In a 310-page report titled “U.S. Internet: The End of the Beginning,” analyst Jeffrey Lindsay at teh wealth management firm Bernstein forecasts that Google and Amazon.com are the Internet companies best able to weather the current economic downturn, while some other major Internet players will be acquired or broken up into smaller pieces. The key differences? Google and Amazon have stated close to their original businesses and competencies, while companies like Yahoo and eBay have spread out into a multitude of other arenas, and operate more like conglomerates.
“We expect two players to continue to perform strongly, Google and Amazon,” Lindsay writes in the report. “Both Google and Amazon.com are still racking up annual growth rates in the 30–40 percent range, with only a relatively modest slowdown in sight.”
Lindsay sees Yahoo eventually being sold to Microsoft—perhaps in a piecemeal fashion—and Barry Diller’s InterActiveCorp (IAC) going through with a planned five-way breakup in August. Lindsay speculates online auction giant eBay could find itself in the crosshairs of a major suitor in the future, and might consider spinning off PayPal and/or Skype into standalone businesses in order to make an acquisition work.
Although Lindsay projects Google and Amazon as long-term Internet winners, he notes both companies face challenges. Google needs to prove it can move into the mobile Internet arena with the same assertiveness is has shown on the desktop, and Amazon will have to figure out how to cope with the falling hammer of state and regional sales taxes on purchases—although Lindsay notes as a large company with significant resources, it probably has a better chance of clearing that hurdle than smaller e-commerce operations.
