The Late, Great Yahoo!
Rick Ackerman
In article <31F1E6...@tiac.net>, John Reder <jre...@tiac.net> wrote:
> I "KNEW" the market was in trouble when YAHOO went pulic and the
>stock went through the ceiling.
> HOW CAN ANYONE EXPECT A COMPANY TO MAKE PROFITS.....when the only
>revenue they produce is from selling ad space on a web site??????
uh, if you say that...I hope you dont have any ABC, NBC, CBS
stocks...
isnt it amazing? how can anyone makes money by providing free
movies/news via tv set??
should we start shorting NBC/CBS/ABC now?
John
>John Reder (jre...@tiac.net)
******
John: The skepticism toward Yahoo! was well-deserved. My reasons are given
in the excerpt below from an edition of my daily newsletter that was
published at the time of the IPO.
LITTLE*BLACK*BOX FORECASTS
"Six hours ahead of its time..."
by Rick Ackerman
Wednesday, April 10, 1996
The Last Yahoo?
GENERAL COMMENTS: If you've been wondering when Internet-mania was going to
crash and burn, the answer is: soon, indeed. Yahoo!'s roll out sometime
this week will be to red-hot IPOs what the late, great, Kahoutek was to
celestial phenomena -- namely, an over hyped non-event that could dampen all
interest henceforth.
Now, I don't mean to imply that, when Yahoo! is taken public, the two
Stanford grads who cobbled together its operational software will come out of
it with a dime less than they deserve. Supposedly they are about to receive
an estimated $60 million from an expected $300 million sale, and this is a
pretty good piece of change -- even in an age when some folks make a bit more
just by lacing on Nike footwear whenever they step onto a basketball court.
But don't be surprised if Yahoo!'s creators wind up with a tad less than
anticipated. Nor should you be shocked when, six to eight weeks after the
dust has settled and the company's shares are trading well below their
opening-day highs, the pundits are boldly asserting, "Hmmm. Might we have
we seen a top?"
Sometimes market tops are easy to pick. For instance, you and I -- everybody
but a few egomaniacal billionaires, actually -- knew the Japanese were buying
el-toppo when they were writing checks ending in seven zeros for Van Gogh
portraits and still-lifes. But in that case, the supply of product was very
limited, and it was the last of the artist's very best, privately held works
that were on the block. We knew, therefore, that the price spiral couldn't
last much longer, and it didn't. But it is different with Internet-related
IPOs, for, unlike Van Gogh masterpieces, the supply of startup companies with
fabulous new ways to achieve presence on the Internet is potentially
unlimited. This fact alone will tend to sustain the buzz concerning "the
next hot IPO." So regardless of what happens with Yahoo!, it will likely be
a while before the herd figures out that the game has already ended.
Meanwhile, it is anybody's guess what Yahoo! shares are worth. I am inclined
to value them conservatively for a couple of reasons, both personal. The
first is that I use other search engines, mostly Digital's "Alta Vista,"
whenever I need to find something on the Internet. Yahoo! is therefore worth
nothing to me. But neither, I would assert, is it worth a whole lot more to
anyone else -- except at the margin, for those particular Web users who
prefer Yahoo! to other multitudes of readily available, cost-free
alternatives. You should note, however, that companies such as Yahoo! and
Alta Vista do not make money by charging us to browse. Their profits come
mainly from advertising revenues, and the businesses that pay for that
advertising are hoping not only that browsers see their ads, but that they
buy the products and services that are being touted. There is bad news on
both counts, however, since no one seems to be buying much of anything on the
Internet right now, except -- no surprise here -- the privilege to view
pictures of naked women. As for the effectiveness of Web advertising,
surveys indicate that the ability of browsers to recall ads that they might
have seen on the Internet is not especially keen.
The implication is that millions of Web browsers don't know, or even care,
who is advertising in cyberspace. And that is why only a relative handful of
companies have figured out how to make a profit on the Internet. It is also
why, as I write these words, the officers at Yahoo! are surely grappling with
the question, How the heck are we going to make some real money now? Good
question.
This brings me to the other reason why I would not be inclined to pay up for
Yahoo! shares. I must confess to having tried selling on the Internet
myself. And, although I received about 60 inquiries concerning a particular
service I had offered, there were virtually no checks in the mail. I am
therefore inclined to think that Serious Buyers still don't know the Internet
from a Buick hubcap. And neither does the average Wall Street analyst or
investment banker, since few of them could even tell you how to log onto the
World Wide Web, much less assess its potential as a sales medium. In fact,
on the basis of personal experience, the average Internet surfer is better
qualified than most Wall Street types to evaluate Yahoo! and other
cyber-IPOs. That the pinstripe crowd is so jazzed about "The Internet" is
clear evidence that they haven't yet bothered to check it out for themselves.
They would discover that, as a sales tool, the medium is still largely
unfocused, immature and, by the statistical evidence, largely unprofitable.
If you think I've got it all wrong, though, I'd suggest calling your broker
right away to tell him you want a piece of Prodigy if and when it goes
public. Unlike Yahoo! and companies of its ilk, it is a real company with
substantial revenues and a real product -- e.g., "Content" -- to sell. Its
present owners, IBM and Sears, who have more than $1 billion in the company,
are contriving to affect disdain for a recently announced, $250 million
buyout offer from management. Sears and Big Blue will come around, though.
And be glad to escape with 25 cents on the dollar. Since we know this
already, one could say that Internet-mania already has crashed and burned.
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Joe Burke
Search engines are a dime a dozen ...Everyday, a few new search
engines join the already flooded market....
........ It's like selling someone web space.... In the
beginning, you'll do fair but afterwhile people will realize it's not a
viable option..........
I suspect Yahoo may become a penny stock.....Maybe that's
how it should have began in the first place.....
JOE
John Lacelle
Interesting post about the Yahoo! IPO activity. I remember back in
the mid 1980's telling my mother that yea it sure seems great that
people are earning 100 million a pop for putting together an LBO
financed by junk bonds. My mother of course was all caught up in
the hype of the time and insisted that I could "take over" Thrifties
Drug and Discount (a chain of 5 and dimes which I was working as
a stock clerk at the time). Well, hindsight being 20-20, I guess
I was right.
Let us zoom ahead to 1996 when IPO's go sky high on hype. I will
say it here right here and right now that in a few short years, many
of the people involved in putting these IPO's together, will be sitting
before a judge explaining why they thought they actually had a viable
company that deserved to go public and get millions of dollars of
investors money. I think the real answer is that the risk belongs
to the investor. Think for yourselves. As for Yahoo!, I wish those
guys the best of luck but everything I know about the Net and the
future of where the money is going to flow, I think they are doomed.
Just my opinion. Don't trade on my words. Don't sue me, don't write
my sysadmin, I'm just the little guy....
-John
--
My policy is to always blame the computer.
-Me