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Mary Meeker on the Internet

May 27th, 2004 · No Comments

John Battelle writes about the Morgan Stanley analyst hailed as the “queen of the Net”: “Her record is admittedly mixed, with flubs like her recommendation of AOL, which lost $150 billion in market cap after its merger with Time Warner (TWX) (the corporate parent of Business 2.0), and ExciteAtHome, which went from $35 billion to nothing. But in 2003, Meeker’s picks were up 78 percent, thanks to stocks she’d long championed, like Amazon, eBay, and Yahoo. If you’d had the fortitude to pile on in early 2001, when she reiterated her support of those companies, you’d be a damn sight richer today. And Meeker is still helping create new industries: Her prescient reports on the search market were part of why Morgan Stanley won a mandate in April to lead Google’s IPO.” Excerpts from the interview:

I still believe the wealth creation from the Internet will be greater than the value at the market peaks in early 2000. If you look at the four most highly capitalized global pure-play Internet companies — eBay, Yahoo Japan, Yahoo, and Amazon.com — they were worth about $220 billion in market capitalization at their respective peaks. They’re worth about $155 billion now, up from the bottoms of about $16 billion in 2000 and 2001.

There are a few basic things that many people may not fully appreciate yet about the Internet.

One is supply-and-demand chain management — knowing how to effectively determine demand and get products to consumers and businesses. The value of that is off the charts, and the Internet is helping drive process improvements — look at Dell.

Second, the leading Web companies have tens of millions of active customers, and their customer retention and acquisition costs are relatively low. This is allowing them, on a relative basis, to invest more in technology and user-experience improvements.

Third, the ability to connect to customers through search and e-mail and highly trafficked webpages helps weave the leading Web companies more pervasively into the fabric of everyday life, especially with broadband.

And last, North America accounts for only 29 percent of global Internet users, and that figure’s declining. China, with 80 million-plus Internet users, is the second-largest market today, and will likely be the largest in five years.

Mary Meeker recently wrote a report on the Internet in China.

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