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


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