About.com Looking to the North

By Dave Marino-Nachison (TMF Braden)
December 7, 1999

Ah, the excitement of the Internet's vast reaches. Today I thought I'd try something new, so I headed over to About.com's (Nasdaq: BOUT) main page, a site I'd never visited before. Noting a hyperlink tagged in Lewis Carroll-like fashion with the words "Surprise Me," I held my breath, clicked, and held on to my seat as the flow of the information river carried me to the fascinating world of...urology.

OK, so maybe that's not quite what I was looking for -- though I suppose most of the visitors to About.com aren't looking for quite the same sort of adventure I was.

That's because people generally visit About.com with a question in mind. About.com is organized vertically, meaning a searching of the site on a specific topic -- hobbies, for example -- will take you to a tightly organized page with a wide range of hobby-related links. Heading from the hobby home page to, let's say, cartooning, takes you to an area maintained by cartoonist and designer Peter Oakley. From there it's a take-your-pick of sites, shopping, chat, and other options.

Though it's not really a perfect comparison, investors looking for further perspective on the notion of vertically organized Web content might want to click here for an Oct. 1 StockTalk interview with the CEO of Internet.com (Nasdaq: INTM), which operates a network of business-to-business news, information, interaction, and commerce sites devoted to the Internet and plugged-in professionals.

The idea is that by organizing content into specifically themed, individually managed areas -- About.com has hundreds of human being-"guided" topical sites divided among 18 categories -- not only will the user's experience improve, but the opportunity to lure specific advertisers and thus, the story goes, command higher ad rates will emerge. The Motley Fool, I discovered while searching the site, has partnered with About.com on its finance channel.

In that sense, About.com bridges the gap between tightly focused sites like Internet.com -- where the main page is essentially an afterthought -- and world-encompassing sites such as Rule Maker Yahoo! (Nasdaq: YHOO) because of About.com's combined use of a portal-like interface and hand-picked content.

Are investors behind the idea? Since falling into the mid-20s in August following a dizzying post-IPO run-up, the shares have crept steadily upward as the company's advertising campaign has raised awareness. Strong third-quarter revenue and gross profit growth have boosted optimism. The company has Media Metrix (Nasdaq: MMXI) user metering data working in its favor, and an Oct. 29 stock offering helped refill the cash coffers.

The stock rose more than 10% today following the news that the company bought North Sky Inc., a website development tools and hosting company, for 500,000 shares of About.com stock -- or about $21 million based on last night's closing price -- in a move the company hopes will add not only a few million page views but a new line of business developing Internet services for Web masters and businesses.

Of course, valuing About.com isn't as easy as finding information about urology. Research reports I've read basically seem to be taking Yahoo!'s operating margins, trimming them back a bit, then applying them to revenue estimates, taking out taxes, and finally using a "peer group" multiple to come up with a share price target. That, or something similar, seems like a pretty common method for analyzing Internet companies these days up there on Wall Street.

And if that's good enough for you, About.com might be worth a speculative buy or at least some speculative research. Though it's far from profitable, as long as it can keep coming up with cash and content, the site's format sets it apart from its in-the-red cousins Lycos (Nasdaq: LCOS) and Ask Jeeves (Nasdaq: ASKJ), among others, on the search side, and a virtual army on the content side.

Related Links:
About.com
About.com Message Board
Your About.com Guide To Urology
StockTalk, 10/1/99, Internet.com

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