Leslie Walker

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Leslie Walker's .com Live
Terra Lycos Vice Chairman Robert J. Davis

Thursday, May 31, 2001; 1:30 p.m. EDT

Robert J. Davis, one of the Internet's new media pioneers, grew Lycos from a small search engine into a $6 billion media portal that merged last year with the Internet access division of Spain's Telefonica to form Terra Lycos. Join us Thursday, May 31, at 1:30 p.m. for a one-hour conversation with Davis about the state of online media and portals.

Robert J. Davis (Courtesy Lycos.com)

Davis currently is a venture partner in Highland Capital Partners. He recently resigned as chief executive of Terra Lycos but remains on as vice chairman. His new book, Speed is Life: Street Smart Lessons from the Front Lines of Business, is hitting bookstores this month.

Submit your questions in advance and come back to join the dialogue at 1:30 p.m. Thursday. And don't miss Leslie's .com column, published weekly on Washtech.com.

Submit your questions and comments before or during Thursday's discussion.

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Leslie Walker: Hello everyone. Welcome to Bob Davis, who is here to talk about his five-year ride on the Internet. His autobiography, "Speed of Life," chronicles how he rode the Internet rocket deep into cyberspace and ejected in the nick of time, selling his company for about $6 billion shortly before Internet stocks crashed. Today, of course, few dot-coms are worth even $1 billion. Many more are dead.

You may not remember, but Bob was our first guest on ".com Live" in 1998, back when Lycos was on a big-time buying binge. You can read his predictions for the Internet then via a link to our archive above. We'll get started in a few minutes, so submit your questions now.

Leslie Walker: Hello, Bob. Glad to have you back. Let’s start with your amazing Internet luck—-or was it skill? What catapulted Lycos into the ranks of top portals, while contenders like Infoseek, Magellan, OpenText all but disappeared. Was there one strategic move you credit most?

Robert J. Davis: It was probably a combination of both. We were surely in the right place at the right time. I also like to think we developed a highly differentiated strategy.

Leslie Walker: One of your book’s messages is that business rules don’t change online—--profits and growth both matter. Today the dot-com meltdown is killing profitless companies at Internet speed.

Do you have a feeling for how long and deep the dot-com death valley might go on—-and which companies will emerge alive?

Robert J. Davis: Companies that pay no regard to earnings are destined to failure. Similarly, dozens of competitive and market factors also eat at any company's survival chances.

Market conditions today are very challenging. I believe a majority of pure play internet companies will either be acquired or close operations. There will surely be a handful of big winners. Companies such as Amazon, eBay, AOL, Yahoo!, CMGI, and others are likely winners.

Boston MA: Internet advertising has been taking a beating. How do you see it evolving from here? Will it ever be as big as TV or newspaper advertising?

Robert J. Davis: Internet advertising has suffered as has all traditional forms of advertising. The internet downturn is receiving a disproportionate share of attention due to the hype of the last few years. I believe internet advertising is here to stay and will come back stronger than ever.

Washington DC: In hindsight, if you could do one thing differently as CEO of Lycos, what would it have been?

Robert J. Davis: In the early months of Lycos, we focused on both a technology and media strategy. It is difficult to excell in two such diverse fields. If I could back up the clock, I would devote 100 percent of the company's efforts to the media side of the business.

Alexandria 22305: Mr. Davis, why were so many people at the height of the tech bubble wrong about the future? A lot of very smart and talented people were predicting the good times would last a lot longer, and a lot of great, conscientious folks got burned when it all went awry. What's your take?

Robert J. Davis: The internet is a transforming technology that saw one of the fastest adoption rates in the history of modern media. With millions of new users coming on line so quickly it was easy to overlook the basic need for earnings while dreaming of a future that was limitless. The reality is that markets, all markets, flow as like the ebb of the tide.

New York City: Why did you quit as ceo of Terra Lycos?

Robert J. Davis: I remain a great believer in the potential before Terra Lycos and continue to serve as the company's Vice Chairman. I did feel, however, that it would be difficult to successfully direct the company with essentially two CEO's--one in Spain, and one in Boston. With that in mind, I felt it was best for both me and the company that I move on.

Reston, Va.: What will AOL competitors need to do to be successful against the media behemoth?

Robert J. Davis: AOL Time Warner is the 800 pound gorilla in both new and traditional media. They will be very difficult to beat. To compete, I suspect a number of mergers, partnerships, and alliances will be laid out in the months ahead.

Boston MA: You write in your book that you feel CMGI's Dave Wetherell---your big investor and long-time backer--"betrayed" you by publicly yanking his support from your proposed merger with USA Networks. Do you feel if he had continued supporting the deal and worked with you, it might have gone through?

If so, where might Lycos be now?

Robert J. Davis: As I write in the book, Dave wasn't alone in his opposition to the merger. I underestimated the market's willingness to accept such a combination. There is really no way of knowing what other outcomes might have been.

To be clear and as I also say in the book, even though Dave and I disagreed on the USA merger, he is to be credited with creating tremendous value for his shareholders over a long period of time.

Leslie Walker: Your book describes how you almost sold Lycos to NBC as well as to USA Networks. It says you explored mergers with almost every other major media company. Given all you know about media consolidation, if you were running Yahoo today, which companies would you want to merge with and why?

Robert J. Davis: It's not certain that I would want to merge with anyone. I would surely seek one or more deep alliances. Potential partners include companies such as Microsoft, Viacom, Vivendi Universal, and others.

Reston, Va.: So, in responding to my AOL question, are you hinting at Terra Lycos partnership announcements in the coming months?? What do you think of AOL's very aggressive moves into the European and Latin American markets?

Robert J. Davis: I am most definately not hinting at anything as it relates to Terra Lycos. I believe AOL's moves into Europe and Latin America are smart but will pose significantly more challenge than they find in the United States.

Dulles VA: Would you like to run another Internet company--or was one enough?

Robert J. Davis: I expect I would like to run another company, it may not be an internet only company. At the same time, I am very much enjoying my life as a venture capitalist. Stay tuned...

D.C.: Were you a candidate for the Yahoo CEO job? If not, why not?

Robert J. Davis: I don't think such a marriage would have made sense for anyone. I spent 6 years feverishly competing with Yahoo! and building the Lycos brand. To one day ignore my Lycos roots, would have been impossible. I suspect the Yahoo! board would feel the same way.

Washington: What do you think of the new Bush administration's approach to the New Economy? What role does the government have in shaping the online economy?

Robert J. Davis: I believe the term "new economy" is a dangerous one. It risks taking the focus away from a businesses fundamental obligation to return something to it's shareholders.

That said, the administration thus far, has adopted a hands off attitude. That is always a good thing for business.

washington DC: The promise of one-to-one online marketing--targeting customized messages to the individual--seems to have been oversold. do you agree? what's the future of micro-targeting?

Robert J. Davis: I don't believe the concept is at all over sold. Although the timing may have been. The internet is perhaps the most effective direct marketing vehicle ever created. It will take time, maybe years, to develop data bases comprehensive enough to realize the medium's potential. But once available, one-to-one marketing, micro-targeting, and developing techniques will become widespread.

Leslie Walker: Where does Terra Lycos go from here? And is there even a shred of truth to rumors that it’s been trying to buy EarthLink?

Robert J. Davis: Terra Lycos is the most global of new media companies with a presence in an industry leading 42 countries. Additionally, the company sits on a warchest of nearly 2 Billion dollars in cash, and has a deep alliance with a leading medial company and a leading telco. It's possibilities are endless.

As you might expect, I cannot comment on rumor.

New York City NY: What's your take on Microsoft's Hailstorm Web services plan--can it work? Or is it unrealistically ambitious?

Robert J. Davis: I would never be so naieve as to underestimate Microsoft's ability to deliver any new platform or technology. Especially when the company has billions to support marketing and development efforts. Hailstorm will likely be a credible force.

new york city: Will any standalone Web retailers survive, or must they all marry brock-and-mortar companies? (Your take on Amazon, too, please!)

Robert J. Davis: Amazon is a powerhouse and is here for the long run. They have become synonomous with shopping on the web. Beyond that, very few, if any, stand alone web retailers will prosper. The reasoning being that even thought a top quality web-site can be built for less than 20 Million dollars. A top quality distribution and customer service infrastructure requires 200 Million plus. Such an investment is unlikely to be made for the web only and is much more likely to be put behind both on-line and off-line efforts.

arlington, virginia:
are you a cmu alum?

Leslie Walker: Arlington is no doubt referring to Carnegie Mellon University, where the Lycos search engine (which takes its name from the Latin word for wolf spider) was born.

Robert J. Davis: No, I am not.

I graduated from Boston's Northeastern University.

Washington DC: We all know the Internet leaders. I'm interested in the little-known newcomers. Can you tell us a few interesting start-ups or new Web concepts that we should keep our eye on?

Robert J. Davis: Working at Highland Capital Partners has exposed me to a number of great start-up franchises. Companies such as Navic Systems, SmartBargains, Club Mom, Relicore, and many others show great potential.

Fairfax, VA: Hi Bob - what do you see as the future for search and directory services? Do you see them continuing to service the 'public' from an Internet perspective or do you see them focusing their skills and technologies inward - toward the enterprise? Thanks.

Robert J. Davis: With one or two exceptions, all of the search/directory services have evolved into portals. The core competency of these businesses have grown into a skill set consistent with traditional media. Bottom line, I see them all focusing on the "public."

D.C.: What long-term impact will the Web have on newspapers? Portals do a nice job of aggregating news in a bundle--much like a newspaper--and lots of Web sites are siphoning classifieds. Meanwhile, very few Web newspapers have been able to charge subscription fees. Did your portal experience give you any insights into how newspapers might have to change to survive?

Robert J. Davis: For the short term, none. None of the portals deliver local news, sports, business, etc. to anywhere near the depth of a newspaper. The broader issue, is what happens to classified advertising on-line. This is a bread and butter revenue stream for newspapers that is under serious attack.

Leslie Walker: I know you’d like government to keep its hands off the Net. But given how media consolidation is trending, do you think even a dollop of regulation might be needed to maintain competition and diversity in the era of pervasive computing?
I’m especially interested in your views on the growing clout of AOL Time Warner. Doest it worry you at all?

Robert J. Davis: There is a place for government regulation, in particular, as it applies to exposing children to hate, violence, and pornography. As you may know, the proceeds of the book are being contributed to the National Center for Missing and Exploited Children for just this reason. Beyond that, I don't see government intervention necessary even as it applies to AOL Time Warner.

Arlington: What was it like cutting a deal with a major European tech firm? Were there big business-cultural differences, or has the Internet created a universal business ethos that makes it easy for online firms to link up across borders?

Robert J. Davis: It was exciting putting the merger together. There were surely cultural differences to resolve as might be expected with any merger of this magnitude. This, once again, is a basic business premise that the internet does not eliminate.

Glover Park, DC: When you get on the Web to do research or to answer a specific question, what is your search strategy? Of course you probably go to Lycos first, but do you admire other search engines or use various strategies?

Leslie Walker: I have to add my two cents here. Google seems to be emerging as a search leader--do you use it? ;-)

Robert J. Davis: As you guessed, I always go to Lycos first. Search is no longer about who provides the most responses. Search quality is determined by relevance. Relevance is determined by an abundance of content. I think the portals have the edge.

Arlington, Virginia: Which online ad firms are doing the best job experimenting and executing online ads? What do you think of the new ad formats like skyscrapers, big boxes, billboards, etc?

Robert J. Davis: New ad formats are being driven more by industry wide (I include ad buyers in this group) initiatives than individual firms. The true promise of internet advertising is rich media such that one day we no longer differentiate a TV ad from a web ad.

Leslie Walker: Before you go, please peer into your crystal ball and tell us if you see any Next Big Thing—-an area ripe for growth much as Web portals were in the 1990s.

Robert J. Davis: I see a number of exciting new areas. Rather than pick which will be the winner, let me offer a laundry list of emerging areas -- Optical switching, business intelligence, converence and interoperability, digital set top boxes, and lastly, using the web to reengineer traditional age-old business processes.

Robert J. Davis: Thanks everyone for your interest - see you in the fast line!

Leslie Walker: That’s all we have time for today. Thanks so much to Bob Davis for answering all your thoughtful questions (the pointed ones, too.) We can’t wait to see where he goes next and hope to have him back in another Internet year or so. Bye for now!

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