Why internet advertising is in a bubble

So, I've been wondering today why it is internet retail hasn't really taken off? Brick n' mortar retailers still continue to have great returns and revenue. The growth of internet-only retailers like Amazon is higher than that of the largest retailer, namely Walmart. However, if we look at the numbers, it's not as impressive as you'd think..

04/05 year over year Christmas quarter revenue growth

Amazon: 17.3%
Walmart: 8.6%

Now, Walmart is the nation's largest retailer. By far. Their quarterly revenue over Christmas is 30 times larger than Amazon's. Yet Amazon is only growing their revenue twice as much as Walmart?

If the Internet Economy is correct, you'd think it would be more than double that. Given all of the hype about internet advertising, wouldn't you have thoguht Amazon should be growing at about 50% a year? Or more? After all, Amazon is one of Google's biggest ad buyers.

Shouldn't they be growing at a far faster clip when Google, their ad medium, is valued at $100B. How'd that happen? The answer is, the internet economy is bulloney (again). And you the shareholder is going to pay the price dearly (again). I guess people forget the basic economics of these things when a few years pass.

But let's talk about marketing for a minute.

I noticed again today that Microsoft is not selling their Xbox 360 on their website. Why is that? Wouldn't it make more sense to sell it on the website and keep that extra $40-$50 or whatever the retailers get?

But they don't because that's marketing suicide. Not having Target, Toys R Us, Walmart, etc. on your side is going to make it much more difficult to sell these things. Because I would guess that a lot of these things get sold as impulse buys.

The problem with the internet economy is that it's adverse to the impulse buy. It's perfect for things that you can't find very easily -- i.e. most of the shit that's sold on eBay -- but really imperfect for the stuff you can find without much of a problem.

When someone is standing in the Xbox 360 aisle at Best Buy trying to decide if they want to buy a game, it's a lot easier to get an impulse buy out of that than when someone is browsing on the Xbox 360 section of Amazon. That person might decide to go check out a review at IGN, read a few bad reviews, then pass up the game. It's also not easy for parents to know what to do when they're out of the game the kid asked for. At Best Buy, at least someone working there could help the parent find a game that the kid might like.

Same with books. Why buy a book on Amazon when you can go to Borders and really read trough it before buying?

In short, most of our money is still spent at brick and mortar stores for a reason, not just because people haven't caught up with the times.

And coming back to the subject line, that's why there's a limited amount of growth to this internet advertising thing and it will pop soon -- I'd say it's finished by the fall of 2007. There's not nearly as much eCommerce growth going on to back up the amount of spending going on for internet advertising.

As investors, you keep falling in the same trap, over and over and over. When will you people stop being played by the venture capitalists?