Another Schadenfreude-filled look back at the dot-com zaniness


I can never remember how I'm supposed to spell CNET. Is it "c|net", "c-net", "CNET"? Well whatever their name is, they published an article titled Top 10 dot-com flops for all your "I can't believe this actually happened" needs. My former colleague Todd Berkebile (now at Turbine) captured the spirit of the era when he remarked at lunch, "The dot-com boom is a highly inefficient yet effective way of transferring money from venture capitalists to me, Todd Berkebile." He was referring specifically to all the companies that were selling their goods and services way below cost in an attempt to "expand the customer base" or "capture mindshare" or "gain first-move advantage" or whatever it was that entrepeneurs managed to put into their business plan to dazzle investors.

My favorite example of this was Kozmo.com. Rob Walker in Slate magazine pointed out that in their S-1 pre-IPO filing, they mentioned the following interesting numbers:

Revenues $2,117,000
Cost of delivery $2,281,000

That's right. Delivery costs exceed total revenues. Even if their suppliers provided the goods absolutely free they were still losing money. As Walker remarks, "For a delivery service, that seems very, very unpromising."

Meanwhile, The Short List on NPR's Day to Day a few months ago consisted of names of failed dot-coms. Some I recognized, some I didn't, and some were in that twilight zone of "Wait, that sounds familiar, what was it again?"

One of the dot-coms that floated in that twilight zone was Mercata, a group buying site where the price of an item dropped the more people signed up to buy it. What they wanted you to think was that the more people who offered to buy an item, the better the deal the company could negotiate with their suppliers. Except that's not how it actually worked.

What's my point? I don't know. Sometimes I don't have one.

Comments (15)
  1. AC says:

    My favorite up to now was:

    http://www.salon.com/tech/log/2000/05/18/boo/

    The fashion retail site Boo.com was laid to rest Wednesday, after reportedly burning through $120 million in a mere six months. The Web’s first immersive retail environment had its own online guide (Miss Boo), its own online magazine (Boom) and some of the hippest clothing brands. But it was wildy overdesigned, difficult to navigate and completely out of touch with most Web retailers’ vision of quick shopping and ease of use.

    http://www.weht.net/WEHT/the_Boo.com_founders.html

    Whatever Happened To: the Boo.com founders?

    They were paid $187,500 in 2003 for talking about their misadventures in the book Boo Hoo: A dot com Story.

  2. Strohm says:

    My favorties were HomeGrocer.com/WebVan (mentioned in the article) and one I don’t remember the name of. On this second site, you could pre-purchase gasoline at a fixed price as a hedge against the price going up in the future. It really flopped when the price of gasoline dropped later on. Anyone remember what this site was?

  3. PatriotB says:

    Ah, the dotcom bust. I was back in high school during the rampup, and I remember that the whole time I was just waiting for it to come crashing down. And it did.

    I get a similar feeling with all of the ad-based craziness of recent. Do people really believe that all these "web 2.0" services can make a living on ad income alone? (Interestingly, there have been stories the past couple days about an ad-supported version of Windows. For crying out loud…)

  4. Eric Lippert says:

    I found my Pets.com sock puppet while cleaning the basement the other day, and it reminded me of Mike Daisey’s bit in "21 Dog Years". He points out that Pets.com was in the business of MAILING YOU BAGS FULL OF ROCKS for crying out loud.

    Rubbing magic internet pixie dust on it doesn’t suddenly make mailing rocks around make any sense.

    Man, do I miss the dot com boom.

  5. Corey says:

    I also don’t have a point, but I was the consultanta and technical lead who build Mobshop, the Mercata competetor (we were first). The company at that time realized that at the beginning it wouldn’t work technically as advertised, but as they got to significant volumes they could negotiote the deals with manufacturers.

    Technical note: try getting Site Server Commerce Edition to work where someone doesn’t actually buy something at a set price and the price won’t be decided until a future date. Tricky… but possible.

  6. Mike Dunn says:

    "F’d Companies" is a short but funny look back at all the whacky ideas that flopped. ISBN 0743228626

  7. AG says:

    What about Google.com was that a crack pot idea or what?!?

  8. smackfu says:

    No kidding about transferring the wealth. I loved the companies that would give you a $25 no minimum coupon. I bought so many DVD’s for $1 that way. And half the time they’d throw something like a mug or a mousepad in the box. So desperate to get customers.

  9. Tim Smith says:

    The DOT-COM bust was based around investment capital being treated more like venture capital chasing after companies who’s business plan’s were basically ****.

    People were investing in companies because they were internet or tech companies and not because they had good business plans.

    Amazon and Google have both done well. But that doesn’t mean the whole DOT-COM bust didn’t revolve around a bunch of stupid people running companies badly.

  10. AndyB says:

    All those examples pale into insignificance compared with one I saw a long time back at the height of the dot com boom: NetJ.com

    NetJ, worth about $40/share at one time making it a $23 million market cap, it’s descriptuion of itself filed with the SEC was "The company is not currently engaged in any substantial business activity and has no plans to engage in any such activity in the foreseeable future."

    So, start up a company, give it the magic name with the parts "Net", "J" (for Java no doubt), ".com" (obviously), and watch the money come rolling in. The founders of that company knew what they were doing (assuming they sold some shares :) )

    A lovely link: http://www.nettime.org/Lists-Archives/nettime-l-0002/msg00031.html

  11. Gabe says:

    The (not-so) funny thing is, I believe that the bubble burst because of the US government.

    The day they ruled that MS must be split up (what a ridiculous thing to do!), MS stock took a dive, and the rest of the tech market went with it. Of course the viable entities recovered but the VC money was gone, so any company that was relying on another round of funding was SOL.

  12. memet says:

    Gabe: wake up. The bubble burst because of Enron, and the energy crisis. That was the beginning of the end. Then 9/11 came in, and everyone that was holding their breath finally exhaled and said "that! that’s why we went bankrupt".

    IMO, it had nothing to do with Microsoft.

  13. Terrence says:

    Ah, Kozmo.com. That brings back some lovely memories….

    We were early Kozmo customers back when they only served select parts of lower Manhattan. At first they only delivered DVDs. The cost, speed, and convenience held a significant advantage over schlepping down to the video store and not finding the movie you wanted. Then they started delivering snacks to satisfy your movie munchie needs.

    After watching the movie, you just dropped it in a local collection box. Since we were early adopters in they neighborhood, one of the boxes was installed on our block after our second or third delivery. Brilliant!

    The founder, Joe Parks, delivered our movies (by bike!) on several occasions and steadfastly refused a tip. (I think that was actually a feature of the service that the delivery folk were not to request or accept tips.)

    I suppose Tivo and Netflix would eventually have been significant competitors, but they really killed themselves by rushing into markets that didn’t have the kind of density to make quick low-margin delivery service profitable.

  14. Gabe says:

    memet: Actually, I’m pretty sure that Enron had nothing to do with it. Their insiders were selling off shares, gradually lowering the price, until bankruptcy was declared at the end of 11/2001. While 9/11 didn’t help, that was hardly what caused it. I consider the "bubble-bursting date" to be the beginning of the end, not the end of the end.

    If you check NASDAQ history (http://moneycentral.msn.com/investor/charts/chartdl.asp?Symbol=MSFT&DateRangeForm=1&PT=8&CP=1&C5=11&C6=1999&C7=12&C8=2000&C9=0&ComparisonsForm=1&CC=1&CE=0&DisplayForm=1&D4=1), you’ll see that it dropped precipitously on April 3, 2000 — the same date as the Conclusions of Law (http://www.usdoj.gov/atr/cases/ms_conclusions.htm) were issued by the Gov’t — never to recover.

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