The Bursting of the .Com Bubble

Well, last month we engaged in a discussion surrounding the promises and pitfalls facing corporations and private citizens hoping to take advantage of emerging wireless technologies. This time around I'm sitting here in the Dunvegan Pub capitalizing on these facilities in order that I might mix a little business with pleasure. I'm telneted into my Linux box at home and simultaneously connected to the web – all by way of my cell phone which hums along at the blistering pace of 14.4bps... wow.

Actually, I'm surprised I can connect to home at all – my Rogers cable-modem service has been giving me nothing but grief over the past several months. It has been so bad that I actually went to Network Solutions' website to register "www.rogerssucks.com"; but can you believe it?... it was already taken. What a surprise. Actually the surprise really came when I discovered who beat me to the punch: Rogers themselves.

Apparently, they know they suck and are planning on exploiting the fact to their commercial advantage. I can see it now... a really amateurish web design effort in support of sundry content dunning the evil capitalist machinations of this Canadian corporate titan. It would inevitably be funded by banner advertising dollars gleaned from companies negatively affected by poor to non-existent ISP performance... further enabling Roger's frantic quest for sub-mediocrity.  Of course, I could be mistaken...

This does however, raise a larger issue. Companies operating at "Internet speed" are bound to become ensnared in quagmire of their own design. In the rush to capitalize on the tremendous opportunities presented by the advent of this new medium, many sought category dominance yet relied on poorly laid implementation strategies or ill conceived business models.

Everyone jumped on the Internet bandwagon fuelled by boatloads of freely available venture capital - accessible by any start-up with even the hint of a business plan. Post IPO dot com CEOs stood before dazzled investors like the great and powerful Oz proclaiming the "new economy" model didn't actually demand profitability – just pay no attention to the man behind the curtain.

The eventual shakeout was as inevitable as rain in Vancouver. As of Nov. 15th 2000, in the United States alone, 22,155 workers had been laid off from 245 major dot com companies... 42 of which closed their doors for good. The latest casualty as of that date? Garden.com.

This web property was touted pre-IPO as a sure-fire category killer - and indeed on the surface seemed poised to reap the rewards everyone apparently thought were surely due it. The site won numerous awards (including best e-commerce site on the net), had an innovative supply chain management solution, plenty of talented people working for it and a seasoned, well educated management team.

I bought the hype and GDEN at $21US on the day after the IPO... today it closed at 9 cents.

So what went wrong?

Well, despite all the items in the plus column for Garden.com, it shares a fundamental flaw with a whole host of Internet properties. Why would I want to go online to purchase an item sight unseen, take a security risk with my credit card (whether real or perceived), pay often exorbitant shipping costs, ensure I'm available at whatever time the courier happens by, and wait "as little as three days" to receive it when I could just go to my local vendor and pick up the same or similar product for less today? This model isn't new – it's called mail order... and when was the last time you purchased anything that way?

The fact that these sites offer additional services such as detailed product information and virtual communities does little to augment their weak value proposition in light of the negatives; it merely enables the consumer to make more informed choices at their local retailer.  If I need a bag of nails am I going to nails.com or taking a trip to the hardware store? If Spot's hungry am I off to the supermarket or visiting Pets.com? Well, as the sock puppet is on the auction block, I think the decision's been made for me.

Is Dot Com dead?

Hardly. There are still zillions of e-commerce dollars to be made out there. So who will be among those collecting? Companies that leverage the unique characteristics of the Internet will succeed while others which merely apply old business models to new technology will not. Sites which empower the consumer by pitting vendors against eachother to win the client's business, (lendingtree.com, priceline.com, quotesmith.com etc.) are a good example.

Corporations which actually deliver on the promise of instant gratification the Internet has enabled by way of electronic delivery of goods and services (time sensitive information providers, software vendors, Application Service Provides) should also enjoy increasing site popularity over the next few years. Sites which cater to the public's desire for privacy and discretion while making certain purchases or inquiries, (adult oriented product vendors, health related web properties etc.) should similarly do well. The bottom line? If the Internet doesn't exclusively enable, or fails to add significant value to the transactional process, perhaps your strategy might be better reconsidered.

Article originally published in HUB Magazine, Connected column, December, 2000, by technology columnist Ray Richards.

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