He recalls being told by a scientist at Carnegie Mellon University that if you plotted on a chart the number of Internet users or of network parts needed, it would rise geometrically. But demand for Internet products and services, though strong, hasn't proven infinite. Once most companies set up a Web strategy and a home page, growth in their Internet spending tends to slow. As the overall economy has downshifted a bit, Internet-advertising dollars have flowed less readily. What's more, Internet companies had assumed shareholders would wait patiently for years before demanding that they show significant profits.
Prospects are more important than immediate earnings.
Yahoo at that time was trading at 500 times projected profits for 2000. Expectations got ahead of reality. But FreeMarkets' potential customers saw similar opportunities and began forming their own online procurement consortia. Mr. Friedman says he didn't foresee the creation of competing consortia. More than any other misconception, this was the most fundamental of the myths to which people succumbed.