For proof that the Internet bubble remains buoyant, just look at Goto.com Inc. (Nasdaq: GOTO)
Shares of the pay-to-be-displayed search engine operator have risen over the last couple of days on news about hitting some metrics targets, and an announcement of a deal involving Netscape's Net Search feature. Goto.com rose as much as 49 percent today, and remained up 29 percent by midday.
When Goto.com went public two weeks ago, it opened 11 points above the initial offering price, so clearly it's a company that Internet stock players are rooting for all along. And on a light volume, pre-holiday session like today, clearly they're looking for any reason -- any reason at all -- to push Goto.com higher.
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This fueled Wednesday's climb: 10,000 advertisers, 80,000 network affiliate sites, 10 million unique users, and "one of top search relevance rankings in the most recent NPD Online Research survey."
Ten thousand advertisers. Sounds impressive, unti you consider the meaning of "advertisers" in this case. Goto.com makes money from companies that pay for higher search rankings. Would-be "advertisers" bid on search-terms through an open auction, and the top bids get the highest placement. The idea is that advertisers get better results than banner ads, and users get more relevant search results.
Regardless of whether the search results are relevant (You'd think "NFL.com" would be among the top returns for a query about "American football", but on Goto.com, the NFL's official website doesn't show until the 48th listing), advertiser revenue remains unpredictable, although CEO Jeffrey Brewer insists that revenue will become easier to forecast as more advertisers come aboard.
It's to hard to see how, since regardless of how many advertisers sign up, who can predict what users will actually search for? You can forecast broad trends based on behavioral patterns, but neither Brewer nor anyone else can say with certainty what specific terms people will enter into the Goto.com query engine. And it's specific terms that advertisers actually bid on.
So Goto.com's user and advertiser metrics carry far less meaning than metrics of, say, Yahoo, which charges advertisers based on impressions, as do just about all websites that carry banner advertising. Yet the market saw Goto.com's measurements as reason enough to pour almost five points into the stock on Wednesday.
Things have become even less rational over the last two days, with stock buyers going ballistic about a deal that places Goto.com in the "Net Search" feature of Netscape's website. Gee, there's a reason to get excited: a spot as one of eight search engines on a website whose viewership growth is threatened as the Navigator browser stagnates in the face of Microsoft's Internet Explorer.
Goto.com isn't necessarily something to be dismissed out of hand. The business model, while not a sure winner, is unique enough to be intriguing -- but not at its current market capitalization of well over $2 billion.
That's just one example of how Internet nuttiness has returned. Notice the return of sector bellwethers such as Yahoo, which has been rising the last couple of weeks after sliding through April and May. Inter@ctive Week's @Net Index is up 11.6 percent over the last 30 days.
Investors aren't worried about interest rates anymore, and they're confident about revenues again, says Volpe Brown Whelan analyst Derek Brown. "It would not surprise me to see things level off a bit in the summer months, but it's not going to decline," says Brown, who doesn't follow Goto.com. "I think that leveling off is going to make for some very attractive opportunities."
As Brown likes to note, he's betting his career on Internet success, so of course he'll be a long-term sector booster. But bias or no -- I'm probably biased too, since I make my living not only writing about this stuff but also writing about it for a website -- Brown is probably right. Internet stocks will keep going up, especially sector bellwethers like Amazon.com, eBay and others, even if they're overvalued (which they are).
And on days when there isn't much going on, their momentum will spread to lesser lights and push them higher on the flimsiest of motives. And then you have Goto.com.
The overall technology market was higher in afternoon trading. With two hours left before the market takes a three-day break, the Nasdaq Composite Index was up 23.10 to 2729.28, the S&P 500 had gained 8.02 on the day to 1388.98, and the Dow Jones Industrial Average had risen 63.32 to 11129.74. 22GO>