Internet Man - internet mutual fund manager Ryan Jacob

Kiplinger's Personal Finance Magazine, May, 2000 by Robert Frick

Jacob says he's quick to ditch potential losers if he senses "shifts in the industry." Factors such as new, strong competitors and the inability of a management team to carry out its plans count as red flags. "If we have question marks like that, we're gone."

Those who know Jacob say his devotion to his system is absolute, like the by-the-book Boy Scout who would do battle over a leafy vegetable. "No matter what time of year, no matter what kind of market, his emphasis is on the method," says Dubrow. His confidence in that method results in a concentrated portfolio of about 25 stocks. "I'm a firm believer in putting all your eggs in one basket and watching that basket very closely," he says.

One of those eggs is iVillage, the Web site catering to women's needs for information and interaction in such areas as parenting, health and beauty. Simply looking at its income statement, iVillage looks like a big fat hole through which money gushes, having lost $28 million in the third quarter of last year, which is 130% more red ink than in the third quarter of 1998. However, iVillage is attracting heavy Internet traffic, and those visitors are high quality, judging from the "very lively" community boards on the site, says Jacob analyst Darren Chervitz.

Tapping into that 25-to-54 age group of women is the "holy grail for advertisers," says Chervitz, and as Jacob himself points out, media ventures such as USA Today and CNN lost millions in their genesis. The beauty of an Internet media play is reaching the elusive profit point: Once there, the company won't need to spend more money serving ten million people than it does five million people, yet profits (in theory) will double.

Aside from media plays such as iVillage, Jacob divides his Internet universe into communications, infrastructure and e-commerce companies, such as NextCard. NextCard provides credit cards online, and its hook is to gather customers much more cheaply through the Web than through traditional mailings. "They really understand how to use the Internet to market credit cards," says Jacob. Say you apply for a card and NextCard offers a deal to transfer $9,000 in debt to a NextCard Platinum card. "And you're like, what a coincidence! I have $9,000 on my other credit cards," says Jacob. "It's not a coincidence--they tap into the credit reports." But again, profitability is a long way off.

Recently Jacob has been adding more business-to-business e-commerce companies into the mix, such as Ventro, which is almost a prototype for B2B businesses. Ventro builds "vertical marketplaces," or soup-to-nuts systems for ordering and managing all the stuff that goes into complex enterprises. In the case of hospitals and other health care organizations, that amounts to about $11 billion a year lost in a supply chain riddled with inefficiencies, the company estimates. The technological expertise Ventro brings to the table will likely keep it ahead of competitors in the same business, says analyst Dubrow. And in the scramble to build Internet businesses, taking the lead is crucial.