TCS Daily


My Favorite Dot-com

By James K. Glassman - May 15, 2000 12:00 AM

One reason that I urge investors to buy shares in great companies and then hold them for several years is that short-term swings in the market are unpredictable - and unavoidable. Today's fad in the e-commerce "space" will be tomorrow's object of investor scorn. Yes, humans are more or less rational creatures, but just as individual people sometimes do things we can't understand, the market as a whole tends to overreact in both directions to new information.

For a long time, the pendulum was swinging in favor of dot-com gambles, and we saw companies with no business going public attracting huge investment dollars. The quest for Internet riches led many people to invest in website operators who didn't even have coherent theories on how they'd become profitable, forget whether they could actually execute. In this week's TechCentralStation poll, we'll leave it up to you to tell us how many dot-coms are for real and how many are just talk.

My guess is that when the votes are tabulated, many of you will have detected a very high BS quotient. In fact, it's now become conventional wisdom that consumer websites are all just one step away from the edge of the cliff. And that's why there may be a buying opportunity. The pendulum has swung away from dot-coms, so if you can spot a gem in the dot-com rough, this could be an opportune moment to invest.

How do you separate the pretenders from the contenders? I like buying companies whose employees are fanatical about serving the customer. That's one reason why I've been an Amazon.com booster for many years. I still believe that Amazon has the best customer experience on the Internet.

I'm not just saying that the site is technically reliable and that the books generally arrive on time. Amazon has created a kind of all-in-one shopping mall/magazine rack/online community/product encyclopedia on the Web. Along with selling everything from books to kitchen utensils to music to power tools, Amazon has a wonderful mix of expert advice and customer reviews.

It's a tightly-edited, informative, entertaining online publication, even if you don't buy anything. Which is why I think Amazon should be able to raise prices over time. This customer experience can't easily be copied, even by a behemoth like Wal-Mart.

I checked out the site last week and laughed out loud reading about the latest Amazon bestseller, "The Worst-Case Scenario Survival Handbook." The authors researched the best ways to survive dangerous situations that we've all seen in the movies. Readers can find out, for example, how to land an airplane, jump from a motorcycle to a moving car, or escape quicksand.

Obviously, this book is available from numerous retailers, online and off, but I think Amazon has a very compelling proposition for the e-shopper. Website visitors can buy the book or read more about it, or they can visit the kitchen area and learn about scaling knives, or they can read customer reviews of Santana's latest CD before tossing it in the virtual shopping cart. Beyond all the hype, beyond the debate about whether Amazon can "scale to profitability," one thing is for sure. This company has a great product, so this is one dot-com that seems built to last.
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