Adam Lashinsky has an article in Fortune (and online at CNN) today about the “new Net boom,” and how to invest in it without getting burned (again). If I’d written this article, it would have had a word count of 1: don’t.
The article makes some good points, however, and, thankfully, is more concerned with the Ciscos and the Googles than the Facebooks and the 13,451 or so online calendars.
It begins by correctly pointing out that when Bubble 1.0 burst, the internet kept on being the internet and has become more and more integral to our lives:
You don’t need us to tell you that today the Net is fulfilling many of the visions its wild-eyed prophets were preaching about just a few years ago. All the impossibly cool applications that seemed so elusive in the late 1990s–Internet phone calls, (legal) downloadable music and movies, high-speed web access on cellphones, online bill paying–are a taken-for-granted part of daily life.
Plus, many more people have broadband internet access now, making the pool of application users bigger than before.
It even addresses (kind of) my greater fool/IPOs in the making concern:
We know what you’re thinking right about now: If there’s a boom underway, then the Wall Street crowd must be fixing to sell us something. After all, we’ve been down this path before. But the investing landscape is very different this time.
In sum, the article says that new reporting requirements and the lower price of net stocks will work to prevent a bunch of silly IPOs.
Maybe. But as soon as the greater fools start believing the the lesser fools are nosing around on the net stock aisle, I suspect there will be plenty of products brought to market. They are working on the supply and waiting on the demand.
Before I invest in any meaningful way in any new net companies I need to see a business plan based on selling something other than ads and an exit strategy other than the hope of getting bought.
Too much of the new net world is being built on top of advertising revenue. I’ve said it before and I’ll say it again and again.
Advertising cannot support the weight of all these so called businesses for the medium or long term.
If you don’t agree with this, just wait. And watch.