>>Consider America Online, the highest-priced ISP. Under your theory of market rationalization, AOL's membership should be imploding but it obviously isn't. Until proven otherwise Amazon is the online-retailing category-killer, and as it scales its offerings it will benefit from increasing returns. I think Amazon will amaze you, and the stock is telling the story.<<
1. Market rationalization takes time, and there is certainly more inertia keeping people from switching their ISP (and e-mail address), once established, than from switching retailers.
2. Most internet-related companies are still in the "give it away to build revenue" phase of development - the question is whether they can make the transition to turning the healthy profits needed to justify their market caps. I (and many others) will happily use YHOO's free news service and ignore their ads, but when they try to make real money off my "eyeballs" - either through more and pushier ads, invasion of my privacy, or charging a fee - you better believe I won't be back. Look at the AOL and GCTY privacy scandals, for example. These companies are assuming their customers will placidly sit still to be relieved of their fleece: it ain't gonna happen, especially with growing numbers of consumer comparison and watchdog groups. On the internet in particular, the truth will out.
3. The keiretsu is really the perfect explanation of what's going on. For a while, Japan had a keiretsu-dominated economy that seemed could do no wrong - all the middlemen you wanted miraculously prospering by employing each other. (In this case, for example, I believe ZDNet, part owned by Softbank, is a major advertiser on YHOO, also part owned by Softbank.) In Japan, the Nikkei climbing to 30,000 on the kind of blind optimism we're seeing now in the internet sector. The questions now are 1. how high will prices go before the house of cards collapses, not to reach those prices again in our lifetimes, 2. will it take the rest of the stock market down with it, and 3. will anyone end up in jail over this.
4. You have not explained the mechanism of this "amazing" money making ability AMZN will display, nor responded to Glenn's requests for any hint of what you think you see that we do not see (except for the always amusing "they lose money on every sale, but they'll make up for it in volume"). I can only conclude that you do not in fact have confidence in the company's prospects long term, but are just hitching a ride on the elephants and kicking up dust with your purported "fundamental long" posts.
OK, I can respect that.
e.b. |
