Internet Based Companies

[ENP]

Who invests in them?

I'm talking about the likes of Trade Me, Webjet, Wotif, REA Group, Car Sales, etc.

Some of them look like good companies to invest into, strong growth, good fundamentals, but I'm just not sure about them for the long term. How quickly technology can change and how quickly the next big thing could make their technology obsolete.

I prefer to invest into companies that won't change too much with technology.

What is everyone else's thoughts?

[percy]

Online sales for the likes of JBHiFi,Pumpkin Patch,Briscoes etc are growing at over 25% pa,while brick and motar stores are growing at under 2%.
Online sales are projected to grow at this level for the next five years.Projections are much the same for USA,Australia and NZ.
Who invests in them? ;; Me.!

[Stranger_Danger]

I've been in some of those names you mentioned.

They can be fantastic investments, but, my cheapskate value investor style gets me out early and often keeps me out.

I agree with you that none of them will be around in 100 years, but, neither will I!

In the shorter time (5, 10 years) many internet based companies have shown a habit of bouncing back hard from bad times, although obviously we only have 15-20 years data on this.

Put it this way. Forgetting about the internet, by using the internet, many such companies have developed business models where they (a) focus on one or two things (b) get really good at them (c) stock in depth in that area, ie, every book, every DVD, travel to everywhere (d) most importantly, are the low cost provider.

Using much more data - a couple hundred years - if you can find a company at a fair valuation, online or not, that exhibits these traits, you will likely do fine.

People get hung up on the internet. The point is, if Sam Morgan had created an auction market based on carrier pigeons that had the same margins, the same price discovery for sellers, the same range of merchants for buyers and the same scaleability, chances are we'd all be praising carrier pigeons.

It isn't about the internet. It is about how its used to drive a business that offers value for the customer and profit for the supplier in a "win, win" way that drives good long term economics.

[percy]

I agree a lot of businesses haven't a clue what they are doing,ie Harvey Norman,Myers etc while others are using it to great affect.I see Pumpkin Patch have closed their UK stores,and using online sales [via the internet]to drive their UK sales,and doing very well.

[Stranger_Danger]

Some models suit the internet better, other models will need to be changed.

Pumpkin Patch = own branded product, made at sweatshop expense levels, sold to westerners using the internet to promote an already strong brand, internet sales don't undercut the stores because its all company owned. This could work.

Harvey Norman = TV ads in a loud voice saying "Come to our sale!", where the prices are higher than everyday internet prices, largely because the real business model is owning bricks and mortar buildings in which franchisees pay rent and are wholesaled products. Any internet success hurts the franchised stores, and hurting the franchised stores threatens the whole model. This model can't work online.

[percy]

Some models suit the internet better, other models will need to be changed.

Pumpkin Patch = own branded product, made at sweatshop expense levels, sold to westerners using the internet to promote an already strong brand, internet sales don't undercut the stores because its all company owned. This could work.

Harvey Norman = TV ads in a loud voice saying "Come to our sale!", where the prices are higher than everyday internet prices, largely because the real business model is owning bricks and mortar buildings in which franchisees pay rent and are wholesaled products. Any internet success hurts the franchised stores, and hurting the franchised stores threatens the whole model. This model can't work online.

Totally agree.Therefore it pays to invest in businesses that suits the internet,and stay well away from busineesses affected by the internet.
As always there will be businesses that should do well on the internet,but don't. Badly run businesses in every field.
However what we are looking for,as investors,is a well run business,being at the right place at the right time to take advantage of the opportunities avaliable.

[trackers]

The company I'm desperate to buy is Fiftyone.com - but its privately owned :-(

A well done concept like that is sorely needed - How do they address returns? It seems thats the tricky part (plus things like power / plug conversions of electronic goods)

edit: nevermind, looks like its covered: http://www.fiftyone.com/solution/customer-care-returns