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Net Numbers Game Adds to Confusion

Media Matrix sees higher Web usage, but does it matter?

How quickly the crystal ball clouds up.

A month ago, disappointing Internet usage numbers from the

Media Metrix


ratings firm put a major hit on the market. But this time around, the monthly Web usage numbers didn't wield the same clout. Now Wall Street seems to be downplaying the importance of the monthly Web traffic data as a barometer of the Internet's health -- at least for now.

In late May, Media Metrix data indicated that the U.S. population surfing the World Wide Web fell to 61.1 million users in April from 61.6 million in March. That was the first reported drop in traffic since Media Matrix changed its measurement methodology in 1998. That wasn't what the market was expecting; the Internet Sector

index fell 3.5% in one day.

Fast forward to Tuesday morning. Web usage rose to 61.9 million in May, according to Media Matrix. So how did the Internet index react this time? It fell another 3%.

So much for the power of the numbers.

How much attention are people paying to Media Metrix data? Less and less, says Alexander Cheung, portfolio manager of the


Monument Internet fund. He notes that Media Metrix numbers aren't seasonally adjusted and do not include overseas growth.

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How do you explain last month's hiccup in Net stocks? "That's the beauty of the market," laughs Cheung. Internet investors who have seen nothing but growth "get accustomed to one direction. They see the stoplight ... and they will back off right away."

"A month or two really doesn't make a trend," Cheung says. "Especially after a big run-up last year." Plus, he says, the new data come at a time when there's a lot of other activity going on in Internet stocks. "The market has gone from a general buying binge to a general selling binge."

At the very least, it's foolhardy to predict an Internet trend based on the evidence of a single month. "It looks more like

last month's numbers may have been an anomaly," says Jeffrey Diecidue, managing director of

Unicom Capital

. "Everyone's relieved we didn't see a further decline in numbers."

In addition, points out Fritz Linkner, research analyst at

Husic Capital Management

, Web sites' reach -- the percentage of Internet users who visit them at least once a month -- can rise and fall month by month. An example of that in action, says Linkner, is the changing reach of the advertising network administered by



(a stock Husic doesn't hold). "Given the volatility they've had in monthly reach numbers, maybe one month is not a very accurate measure to use."

But on the Net there are few accurate measurements available. So apply caution when using numbers.