Shopping.com's curious journey

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MyWay.com isn't the only CMGI venture to change direction. Consider the strange tale of Shopping.com and how it got involved with FreePC.

Shopping.com began selling electronics in mid-1997 and went public a few months later. It lost $6.9 million for the year that ended in January 1998, a year when it spent more on ads than the $851,000 it generated in sales.

The site lost $49.7 million on revenue of $8.1 million in the year ended in January 1999, when it spent $6.2 million on ads.

In February of that year, ailing Compaq Computer Corp., angling to expand its AltaVista venture, bought Shopping.com for $257 million. Compaq changed CEOs in July 1999 and a month later sold AltaVista, Shopping.com and related operations to CMGI, retaining a minority interest in a deal CMGI valued at $2.9 billion.

Then in October, AltaVista Shopping.com shifted strategies--from selling products to acting as an e-tail portal that provided comparison shopping services and links to merchants.

For the 13-month period ended Jan. 31, 2000, Shopping.com sold $52.7 million worth of products; it paid $54.7 million for the goods, so it lost money even before factoring in marketing, salaries and other overhead.

End of story? Not quite.

Idealab launched FreePC in February 1999 with great fanfare, announcing the start-up would give away PCs and make its money by placing ads on the machines. In March 1999, AltaVista, through Compaq, bought a stake in FreePC. FreePC bombed as a standalone company, with a 1999 net loss of $29.8 million on revenue of $1.2 million from the sale of ads (including $218,000 from other Idealab companies).

Flash forward: About 40%--$20.9 million--of Shopping.com's product revenue for the 13 months ended Jan. 31 consisted of sales of Compaq computers to FreePC.

End of story? Not quite.

Cheap PC marketer eMachines bought FreePC in January in a stock deal for $150.5 million as part of eMachines' play to develop an ad model for its hardware. EMachines promptly halted FreePC's computer giveaways and ad-supported service. Idea-lab and CMGI's AltaVista are eMachines shareholders. FreePC consumers got to keep their year-old Compaqs.

End of story. For now.

Copyright May 2000, Crain Communications Inc.

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