With the soon-to-be new issue Facebook coming out next week I thought it would be fun to look back on some other internet stocks and how different they are from Facebook and other recent issues. Back in the 90’s I was buying stocks of many tech names. I think at one point I probably owned every single one of them . Of course, my favorites were the high flying names like Doubleclick, CNET, Infospace, CMGI, Internet Capital Group, Yahoo, Excite, Netscape, AOL, Exodus Communications. Many of these names came public during the mid 90’s and really exploded to finish the decade. Back then it was a different metric that caught investor attention: more eyeballs. Of course, that never translated into profits directly but it sold quite a bit of stock. Profits? Hey, that wasn’t their problem — they needed as much traffic as they could find (like a land grab) and then the payoff would be down the road (in some cases….that road was endless). Today we have companies that actually make money and grow their earnings. The promise of profits some day is not enough to support a premium valuation, but there is still some myopia out there – so beware.
Some of my favorite plays of yesteryear that you may remember:
Excite@Home – This was a combo of search/portal with @home, the precursor to the cable companies providing high-speed internet access. Like many of the dotcoms they went on a massive spending binge in search of a land grab. They overpaid for names like blue mountain arts (greeting cards?), iMall (nearly a billion dollars for both) and had big nascar sponsorships. The stock was a hot one back in 1998 and I made some great money on this at one time, but it basically folded up in 2001 and sold their network to AT&T. Their buildings were sold to Stanford Medical and today are a stark reminder of those good ol’ days.
Lycos – Like Excite, Lycos was a portal that was trying to compete with Yahoo and go.com (eventually bought by Disney). They had no trouble finding eyeballs but they did have an issue with profits. They were eventually bought by a S American firm (Terra) after a heavy investment (which gave them a longer shelf life than Excite). Lycos made some nominal purchases but eventually they would fall by the wayside.
Doubleclick – The advertising firm started in the early 90’s and was a firecracker. This one was a trader’s favorite, it had a dominant share of the market until the big boy (Google) came around. Ironically, Google bought them a few years ago in what was considered a very costly transaction. Doubleclick still has influence in this market as Google shapes itself in the world of mobile.
CMGI – One of my favorite and most played names. CMGI (College Marketing Group) was an incubator of internet companies, a type of ‘public hedge fund’. They would give seed money to startups, let them get a foothold on their business then unleash them on the market for an IPO. Some of the more successful ones included Navisite, Alta Vista, uBid and Engage. Via their @Ventures they made millions bringing eCommerce and B2B firms to market. Today this firm funds alternative and clean energy startups.
Juniper Networks – A high flyer back in the day as they were seen as major competition for Cisco and Nortel Networks. The gear and packet products were adopted early by major players as Juniper was seen as the alternative to yesterday’s technology. They were one of the best performers in tech in the late 90’s and garnered the eye of many traders (me included). They were hammered when the tech bubble imploded and have yet to return to its former glory. The company is still in the shadow of Cisco as other competition have morphed into the cloud or moved on. One of my four ‘trading’ horsemen — includes Redback Networks, Ariba and Brocade.
Infospace – My most favorite name because I received IPO shares on this. It was only 100 shares priced at 15 bucks. But I held onto them and in about 3 yrs I had 1600 shares after the many splits and price appreciation (at peak share price my value was worth over 100K without ever adding a share). The company was started by a Microsoft misfit who saw value early in mobile communication, search and advertising. They never really put their arms around the technology and it became a game of who can talk bigger. They faced accounting issues and were forced to restate financials in 2000, which was a bad time as the tech bubble was being popped. The company is still kicking but is a shell of its former self and is likely dismantling.
Did I lose money on these plays? Like many whose bubble was burst in 2000 I did take some hits. I made money in this market for no better reason than being in the right place at the right time with money on the line. I will never take credit for having smarts in this time, rather I was lucky to be in a bubble. But the ride up was great.
Facebook will be an exciting offering. With the lead they have I doubt Facebook will face the extinction (or near extinction) of these companies. It’s a different world today with the focus on good business models, profits, cash flow, first mover advantage and footprint. Somehow I believe the giddiness of the 90’s gold rush has passed us by — at least I hope so!
