Four emerging Internet trends for investors

by: David Jackson

Market efficiency, changes in trend and Internet stocks argued that investors can make money by focusing on trends as they begin to emerge.  This short series of articles will try to accomplish that for Internet-related stocks.  Here’s the plan of action.  This post identifies four Internet trends.  The next post will look at the ramifications of those trends.  Subsequent posts will explore the implications for specific stocks.

Here are the four trends:

Trend 1: Web advertising becomes really useful

Until recently Internet advertising was like most other advertising: an annoying distraction.  The low conversion rates of banner ads and the spread of pop-up blockers proved it.  But contextual advertising on search engines and third party Web sites has fundamentally altered this.  Because they are relevant to the page on which the ad appears, contextual ads are actually useful. Over the next few years Internet ads will become even more useful: graphically richer, more personalized, and – particularly important for mobile devices - more localized.  At the same time, Web advertising technology has become far easier for managers of small sites to implement, and will continue to get more "Webmaster friendly".

Trend 2: Web sites become progressively easier and cheaper to build

A key point has been lost amid the media's sudden interest in blogs.  The dramatic growth of blogs is an indicator that it’s become far easier and cheaper for non-techies to publish a Web site. Personal blogs are the fad of today, but over the next few years companies, small businesses and non-profits will be able to build informational and transactional Web sites with less and less cost and effort. Those Web sites will include audio and video, as well as content tailored for mobile devices.

Trend 3: Syndication and filtering dramatically improve web publishing and information dissemination

The spread of RSS (Really Simple Syndication) and mark-up languages will have two effects.  First, it will become easier to access favorite authors and topics without having to remember web site addresses and plough through unwanted material.  Second, it will become easier to find and compare information.  Tags will enable fast access to product and service attributes, such as dates, prices, locations, and financial data.

The net impact will be that Web content will become more accessible and more usable.  Mark-up languages will also reinforce the fourth trend:

Trend 4: Search continues to improve and grow in significance

Search will become more topic (or product) specific, more personalized, more localized, and more accurate.  Search will replace the Yellow Pages as well as ads and listings in local newspapers.  Two important features of search will also become more obvious. First, search is increasingly being used as the on-ramp to the Web.  Even when people have already visited a web site, they often return to it by using a search engine instead of by typing the (known) Web address into their browser.  Second, search engines favor Web sites that are frequently updated and have tightly focused content.

That’s it.  The list isn’t exhaustive, and nothing here should be a surprise. But in the next piece I’m going to make some radical claims about what these trends imply.  Meanwhile, your comments are welcome.

Links and article tools:

1. This is the second article in a series about Internet investment themes.  The first was:

Market efficiency, changes in trend and Internet stocks
The next article in the series is:
Internet investing: A new world of fragmentation and transparency

2. Other Seeking Alpha articles about Internet stocks include:

Five quick thoughts on (NYSE:SHOP)

Why the buy-side doesn't understand (SHOP)

A lesson in technology and Internet investing from Netflix (NASDAQ:NFLX)

Netflix (NFLX) loses its future in a game of chicken

Google's future is not what you think

Will Google be forced to re-ignite the browser wars?

Don't confuse Internet stocks with tech stocks

and Will Tiffany be hit by the Internet?.

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