>>Electronic commerce ho-ho-hum after holidays
Investors have been betting big on e-commerce stocks in recent weeks. Their hope, it seems, is that holiday shoppers will choose to shop online rather than stand in line at real-world stores. But the Red Herring Online Insider News column questions whether Internet companies will ever make money. Writer David Simons says holiday shopping alone can't offset aggressive spending on marketing. He points out that some of the biggest winners in the stock market this month have been spending big money to market themselves. So big, in fact, that marketing costs alone outpace gross profits. Amazon.com (AMZN) reported marketing expenses as 107 percent of gross profits last quarter and says it will increase its marketing spending. CDnow (CDNW), meanwhile, is raising marketing spending by 527 percent, and fellow online music retailer N2K (NTKI) is upping its marketing spending by 1,550 percent. Simons says the stock market has chosen to view these as investments, but he wonders what will happen when the stock market realizes the risks may never pay off. Simons' question for investors is whether establishing an Internet brand will gain permanent customer loyalty or whether consumer behavior on the Internet will require perpetually outsized marketing budgets. More on this recommendation is available at redherring.com.
Internet bidding bodes well
The best online customer may be the one with a business. Internet.com investment analyst Steve Harmon writes in the Internet Stock Report that marrying the business customer with one of the successful means of selling on the Internet, the auction format, could be profitable. He says the real heavy lifting and deal flow may come from business-to-business auction action because of the much bigger dollar volumes. Harmon was responding to a reader's question about Onsale.com (ONSL), which has a business-to-business auction site, and he said he also thinks eBay (EBAY) has added excitement to the e-commerce field with its auction format. Harmon responds to a query about Network Solutions (NSOL), the dominant force in the Internet domain-name registration game, by saying he views it as strong, based on its leadership and the effort it would take rivals to overcome its advantage. But, with its stock up 422 percent this year, Harmon writes that the company has enjoyed a huge run and may not have much ground left to gain in 1998. More on this recommendation is available at internetnews.com;
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