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

To: Mark Fowler who wrote (38543)	2/7/1999 11:10:00 AM
From: Glenn D. Rudolph	Respond to of 164685

8 infrastructure gets commodified and competition between ETrade, Schwab, Merrill Lynch et al will revolve squarely around content and context, which plays to content providers' strengths. So in the near term, folks like TheStreet.com will likely be focused on proving to their commerce partners (like ETrade) how much their content can stimulate commerce (trades, account sign-ups, etc.), while in the long term focusing on how to develop deep, mutually beneficial partnerships with these partners that balances the competing demands (in the case of TheStreet.com, advertising and subscriptions) of their model. Advertising In ‘99: Depth Trumps Breadth Though we've established that certain content is highly valuable in a commerce setting, it's equally important to examine the state of Internet advertising today, if we are to understand why content will become valuable. In 1998, it is clear that advertisers thought mostly along only one of the two axes that marketers usually think about (breadth and depth). In their quest for wide dissemination, most Internet advertisers sought to purchase mostly on the basis of reach (breadth), or how many Internet users a site “touched” rather than how much time (depth) those users spent on the site. Faced with ever-declining click-through statistics (some as low as 0.4%), Internet advertisers have now started to think about user stickiness, which is where companies like TheStreet.com come in. The average TheStreet.com subscriber logs on three times per day and spends about 22 minutes on the site per visit, this compared to the portal peer group at roughly 2.5 minutes per visit. We often like to repeat one of our favorite Internet first principles; companies that change the way people spend their either their time and money will necessarily generate real shareholder value in time. And though the efficiency for an advertiser to spend on one or two sites and get a 50% share of the Internet is hard to ignore, advertisers are increasingly looking to specialized, highly concentrated content sites to supplement their “breadth” buys. Sites like TheStreet.com will benefit enormously in 1999 from this growing trend. Company Watch Amazon.com (AMZN) You Thought You Already Knew What A Great Q4 Amazon Had?…Think Again Amazon reported a December quarter that, despite the pre-release of the top-line, provided as much jaw-dropping material as any quarter in their short history. Without question, Q4:98 provided the most compelling sets of data points yet that Amazon's commerce portal thesis is becoming a near term reality; the question has gone from “Can they become a commerce portal?” to “How big can they be as a commerce portal?” [For a more complete dissertation of this thesis, please see our 12/18/98 Internet Capitalist piece “A Web Retailer Does Not Equal A Commerce Portal”.] AMZN posted a loss of ($0.14) per share and beat our consensus-matching ($0.18) estimate by $0.04 on phenomenal revenue growth and some nice, somewhat unexpected leverage in the cost structure. All the key drivers of the model were exceptional; revenue growth, customer acquisition, music sales, video/international sales, and sales and marketing expenditures, with gross margins, the only out layer, declining Q/Q thanks to the mix shift to music and videos. We detail each below: Revenue: At $253 million, total revenue beat our $192 million estimate handily (disturbingly, really) and represented 65% sequential top line growth. Music sales surged 130% q/q, to $33 million (vs $14mm in Q3) to account for 13% of total, versus our mere $21 million estimate. Overall, videos, the gift center, the German store, and the UK operations generated