Why do people like the Net? What is behind the so-called lunacy? Why are these stocks not tulip bulbs???
Three quick facts blew me away in the past 24 hours.
only hired 117 people last quarter. There are only 920 people who work there. That's an extremely slow pace of hiring vs. the revenue ramp. That means the dream scenario, the rapid increase of revs without a pickup in expenses, could be occurring. That means that profitability could be far more explosive than, say, a television network, where expenses are way too variable and revenues just don't grow as fast. If you can keep your table of employment low and your revs high, you can have gross margins that will be the envy of every industry.
(A word on this. I am long Yahoo! So, you can argue that I am just talking my position on this or anything else I am long. To which I say, hey, the employment numbers and revs are publicly available. My conclusions might not be, but that's why I disclose.)
Second, let's talk
. This company is developing a regional business model that basically takes the place of local classified ads. People are selling cars and lawnmowers on eBay. That's what the bread and butter of dead-tree classifieds are. As an old newspaperman myself, I can tell you that there's big money in classifieds, except for all of those operators and typists that take the stuff down. Oops!!! There goes that expense-control issue again: There are no operators standing by, no hundreds of typists to take the classifieds down. You the consumer do it.
Finally, you are
. You have too much inventory. You got to move it. What do you do? You go on eBay and enter the goods. They get sold. No extra cost. It's happening -- right now.
Who could have thought about this a year ago?
Contrast this with tulips: They look like onions but don't taste as good. They come up once a year. They look nice. Slow-growth biz.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo! and eBay, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at