<THE RULE MAKER PORTFOLIO>

Destination Yahoo!

By Rob Landley (TMF Oak)

AUSTIN, TX (June 4, 1999) -- All week, we've been taking you on tours of company home pages. One of the companies in this portfolio, Yahoo! (Nasdaq: YHOO), doesn't just have a website; it is a website. At www.yahoo.com, Yahoo! started life as the first Internet search engine, and has successfully leveraged that beginning into a mega-site that doesn't just direct people to interesting content on the Internet, but in fact contains quite a bit of its own. This is fortunate, because its search engine, itself, is under attack from all sides.

Yahoo!'s human-sorted search categories remain a unique offering in the search engine world, a sort of Internet librarian that reads Web pages and can point you to a few that may be what you're looking for. But the labor-intensive nature of this business can cause problems scaling up to the ever-increasing size of the Internet, and is inherently expensive and time-consuming as well. A dozen other companies, including Lycos, Excite, Infoseek, and Altavista, have all been trying hard to develop cheaper, faster, fully-automated Internet searching techniques that can match human judgment. The results were initially laughable, but it is possible to mine human judgment from the seething mass of the Internet. I know this because I finally found a search engine that does it.

My first choice these days when trying to find something on the Internet is a tiny little site called Google. Google prioritizes search results by how many other pages it has found that link to the page in question, and thus can roughly judge how important or authoritative the rest of the people making up the Internet consider that page to be. The results have been consistently good enough to make me switch. Other search engines have similarly improved their automatic searching techniques (often hiring a few librarians themselves) to the point where Yahoo!'s searches have, at times, lagged behind.

That said, I'm still bullish on Yahoo! for several reasons. It was on the Internet first and has an established and trusted brand name. So, the fact that its search engine finally has decent competition doesn't put it out of the running. It has an impressive technical infrastructure that has scaled well to a growing Internet, and even with today's traffic, it brings up pages rapidly without making fickle users wait for their results. But most importantly, Yahoo! long ago ceased to be mainly a search engine, so even if that gold mine were to dry up, it has plenty of others.

Yahoo!'s recent purchase of free Web page pioneer GeoCities was just one more step in the steady diversification of the company beyond just being a portal to other people's content. Although Microsoft beat it to the purchase of free e-mail address pioneer Hotmail, Yahoo! Mail is quite a force in the free e-mail world in its own right. Yahoo! Auctions competes head-on with eBay and Amazon in auctions. Yahoo! Messenger competes with AOL's Instant Messenger service. Yahoo! Travel can book an entire vacation. Yahoo's excellent technical infrastructure and strong brand name allow it to compete vigorously with almost any content hosting service out there.

One service that Yahoo! hosts which I believe deserves special mention is Yahoo! Finance. Yahoo's free stock information is my first stop when researching a stock, and their news about each stock is comprehensive and up-to-the-minute. With their rapid response times and the ability to type in more than one stock symbol per query (and then bookmark that query), I've never found a need to register and create a portfolio. And although they don't attempt to educate individual investors beyond providing research materials, and their message boards often have a distinct day-trading tilt, they're clearly an ally in The Fool's ongoing quest to educate, amuse, and enrich the general public.

Yahoo!'s strength at categorizing incoming information comes in handy to filter news feeds from the AP and Reuters news wires (as well as dozens of other online information sources) into topic groups, such as the stock related news I just mentioned. While it doesn't have the polish of CNN.com, Yahoo! News has far more depth and variety of information and is a great one-stop place to find all the latest stories. In covering specialized topics like the recently resumed Microsoft antitrust trial, notice that Yahoo! will happily link to external content from other news sites or online magazines. Yahoo! isn't writing any articles, but rather is sticking to its strengths and acting as a search engine and conglomerator of recent news from whichever sites have interesting, timely, and reliable information.

Yahoo! can also be used as a search engine for the phone book, providing phone numbers through its People Search and Yellow Pages. You can search the planet's surface with Yahoo! Maps and even get driving directions from place to place. Yahoo! also provides sports scores, weather reports, and television listings. It doesn't just provide pointers to other people's Web pages anymore; it provides all kinds of information.

Yahoo! is also good at getting personal. My Yahoo! allows users who wish to create a free account to put together a personalized page of information that the user chooses. This account can also be used to set up an appointment calendar through calendar.yahoo.com, or to compete against other users at chess, bridge, fantasy football, and more in games.yahoo.com. Talk in real time through chat.yahoo.com, or post to message boards at messages.yahoo.com. (As a sidenote, you can see that Yahoo! keeps its URLs short, sweet, intuitive, and most importantly, memorable.)

Yahoo! even has local sites, like austin.yahoo.com (the local metro page for Austin, Texas), serving geographical regions with local content. Or, you can do a geographical region search on their other sites like Yahoo! Classifieds or Yahoo! Personals (which has so far disappointed this single 27-year old male, but then again most supermodels with doctorates and Pulitzer prizes probably don't have time to surf the Internet).

The frightening part is that I've only scratched the surface of what Yahoo has to offer, and more is appearing all the time. Yahoo! sprinted ahead of the competition early on, and has more resources and experience to do whatever it wants to do, and do it faster and better than its competition. If Yahoo! focused on offering dial-up Internet access, they'd be head-on competition for America Online. Even today, when someone unfamiliar with the Internet asks me how to get started, I sit them down at a browser and teach them how to call up Yahoo!. Yahoo! can generally take it from there.

We hope you've enjoyed this week's website tours. Next week, we'll be discussing our favorite message board threads.

In the meantime, be sure to come by the Rule Maker Companies board (linked below), where we now have over 80 individual companies ranked. A Foolish thank you to everyone who has posted their work -- you are what makes the Motley Fool special. Here's a link to the master list of rankings.

Finally, if you'd like to have the Rule Maker report sent to your e-mail box each night, sign up for Motley Fool Direct.

Have a great weekend!

- Oak

06/04/99 Close

Stock Change    Bid
AXP   +3 5/8    125.25
CHV     ---      91.56
CSCO  +6 1/16   114.88
EK    +  5/8     68.00
GM    -1 1/16    68.38
GPS   +1 7/8     67.75
INTC  +2 11/16   53.19
KO    +  13/16   69.75
MSFT  +3 3/16    79.56
PFE   +6 5/8    115.13
SGP   +2 3/4     48.88
TROW  -  29/32   36.84
XON   +  3/4     80.69
YHOO  +12 1/16  147.44

                  Day     Month  Year    History
        R-MAKER  +3.44%   2.32%   7.13%  35.55%
        S&P:     +2.17%   1.99%   8.33%  34.02%
        NASDAQ:  +3.12%   0.32%  13.03%  49.94%

Rule Maker Stocks

    Rec'd    #  Security     In At       Now    Change
    2/3/98   48 Microsoft     39.13     79.56   103.31%
    5/1/98   55 Gap Inc.      34.37     67.75    97.12%
   6/23/98   34 Cisco Syst    58.41    114.88    96.67%
    2/3/98   22 Pfizer        82.30    115.13    39.89%
   2/13/98   44 Intel         42.34     53.19    25.63%
   5/26/98   18 AmExpress    104.07    125.25    20.36%
   2/17/99   16 Yahoo Inc.   126.31    147.44    16.73%
    2/6/98   56 T. Rowe Pr    33.67     36.84     9.42%
   8/21/98   44 Schering-P    47.99     48.88     1.84%
   2/27/98   27 Coca-Cola     69.11     69.75     0.93%

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   20 Exxon         64.34     80.69    25.42%
   3/12/98   15 Chevron       83.34     91.56     9.86%
   3/12/98   20 Eastman Ko    63.15     68.00     7.68%
   3/12/98   17 General Mo    72.41     68.38    -5.57%

Rule Maker Stocks

    Rec'd    #  Security     In At     Value    Change
    2/3/98   48 Microsoft   1878.45   3819.00  $1940.55
   6/23/98   34 Cisco Syst  1985.95   3905.75  $1919.80
    5/1/98   55 Gap Inc.    1890.33   3726.25  $1835.92
    2/3/98   22 Pfizer      1810.58   2532.75   $722.17
   2/13/98   44 Intel       1862.83   2340.25   $477.42
   5/26/98   18 AmExpress   1873.20   2254.50   $381.30
   2/17/99   16 Yahoo Inc.  2020.95   2359.00   $338.05
    2/6/98   56 T. Rowe Pr  1885.70   2063.25   $177.55
   8/21/98   44 Schering-P   2111.7   2150.50    $38.80
   2/27/98   27 Coca-Cola   1865.89   1883.25    $17.36

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   20 Exxon       1286.70   1613.75   $327.05
   3/12/98   15 Chevron     1250.14   1373.44   $123.30
   3/12/98   20 Eastman Ko  1262.95   1360.00    $97.05
   3/12/98   17 General Mo  1230.89   1162.38   -$68.52

                              CASH     $70.09
                             TOTAL  $32614.15

Note: The Rule Maker Portfolio began with $20,000 on February 2, 1998, and it adds $2,000 in cash (which is soon invested in stocks) every six months.

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