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October 15, 1998

ZAPATA RETREATS FROM WEB STRATEGY, BACK TO FISH OIL

By CBR Staff Writer

One the of the most audacious attempts to manufacture a business model based on the internet has been abandoned after just six months of real time, which was seemingly an internet lifetime for Zapata Corp. The Texan fish oil manufacturer, established by President George Bush in the 1950s has abandoned its 1990s dream of becoming a major portal through the acquisition of, or investment in, 31 internet content properties, mainly, it says because of the volatility in international financial markets. It has also scrapped plans to spin off its online unit, Zap Corp from its fish oil processing firm, Omega Protein Corp and its food services company, Viskase Companies Inc. The company did not get back to us to explain how many of the 31 deals had been completed, or from how many of the deals it would withdraw. Shares in Zapata closed down just $0.375 or 5.2% at $6.875 after rising above $7 shortly after the announcement was made. At the end of August Zapata announced that it had retained Salomon Smith Barney to advise on its acquisition strategy as well as alternatives, it said at the time (09/01/98). As well as the financial advisors obviously telling the company it was pursuing the wrong path, the strategy has been criticized widely by many ‘new media’ types as being inherently old-school; smacking of the approach taken by media giant Time Warner Inc with its Pathfinder web site, which simply bolted on titles to a central site (09/01/98). Portals such as Yahoo, Infoseek and Excite – for which Zapata made an audacious unsolicited $1.7bn bid in May (05/22/98) – integrate content they license from various sources, usually in non-exclusive deals. They create their differentiatons by the services added around the content, such as email and chat. While a few of the sites Zapata acquired made money in their own right, many were pretty washed up or obscure, which makes its eagerness to buy them all the more curious. The first two properties Zapata bought were Word and Charged, two veteran internet zines that Zapata bought from Icon CMT Corp for $2m. Icon had already closed the titles due to increasing losses. They were the only two featuring on the zap.com web site yesterday, and seem like the only to survive under the Zapata name, for now at least. The remainder of the content has disappeared and the site promises a redesign soon. Among the other famous web names swept up in the Zap tsunami was the Attitude Network, best know by its Happy Puppy games subsidiary (08/06/98) and the CoolChat web community (07/13/98). The happy Puppy team were expected to have become the core management team of Zap, but the deal was only described as tentative at the time of the announcement. The strategy sent Zapata’s shares to a peak of just under $25 in the summer, which was apparently higher than they had been for more than 10 years. Life with Zapata was entertaining while it lasted and we’ll probably never see such a misguided attempt to co-opt the web again.

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