What were the mistakes of the days of dot-com mania?

Hi,

What do you think were the big mistakes of online businesses in the days of dot-com mania?

It's been about a year (give or take a few months) since the tech crash, so now may be a good time to reflect on what the lessons of history are for US....

What are your thoughts on this?

- Dien Rice

One of the reasons I've been thinking about this topic was because just yesterday, I saw a documentary about online business which was obviously made at the height of the dot-com boom.... Now, it looked like a quaint slice of history. Times change so fast.

I think one of the mistakes was the focus on "eyeballs" instead of sales. You can have a million eyeballs, but if you don't have any sales it's not much good....

- Dien Rice

Hi Dien --

Just some obvious observations:

1) Too much money. Most of these companies found it way too easy to attract way too much money.

2) Grossly inflated overhead & perks, just because the money was there to spend.

3) An over-dependence on non-sustainable business models.

4) Hyped up projections... And the fact that they believed their own hype.

There's a few to start with. : )

Best Wishes,
Jim Erskine
Homeway Press




Some great LOCAL business ideas for you!

WHERE'S THE MONEY COMING FROM?

I know friends who worked at some of these Dot-coms. They had great ambitions, great drive, great plans, and all sorts of startup capital. What they didn't have a *clue* about was where the money was coming from. They were interested in the "new paradigm" (Internet! Freedom! Lotsa Money Floating Around! Everyone Needs One!) and forgot the old paradigm of know what the market is, identify the value to the customer, analyze the need, know how to find where and who the customers are, know what the customer thinks they'll need and what they'll pay for. It was the "if you build it they will buy" mentality and combined with the joy of playing with the venture capital, it was a formula for disaster.

More money must be coming in than is going out. Just common sense.

The high rollers spend all of the venture money and then leave the troops holding the bag.

Even Amazon.com is going to come crashing down if they don't control the comings and goings of their cashflow. If you have a hole in your bucket, it will empty the bucket. You may be able to keep it full by pouring in more water faster than it is leaking out, but once you stop adding water, the bucket will run dry.

Kind of like the monetary policy of some governments...the difference is that they can print the stuff when they need more! I'd go to jail if I tried that myself...

The bottom line is the bottom line.

JDB


The bottom line on auctions...

Greetings,

Way too much money. It is the smaller operations that are still around. Everyone here knows the Internet is a great way to do business. Christmas retail sales are down because of the Internet. But everyone "knew" the Internet was HUGE - and they didn't take the time to build a base to start from and grow. They were willing to spend millions thinking the Internet couldn't fail. Now they know they can - and businesses will start to grow online in a more realistic fashion.

Stephen Dean
ebizknowitall.com
Home of the Tombstone Sales Letter


The Tombstone Sales Letter

...how long the dot-com boom lasted. I mean, a lot of people saw the writing on the wall very early on. But when things didn't start crumbling down right away, it became easier to believe that maybe the economy had changed.

If you were in a high-tech field, I think it took a lot of character to withstand the peer-presure that built up over that time.

Regards,
Phil

> Greetings,

> Way too much money. It is the smaller
> operations that are still around. Everyone
> here knows the Internet is a great way to do
> business. Christmas retail sales are down
> because of the Internet. But everyone
> "knew" the Internet was HUGE - and
> they didn't take the time to build a base to
> start from and grow. They were willing to
> spend millions thinking the Internet
> couldn't fail. Now they know they can - and
> businesses will start to grow online in a
> more realistic fashion.

> Stephen Dean
> ebizknowitall.com
> Home of the Tombstone Sales Letter

There is a very good documentary called Startup.com. Two friends leave their jobs to start an Internet business.

Shows their entire process of thinking from dream to bust.

Matt

I worked in a major international advertising agency at the height of the dot.com boom.

Everybody knew that these cyber folks were crazy, but they had so much money it was impossible to tell them that they were being set up for a fall.

I remember sitting in a conference room with a 23-year old Swedish entrepreneur who had just been given $10m by a venture capitalist to launch a 'new concept in chat rooms.'

We all knew that his idea was rubbish - everyone in the agency had spent a day trying to use the chat room. It took about an hour just to sign on!

Yet, when this spotty lad sat in tattered jeans sat in our boardroom and insisted that we send out for smoked salmon (which he left) and champagne (at 10 am, but he did drink it), did we tell him his site stank?

No. The emporers new clothes appeared before our eyes and we smothered him with fantastically well thought out advertising concepts for targeting online chatroom users.

Did we get the business? No. As he left, he mumbled that we didn't 'get it'. His bankers, he said, would never let him spend the money online - 'they want to see a big splash, you know, TV, Cinema, that kind of stuff.'

That was one of the reasons so many dot.coms failed. They thought (or their investors did) that all it takes to build a trusted and respected brand is to spend huge amounts of money. Forget brand values. Ignore the fact that these things take time to establish.

They saw a simple equation: money in = brand out. More money in = bigger brand out.

Burn rate was the mantra. 'You can't hope to make money in the future unless you are burning enough right now.'

That is what happens when marketing is taken over by financiers, programmers, chancers, and everybody else who should be getting on with their own job. If they had left the sales and marketing to the people who understood it, some of them might have survived.

Just my observations (and by the way, I've nothing against Swedish people).

Martin Avis




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