Business Week e.biz -- Clicks & Misses
Gone but Not Forgotten
The dot-com dropout class of 2000 tells a lot about what won't work online
As 2000 faded to black, Netizens might have thought the cartoon geezer representing the old year should dress as the Grim Reaper. At least 210 dot-com companies failed in 2000. But that raises an existential question: If 210 fall in a forest of more than 25,000 consumer Web sites, and most of the failures have little audience, do they make a sound?
The answer is no, not yet. The real crisis of sites that large numbers of people actually use--and like--is at least months off. If the climate for raising money doesn't improve, popular sites, including Webvan and theglobe.com, could run out of dough by mid-2001. So why care about the dropouts of 2000? Mulling them over teaches mordant lessons for entrepreneurs and investors. The most obvious one: Use common sense. The Web doesn't change the dismal economics of nowhere businesses like local delivery services. But the sadder failures are those that warn us consumers that the Web's promise might be harder to deliver on than we hoped. It's becoming apparent, for instance, that the economics of quality news and community sites haven't worked. We'll never know if sites like Garden.com would ever have made money, but we know investors won't take such risks again soon.
Here are some I'll miss:Garden.com. This e-commerce site for gardeners was one of the first crashes of the classic e-commerce-community business model. The site is scheduled to shut down soon and has already stopped taking orders. Boy, was it slick: well-designed pages and solid articles, interactive help for planning gardens in different U.S. climates, monthly calendars for what the amateur gardener should do, and more. It was nicely personalized, and even sent e-mail reminders with tips on cultivating a dream garden. Until recently, it sold the things needed to make it happen. The idea was to replicate the best salesperson at a local garden store, and Garden.com did it quite well. But the money part didn't work: It lost $75 million since 1995. E-commerce didn't grow fast enough--just $2.2 million in its last quarter--and ad sales were of the dwarf variety. One premise of "Three Cs" sites (content, community, and commerce) was that targeted content would draw ready-to-buy audiences that advertisers would flock to. So far, it's not happening.Scour.com. RIP Scour, killed by lawsuits as surely as the Gore Administration. This music file-sharing site shut down in the face of the same litigation wave that forced Napster Inc. and MP3.com Inc. to seek settlements with the music industry. I found Scour easier and faster to use than Napster. The courts, however, haven't bought the idea that royalty-free file sharing is legal. The lesson is not to fool yourself that cool technology alone will change people's tastes--or the law--overnight. Scour's assets were sold to a company that plans to use its technology for a pay-per-download site that'll cut artists in. We may like that service just fine, but online music's free-ride stage is finito.APBnews.com. This crime-news site (think All Points Bulletin) isn't out of business, but its assets have been sold through a bankruptcy court--and now the new owners are running out of cash. It's a shadow of what it was. A finalist for top honors in Columbia University's first Online Journalism Awards last year, APBnews made its mark with a combination of true-crime sizzle and investigative-reporting steak.
When we gave APBnews a rave 1999 review on our e.biz Web site, we called it the New York Post with a brain. Now it's closer to just the New York Post. You used to see the latest on the sensational murder-for-hire trial of Carolina Panthers footballer Rae Carruth next to a three-parter on the abuse of Americans in Japanese prisons. Now it's little more than a crime wire service. Some enterprise reporting is still posted, but it's months old. It's simple: Good content costs money. Small independents, despite the romance of the lone Web publisher, rarely have enough of it.
Here are some bygone sites I'm happy to see go:Furniture.com. The lesson: Keep your promises. Furniture.com talked big about delivering a better experience than furniture stores, where salespeople can intimidate and direct price comparison is tough. But Furniture.com didn't walk its talk. When e.biz looked into the company last July, we found a mess. Product returns were higher than most realized. Damage to goods in transit and late deliveries were common. And promises of customer service were writ on air: When I logged on to their instant-messaging support line, I was on hold nearly long enough to read a copy of Sports Illustrated.TheMan.com. It was just another stab at building an online 'zine/store--this one in the young-male market dominated in print by magazines like Maxim. But even I, too old a fart to laugh at Maxim's fart jokes, can name five or six 'zines that got there first. That shows clearly that this thing should never have been launched. The lesson: You have to be at least a little bit original.Mortgage.com. Web sites have to be much more convenient, not a little, to draw customers away from old ways of doing business. Online mortgages seemed like such a brilliant idea. The old way of getting home loans is a paperwork mess no one really likes. But online mortgages actually eliminated little paperwork. And the offline mortgage market is already highly competitive on price, so the advantage the Web brought was minimized. Mortgage.com has closed its site but hopes to sell its technology to banks. It still may make borrowing from the Old Guard moderately better. We hoped for more.
Who's next? Maybe a site you know and love. It's a shame. Good ideas that simply need time are caught in the same financing vise as bad ideas. Given time, businesses such as mortgage marketplace LendingTree Inc. or grocery-delivery service Webvan Group Inc. might well carve out profitable niches. Whether they'll get that time is an open question since Digital Darwinism is here with a vengeance. It ain't fair. But it wasn't fair when guys like these got rich overnight, either. Rise by the buzz, crash by the buzz.By Timothy J. Mullaney, Tim_mullaney@ebiz.Businessweek.comReturn to top