MSNBC Article:::
CMGI CEO David Wetherell says one of his company's biggest
mistakes was failing to invest in the highly successful online
auctioneer eBay.
Does CMGI have
the golden touch?
CEO Wetherell turned a sleepy direct
marketing firm into a hot Internet player
By Steve Frank
THE WALL STREET JOURNAL
ANDOVER, Mass., March 1 — On the surface, CMGI
Inc. doesn't look like ground zero for the recent
explosion in Internet stocks. The company is
housed in a converted textile mill in the small
New England town of Andover, Mass. CMGI's
chairman, David Wetherell also belies the image
of a cutting edge Internet executive. But don't
underestimate the company or its top
management. CMGI is one of the savviest
Internet investors this side of Silicon Valley; its
seed money has helped a number of high-profile
cyber firms including Lycos, GeoCities and
Raging Bull.
CMGI, Inc. (CMGI)
price
change
$133.38
+10.750
Lycos, Inc. (LCOS)
price
change
$88.56
+0.938
GeoCities (GCTY)
price
change
$102.00
+4.250
Data: Microsoft Investor and S&P
Comstock 20 min.delay
“THERE HAS never been a greater wealth creation in
the history of mankind than in the Internet so far. And if
there's a bubble bursting, I don't believe it will be long-lived
because there are very strong, real businesses being
generated here. They'll solidify their positions and continue
to move forward,” said Wetherell.
Thirteen years ago Wetherell, a mathematician by
training, took charge of a sleepy company that sold mailing
lists to academic publishers. Now, as CMGI's largest
shareholder and its top executive, he has bet the company
on the Internet boom. Over the last few years he has
repositioned CMGI so it is now exclusively devoted to the
Net — with a venture capital arm that makes multi-million
dollar bets on start-up Internet companies and another
division that buys existing Internet companies outright or
creates them from scratch.
Data provided by Microsoft
Investor
Whether by luck or by skill, CMGI has repeatedly
struck gold. Its first investment — a $2 million bet in 1995
on the Web portal company that became Lycos Inc. — is
today worth in excess of $500 million That's after the recent
plunge in Lycos' stock price. (Lycos shares closed Monday
at $88.56.)
CMGI currently owns 20 percent of Lycos, and its role
as a prominent shareholder has been in the spotlight
recently. On Feb. 9, USA Networks Inc. made an offer for
the search engine. At that time Lycos was trading at $127 a
share. Lycos shares plunged when the deal was announced
and haven't recovered in the last three weeks.
CMGI says it won't vote in favor of the deal unless the
portal's stock returns to a level that would represent a
premium to the $127 share price. Wetherell said
he's accepted the idea that the Lycos/USA Networks deal
might fall apart.
Another early, but less controversial bet has also paid
off. In 1996, CMGI invested $2 million in the do-it-yourself
Web page company GeoCities. Based on the
approximately $5 billion that Yahoo! plans to pay for
GeoCities, a deal announced in late January, CMGI's stake
is now worth well over $700 million.
Wetherell “is a genius. He sees trends before everyone
else,” said Tom Evans, CEO, GeoCities Inc.
Yahoo! plans to stay independent
Overall CMGI's investments have returned nearly
5,000 percent so far. The company's own stock has soared
more than 17,000 percent since it went public five years
ago.
“Our model is to nurture and incubate these Internet
start-ups and help them get to a point where they can either
spin off through an initial public offering or maintain their
position as a profitable operation for CMGI,” said Bill
White, CMGI's president of marketing and strategic
operations.
INFECTIOUS INVESTMENT
‘Wetherell is a
genius. He sees
trends before
everyone else.'
— TOM EVANS
CEO, GeoCities
In making investments, CMGI looks for “viral” Web
companies — businesses that will spawn an ever-multiplying
number of visitors.
One site which hews to that theory is Ancestry.com ,
whose Myfamily.com Web site lets users trace their family
tree. In the first two weeks after Ancestry.com launched,
Wetherell says Myfamily.com attracted 3,000 new
members per day. In its second two weeks, that number
was up to 10,000 per day.
CMGI also tries to leverage its investments by having
its companies work together, much like a Japanese kereitsu,
to build each other's businesses.
Consider Raging Bull, a popular Internet chat room.
The start-up's three 20-something founders used to rely on
a company called Exodus for the back-office functions that
kept their site up and running. But after CMGI bought a 50
percent stake in Raging Bull for $2 million last year, the chat
room company moved those needs to NaviSite, a CMGI
company.
Raging Bull's President, William Martin, said CMGI's
muscle was part of the attraction. “The human resources
people from CMGI walked in and said, ‘Who do you need
to hire? Two weeks later we had an ad in The Boston
Globe. CMGI did the pre-interviews for us and everything
else,” said Martin.
Thanks to a burgeoning wallet and growing clout,
CMGI received more than 1,000 requests for funding from
would-be entrepreneurs in January alone. Of those, the firm
will likely choose between two and four proposals for
funding — usually investing $2 million to $5 million for a
stake of up to 50 percent. The company aims to take those
investments public within a couple of years.
Of course, CMGI has backed a few mistakes.
Freemark, an e-mail company that CMGI supported,
closed its doors barely a year after CMGI invested $5
million.
There was also the big one that got away — eBay, the
online auctioneer with the skyrocketing stock price.
Wetherell admits that passing on eBay still haunts him. “I
stopped waking up screaming at 2:00 in the morning about
a month ago,” he said.
Fortunately, CMGI's strong track record has room for
a few bumps along the way.
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