Web Stock Search Snares Yahoo!, Sirius, Niches

This column was originally published on RealMoney on July 20 at 12:46 p.m. EDT.

As promised yesterday, I am offering five more Internet stocks to own today. I started with three niche players and Sirius Satellite, but Tuesday's earnings report from Yahoo!(YHOO Quote) brought the stock to my attention and the stock's action today put it at the top of this list.

The fact that this stock was down 10% in the premarket and some $4.35 midmorning forced me to take a closer look at its numbers.

What happened? Did it lose money? Did it kill someone? Let's see.

Revenue was $875 million, up 44% year over year. International revenue was up 84%. Gross margins were at 87%. Unique users were up 27% to 379 million. Paying subscribers were up 58%, and the cash position was up $1.1 billion from the prior quarter.

True, it guided revenue down for the year to $3.2 billion from $3.68 billion, but I expect its newly announced foray into contextual advertising is going to make a dent in Google(GOOG Quote) once it's up and running. Yahoo!'s personals services, financial content, online classifieds and more, offer it many more areas to deliver targeted contextual ads. Yahoo! is a definite Internet stock to own here.

Now to the niche stocks. These three companies have been building their brands over the past five years, while consolidating their balance sheets and, in general, fattening themselves up (in my opinion) to get acquired by the further entry of the media companies into the space.

1. Hollywood Media(HOLL Quote) owns Broadway.com, which sells theater tickets online. The company also owns 26% of MovieTickets.com, the online movie ticket vendor that sells tickets for AOL, MovieFone, MSN, Lycos The New York Times and others. The New York Times also just signed a deal with Broadway.com to sell tickets through the Broadway.com site.

Other owners of MovieTickets.com include Viacom(VIA.B Quote) at 4.25% and AMC Entertainment, which was one of the founding partners and now, with AMC's takeover of Loew's theaters, stands to increase market share over Fandango, which is Loew's ticket seller. While this is a more speculative play, I think the potential growth of MovieTickets.com is going to be the driving force.

2. I can't believe The Knot(KNOT Quote) survived. Congratulations. In 1998, I became intimately familiar with the site's operations when I helped diamondcutters.com work out a deal with The Knot. The company was going public around that time and I honestly didn't think a niche site about weddings would have the weight to survive as a public company. But it showed a net profit of $1.275 million last year on $41 million in revenue (up from $36 million the year before and $29 million the year before that) and actual cash flow from operations over the past 12 months has been $1.9 miillion.

With $22 million in the bank and no debt, it looks like the company is here to stay. The wedding "demographic" includes not only what is spent for the wedding: gowns reception and registry, but also what is spent as a newlywed. This is a period when women are making decisions about every aspect of life: cars, homes, furniture, home electronics, etc. Theknot.com expanded into this space with thenest.com, and it also just launched the dating site, GreatGirlfriends.com.