Syndicate
Internet Security Investments
The overwhelming growth of the Internet has originated a frenzy for buying securities of the Internet; that is, shares of “dot com” companies. This frenzy has transformed the directives and shareholders into millionaires and those investors that bought shares at the beginning obtained at least some benefits and then sold. The frenzy was at first enlightened by the relatively scarce number of shares in sale, which created a true evolution.
When arriving more and more dot com securities to the market, the immediate benefits where reserved for the strongest of the securities, up to a point in which many new securities ended in its first day of quotation under its offering price. Speculators (mainly the investment fund of growth securities and the small stock exchangers) were obsessed with securities of companies that do not have any benefits and that many times they do not even have an income, but that have reached prices of around 1,500 that of the sales. Since nothing endures forever, many of these securities have experimented substantial backward motions, in many cases under their initial public offer price.
As many stock observers have pointed out today’s passion for the Internet keeps many similarities with the frenzy that happened at the end of the twenties when the investors became crazy for buying securities of automobile and radio companies.
From the 30 companies that were leaders in 1928, only three remain today: RCA that reached a quotation of 500 dollars at the end of 1929 had to wait almost 50 years to reach again that price.
After this we can reasonably think that history will repeat itself again with the collapsing of many, if not of the majority, of the initial public offers of the actual issues, although if it only means that by a historical norm that will be between 80 and 90% of the new companies that will fall in the first years of existence.
What is really true about the Internet is that it has definitely changed the way of doing business, not only at a national scale, but also in a worldwide level. The geographic and national borders have become invisible and irrelevant; the movement towards the electronic commerce is still in diapers for which what stands in front of us is a vein of money for exploitation. But as it happens with all great innovations, we also should expect certain distortions in the working area and that of the flow of money.
Today the government of several states has been seeking the way in which to apply a fiscal tax to the commerce through the Internet, foreseeing that their income due to the taxing over their sales will diminish.
The development of the electronic commerce has given place to a change in the creation of companies and in the way of presenting the already established. We are facing a phenomenon that is obligating the companies to compete according to new game rules if they do not want to be wiped out from the commercial map. And thus, we see how big retail agencies are working to make an act of presence in the area of electronic contracting and as BarnesandNoble.com goes elbow to elbow with amazon.com. Anyway, we should not deduce from the past that today’s pioneering companies would be the survivors of tomorrow.
When evaluating an Internet company for a possible investment, maybe the most important aspect is that the Internet represents on its own. A way of eliminating the inter-mediation of taking from the middle of a person that is between the producer and the final user.
Many of the business models adopted nowadays by the Internet companies simply consist in replacing a form of inter-mediation (the retail store) for another kind of “store” that usually sells with discount, due that not having a local, the general expenses are less, and then, this model is based only in the comfort of the buy and of the price.
The Internet on its own changes the ground of the game due that it permits the consumer shop and seeks the best price using only an electronic robot.
Those companies that have a place in the market and give a service with an added value or that increase the direct contact between the producers and the users will be the ones to survive.
The search companies, such as Yahoo! Get from the ads that appear on their portal the majority of their income, but in the renewal of the ads there has been profits and losses, due that the companies that announce in it pay according to the visits they have on their ads and they can also bid for the place in which their ad will occupy according to the price they are willing to pay for each visit.