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Don’t let the bastards grind you down

by Toby Ward on Thu 02 Feb 2006 10:24 PM PST | Permanent Link | Cosmos

Last week Yahoo! reported record profits – double the profit of last year. What was Wall Street’s response? Hammer it. The stock dropped quickly because it failed to reach the expectations of a few analysts. Those ‘expectations’ were off a couple of pennies per share. Yahoo’s stock is now less than it was a year ago despite doubling its profit on tremendous grouwth. Yahoo’s price-to-earnings ratio now sits at under 27.

Pessimism continues to proliferate Wall Street and Main Street. Ironically, this is the complete opposite of the trend six years ago when Wall Street couldn’t buy enough Internet stocks – sending prices to outrageously high and unconscionable levels. Those same sage investors now turn down their noses at Internet stocks, driving the prices to levels lower than would otherwise be seen as reasonable to outside onlookers. USA Today’s index of 50 Internet stocks increased just 1% in 2005. Without Google, it would have lost 8.2%.

Does this mean you should hesitate to invest in your website? An informed decision is required. Let’s take a look at some of the numbers:

Almost 80 percent of North Americans have Internet access.
More than 50 percent have made online purchases.
A majority use the Internet as a decision-making tool.
Online retail sales in the two weeks preceding Christmas were up 29% over last year to US$3.03 billion.
The Internet is cited as the most influential channel on luxury purchasing (cited by 44 percent of affluent purchasers).
35% of first-time buyers consider the Internet to be their most important informational tool, as compared to 8.2% naming TV
Online newspaper reading is up 30% to 53.6 million visitors a month during the fourth quarter of 2005
39%of North Americans use online banking.
73.5% of e-commerce sites estimate sales growth of 15 to 35% this year.
60% of chain retailers estimate web sales growth of 25-200 percent.
Time spent online by adult Canadians has increased 50% since 2002 and Internet use is ready to overtake watching television.

Those numbers reflect a different story then the dogged, pessimistic tale woven by Wall Street. Its credibility as it relates to Internet stocks was ruined in the bubble of 1999 – 2000. That credibility continues to fail today.

“And it's not for a lack of profit,” writes USA Today’s Matt Krantz in Dot-coms' song and dance no longer entertains investors. “Forty-eight of the current members of the Internet 50 that were public in 2000 have seen their profits as a group quadruple since then. Google and Salesforce.com were private in 2000, so that doesn't even include Google's massive profit contribution.”

Here’s another key fact: according to the IDC FutureScan, all the indicators depict an expectation of 5% growth in U.S. IT spending this year. In other words, off the street and in the offices, business is investing in IT and the Web.

Don’t be scared away by Wall Street. Instead, listen to and embrace what your customers demand.