Until recently, many investment bankers criticized the conservative leadership of D.R. Grimes. chief executive of NetBank, an online savings and loan near Atlanta. They said the company needed to advertise more and pointed to its finances as exhibit No. 1.

What on NetBank’s balance sheet was so damning?

Enamored with big spenders, the investment bankers were disgruntled that NetBank was — of all things — earning a healthy profit.

I can well remember them asking me, ‘What is this profit thing?’ Grimes said. They asked, ‘Why don’t you take the opportunity to grow fast?’ Now I don’t get any of those questions.

Despite the reputation of public Internet companies as money pits, a handful are in fact succeeding. They are turning a profit today, not sometime in the future as most Web executives predict.

In fact, the list is deeper than just well-known Internet moneymakers like EBay and E-Trade. Many in this select club have low profiles, focus on obscure niches and are located hundreds of miles from the Web’s glamour capital, Silicon Valley.

For several of these small companies, success on the Internet meant surviving the familiar hurdles of fickle investors and job cuts. But it also required maintaining financial sobriety while other online companies threw lavish parties featuring popular rock bands and limitless sushi.

Among the small online firms reporting a net profit during the most recent quarter were Hotel Reservations Network, a hotel room discounter in Dallas, and Multex, a financial research company in New York. There was also IndyMac Bancorp, an Internet mortgage company in Pasadena and FTD.com, the online arm of the well-known flower wholesaler, FTD.

NetBank, in Alpharetta, Ga. is perhaps the dean of these Internet survivors with 12 consecutive quarters of profitability. It has more then 200, 000 accounts with $2 billion in assets.

Two years ago, people were saying if you operate on the Internet, you can’t fail, Grimes said. Now they say if you operate on the Internet you will fail. I disagree with both ideas.

To turn a profit, Grimes said he had to be satisfied with expanding his firm more slowly than other Internet greyhounds. Matching their expansions would have meant losing money over a long period, a bad business idea and a sore point for federal bank regulators, he said.

I think discipline is important, Grimes said. In my experience, companies that lose money for a long period of time have difficulty ever becoming profitable.

ACCOUNTING METHODS DIFFER

Determining whether an Internet company is profitable is not as easy as it may seem. Many companies tout being cash-flow positive, pro-forma profitable or operationally profitable, but those accounting methods leave out big expenses such as aquisitions.

Companies in this article were net profitable in the last quarter they reported. That means they made money after taking all of their expenses into account.

David Kathman. an analyst with Morningstar, an investment advisory service, said the key to Internet profitability is low costs. That means online firms without inventory and only minimal shipping bills have a big advantage, he said.

Profitable firms cited here generally fit that description. They are either middlemen or offer products that can be transmitted electronically.

EToys is the classic example of what not to do, Kathman said, referring to the failed online retailer. It had to build warehouses but didn’t have the money to pay for them. It also had to mail orders to customers, which can cost a lot and really cut into potential profits.

FTD.com, the online florist in the Chicago suburbs, in fact washes its hands of both inventory and shipping. It merely takes customer orders and then forwards them for a fee to one of 17,000 independently owned florists in its network.

Michael Soenen. chief executive for FTD.com, which went public in 1999 and has been profitable for the last three quarters, said his firm’s fortunes have been helped immeasurably by its established parent, FTD. Without spending much money, his company got a network of florists and nearly 90 years of customer awareness.

Right out of the box, we are acquiring customers cheaper than anyone else, Soenen said.

Initially, Soenen pushed for an expensive television commercial campaign to boost sales for FTD.com. However, he suspended it after Mother’s Day 2000 to save money after realizing consumers already knew the company existed.

Other than its temporary marketing foray, Soenen said, FTD.com has been relatively frugal, with only 80 employees generating $36 million in revenue last quarter. In contrast, Ask Jeeves, an unprofitable Internet search engine in Emeryville, took in only half as much revenue with four times as many workers.

RESTRAINED SPENDING

Another distinguishing characteristic between the profitable dot-coms and the dot-bombs was their spending on fancy offices, designer chairs and parties.

Even during the height of the Internet craze, celebrations at these small and profitable firms were generally restrained, consisting of little more than a buffet at the boss’ house or a trip to the local amusement park.

We never started bringing our dogs to work, Soenen said. For us, a party is knocking off half a day on Friday and going to the corner bar where there’s a beach volleyball court.

One big source of revenue for many profitable Internet companies is selling software to other businesses. In fact, online companies that do not provide services to others are increasingly rare.

For example, Ebix.com, an insurance quote Web site in Atlanta that reported its first profit last quarter, also creates programs to help insurance companies operate online. Software accounts for about 85 percent of the firm’s revenues versus about 15 percent for sending insurance buyers to other Web sites.

Robin Raina. Ebix.com’s chief executive, said many Internet companies will ultimately suffer for their big losses. Firms such as retailer Amazon.com may have trouble paying interest on their multibillion-dollar loans even if their businesses improve dramatically, he said.

I personally believe the Internet bust hasn’t finished yet, Raina said. I think another 30 to 40 percent of Internet companies are going to go down the drain.

Since January 2000, at least 555 Internet firms have gone out of business or declared bankruptcy, according to Webmergers.com, a research and advisory company in San Francisco. They include such profligate and profit-challenged companies as Pets.com, AllAdvantage.com and PlanetRx.com.

Profitable Internet companies are generally well rewarded in the stock market compared with their money-losing cousins. While shares of many prominent online firms are down nearly 90 percent from their highs, the tiny moneymakers are generally soaring, or at least floating, a success in itself in this unfavorable investing environment.

For example, the stock of University of Phoenix Online, the Internet arm of the college chain, is up from $14 at its initial public offering in September 2000 to nearly $50 today. Hotel Reservations Network, the hotel room discounter, is up from around $32 to $45 during the past year.

GEOGRAPHY FACTOR

One unexplained factor seemingly tied to Internet profitability is geography. Most small public Internet companies making money are based hundreds of miles from the Internet’s epicenter, Silicon Valley.

Analysts could not account for this anomaly. Some pointed to local and profitable online giants such as E-Trade and EBay to prove the Bay Area is not totally jinxed.

However, Soenen, the FTD.com executive, guessed that business practices outside of Northern California are more conservative and therefore more successful.

There is a natural filter in the outlying communities that let us avoid some of the craziness, Soenen said.

But profitability does not necessarily solve all of a company’s problems, as illustrated by the plight of Ebix.com. Nasdaq warned the firm in April that it was in danger of being delisted because it had too little cash and a market value below the minimum required.

Since then, Ebix.com has received private investment and it shares have rebounded. The company appealed the delisting and last week announced it won the right to stay on Nasdaq.

Raina, Ebix.com’s chief executive, said he is cautiously optimistic about his firm’s future. He was pleased with the company’s profit. These are funny times, he said of its moment of glory coinciding with one of its darkest hours.

I won’t say that I’m on top of the world, Raina said. It’s not important just to report profitability. It’s how consistent you are. I would be at the top of the world if I could show consistent profits for the next eight quarters.