WEEKLY COMMENT: 2003: The year of profitability

Given that, apart from Lastminute.com, there are few large UK dotcoms left, this week of figures represents the best opportunity to take the temperature of the market and it's safe to say that it far exceeds that of the pavements of London and the sidewalks of New York.

DoubleClick, the biggest name in online advertising; Amazon, the biggest name in etail; and Ask Jeeves, the biggest (floated) name in online search all reported this week, and all - that's all - unveiled their first full year of profit.

DoubleClick hailed the resurrection of online advertising, Amazon the continued uptake of e-commerce (and price cuts), and Ask Jeeves the continued rise of search. But all their results pointed helpfully to one thing - cost cutting. Each recorded a greater proportional rise in their bottom line than in their sales, as continued sales growth crossed paths at last with the intense management of the cost of those sales. And the profitability that so many anti-net bores predicted - and hoped - would never come is here. So what now for all three?

Frustratingly, Amazon's results were met with concern by analysts and the stock market. They felt that the company's continued drive to cut prices suggested an inevitable spiral and marked the shares down. In fact, Jeff Bezos is sticking to the policy that continues to make Amazon a model for customer service. Everything about the site, the way one can search and order, the prices and the speed of delivery, makes the user feel that at last there is a shop designed solely for shoppers. Cheaper prices will bring us begging for more as Wal-Mart and Asda have shown in the offline world, and especially when delivered in as high quality a manner as on Amazon. It is our humble opinion that doing the right thing by shoppers is probably a good thing for an online shop - Amazon will be fine.

DoubleClick too has succeeded by focus. It was approximately two years ago the company made the decision to drop its marketing services operations - all of them - and concentrate on the technology behind them. Supplying as volatile a sector as advertising is always a risky busines and, if anything, DoubleClick's retreat from the front line of marketing puts it more at risk as spending in the sector flucutuates. But as the largest name in a tight niche, continued R&D should see it dominate and secure steady revenues, whatever the sector's condition. Its performance come the next ad trough will be the litmus test for DoubleClick's survival.

Ask Jeeves meanwhile sits in a market so competitive, it must be almost impossible to keep up, but somewhat against the odds, keep up it does. Despite its huge brand recall among internet users it has taken a technology and usability overhaul at Ask Jeeves to push it into profit as, up until three months ago, most experienced internet users viewed the site as BBC Four viewers might view ITV. Now, the Teoma-provided search technology and the usability of its site are much improved. Accompanied by a continued rise in the stock of sponsored search tools, the company has found solid profit.

Strategically, Ask Jeeves faces a significantly greater challenge than its results-week rivals, battling as it is in a still emerging sector. Consolidation in search remains an issue. Ask itself, which although perceived as a potential target, is sitting on a war-chest of about £100m that it has confirmed will be used to buy something by the end of the summer, if only it can find something to buy. Targets on the European mainland include the likes of Mirago, the European competitor to Overture and Espotting. For the moment, however, the cash pile is at least protection against the advances of other players in a sector full of talent. Ask Jeeves's future is still rosy but uncertain.



29 January 2004:

29 January 2004:

28 January 2004:

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