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Lamenting the Dot Coms
By Scott Bradner
Dot-coms seem to be
dropping like flies and those that have not died yet will soon as they run out
of their venture capital money. The popular press seems to be writing off the
whole concept and even PBS's News Hour with Jim Lehrer had a segment entitled
"Dot-Com Failure" lamenting the fate of the consumer e-commerce
revolution. But it seems to me that the lamenting is way premature and many of
the failures to date are the result of aggressive daydreaming.
It was not all that long
ago that venture capitalists were throwing money at and the trade press was
drooling over just about any startup that was going to sell stuff or services
to individual customers over the Internet. Wall Street seemed to think that
shopping malls were about to close down. That is the only explanation of the
relative evaluations that were given to physical and virtual stores.
But in the last few
months the same pundits that told everyone to bet the farm on the future of
business-to-consumer (B2C) e-commerce are now saying "nevermind."
The fate of some of the
startups should have been very easy to predict. It should not have been hard to
guess that any company that decided to spend 80% of its capital reserves on
Super Bowl ads last January was not long for this world. The same should have
been obvious in response to a press release talking about spending a few 10s of
millions on a web site to sell some yuppy bobbles. In a potentially related
story the auto industry announced the other day that they were spending $75
million on a B2B web site.
Just as it should have
been a no-brainer to ignore the wacko projections of success that many of the
B2C startups had it should also be a no-brainer to recognize that B2C web sites
have a real future - maybe not billions per web site - but a good solid future.
Just take a look at the
catalogue sales business. My household gets catalogues from literally hundreds
of companies every year. Every one of these companies could put up a cheap
order-entry web site and save money over having a human answer the phone. All
they need to do is add a page in the catalogue telling the reader the URL. That
worked just fine for the specialty spices catalogue we got the other day. They
got a web order the next day. (And I'd rather not say how much it was for.)
I see no reason to think
that the B2C companies are failing at a rate greater than catalogue companies,
they just blow a whole lot more money failing. Once some of the irrational
exuberance has faded the many quiet successes will become visible.
disclaimer: I have found
that the further you are from Harvard the more irrational the exuberance about
the place is but the above spice order was mine.