The Internet Value Chain

THE INTERNET VALUE CHAIN
Parallels are made with the dot-com bubble at the turn
of the millennium, and there is an element of truth that
many of the online services and, to a lesser extent,
enabling technology companies have relatively high EV/
EBITDA multiples. The baskets of online services and
enabling technology companies in this case average
43.6x and 19.8x respectively, in contrast to 8.0x for the
connectivity providers and 6.6x for the user interface
companies.7 It is also true that, unlike most publicly
listed online services companies, many companies in
the other segments are ‘dividend stocks’, providing
shareholder returns through regular dividend payouts
rather than through stock price appreciation.
Online services companies have, on the whole, significantly outperformed
all other internet segments since 2009 in terms of market capitalisation.
When comparing the situation today with the turn of the
millennium, however, the online services companies
analysed here on the whole have proven revenue
streams, business models based on network effects or
other sources of competitive advantage, and identifiable
assets such as servers or proprietary technology (for
instance, search or advertising algorithms).
At the same time, they are also relatively unencumbered
by geographic boundaries or regulatory restrictions
(although there are indications that this is shifting, for
example, with the debates on privacy). Recent
commentary on stock market trends has suggested that
these firms are also benefiting from investor scepticism
about the prospects of traditional sectors of the
economy. Ironically, some of this scepticism is caused by
competition and disruption from the internet.
7 Based on historical economic value to trailing 12-month EBITDA for the last reporting period, which in most cases ends on 30 September 2015
29