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THE DAY AHEAD: Dot-com execs bemoan stock market

COMMENTARY--A year after the Nasdaq hit 5,000, dot-com execs find themselves in a conundrum. They can't live with the stock market and they can't live without it.

The Nasdaq crash from 5,000 to nearly 2,000 has created a lot of angst among the Internet's top execs. The stock market has become a burden as investors bail on their companies' shares. It was great last year when irrational exuberance made Internet execs paper millionaires. Now falling stock prices overshadow the still obvious fundamentals of the Internet. These execs acknowledge investors were irrational on the way up, but bemoan how they are irrational on the way down.

The angst was evident at last week's Merrill Lynch Internet conference, a shindig that was postponed last fall due to lack of interest. Investors were more skeptical. A few folks admitted they were long-term believers in some downtrodden dot-coms, but they weren't going to proclaim their love to the world.

As for the Internet execs at the conference, a few of them were downright quirky.

VerticalNet (Nasdaq: VERT) Chairman Mark Walsh was overheard telling colleagues that fortunately his life doesn't revolve around the stock market. Walsh also seemed interested in scamming a TiVo box to test out. Later, Walsh was spotted trying to convince prospective investors not to worry about churn rates for VerticalNet's B2B storefronts. VerticalNet provides business-to-business software, but still relies on advertising and its storefronts.

DoubleClick CEO Kevin Ryan pondered out loud what life would be like if all the online advertising companies were private. His argument was that online advertising would look much better if it weren't for those pesky stock prices.

Outgoing Excite@Home CEO George Bell sounded like he was from a next generation telecom provider. Bell downplayed most of his business to cheer about its broadband backbone. Last year Excite@Home (Nasdaq: ATHM) was a narrowband (Excite.com), broadband (@Home), direct marketing (Matchlogic) and e-card-sending (Bluemountainarts.com) giant. Nothing like a falling stock price to make you focus your pitch.

iVillage CEO Doug McCormick talked about how his company's network is vital to women and how it will survive the downturn and bring value to advertisers. It also has enough cash to ride out the storm. According to McCormick, iVillage (Nasdaq: IVIL) has "metrics, management and money." It doesn't have market cap, a point not lost on the audience.

CMGI Chairman David Wetherell did his spiel as did Internet Capital Group CFO Ed West. The message is that Internet incubators aren't dead. Try telling that one to investors.

It was as if all these dot-com CEOs wanted to stand up and scream, "Don't you people get it." After all, everyone loved their companies last year. It's not easy to go from the most popular kid in school to an outcast in a year.

And it's downright humbling. That's why Yahoo CEO Tim Koogle is stepping aside. In the boom times, Yahoo (Nasdaq: YHOO) was arrogant and left traditional ad agencies out of the loop. Now Yahoo needs traditional advertisers in a major way and has to find a media-savvy CEO to rebuild bridges.

The CEOs observed in my little anthropology experiment still clearly believe in their business, or at least they put on a good show. Despite their stock market profits and perils, they still remain upbeat.

DoubleClick's Ryan was the most convincing. After fielding roughly dozens of questions about his company's prospects in light of Yahoo's recent warning, Ryan said DoubleClick (Nasdaq: DCLK) will be OK. Sure business will be down in the first quarter, but DoubleClick can ride it out.

He also noted that online advertising isn't dead. "The biggest problem for Internet advertising is the stock market," he said. "All these glum faces in the audience are stock-market driven."

Ryan told the audience to imagine what it'd be like if the online advertising companies were private. There are tons of people on the Internet, and online advertising is still growing. "Fundamentally, this is working," he said.

But because of the Nasdaq crash, venture capitalists are gun shy and capital has dried up, he said. Nevertheless, Ryan said he's never felt better about the long-term prospects for DoubleClick. He has a good reason: DoubleClick has more than $800 million in cash.

And there's the rub. Ryan can complain about how Wall Street can turn on good companies, but DoubleClick would have never had that war chest without the stock market. You can't live with Wall Street and you can't live without it.

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