FOOL ON THE HILL
Wall Street funded a lot of dumb dot-com ideas that turned into dot-bombs, but some companies operating in sectors that are a natural fit with the Internet have actually fulfilled the promise of online commerce. TMP Worldwide, Expedia, Travelocity, and Homestore.com are just some of the companies that are thriving despite a downbeat economy.
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The days when monthly traffic numbers from Jupiter Media Metrix (Nasdaq: JMXI) had Wall Street waiting with bated breath are over. One might say while rolling their eyes, "That's so 1999." We've all learned that, yes, website visitors are important to success in the world of online businesses, but shareholder value also won't come unless traffic is combined with a viable business model. In the last couple issues of Internet Report, we have focused on sectors of the Internet economy -- job search, travel booking, and real-estate information -- that have bucked the overall trend and hit paydirt online. Most of the companies we've focused on in these sectors are profitable and cash flow positive (or should be soon), and none of our focus companies are about to give up the ghost. In those sectors of the Internet where multiple companies have found success, Media Metrix visitor traffic numbers still mean something. Let's take a look at three of those sectors, who leads them, and how the newly released traffic figures from June indicate who is winning the battle for position. Career sector -- June, 2001 Back in the April issue of Internet Report, we said: "There is no doubt who the monster is in the online career marketplace." That statement still holds true today as Monster.com, owned and operated by TMP Worldwide (Nasdaq: TMPW), continues to have a stranglehold on the online career category. When its recently announced acquisition of HotJobs.com (Nasdaq: HOTJ) is complete, its leadership position will be cemented even further. It's also interesting to note that Headhunter.net (Nasdaq: HHNT), the only other public company in the top five of the sector, is making some interesting headway, especially with page views per visitor. (Just getting a visitor to a site is one thing -- getting them to actually look around and use a service is another.) Either way, it is still going to be an uphill battle for anyone to topple TMP Worldwide from its perch in the online jobs sector, and the highly profitable company is as attractive as it has ever been. Travel sector -- June, 2001 Though Mapquest is clearly the traffic leader in the online travel sector, we did not focus on the site in the recent Internet Report since it is but a minor part of the content empire of AOL Time Warner (NYSE: AOL). We did, however, take a closer look at Expedia (Nasdaq: EXPE) and Travelocity (Nasdaq: TVLY), the twin towers of online travel booking. Both companies are now profitable and duking it out for the lead among the sites that allow Internet users to make travel arrangements online (Travelocity announced this weekend that it is opening its third customer-service center). The companies were neck-and-neck when we wrote about them in the June issue, and they remain in what amounts to a tie today. Given their earlier-than-expected breakthroughs to profitability, both are worthy of investment consideration. That said, both companies must also deal a new force in the sector: Orbitz.com. Though it just barely missed cracking the top five in the sector, it's still interesting to note that the newly opened, airline-run site was able to attract 3.8 million unique visitors in June as well as 14.2 page views per visitor. To go inside a month from essentially nothing to these kinds of figures shows that Orbitz is indeed a force to be reckoned with. Real-estate sector -- June, 2001 In our just-released issue of Internet Report, we looked at the online real-estate market and the companies that are using the Internet to make finding a house and a mortgage easier. While one of our focus companies, LendingTree (Nasdaq: TREE), remains a niche player in the overall online lending market, our other focus company -- Homestore.com (Nasdaq: HOMS) -- appears to be pulling away from the pack. Microsoft's (Nasdaq: MSFT) HomeAdvisor is certainly a solid offering within the online real-estate space. But today, Homestore.com dominates and has positioning that will be difficult to beat. Homestore.com not only owns its namesake site, but it also operates realtor.com thanks to its cozy and exclusive relationship with the National Association of Realtors. Quite simply, Homestore.com operates the largest conglomerate of real estate-related sites and has the most property listings online. The largest collection of listings attract the most potential buyers, and the relatively hefty amount of traffic Homestore generates is highly attractive for those real-estate professionals trying to sell homes and generate sales leads. Homestore.com was also profitable on a pro forma basis in the first quarter, and the company is expected to be profitable for the foreseeable future as revenue grows at a much higher rate than costs. Though the stock has a fairly high valuation with a market capitalization in excess of $3 billion, it is still well worth considering at these levels given its prime positioning and its potential to explosively grow its cash flow in the coming years. Three sectors, four leaders Wall Street funded a lot of dumb dot-com ideas that turned into dot-bombs, but believe it or not, some companies have actually fulfilled the promise of online commerce. TMP Worldwide, Expedia, Travelocity, and Homestore.com are just some of the companies that are thriving even in today's depressed economic environment. Paul Larson found his current home using realtor.com. You can see Paul's stock holdings online. The Motley Fool is investors writing for investors.Site UVs (millions) Avg. PVs/Visitor
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Monster.com 5.2 34.8
JobsOnline 4.6 4.4
CareerBuilder Network 4.0 5.4
HotJobs.com 4.0 7.5
Headhunter.net 2.4 14.7
Source: Media Metrix
UVs = Unique Visitors
PVs = Page ViewsSite UVs (millions) Avg. PVs/Visitor
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Mapquest 12.1 8.9
Expedia 7.9 11.6
Travelocity 7.8 15.4
American Express 7.0 12.8
AA.com 3.8 4.6
Source: Media Metrix
Site UVs (millions) Avg. PVs/Visitor
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Homestore Sites 3.8 4.0
Realtor.com 3.2 26.3
HomeAdvisor 2.9 8.6
Homestore Apartments 1.4 11.1
MonsterMoving 1.1 3.8
Source: Media Metrix
Finding a job, booking a flight, and doing preliminary real-estate research are all much easier and more efficient on the Internet than they used to be. The companies that provide these services online have added a great deal of value for Internet users, and they are now starting to provide positive value for their shareholders. This value proposition for investors should only accelerate over time.
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