The Internet Capitalist
SG Cowen Internet Research
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concomitant targeting) is also important. Both
the portal players and the Street have come to
this realization over the last few quarters,
thanks to the glaring dichotomy between reach
metrics and advertising effectiveness. One does
not necessarily lead to the other.
@Home, with “only” 210,000 subscribers,
most certainly needs to be selling these
eyeballs and ears in a more precise (not to
mention effective) fashion, since they can
hardly claim to have a reach that comes
anywhere close to Yahoo! or AOL. The
purchase of Narrative, then, seems like a smart
(and perhaps inevitable, since @Home's
subscriber base won't be 5 million anytime
soon) move.
Big Media Dynamism
The long article in Sunday's (12/13/98) NYT's
business section on the launch of Go.com (the
Disney/Infoseek venture) provided some nice
evidence to support our thesis that, in all
likelihood, the Disney/Infoseek partnership
(with respect to Go.com, at least) will probably
end as a bust.
Our overarching belief is that, still, traditional
media companies don't completely get the
Internet yet. Sure, they may sound like they
do, they may talk the talk and spend some
monies and release some data about reach and
page views, but, we continue to believe that,
until, say ESPN's ratings are hurt by, say
Sportsline.com (and we are definitely not
making that prediction) or when ER's ratings
are impacted by a Garth Brooks live chat on
AOL, then Disney and NBC won't take the
necessary (and probably painful) steps to really
embrace and extend the Internet as a medium
into their empires.
There are plenty of reasons for our stance,
some small, some large, but they revolve
around the idea that the traditional media
companies just don't get it yet; that the
Internet is interactive and demands a different
skill set and understanding about and
appreciation for the consumer, that this
interaction changes the nature of the
relationship between media company and
advertising partners, and finally, that big media
company organizational charts don't work in a
medium that is evolving as quickly and
radically as this one is.
To this end, we chuckled when we read the
following quote, from Ned Desmond, Seek's
Vp of content, in the aforementioned NYT's
article: “Disney has geometricaly expanded the
complexity of what we do. If you bring up the
idea, say, of an email service for kids, suddenly
you're on a conference call with 15 lawyers
who are dedicated to nothing but children's
privacy.” We can't say for sure, but we're
pretty certain that this isn't the way Yahoo!
makes it decisions.
Of course, cross-promotion throughout their
media property portfolios will aid the
traditional media companies, but since only
40% of consumer households have computers,
branding (that is, indiscriminate branding) on
television or in movie theaters or in theme
parks will be 60% wasted, since 60% of them
most likely won't be able to take the action the
branding is suggesting. That said, these
organizations are large enough and have a
sizable enough asset base with which to make
an impact anyway, whether or not go.com or
snap.com is ever successful in generating
traffic.
And Now A Note from Our Strategist…
Charles Pradilla, SG Cowen's Chief Investment
Strategist, had recently penned a helpful
historical piece on the Internet sector as it
relates to other market sectors that, well,
“benefited” from aggressive enthusiasm. We
found many of the facts and observations from
the piece (much of which we reprint below)
helpful, and thought readers might too. |
