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Non-Tech : Tulipomania Blowoff Contest: Why and When will it end?
YHOO 52.580.0%Jun 26 5:00 PM EST
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To: Dale Baker who wrote (2430)1/6/2000 8:50:00 AM
From: Zog  Read Replies (1) of 3543
 
Let me clear up the issue of "no profits." That is a little simplistic. Sure internet companies will make profits, but there will be zero economic profits. That is, they will make enough money to stay in business and make a return on investments. However, they will not make "excessive" profits (i.e., monopoly profits such as Microsoft is accused of making). The internet prevents the development of monopoly power, so competition will drive profits down to the level where it is just profitable to stay in business.

Lets also look for a minute at some of your examples (I cannot address each one, since I do not know the details of each). AOL is making money, but look at all the free ISP coming out (I guess CMGI and ATHM announced one today). How can AOL survive with its rich valuation given these free ISPs? Hard to keep any pricing power when your competition is giving it away! From what you wrote about NSOL, it sounds like it is given monopoly rights by the Dept. of Commerce, so I am not surprised they make money. Some of the other examples you cite are more support services (software, consulting), where the barriers to entry are different so the economics may be different. But still, I doubt that excess profits will be made, since there is nothing aside from brand loyalty to keep other firms out.
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