Winds change for dot-coms

Published on .

Let the shakeout begin. The easy money of the dot-com frenzy, where even failures could be "successes," is giving way to a tougher market. Venture capitalists want accountability; lots of last year's Net stocks are in the tank; and many dot-coms show signs of running out of cash. This is good news. It will lead to a winnowing out. Now we get to see which have talent and business savvy.

Last year was a giddy time to invest in, work at, create ads for or sell TV time to dot-coms. It was a surreal market based not on business reality but on cash flowing in from VCs and initial public offerings. As we reported last week, there are unmistakable signs the Net market is entering a more measured phase. Agencies report dot-com clients are taking a little time to think about advertising, a change from the "ready, shoot, aim" approach. VCs now want ads that perform after having blown billions last year on ineffective advertising.

In addition, some agencies say the flurry of calls from new dot-coms has slowed, and this year's boom in business-to-business dot-coms has brought with it a bevvy of serious ads. Even on the business-to-consumer side, more dot-coms see the wisdom of targeted, direct-oriented ad pitches vs. last year's over-the-top, edgy brand ads.

The most telling sign of change is money. To be sure, there still is a flood of cash coming in. That means some bad ideas still will get funded. But a lot of IPOs are hitting the market with a thud, and the prices of many of last year's consumer dot-com stocks have plummeted. It doesn't speak well for similar companies that count on funding their marketing budgets with new cash raised in the stock market.

Dot-coms fall as easily as they rise. A year ago, e-tail pioneer CDnow was at the top of its game. Last week, it revealed its auditors raised "serious doubt about its ability to continue as a going concern." So connect the dots. The Internet will change everything. But dot-coms are more likely to lose badly than win big in this sorting out.

Most Popular
In this article: