Speed Is Life

Bob Davis, the former CEO of Lycos Inc., may be looking for a new job, but things could be worse.

After all, Davis found a buyer for Lycos before Net-company valuations completely tanked, selling the Web portal to Barcelona-based Terra Networks for $6.95 billion in October. Davis lost management control of Terra Lycos's Internet business, but at least the company he started has -- so far -- escaped the cudgel that fell on arch rival Yahoo!, which is reeling from declining revenues and profits, a layoff of more than 400 people, and a stinging restructuring charge.

Davis believes that it's only a matter of time before Yahoo! gets acquired. Of course, he's been saying that for a couple of years, ever since he tried to merge Lycos with USA Networks, the television and digital-entertainment company run by TV veteran Barry Diller. The deal imploded -- thanks to opposition from David Wetherell, whose Internet holding company, CMGI, was a major shareholder in Lycos. But the experience branded Davis as a new-media maverick who was willing to embrace traditional media and their business model, which, although stodgy, boasts something almost no Internet company could lay claim to at the time: profits.

Davis's attempt to "put a floor under Lycos" with the USA Networks deal constitutes the most compelling material of his new book, Speed Is Life: Street Smart Lessons From the Front Lines of Business, (Doubleday, 2001). The book is a tough-minded account of the rocket ride that lifted Lycos -- one of the Internet's most visible brands -- into the stratosphere before a fiery reentry.

These days, Davis, 44, splits his time between Highland Capital Partners, a Boston-based venture-capital firm, and Terra Lycos, where he still holds the title of vice chairman. In one of his first lengthy interviews since stepping down as CEO of Lycos, Davis displays the same street smarts that helped him muscle his way to the top of the new-media business.

You defined Lycos as a media company very early on. You referred to the TV networks' model and said that if you focused on winning an audience, everything else would fall into place. That's not a technology insight. Where did it come from?

That insight came from opportunity, but it also came from building customers. That's what any business is all about -- building an audience base and a customer base. In Lycos's first year, we had a media model, but a third of our revenues came from licensing our search engine to companies like AT&T, Microsoft, and CompuServe. At that stage, we bordered on an identity crisis; we needed to be great at something. One day, I woke up and realized that media is where the dollars are in this industry. More important, media is what we are best at in this company. Our audience was growing very rapidly, and I said that we should take a run at this idea. And we moved out of the technology model completely and focused all of our energies in media. That's where we've been ever since.

Any misgivings about that?

Not a single misgiving, no. Lycos has 94 million unique visitors right now. We generate 350 million page views every day. By any standard, that's a large audience. When we decided to focus on media, there were God knows how many companies -- 50, 100 -- trying to launch search engines and to establish themselves as an entry point to the Internet. Today, most of those companies don't exist. They've all just faded away.

You also focused on generating an operating profit, even though that was unfashionable until recently. Could Lycos have grown faster, attracted the recognition that it deserved, and surpassed Yahoo! as a brand if you had changed your tune and followed the status quo?

I don't know. Could we have grown faster? Maybe. But we would have grown recklessly. Would we have found the same happy ending? I don't think so. Business is all about profits. Your right to exist is driven by your ability to generate a return for something, for somebody.

But that was sacrilege two years ago.

Yeah, it was. It was crazy, wasn't it? We lived in an irrational world. We felt a sense of euphoria and believed that every Internet-based idea had to rise to the top. Now look what's happened. Lycos has experienced some valuation erosion, but we've escaped the devaluation of so many of our erstwhile competitors. For example, CMGI initially criticized our integration of the new and old worlds. When we tried to put the USA Networks transaction in place, CMGI very proudly and loudly stood up, banged its chest, and said that shouldn't happen. Today, CMGI has seen a valuation erosion of enormous proportions.

What gave you the conviction to withstand that pressure and stick with a more conservative approach?