• Dow Jones, Monday, December 22, 2008 11:30 AM

The economic downturn could turn out to be "a golden opportunity" for the Web industry's leaders to solidify their dominant positions, says Dow Jones' Scott Morrison. As smaller competitors simply try to survive, the likes of Google, Netflix, and Amazon can invest in reinforcing customer relationships with new products, services, and technologies, helping to grow their market share further.

In a recent research note, Barclays Capital Analyst Doug Anmuth said he likes Google, Netflix, Amazon and Blue Nile because they have strong free cash flow that can be reinvested, giving them an opportunity to further distance themselves from competitors. "We believe certain segments within e-commerce and online advertising may actually be widening the gap with their competition more during this recession than even if we were in a more favorable overall economic environment," Anmuth said.

That said, none of these companies will emerge from the recession unscathed: Amazon and Netflix both lowered their fourth quarter revenue guidance, while Wall Street analysts recently downgraded fourth quarter revenue and earnings expectations for Google and Blue Nile. Collectively, these companies' stock prices have tumbled this year, with Google off 55% for the year, Amazon down 44%, and Blue Nile down 61%. Netflix is up 6% for the year but down 31% since April.

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