As a result, there is an overallocation of resources to projects that will never generate significant revenues, let alone profits. This implies a funding oversupply in the Internet arena. For example, personal-finance related sites may make sense in Hong Kong. It can support maybe four or five. One reason for the rapid pace of the Internet's growth is that it's free.
Internet companies can give away information because their cost of capital is virtually zero.
This in turn forces many Old Economy companies also to give away their services on-line. If they didn't, they would lose market share. Most still haven't figured out how to generate significant revenue. In fact, many Internet companies that used to generate revenues cannot charge for their services any longer because an upstart competitor now offers the same services for free. Oversubscribed IPOs have provided a steady stream of funds, filling the war chests of the New Economy champions and allowing them to spend with abandon.