SAN FRANCISCO -- Picture Gordon Gekko doing business with Jerry Garcia.
It's an extreme image, but it cuts to the heart of the challenge that awaits
as it tries to integrate the touchy-feely electronic greeting card company
. Excite@Home's goal is to transform the folksy card seller into a commerce bonanza, but if it moves too aggressively, it could alienate a lot of users.
High-speed ISP Excite@Home agreed to buy the Web site of
Blue Mountain Arts Publishing
for $780 million in stock and cash. The acquisition, which does not require a shareholder vote, is expected to close in 30 to 45 days. Bluemountain.com could also gain an extra $270 million in stock if it meets certain performance criteria.
One potential benefit from the merger is eyeballs. Through its acquisition of Bluemountain.com, the 14th most-visited Web property, Excite@Home's reach will receive a
much-needed boost. Excite@Home's viewers have fallen to 15.3 million in September from 17.4 million in April. Bluemountain.com's visitors have also dropped, sliding to 9.1 million from 11.5 million in the same period.
Excluding the overlapping audience, says Excite@Home President George Bell, the acquisition will give Excite@Home another 6 million unique visitors. That may be enough to help Excite@Home, the sixth most-frequented site in September, nudge past
into fifth place.
Another benefit is advertising and e-commerce. When Excite@Home looks at Bluemountain.com, a site that has been aggressively noncommercial, it sees a monumentally untapped opportunity to sell advertising and all sorts of products to its loyal users. After all, Bluemountain.com gives its cards away for free. The site didn't start selling ads until a year ago. And even now, it's hard to find a banner ad there.
"This is clearly a nontraditional demographic" for Excite@Home, says
analyst Paul Merenbloom, who has a strong buy rating on the company's shares. "Everyone who goes to
Bluemountain.com is a potential gift buyer or recipient." Prudential has not done underwriting for Excite@Home.
But to capture and convert those users into ad-viewing, consumption-crazy customers, Excite@Home will have to navigate a tricky tightrope. Bluemountain.com has been that rare case of a successful Web site that refused to ram ads down the throats of its users. Rather than cashing out through an IPO or milking its audience for money, the site has aimed, in its own words, to help "people communicate their feelings through poetry and art."
Based in Boulder, Colo., Blue Mountain Arts Publishing was founded by writer and activist Susan Polis Schutz and her husband Stephen Schutz, who has a Ph.D. in physics from
. The two got their start in publishing by
printing poetry posters in the basement of their tiny apartment in the early 1970s.
After turning that passion into a small card and book publisher, the Schutzes created the Blue Mountain Arts Web site in September 1996 to reach more people. It took off instantly, and the Schutzes were soon turning away investment bankers.
Even though they finally gave into the forces of commercialism, the Schutzes maintain that the sale will further advance their mission of "helping people around the world communicate." In a statement, the Schutzes said with audible relief that, "On a personal level ... we will be able to get back to creative pursuits, and with the proceeds we receive, we plan to support world health, hunger relief and peace."
The distance between the cultures comes into relief by contrasting that statement with Excite@Home's, which proclaimed that "Excite@Home will package Bluemountain's millions of daily page views for advertisers, monetizing a portion of total page views with advertisements and giving advertisers the opportunity for targeted exposure."
So far, both companies are downplaying the challenge of bringing the two cultures together.
"We don't see much room for conflict," says Jared Schutz, the son of the Schutzes and the former executive director of the Web site. "Excite@Home has a great understanding of what makes our community tick." Jared, widely considered to be the driving force behind Bluemountain.com's business, says he'll be leaving the company to spend more time as chairman of
, an online florist. In his place, Mark Rinella, the former chief technology officer, will take over.
Meanwhile, analysts expect any short-term defection of loyal Bluemountain.com users to be more than offset by new visitors attracted by Excite@Home's marketing drive. "I think it will change the chemistry," says Merenbloom. "Will some people leave? Probably. Will more people come? Probably."
To make sure the merger goes smoothly, Bell insisted that Stephen Schutz stay on as editor-in-chief for the first year. The Schutzes say they will retain editorial control of the site, but Bell says he has set up a special four-person committee to deal with any disputes that may arise.
For now, though, the Schutzes are trusting Excite@Home to follow through on its promises. Jared says his parents "have never been interested in the business aspects of the Web site.
"I think this comes as a relief to them," he says. "They get the most joy out of seeing the smiles that the cards bring to our users."