Face Time: Ahem, Bob Davis Was Right

Like a lot of other dotcom executives, Bob Davis no longer is one. But in his case the choice was his, not that of angry shareholders and VCs. Davis burst onto the Internet stage in 1995 with that perky little search engine cum portal Lycos and made it profitable, even as others scrambled for revenues. Lycos beat earnings estimates for 19 consecutive quarters. Last October, as dotcoms melted, Davis pulled off a masterstroke, selling the company to Terra Networks, a subsidiary of the Spanish telecom giant Telefonica, for more than $5 billion, including $2 billion in cash.

Then he quit in February, leaving behind the world's third most popular online network, a behemoth with 98 million registered users in 41 countries and, because of Telefonica's 23 million wireless customers, a guaranteed global reach.

The story of how Davis built an Internet company and bailed at just the right moment offers absolutely no lessons on the Internet economy, Davis explains: "It is a terrible mistake to buy into the idea of the Internet economy. The business of the Internet is business, just as it's been for thousands of years."

And part of business is figuring out who's going to be the boss, which explains why he quit the almost-top job at TerraLycos. "I was hoping I wouldn't have to," concedes Davis. "But we had more than one hand on the tiller, and that's an impossible way to steer a company." The other hand belongs to Joaquim Agut, TerraLycos' CEO, who has a bigger claim to the job, since his company bought Davis'.

So Davis will have to be satisfied knowing that he's one of the few Internet entrepreneurs who rode the elevator to the penthouse and got off before it plunged earthward. That's not bad for a kid from the working-class south Boston neighborhood of Dorchester. Davis learned the basics as a salesman at GE and later at the now defunct office-automation pioneer Wang Labs--one of the hottest companies of its time before being blown away by DEC and others. In 1995 he was brought in by a fledgling venture-capital company, CMGI, to run a search-engine operation called Lycos (derived by the technology's creator from the Latin name for wolf spider). Davis had $1.2 million in seed money and, as he writes in a new autobiography, Speed Is Life, "largely untested technology in an industry nobody really understood."

At first he stumbled around: Would Lycos be a portal or a search engine? Make money through advertising or subscriptions? In early 1996, when Lycos was days away from an initial public offering, the folks at Netscape surprised Davis with a $5 million bill for the privilege of featuring Lycos on the Netscape start-up page (it had always been free). Lycos had only $1 million in revenues, and this Netscape larceny threatened to derail the IPO. But Davis and his team threw together a more disciplined business model, squeezed through the IPO hole and raised $40 million in a day's trading.

Still, Lycos struggled, reaching only 14% of Internet households, vs. Yahoo's 55%. Then in early 1997, the light bulb clicked on: acquire, acquire, acquire. In three years, Davis took advantage of a powerful new currency, equity, to purchase more than a dozen Internet sites. Taking a page from AOL's book, Lycos became a one-stop Internet "community," with brands that ranged from Web-page builder Tripod to Quote.com a financial chat service, and dating service Matchmaker.