By Paul Larson (TMF Parlay)

I think that Rick makes an interesting argument for iVillage, but he's putting a little bit too much faith in a company that has only shown it is adept at spending its investors' money.

First, Rick is absolutely right to point out that iVillage has been able to grow its topline and, recently, its margins. One of the ways iVillage was able to improve its margins in the most recent quarter was by cutting back on its marketing expenditures. Marketing expenses went from $24.5 million in the fourth quarter to $16.8 million in the first quarter. Keep in mind that here we have a company whose only real asset is the goodwill and branding created by these marketing dollars. Even if marketing expenses are curbed further without hurting the brand (hard to do), there is plenty of other operational overhead weighing the company's finances down. This is still a company that spends two dollars for every dollar it brings in.

Let's now consider the content. There is absolutely nothing proprietary about what iVillage is publishing. It would be extremely easy for copycat sites to come along, and me thinks it won't be long before some of the other Internet heavies like Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> attempt to grow female-centric sites themselves. As much as Rick would like to think iVillage is a leader in a strong position, it remains a second-tier player in the overall Internet content space.

Rick is right that iVillage has been able to post some fairly notable results as far as usage. However, all those millions of registered users and page views don't mean diddly if you can't convert them into revenue. iVillage remains deep, deep in the red, and I think the financials speak for themselves on this issue.

My dueling buddy also contends that an Internet shakeout will weed out the lesser and undercapitalized ventures, and he's absolutely right! Where he's wrong is assuming iVillage is one of the tall trees that will survive the brushfire. It's a company in a poor position that is getting poorer by the day. With less than two years' worth of cash fuel left in the tanks and a sputtering stock, I also wonder where iVillage will get the currency to buy out these troubled competitors.

Stay away from this iVillage. It may be a friendly village to visit, but it's on the wrong side of the investing tracks. Your wallet is in grave danger over there.

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