In fact, about 20 dot-coms went out of business in the first two weeks of November, which is nearly the number for the entire month of October. Actually, the entire year has been rough for Internet companies with over 130 dot-coms closing down since January, resulting in about 8,000 layoffs according to findings of a survey by Webmergers.com. This doesn’t even include the job slashing that companies like The Street.com, Britannica.com and marchFIRST have done to reduce expenses to stay afloat. Unfortunately, with the holiday shopping season on top of us, I’m afraid another parade of dot-coms will fail to deliver as promised and meet their demise.
Certainly one reason is that investors in Internet companies are finally applying the same standards that traditional business adheres to: companies eventually need to be profitable, let alone make money. The market downturn and steady tumble of share prices from the lofty IPO days are clear indication of this fact. This, of course, has led to reduce funding and closed doors. In the end, however, stock valuations will find their logical and fair levels, and the strong Internet companies will do what needs to be done—merge, streamline, expand, or compete—to be successful. This shakeout is inevitable and expected and will continue for a couple of years.
What concerns me more is an underlying belief that, at this point in time, consumers are still not comfortable purchasing products and services through the Internet. I don’t claim to know all the reasons why companies with good brand names, functional websites, quality products, and competitive pricing, like Furniture.com and Garden.com, would go belly-up, but I venture to guess that it has more to do than just high burn-rate of capital money. I fear that, fundamentally, consumers are still not ready to click-on the checkout button on their virtual shopping carts yet. The convenience and selection of shopping on the web has not been a strong enough pull for most people. Maybe it’s the immediacy of taking something off a shelf, talking to a salesperson, window shopping with a friend, trying something on, or the security of the transaction, but consumers do not seem ready to give up their old shopping ways.
I see these same parallels with online ad exchanges. After all, media planners and buyers are still consumers in the end. Despite the influx of new ad exchanges and the promises that they hold for using the Internet to make buying media more efficient and effective, they are barely being used right now. Again, maybe it’s the lack of personal contact with sellers, deals are “too complex” for the web to handle, or agencies want to use their own insertion orders, but media buyers do not seem ready to give up their old buying ways.
I firmly believe that the Internet, maybe in the form of ad exchanges, will have a major impact on how media is bought someday. It just looks like the future is not as near as we hoped it would be by now.