Special Report: Publishing Money Online

One of the best known Internet business models is to provide free content to online readers and charge corporate sponsors for advertising space.While there has never been a doubt as to the success of this paradigm in the print and broadcast media, some skeptics have questioned whether this “content/publisher” strategy can succeed on the Web. The E-Commerce Times took a close look at five Internet-based content publishing companies,Andover.net, Inc., CNET Networks, Inc., Internet.com Corp.,Yahoo! Inc. andZDNet Group, and found not only that the business model is fundamentally sound, but also that some of the leading content providers are well-positioned to become extremely profitable pillars of the new Internet economy.

Yahoo!: The Advertising Giant

Yahoo! is the Internet’s second largest content publisher, trailing only America Online. According to media measurementfirm Media Metrix, the Internet giantrecorded 45.5 million unique visitors in February 2000, as compared to AOL’s total of 56.6 million. Among Yahoo!’s many offerings are guides to onlinecontent, Web search capabilities, aggregated third-party news content, community and personalization features, e-mail, reference information and avenues for small-business e-commerce.

Yahoo!’s revenues in FY1995 were a paltry $1 million (US$). The company went public in April 1996 at $13 per share, and when the IPO was completed, its market capitalization was $334 million.

Four years later, Yahoo! is now on track to reach revenues of about $1.5 billion in FY2000, nearly triple its $588.6 million take in FY1999. Yahoo! posted revenues of $201 million in the fourth quarter alone, up from $155 million in the third quarter.

Most importantly, practically none of Yahoo!’s revenues were derived from B2B initiatives, technology infrastructure or online sales of goods and services.Rather, the content giant’s corporate pockets have been filled with revenues from online advertising.

Fueled by this advertising income, the company’s market capitalization has soared to a staggering $103billion — about $50 billion more than either Ford Motor Co. or General Motors Corp.

While some may quibble about whether Yahoo! deserves such a high valuation, there is no doubt that thecompany has proven that the Internet publisher/content provider model can work. In 1999, Yahoo! reported net earnings of $61.1 million. If the company maintains its present quarter-to-quarter pace throughout theyear, it will post earnings in the $150 million to $200 million range, on revenues of $1.5 billion.

Other Content Publishing Firms

While Yahoo!’s profitability is clearly exceptional in the “spend now, count the money later” Internet world, other content publishing firms are successfully pursuing a similar business strategy. A look at the marketcapitalizations of four other content companies at the time of their IPOs, compared to their present market capitalizations, shows that investors didvery well when they bought into these advertising revenue-based media companies.

CompanyDate of IPOInitial Market Cap*Present Market Cap*Monthly Visitors*Andover.net12/99$270$3562.4CNET.com07/96$70$4,0609.2Internet.com06/99$67$1,2902.0Yahoo!04/96$334$103,00045.5ZDNet Group03/99$1,400$2,0509.9* In Millions


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