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Internet stocks are no fad

PERHAPS it’s because a number of Perth-based exploration businesses have re-invented themselves as Internet players or maybe it’s just that time of the financial year but the question I get asked several times a week lately is: “What about these Internet stocks then?”.

My first response is to say that I am not a financial advisor. My business is to put businesses lock, stock and barrel on to the Internet.

However, as the Internet is essential to my business I feel obliged to comment that the Internet is not a fad or some sort of financial market aberration.

It will not evaporate in a couple of months.

As Goldman Sachs & Co Internet research head Michael Parekh said: “The Internet is fundamentally real despite all the hype and volatility”.

“We feel the Internet is actually underhyped and this is only the beginning,” Mr Parekh said.

There are some pretty hard facts to support his case.

In 1994 corporate spending on information technology in the US accounted for one per cent of GDP.

This year that figure will rise to six per cent.

That is almost as much as Australia’s total GDP per year. Much of it is spent on Internet infrastructure.

Recent research by Nielsen Media Research and Commerce-Net shows more than half the adult population of North America now has Internet access.

Consumers continue their love affair with the Internet, spending an average of one hour a day online.

The number of women making purchases online is rising dramatically. The most popular items for women to buy on the web were books, CDs and videos with 9.6 million purchases of these items made during the past nine months.

Interestingly, the number of women buying computers over the Internet climbed fastest, up 160 per cent to 1.3 million over the previous nine months.

In 1995 Jupiter Communications predicted consumer electronic commerce would reach $3.1 billion in 1998.

Last year it was actually nearer US$13 billion.

In the business-to-business e-commerce environment, analysts continue to raise their predictions.

Forrester Research last year predicted online business-to-business would grow to US$327 billion by 20002 but recently revised this number to US$842 billion. Obviously, the figures are signs of a new industry growing rapidly, not some media-hyped fad.

As online technology magazine ZDNet stated: “Wall Street still is bullish on the future of e-commerce. Even with the recent swoon in Internet stocks, the market capitalisation of Internet firms skyrocketed to US$300 billion over the past four years.

“As the online infrastructure grows and profits come, Wall Street will pour even more money into virtual firms.”

In Australia, the listing of eCorp demonstrated there are local opportunities to benefit from the spectacular growth in the Internet industry.

The question still remains – which Internet stock?

Sorry. It’s not my job to provide financial advice but if you need it, at least pick an advisor who believes the Internet is real.

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