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Market valuation of net companies is in a pretty strange realm these days.
It appears increasingly unrelated to revenue and earnings.  The one that
stunned me was the astronomical price AOL paid for ICQ...which had members,
but almost no revenue at all.  The financial assumptioins behind such
outpriced private deals may turn out to be accurate, eventually, but I have
serious doubts.

In the public market there is a different phenomena at work.  Investors
know the Net is a good long term investment, but there are so few pure net
plays available, that those that are get bid up very fast to levels they do
not deserve on the face of modest revenues and earning.  The result is that
the stronger newcomers, such as some portals, can use their inflated
valuation to acquire other firms and technology like wild.   Large media
firms have acquired portals, or big stakes in them.  The investment acts as
a staking horse within the Net businesses for the traditional firm.  In
this role, these staked businesses acquire other services, accumulating
techniques, integrating products, that augment or unlock an expanded range
of business models.




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