• WSJ (paid subscription required), Tuesday, March 7, 2006 10:31 AM

In the fast-moving, high-stakes world of Internet media, constant spending has proved to be a requirement for "established players" wanting to stay ahead of smaller, lithe competitors ready to pounce on areas of visible weakness. This is the new reality, says The Wall Street Journal, perhaps best reflected in the volatile stock prices of media and technology companies on major stock exchanges around the world. These pressures mean Web companies need to spend heavily on personnel, technology, and products and services to stay ahead of competitors and relevant to consumers. Think of the present activity of major media and technology companies: Google, Yahoo and MSN investing heavily--and expected to increase spending--in new areas of search and broadband content; phone and cable companies investing billions in expanding the capacity of their networks; media giants like Viacom and News Corp underlining new content strategies that revolve around social networks; Apple rolling out a new iPod or computer product each month; and retailers like eBay investing billions in companies like Skype and Craigslist. In spite of the resulting climate of uncertainty, investors are showing a commitment to Web stocks: the tech sector's average price to earning ratio is 22, compared to the Standard & Poor's 500's P/E of 18. Of course the big guys prop that number up: Google's P/E is 73, eBay sits at 51, and Amazon trades at a multiple of 44. Analysts say these numbers show that the Web is far from mature, but as the area of the most activity, it's also the most likely to grow. The question for investors is: who will win, and by how much?  

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