The statistics coming off the crash in dot com stocks are
adding up to a bleak picture. This week I read an editorial
in Electronic News by managing editor Peter Brown that
presented some disturbing numbers. According to Reuters
Media, a total of 100,000 jobs have vanished from the Internet
economy since December, 1999. A full 50,000 of those jobs
have disappeared since February. In three bloody months, the
dot com damage has doubled. In April, 55 dot com companies
shut their doors, which is up from the March total of 44.
Since January of last year, 435 Internet-based companies have
folded. More than half of these closures occurred this year
alone.
The carnage has spread far beyond Silicon Valley. Seems much
of our economy is now shaking because of the dot com fall
out. Even the major television networks, ABC, NBC and CBS
blame their current advertising revenue woes on the dot com
failures. Certainly Cisco, Sun Microsystems and Intel are
suffering from fall-off in demand for their Internet-boom
products. Many observers blame the downturn itself on the
popping dot com bubble. I guess the failure of a few hundred
Internet start-ups can drag down the entire global economy.
So whose fault is it?
Is it the dot com executives fault?
Should we blame the 26-year-old college dropout who was funded
to the tune of $15 or $20 million to develop a cool new way
for teens to communicate with each other over the Net? We
say, "Hey, how do you make any money off bringing a bunch a
kids to chat rooms and games?" I say, how is a 26-year-old
college dropout supposed to question the business model of a
company that has been funded to draw audience rather than to
create profits? Remember the eyeball rush? The dot com
start-up kids were not given the mandate to build profitable
revenue streams. They were funded to build audience. They did.
Is it the venture capitalist's fault?
So does that mean it was the venture capitalists' fault for
giving the kid a very big pocket full of change without
making sure the business plan said something about profits
before the kid retires? The VC is easily the most
misunderstood character on the dot com scene. One of the
interesting statistics coming from the Internet crash is that
VCs are hitting their batting averages. Most venture
companies don't expect to bat much above 300. That means
seven out of ten of their companies are expected to fail. The
word venture means big, big risk. Most of the experienced VCs
met or beat their average during the dot com craze.
Is it my fault?
How about the media? Oh, we hyped it all right. But we hype
everything. Right now we're hyping the crash. The dramatic
rise of the Internet bubble has been the business story of my
professional career. Of course we're going to cover it with
raving enthusiasm. But remember, deep skepticism ran through
the business press simultaneously with the gushing over the
New Economy. All told, I think the business media did a
balanced job reporting the dot com raise and collapse.
Does all this mean I don't blame anybody? Yes, pretty much.
The dot com phenomenon has included both successes and
failures every step of the way. Even now, with those dire
statistics of Internet crashes, I can make a case for the
continued success of e-business transformation.
What about all this good news?
Did you know that virtually every large company is still
hip-deep in the process of re-making itself into a
Internet-centric entity? More than 50 percent of corporate
capital spending is going to information technology, up from
15 percent in 1990. Did you know the growth in consumer
spending over the Internet will exceed 45 percent this year?
Spending at travel sites alone will grow more than 50
percent. Did you know the total spending over the Internet
will exceed half a trillion dollars this year, far beyond the
craziest dream of just three years ago? In the Internet world,
these are the best of times and these are the worst of times.
