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To: H James Morris who wrote (36335)	1/24/1999 7:50:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 16 that (assumption of 7+ million subs against the Street consensus of 6-6.5mm pre-XCIT), media revenue (ad/commerce/content fees) accounting for 40-45% (2/3rds advertising/commerce and 1/3 content licensing), and @Work accounting for the remaining 10-20% of revenue. All In, A Smart Move By @Home And A Great Boon To Excite Shareholders… As we have watched Excite develop over the last handful of years, we have (sometimes) struggled to keep the faith that their focus on building a large and valuable online audience would eventually create substantial shareholder value and nice returns for investors. Though we'll hate to see Excite the entity retire from the capital markets, we think it's important to note that the very big bets that George Bell et al made over the last 18 months have paid off handsomely. @Home has not only been strengthened by the addition of Excite's audience and advertising and commerce skill sets, but also by the addition of Bell to the @Home management team. And at a time when most Internet investors' focus strays from tried and true investing principles (like solid management teams), we think it's key to recognize the impact of a strong management team. December Quarter Earnings Excite reported an essentially in-line Q4 last night, posting an operating profit of $0.04 per share, on $54 million in revenue (up 23% q/q and $3mm ahead of our estimate). Though the quarter wasn't a blow-out by any means (either along traffic, registrations, or profitability metrics), it was certainly a solid quarter that saw real gains in “staying power”, a condition we'd exalt if it mattered any longer; as it is, the P&L becomes important to a combined @Home model now. Netcenter Seems To Be Back On Track… Recall that last quarter, Netcenter under-delivered against Excite's expectations on the traffic and revenue front, showing just $3 million of revenue to Excite's top line in Q3. In the December quarter, both Excite's and Netscape's efforts to turn traffic around resulted in about $5.5 million in revenue to Excite, almost double the September quarter, with visibility on sequential increases in this line item for Q1:99. And The Core Business Fundamentals Continue To Chug, Not Scream, Along… Page views grew to 58 million in December, up 16% sequentially (the same as Yahoo!); this was a bit less than we had been thinking, though the Street has started to come to terms with the prospect that Excite is about revenue generation, not simply page views. Registered users shot up to 20 million (up 43% q/q from 14 million in September). Total advertisers came in at 1,241, up 25% q/q, showing a 90% retention rate. 84% represented non-technical (i.e. consumer brand) advertisers; roughly the same as Q3. Once again, both MatchLogic and Classifieds 2000 were profitable in the quarter, with MatchLogic producing $13 million (24%) of Excite's revenue in Q4. As well, management estimates that their e-commerce focused properties tallied something like $244 million in gross revenue during the quarter. It Looks Like Excite's Strategy Of Focusing On Targeting, Not Page Views, Is Bearing Fruit… Management shared anecdotal evidence that their focus on targetability and not reach has started to make some difference; their ability to increase response rates and click-throughs, when coupled with their ability to sell “horizontally” across multiple content categories (not simply sports or automobiles or finance but, say, all three) has produced CPMs in the $300 range (e.g. for opt-in emails). …Unfortunately, It Just Happens To Be Small Fruit