A:

According to the Department of Homeland Security (DHS), the Internet sector is a collaboration between the information technology and communications sectors. It deals primarily with virtual applications such as information technology systems and the transmission of communications. Companies belonging to this sector specialize in the creation, distribution and exchange of digital information. Internet-based companies such as Amazon, Google, Facebook, Ebay and CISCO are part of this sector. As a hybrid of two critical infrastructure sectors, the Internet sector can be considered a complex and diverse environment that serves an essential function in society.

In the late 1990s and early 2000s, the Internet sector in the United States formed what came to be known as the Dot Com Bubble. The bubble's growth began in April 1997 and ended in June 2003, according to Business Insider. During this period, several Internet-based companies were founded, and their stock prices grew rapidly. WorldCom, InfoSpace, Geocities and Lycos were among the period's key companies. Investors were so confident in the success of emerging technologies that they failed to consider key metrics such as price to earnings (P/E) ratio in their zeal to invest. This contributed to high stock prices, free spending and an eventual market crash. The stock market lost $5 trillion of its value between 2000 and 2002. In the aftermath of the boom, leaders in the Internet sector consolidated and grew their companies, so the sector now bears a closer resemblance to other market sectors in the U.S

The Internet sector is a portal for many different products and services, so it is often informally divided into different subsectors. These include software services, e-commerce, service delivery, content, hosting and broadcasting. Several mutual fund companies offer exchange-traded funds (ETFs) that target specific Internet subsectors for investors who wish to invest in more specialized Internet services funds.

Because the information technology side of the Internet sector is continually changing, it is difficult to assess its weaknesses and threats. This contributes to high volatility. However, this volatility may be somewhat offset by the sector's communications side. Communications technologies are consistently in demand, making the sector less vulnerable to economic changes. Both of the Internet's contributing sectors offer opportunities for growth through the expanding development and use of cloud computing, big data, wireless communications and smart devices. The Internet sector is also capable of producing high dividend yields for investors through its interconnectedness with the communications sector.

The Internet belongs to the quaternary sector of the economy according to the three-sector theory of industry. This sector deals with knowledge-based industries such as communications technologies, computing and research. The Internet is also a portal for services such as wholesaling, retailing, entertainment and information generation. This shows that there is some overlap between the quaternary sector and the tertiary sector, which is service-oriented. For this reason, some economists attribute the Internet attributed to the tertiary sector.

RELATED FAQS
  1. What is the average price-to-earnings ratio in the Internet sector?

    Learn what the average price-to-earnings ratio, or P/E ratio, is for companies in the Internet sector and how the sector ... Read Answer >>
  2. What are examples of popular companies in the Internet sector?

    Discover which Internet companies are the most popular among investors in this high potential growth area of the technology ... Read Answer >>
  3. How does debt affect a company's beta?

    Learn what the average debt-to-equity ratio is for companies operating in the Internet sector. Understand why Internet companies ... Read Answer >>
  4. What is the Difference Between an Industry and a Sector?

    The terms industry and sector are often used interchangeably, but they have slightly different meanings, with a sector being ... Read Answer >>
  5. What happens to the intangible assets of a company when it is bought or sold?

    Discover the best-performing stock market sectors over the past five years and learn which sectors continue to offer high ... Read Answer >>
  6. What is the average profit margin for a company in the telecommunications sector?

    Get an overview of the telecommunications sector, and learn the average net profit margins for companies in this highly competitive ... Read Answer >>
Related Articles
  1. Financial Advisor

    Financial Funds Provide Diversity ... And Risk

    Sector funds can provide maximum exposure to financial industry stocks, but this benefit is a double-edged sword.
  2. Investing

    How to Choose the Right Sector Funds

    Adding sector funds to your portfolio can pay off but it's important to make sure you're choosing the right market niche.
  3. Investing

    The One ETF To Own The Top Internet Company Stocks

    Grab a pie of booming online businesses in one shot! Here is the one ETF that lets you own stock in the top Internet companies.
  4. Investing

    How The Internet Has Changed Investing

    Discover the significant impact the Internet has had on how we invest and view the markets.
  5. Investing

    Analyzing Mutual Fund Risk

    Find out whether a fund's performance is a result of the manager's abilities, or just a fluke.
  6. Investing

    An Introduction To Sector ETFs

    Find out how sector ETFs can give your portfolio the punch it needs.
  7. Investing

    These Internet ETFs Have The Highest Earnings in 2017 So Far

    The technology sector is set to receive the most capital in 15 years.
  8. Investing

    Shifting Focus To Sector Allocation

    Investing in sectors may trump international investments for providing diversification.
  9. Investing

    How To Value An Internet Stock

    An academic study, published several years after the peak of the dot-com bubble in March 2000, accurately described just how whacky internet valuations grew until the bubble burst. The study's ...
  10. Financial Advisor

    Technology Sector Funds

    Evaluate past performance before investing in these types of gadget funds, as technology investors have been on a wild ride for a few years.
RELATED TERMS
  1. Sector Breakdown

    A sector breakdown is the mix of sectors within a fund or portfolio, ...
  2. Financial Sector

    The financial sector is a category comprising companies that ...
  3. Consumer Internet Barometer

    A quarterly survey report produced by the Conference Board and ...
  4. Technology, Media, and Telecom (TMT) Sector

    The technology, media, and telecom (TMT) sector, sometimes also ...
  5. ISP (Internet Service Provider)

    An ISP, or internet service provider, is a company that provides ...
  6. Capital Goods Sector

    The capital goods sector refers to a grouping if publicly-traded ...
Hot Definitions
  1. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  2. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  3. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  4. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  5. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
  6. Cash Conversion Cycle - CCC

    Cash conversion cycle (CCC) is a metric that expresses the length of time, in days, that it takes for a company to convert ...
Trading Center