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krj
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The dot-com meltdown
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Nov 10 06:42 UTC 2000 |
Random thoughts on the dot-com implosion:
http://fuckedcompany.com has added discussion forums to its reports
of corporate failures. If you're into doom and gloom, these are
a lot of fun to read.
http://www.yourownworld.com has the cutest going-out-of-business
web page ever.
Closing announcements are on their websites for pets.com and
furniture.com. The fuckedcompany.com discussion on pets.com
was extra fun: lots of mourning and glee over the demise of
their sock puppet.
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| 12 responses total. |
noti
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response 1 of 12:
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Nov 10 23:13 UTC 2000 |
This response has been erased.
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danr
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response 2 of 12:
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Nov 12 18:17 UTC 2000 |
Mostly, I just shrug my shoulders at these failures. While some of these web
sites did provide a useful service for their users, it didn't take a rocket
scientist to figure out that there was no way they were going to make any money
in the process.
And the burn rate of some of these companies was enormous compared to whatever
small amount of revenue they were able to produce. I honestly wonder what's
going through the minds of both the CEOs of these companies and the people who
actually invested money in them.
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scg
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response 3 of 12:
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Nov 12 20:39 UTC 2000 |
It seems to be creating some degree of mild panic in San Francisco, but I
haven't yet heard of anybody losing their job at a failed dot com and not
being able to find another one.
I never understood the dot com thing. Web sites do strike me as a better
interface to mail order than mailing in a form or reading the form over the
phone, but buying stuff on the web never seemed earth shattering. More
confusing to me was the notion that the web site selling the products (the
marketing) was the important part of the company, while the products
themselves were unimportant. Why I would want to buy from a company that
didn't seem to know what it was selling never made sense to me.
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pfv
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response 4 of 12:
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Nov 12 20:54 UTC 2000 |
THAT!, I can identify with 120%.
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scott
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response 5 of 12:
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Nov 12 21:57 UTC 2000 |
The current face that's being painted on dot-com failures is that the people
involved are learning what not to do next time. I can sort of buy into that,
actually. Although I doubt as many of them will have the same opportunity
(gobs of VC cash) that they already squandered their first time around.
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ric
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response 6 of 12:
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Nov 12 22:06 UTC 2000 |
A lot of dot-com failures don't surprise me at all... like the recent failure
of "furniture.com".. fucking duh. Buying furniture on the 'net? No. Or what
about "Boo.com"? wtf was that all about?
I'm surprised to see "Pets.com" fail. They probably could've made it but they
must've went about it all wrong.
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scg
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response 7 of 12:
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Nov 12 23:23 UTC 2000 |
There certainly are some dot coms (companies that interface with customers
only through their websites) that seem useful and likely to survive. My
impression, though, is that lots of people jumped on the dot com bandwagon
without really understanding what they were doing.
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danr
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response 8 of 12:
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Nov 13 00:15 UTC 2000 |
I think it's useful to differentiate between retail dot-coms, dot-coms that are
providing some kind of service to end users such as about.com or geocities.com,
and business-to-business dot-coms. The retail dot-coms often acted as though
the "rules" of retail somehow didn't apply to them. They ended up spending way
too much to acquire customers and the money ran out before they could start
turning a profit. I think that's what happened to pets.com.
The second type of dot-coms often have a good idea for a server, but don't have
a clue as to how they're going to make a profit. In their business plans, they
say they're going to sell advertising, but grossly underestimate how much
competition they'll face and overestimate the amout of revenue they'll
generate. yourownworld.com may have been in this category (although I don't
know for sure).
Many business-to-business dot-coms think that they are going to make a pile of
money by setting up a mechanism for companies to sell things to one another.
They skim a percentage of each transaction. They make several incorrect
assumptions in their plans.
First, they underestimate the inertia inherent in the current system. It's hard
convincing companies to change the way they do business. Second, they
underestimate the technical difficulties of setting up an infrastructure.
My favorite in the b2b category is VerticalNet. They were supposed to be one of
the leading-edge business exchanges. Now, however, it looks like that strategy
isn't panning out so well. What's their plan B? Sell the software they've
developed to other companies who want to set up their own b2b exchanges!
If I had the ambition to start my own Internet company, what I'd do is make
sure that the company developed some really interesting technology. My plan B
would then be to sell that technology to Microsoft or IBM or some other big
company. WebTV is a good example of this approach. I don't think they had a
snowball's chance in Hell of turning a profit on their own, but the founders
and investors probably did pretty well when Microsoft snapped it up.
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i
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response 9 of 12:
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Nov 13 04:48 UTC 2000 |
I work for a small web site design & hosting firm, and the whole dot-com
web-frenzy has looked very much like a gold rush to us. Just as jillions
of folks who had no clue whatever about how to find, mine, etc. gold ran
west in '49 and spent themselves dry on a fantasy of getting rich, we've
seen all sorts of clients with little or no conception whatever of the
basics of running a business or a web business trying to get rich on the
web.
Rule of thumb: if you don't have the resources, resoucefulness, and
determination to set up and run and hot dog wagon (secure location, buy
equipment & supplies, learn health code and tax & accounting basics,
set prices, deal with a business bank account, sooth unhappy customers,
etc.), then you should blow your money in Vegas instead of trying to set
up a web business. It'll be much quicker, easier, more fun, and more
likely profitable than anything you could do with your own web site.
Also interesting: we've seen a number of low-tech success stories on the
web. Folks who got very modest marketing/informational web sites for
their non-web-based businesses, then put the URL on everything they
printed, submitted to search engines, spent some idle hours finding
places they could get links from or trade links, etc.
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bdh3
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response 10 of 12:
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Nov 13 05:07 UTC 2000 |
Im my day to day work I often run into .coms from the inside. I noticed
a few things.
You can often tell about the viability of a .com by looking at it. If
they have glitzy office suites and pay lots of money for 'interior
decorators' (150$ framed posters on the wall) but their computer systems
suck, then its probably a nogo. IF on the other hand the 'office suite'
looks like a second hand dump, but the computer systems are top notch
then it is interesting. This is not always the case, but its a pretty
good bet.
When the .com stops offering its technical staff free beverages of
choice, thats a bad sign - sell. Happy caffiene buzzed techys are
productive techys.
The '.com'-ing of an existing 'bricks and mortar' tends to eat itself.
Even if it is 'non-branded'. I worked with one banking conglomerate
that found after buying a couple other banks that once it was all said
and done and they looked at it they found that a higher and higher
percentage of 'new customers' the closer and closer they looked at it
for their new .com, a non-brand 'eBank', were at the expense of their
existing infrastructure. Quite naturally, the new non-brand 'eBank' was
targeting marketing at the existing customers because they had easy
access to mailing lists for no cost. "What we lose on each sale we make
up for in volume." Since they were offering better terms and conditions
quite naturally folk were switching money to the eBank at the expense of
the 'real' bank.
"Strategic Mergers" tend to have a negative impact on a .com product.
I know of one case where an obvious memory leak problem that prevented
large scale customers from using a product effectively. First off it
became impossible to figure out who was responsible for following up on
the bug fix and secondly because of the 'culture clash' between the two
merged entities, the core developers quit to form a competing .com so it
took well over six months to fix - many customers simply went elsewhere
(some naturally to the 'new' '.com').
Annual Reports or financial reports can often be a 'clue'. I know of
one software company that was in the process of vulturing where the
statement looked pretty good until you realize one asset called
'capitalized R&D' was simply the total of all money ever paid to
employees or contractor/consultants. Some 900K$US was listed as an
'asset' on the books - the 'value' of the software. Now for various tax
purposes this might be reasonably (although I doubt it, but I'm not an
accountant so what do I know) but it does seem to me in 'valueing' a
company such is not an 'asset'.
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danr
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response 11 of 12:
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Nov 13 18:09 UTC 2000 |
Depends on how good the software is, I'd say. If those contractors/consultants
did top-notch work, then it's a valuable asset. If, as is usually the case, the
contractors/consultants were poorly managed and the software they produced just
trash, then it's not. Walter could undoubtedly answer this better than I can,
but I believe there are tax advanatages to capitalizing this work under certain
circumstances.
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i
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response 12 of 12:
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Nov 25 00:37 UTC 2000 |
At least to my eye, "Capitalized R&D" on the balance sheet of a company I'm
looking at (from the outside) is always followed by "(Change the number on
this line to zero and base your opinions of our company on that corrected
balance sheet.)"
The fact that something has been capitalized for tax purposes is NO excuse
for padding the balance sheet presented to investors, etc. with it.
On *insider* financial reports (for management's own consumption), there
are legitimate uses for "Capitalized R&D"...but bad management will tend
to make it a "wishful thinking fudge account".
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