If the Net is simply a long-lasting bubble, why didn't old-line companies see the bubble and take advantage of it? Take a look at the major search engine sites,
and, of course,
. What do you see there? On the home page is pretty much the same thing you get from a newspaper or a TV station: news, sports, weather, business.
Who could have done this better than any network or newspaper in the country? Yahoo!, a $90 billion company, is basically an amalgam of journalism and reference sources that any paper or station could have put together.
is basically a classified ad service.
Los Angeles Times
, two great classified institutions, have been better at doing eBay than eBay? Couldn't
have been Yahoo! or AOL?
Couldn't it have been much better because it could have forced sports figures and entertainers to do chats if they wanted to get exposure in
? Can you imagine the cross-promotion heaven these folks would have had at Time Warner? Instead they get bought by someone who couldn't equal them in talent or brand names in dozens of years.
So what happened in this era that eBay gets valued in the high billions and gets to be a target of Yahoo!, while the
Los Angeles Times
gets a low billion valuation and a bid from
? How did Time Warner get smoked by AOL? How did the
get smoked by Yahoo! Finance?
I have some simple answers. First, the journalism business is run by journalists, and the collective mindset of journalists is not about profit, but about the craft itself. However, in the late '90s and early 21st century, you had to be more of a businessperson than a journalist if your institution was going to prosper. You had to recognize that this new medium would be worth billions even as it was worth nothing and you had to rush headlong into it. You had to be like
; you had to cannibalize your own. Do you think that
would be sold for peanuts vs. Yahoo!'s valuation if someone hadn't said "We are going to scrap the darn newspaper game and win the Web game"?
Instead, it probably put some not-so-powerful people in charge of the Web and forbade them to talk to the big ad accounts.
Do you think that Time Warner would be succumbing if the top editorial people made a judgment that the Web could be bigger than print, so let's stop talking about
and start talking about portals? Nah, they are still developing new magazines over there, which could be worth millions, not billions, except now the profits will accrue to AOL here on in.
Don't you think the networks could have done the same? If instead of relentlessly plugging some new boring, costly production of some show that got canceled, one of these networks had decided to plug its own site relentlessly, it would have more page views than all of the big sites combined. They know that now. But it is too late to recover. The market isn't interested in any more content plays or aggregation plays, and the landscape seems pretty well fixed.
will never be as big as Yahoo! now.
So if the journalists didn't see it coming, why didn't the business execs? That's just generational. To rise up and be powerful in a newspaper chain virtually requires years of service or a last name that is like the last name of the top guy. If the top guy stuck around too long, it didn't matter. He or she was too old to get the Web. In my younger, less mellow days, I would simply say these big shots were too busy playing golf. Now I just say they were pursuing other interests.
Finally, nobody believed. Most people in journalism thought the market didn't matter and that the valuations would just go away. They didn't understand that the Net could be worth more than the printing press. They weren't nerdy enough to get the Net. They wanted to be glamorous and be in the society columns -- which they are -- not on the new high list, which they will never be. They had disdain for the market's view. In the end, that lack of respect for the valuations we in the market accorded these companies is what doomed the Old World guys into being bought by each other or by the Net companies.
Now that AOL's stock has crawled back to respectable levels, I suspect you will see many more deals in which the guys with the editorial talent get bought by the guys with stock price dollars. And those who were ignorant of the Web will just eventually be doomed to work for it.
I guess that's just business justice.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long America Online, Yahoo!, Intel and Lycos. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at