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© 2000

Go2Net-Infospace Synergies Little Understood

TRAFFICK WEEKLY COMMENTARY by Andrew Goodman - July 31, 2000

This week's top story is the announced merger of Go2Net (GNET), a second-tier consumer portal company, with Infospace (INSP), a provider of Internet and wireless infrastructure services. Continued weakness in the market for tech stocks has exaggerated the decline of Infospace stock in the wake of the announcement. If the merger is approved, it marks a significant turning point for Go2Net, which has taken several quantum leaps forward in its short history since going public unconventionally as a small-cap NASDAQ company in 1996.

Horowitz led remarkable Go2Net growth
Under the leadership of youthful chairman and founder Russell Horowitz, Go2Net acquired some winning properties almost entirely for stock: Metacrawler, Silicon Investor, Hypermart, An enormous turning point following the move into an upscale office space in Seattle (Horowitz negotiated a good price) was a large equity investment from Microsoft billionaire Paul Allen's Vulcan Ventures, which saw Go2Net's content, technology, and talent as a good fit with Allen's plans for a broadband empire (Allen's Charter Communications went public this year).
According to a Seattle Times story, Horowitz and Infospace chairman and founder Naveen Jain have informally talked about a merger for a couple of years.
The Seattle Times story adds:
"Horowitz visited Jain again about a month ago and was introduced to [Arun] Sarin, the recently arrived InfoSpace CEO.
"(Horowitz) gave me a thumbnail sketch of Go2Net, and I said, `Wow, wouldn't it be great if the companies were together,' " Sarin said. "On my way to the airport, I called Naveen [Jain, Infospace founder] and said don't let him go. Do the deal now."

"Arun is to blame," joked Jain. "

Horowitz stays on as vice chairman and President; Sarin will be vice chairman and CEO.

The merger with Infospace would be another major chapter in the amazing Go2Net growth story.

Infospace makes content delivery seamless
Infospace is a major player on the Internet infrastructure scene, but also seems poorly understood. It made early strides as a provider and technical "delivery system" of the underlying information - weather, finance, local information, maps, and so on - that makes major web information providers, from AOL on down, tick. It's not just about the content itself, but also about providing services and technologies that keep the content humming properly in different environments.

Increasingly, that environment has been wireless. Infospace is trying to make its mark as a company that can deliver content to handheld and WAP-enabled devices just as easily as to regular Internet-connected terminals. The technical requirements of this would seem to require ongoing development, consulting, and service. To master these areas, Infospace has made several strategic acquisitions, including some companies that really seem hotter and more fundamental than Infospace itself ever was at a similar stage of development, including Saraide , a cutting-edge wireless content delivery powerhouse. Infospace currently has major partnerships with wireless companies around the globe, including Verizon and AT&T Wireless.

Many would argue that Go2Net is a better company than Infospace, due to the wide variety of profit centers it has amassed, its access to Paul Allen's vision and capital, and its various strategic investments in emerging technologies and interactive tools.

Go2Net was never fully a portal, but it is certainly a healthy business perhaps best likened to a holding company comprised of various thriving businesses. As such, it offers a lot of value to an acquirer. The fact that Infospace stock plunged on news of the deal may be an indication that Go2Net is little-understood. Anyone who has watched the Go2Net management team in action knows that they combine business sense and a careful approach to strategy and acquisitions with the all-important willingness to plunge into emerging business niches with both feet.

The merger's synergies are being questioned by analysts, and probably rightly so. Then again, many great companies such as Qualcomm, IBM, Motorola, HP, and even Microsoft don't always find the synergies they're looking for in every deal, but since size matters, there is something to be said for owning a diversity of properties, many of which are at the cutting edge of tomorrow's wired existence, and many of which are becoming profit centers in the here and now.
Was this Go2Net's destiny?
One of the most interesting things about this is that Go2Net had begun moving more seriously into providing business services, like portal building. Infospace is a major player in that arena, so it may actually be less complicated for the merged company to provide a comprehensive suite of solutions to companies building portals and information hubs of all shapes and sizes.
Another interesting thing to keep in mind is that in the very early days of Go2Net, the two key founders may have been envisioning a company very much like Infospace. Both companies have focused on similar themes, focusing on the "guts" of online content delivery. Go2Net's flashier consumer media properties have overshadowed that focus, but the founders never strayed too far from that vision.
A not-inconsequential side effect of this merger is a name change for Go2Net, which had ongoing branding confusion with (pay for placement search engine) and Go Network (Disney's portal).

More importantly, consumers wanting to search Metacrawler or play games on their wireless devices are going to have a lot easier time of it in the future.

Related Links
Infospace to buy Go2Net

Infospace takes Go2Net out of the shadows
Red Herring

Analyst: Go2Net Doesn't Care About Folding Its Brand
ON24 Audio and Video

Analyst: Go2Net Complements InfoSpace and Vice-Versa
ON24 Audio and Video

Two Portals Better Than One
Internet Stock Report

Fool Plate Special -- Is There Room at InfoSpace for
Motley Fool

InfoSpace to acquire Go2Net in $4 billion merger
Seattle Times

InfoSpace Digs Deep To Acquire Go2Net

Traffick articles about Go2Net
Building a Portal? Go2Net Wants Your Business

Metacrawler Does Go2Net Proud


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