Generation i: Tuned in, logged on, cashed up, Part II
The potential profit from the Internet generation has Wall Street interested in Snowball. Snowball, which counts New Line Cinema's new-media unit as an investor, is planning an IPO with Goldman Sachs as the lead underwriter. On Feb. 11 Snowball said it will offer 6.25 million shares with an expected price range of $10 to $12.
Bolt.com, which focuses on 15- to 20-year-old teens, has lined up Morgan Stanley as its lead underwriter. Bolt officials wouldn't comment, citing the company's quiet period. Weiner puts Snowball in front of the pack. "Of all the sites, Snowball does the most effective job of reaching people at various crossroads," he said. "They have done a nice job of being vertical and horizontal. If they pull it off, they can get advertisers for every community." But revenue for both Snowball and Bolt.com remains light.
For the nine months ending Sept. 30 Snowball had sales of $3.2m with a loss of $18.4m. Bolt didn't look any better in its regulatory filings. For the nine months ending Sept. 30 Bolt reported sales of $1.9m and a net loss of $4.4m. The company, which counts AOL, Microsoft's MSN Hotmail and Ford Motor Co. as partners, launched an online store but is yet to record any meaningful sales. Bolt said its revenue would derive from advertising, e-commerce and market research data on its audience.
eUniverse, which is waiting for a Nasdaq market listing, reported a December quarter pro forma loss of $2.3m on sales of $3.1m. In its updated regulatory filings Snowball said it had sales of $6.7m for the year ending Dec. 31, which would indicate fourth-quarter sales of about $3.5m. As of Dec. 31 Snowball had an accumulated deficit of about $39.8m.
Despite the big backers and mouth-watering demographics, there are a few question marks about focusing on Generation i. Forrester's Walsh noted that Generation i may not buy into the targeted content and marketing pitches.
According to Forrester's research, Generation i lists Yahoo!, Amazon.com, Intel, and CDNow, among their favourite sites. Snowball and eUniverse are among the top 50 Web properties, according to Media Metrix, but teens also spread the traffic around by visiting ESPN.com, MP3.com and even Wal-Mart.com. "The way to reach kids is to treat them like adults," Walsh said. "Yahoo! has never limited itself to one audience."
Analysts warn that companies can't fool Generation i. If a company's targeting is too blatant this Web-centric crowd will steer clear. Currently, Generation i also has a plethora of companies to choose among, making an industry shakeout likely down the road. Snowball, for instance, faces competition on numerous fronts, including AOL and Ugo Networks, among others.
There's also a precedent for Wall Street flops focusing on this audience. Alloy Online went public as an e-commerce company focused on Generation Y and is currently on par with its May 1999 IPO price of 15. iTurf, another generation Y e-commerce company, has fared even worse. iTurf went public at 22 in April 1999 and now trades around 12.
And then there's Greco, the Web kid from Sparta who's yet to be reeled in by Generation i sites. He said he didn't visit sites in Snowball's network or bother with eUniverse or Bolt.com. Instead, He listed his favorite sites as Yahoo!, Scour.net (an MP3 download site) and Hotmail. "I never heard of any of them," Greco said. "I might try them out sometime though."