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Has Internet Business Become Relevant for Stocks? (Part 1)

25 October 2007 - Features - Editor

Marketing is at best a secondary matter for most investors, so the subject gets short shrift when decisions about stocks are made. Internet marketing and electronic commerce have not made the kinds of waves in the worlds of stocks, as they have done in many other sectors of human enterprise. Investors are relieved by electronic versions of shares, and by the facility to buy and sell stocks without physical presence on any trading ring, but the World Wide Web has been largely ignored by Exchanges otherwise.

The time is ripe for change. Online business has made sufficient impacts in selected cases and countries for investors to take notice. The abilities of executive teams to exploit the technical features of the Internet have begun to seriously influence profitability and market shares. This is why a global survey by a top notch consultancy is something for all investors to study carefully.

The survey establishes three important developments with respect to stocks. Firstly, online advertising is here to stay. This raises the profitability barrier for all stocks, because advertising on the Internet is so much more cost-effective than investing in traditional media. Newspapers, television channels, and advertising agencies, which remain somnolent about this new trend of online advertising, could lose relevance, whereas search engines, Internet service providers, and cellular telephones with wide screens, can enjoy new revenue potentials.

An interesting finding of the survey is that online and offline marketing is not integrated as yet. Therefore, the short-term effects on expenditure levels are negative, though investors should ultimately look for communication cost savings through the Internet. The growth of the Services Sector must imply that productivity of marketing expenses will separate the best stocks from others, so analysts and owners must pull up their socks in terms of pushing for quick and full integration of online and offline branding.

Finally, the survey finds that a large number of businesses will begin to earn significant (at least 10%) of their revenues through the e-commerce route. This is extremely significant for all tiers of the distribution chain. Wholesale warehouses and doorstep delivery services will increase in importance, while retailing will change form, if not disappear altogether from the physical world. Already, we see a change from visiting a travel agent to buy travel tickets!

Has Internet Business Become Relevant for Stocks? (Part 2)

 


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