Bullish About the Web
ONLINE ADS: WINNERS AND LOSERS — Perhaps because a Jan. 2 report (pdf) by JPMorgan Chase on Internet stocks ran 312 pages, it took a while for many bloggers to digest it. “Nothing but Net,” written by Imran Khan, a stock analyst, and his team at the investment bank …
Context & Ripple Effects
The Times piece is a second pass at Imran Khan's 312-page JPMorgan report "Nothing but Net," first picked up by TechCrunch in its January 2 write-up of JPMorgan's 2008 Internet outlook and only now fully digested by the blogging layer. That lag matters: a document that size functions less as a note than as a year-long reference frame for how the Street prices web stocks.
It also lands mid-arc on a running argument about whether the Web 2.0 buildout is overfunded. Kedrosky's late-2006 Web 2.0 short-sellers' list put the bear case on record, while the May 2007 Betting on the Future analysis weighed where durable value sits; a 312-page bull case from a major bank is the heaviest institutional counterweight that debate has produced.
First-order effects
- Investors tracking online advertising get a single consolidated framework from JPMorgan naming winners and losers across the ad market, replacing scattered sector notes with one house view.
- Imran Khan's team becomes the most-cited voice on Internet stocks going into 2008, since the report's length makes it the default citation for anyone arguing the bull or bear side.
Second-order effects
- Rival banks' internet analysts are pushed to respond with their own full-year outlooks rather than piecemeal calls, because a 312-page anchor resets what clients expect from coverage.
- Bloggers and financial media now have a shared scorecard to measure quarterly ad results against, which concentrates attention on whichever names Khan's team flagged as losers.
Third-order effects
- If the pattern holds, sell-side mega-reports become the mechanism through which Wall Street opinion consolidates around web advertising as the sector's core economic engine, crowding out earlier valuation debates about traffic or technology alone.
- A widely distributed bull consensus built before any downturn would sharpen the repricing if ad growth disappoints, since the same institutions would be forced to unwind a published position.
The trend: Annual sell-side mega-reports like "Nothing but Net" are turning Wall Street research into the central scoreboard for how online advertising and web stocks are priced.