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The New New Economy

Don't look now, but E-commerce -- and E-commerce companies -- are staging a comeback.

Except for Xerox and FedEx, few corporate names ever make it into the lexicon of action verbs. The latest entry, however, appears to be search-engine specialist Google, which is now invoked routinely by users of the Internet (“How did you find me?” “I just Googled your name.”).

While Google’s migration into the realm of public usage may be surprising, it’s not nearly as surprising as its migration into the realm of public markets. Google management is expected to take the company public in a deal that could be valued as high as $20 billion.

The underwriting would be the surest signal yet that the retreat from all things Net may finally be over. Of late, commercials for online businesses—not seen for the past two years—have started popping up on television once again.

Such profile-raising is big news in the virtual world. Even bigger news: the recent run-up in the share prices of many dot-coms. During the first three quarters of 2003, the stock price of Ebay Inc., the E-commerce standard-bearer, jumped from $34 to just over $54 (the company also launched a two-for-one stock split). Likewise, the share price of book-and-movie giant Amazon.com more than doubled during that same period.

Those spikes—plus the emergence of such lesser-known but thriving dot-coms as RedEnvelope and prototyper Quickparts.com—could have finance executives revisiting their dot-com strategies. Odd as it may sound, investing in Internet projects may make sense again. Same thing for mimicking successful E-business models. Wal-Mart Stores Inc., for example, is gearing up to compete with Internet movie darling Netflix Inc.

Talk of acquiring an Internet company is no longer grounds for institutionalization, either. Consider InterActive-Corp, the New York­based owner of TV shopping channel HSN. The company, which is run by former Vivendi Universal boss Barry Diller, has gone on an E-acquisition frenzy during the past six months, purchasing Expedia, Hotwire .com, and Hotels.com, among others.

Contrarian plays? Perhaps. But E-commerce veterans say consumers and business customers have finally grown accustomed to electronic commerce. A recent survey, for instance, showed that electronic bill presentation and payment (EBPP) has finally made its way into the mainstream: 57 percent of respondents said they pay at least one bill electronically. In 2000 that number was more like 17 percent. “The connectivity the Internet provides to businesses is still a huge benefit,” says Mark Jensen, national director of venture-capital services at Deloitte Touche Tohmatsu in New York. “It’s as true today as it was in 2000. The Internet does change everything.”

Big Pipes

So does money. And unlike the Twistie.coms and AgletEmporium.nets of the late 1990s, the survivors of the dot-com shakeout are generating real revenues.

Take LendingTree Inc., a dot-com that has reaped the benefits of the recent mortgage-refinancing boom. In 2002, the online loan and real-estate exchange racked up sales of $111 million, a net income of $9 million (compared with a $29.3 million net loss in 2001), and sales growth of 74.01 percent. Those numbers spurred the interest of InterActiveCorp, which bought LendingTree in August in a stock deal valued at about $730 million.

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