The pending liquidation of broadband Internet company
Excite@Home puts its well-trafficked Excite.com Web portal up for grabs,
but even at a fire sale price the site could have trouble attracting a
As a "second tier" player in a market increasingly
dominated by AOL Time Warner's America Online, Microsoft's MSN and
Yahoo, Excite.com was in trouble long before its parent filed for bankruptcy
protection last week.
Now it faces potentially insurmountable obstacles: In its bankruptcy
filing two weeks ago, Excite@Home said it had "initiated a wind down of
Excite.com and other portions of the Excite Media Network," a sign that
the company is not holding out high hopes for a significant sale price.
Analysts said competitors--which might normally be considered among the
most likely potential buyers--may now decide that it is easier to simply
allow Excite to die a slow death than step in with an offer.
"This is now a waltz of elephants...Excite ain't an elephant," wrote
Merrill Lynch analyst Henry Blodget in an e-mail exchange. "Over time, I
expect that their traffic and registered users will gradually migrate to
one of the big three."
Microsoft, which operates the MSN Web properties, has been mentioned as one of the potential buyers of Excite. A representative of the software giant declined to comment.
Like other portals, Excite was once valued for its ability to bring in
"eyeballs," and by that benchmark it has continued to perform well,
ranking as the seventh most visited site on the Web for the month of
August with 28.7 million unique visitors, according to online research
company Jupiter Media Metrix.
While those numbers were worthy of a billion-dollar market capitalization a few years ago, investors now want to know when and how such traffic will produce profits. In this case, the Excite portal accounted for most of Excite@Home's $65 million
in losses last quarter.
Despite its financial woes, Excite.com has continued to draw U.S. Web users to its portal and services, ranking among the top 10 most-visited sites in August.
|Rank ||Top properties ||Unique visitors (000)|
|1 ||AOL Time Warner network* ||78,543|
|2 ||MSN-Microsoft sites* ||67,402|
|3 ||Yahoo* ||64,683|
|4 ||Terra Lycos* ||38,818|
|5 ||X10.com ||34,622|
|6 ||About/Primedia* ||29,428|
|7 ||Excite network* ||28,679|
|8 ||eBay* ||24,900|
|9 ||Vivendi-Universal sites* ||23,001|
|10 ||Amazon.com* ||22,950|
* represents a group of commonly owned and/or branded domain names
Source: Jupiter Media Metrix
Excite@Home did not respond to calls seeking comment.
But the company's actions
indicate that its priority is to salvage as much of its high-speed
access business as possible, even at the expense of its long-suffering
When the company announced last month it would lay off 500 employees, it said the
lion's share of the cuts would come from Excite, and from shuttering its
MatchLogic interactive marketing subsidiary. Most of Excite@Home's
remaining 1,350 employees are involved in the company's high-speed
While day-to-day operations have not been suspended, they have been
curtailed. News headlines continue to be posted to the site and services
such as ticker searches and movie listings are functioning. But some
features, such as a horoscope service, have already shut down.
tellingly, the site has all but ceased serving third-party banner
advertisements. In addition, as of Friday it had suspended new
classified ad sales, citing "server maintenance" in a notice on the
"Laying off most of the Excite.com employees involved in developing
on the site, in my view, may diminish the value of the asset," said
Johnstone, an analyst at investment bank Davenport & Company.
@Home paid $7.2 billion for Excite in 1999 as part of an ambitious plan
to match AOL's highly successful strategy of marrying online access with
content. Executives had hoped that tying together broadband
Internet access with its own start page to help guide people through the
Web could add more loyalty and an additional advertising revenue stream.
At the time of the negotiations between the companies in 1998, Excite
also being courted by Microsoft and Yahoo, according to sources familiar
with the discussions. Excite and Yahoo came steps away from shaking hands
on a deal
at about $5.5 billion to $6 billion, but @Home came in the last minute
a better offer.
After the companies consummated their marriage, the new entity enjoyed a
lengthy honeymoon period. In 1999, Excite@Home's media and advertising
dollars, largely comprised of advertisements on Excite, reached $197
million, or 58 percent of the company's overall revenues. The next year,
media and advertising revenue skyrocketed to $308 million, riding on the
residue of the Internet boom.
However, in April of 2000, the Internet stock bubble burst, which then
wiped out venture capital funding almost overnight and caused start-ups
supplying online advertising dollars to fold.
Within a few months, the ripple effect of the stock collapse began
industry giants. Yahoo, which had anticipated generating $1.2 billion in
revenue for 2001 has since twice reduced estimates and now expects to
between $700 million and $750 million. Some analysts expect Yahoo to
estimates again when it reports earnings on October 10.
Meanwhile, AOL, which acquired Time Warner in January this
began showing signs that it would also fall short of financial
The company two weeks ago said it would not meet its aggressive year-end
financial expectations in part due to the terrorist attacks that
the World Trade Center.
Media companies at the time lost significant advertising dollars after
running ad-free coverage of the attacks. Media companies also were
to forecast how 2002 would turn out, given the difficulty in spotting
advertising will revitalize.
Given the dismal outlook for even the biggest of traditional media
companies, the outlook for second-tier Web portals like Excite remains
pessimistic. In January this year, Excite@Home wrote-off $4.6 billion in intangible assets from the decline in value of its two
expensive acquisitions: Excite.com and online greeting card site
Blue Mountain Arts.
In the fiscal quarter that ended June 30 this year, Excite@Home's media
advertising revenue dropped 62 percent from the previous year to $28.6
million. Advertising only accounted for 21 percent of the company's
revenue. Looking at the first half of 2001, advertising declined 51
from the previous year to $73.6 million.
"With revenue declining at such a huge amount, it would be hard to get
someone interested in it," said Drake Johnstone, an analyst at
bank Davenport & Company. "Revenue hasn't stabilized, it keeps on
One issue compounding the situation is the amount of over $1 billion in
debt for the entire company. Most of the debt is in the form of bonds
are not due for at least five years, but there remains lingering
uncertainty about who will incur the debt in the event of an
There's no question Excite continues to be a hard sell. Finding the
deal will depend on the needs of the buyer, and some analysts say Excite
still has something people may want: a database of consumer information.
That in itself could be worth something.
"They don't have any defensible proprietary content that anybody really
needs," said Patrick Keane, an analyst at online research company
Media Metrix. "They have a huge database of names, and a direct marketer
might want to purchase that."