The sudsy days of dot-com bubble stocks have been over for years. If you want to make it as a publicly traded Internet company today, you need profitable growth and a defendable moat. That is great news for investors, who have to sift through a less cluttered minefield of potential opportunities, but it's not foolproof.
In a nutshell, some Internet stocks are better than others. You know that, of course, but I'm going to get into the Olympian swing by singling out the three Internet stocks that I feel are worthy of wearing medals around their necks.
You may agree. You may disagree. We'll get into that later, but for now I hear the "do no evil" anthem starting, so let's turn our attention to the podium where the awards are being handed out.
Good luck awarding the top prize in this event to anyone other than Google
One crown goes with other, naturally. Responding to search queries provides the juiciest opportunity to deliver credible leads to high-paying sponsors. A smaller player like Yahoo!
Google's latest quarter shows that the company's model is still rocking. Revenue for the period soared 39% to $5.37 billion, with earnings increasing 34% to $1.25 billion, or $3.92 a share. Google isn't perfect. It is, at its very heart, a media advertising company, and that isn't a very attractive sector in this stingy economy. Google has missed Wall Street's profit targets in three of the past five quarters, including last month's second-quarter report.
However, until proven otherwise, it's hard to give the gold to any other company. Between its market-dominant position in search and its cloud-computing initiatives, Google will continue to be a juggernaut in the industry and a thorn in the sides of its rivals.
One of the few places on the planet where Google isn't a market leader just happens to be the world's most populous nation. China's version of Google is Baidu.com
Baidu is making the most of China's booming economy. Revenue doubled in its latest quarter. Earnings rose by 87%, and would have doubled if not for the company's capital investments in Japan as it tries to grow its search-engine reach beyond China.
Baidu may not seem cheap, at 43 times next year's earnings, but go back a paragraph and reread the part about the company's heady growth rates. China lapped the United States this summer in terms of the number of Internet users, and it's just getting warmed up. Just a fifth of the country is online at the moment. You have to like the Chinese search engines -- like Baidu, Google, and Sohu.com's
My third medalist may not be a popular choice. I can't seem to mention the company's name without my email filling up with angry power sellers who have bolted from the namesake site. The company also overpaid for Web chat leader Skype. Sure, but what has eBay done for you lately?
The company's most recent quarter was sound. Revenue and net income grew by roughly 20%. Even if listings have slowed at eBay.com, the company still has the financial-transactions market leader in PayPal. It also has a very robust global portfolio of online classifieds websites, attracting 74 million monthly unique visitors who go through nearly 3 billion pages a month.
If you want to go region-specific, you will find faster-growing marketplaces like Gmarket
So stand tall and proud on that podium, medal recipients. Your hard work has paid off.
More medal-worthy reads:
Longtime Fool contributor Rick Munarriz is a fan of any person -- or company -- with the skills to win a medal this summer. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.