Speed Is Life

The former head of Lycos defends his portal strategy, diagnoses Yahoo!’s ailments, and encourages entrepreneurs to look over their shoulders — to study history with a vengeance.

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?

If you’re running a business, you ultimately have to show earnings and cash flow, or you have no business. It was illogical to ignore that. The fact that Lycos only took in $2 million of venture-capital money when others were pawing through tens of millions of dollars speaks to that belief, which rooted our strategy. We had a sense of fiscal conservatism, or Yankee frugality, from the beginning.

Of course, the market now recognizes that fiscal stability is what it’s all about. Don’t tell me about your revenue, tell me about your bottom line. Now the market not only expects that kind of stability, the market requires it. And the companies without a strong bottom line are encountering great difficulty.

Now, out of this mess, strong companies will emerge. Companies that did not exist five or six years ago will become behemoths in the decades ahead. Surely, we’ll come to recognize some international and global powerhouses that will rise from the ashes of the 2001 Internet meltdown. But many more companies will just fade away.

What companies do you expect to rise from the ashes?

Well, of course Terra Lycos …


Aside from Terra Lycos?

In the portal category, we will see a small handful of behemoths emerge. AOL has transformed into a much different company through its merger with Time Warner, but AOL is not going anywhere in my lifetime. It will only grow bigger. I like to believe that Terra Lycos is in that category of survivors. Yahoo! surely is, but I can’t envision Yahoo! remaining independent five years from now. It will ultimately get acquired, or it will merge with another company. Yahoo! had an opportunity to avoid that fate, but it let that opportunity get away.

What put Yahoo! in its current bind?

Yahoo!’s leaders were drinking the Internet Kool-Aid. They were too committed to Internet purity and were unwilling to recognize that convergence is a wonderful opportunity, rather than a threat to the medium. Yahoo! management felt that the Internet would overtake traditional media and render them obsolete. That wasn’t the case. At one point, Yahoo! had a $132 billion market cap. Today, Yahoo! exemplifies one of the greatest market erosions in history — not just in the Internet bubble.

At one time, Yahoo! could have purchased virtually all of the television networks combined. Today, its value is only a subset of the value of any one of those networks. What Yahoo! didn’t do is exactly what I tried to do with USA and exactly what AOL did do with Time Warner — take this lofty market valuation and try to build some long-term and sustainable assets.

Lycos is one of perhaps a half dozen “pure” Internet companies that managed to establish itself even though share prices — along with the whole industry — have been hammered into the ground. What’s allowed Lycos to make it this far?


We were able to identify emerging trends in the Internet industry, and we picked up some crucial themes before our competitors did. In some cases, that worked well for us. In other cases, we paid a penalty. We picked up the profit theme and lived through the attempted merger with USA. In hindsight, that merger would have been wonderful. At the time, it just couldn’t happen. We truly misjudged the market’s timing.

We also embraced the concept of community well before our traditional peers. We paid $61 million for Tripod about a year before Yahoo! paid $4.6 billion for GeoCities. Tripod and GeoCities had virtually identical audiences. We at Lycos saw community and built around it.

The third Lycos theme was the concept of a network online — a path that virtually every online media company has taken at this point. At the time, many people questioned why we would evolve from a mono-brand environment into a multi-brand environment.

You’re being generous. People weren’t just questioning. They were downright skeptical of the multi-brand approach.

They sure were. Yet today, Yahoo!, AOL, Microsoft, and everyone else across the board has followed that approach.

My teacher was history. Multi-brand environments have worked in every media organization that I studied. No single media company on Earth has achieved scale without operating in a multi-brand environment. I believed that if such an approach worked elsewhere, it would work on the Web.


It’s a mistake to look at the Internet as an industry. The Internet is a medium that enables hundreds of thousands of businesses across thousands of industries reach more customers, perform better services, and innovate product. To place Terra Lycos,, and Internet Capital Group in the same “Internet-industry bucket” is crazy. We have about as much in common as Revlon, Procter & Gamble, and Sears, Roebuck, and Co. Terra Lycos and the others are just three different companies.

Paul C. Judge ( is a Fast Company senior editor. Contact Bob Davis by email (