In forming a logical story, analysts today tend to focus on Internet company revenues because profits are not yet present. This approach is fine if there is a persuasive business model that allows the translation of sales to profits over time. Still, investors are persuaded because past efforts by these entrepreneurs have created wealth. My nagging concern comes from the application of simple microeconomics. If an enterprise begins to create extraordinary profits it attracts competitors in many forms.
Competition brings price reductions and the profits return to normal.
The only exception to this is when a firm holds monopoly power, and in Jim Clark's world it seems the only one in that seat is Microsoft. If it costs virtually nothing to log onto a portal and order a book or CD, the ultimate charge for that service will be zero. No matter what its volume, if it doesn't figure out a way to create extraordinary profits, and dissuade hungry competitors, it will be a mortal company. Yet the experience of the last few years seems to point elsewhere. The brightest young engineers on the planet are attracted to people like Jim Clark.