Dot-com business–not a sure thing

Dot-com business–not a sure thing

By By Mike Lotz

Dot-com business–not a sure thing

By Mike Lotz

Dot-com failures are accelerating, with the Internet startups now closing at the rate of about one a day, according to a new report.

Across the U.S. and Europe, 130 Internet companies have folded since the beginning of the year, with 21 in October alone. In November, the rate of closure exceeded one a day, with 21 closures in the first half of the month alone, according to a study from

One in four of the failed sites were B2C (business-to-consumer) companies, but 26 B2B (business-to-business) sites were also hit. The largest proportion–35 percent–were in California.

Most of the companies are not being snapped up by better-established or more traditional competitors because they simply have no assets–such as an audience base, a brand or proprietary technology–worth buying.

The rate of small business failure is not news; 80 percent never last past the five-year mark. The dot-com business just gets more press because of the hoopla of the Internet. It is truly surprising to see such excitement over the past year or so about How can you get excited about a company that never turns a profit but beats the loss estimates? Doesn’t make sense.

Most web businesses are less revolutionary than evolutionary. What is so revolutionary about dot-com businesses like or It’s really just a variation of the phone/mail order business that Sears pioneered more than 100 years ago. The only “revolution” is that the Internet makes it easier for consumers to seek, find and buy their products. The rest of e-tailing is little different than any other business.

Another reason for so much failure is due to the new “web economy” way of thinking. They really have bought into the idea that success in a business is not about revenues exceeding expenses, but the ability to sustain their business based on the endlessly rising stock prices and the constant intake of new capital. Revenue is barely an afterthought.

Most of these “web economy” people are young, and over the past five years, they’ve watched people get rich solely on stock options instead of good old-fashioned profitability. Stock dividends, formerly the product of profitability, are a thing of the past. With this attitude, the reality is that they’ve bought into a load of bull but haven’t yet realized it.

The point is that a business is a business; a dot-com doesn’t make it immune to the hard work and knowledge of running a business. Either you understand how to run a business or you don’t. It’s a knack more than anything else.

If you have any questions or comments, please contact me at

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