CAMPAIGN-I: Spotlight on: boo.com - Boo.com’s demise is unlikely to put off determined e-tailors. But errors that destroyed Boo.com are set to claim others, Alasdair Reid says

Reality check number two. First, the ’structural readjustment’ of new economy stocks and, last week, the demise of Boo.com, the European dotcom company with the highest profile and the heaviest backing. When Boo.com was declared bankrupt last week it had used up pounds 91 million in funds in less than a year, making Boo.com the dotcom for whom the term ’burn rate’ was surely invented.

Reality check number two. First, the ’structural readjustment’ of

new economy stocks and, last week, the demise of Boo.com, the European

dotcom company with the highest profile and the heaviest backing. When

Boo.com was declared bankrupt last week it had used up pounds 91 million

in funds in less than a year, making Boo.com the dotcom for whom the

term ’burn rate’ was surely invented.



Burn rate is, of course, used to denote a dotcom company’s enthusiasm

for getting through its available cash - and, for the majority of

dotcoms, marketing accounts for a very large proportion of spend. Cynics

would argue that what the burn rate also indicates is their

determination to get the least possible value from this cash. At least

the pop group and art guerrillas, KLF, when they set fire to pounds 1

million in used notes, got a rather compelling home video out of it

all.



Boo.com commissioned a couple of quirky films which undoubtedly made

everyone aware of the site’s address. But what the company actually

offered was never really clear from the advertising; and as the Boo.com

site denied access to all but those using the most powerful of PCs and

fastest internet connection, it was difficult for many people to find

out for themselves.



That’s not to say that the company’s marketing efforts drew a complete

blank. Last week some of the industry’s waggish observers were pointing

out, perhaps cruelly, that one of its ads featuring a guy in designer

lycra cycle gear being loaded into an ambulance turned out to be a

remarkably accurate portrayal of the operation’s fate.



So what lessons do we take from Boo.com’s fate as the first major

casualty of the e-commerce adventure? Surely, if nothing else, all talk

of burn rate will become rather unfashionable?



Miles Saltiel, the director of technology research at WestLB Panmure,

says: ’No-one has been more aggressive about spending money than

Boo.com, and they spent it too fast on a questionable business model.

They had technical problems. They delayed their launch. They weren’t

properly operational in time for Christmas. One of the things it teaches

us is that when money is cheap it gets treated cheaply. Will it now be

harder for dotcoms to get cash? It was always going to be hard getting

cash in the new climate.’



Worryingly, though, there are a large number of dotcom companies still

committed to scary burn rates. A report from PricewaterhouseCoopers last

week predicted one in four UK-listed internet companies could run out of

cash within 15 months. The report concluded that a phase of

consolidation is perhaps inevitable.



Already time is up for Net Imperative. On Monday the online news and

community site called in the receivers. After only six months the main

backer, Durlacher, was refusing to provide extra funding.



One way or another, all this signals the end of the boom times for media

owners, not just in TV but also in radio and outdoor.



Most media analysts, however, agree with the assessment that there are

few generic lessons to be learned from Boo.com’s profligacy. Nigel

Sheldon, the managing partner of m-digital, comments: ’It tells us you

need to have the practical technical expertise to implement your

strategy. There were too many delays and mistakes. Overall, though, I

think it will lead to better management in this sector. It’s the nature

of this business that the demise of a company like Boo.com won’t deter

people from launching.’



This may ensure, for instance, that in the future retail sites will be

run by people who have some sort of knowledge of retail. However, there

are those in the advertising business who draw more revolutionary

conclusions from all of this.



As the boss of an agency representing one of the world’s largest FMCG

advertisers stated last week: ’The much maligned leaders of the

so-called old economy have been predicting this privately for many

months now and have been preparing for it. Some people believe that the

web isn’t about the creation of a new type of retailer, it’s about doing

away with a whole layer of retailing infrastructure altogether. As old

economy companies prepare to take their place at the heart of the new

economy, they’ll regard all the money spent by companies like Boo.com

merely as generic marketing for the proposition that you can buy things

via the internet.’



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