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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Nicholas Thompson who wrote (37294)	1/27/1999 9:19:00 PM
From: llamaphlegm	Read Replies (1) \| Respond to of 164684

In case my esteemable colleague GR has not yet posted this, i leave the bears, bulls, lunatics (who apparently procreate very quickly around here) and bateman (special category) with this nugget from the OpEd page of today's NYT's. January 27, 1999 So Lucrative That It's Almost Profitable By NEAL A. MASIA ASHINGTON -- Eureka! I've been trying for months now to work out a way to capitalize on the Internet stock roller coaster. And I've finally hit on the perfect scheme. We've all read stories about "businesses" without profit (or even the near-term prospect of profit) that have market capitalizations in the billions. Wall Street analysts value these companies based on revenue growth, volume and more exotic measures heretofore unheard of: "eyeball counts," "traffic," "click-through rates" and the like. Most investors nervously justify the companies' huge losses as "investments" in creating a brand name; the theory is that once Web sites' owners build a loyal customer base, they will -- no one says when or how -- find a way to turn a profit. This rather odd valuation method explains why investors who bought into Amazon.com early on (or into dozens of other upstarts) have earned returns of 1,100 percent or so over the past year -- even though it costs Amazon about $1.21 to generate every dollar in revenue. Yet somehow, whenever I suggest to otherwise intelligent individuals that the Internet frenzy is the biggest speculative bubble in our lifetimes, they laugh at me. Even the recent plunge in Internet stock prices is, they insist, merely a slight correction, nothing to worry about. Overall, of course, my friends' portfolios have swelled while mine, mired in health care and biotech, has slipped into a coma. But I digress. I write instead to inform potential investors that I have come up with the ultimate Internet business. I guarantee tremendous revenue growth. I guarantee "eyeballs." I guarantee that my first-year losses will be a scant 5 percent of revenue -- it's a lock. (Compare that with Amazon's 21 percent margin!) Like most recent Internet issues, I don't foresee any profits on the horizon, but my daily traffic will be tremendous. I am sure that advertising revenue will go through the roof (someday). My idea is this: a site that sells $100 bills for $95. The losses are manageable -- and think of the revenue! I will build up a loyal following, a subscriber base of, no doubt, millions of "unique" site visitors. I will limit the offer only by restricting the orders to one (1) hundred-dollar bill per visit -- no automated visits allowed. Each purchaser will have a unique log-in name, and I am certain that I will be able to show that visitors return to the site. If I can get one million registered users to log on every day, my revenue will skyrocket to $665 million per week. By the end of the first month, revenue will probably lurch into the tens of billions. Then I will raise the price a bit -- perhaps to $96 -- and tout my earnings improvement: losses narrowed by 20 percent! (If you are reminded of the story of a shopkeeper who loses a nickel on every sale but plans to make it up in volume, then your memory is better than most Internet stock analysts'.) The following month I will again raise the price, to $97, this time narrowing my loss by 25 percent -- quite an improvement. I will take the business public within three months. Considering that Amazon has a market cap of about $18 billion, that my traffic will be higher than Amazon's and that my losses will then be at a mere 3 percent, I figure I should net at least $100 billion. Then, with a little luck, I will be able to pursue my true dream: owning a professional football team. Neal A. Masia is an economist.