A VC - Latest Comments in The Internet Is Alive And Well (As An Investment)

Re: The Internet Is Alive And Well (As An Investment)

Mark Essel — Tue, 08 Sep 2009 16:00:11 -0000

Howdy Ed, if you don't mind me asking how'd you come across this comment a month later?

I still am dedicated to search and it's potentially disruptive changes when incorporating user semantic data, as well as semantic algorithms running on all rss info.

I'm curious what your venture is building. You can contact me on friendfeed (messel, or Twitter at victusfate)

Re: The Internet Is Alive And Well (As An Investment)

Dave Pinsen — Tue, 08 Sep 2009 12:51:07 -0000

The company I mentioned above is up about 150% today as I write this, on news that it landed a huge long-term contract to supply its proprietary product to BHP Billiton. I blogged about that today, The Power of Positive News.

Re: The Internet Is Alive And Well (As An Investment)

Ed Aster — Tue, 08 Sep 2009 12:18:14 -0000

Hi Mark,
Excellent insight, I am part of a venture going live in 2 weeks using Yahoo and sveral others as our partners to create shopping components for these portals. we are all still sweating knowing though the size and scale of these search engines are hughe it aint going to happen overnight. We will work it slow and easy , manage it and operate it like any other start up.
Regards,
Ed Aster
New Zealand

Re: The Internet Is Alive And Well (As An Investment)

fredwilson — Sat, 08 Aug 2009 15:35:24 -0000

This is a great comment. If james had written this, I'd agree with him as I agree with you (mostly)

I think youtube and skype are great assets but maybe in the wrong hands (ebay) or undermonetized (because google can get away with that)

Re: The Internet Is Alive And Well (As An Investment)

Richard Kain — Fri, 07 Aug 2009 15:18:54 -0000

I'd say "Freemium" is more than a buzzword -- it is a new way to monetize relationships with customers. There are tangible proof points of quite a few companies making very good returns on investments.

However I'm with James on the investibility of the internet. The very openness and lack of barriers to entry, the ease of viral marketing all decrease the need for capital. When there is a low need for capital the value an investor has to pay to own part of a company is higher, diminishing returns. Hence there may be exceptionally good businesses to be had out there, but the likelihood for an investor without sterling seed-stage connections to outperform the market is minimal at best. If you aren't investing in an internet company before its cosmic inflationary stage, you're out of luck. Facebook and Twitter might have a good ROI one day but its the very early stage investors who will get any meaningful return from it. Meanwhile, how's that investment in Slide at 500m pre coming along?

This includes, by the way, the large scale publicly traded internet companies (that instead of buying their own stock) are making acquisitions of later stage companies that either have been a general drag on their finances (YouTube) or outright failures (Skype.) That some of these acquisitions are overpaid by the acquirers for "strategic reasons" shows the peril to long term value of even powerful current franchises.

Put another way, how many publicly traded internet companies have outperformed the market (or their previous growth trajectories) after making an acquisition over $250 million? I would be very wary as an Amazon shareholder if minimally profitable companies like Zappos have to be regularly taken over at huge premiums to inoculate against competitive risk.

Re: The Internet Is Alive And Well (As An Investment)

TheNowMall — Thu, 30 Jul 2009 16:02:26 -0000

A bit of both J

Re: The Internet Is Alive And Well (As An Investment)

fredwilson — Wed, 29 Jul 2009 18:22:09 -0000

Is this a comment or an advertisement?

Re: The Internet Is Alive And Well (As An Investment)

TheNowMall — Tue, 28 Jul 2009 14:43:13 -0000

My partners and I at www.TheNOWmall.com applied the Internet to our 30 years experience in rapid order fulfillment of groceries, restaurant & fast food & retail items. Along the way, we patented off-premise call center staffing (now Arise.com) and earned a Smithsonian Award for Internet-related technologies. We have proven to increase participating store sales by 15% and profits by 58%, while providing employment for thousands. I'd say the Internet is alive and well as an investment...now we're rolling out our patented network nationwide with our strategic alliance with major fleet owners in the taxi industry to provide service 2/7/365 usually within 45 minutes (7-10 mins from the store cashier). Our revenue sharing program offers participants an ROI of 79%

Re: The Internet Is Alive And Well (As An Investment)

Bob Hedrick — Sun, 26 Jul 2009 14:45:37 -0000

My take is that the author, James Altucher, really misses the boat on this. Of course, he is trying to sell newspapers, not investment advice.

The Internet never was and never will be an investment. You cannot buy stock in the Internet. You never will be able to buy stock in the Internet. Of course, you can buy stocks in companies that operate on, provide services for, provide equipment for, will use the Internet integrally in their business model, etc. And this is where the rub comes. Few companies have been able to make money recently on the Internet because it is basically a communication channel. Perhaps, the most sophisticated communications channel we have ever observed or imagined, let alone ubiquitously implemented, but still a communications channel. It's a wide pipe that you can shove stuff down back and forth, like encyclopedias, like networks of friends, etc.

I would agree that the transmission hardware and software of the Internet appears to be a mature market. So are nearly all things related to Web 1. Like shrink wrapped software (look at Microsoft's unappreciated stock price for the past five years), and investments in Internet transmission hardware and software would not appear to be big gainers anytime soon due to maturity of market, if not post maturity. On the other hand, business models that rely pragmatically upon Web 2.0 and that can create communities around their product or sell related products into existing communities would appear to be reasonable investments to consider. Unless the product is revolutionary in some way like the Internet was during its embryonic period, such investments are unlikely to grow as rapidly as Amazon, Google, and even Yahoo did during their heyday.

Re: The Internet Is Alive And Well (As An Investment)

Seenator — Tue, 21 Jul 2009 08:57:26 -0000

Fred,

I am very late to the party. But, I had helped Bill Burham get together some data on Internet Companies a couple of years ago.

Its available here -

http://spreadsheets.google....

I took a preliminary glance at the companies and quite a few of them are profitable and growing companies. Perhaps, the internet sector has more companies as a % of total companies that are growing/profitable than most other sectors.

I read James article and I was a little confused by his central argument. I am not sure if his argument that
1) Public Internet Companies are generally profitable (The data from Bill's spreadsheets dont seem to suggest that)

2) The multiples doesn't justify the potential growth (which maybe a valid point).

If his point is the 2nd, then he should have perhaps gone with a less sensational headline such as "The Public Internet companies don't justify the multiples"

Re: The Internet Is Alive And Well (As An Investment)

fredwilson — Tue, 21 Jul 2009 03:40:12 -0000

Great suggestion. I think art, psychology, anthropology, design, etc would all be really valuable disciplines for a software engineer in today's world

Re: The Internet Is Alive And Well (As An Investment)

FreeLineGuru — Mon, 20 Jul 2009 23:57:13 -0000

"The goal is to mimic the internet onto the real world"
cool idea!

Re: The Internet Is Alive And Well (As An Investment)

davenathan — Mon, 20 Jul 2009 18:01:12 -0000

The biggest no-brainer in online marketing would be Craigslist serving up Google AdSense ads.

Re: The Internet Is Alive And Well (As An Investment)

GlennKelman — Mon, 20 Jul 2009 17:57:17 -0000

I like browsing actual bookstores too but would rather run Amazon, and often I would rather buy from Amazon so I don't have to take the book to the postoffice...

Re: The Internet Is Alive And Well (As An Investment)

James Altucher — Mon, 20 Jul 2009 16:45:39 -0000

If you want to invest in the developing world my recommendation is twofold: cement and motorcycles before Internet. For a discussion as to why I recommend this book: http://www.amazon.com/Findi...

Re: The Internet Is Alive And Well (As An Investment)

James Altucher — Mon, 20 Jul 2009 16:41:39 -0000

Actually, most of the original automobile companies were out of business by 1935. Some were consolidated (Dodge, for instance) but not all. And then there were three.

Re: The Internet Is Alive And Well (As An Investment)

hardaway — Mon, 20 Jul 2009 16:21:58 -0000

I might be cynical, but whenever I see an article in the WSJ that says something's dead, it often means we are on the brink of a monumental run-up in values. I read through most of these comments, and a lot has been said, but I still think no one has adequately figured in the power of the developing world.

Re: The Internet Is Alive And Well (As An Investment)

hardaway — Mon, 20 Jul 2009 16:13:13 -0000

Yeah, but all of that took almost a hundred years, and plenty of smart investors MADE a lot of money investing in automobile companies along the way. That's too simplistic for an intelligent guy like you.

Re: The Internet Is Alive And Well (As An Investment)

Keenan — Mon, 20 Jul 2009 16:06:02 -0000

You're right Fred. However, depending on which perspective you are taking, the returns and investment perspective is very different. As a VC, you can make money through an exit w/o the business ever making money or being overly profitable or profitable at all for that matter.

The public markets are a little more unforgiving, (Google aside), the ability for the average investor to make money on a pure Internet play (especially one that hasn't made any money or a strong business model) has become a little difficult as of late. The lack of a strong IPO market impact this as well. No Internet IPO's fewer opportunities for the avg investor to invest. I think Twitter maybe a perfect example of this. I suspect Twitter will exit to an existing business. Great investment for the VC community, no opportunity for the average investor.

Yes there is money to be made in the Internet and there are and will continue to be more opportunities. The breadth of opportunities and the potential returns however vary depending on who you are an where you sit. And I think currently they are very different.

Re: The Internet Is Alive And Well (As An Investment)

ShanaC — Mon, 20 Jul 2009 15:09:54 -0000

That being said- I still go with the grand master model of great art- you copy until someone finds a model to steal. Most fail, the best succeed.

Re: The Internet Is Alive And Well (As An Investment)

ShanaC — Mon, 20 Jul 2009 15:06:55 -0000

If you want someone to make a few calls- getting free/gnu type programs to get music is not difficult. ;)

Re: The Internet Is Alive And Well (As An Investment)

James Altucher — Mon, 20 Jul 2009 14:27:03 -0000

Alongside my post above, a lot of people here are saying that I'm just arguing the merits or demerits of the new "freemium" model. This is not new either. Its as old as the first caveman who offered his slavegirl crack for free and kept her begging for more. "freemium" is the latest buzzword I'll chalk up there with "eyeballs" and "B2B". Its fancy and drives book sales and (as Chris Anderson admits) expensive lecture gigs.

Don't get me wrong. I love the internet. I invest in it. I've started Internet-based companies and advised other companies on their internet strategies. But don't smoke too much crack or you become an addict.

Re: The Internet Is Alive And Well (As An Investment)

James Altucher — Mon, 20 Jul 2009 14:22:55 -0000

Since 1994 people have been saying, "the internet is a new business model". Sadly, there's never such thing as a "new business model". The only business model is "makes cash" and you can throw in "has good growth prospects" and for something thats an excellent business model you can throw in "and has good margins". The Internet's dream was all three in spades and that just never came to pass except for maybe one company (Google) and we'll see when that ship finally passes.

Many things have rewired humanity. Particularly plumbing. But it doesn't mean I'm going to invest in Chemed (CHE), which has a 90% market share in the US on plumbing services (via roto-rooter, founded in the middle of the great depression in 1935). Actually, come to think of it, CHE might be a better investment than GOOG right here.

Re: The Internet Is Alive And Well (As An Investment)

ShanaC — Mon, 20 Jul 2009 14:19:57 -0000

;-) Realize the newbie is the newbie- and a newbie who wants to be on the edge of the curve to see past its horizon- so your answer is fine. I search.

Re: The Internet Is Alive And Well (As An Investment)

Terry J Leach — Mon, 20 Jul 2009 14:07:38 -0000

@pruett.....I agree with you, except I would add one caveat to future engineer in the computer science field and that would be to become a "renaissance" engineer by studying beyond their chosen field. Studying beyond engineering and sciences fields would enable them to bring difference thinking/problem solving skills to small agile start up.