Bob Davis, Private Dancer

  |  May 17, 2000   |  Comments

When you're the number-four portal in the ratings, it's hard to get your props even if most of your rivals are TV networks. While Lycos' value has increased tenfold in the last five years, rival Yahoo! is up over fiftyfold. So Davis has always been under pressure to sell Lycos. It's one of Dana's favorite soap operas. Call it "As the Portal Turns." Now Davis is playing footsie with Telefonica Espana's Terra unit, a Latin American ISP.

Bob Davis of Lycos has never gotten much respect as a manager.

When you're the number-four portal in the ratings, it's hard to get your props even if most of your rivals are TV networks. While Lycos' value has increased tenfold in the last five years, rival Yahoo is up over fiftyfold.

So Davis has always been under pressure to sell Lycos. It has become one of my favorite soap operas. Call it "As the Portal Turns."

You may recall that two years ago Davis was prepared to sell Lycos to Barry Diller's USA Networks. Diller offered roughly 40 percent of a new company that would include the Home Shopping Network and Ticketmaster-CitySearch, with Diller in charge.

The deal collapsed because Lycos shareholders (notably CMGI Chairman David Weatherell) wanted a better price, which would have given them control of the combined companies. Diller refused, the deal collapsed, and Diller has spent the last two years crowing over Lycos' subsequent fall. (Do you think he was right? Answer honestly before you click the link.)

Now Davis is playing footsie with Telefonica Espana's Terra unit, a Latin American ISP. Telefonica's chairman is reportedly willing to pay $10 billion (in Terra stock) for Lycos.

But this time Davis might be buying just what Diller backed away from. Compare the action in Terra over the last year to that of Lycos. Terra's gone through a boom and a bust, yet it still sits 60 percent over its price of a year ago, while Lycos has gone nowhere.

But looks can be deceiving. Terra's sales for the last year were just $14 million, a price-sales ratio of over 1,000! To be fair, sales more than doubled in its most recent quarter, but the price-sales ratio for Lycos is 28.5, and for Yahoo it's 101.93.

Excitement over Latin America's Internet prospects has turned Terra into a financial egg cream. (An egg cream, you'll recall, is a little milk, a little chocolate, and a lot of vigorously stirred seltzer water.) If Lycos looked like liquid next to Diller's solid TV assets, Terra is pure air.

Under Terra's present proposal, Telefonica would control the Terra-Lycos combination. But most of Terra's sales are coming from ISP access charges, at a time when free access is the rage. Terra badly needs content, advertising and e-commerce revenues to succeed, which is where Lycos shines. But could Terra run Lycos after the merger, and why would Lycos' best people stay if stock options were off the table?

Personally, I like Bob Davis, but he's more of a tease than Britney Spears. Wall Street loves deals, so Davis shows it deals. Then when the deals collapse he goes back to running his company. I don't know if you've noticed, but he does a pretty fair job of that.

If the arbitrageurs would leave him alone Davis would continue to do all right. But they won't. Even if the Terra deal falls apart, Davis will have to dance again. That's why they call Wall Street a dirty business.

ClickZ Live Chicago Join the Industry's Leading eCommerce & Direct Marketing Experts in Chicago
ClickZ Live Chicago (Nov 3-6) will deliver over 50 sessions across 4 days and 10 individual tracks, including Data-Driven Marketing, Social, Mobile, Display, Search and Email. Check out the full agenda and register by Friday, Oct 3 to take advantage of Early Bird Rates!

ABOUT THE AUTHOR

Dana Blankenhorn

Dana Blankenhorn has been a business reporter for more than 20 years. He has written parts of five books and currently contributes to Advertising Age, Business Marketing, NetMarketing, the Chicago Tribune, Boardwatch, CLEC Magazine, and other publications. His own newsletter, A-Clue.Com, is published weekly.

COMMENTSCommenting policy

comments powered by Disqus

ClickZ Today is our #1 newsletter.
Get a daily dose of digital marketing.

COMMENTS

UPCOMING EVENTS

Featured White Papers

IBM: Social Analytics - The Science Behind Social Media Marketing

IBM Social Analytics: The Science Behind Social Media Marketing
80% of internet users say they prefer to connect with brands via Facebook. 65% of social media users say they use it to learn more about brands, products and services. Learn about how to find more about customers' attitudes, preferences and buying habits from what they say on social media channels.

An Introduction to Marketing Attribution: Selecting the Right Model for Search, Display & Social Advertising

An Introduction to Marketing Attribution: Selecting the Right Model for Search, Display & Social Advertising
If you're considering implementing a marketing attribution model to measure and optimize your programs, this paper is a great introduction. It also includes real-life tips from marketers who have successfully implemented attribution in their organizations.

Jobs

    • Tier 1 Support Specialist
      Tier 1 Support Specialist (Agora Inc.) - BaltimoreThis position requires a highly motivated and multifaceted individual to contribute to and be...
    • Recent Grads: Customer Service Representative
      Recent Grads: Customer Service Representative (Agora Financial) - BaltimoreAgora Financial, one of the nation's largest independent publishers...
    • Managing Editor
      Managing Editor (Common Sense Publishing) - BaltimoreWE’RE HIRING: WE NEED AN AMAZING EDITOR TO POLISH WORLD-CLASS CONTENT   The Palm...