Go to Jeff Salisbury LWGate Home Page.From: Sam Funchess <sam5@mindspring.com>
Subject: Re: [CANSLIM] Yahoo in trouble or wising up?
Date: Wed, 03 Jul 2002 11:55:25 -0400
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I have a very small position in YHOO and have had it since 1998 or before.
I have actually thought about lumping a large portion of my cash into it
for the long haul as I think the internet is the way of the future.
We are still dealing with the last mile issue and this should be fixed
over the next 5 years is my speculation. What recently made me think
of lumping some long term capital into the company was when I was bored
and clicked a music video link on YHOO's home page and had streaming videos
right to me. The best part was that the videos just kept coming.
Same genre that I had selected with no interruption. Just think of the
capabilities of such a product. Better than radio in the sense that
you have video and better than TV because you can really narrow your audience
to the Nth degree for very little additional costs. The very targeted
advertising that could be directed to viewers based on music selections
would be ideal from an advertisers point of view. Think of the costs
versus a traditional media company. The capital costs required to
own the "programing" to the end customer is greatly reduced because you
don't have to have affiliate locations in each city you service, just one
location (of course multiple for back up purposes) to serve the entire
world. Since you own the entire program to the end user, you are
able to pick up the entire revenue stream. Traditional TV advertising
are broken down into National advertising which the parent company receives
and the local advertising which the affiliate gets. (There are more
details to the revenue sharing but that is the basic as I understand it)
Think of combining these revenue streams with less costs. This goes
beyond TV and Radio because it is both yet neither.
<p>Given broadband is a requirement for this application. The cable
companies appear to have the most cost effective last mile option available
at this time. I have Road Runner through Mindspring/Earthlink and
would also die if they took it away from me. The quality of the videos
was poor but I imaging that is due to the compression that must occur so
that the transmission is bearable on a dial up. There is no medium
that I am aware of that offers the potential that the Internet does.
I believe that wireless has a lot of opportunity but not nearly as large
as the Internet. The wireless options will continue to charge by
the minute for the next several years instead of the flat fee per month
that land lines offer. This will be a limitation. I think the
advertising via cell phones is a far fetch from reality. I am going
to start getting angry if my cell phone rings because Starbucks is on the
next block and they sent me an advertisement because they just wanted to
make sure that I knew it was there. If they don't ring me how will
I know? I will not be looking at my cell phone waiting for advertisements
to scroll by. Sure, make the cell phones have access to the Internet
so that you can search for the Starbucks nearest you, well your back to
the Internet. The cell phone companies will still have to charge
you a per-minute charge for the service.
<p>It will take YHOO some time to figure out all of its revenue possibilities
and then exploit them, but I feel it will come. Time Warner is also
placed very well to benefit from the Internet. They have the content
and the delivery option of choice. However, they are a large old
company that will have a hard time letting the other business units die
in the face of the new opportunities that lay before them.
<br><br>
Just my kernels of infinite stupidity.<br>
<br>
Sam
<p>Duke Miller wrote:
<blockquote TYPE=CITE><style></style>
<span class=093355114-03072002><font face="Arial">Katherine:</font></span><span class=093355114-03072002></span><span class=093355114-03072002><font face="Arial">Interesting
comments. </font></span><span class=093355114-03072002></span><span class=093355114-03072002><font face="Arial">Which
makes me wonder why I feel the way I do about broadband, to wit:
If somebody took my cable modem away from me I'd feel like both my hands
were tied behind my back and my oxygen cut off. Of course, I am expensing
the $44.50 a month Time-Warner is nailing me for! Maybe it will travel
the way the Cell Phone and most other technologies. I remember when
I used to pay 40 cents a minute for calls on those 3-pound Motorola phones!
And, oh those roaming charges!</font></span><span class=093355114-03072002></span><span class=093355114-03072002><font face="Arial">Duke</font></span>
<blockquote dir=ltr style="MARGIN-RIGHT: 0px">
<div class="OutlookMessageHeader" lang="en-us" dir="ltr"><font face="Tahoma"><font size=-1>-----Original
Message-----</font></font>
<br><font face="Tahoma"><font size=-1><b>From:</b> owner-canslim@lists.xmission.com
[<A HREF="mailto:owner-canslim@lists.xmission.com">mailto:owner-canslim@lists.xmission.com</A>] <b>On Behalf Of </b>Katherine
Malm</font></font>
<br><font face="Tahoma"><font size=-1><b>Sent:</b> Wednesday, July 03,
2002 10:26 AM</font></font>
<br><font face="Tahoma"><font size=-1><b>To:</b> canslim@lists.xmission.com</font></font>
<br><font face="Tahoma"><font size=-1><b>Subject:</b> Re: [CANSLIM] Yahoo
in trouble or wising up?</font></font>
<br> </div>
Kelly, Interesting you should bring up Yahoo, as there was a very
good article on the failure of Broadband Internet and reference to Yahoo
at yesterday's Briefing.com. From a CANSLIM perspective, I think it's an
important one, as it shows that the technology direction that everybody
was betting on may not come to fruition. I'm even inclined to mark it off
my macrotheme list altogether. Up to now, I've been watching for signs
of the ultimate broadband "killer app" , and technology and/or legislation
which would solve the last mile problem. Turns out it may just not be something
we'll need to monitor for some time to come. Darn, guess I'll have to do
some more studying on immerging technologies....but then again, maybe I'll
just go take a swim.... Katherine PS Article pasted after Kelly's
message....
<div style="FONT: 10pt arial">----- Original Message -----</div>
<div
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><b>From:</b>
<a href="mailto:kelly.short@neoris.com" title="kelly.short@neoris.com">Kelly
Short</a></div>
<div style="FONT: 10pt arial"><b>To:</b> <a href="mailto:canslim@lists.xmission.com" title="canslim@lists.xmission.com">canslim@lists.xmission.com</a></div>
<div style="FONT: 10pt arial"><b>Sent:</b> Wednesday, July 03, 2002 9:14
AM</div>
<div style="FONT: 10pt arial"><b>Subject:</b> [CANSLIM] Yahoo in trouble
or wising up?</div>
<span class=899491014-03072002><font face="Arial"><font color="#0000FF"><font size=-1>Yahoo
has recently ejected their streaming financial tv/internet service ("the
only one of its kind"? hello Bloomberg) and now Ziff-Davis is pulling Yahoo
Internet Life. Is Yahoo in trouble, ejecting dogs, or are they wising up
and returning to their roots? (Sergey Brin, cofounder of Google, calls
it "their biggest mistake" straying from a search engine).</font></font></font></span><span class=899491014-03072002></span><span class=899491014-03072002><font face="Arial"><font color="#0000FF"><font size=-1>today's
article on Internet Life: <a href="http://cbs.marketwatch.com/news/story.asp?guid=%7BEC1E19EB%2D6ECE%2D404B%2DB521%2D849F9797C744%7D&siteid=mktw">http://cbs.marketwatch.com/news/story.asp?guid=%7BEC1E19EB%2D6ECE%2D404B%2DB521%2D849F9797C744%7D&siteid=mktw</a></font></font></font></span><span class=899491014-03072002></span><span class=899491014-03072002><font face="Arial"><font color="#0000FF"><font size=-1>Kelly</font></font></font></span><span class=899491014-03072002></span><span class=899491014-03072002><font face="Arial"><font color="#0000FF"><font size=-1>===</font></font></font></span><span class=899491014-03072002></span><span class=899491014-03072002>
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<td class="header">Broadband's Failure - The Real Reason</td>
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<td><b><font face="Verdana"><font size=-2>02-Jul-02 09:20 ET</font></font></b></td>
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<td>[BRIEFING.COM - Robert V. Green] Last week, Yahoo announced that they
were shutting down their broadband product lines that create original content,
including Yahoo! FinanceVision and Yahoo! Radio. Herein lies a key, simple
explanation as to why broadband has been slow to be adopted - and why broadband
will not revive the technology vendors.
<h3>
Why Broadband Is Important</h3>
Broadband technology was widely viewed as the next wave of the great internet
buildout. Internet I, as it was called, was the textual internet. Internet
II was viewed as the visual internet.
<p>As late as 1999, the internet II was viewed as the next phase which
would take the internet revolution, and stock market boom, to even higher
heights. The internet infrastructure would have to be doubled, benefitting
every level of network supplier, including: Cisco, JDS Uniphase, Exodus
Communications, etc.
<p>Even the collapse of the textual internet dot-com companies did not
deter some investors from believing in the internet II broadband vision.
The AOL/Time-Warner merger was supposed to the king of the new broadband
era. But that never happened.
<p>In fact, many <i>still </i>view broadband - meaning streaming video
and audio - as the great technology white-horse that could rescue the technology
industry from its current slump.
<p>And it isn't going to happen. At least, not in the foreseeable future.
<h3>
The Real Problem</h3>
Broadband video applications failed because of one simple reason:
<blockquote><i>You can't watch TV at work.</i></blockquote>
Face it, the vast number of internet users are using the internet <i>at
work,</i> instead of working. And broadband video is essentially the same
as TV.
<p>Certainly on-line brokerage accounts owed their great emergence to one
simple fact: you could finally trade stocks at work.
<p>Online trading software existed before the internet came along, but
it was largely considered a colossal failure. FOX (Fidelity Online Exchange)
software, manufactured by Meca Software (now defunct) was a huge disaster
in the early nineties. Why? Because you couldn't use this software at work.
It required that you dial-in, on a modem, to the system. Office PCs didn't
easily have this capability.
<p>When the internet came along, access to online trading was simple. Internet
access, especially in the beginning, was completely open. <i>Anyone </i>could
trade. Instead of calling your broker (which others in the office would
be able to hear), you could enter a trade - <i>and it would look like you
were working.</i> Not only that, but it was cheaper than a trade from even
a discount broker.
<p>Online trading, and all of the associated internet activities with it,
boomed. Internet trading made an existing task easier and cheaper: <i>online
trading</i> <i>liquifiedthe market</i> for market transactions.
<p>The applications which were successful on the internet during Internet
I days all had the following aspect in common: they liquified an existing
trait or business. Chat rooms liquified water cooler talk. Email liquified
phone calls. Instant messaging liquified email.
<p>But broadband video doesn't liquify anything, especially in the business
arena.
<p><i>Yahoo! FinanceVision failed because it is neither cheaper nor easier
than watching CNBC and most offices don't watch CNBC anyways!</i> Because
of this, no one was willing to pay for it.
<h3>
The Future For Business Broadband</h3>
So if broadband is to succeed in the business market, it needs to liquify
an existing business function.
<p>At the moment, teleconferencing is the most likely business event to
be liquified by broadband video.
<p>However, here, audio already works remarkably well, and the price has
been continually dropping. Audio conference meetings are becoming more
popular and more frequent. Broadband audio conferencing stand little chance
of replacing the audio teleconference.
<p>Webcasting of conference calls, now widespread, does not replace ordinary
teleconferencing, although it has reduced dial-up 1-800 costs. However,
those costs are replaced by the costs of providing the webcast service.
<p>Technologies such as webconferencing (Webex or Interwise, for example)
are growing in popularity. These allow a company to present Powerpoint
presentations or multi-media presentations over the internet. These services
<i>liquify a sales call. </i>They probably have strong futures.
<p>But the webconferencing technologies all work well with existing internet
infrastructure. Even rapid growth in webconferencing will not provide a
strong driver to building out the "internet II" network, with the anticipated
benefits to Cisco, Juniper Networks, Sycamore, etc. Webconferencing services
work well with today's infrastructure.
<p>Other than webconferencing, what existing business function does broadband
replace, at lower and easier costs? If you cannot provide an answer, broadband
cannot be viewed as a dramatic driver of the internet infrastructure.
<h3>
The Future For Consumer Broadband</h3>
Consumer broadband prospects are even fuzzier.
<p>The truth is that broadband simply costs too much for much home markets.
Most people use the internet primarily for email and instant messaging.
AOL has about half of the consumer market - and that's what they think
the internet is - email and IM.
<p>TV rules the video entertainment market. Broadband internet video is
neither cheaper (it is often more expensive than cable) nor easier (the
remote control beats keyboard/mouse easily) than TV. Until it is, broadband
will not dethrone TV as the video device of choice.
<p>To make matters even worse, content for broadband video is significantly
worse than for TV, because the best TV content has been syndicated to TV,
not the web.
<p>Pornography is the only significant broadband service. <i>It provides
pay-per-view video</i> and is a lot easier, and more private, than going
to the XXX video store. Quality of video does not matter. Broadband pornography
liquifies the existing porno market.
<p>But there is nothing on broadband today that liquifies the home video
entertainment market. In fact, there is a lot working against broadband:
TiVo and DVD subscription services are just two major drivers.
<p>Until broadband, internet-based on-demand-video gets linked to the TV,
and not the PC, broadband will not have significant penetration difficulties
in the consumer market.
<h3>
The Implications</h3>
For those of you thinking "Great - why didn't you tell me earlier" we did.
Any frequent reader of our Stock Briefs knows that we have long been discussing
this. We became luke-warm on the "internet II" idea years ago:
<ul>
<li>
<a href="http://www.briefing.com/scripts/sub/stocks/PowerAnchor.asp?varArticleID=SB20001023075800rvgreen" target="NEW">23-Oct-00
The Broadband Future Gets Fuzzy </a></li>
<li>
<a href="http://www.briefing.com/scripts/sub/stocks/PowerAnchor.asp?varArticleID=SB20001127082353rvgreen" target="_NEW">27-Nov-00
The Internet: What We've Learned</a> </li>
</ul>
If you are still waiting for broadband - Internet II as it is called -
to rescue the tech sector - forget it. You need to develop another premise
for a major driver of technology stocks. (Good luck - we haven't been able
to.)
<p>Broadband applications are likely to continue to develop, but slowly,
and not be a major driver of the overall technology market and certainly
not be a major driver of continued internet buildout.
<p>Unlike cable TV or satellite TV, both of which took their markets by
storm, broadband video is still looking for the key element that would
make it a bull market: <i>liquifying an existing market. </i>Until that
happens, broadband applications are likely to continue to struggle to find
meaningful markets.
<p>Yahoo! found this out the hard way with Yahoo FinanceVision and Yahoo
Radio.
<p>Comments may be emailed to the author, Robert V. Green, at <a href="mailto:rvgreen@briefing.com">rvgreen@briefing.com</a></td>
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