Actually, I DID get five bucks on my first attempt at this!
Congrats, you are a winner! :) More than can be said of many...
Infrastructure is called "barrier to entry"...something you need to keep out competition. Like Intel has. Like AOL doesn't have.
Yes, there is no mystery that BTEs are low or non-existent for internet stocks. What counts, or should count, in place of BTE is name recognition and being first on the block, corraling customers. AOL, AMZN, and YHOO have done this so far. Don't underestimate the power of brand recognition and comfort level.
Sears was bid up to fantastic levels because of the Sears Catalog, that brought the convenience of home shopping to every tiny frontier town. Honestly, I don't see any difference between the hardcover and catalog versions of catalog merchandising..except it's theoretically easier for me to find the cheapest price on the internet. This is called "deflation"...it means that severe price wars will eat up profit margins and drive prices down. It means that stock prices will go down, not up.
I think I agree with you on this. That is why I am not a fan of the long term prospects of companies like AMZN. AOL, OTOH, I see as competing not in e-commerce directly, but in enterntainment. There are rumours about AOL+CBS, and Disney tried a takeover several years ago. With the eventual convergence of TV and the internet, the winner will be the company who can capture audience share and sell eyeballs. AOL has the inside track there. So for historical comparison, I think RCA might be a better analog than a utility. All this IMO, of course.
Content and advertising revenue is a business expense, not a profit.
The big difference between AOL and a utility is money derived from advertising revenue (like the Yellow Pages). The big IF: if companies find the cost of the internet maintenance and advertising cost doesn't give an adequate return on investment in an era of deflationary pricing, they won't pay the advertising costs or go to a cheaper competitor.
Yes, that is true... and will contribute to the shakeout. I do think we have a ways to go before that happens.
Conversely, the utilities are getting into the internet business..
If you got free ISP with your utility bill, would you switch?
Remember, AOL is a portal as well as an ISP, so switching would not be necessary. What would be a problem is the loss of subscription revenue, but again this is a long ways off.
I think the biggest sales pitch AOL (or Yahoo, for that matter) is its addictive quality. I need to see more studies here, but it looks like an increasing number of people are literally addicted to the internet sites..just like Ko or Mo, there's a certain set of the population who are addicted for life and form a repeat audience.
Exactly. As I said, it is like the entertainment business, audience share. Right now AOL is the equivalent of all the broadcast channels combined, with the remainder being the equivalent of cable channels.
The stock market, as a form of gambling, feeds a lot of the addictive qualities..it's also leading to a level of bankruptcies without equal in US history.
We have entered the stage of internet stock gambling. And yes, it is a sobering thought. But I think most people playing the internuts know they are gambling. It is not like the 20's, when investors were playing with 10% margin and thought they were investors. So when the bubble bursts, it will be interesting to see what happens to the highest flyers. I don't place AOL in that category yet, but if it goes up much more at this rate, it may well be.
I also suspect that a lot of the money from the OTC-BB marketplace has flowed over to the internuts. The OTC MM's killed the goose that laid their golden egg through greediness. It was not enough that they scalped outragous margins, they also had to run them up and down to squeeze the last dime out of the investors, until they all left.
These are interesting times we live in.
Yes, maybe utilities will be the answer.... :-) |
