Dot.Bombs The Internets New Growth Sector

Dot.coms" became "Dot.Bombs" late last year, and they continue to drop even now.
Webmergers.com reported that at least 210 Internet companies folded in 2000,
with nearly 60 percent of the dot.com deaths occurring in the fourth quarter of
2000. The staggering cost of December 2000's shutdowns alone rang up at
$1.5 billion in sunk investments. The new year did not bring new hope to the
industry, since another 225 Internet companies folded in the first four months of
2001.

</p><p>No one is immune from the failures. Mom-and-pop dot.coms are going under just like
the "big name" players. For example, dot.com deaths included Disney's Go.com,
Toysmart.com, Planet-RX.com and even MVP.com—a company backed by notables John
Elway, Michael Jordan and Wayne Gretsky.

</p><p>Bankruptcy is the new buzz word in the "dot.com" world. Sites are popping up
everywhere to keep tabs on the companies that have thrown in the towel. ABI World
joined in to track this trend as well. Check out the Dot.com Death Watch web page
at www.abiworld.org, where we dedicated an entire page to providing links to many
of the sites tracking these failures.

</p><p>Bankruptcy headlines featured on ABI World (<a href="/headlines/todayshead.html" target="window2">www.abiworld.org/headlines/
todayshead.html</a>) also provide up-to-date information regarding who's failing each day.
It reports the day-by-day adventures of the dot.bombs and "regular" companies that
find themselves in financial distress.

</p><p>One of the links on the Death Watch page is the Dot.com Graveyard (www.
upside.com/graveyard), which comes complete with tombstones that list both the company's
life span and "burn rate" (the amount of money they went through—with some really
spectacular amounts).

</p><p>Those interested in tracking these downfalls and looking for the latest news, surveys
and a sounding board can log on to www.dotcomdoom.com. This site tracks the daily
activity of dead and dying dot.coms.

</p><p>If you are optimistic, www.startupfailures.com bills itself as being for
entrepreneurs riding the start-up roller coaster. Its primary philosophy appears to be
that you can always bounce back from being with a start-up business.

</p><p>For dot.com employees (and soon to be involuntary alumni), there is even a site
dealing with employee issues. Its name is, frankly, unfit for print. It is also
unlikely to be accessible from large-firm computers that have "locked down" many of
the sites on the net that appear to contain inappropriate subjects or contents (but
those types of restrictions are another story in and of itself).

</p><p>A site that studies failure is www. whytheyfailed.com. It bills itself as looking
"at Internet business failure, the causes of failure and how best to avoid
it...provid[ing] valuable information on this subject area and...encourag[ing] more
transparency around failed businesses and projects. Whytheyfailed.com is not celebrating
failure; quite the opposite, it is learning from it."

</p><p>The twin problems faced by most dot.coms are a lack of tangible assets coupled with
the absence of profits. (Apparently profits are irrelevant if you are going for
volume.) As everyone reading this knows, a business needs a positive cash flow to
hope to reorganize and repay their debts. Many dot.coms lacked cash flow, and
profitability was a dream for the future. Without a profit after paying all expenses
(including interest), a company can almost never repay old debts.

</p><p>Other special problems and complications arose from days gone by. Dot.coms
expanded much faster than both their record keeping and the experience of management.
A server's IP (internet provider) address is important to a "techie" (or network
engineer), but not nearly as important as its street address when the assets have
to be sold by the trustee. Bankruptcy trustees have had significant problems in just
finding tangible assets to be sold.

</p><p>One asset that dot.coms have in abundance is customer information. Between the
standard "customer list" type information and the data captured during customers' visits
to their web sites, dot.coms should know more about who their customers are and what
they like than any other business. Frequent-flying and frequent-shopping "memberships"
only track customer purchases. Dot.coms know exactly what the actual potential
customers saw even if there was never a sale. With specifically designed cookies and
tracking software, customer-specific data banks were created.

</p><p>Monetizing this information is an issue of its own. The information can become the
most valuable corporate asset—exactly the problem that arose when the toysmart.com data
was up for sale in its bankruptcy case. In that case, at issue was whether its
customer database could be considered an asset that could be sold to repay creditors.
Let's just say that this kind of information is not truly valuable unless you can use
or sell it.

</p><p>Ironically, some companies have even auctioned off their assets on their own site
before the dot.bomb goes off. For others, their losses have opened up more potential
business on the Internet, with online listings of auctions and asset sales of dot.com
residue, including ABI's own <a href="http://www.bankruptcysales.com&quot; target="window2">www.bankruptcysales.com</a&gt;.

</p><p>Perhaps "Dot.Bomb" really is the most accurate description for these former high
fliers. Bombs are frequently dropped in a "free fall" from high altitude. And then
(thankfully!), someone has to come in to clean up the mess.

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