common among these advertising-based businesses. And since the