10
universe of Internet coverage: we don't have too
many Strong Buy-rated names in our list and we
don't give out that rating easily. This is one of
the reasons we performed so much due
diligence, because we take our rating seriously
and use them to differentiate interesting
opportunities (Buy-ratings) from must-own-names
(Strong buy ratings). Sure, we've always
been interested in DoubleClick because of their
great technology, aggressive young management
team, and access to multiple revenue streams in
a hyper-growth market (Internet advertising).
But from where we sit, it is increasingly clear
that the number of revenue opportunities is
growing and so are their size. And as you've
heard us say before, once a company has reached
a point of critical mass within an increasing
returns market, they are very, very hard to
unseat. We believe that DoubleClick has
reached that threshold. With an Internet
advertising market of $7.1 billion in 2002 (a
238% increase from $2.1 billion in 1998) and a
set of products and services that (uniquely)
address a crucial market development (targeting)
at just the right time (1999), we've come to the
realization that DoubleClick should be a core
Internet small cap holding. Buy DCLK.
[Agencies, Advertisers, and Sites We
Interviewed: Agencies: Hill Holiday, Grey
Interactive, APL Digital, FCB, Margeotes
Fertitta & Partners, OgilvyOne, Anderson &
Lembke, Modem Media, DMB&B, iballs, i-traffic,
BBDO, Fitzgerald & Co., Bernstein-Rein,
Ketchum, Organic Online, Interactive 8,
Cybersight. Marketers and Merchants: Coca-Cola,
Levi's, Clorox, P&G, GM, UPS, 1-800-
Flowers, IBM, Office Depot, Sports Superstore
Online. Web publishers: The Weather Channel,
Bolt, CNET, PC Quote, Garden.com.]
Trend Watch
Web Retailing: The Relationship's The Thing
During our visit with AOL management last
week, we had the chance to chat with Wendy
Brown, AOL's VP of Commerce about what
(mass market) consumers are doing these days
with respect to Web retailing on AOL. She
shared with us a few important observations
that we believe are important to Internet
investors.
First and foremost, Wendy steadfastly believes
that shopping online is absolutely not about
price (her emphasis) but rather about the
convenience of the medium (search, selection,
delivery, service, availability, interactivity,
personalization, etc.). Yes, 20% or so of the
market is very price sensitive (just like off-line,
with the rise of Sam's Club, Costco, etc.)
Wendy suggested, but the rest rely on a series
of variables with which to make their purchase
decision (a “value bundle” as we like to call it).
We explored this idea in detail in a past
Internet Capitalist (dated 2/19/99) entitled
“Don't Believe The Price Is King Thesis”.
An important change Wendy noticed over the
last two quarters is the shift from “ultra-convenience”
shopping (last minute, large
selection, commodity-type goods) where
buyers didn't really have a choice but to use
the Internet to source their purchase, to buyers
who now default to the Web for many/all of
their retailing needs thanks to the medium's
ease of use and selection (more retailer equal
more buyers equal more retailers). In our view
this is the key reasons why leading retailers
(like Amazon.com) will show nice sequential
increases in revenue growth for the March
quarter; shoppers have moved from
completing ultra-convenience shopping to
completing daily, run-of-the-mill shopping on
the Web. This trend is important to retailers
who are looking to establish a relationship
with customers since we can assume that ultra-convenience
shoppers have limited time and
are price sensitive, making them less open to |
