No such thing as a profitable dot-com?
The Internet Bubble of 1998-2000 was a frenzy for gaining market
share in emerging online markets. The idea was to be early into
new markets, build brand and forget about profits--they would
come after you dominate the market. And sometimes that strategy
works if your investors have lots of faith and patience and there
aren't too many competitors. But when you're in markets where
hundreds of companies are all following that same strategy, you're
in trouble. It becomes a question of, will my venture capital
outlast your venture capital? Beginning in the spring of 2000
investors began losing faith in the strategies of hundreds of
companies each hoping to be the BigWinner in its market space.
When investors lost faith, money was pulled out, new venture
funds became extremely difficult to find and hundreds of dot-coms
that weren't designed to survive on revenues alone disappeared.
WebMergers.com listed over 200 dot-coms that went out of business
and over 900 others that merged or were acquired during 2000.
It can seem as though there is no such thing as a profitable
dot-com. But that isn't due to the nature of the Net, it was simply
a matter of strategy. Companies that focused on growth while sacrificing
profits were, not surprisingly, not profitable.
Ask for profitable dot-coms and you're likely to hear three examples:
Yahoo, eBay and AOL. Indeed they are profitable and have been
for years. But there are many more and some are listed below.
- Agency.com
- Alloy.com
- BarPoint.com
- BiggerBras.com
- Billiards.com
- Broadcast.com
- Broadvision
- CheapTickets.com
- CollegeRecruiter.com
- Condenet
- DoubleClick
- Ebay
- e-Trade
- Filenet
- Florist.com
- FragranceNet.com
- HairBoutique.com
- Homestore.com
- hoteldiscount.com
- Inet Technologies
- Intrusion.com
- iQVC
- Judge.com
- Lycos
- Manugistics
- Michaelsmark.com
- Motorcycle Online
- Netscout
- Netsilicon
- Network Associates
- PortalSoftware
- ProsoftTraining.com
- PurchasePro
- RealNetworks
- Schwab.com
- ScrappinHappy.com
- Serena Software
- Shopinprivate.com
- Siebel
- Talk.com
- Tickets.com
- Ulticom
- Verisign
- Verity
- WagginTails.com
- WebTrends
- WinningHabits.com
- Yahoo
Do you think some of these shouldn't be included on a list of
dot-coms? Definitions are certainly debatable. Many companies
on the list have substantial offline business such as Schwab.com.
There are some dot-com spinoffs of offline businesses such as
FTD.com and LandsEnd.com. Although these certainly have benefited
from their parents' brand, they are nevertheless profitable online
businesses. And what about tool and infrastructure companies such
as RealNetworks (streaming media), Verisign (SSL certificates),
Verity (search engines) and WebTrends (server log analysis software)?
Here's the deal: rather than debate the definitions, let's just
say that the variety of companies on this list begins to give
some clues as to where profits actually are being made.
Out of the thousands of dot-com startups of the past few years
are these the only profitable ones? Certainly not. Lots of small
businesses have appeared online, some becoming profitable and
others going out of business, but doing so without a lot of fanfare.
Small businesses such as BiggerBras.com, Billiards.com and HairBoutique.com
are privately held and would not tend to make announcements of
profitability. I just happen to know the principles involved in
these companies.
One last point: profits are a good idea, right? Stock prices
of lots of unprofitable dot-coms have fallen for nearly a year.
But when FragranceNet.com announced its profits in October, 2000,
it's stock price went down! Why? Analysts complained that there
was too much attention on profitability--there should have been
greater emphasis on growth!?!?
Do you know of other profitable dot-coms? Please let
me know.
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