The
lows on the Nasdaq in April has raised serious doubts for many dotcom darlings
about the internet pure play e-tailers like Cdnow.com, Peapod and drkoop.com.
The doubts hover around the never ending list of failing companies in the dotcom
world. Investors are wondering whether these new age retailers will be able to
withstand pressures of the old world retailers moving online with their intimate
knowledge of buyers, inventory management and brand loyalties.
At the same time, the VC world is
rampant with stories about dotcom companies not able to raise money for the
second round or on the brink of bankruptcy. The upsurge of doubt about the new
economy companies has affected even leaders like Amazon.com, infospace.com and
eBay.com. As if this was not enough, both IDC and Forrester Research have
reached similar conclusions that majority of the dotcommers will be dead.
What does this mean for Indian
dotcoms who have just begun with seed funding, targeting venture funds to create
their branding in the marketplace and building teams with sky high salaries and
options? Will they get funding and survive? Is it time to call it quits and
return to those staid jobs in the real world for web-entrepreneurs? What about
individuals nursing their big business idea? Is it better to stay put and keep
their ideas in the closet until the clouds disappear?
The answers, of course, are not
at hand but one can learn from the American experience. Firstly, the internet is
not about selling dollar bills for 85 cents. Business models based on eyeballs
died long ago. Even pure B2C retailing on the net has its days numbered as
existing brick and mortar businesses move online. What about B2B? Internet
Capital Group, the kingpin of B2B ecommerce, has decided to stop investing in
B2B and refocused on the infrastructure comprised of software, communications
and e-services. But, if dotcommers go down, then what is the future of people
who provide them with the infrastructure?
All this counter-hype about the
dotcom world is, of course, an over-reaction. As some of the web companies
report better results and create a few coups in the IPO markets, investments
will once again flow into web start-ups. However, these events should send a
warning to all those dotcoms, which are building their businesses to make money
by providing value to the customer at a cost, which their competitors cannot
match. The other way is to provide products and services, that solve a customer
problem yet to be serviced by the market. Clearly both these are not easy.
Understanding markets, experience in operating in them, appreciating technology
issues and the ability to change mid-course are essential for the new economy
companies as they face competition from both existing businesses and the new
burgeoning ones. Dotcom companies need to demonstrate that they can not only
make revenues but also profits, which is the essential mission of any business.
Forget about the basic tenets of business and you too will surely be forgotten.