Advertisers, Investors Like Internet Start-Up GoTo.com.

GOTO.COM Inc., a young Internet company that is the brainchild of prolific Idealab in Pasadena, is just the kind of endeavor that Wall Street loves these days.

When its initial public offering was launched on June 18, shares opened at $15 and quickly shot up to $28.50, before settling back that day to $22.38. Trading has been highly volatile in the months since, with the stock soaring as high as $114.50 before leveling off recently in the low $70 range.

What makes GoTo.com different from other search engines, like Excite or Lycos, is that it generates ad revenues not by selling banner ads or "advertorials." Instead, advertisers make a bid to GoTo.com on how much they will pay the company per user who clicks through to their sites; the highest bidder gets the highest placement in GoTo.com's search results.

Say an online bookstore is willing to pay a higher fee than its competitors. That would place the site first among the GoTo search results. The second highest bidder will appear second, and so on.

When GoTo.com launched its IPO, it had 7,500 advertisers. That grew to 16,000 by the end of September and is expected to keep rising, company officials said.

"I would compare it to the Yellow Pages," said analyst Lanny Baker with Salomon Smith Barney Inc. "From the consumer's perspective, you don't look in the Yellow Pages to find out who won the Civil War. But if you have a leaky sink, you will be interested in finding a plumber. GoTo sorts out the plumbers... It is totally unique."

Why would users want to go to a search engine that lists results solely on the basis of advertising rates? The premise, analysts and GoTo officials say, is that a company willing to pay a lot for advertising is a big player with a well-funded site that will be user-friendly and have a large selection.

"Essentially, GoTo is a marketplace where consumers are searching for solutions. They are searching for product services and information," said Jeffrey Brewer, GoTo's chief executive. "And advertisers are able to micro-target consumers."

In November, GoTo was the 20th most popular online site in the country, according to online research firm Media Metrix.

The company was founded in 1997, when Idealab's Bill Gross, thought it would be profitable to develop an online marketplace that introduces consumers to advertisers without any frills. GoTo.com has a simple home page with no photos, banner ads, stock quotes, and e-mail links. It delivers 40 search results per page, as opposed to 10 to 20 per page delivered by its competitors.

"You have a search engine that actually gives relevant results," said Kevin Prigel, an analyst who started StreetAdvisor.com. "The better your search results and the faster people get them means people will come back again."

In recent months, GoTo.com negotiated deals with EarthLink Network Inc. and MindSpring to be their default search engine. EarthLink and MindSpring will complete their merger early next year.

Like most new Web ventures, the company has yet to make a profit - reporting a net loss for the third quarter ended Sept. 30 of $7.6 million (18 cents per share), compared with a loss of $5.3 million (51 cents) for the like period a year earlier.

To many, GoTo.com is best known not for its site, but its suit.

In February, it filed a lawsuit against Walt Disney Co., maintaining that the Burbank-based company has used a green-dot logo in its Go.com subsidiary that is too similar to GoTo.com's logo.

In early November, GoTo's stock shot up when a federal court issued an injunction barring Disney from using the green-dot logo. But a few days later, a U.S. Court of Appeals ruling stayed that injunction pending appeal. The company believes that the similarity to Disney's site and logo has created confusion in the minds of users.

Meanwhile, company executives say they plan to keep the sparse look of their home page and concentrate on signing up more advertisers and finding more consumers.

"We are completely focused on helping the consumer find what they are looking for with our clean interface and 40 search results at a time," Brewer said. "Consumers say they like us and advertisers are signing up in droves."

                               GoTo.com Inc.
YEAR (Dec. 31)                 1998   1997
Revenue (thousands)            $822    $22
Operating Expenses (millions)  13.7    0.14
Operating Loss (millions)     (14.3)  (0.12)
Net Loss (millions)           (14.0)  (0.12)
Loss Per Share                ($1.4) ($0.01)
YEAR (Dec. 31)                         SUMMARY
Revenue (thousands)                    Business: Internet search engine
Operating Expenses (millions)          Headquarters: Pasadena
Operating Loss (millions)              CEO: Jeffrey Brewer
Net Loss (millions)                    Market Cap: $3.2 billion Dividend

                                       Yield: N/A [*]
Loss Per Share                         Total Liabilities: $13.2 million P/E
                                       Ratio: N/A [*]
                                       Long-Term Debt: $986,000
(*.)GoTo.com does not pay dividends and has no earnings.