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TMF Interview With Infoseek
CEO Harry Motro
July 14, 1999
With Yi-Hsin Chang (TMF Puck)
This week, Internet portal and search engine company Infoseek (Nasdaq: SEEK) announced it will merge with Walt Disney Co.'s (NYSE: DIS) Buena Vista Internet Group to create a single network called go.com. The combined entity will trade under the stock ticker "GO" on the New York Stock Exchange. The Fool talked to Infoseek CEO Harry Motro a year ago, when Disney first acquired a 43% stake in the company.
TMF: First of all, I was wondering why you chose to do the merger now. Obviously you've had this partnership with Disney for about a year now. Why is this a good time?
Motro: A year ago, Disney and Infoseek focused together on a vision of combining a portal and world-class, category-leading verticals into one entity. We felt that this combined set of assets would create a much more compelling, differentiated offering for consumers. We announced the deal last June, closed the deal in November, launched GO network in January, and have been building it now for almost six months. It's grown from 30 million page views a day to 50 million page views. We've grown from 8 million registered users to 14 million.
But as we've looked at what we accomplished together, for everything we did, we saw how we could do 10 times more if we could totally align the companies and combine assets at a deeper level that goes past two separate companies into one unified entity. And so, to have that clear and unified focus, unlocking the full potential of the assets by combining, that was why we went ahead and put together this transaction.
TMF: Last year when we talked, we discussed the issue of independence for Infoseek, and at that time, part of that deal was that Disney couldn't acquire a more than 49% interest in Infoseek for a period of three years. So why the change in strategy?
"We saw how we could do 10 times more if we could totally align the companies and combine assets at a deeper level that goes past two separate companies."
Motro: The previous deal gave us at Infoseek an opportunity to stay focused with an Internet stock, where there could be a unified leadership of an Internet company that had its own stock really to rally around, and people could see the results of their work reflected in an Internet stock. Well, with this transaction, we found a way to preserve that and get better leverage because the tracking stock is actually a different type of common stock of the Walt Disney Co. You're getting the maximum leverage, you're fully integrated with Walt Disney on one hand. On the other hand, you still have the unification that comes around a separate Internet stock, which is the tracking stock. In a way it's the best of both worlds.
TMF: Now, does this mean the end of the Infoseek brand?
Motro: Absolutely not. That Infoseek brand is a killer search engine brand, and we're doing millions of dollars worth of revenues on that just based on our sales to corporate customers. It's still, we believe, the best search engine on the Internet. It's a part of GO Network, just like ESPN is part of GO Network. ESPN isn't going away. Disney is part of GO Network. Disney doesn't go away. Infoseek's part of GO Network. Infoseek doesn't go away. And I hope Infoseek's a stronger brand one day than any brand in the world.
TMF: So where will go.com be based?
Motro: There's a transition team that's being put together. The transition team will focus on what the vision and what the long-term strategies are for the unified company. Out of that process, we'll identify leadership going forward, and it's really too early to talk about where the headquarters will be until we address the management decisions.
TMF: How will go.com stay mean and nimble while reporting to Michael Eisner?
Motro: Michael Eisner is one of the smartest and most passionate CEOs, I think, in the world. Innovation at the Walt Disney Co. would stack up to any I've seen by any company. By launching things like ESPN -- they launch new theme parks, they launch new movies, they come up with new ways of entertainment every single day. They embrace technology. They have huge passion for everything they do. They have a real sense of the customer and a product focus. They know how to market. I'll tell you, there are very few companies in the world that do as many things as well as them. They are the most profitable media company in the world. It's an incredible opportunity to work with these guys.
TMF: So will go.com essentially serve as the Disney site, or do you see it as being bigger than Disney?
"[go.com has] grown from 30 million page views a day to 50 million page views. We've grown from 8 million registered users to 14 million."
Motro: Disney is one of the key assets that we have. As Michael [Eisner] says, it's the life blood of their company. It's now part of this Internet asset. The Infoseek shareholder tremendously benefits by having Disney and all of the different Disney Internet opportunities now in this tracking stock, but it's more than Disney. It's go.com. Having the name of the tracking stock be go.com and having the ticker symbol be "GO" on the New York Stock Exchange should be an absolutely clear signal that this is not just about Disney or the Disney name or the Disney.com brand. It's GO and all of the other assets put together.
TMF: Why aren't you staying on as CEO then?
Motro: I am incredibly proud of what my management team has been able to accomplish in this company. It's been a tremendous effort. We had a ton of fun. Our values have really seen us through a lot of growth. It's hard for me to answer the question because I don't feel like I'm going because I'm committed to being CEO through closing and a transition period -- it's at least a six-month tenure and probably closer to nine months. After that, I want to reacquaint myself with my family. In another interview just before this, I was asked if I had any regret during my tenure with Infoseek, and the only one I've had is I haven't spent as much time with my family as I'd like to. So I'm going to catch up on some of that.
TMF: What do you think of doing after that? Do you see yourself being involved in another Internet business?
Motro: I haven't thought about a single other business activity. I am focused on Infoseek and GO and Disney through and through.
TMF: Looking at the stock performance of Infoseek, it's actually down 3% for the first six months of the year while Yahoo! (Nasdaq: YHOO) was up 45% and Lycos (Nasdaq: LCOS) was up 65%. Why do you think there is such disparity between the companies?
Motro: Well, we just announced this deal, and we're essentially buying private assets of a division of a public company, so these assets have very little visibility today, and we are actually now in a quiet period, so I can't talk to you about details. I think once the marketplace understands these assets, understands our ability to execute on the vision, the market will recognize that asset potential here. And I'd turn the question around and say that some of those other stocks may have had their run, and that means we're probably a better value.
TMF: What about not in terms of stock performance, but in terms of customers and the market. Do you think that you're playing catch-up to Yahoo! and Lycos?
Motro: I think in the sports area, they're playing catch-up [to Infoseek]; in the news area they're playing catch-up. I think in the kids area, they're playing catch-up, and I think in the family area, they're playing catch-up. I've never met a person who's not passionate about kids, news, sports, and family. And in the entertainment area, they're playing catch-up. In the broadband area, they're playing massive catch-up, and in the theme park area, they're playing catch-up; in the movie area, they're playing catch-up; in the television area, they're playing catch-up; in the portal area and search, they're playing catch-up. A lot of our sections are playing catch-up, and in some areas we're playing catch-up. I think it's going to be a really interesting game.
TMF: Which areas do you think are ones that go.com needs to beef up?
"Some of those other stocks may have had their run, and that means we're probably a better value."
Motro: We are working on beefing up a lot of our different sections. We've got a ton of upcoming activity in the commerce area. I think commerce is the least inventive of everything on the Internet. We're all starting to do that. One thing that we got out of the transaction [with Disney] is the [Disney] catalog, which has the ability to pick, pack and ship. The warehouse is doing $150 million a year; it can do $400 million a year of capacity. It's another area where Yahoo! has to catch up -- they don't have that kind of asset. I think they'll be aggressive; they're good competitors. So let's have the battle. It's not like they've won any kind of war. It's like we're all running a marathon without even having crossed mile number one. And we're upping the bets, and let's let the better man win.
TMF: You were talking about moving more into e-commerce. Does that mean you'll be competing more directly against, say, an Amazon.com (Nasdaq: AMZN)?
Motro: Well, the problem that Amazon has, and, in fact, a lot of their competitors have, they're selling commodity merchandise, and the only way to differentiate is price. Let me tell you, I've got a set of products that are proprietary. There's over $20 billion worth of Disney products sold every year. Why aren't people buying that on the Internet? Well, some are already at Disney.com. The margins on proprietary goods are much better than commodity goods. I can be in the commerce business without competing head-on in the commodity area.
TMF: So maybe you wouldn't directly sell, say, books?
Motro: Well, we do that now at go.shop. We help people choose from other vendors, and we add value as a trusted place to compare prices and sources, and weigh other factors in the purchase decision. But what we've got the opportunity to do here is to say, "Oh, by the way, if you want to get an engraved Winnie the Pooh..." Hey, that's pretty cool. Or a Pooh Gram. Or a Disney doll customized. We can do things that nobody else can do.
TMF: What do you think about auctions? It seems everyone's getting into it.
"Infoseek's part of GO Network. Infoseek doesn't go away."
Motro: We're getting into auctions as well, but, again, this is where we built this auction platform, this world-class commerce platform. Let's think for a second about what some of the top auction areas are. Well, trading cards is a huge area of auctions -- sports trading cards, actually. Who has more sports nuts than anybody in the world?
Motro: ESPN. Thank you, very good. What is one of the biggest collectible items on the Internet period? There's a whole movement out there called Disneyana -- it's not even sponsored by Disney -- where they have multiple conventions throughout the U.S., where people collect Disney stuff. Who can create Disney collectibles at will? The Walt Disney Co. That's where they can put what I call the magic on top -- Tinkerbell with her magic wand -- and add sparkle and color to a lot of different commodity areas that our competitors may have.
TMF: Disney's definitely a global brand. Will go.com push harder, more aggressively overseas?
Motro: It already has. They're doing very well in Germany and Japan. We've got Infoseek in 11 different languages. The Disney brand is everywhere, and their national properties we bought are already in 23 different countries in licensing and advertising revenues, and this is a way for us to trump some of our competitors' moves on the international arena. It's a pretty compelling story.
TMF: Is there anything else you'd like to add?
Motro: No, because you've asked all of the wonderful questions.
TMF: Thank you. Thanks for your time.
Motro: My pleasure.
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