Investment Column: Virtual Internet

IN THE week that Freeserve, Dixons' Internet service provider, came to the market, investors should consider an emerging rule about the web: there are no monopolies on the Internet. This creates a threat for some businesses, notably Freeserve, and an opportunity for others, such as VirtualInternet.net.

Like all rules, there are exceptions. At the present time, Network Solutions, a US company, has a monopoly on the registration of website addresses. But in a few weeks that will change and VirtualInternet.net is poised to clean up the market for the associated one-off registration and annual subscription fees.

The company, floated in January, already provides services based around domain registration - it pays a fee to Network Solutions - and website hosting. It generated sales of pounds 528,000 last year; investment prevented it posting profits. In anticipation of the end of Network's monopoly it's signed a deal with Microsoft whereby browsers can use its services from Microsoft's website.

Browsers will be able to use VirtualInternet.net's unique search engine, allowing them to see if a particular web address has already been taken. If it hasn't, they can register it.

The economics of are impressive. VirtualInternet.net will take at least 50 per cent of the registration fee, between pounds 80 and pounds 250. There are almost no costs to the operation.

Analyst expect the company to make pounds 2.1m this year. That looks too conservative. So what's the catch? Unfortunately, there's no reason, says the company, a rival couldn't replicate the search engine - there are no monopolies, of course. But Microsoft's website seems the best marketing deal for such a product, and VirtualInternet.net seems undervalued.