Look out everyone. Run for cover. The bubble has burst. Dotcoms are
The past month has seen millions of pounds wiped off dotcom share
prices, the internet sector’s confidence is lower than ever and it has
all been topped off by the news that Boo.com, one of the highest profile
and best-funded start-ups of last year, is to bring in the liquidators.
Everything points to the fact that a wave of panic is sweeping the
dotcom world and those start-ups that had such glorious ambitions will
be crushed mercilessly underfoot by an unforgiving market.
Of course, from the perspective of someone in the start-up’s shoes, it’s
nothing like this in real life. If you pick through the media’s
schadenfreude, you will find that for every Boo.com, which sadly made a
litany of strategic and operational mistakes, you have a rising star
such as thinknatural.com, the natural health e-tailer, which, on the
very same day as Boo’s fall, secured a further pounds 10 million in
funding. Just as one swallow does not a summer make, one e-tailer going
bust does not bring a sector to its knees.
What has actually happened is a market correction. Nearly every start-up
I talk to welcomes this in a strange way, because it brings a sense of
realism to their business goals.
Over the past six months there has been a movement away from
business-to-consumer investment in start-ups. Undoubtedly, this has been
due to the plethora of ’me too’ players reinventing the wheel.
Another reason for the lack of investment in this sector is the cost of
the marketing and the rising cost of customer acquisition and retention.
I can’t say this has, as the majority of dotcom advertising is pure
rubbish, devoid of proposition and smacking of agencies making a quick
The money instead has flown into business-to-business and WAP
investments, and I would imagine it will move on quickly to broadband
and interactive TV players in the next six months as the venture
capitalists look for new models to trumpet.
The problem is that if you are a B2C start-up, getting initial funding
is difficult but raising further rounds can be even harder simply
because there is a lack of appetite for the sector. With so many
opportunities in this sector to create new-business models and personal
relationships with users, it’s a crying shame that investors adopt such
This combination of a lack of appetite and the poor showing of one or
two of the overpriced B2C initial public offerings will lead to a number
of mergers and acquisitions in the following months. Consolidation can
only be good for the market and the consumer. So, to reassure you, it’s
not the end of the dotcom world yet - even for B2C players.