Internet Valuations: Eyeballs or Bandwidth?

99/03/30

Consider two models for valuation of Internet services.

  • the eyeballs model assumes that content will be the main profit center (entertainment, shopping),
  • the bandwidth model assumes nothing other than the fact that valuable information will be transmitted, and that the demand for bandwidth will exceed the supply.
  • Wall Street currently is emphasizing the "eyeballs" as the scarce resource. The key resource, in my humble opinion, is and will remain "bandwidth".

    I think the latter model is more powerful, because, in the future, most of Internet traffic may not even involve human eyes!! It will be machines talking to each other, whether it's banking systems, dsitributed databases exchanging updates, lightbulbs, toasters, microwave ovens fridges transmitting your shopping list to the online grocer, etc.

    In other words, in the long run, all the advertising supported "media" type Internet services may only account for a fraction of what is actually going on on the net. Let them have the crumbs, bandwidth is the cake.


    Nemo Semret