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StockTalk
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TMF Interview With Go2Net CEO Russ Horowitz
November 23, 1998
With Yi-Hsin Chang (TMF Puck)
Go2Net Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GNET)") else Response.Write("(Nasdaq: GNET)") end if %> is a Seattle-based network of community-driven websites focused on personal finance, search, commerce, and games. The company's properties include financial discussion forum Silicon Investor, investment research area StockSite, "metasearch" service MetaCrawler, recently acquired free business hosting services provider HyperMart, comparison shopper WebMarket, game area PlaySite, and The Useless Pages -- "useless" meaning "there isn't any point in making these things available on the Web." Earlier this month, Go2Net reported better-than-expected fiscal fourth quarter earnings.
TMF: First of all, what do you think about the proposed deal between America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> and Netscape <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %>? How do you think this will change the Internet portal landscape?
Horowitz: I think it very much appears that it's a deal that would be a real positive for both companies, in terms of AOL and Netscape. Netscape has looked like a company that could very much use a larger partner to ensure its position in the industry, and, at the same time, AOL's done a tremendous job of building an online service but hasn't really exploited it on the Web. This will give them tremendous inertia as it relates to that position.
In terms of the portal landscape, I think what it does in many respects is -- from the perspective of the value of the market position -- I think it solidifies that these are valuable positions to have. When you look at the landscape and all of the substantial companies -- in terms of financial resources and also human capital -- it's amazing that so few companies have been successful in being able to carve out a critical mass in terms of audience, in terms of consumer Web presence. And so from that perspective, I think it's a real positive for the portal space over all.
TMF: You launched your own portal today as a gateway to your various Internet websites. What sets your portal apart from your competitors?
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"We aren't building a portal as the foundation element of our business. Our business already exists and already works."
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Horowitz: A couple of things. One of the main things to distinguish with our approach probably goes down to the foundation of our initial strategy when we started to build Go2Net's strategic position on the Web in early 1997. Given the timing of when we came into the industry and the fact that most of the portal names that people know now -- Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>, Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %>, Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %>, Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> -- had come on the Web in 1994, 1995 when there were only thousands of websites. They were able to build their brands early on, and they've spent the last couple of years establishing services underneath them.
When we came on, we felt that we should really look at each site as its own individual property, its own individual business, and really focus on the products. We own our own technologies and felt that would be a differential element of our strategy and to leverage it in a way that we could focus on the real utility as opposed to the brand drawing them in -- that our products would be validated through word of mouth and editorial. And the goal all along was to add these pieces of this puzzle in the categories that we focused on -- finance search, commerce, and games.
We felt those were applicable to the widest base of the Web audience, and we wanted to carve out a premiere audience with each and make each one work as its own business. And then the plan was to leverage that and leverage the fact that we had the core competency and technology in house to create a customizable gateway into our offerings. It's not a coincidence that the things that we offer are very similar to some of the other portals because they are the main services that Web users look for.
So the main thing with us -- where they kind of took a brand, top-down approach and then established services underneath it -- ours was: establish the communities, establish the products, and leverage the best or unique feature of each on to the [Go2Net] site, and so that's the next step or natural evolution for us. What we announced today and with the launch of the site under Go2Net.com, it's really just the beginning because we haven't yet translated all of our technologies into the site, but it effectively showcases a few of the things that we do well.
TMF: As far as the portals are concerned, do you feel like you're playing catch-up to AOL, Yahoo!, Excite, etc.?
Horowitz: No, not at all. We weren't motivated to launch a portal just because everybody else did. Again, each of our sites is its own business, and so we're looking to leverage that. We try to be real proactive as it relates to the categories we want to be in and the profile of our assets as it relates to the profile of the business -- having different sources of revenues, whether it's technology, licensing, ads, commerce, or subscriptions. But the flip side of that as it relates to our products is we really focus on what the users are telling us we're doing well and what they tell us maybe we aren't doing so well. What motivated us to take the step now and aggregate things into creating a portal to our own sites was really what the users were telling us.
One example would be Silicon Investor, which I think you're pretty familiar with. It has a tremendous audience as it relates to financial discussion, but the Coffee Shop, which is where non-stock topics are discussed, has been one of the fastest growing and most popular areas on Silicon Investor. And to the extent that people are discussing current events or sports or politics, that was an indication to us that they wanted network-wide discussion. And so we've taken the Silicon Investor message board technology, and in the course of our portal, we have used the Coffee Shop to leverage this critical mass into network-wide discussion.
The main thing when you look at the Web as an interactive medium -- that when you have certain sites like ours, where everything you do involves interactivity, whether it's making a post, entering a query, playing a game -- you need critical mass in terms of numbers of people that are actively involved in that activity or people won't come back. In terms of message boards, it's a category that a lot of people have tried to address, a lot of big companies have tried to step in, but they've failed due to the fact that they're not able to maintain a level of activity that keeps people's interest.
For us to be able to take Silicon Investor and leverage it in this respect, I think shows how it's different, but at the same time it's an example of why we took this step now. We aren't building a portal as the foundation element of our business. Our business already exists and already works. And so the portal for us is the natural next step, it's a way just to leverage our sites and technologies to create more of a business opportunity and a better service for our users.
TMF: How do you plan to build the Go2Net brand to compete against the more established names?
Horowitz: Just to go back to competition, which you brought up in the previous question. One of the other differential points is we're trying to focus on experienced Web users rather than newbies. We welcome new Internet users, but the thing that we found is that each thing we do seems to be appreciated a little bit more by people who come on to the Web and gain some experience and then want to be part of a community of other kinds of sophisticated or experienced Web users. If somebody came on the Web and the first search service they use was MetaCrawler, I don't know if they could really appreciate the differential element of it without trying some others first. And as it relates to Silicon Investor message boards, same story -- and the same with PlaySite games.
So in terms of the competitive element, there's a lot of good services that are focused on new Web users. Yahoo! does a good job. Snap! does a good job with that. That's not [our] audience. Once the novelty of being on the Web wears off, and it's not a matter of going to sites that are cool anymore, but to places that really have utility -- and I'm not implying that those sites don't have utility because they do, but it's a matter of priorities, and that's the real priority for us.
So in terms of carving out our name and carving out our position, that's one that we feel we're really able to be competitive with in terms of focusing on experienced Web users. But the next step for us with the launch of this site is to really start focusing on marketing as well. We have achieved critical mass as a business, and it's time to start building some visibility in terms of the consumer landscape. Given our focus on experienced Internet users, it's probably a logical evolution that one of the places you find those people is online. We'll do a lot of online advertising. And at the same time our offline advertising will be geographically focused in those areas that have the largest Web editorial presences, like San Francisco, Boston, New York, and Seattle. So our marketing and PR plans pretty much go hand in hand.
TMF: And would those be TV, radio advertising?
Horowitz: I wouldn't put television in the mix at this point. But in terms of our offline [ads], I would look at some radio and billboards, along those lines, in addition to industry print.
TMF: What do you plan to add to your offerings to keep users from leaving your internal network?
Horowitz: One of the things is that we really try to look at what we're doing well and then come up with other products that represent the same characteristics to leverage the technology. So as it relates to the network in this case, I think we're effectively leveraging our message board technology and community, which are two key elements to success. And at the same time, with our search channels on the Go2Net.com, we've extended the functionality of MetaCrawler.
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"One of the other differential points is we're trying to focus on experienced Web users rather than newbies."
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The great thing about metasearch technology is it's not just Web search engines that can be utilized. The concept is to simultaneously query multiple databases in parallel. That's where the efficiency is, that's where the win is for the Web user, and for us to take that technology and apply it to vertical search channels where you can now do category-specific searching -- whether it's finance, metasearching the top finance sites, or computing on the Internet -- you now can do very specialized searching with the metasearch technology. And that's a great way for us because we've already developed it, and now we're just leveraging it to create better products for our users and additional revenue opportunities for the company.
TMF: In your Q4 earnings release, you said short-term profitability could be hurt as you move to expand your offerings, perhaps through acquisitions. Could you elaborate on your profit outlook?
Horowitz: Sure. We are looking to spend more money to make sure that we both maintain the position we have in terms of our emergence in this category and, more than anything, to really accelerate it. But at the same time, we're in a fortunate position because we have achieved critical mass in our business. Not only have we achieved critical mass as a company, but each underlying property has achieved critical mass. And so what that allows us to do is be in the luxurious position of spending some of our growth. So while we are going to increase spending, we're confident that under our current model with our current properties, we can maintain profitability.
But we do feel that, in terms of establishing or maximizing our market position, that it is the right time to spend because this industry's got a ways to go, and we feel we do have an opportunity to enhance it. But the other part of that is while you need to maximize your market position, you also need to deliver on your operations. So we are striking the balance and showing that we will continue to make progress as it relates to both the top and bottom line and on the charts as it relates to our market position.
But the one other element that you can't completely factor in is we are a consolidator. We've made a number of acquisitions. We'll continue to make acquisitions and an opportunity may come along that doesn't add profitability now but it may be the right thing for the company. And from that perspective, it could affect things in the short term, although currently there isn't anything that represents that.
TMF: Do you see yourself more as an acquirer rather than an acquiree?
Horowitz: Yes. Our strategy now is to continue to expand our presence, and acquisition is a part of that. In this landscape, though, which is rapidly consolidating, acquirer can quickly become acquiree. So from that perspective, our job and our responsibility is to maximize our value and if we can do that as an independent company, that's great. To the extent that we feel that there is a right partner for us, and that's the right thing for the shareholders and employees here and our users, that's what we'll do, too. We'll consider that.
TMF: How much do your individual websites overlap in terms of traffic and customers?
Horowitz: Currently, there isn't a tremendous amount of overlap between our sites. We haven't tried, up until now, in a real assertive way to leverage them across each other. Our view was rather than just throwing up links between the sites to try to leverage one into the other is that we would execute this portal strategy, and that would be the most effective way to do it. The one thing that we're real sensitive about and didn't want to compromise -- as great as we think our new site is, in terms of Go2Net.com, and as great as we think it will be in the coming months as we expand the service -- we didn't want it to be at the expense of any of the individual sites. Some people go to those sites directly because that's the experience they want from us, and we want to make it easy for them to the extent they want to explore the other things we offer. But we don't want to force it on them.
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"Our strategy now is to continue to expand our presence, and acquisition is a part of that. In this landscape, though, which is rapidly consolidating, acquirer can quickly become acquiree."
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So we make a promise to our users with each of our sites in terms of what it's about, and we want to keep that. We felt that the strategy in terms of the Go2Net.com portal to our own sites would be the most effective way to do it without compromising the experience on each individual site. I haven't seen a lot of overlap, but I do expect that as the Go2Net.com site starts to really take hold that we will see a lot of users effectively getting the best out of each thing we offer.
TMF: What are your goals for fiscal 1999 in terms of things like number of unique visitors, page views, revenues, etc.?
Horowitz: That's not something that we publicly disclose. In '98, we set a goal to route our network to see a million unique users a day, and we accomplished that in September. There are other goals that we've set. A lot of them are geared back towards user retention, user conversion, frequency of visits, and length of stay. We have tremendously favorable growth trends as it relates to usage overall.
You know, with the Web, everybody talks about Web surfing. There's nothing easier than changing from one website to another -- use a bookmark, enter a new URL, and you're gone. A lot of people are gone, never to return. So for us, we know that we retain a very high percentage of users that come to our sites and, once we retain them, they visit more frequently than they do most other sites, and when they visit, they stay longer than they do on most other sites. Those are all trends that we feel real good about and, at the same time, want to ensure they continue. But as it relates to specifics on traffic, that's not something that we publicly forecast.
TMF: Thank you so much for speaking with us today.
Horowitz: It's been my pleasure. Those were excellent questions, and, hopefully, some of the answers were useful.
TMF: Yes, thank you.
Horowitz: Thanks a lot.
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