Undeniably, the Internet in toto has indeed a brilliant future ahead of it. It will experience the astronomical growth of its predecessors of mass communication: telephones, radio and television. HOWEVER, there is one big monumental difference called EASE-OF-ENTRY in a business.

EASE-OF ENTRY simply means any and many Tom, Dick or Harrys will be entering the Internet business in the very near future. Be cognizant of the following. Little investment capital is required for start-up. There are no required licenses nor curtailing regulations to restrict wild growth. Literally, everyone and his Uncle will be entering the Internet bonanza - including the very deep-pocketed Communication Giants who are just now awaking to the potential of the Internet. Once the 'ATTs,' 'Time-Warners,' and 'RCAs' of the communication world enter the fray, then it will be as the business jungle has always dictated: THE SURVIVAL OF THE FITTEST.

At the far end of the EASE OF ENTRY Internet commercial service business is the CAPITAL INTENSIVE industry. Specifically, the telephone, radio and television industries are all Capital Intensive - which means anyone competing in those markets must have mega-bucks to create the necessary infra-structure in order to address the public's demand for these services. Not so with Internet business.

Any two guys and gals long on computer and cyber smarts can start an Internet business tomorrow. Just as the 'Yahoos,' 'AOLs,' 'eBays,' and 'Amazons' have done during the last few years. They offer the Internet service FREE or practically FREE to the cyber-consumer. They experience exponentially astronomical growth in subscriber numbers to their services. Subsequently, they contact a securities lawyer to smooth an IPO through the SEC and the NASD (the lawyer's services in exchange for FREE shares prior to the IPO). Finally, word is let out to US brokers that another 'Internet' high-flyer stock is about to be offered. In a feeding frenzy the Brokerage houses wet their pants in bidding for just a minuscule portion of the IPO underwriting…. The rest becomes unbelievable market history - bordering on Market Madness and Market Mania - reminiscent of the Tulip-Craze (1634), Mississippi Bubble (1720), South Sea Bubble (1719), Great Crash (1929), Japan Bubble (1989) etc etc etc

My point is the following. The Internet related stocks have enjoyed a phenomenal price run-up in the last two years, enviable as any in Wall Street's 200-year history. Forget Price to Earnings Ratios as a gauge to their real market value - as most have NO EARNINGS (or just a few pennies per share). The best way to put their market cap into some understandable perspective is to compare their total market cap to that of major blue-chip companies. Additionally, one should compare the market price/share to their REVENUES (annual sales).

Total Market Capitalization

AOL has an unbelievable market cap of $70 billion
Yahoo has a phenomenal market cap of $26 billion
Amazon has an incredulous market cap of $17 billion
eBay has a market cap of $11 billion (after only 3 months trading)

These market caps are multiple times greater than most S&P 500 companies - which took many decades of hard work and vast amounts of capital to build their enormous industries. There was NO EASE OF ENTRY for them, and competition was always fierce and unforgiving.

Market Capitalization to Revenues (Annual Sales)

This has NEVER been until now an accepted way of comparing the commercial value of publicly owned companies. It was literally invented so as to make some comparison of companies with ZERO EASRNINGS - or rather how to evaluate the degree of market madness. Can any reasonably prudent investor say the following does NOT defy all common business logic?

Microsoft shares sell for 20 TIMES REVENUES
Ebay shares sell for 370 TIMES REVENUES
Yahoo shares sell for 1,600 TIMES REVENUES

Look at the price movement during the last couple of years. In all cases it demonstrates classic-book price 'blow-off' characteristics. This means once the upward price momentum becomes less than the pull of 'gravity', like a stone thrown into the air, the price will plummet earth bound.