Mary G. Meeker

By Heather Green
Business Week

September 27, 1999

Poor Mary Meeker. When she started covering technology companies as an analyst at Salomon Brothers Inc. in 1989, it looked as though she had come late to a doozy of a party. The PC revolution was well under way, and it seemed that nothing else would come along during her career that could possibly be its match. Still, she learned the fine art of trend-spotting from some of the sharpest analysts in New York--just in case another technology revolution should happen to come along.

Boy, was she ready when it did. Meeker, by then at Morgan Stanley Dean Witter (MWD), not only called the Internet early as a mega business opportunity, but, with her insightful commentaries and bold predictions, she helped just about everybody else see it, too. She and a handful of colleagues penned three pieces of standout trend analysis--the Internet Report in 1995, followed by advertising and e-commerce studies in 1996 and 1997--that became virtual bibles for investors and CEOs alike. ''She gets it, got it earlier than most, and was able to articulate it to the business community in a way they could understand,'' says John Chambers, CEO of Cisco Systems Inc. (CSCO)

Nutty Market? Meeker is an unlikely seer. Born and raised in rural Indiana, she's plain-spoken and humble. But all that only masks her laser-sharp analytical skills. Her specialty: Making sense out of bedlam. Like the day one of her early discoveries, Netscape Communications Corp., went public in 1995. ''I will never forget that,'' Meeker says. ''We were on the trading floor when Netscape was trading at 72. Someone turned to me and said 'Isn't this exciting?' and I just looked at him and almost started to cry because now I had to deal with this.''

The market seemed to have gone nuts. Meeker's challenge was to explain it to Wall Street. She saw that new rules were required for evaluating Net startups. These companies didn't have profits. In some cases, they didn't even ask customers to pay for their goods. What they had, she understood, was millions of customers and brands that had a shot at shining around the world. After Netscape's initial public offering, she helped create a new methodology for estimating companies' value based on how much a Web site visitor or software user might be worth in the future and projecting revenues and profits based on that. Since then, hundreds of Internet companies have gone public--and nobody blinks when their stock prices soar.

Meeker isn't all numbers and spreadsheets, though. She learned about the Net industry by talking to hundreds of entrepreneurs on frequent visits to Silicon Valley and San Francisco. She immersed herself in Net culture--hanging out in the Valley with Netscape wunderkind Marc Andreessen. In 1995, she and Andreessen smugly estimated that only 400 people really ''got the Net.'' Meeker was one of them--and proved expert at pulling all that she had gleaned into one big picture.

Some of Meeker's early revelations seem quaint or obvious now. But at the time, they were daring. In 1993, she backed America Online Inc. (AOL), a fledgling service with just 300,000 subscribers that was viewed skeptically by many analysts. But she understood how AOL would gain tremendous power and value as more and more people signed on for news, e-mail, chat--and, ultimately, access to the Web. ''She understands the economics of the medium and has an intuitive feel for the people and trends,'' says AOL Chairman Stephen M. Case, whose service now has more than 20 million customers.

The trends Meeker is spotting now could very well become tomorrow's gold standards. She believes there is plenty of room for good companies to build huge businesses that support rich market caps. She has high expectations for business-to-business markets that are revamping traditional commerce. Example: Chemdex (CMDX), an online marketplace that brings together chemical buyers and sellers. Another hot space could be online music, where companies such as RealNetworks (RNWK), (MPPP), (AMZN), and AOL are making deep inroads.

Since 1995, Meeker's job has shifted with the Net tides. Now, in addition to analyzing new companies and trends, she increasingly focuses on how established companies such as Yahoo (YHOO), AOL, and Amazon will adjust and compete with one another. And she even gives counsel to some of the industry's big shots. ''She sees how large the opportunity is--and encourages us to think big,'' says Amazon CEO Jeffrey Bezos.

Meeker also has become something of a Cassandra--warning that greed is encouraging investments that won't ever pan out. ''I think we have a vicious cycle, where the amount of money lost for a lot of new companies and a lot of old companies trying to get into this space is going to be HUGE--in all caps,'' she says. That's a scary warning, especially if you consider the forecasting record of the person it's coming from.


Position: Managing Director

Contribution: Kicked off the consumer e-commerce gold rush by predicting huge growth in Internet advertising and consumers' readiness to open their wallets on the Web.

Ambition: To spot the next Netscapes (the way she did the original one) and help investors avoid getting caught in the backdraft when the weaker Internet stocks melt down.

"Playbooks for the Evolution of Internet Businesses"

Morgan Stanley's Mary Meeker on the Net's growth -- and her role in it

Mary Meeker, managing director at Morgan Stanley Dean Witter, stands out as a Wall Street guru who understood early on the huge impact the Internet would have. Meeker recently talked about her job and investment opportunities with Business Week's Heather Green. Here are edited excerpts:

BW: When you began covering Internet companies, you had to take a step back and explain to people what this industry was. What is your job now?

Meeker: In 1994-95, There weren't a lot of people who "got" the Internet. Marc Andreessen and I estimated in 1995 there were 400 max. Now, clearly a lot more people understand what the Internet is and its implications. From a technology perspective, we have moved from the cowboy and Indian stage to a more mature stage. But from a human interest and financial perspective, things are more wild and wooly than they were four to five years ago.

Many entrepreneurs seem to think it's really easy to start Internet companies, do the IPO thing, and become instant millionaires. And investors, fortified by their seemingly easy Internet successes (or anxious about there abstinence) in many instances, have become reckless with their capital commitments. While we continue to believe that the wealth creation related to the evolution of the Internet is still in its early stages, we are about to enter a period where there will likely be many gargantuan losses.

My job has shifted from being part of small group who helped create a framework for the evolution of the Internet and Internet-related businesses. In addition, we attempted to determine which companies would win/lose. Now, we do more of the same with a lot more blocking and tackling related to determining how the incumbent companies will adjust/compete with one another, and how emerging companies will define their own categories or compete with the incumbents.

In many respects, the jobs of Internet-focused research analysts and investment bankers have become more difficult as companies -- and there are thousands of them -- are attempting to go public at ever earlier stages at ever higher valuations. One can argue that on a relative basis, the risks are higher and the rewards are lower.

BW: How would you describe your contribution so far?

Meeker: I'd prefer to have you or someone else answer this question! I'd like to think that the folks at Morgan Stanley and I helped create important, insightful, and credible playbooks for the evolution of Internet businesses and that we helped legitimize the financing of Internet companies with early, critical, and aggressive financings for especially successful companies such as America Online, Netscape, excite@home, and And, importantly, while I have certainly had my share of screwups, so far [over the past decade] we have been on a ride with our stocks and investors for hundreds of billions in market capitalization appreciation.

BW: Can you give me examples of companies and new opportunities for building Net businesses?

Meeker: Ariba in business-to-business (B2B) software and a host of private companies in the exchange area that are going after industry verticals such as health care/life sciences (Chemdex), financial services, industrial products, transportation, energy, and real estate.

BW: Will the impact be bigger than an Amazon or an AOL?

Meeker: That's a tricky call as these B2C companies are the uber-players in very broad markets and for now the emerging B2B companies are focusing on more narrow opportunities. Many believe that B2B will be bigger than B2C. But don't rule companies like AOL and Yahoo! out of being players in B2B.

BW: Can you give one example of a company in the health-care, financial-services, and music areas that you think will be as important as the Net leaders today?

Meeker: Health care: Healtheon. Financial services: Our financial services analyst Henry McVey likes Schwab, and I like it too. Music: Too early to call the biggest winner (other than musicians and their fans), but this will be a huge space. Continue to watch for evolutionary moves from RealNetworks, Yahoo!, AOL,,, and lots of emerging companies. This is a fantastic time to be an entrepreneurial Web-savvy musician. I wish I could hold a tune!

BW: What are the broad trends that will direct the growth of the Net?

Meeker: First, customer satisfaction needs to improve so users make the Internet a more integral part of their daily lives and more users go online; faster access speeds (assisted by broadband); content/commerce that is increasingly easy to access and relevant to customers; more rollouts of successful/useful Internet-related tools/products, like the Rio and the Palm VII.

Second, telecom and computing costs need to continue to decline. These trends should especially help Internet-usage growth in the non-U.S. markets. Third, to date, consumers have been critical drivers of Internet usage; increasingly, businesses will drive usage growth as we move into a wave of Internet-related business reengineering. Fourth, in order to warrant ongoing financing and support, Internet companies will be tested to demonstrate clear paths to profitability.

BW: How do you figure into that picture?

Meeker: I hope the Morgan Stanley Dean Witter folks and I can help create some playbooks for the next waves of Internet growth; that we can continue to help finance the market leaders and help them grow; that we can continue to help our investors outperform the market, and we can continue to keep our failure rate low.

BW: Do you think the money flowing into all this goes away anytime soon?

Meeker: First, it's our assumption that investment capital exists. All bets are off if we have a superaggressive ramp in interest rates, a Y2K debacle, or a serious recession. It's our basic theory that the business changes caused by the Internet are so fundamental that capital will follow the opportunities to fund businesses that capitalize on these changes -- and that capital may simply flow out of businesses that are experiencing revenue slowdowns as Internet-focused companies take away incremental sales.

Internet financing has occurred in waves, and will likely continue to do so. We have two points here: Financing trends for Internet segments will rise and fall and rise and fall; and in "networking effect" businesses, the No. 1 player usually gets more than his fair share of the spoils.

Copyright 1999, by The McGraw-Hill Companies Inc. All rights reserved