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Double Trouble For The Dotcom Bubble

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DQI Bureau
New Update

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.

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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.

SUSHANTO

MITRA


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