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EBay (EBAY: news, chart, profile) , one of the most expensive Internet stocks that's reliably delivered expanding profit margins, saw its shares plunged as much as 21 percent to $81 on Thursday. The stock was down 17 percent to $85 in recent trading. Earlier this week, 51job (JOBS: news, chart, profile) , a Chinese Internet company priced at premium, saws its stock plunge nearly 40 percent after an earnings warning. In eBay's case, the prominent online marketplace missed its fourth-quarter bottom line and said it wouldn't be as profitable this year because it's choosing to reinvest in its business. This is alarming news for investors who've become used to eBay's consistent ability to soundly beat expectations over the last couple of years. Since the start of 2003, eBay shares have run up nearly 200 percent. By the middle of December 2004, the stock struck $118, and traded at a multiple of roughly 73 times this year's previous profit estimates. The company's market valuation was $81.7 billion, well above today's valuation of $56 billion. In fact, at the end of last week, eBay traded at a valuation of 34 percent above a basket of Internet retailers. On average, eBay traded at a 61 percent premium over Internet retailers over the past five years. Investors were willing to pay a premium for eBay because they were betting that profit projections would go up, thereby shrinking the multiple they paid. That's not the case today as projections were brought down, thereby making eBay look even more expensive. Ripple effects When a lower valuation is applied to the Internet leader, investors begin lowering their view of reasonable valuations for the entire group. Take a look at Travelzoo (TZOO: news, chart, profile) . Shares last week traded at 131 times this year's expected profit. In Thursday trading, the stock fell 8 percent. Overstock.com (OSTK: news, chart, profile) lost 5 percent to $59.89. Overstock shares trade at some 650 times this year's earnings expectations. Online retailer Amazon.com (AMZN: news, chart, profile) , which traded at 38 times this year's earnings, took a relatively bigger hit than other familiar names in the sector. Amazon fell 4 percent to around $42 Thursday. Chief Executive Meg Whitman said that advertising costs were rising and would continue rising in 2005, making it challenging to keep those costs under control. This raised concerns that the expense to advertise and market would be tough for retailers. On the flip side, higher ad dollars would benefit those that rely on advertising.  See interview with Kanoodle on search advertising. Yahoo (YHOO: news, chart, profile) and Google (GOOG: news, chart, profile) gave up about 1 percent each. Shopping.com (SHOP: news, chart, profile) lost 4 percent; Online diamond retailer Blue Nile (NILE: news, chart, profile) gave up 2 percent and Red Envelope (REDE: news, chart, profile) declined better than a percent. CNet Networks (CNET: news, chart, profile) gave up 2 percent to $20.89. | 
