The Net--culture clash or perfect fit?
Reports have said that 65 percent of all Lycos shareholders were day traders.
You know, I said that because it was what was told to me and lately I've been corrected by
the same people who told it to me...which is curious. Nevertheless, they don't know exactly what it is, but they are currently stating that they think it's 30 to 40 percent day traders.
Still, with CMGI's stake and [chief executive David] Wetherell's disapproval, over 50 percent would have voted no?
Well, the way this merger agreement was, it took 50.1 percent affirmative votes. A no vote of any kind is a negative vote. And since a good portion of the stock is held by people who own it for voting purposes, but subsequently sell it, they don't own the stock when they're asked to vote--there's nothing that you can do to get them to vote.
At investor conferences, both the Lycos team and the USA Networks team really stressed the infrastructure--as in the number of credit card numbers that you have and the ability to fulfill all these orders, etc. Is that the main selling point that you're offering potential partners?
In-between HSN and Ticketmaster, we have 25 million current names with credit cards; 40 percent have email accounts and our electronic retailing
infrastructure is extremely strong. We take 120 million calls in a year; we
manage at any given time a half a billion dollars of inventory among 20,000 stock-keeping units in a very sophisticated way. We ship 30 million
packages a year. We do this all integrated at scale. All of it electronic and certainly the beginning struts of much of it organized to be delivered over Internet systems. So a lot of our revenue that supports this is of course from one-at-a-time retailing--video retailing of
the Home Shopping Network. But all the systems that back that up are as electronically contemporary as it gets.
Are you looking around for another Lycos?
Or at least for someone to fill in what Lycos would have done?
We said it for a long time--we didn't think national portals supported by advertising were a particularly frothy long-term proposition--didn't then and don't now.
We were interested in taking the aggregation of audience in Lycos and making serial businesses out of it. And that was a speculation. The need we
have was to be sure that we got enough eyeballs, audience being passed to us for our Ticketmaster-CitySearch site. There are several ways to someday achieve that--and those we are engaged in right now.
What got us there was the need for a national portal to toss audience to us. We were in discussions with six different people to give us that ability. We advanced the Lycos discussions because we became convinced that if we put our Internet commerce in, that in fact that could create a business for Lycos that we could take advantage of.
What are you looking at now for your Web strategy?
What we want to do is to make arrangements with people who have big aggregated audiences on their local spaces where they're going to have local offerings and have CitySearch be the local portal. We believe very much in the local portal business model.
Will these deals involve equity, or just simple partnerships?
We want some that involve equity, some that involve cash, some that involve partnerships. I
mean, around the dial. We have enough of each.
I guess if you're really localizing now, what is it that you really want to be looking at toward the future? If you're really trying to look at local markets, is it all about the revenue that you're trying to attract?
There are so many local businesses that are "real" businesses, meaning that the business is not commoditized information. You sell a service. And presuming you don't spend all your money on marketing, you have a good margin. Now if we can build up enough of those and get people to seamlessly use this so that their habits are inside it, we think it's a good organizing
Over time we're going to be in 70 percent of the U.S. by the end of this year and 45 cities,
which is more than anybody else will be in. And that's our concentration. We believe in it. Of
course, we could be wrong, but we believe in it, we very much believe in it as a way to organize one aspect of it. And then, of course, we've got our commerce sites, which is
First Auction and City Auction and Hotel Reservations Network, which we just purchased.
Coming from the media side and being the deal maker that you are, was there a real culture clash in doing deals on the Internet? Is there a clash between how Internet and traditional media deals are done?
against an Internet piece of paper. So when the analogy is made to our businesses, our Internet shopping network business, which have real revenue, to let's say
the transaction that involved Excite being sold to @Home at a 60 percent premium, that's combining one piece of paper, @Home, which has no subscribers essentially, with Excite, which has very little revenue. It's one piece of paper valuing another piece of paper at a premium, combining it and seeing at that time their stock go up. So then deal making is not in terms of the kinds of things you use--it's just in the fact that the two worlds currently are based on such different solar systems that you can't do it.
No, I don't think the transactions--the actual making of the transactions--is any different. The difference is for however long it lasts, all companies and media companies that have businesses are worthless
Now it may be true that these Internet valuations will not only sustain themselves, but will be worth whatever you're paying for them in 8, 10, 15 years. But it certainly defies any kind of gravity to look at most of these valuations and say they'll be sustainable over a period of time. That makes deal making very tough.
Any companies out there that you're really keeping your eye on right now?
Everything and everybody.
Anything that's particularly impressed you?
Oh yes, lots of companies particularly impress me. Other than the ones that are so obvious because they're already very well-known. But the ones that interest me are ones we're tracking in various ways to hopefully take an interest in one way or the other.
Will it take a correction on Wall Street for a lot of these media companies really to
make their moves? Are they waiting for the correction? Seemed like you were kind of hedging your bets for the correction, too.
Well, we simply said, "We'll go this far, but no further." We didn't bid against ourselves and
raise our bid for Lycos, which is what everybody was cheering us on to do....because we felt
that would be too dangerous.
I think one of two things will happen: Either the valuations of the companies will come enough in stream with old media companies--correct enough for old media companies to yes, take opportunistic moves and buy stuff--or they will create Internet paper one way or the other with which to make acquisitions. But any media company that does not--any
company, by the way, it's nothing to do with media--will probably be marginalized; it will take longer to get rid of them. Any company that is not actively thinking with a very big part of its heartbeat about the radical revolution that is the Internet is going to be marginalized at some point along the way. I mean, they can recoup, but they will be marginalized.
Do you think you're in a good position not to be marginalized?
I think we're in a great position. Look, believe me--we can screw it all up, but believe me--every night that I don't sleep, it's because I know so well we can screw it up. But a company that is positioned as we are with our cable networks, with our aggregations of audience between the USA Network and the Sci-Fi channel or the broadcast stations or HSN, in terms
of television and film, production and distribution--I think we're very nicely positioned.
But on the other side of our business, whether it's TMCS or Ticketmaster or Internet Shopping Network or the Hotel Reservations Network or Match.com, all of which deal in one form or the other with Internet direct selling to people, that's the through line to both of our worlds. If we use them correctly, it's hard for us not to do really well, no matter what happens...unless we screw it up!