Tuesday, February 08, 2005

What is the Deal with GuruNet?

Well, besides the fact that this puppy is flying higher than your parents were at Woodstock. All weekend all I read about was Answers.com, the new question and answer web service (ok, it is a lot more than that) GuruNET (GRU) just released in early Jan. Trader Mike, Seeking Alpha, and A VC all had posts on the matter. My IBD stock checkup displayed heavy, heavy accumulation, too. I finally checked out Answer.com and frankly, I'm blown away. It's clean layout makes info-finding more fun than Friday night poker. From estorica to everyday matters, the site has something to say on everything. The stock looks great--the company, uuuhhh, not so great. But crowd psychology is the name of the game. I urged my parents to pick up some shares on Monday--I bet they didn't, knowing them and their ultra conservative take on the market. The stock is up ten points in two sessions. Here is what the Forbes.com thought:
Answers.com is the most useful, smartest, coolest, easiest-to-use Web innovation to come around in years. Answers.com is a new approach to Internet search, but make no mistake: It is not search. With one click Answers.com delivers instant information, not Web links, laid out cleanly on one page. All the information available on Answers.com is out there, somewhere, but it's not aggregated and laid out as cleanly and easily. hat's even cooler is GuruNet's one-click technology. It works like this: After downloading a tiny bit of software, users mouse over any word on any Web page, within any e-mail, within any document, hit the "Alt" key and automatically get an Answers.com page with information described above.What's better still is its ability to recognize context. If you mouse over the word "Ford" in one paragraph containing three different references to Ford Motor Harrison Ford and Francis Ford Coppola, the system will process that and deliver information on cars, actors and directors respectively. Any word on the screen, provided you're online, becomes a simple gateway to more information. The system, which has been live for about two weeks, is not perfect. It aggregates data from about 100 sources including dictionaries, encyclopedias and covers about one million topics, which sounds like a lot until you consider how many possible topic areas there are. Rosenschein says the company is adding sources and topics all the time. The company, based in Wesley Hills, N.Y., hopes advertising will sustain its business. In the past nine months GuruNet reported a $2.4 million loss on $117,000 in revenue. Rosenschein founded GuruNet in 1999 and raised $28 million from top-shelf investors like Goldman Sachs. But it wrongly tried to sell its technology--enterprise search--to corporations. It retreated from that business and re-emerged in 2004 with Answers.com. Rosenschein says one potential investor was so blown away by the demo that he told him to write down a number on the back of a business card. The tech industry is full of hype and overblown promises. Rosenschein is a pleasant surprise. He appears to be a humble, aw-shucks kind of guy who may have just unleashed the Internet's next big thing.
Fool.com is a bit less jubilant and more on the cautionary side:
Could the next Google be found in Jerusalem, Israel? Are you tired of search products that return a long list of websites that may or may not be related to the query term? GuruNet's search engine avoids the typical hyperlink list with narrative responses -- it even provides tabs for other related information that comes formatted as charts, graphs, and maps.
Investors, they warn, should look more closely at
IPO funding. While it is adequate for the next 12 months, the company is going to be producing operating losses. More funding, and probably share dilution, is coming. Oh, and the company has more debt than cash. Yikes. The company's content is licensed from year to year. That's hardly comforting when it is the content, as well as the search, that counts. Why is GuruNet soaring? Investors may be looking at Google's $55.6 billion market capitalization and thinking that GuruNet's Lilliputian $93 million capitalization leaves a lot of room for growth. Maybe, but Answers.com has just been released, and its future, and the company's too, are far from certain.
Today's spike on heavy heavy volume will have me keeping an eye out for an inevitable climax run--let's wait for new highs on light volume--maybe we'll buy on the dip. Dad, I hope you're paying attention.

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