title: Is it safe to not go
into the water?
by: Scott Bradner
So the dot-com boom did just
that. Not a fun time in VC-land. Not a fun time in Nasdaq-land. The Wall Street Journal estimates that
just one component of the dot-com frenzy -- the telcom companies -- have built
up a debt of $650 billion in the past few years, with the prospect of outright
losses near $150 billion. No
matter how you look at it, $150 billion is real money -- well, it
<ital>was</ital> real money once upon a time. At least some of the telcom companies
have some physical assets that have a half-life of more than 6 months -
millions of miles of fiber have been installed just in the US over the last two
years. To be sure most of it is
currently unused, 97% by some estimates, but at least it's something that does
not generally become worthless with the next hardware revision, like old
servers and routers do. E-commerce
companies like e-Toys, pets.com and hundreds more turned purely virtual
overnight and wound up being worth a few cents on the invested dollar.
Many of the biggest
investments in e-commerce sites were traditional companies trying to protect
themselves from being "Amazoned," as the New York Times put it. The
term was used to personalize the corporate angst over the possibility of having
their corporate existence wiped from the electronic face of the world by some
virtual superstore. According to
the Times, last year alone $10 billion was spent on Internet consultants, much
of it to prevent Amazoniation.
Billions more were spent starting over-hyped web sites - for example
Toys "R" Us is said to have spent $260 million on toysrus.com. I will say I did not know it was
possible to spend that much of money to get so little for it. So little that now when you ask for
www.toysrus.com you get Amazon.com.
Yup - they got "Amazoned" in spite of the money.
With all this carnage is it
safe for non-web companies to try to build a web presence? You can sure spend a lot of money for
little return. I think the
question should be turned around -- is it safe for a non-web company to stay
that way? Sure it is. It is also safe for a company that has
physical stores to not run a catalogue business. But if a company already has a reasonable infrastructure it
can make some money from people who happen to not live near a store. The same is true with the web. It may still be a smaller overall
business than catalogue sales but if the current -- realism enhanced -- trend
continues it will be much larger in a few years. You can avoid the opportunity if you want to but it seems
foolish. Not quite as foolish as
assuming you need to spend 10s of millions of dollars getting there. But for some reason the consultants are
getting cheaper these days.
disclaimer: Its not getting
cheaper but spending money on Harvard seems to pay off but the University has
not expressed a view on this topic.