Cramer Can't Hold Back Any Longer on Consultants

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Who will win on the Internet? Who will triumph as a new brand name and who will just spend a whole lot of money and wish they had never heard of the darn thing?

I'm not sure, beyond

America Online





, who will emerge from the Net's cacophony. As someone who has spent the better part of the last three years trying to figure out the winners and losers in order to profit from their stocks, I can tell you that NOBODY knows for sure who will triumph in the end.

But I do know this: Anybody who thinks he has a crystal ball, anybody who thinks he can arrive at a thesis and stick with it about winners and losers -- some sort of magic divining rod to sort out wheat and chaff -- is a charlatan. A quack. A phony.

Which brings me to the point of this article. I write to right a wrong that has been visited upon

by some outfit in Cambridge called

Forrester Research

, which claims to have a crystal ball that shows our pending demise.

In this business it is not enough to be judged successful by your business or journalism peers, your readers or your investors. Like municipalities that pay to get rated by the bond agencies, all of us who try something new online end up getting rated by the consultants at Forrester. I always believed that these guys were irrelevant. Heck, if they were any good, I would think they would be out there doing instead of grading. That's just probably my predilection for builders and disdain for critics. No matter.

One of the ranking members of our business side said that Forrester mattered, though, so a bunch of

'ers took a pilgrimage to Forrester about a year ago and made what I guess was an entirely unfavorable impression. They could have made the best impression possible, but still it would not have mattered to these guys. Forrester already had established its universal thesis: Paid content sites are doomed.

Ever since then we have had to live with the indignities of their indictment that

won't make it, that it will fold, or vanish or wither away. Initially, I was going to write an article simply blasting them for not understanding us and why we were simply offering something that



Dow Jones



offer for a tiny fraction of the cost to the consumer. The at-home BDJR for 10 bucks a month instead of $1,500. My wife suggested that I just blowtorch the s.o.b's to teach 'em a lesson. But

hierarchy told me, "No can do, you can't take these guys on, they can make life miserable for you. They speak to the press, get quoted all of the time. They can hurt us." There's some priceless wisdom. I bought it, figuring I will just go out and show them how wrong they are and that they would come to their senses and eventually see how

was a winner, not a loser. Let the marketplace prove our worth. Like it mattered to these guys and their crystal balls.

So the dance began. I began to cultivate their analysts. I would say, "Hey, we got off on the wrong foot, here, let me tell you why we are going to succeed." They were always a bit skeptical, but polite. With each new milestone in ads or circ I would fill them in about out achievements. They listened, and from what I could tell, might have even taken notes!

I listened too. One of their suggestions was that I get a big-name writer at

, someone who would show it wasn't just me. I found this line of thought incredibly offensive, because we have built an organization of 30 journalists who by and large are the envy of the industry we picked them from. Almost every hire we have made is one that my buddies in the journalism business have asked me not to take. But

Dave Kansas

, our editor, will not be denied putting together the best business newsroom around.

No matter, Forrester wasn't hearing. So we went out and recruited

Herb Greenberg

from the San Francisco


, because in my real business, the hedge fund business, he was the only must-read business journalist on the entire planet. He still is, as his articles are more read than mine on most weeks (yes, we have that kind of information on the Net).

I remember proudly calling the same critics at Forrester to relay the good news that we had cinched Greenberg. I called them ahead of everybody save my wife! I got the distinct sense that they had never heard of Greenberg, typical, in retrospect, of what I see as their lack of knowledge and judgment about the press and stocks. I spent a lot of time telling them why Greenberg would be an immediate boost to circulation, which, from what I could tell, they wanted

to stop charging for, even though it brought in a million dollars in revenue. (I remember thinking, why give it away for free if people would pay? But dare I try to convince them of that?)

Anyway, I thought I pretty much had budged their intransigence after we started building one of the biggest revenue-generating circulation departments on the Net, and started taking in nice six-figure ad revenues per month. I thought this change was important, because Forrester analysts have an uncanny habit of showing up in the newspapers all of the time alternately slamming and praising businesses they allegedly have examined. I wanted that head-slap stuff to stop.

And then a month ago, I learned my efforts were all for naught.

The New York Times

, in a silly, embarrassing article about me and

, dredged up all of the usual canards about how

is just me and there isn't anything else to it worth paying for. Anybody who had read us in the last year, anybody who had a *&^$*^$^ password, for Pete's sake, knew that we had become much more than that. Certainly the investors and the bankers got it, not to mention the subscribers.

But there, right smack in the middle of the article, was a gratuitously negative quote about our dim prospects, from some guy named Mike Gazala, a Forrester analyst I have never spoken to. He lent his firm's "credibility" to the notion, so much sought after by the


Business Section, that there was nothing to

except Cramer.

I picked up the phone and called the guy.

I asked him if he knew about all of the other information now available on

and how there was much more to us. You know what he said? He responded that he accurately represented the "thesis" that

was just Jim Cramer and nothing else worth paying for and then he asked me if he hadn't gotten that right. Yeah, he wanted to know whether I thought he had accurately represented Forrester's negative thesis.

"Sure, Mikey, you got it. Way to go." crossed my mind amid a sea of expletives.

I could barely speak. We are pouring our heads and hearts into this thing everyday, generating real cash, and he wants to know if I thought he got Forrester's thesis about


That got me hopping mad. So, for the last four weeks I have assigned a researcher to find everything I can out about how Forrester's consultants have done in divining winners and losers on the Net. I have read their clippings, their reports and their quotes. I wish I could tell you that they were 100% wrong about everything. I wish I could tell you they are corrupt and write up their highest-paying clients enthusiastically and slam the others. (I know Bill Miller, who runs the highly acclaimed

Legg Mason Value Trust

, took pains to

point out that Forrester would have kept you out of AOL's unprecedented runup because it has a closed system!)

Instead, I have a far more damning conclusion. They might as well roll dice or flip coins. I see no pattern to their stuff, right or wrong, predictive or not. As its annual report states, "You might agree or disagree with our analysis and conclusions. You might or might not believe our predictions. But one thing we do guarantee. You will always

emphasis added

know where Forrester stands

." Nothing could be more true. To put it in the parlance of the business I am in, you could just as well be throwing darts and then defend those dart picks to the bitter end. But you can throw darts a lot more cheaply than you can buy Forrester's research.

The Forrester mob does love to have a thesis, like "content sites will not get cash from users," or some other nonsense. And then they like to stick to their thesis regardless of the facts. They do love to speak to the press, and the lap dogs in the press are more than willing to let them play the arbiter role, for who knows what reason. It has been suggested that Forrester pays its people if they get quoted, but they deny that. (The press should ask whom they are being paid by instead of assuming they are "neutral.") I am sure that going forward they will now go out of their way to say we won't make it, but that's fine, at least now they have a reason to be pissed off at me.

But now I will tell you why they are wrong. Their thesis about


presumes that no individual or individuals will ever try to surmount incredible odds to make a great thing work. Their thesis presumes that our team is not dedicated or hard-working enough to pull it off. After we have made it I am sure they will say it is an aberration and that we are the exception to the rule.

My response: Trying to figure out who will beat the insurmountable odds is what investing is all about. Most businesses fail. Most businesses need a huge partner to make it. Most businesses can't survive the cutthroat world of capitalism.

But some, motivated by the need to succeed and the belief in themselves, do succeed. Which is why you can't just have a thesis -- "no one will ever develop a successful chain of low-cost hardware stores," or "no one will ever be able to afford the power of a mainframe computer at home" -- and stick by it.

So, now I have done the deed. I have stood up to the equivalent of this protection racket of consultants who rate us. I have taken on the critics, fully knowing that if I were in the movie business I would never get a good review again.

And all I can say is I wish I had done it when my wife first suggested, instead of playing the same bend-over game that everyone else plays. As is so often the case, when common sense and not sucking up is called for, my wife was dead right all along.

James J. Cramer is manager of a hedge fund and co-chairman of

At the time of publication the fund was long America Online and Yahoo!, though positions can 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 by sending a letter to at