Investment bankers argue, conventional ratios like P/E multiples and returns on assets and net worth are obsolete. What stuns the traditional mind more in the wired world, is that such companies have no tangible assets to back the kind of valuations they command.

Instead, what they have are ideas and the ability to market them. And while analysts are yet to put their finger on the "price of brains", it keeps ricocheting to newer heights. Bubble? Maybe. Maybe not.

Most valuations are driven by conventional economics -- demand -- supply gap. It translates into the kind of valuations dot.com companies receive. A lot of money chasing too little paper.

All of this money is betting on a hunch. That at some future date, intangibles like "hits, pageviews and registered users," will morph into tangible revenue streams. What is not known however is, which of these upstarts will get it right first. And expecting a new GE or Ford to emerge, the valuations gets increasingly obscene.

Problem is, the kind of logic that drives these numbers are not clearcut. Instead, there are shades of grey, leaving everything open to debate and evolution.

Thus, Priceline.com provides an interesting analogy. Conventional wisdom dictates that the future of an airline ticket vendor depends on the airline. Therefore, it would be downright absurd to pay more for the vendor’s stock than what the airline can ever hope to achieve.

In the Internet world, valuations are driven by intellectual capital. More pertinently, the kind of ideas which don’t need expensive physical assets. Equally important is that even if the airline collapses, the ticket seller still remains in business by selling tickets for another airline. Or maybe, he could simply use his on-line expertise to hawk an altogether different product.

Pretty much like Amazon.com. It started off selling books. But is now diversified and harbours dreams of being the world’s largest on-line supermarket. Jeff Bozos, the maverick CEO of the company, reckons it is easier for Amazon.com to extend its product line and mine revenues. This, because over the years, Amazon.com has built a customer base which trusts the company and the kind of service it offers.

On Amazon’s part, the incremental cost of servicing the customer is minimal if not zero. Customer acquisition is a different ball game. But that is besides the point.

Therefore, Amazon.com gets the kind of valuations it does for its potential to retain customers and extract that extra dollar from them.

There is more to the argument. Amazon.com buys its raw material only after receiving an order. It buys on credit and sells strictly on cash. This means a positive net working capital and leaves the sternest of banker salivating.

It is this perspective that has allowed Net heads to get away. But there’s a caveat. Not anyone can command such premiums. It’s meant for market leaders. The kind who corner at least a 60 per cent share. The number two gets around 30 per cent and all of the others put together get a painful 10 per cent, at best.