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Tony,

We're going to have to agree to disagree on this one. I believe online advertising is not just here to stay, but will expand at an extraordinary rate over the next decade.

Today, Web ads allow for better targeting and much better measurement. Going into a magazine advertisement, there's no way to really know how many people will see your ad. This is a risk that advertisers would love to take out of process. The Web allows them to do just that.

What you'll often hear from users is "Hey, I never click on these ads. They're worthless." But think how many ads readers mentally click on when they read a newspaper. Very few. Further, think how many radio listeners flip channels when an ad airs. In no medium is advertising an automatic hit for the entire audience.

What that means, though, is that targeting is of increasing importance. If you're offering discount brokerage services, you wouldn't want to advertise on Nickelodeon. But when considering a financial magazine versus a financial web site, would it not comfort you as an advertiser to know that there is a way to count how many folks saw the page, there is a way to count how many folks clicked through to your site, and there is a way to communicate immediately with those who contacted you.

To provide a little bit of guidance beyond this, a few years ago, The Motley Fool had to pull an advertiser (at their request) immediately, because the responses overwhelmed their capacity to classify them and respond to them. This is a problem that we've had on a fairly continuing basis, with advertisers large and small. Even though many of us may rarely look at these ads, and even less frequently click through them, the online discount brokerage industry has been built from the ground up by online advertising. It's an industry that is taking Wall Street by storm -- and I think it's a fine example of repeated advertising into an environment that can allows targeting and tight measurement.

My belief has only grown stronger, over the past three years, that the real risk in the world of media is in the traditional mediums: newspaper, magazine, television, radio -- where targeting and tracking is less efficient. If you take a look at the numbers comparing a company like CBS to Yahoo!, I think you'll see that what might've seemed a stabler business (CBS) is actually at risk (and has resulted in layoffs this past year). And what seems the less stable business (Yahoo!) is actually firming up very quickly (and has resulted in Yahoo!'s inability to find enough candidates to hire).

Time will tell here. But I think the inflection point in media is so profound right now, and yet so clear in the numbers, that Yahoo! is a late-stage Tweener headed quickly for a crown. . . while the traditional media is flying into storm clouds. Again, what looks stable isn't; what looks immature is aging at a thrice accelerated rate.

The beauty of it all is that if we are wrong, as managers of this portfolio, we've risked just 6.6% of our total assets -- after having shored the portfolio up with dominant companies that stand to benefit from the changes in today's business world. Pretty Foolish, I think.

Tom Gardner

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