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To: Diamond Jim who wrote (84805)	7/2/1999 9:52:00 AM
From: Diamond Jim	Respond to of 186894

Is Internet Growth Slowing? The price of any stock is always based upon two things: Perceptions of future business prospects for the company Demand for the stock, in relation to the available supply The first can be measured, analyzed, and predicted. The second cannot. Internet stocks have been the beneficiary of a strong rise in both factors, but particularly from the second factor. Most internet stocks have issued relatively small proportions of their outstanding stock as float, the stock available for trading. This low supply for a strong demand increases the price. But the first perception, that the internet will be the greatest economic boom ever, is the most obvious factor pointed to by most analysts. And because no one could accurately predict either the eventually size or "top" of the overall internet, factor one became irrelevant in judging internet stocks. Factor two has controlled the price of the biggest internet stocks throughout 1997 and 1998, their greatest years. There is an Eventual Ceiling But the internet can't grow forever. And if you accept this, it means that someday, usage of the internet will begin to flatten out, and grow at much smaller rates. When that happens, and is measurable, much of the high valuations of internet stocks will be taken down. The duty of management, to shareholders, at internet companies is to make sure that their revenues increase at a fast enough pace to keep the stock price rising, as the multiple the market gives them declines. That will be no easy task. When Will Growth Flatten? So when will the growth of the internet, overall, begin to flatten? Frankly, at Briefing.com we don't really know, but neither does anyone else. However, it is time to begin thinking about it. Here are four recent events that brought us to this conclusion. PC Usage and Internet Usage is not rising rapidly as PCs and the internet penetrate the rest of the population. A recent survey done by Arbitron New Media, as reported in the June 21 Wall Street Journal, showed that while 59% of all US homes now have PCs, the percentage of adults using the machines fell from 90% to 53%. The numbers are especially interesting because they exclude usage by children. This means that while the new PCs being purchased is going up, the new users aren't really using them for much. The study also showed that the new PC owners do sign up for internet services, bringing the total US internet population to 38% of the nation's population. But only 2/3 of those signed up for internet services actually use them regularly or had made an online purchase. This survey, the full results of which have still not yet been released, may indicate that the current incarnation of the internet is simply too hard to use to capture the rest of the mass market yet.