This is a sample Internet Review newsletter, originally sent to subscribers on Oct. 17.

I regularly look at many different sectors of the market in my job running a fund of hedge funds, as well as for my various writings. Sectors I regularly follow include alternative energy, homeland security, areas in information technology other than the Internet, nanotechnology, closed-end funds, and any deep-value stock or company with an activist following.

But no sector excites me as much as the Internet.

The Internet, by itself, is an emerging market, and every day there are new sources of profit that the various public companies are trying to exploit, and new private companies are getting funded every day that will get bought tomorrow by the six companies out there currently doing a landgrab -- Google ( GOOG), Yahoo! ( YHOO), InteractiveCorp ( IACI), News Corp. ( NWS), Time Warner ( TWX) and Microsoft ( MSFT).

Looking at the various statistics in the Internet sector is important for unearthing where the trends in profits and M&A will take us.

For instance, in an article earlier this year I outlined the demise of traditional media and pointed out that the right direction would be to look at the companies taking advantage of the 10 million (and rising) blogs out there. I identified New York Times ( NYT) as potentially losing the battle and said that whoever bought blog aggregators like weblogsinc.com or Gawker would be the potential winners.

The underlying statistic there was that print advertising (including classifieds) and radio advertising were being quickly surpassed by pay-per-click advertising, and that "eyeballs" were going from print to the blog world. New York Times has continued to disappoint since then; meanwhile AOL has bought weblogsinc, and although considered a dying beast just a few months ago, it now has the five landgrab companies that don't own it as possible M&A suitors.

That is a prime example of why I keep track of the stats. Not only because I love the space and it's fun to learn what's going on -- it's the only way to get a sense of where the money is flowing and how to get there first. In turn, it forms a big part of how I pick stocks for the model portfolio of the Internet Review.

Stat No. 1: Keyword Prices

The average price for search terms fell again: According to Fathom Online via Media Post, the average price to buy a keyword on a search engine was $1.44 in September, down from $1.50 in August, and 26% less than the 12-month high of $1.95 in April. The categories down the most were investment, down 17% to $1.46; telecom, down 15% to $1.62; and automotive, down 2% to $1.51.

Just to review: if you want to sell an item (let's say, hypothetically, dogfood) you would go to a search engine (Google being the common choice) and purchase the key words "dog food" for, let's say, 50 cents per click. Whenever anyone searches on the words "dog food" your ad would appear to the right. A click on the ad would result in your account being deducted 50 cents until you hit your allotted ad budget.

What does it mean that prices are declining, particularly when spending on search marketing is up 40% year over year? Gregg Steward from Fathom Online comments: "We continue to see more volume being pumped into this basic commodity market of words and, as volume increases, prices tend to stabilize."

As keyword purchases become a commodity, custom-tailored search engine ad campaigns become more important as companies seek to stand out and optimize their spending online. Although these stocks are not making the recommended list at this point, I am keeping an eye on CGI Holding ( THK) and Interchange ( INCX), two companies that specialize in creating search engine marketing campaigns for customers. Of the two companies, Interchange has the better balance sheet, but I'm nervous about its business prospects, particularly the focus on its new Local.com division.

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