The Internet keiretsuKnown as the "Internet keiretsu" (the Japanese word for a network of companies), CMGI is not your typical VC company. The company believes its structure allows the network companies to create an infrastructure of shared technologies and content, which each individual company can utilize to its own advantage. CMGI has a base of wholly-owned operating companies and makes strategic investments in "synergistic Internet enterprises" through its @Ventures division. As of November 2000, @Ventures had invested in 60 Internet companies in four sectors: marketing and advertising, e-commerce, content and community and enabling technology.
"Deal-happy" Wetherell
CMGI head David Wetherell was labeled the "Warren Buffet of Internet investing" by Boston Magazine. In 1986 Wetherell executed a leveraged buyout of CMG Information Services, a company that sold lists of college professors and courses to textbook companies. Under Wetherell's management, the company was transformed from a database management company to an Internet laboratory. In 1995 CMG was renamed CMGI to emphasize its Internet focus.
Wetherell spearheaded an acquisition frenzy in 19999 that met with both praise and skepticism. CMGI (either directly or through its subsidiaries) completed purchases of 15 companies in 1999, including Flycast Communications, AdForce, AdKnowledge, and 1stUp.com. In December 1999, CMGI announced its intention to purchase YesMail.com for approximately $500 million in stock.
Proponents of Wetherell say he has a undeniable knack for sensing trends and making smart deals, Geocities being just one example. His critics worry that Wetherall's love of the deal might blind him. For example, many believe the highly publicized acquisition of Alta Vista by CMGI in the summer of 1999 will conflict with CMGI's stake in Lycos.
@Ventures
@Ventures is the private venture capital of CMGI. @Ventures holds minority stakes in early stage Internet companies and has so far organized five funds. CMGI is the sole limited partner of Funds I and II, @Ventures IV and the B2B (Business to business) fund. Investors in @Ventures III included Microsoft and Vulcan Ventures. @Ventures IV and the B2B fund will focus on e-commerce opportunities and are expected to raise a combined $2 billion. The most recent fund, CMGI @Ventures Global Partners, is a $1.5 billion fund investing in Internet companies in the U.S., Europe and Asia. CMGI and its partners in the fund, Hicks, Muse, Tate & Furst and Pacific Century CyberWorks, each contributed $500 million.
Strategy
At a basic level, CMGI's goal is to dominate the Internet by having a stake in every leading company in the online world. CMGI executives hope to accomplish this goal through holdings in portals, advertising companies, web development tools, and CMGI's latest media endeavor, iCast (online, individualized broadcasting). Bill White, President of marketing and strategy at CMGI, told The Standard "we think we're the model for the future, similar to Procter and Gamble, where there are multiple brands under one corporation." According to the firm, @Ventures prefers to lead a financing round and will consider investments ranging from $2 to $30 million.
Trouble in Internet paradise
The slump in the Internet sector in early 2000 hurt CMGI to the point that the company began layoffs and divestitures. The company announced in November 2000 its intention to sell iCast and 1stUp.com as part of a restructuring that would leave CMGI with majority stakes in only seven businesses. In a release the firm said the reorganization would "dramatically accelerate [CMGI's] path to profitability." Acceleration is needed; CMGI posted a loss of $1.36 billion for its 2000 fiscal year.
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