Sunday, July 23, 2000

George Mindling Column 7-23-2000


Dot.coms suffer downturns


In the realm of Internet business processes, there are two basic styles of companies using the Internet. The standard, established business that earns its income traditionally through direct or representative sales is called a "Brick and Mortar" type firm, while the new firms relying on electronic media for customer transactions are called E-com­merce firms.

The e-commerce firms, or “dot.coms," may sell services or goods, but they do it all electronically, from the marketing to the collection of funds.

While the brick and mortar companies have found it is a business necessity to be on the Web for advertising, sales and communications, it is estimated that 80% of the "dot.coms" will suffer financial downturns, according to Tony Tamer, H.I.G. Capital in Miami. That is a phenomenal failure prediction, especially considering the capital and marketing resources poured into the e-commerce startup businesses.

My wife tracked our daughter's recent airline trip to Hawaii on the Internet. The miles remaining and the flight time were updated every few minutes. An amazing feature simply not possible with any other medium. So why then are so many of the "dot.coms" floundering? There are many schools of thought, and if you find the one to save the high dollar investments in the startup companies, you will be a millionaire, without Regis. The reasons are complicated and as varied as the “dot.com” businesses themselves.

Multi-millions of dollars are spent on TV commercials showing products or services that must be accessed through Web site addresses that no one remembers two hours later, much less the next day. Not many people keep a note pad taped to the TV remote to jot down Web addresses, although that may be a good use for those obsolete suction cup windshield and dashboard note pads that were the fad several years back. These are sites marketed to the average television viewer, who hopefully has access to the Internet, in the hopes that they will remember where to look on the Internet when they decide to buy.

We recently tried "on-line-grocery-shopping. com." No, that's not the real name, but I'm sure you've heard of them after the radio and television ad blitz. After first ordering their card, which came through the mail, we sat at our PC accessing their Web site for over an hour. It was not an easy process and we soon got frustrated after realizing we weren't getting anywhere and we certainly were not buying what we wanted. We have been back to the site several times, but still haven't purchased anything. Perhaps others have had better success. We'll see this time next year.

I now have my own theory. Any company that relies on local telephone access with people like me at the keyboard and service to create enough cash flow to insure commercial success, is on the wrong planet. Unless, of course, it is the phone company itself. I often wonder as I watch the squirrels hopping along my telephone line if they are going faster than my data.

Marshall McLuhan said "The Medium is the Message." The dot.com people don't understand the medium.

George Mindling © 2000

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