William:
You compound your arrogance with ignorance -- a delightful combination. Perhaps you'd do better to occasionally post something of substance that one could debate. Since you seem utterly incapable of doing so, I'll give you an example. Kindly put your rose colored myopic spin on this and explain to us all how this bodes well for amzn.
LP
Silicon Valley: Slowing Traffic Growth
Worries Web Watchers
By Suzanne Galante
Staff Reporter
8/20/98 10:30 AM ET
SAN FRANCISCO -- Traffic figures show the Internet's growth
has started to slow, and that has the Street worried.
Investors big and small have taken Internet stocks for a ride
on the assumption that Internet growth is soaring. But now a
handful of recent earnings reports suggest a disturbing trend
toward a Netwide slowdown in growth.
Buried in second-quarter earnings announcements from
America Online (AOL:NYSE), Excite (XCIT:Nasdaq),
Infoseek (SEEK:Nasdaq) and Yahoo! (YHOO:Nasdaq) were
signs of slowing growth. That's bad just at face value. But
factor in the skittish mood on Wall Street and stunted Net
growth looms even larger.
"Two years ago growth on the Internet was exploding, a year
ago on it was on fire," says Robert Seidman, publisher of
well-read Online Insider newsletter. "But now it isn't doubling
every six months, and that affects the Yahoos and the
Excites."
Look at AOL. In the second quarter, its growth cooled in two
ways. First, the average user spent 4% less time logged on
in the June quarter than in the March quarter. In the same
period of 1997, usage grew 5.5%. Second, AOL signed up
665,000 users during the quarter, a 5.3% rise from the
previous quarter. A year ago during the same period, the
giant online service expanded its base by 7%. Tricia
Primrose, a company spokeswoman, said strong
second-quarter growth in 1997 was fueled by a change in
monthly pricing plans, so year-over-year comparisons are
hard to make.
But traffic growth across the heavily trafficked portal sites,
which wouldn't be affected by AOL's pricing changes, also
tailed off in the most recent quarter. Yahoo reported traffic
growth of 21% from the previous quarter, the slowest in the
company's history. In the same period a year ago, Yahoo's
traffic rose 27%. Excite's traffic rose just 10%, down from
33% last year; Infoseek's traffic actually fell 8%, against a
31% gain last year.
Each company tied the slower growth to summer, typically a
sluggish season for Net traffic. But when asked why traffic
growth this summer was slower than even last summer's,
only Yahoo offered an explanation.
"The bottom line is that the law of big numbers is kicking in,"
says Gary Valenzuela, Yahoo's chief financial officer.
"Clearly, as the numbers get larger, to maintain the same
potential growth is more and more difficult. But we are still
very early on in the adoption of the Internet."
And revenues and earnings are on the rise. In Yahoo's most
recent quarter, for example, the company reported operating
profits of $8.1 million, or 15 cents a share, compared with a
loss of $300,000, or 2 cents a share, in the second quarter a
year ago. Revenue reached $41.2 million, nearly triple the
year-earlier's $14 million.
But growth is still slowing, which is worrisome this early in
the game. Remember, Internet stock valuations have
skyrocketed in recent months on the premise that heady
revenue growth would continue for years to come.
"The trend is still a slowing trend," says Brian Oakes, an
analyst at Lehman Brothers (a Yahoo underwriter with a
neutral rating on the stock). "Valuations say that this was a
never-ending business. But now it seems as if there are
limitations to how far the business can grow."
It's even possible that Yahoo and others may not have
gained new customers in the past quarter, though that's
tough to decipher. Page-view growth might reflect increased
usage from existing customers: According to
RelevantKnowledge, an Internet rating service, Yahoo had
28.6 million unique users in March, but by the end of July
had just 26.5 million users, a 7% drop. Infoseek's unique
users fell 15% over that same period, while Excite lost 3%
and Lycos tumbled 12%. (RelevantKnowledge started
tracking the numbers last September, so year-on-year
comparisons aren't possible.)
All in all, while page views for these companies increased,
the number of people looking at their sites fell. (The
companies declined to comment on RelevantKnowledge's
numbers, saying they hadn't looked at them closely.
Valenzuela said Yahoo's internal numbers show unique
users are growing, as are page views.)
Traffic is the Internet's lifeblood, and it is the key to moving
Net companies toward profitability. Right now, revenue
growth is all investors have to bank on because the Net has
mostly been an unprofitable place to operate. If growth does
continue to slow, that could throw off the valuation models.
Analysts suggest the acquisitions Net companies have
made to beef up their offerings to surfers can also mask the
slowdown in traffic growth. Lycos recently signed a definitive
agreement to acquire directory WhoWhere, even after it
acquired Tripod in February. In the past year Yahoo bought
Four11 while Excite bought Classifieds2000. Through those
deals, the portals have bundled the traffic of the acquired
companies in with their own.
"Those kinds of acquisitions mask the growth," says
Seidman. "It makes it harder to see just the Yahoo stuff."
"These companies are based on potential, not
fundamentals," adds Seidman. "AOL and Yahoo have
demonstrated a bit of the potential [by reporting profits], but
for the most part, they are not performing where they are
valued. But over the next couple of years, they have to move
away from potential to delivery. You can't bank on potential
forever." |
