The spread of the Net's richest offerings is thus curtailed. But as painful as the current situation is for stock speculators and paper millionaires, it will in the end make for a healthier Internet Economy. Boom times ultimately undermine profitability because easy money brings more sellers and more capacity into markets. The resulting expansion of competition and supply makes it harder for everyone to make a buck. The shakeout that inevitably follows clears out the weakest competitors and forces the strongest to get even stronger.
Companies become more efficient and markets become more profitable.
We're now in the midst of the Internet's first shakeout. In this phase of market evolution, the keys to success are very different than in the expansion phase. Speed, creativity and incestuous partnering become relatively less valuable, while patience, efficiency and ruthless competitiveness become more valuable. The winners will be those who act strategically rather than tactically. They'll set their prices, for example, not simply to attract incremental customers, but to boost profits in some sectors while inflicting maximum pain on struggling competitors in others.