Why invest in the Internet? The view for 2002....
The Internet is the fastest growing industry in the world today and is a revolutionary medium of communication that will be unparalleled for years to come. Annual growth rates for many companies that gain the majority of their revenues from the internet will be well over 50% for the next few years. This is a rate that is much higher than in any other industry. Although many people are new to the Internet and view it as a technological breakthrough that will not become commonplace for years, the constant use of e-mail and the availability of high-speed access are causing the internet and the world wide web to become ingrained in our every day lives. The internet enables thousands of personal and commercial triumphs that have been virtually inconceivable since the beginning of time. For example, the internet allows us to communicate quicker and more efficiently. We can reach a relative on the other side of the globe within seconds via e-mail whereas we used to have to wait upwards of three weeks for "snail mail" to arrive in many small third-world countires. The internet also enables world commerce. We can now browse and order goods and services from companies all over the world within seconds whereas before we were limited by regional retailers. These goods come to us at cheaper prices because of an increase in competition and a lack of overhead and expensive marketing. For advertisers, the internet is able to reach a direct specified audience 24 hours a day, a situation that is far more efficient and appealing than television, radio, or newspaper.
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Sure enough, where there are new and rapidly developing forms of commerce and communication, there is plenty of money to be made, not just by businesses and institutions, but by individual investors. Over the past year internet stocks overall have experienced triple digit percentage gains in share price. This year alone internet companies are on pace to experience over 50% gains as a sector. Most internet stocks such as Amazon, Excite, and C|Net currently trade at high price-to-earnings ratios based on 1999 and afterwards' earnings. One can set these high valuations on internet-based companies because many of them, although not yet profitable, are currently experiencing growth rates much higher than in any other industry. This will often cause these companies to make the transition from large losses to extreme profitability much faster than companies in other industries. A good comparison for today's internet content and e-tailing companies would be television broadcast networks years ago. Emerging with only one or two channels, the industry grew to offer thousands of channels, many of which continue to receive millions of dollars in advertising revenue today. Several companies emerged as the leaders in this industry and subsequently, received investments by some of the world's largest corporations who all wanted a slice of the pie. The internet enables communication that would never have been possible before and investing in the internet is essentially investing in our society's inevitable and profitable future. Considering that less than 5% of our country uses the internet on a daily basis, and that the internet is in its infancy, we believe that we are at the starting point of a long social trend and that the leaders in the various internet sectors will experience extreme growth over the next three to five years because of this movement.
TsioKawe
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