Critical mass. It's such an important concept in technology, but the phrase is so overused that most people don't realize what it actually means. Google (GOOG - commentary - Cramer's Take) long ago hit critical mass as a search engine, and the company continues to leverage that critical mass by layering new applications into its search engine, including the ability to type in:
Define: Critical mass
Doing so brings up several definitions, among them:
The minimum quantity of fissile material required for a nuclear chain reaction.
The scale or volume at which processes become self-perpetuating.
As I wrote here at the time, Apple's (AAPL - commentary - Cramer's Take) goal when it went into the music business was to reach critical mass -- to sell enough iPods and control enough of the MP3 player business to become the de facto standard of digital music. At some point, the average consumer came to know that the only clear choice in MP3 players was the iPod.
And when Apple hit critical mass in the MP3 player market, it set the stage for a 500% move in the stock.
Where else can we look to find a product hitting critical mass? Look for clues such as companies building their business models off another's business model. Look for new products crossing into the mainstream.
One company currently reaching for critical mass is eBay (EBAY - commentary - Cramer's Take) and its Skype division. eBay saw companies like iSkoot building business models on top of Skype. With millions of people already using Skype, eBay decided that there was momentum toward critical mass in VoIP and it was worth risking up to $4 billion on the start-up. eBay has already played this game successfully with PayPal, which hit critical mass in online transactions and is now the de facto standard.
Investing Bottom Line: Results Matter 2/15/2006 12:32 PM EST Amid the endless debates on economic arcana is a lesson for investors to focus on results.
Technology Back in Buying Mode 2/14/2006 1:02 PM EST With the market pulling back, I'm stepping in to buy some favorite stocks, and a new name, too.
At the time of publication, the firm in which Willard is a partner was net long Apple, Google, Broadcom, eBay, SanDisk and PortalPlayer, although positions can change at any time and without notice.
Cody Willard is a partner in a buy-side firm and a contributor to TheStreet.com's RealMoney. He also produces a premium product for TheStreet.com called The Telecom Connection and is the founder of Teleconomics.com. The firm in which Willard is a partner may, from time to time, have long or short positions in, or buy or sell the securities, or derivatives thereof, of companies mentioned in his columns.None of the information in this column constitutes, or is intended to constitute, a recommendation by Willard of any particular security or trading strategy or a determination by Willard that any security or trading strategy is suitable for any specific person. Willard appreciates your feedback -- click here to send him an email.
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