Morgan Stanley's Meeker: The Internet Boom Is At Hand
By Riva Richmond Of DOW JONES NEWSWIRES
NEW YORK -- Mary Meeker is as jazzed about the Internet as ever.
The Morgan Stanley analyst, well known for her bullish and influential calls on Internet stocks during the late '90s craze, says the predicted boom is underway.
"The enthusiasm was well placed, it just got ahead of itself in many respects," Meeker said, speaking at the Interactive Local Media 2004 conference in Jersey City, N.J., Friday. "As we have said for a long time, from a wealth-creation standpoint, we believe we lived through a boomlet, followed by a bust, followed by a boom."
As evidence, Meeker pointed to the combined market value of eBay Inc. (EBAY), Google Inc. (GOOG), Yahoo Inc. (YHOO), Yahoo Japan Corp. and Amazon.com Inc. (AMZN), which was $231 billion as of Wednesday. That's a remarkable turnaround from $32 billion on Oct. 9, 2002, when the Nasdaq market bottomed, and a sum that has exceeded the March 10, 2000, peak of $178 billion.
The good news is, this time, revenue and profits are driving the boom, not just excited visions of a wired future. For two years now, Internet companies have mostly posted better-than-expected quarterly results, as growth in e-commerce and online advertising accelerated. In the third quarter, eBay reported 44% year-over-year revenue growth to $806 million. Yahoo's revenue rose 84% to $655 million and Google's doubled to $503 million. All reported handsome profits.
At work are rising numbers of Internet users globally and their increasing use of online services, combined with Internet companies' continuously improving ability profit, Meeker said. In fact, Internet companies' hot competition for consumers and advertisers is creating a virtuous circle, she said. Their feverish innovation is attracting even more users, driving more Internet use and giving their patrons more reason to spend.
Internet company innovation is focused on improving user experiences with simple, quick-to-download Web pages; providing more effective search engines and search-advertising tools; introducing more personalized and targeted content and ads; offering more sophisticated music, video and local content; and improving accessibility to content, whether on mobile devices or PCs, Meeker said.
"We've never had such a long list of (near-term) drivers" behind Internet user and usage - and Internet company - growth, she said. Meeker predicted 10% to 15% annual global user growth, 20% to 30% usage growth and more than 30% improvement in monetization metrics during the next two to four years.
The success of the big Internet players, particularly in search technology, is attracting attention from would-be rivals. In particular, Microsoft Corp. (MSFT) has mobilized to develop its own search engine, which Meeker believes could be available before Christmas. The move is in large measure designed to counter the threat posed by Google, which has entered Microsoft's turf with a new tool for searching files and e-mails in Windows PCs.
While Microsoft could become a competitive threat to established Internet players, Meeker argues its success isn't assured. Unless its search technology is clearly superior to those of Google and Yahoo, it will be hard for it to take share.
"Microsoft has to show their ability to compete, and they haven't quite done that," she said. "This is a more competitive market for Microsoft to play in than they've had in a long time."
Meeker believes the incumbents "all have a fair amount of running room for the next couple of years," but will only hold their positions if they stay cutting edge by continuing to innovate and acquire emerging companies.
"Execution on strategy, which can be hard to predict, will be the determinant of continued success," she said. |
