A Look Back At Ten Dot-Com Flops

climbing_monkey writes "CNET.com has posted what, in their opinion, are the top 10 dot-com flops." From the article: "The most astounding thing about the dot-com boom was the obscene amount of money that was spent. Zealous venture capitalists fell over themselves to invest millions in Internet start-ups; dot-coms blew millions on spectacular marketing campaigns; new college graduates became instant millionaires (albeit on paper) and rushed out to spend it; and companies with unproven business models executed massive IPOs with sky-high stock prices. Of course, we all know what eventually happened to this world. Few of these companies actually made enough money to recoup that cash, and when their investors fled to the hills, these start-ups died dramatic deaths. These are the celebrity victims of the new-economy bust."

Comments

Real Estate Bubble

[superpulpsicle]

Wait till this one pop. It'll have the dot com era seem so yesterday. Go to this website http://www.stock-market-crash.net/housing-bubble.h tm. In 1989 Japanese housing bubble, housing prices tanked for 13 straight years. US might do the same. The hi-tech industry is recovering alright considering the short period of time.

Rocket cash anyone?

[Ledora]

Coca cola backed rocketcash was a pretty dumb idea. It was another virtual currency, I won 1000 dollar of it (yes it was worth that in USD) and tryed to order large amount on sites with it only to be harassed by their "partners" because all rocket cash did was fill in websites order info with your name and THEIR visa card. so I would get a call from (ebgames I believe it was) asking me to confirm my visa number and give them my DL # and all that and I would tell them ITS ROCKETCASH! I ended up having to call cokes marketing department and yelling at them. Anyone eles use that crap?

Dot-Bomb Experience

[BuildMonkey]

I worked at a dot-bomb through the latter half of 1999 and into the beginning of 2000. We were building an online drug store to complement the company's mail-order prescription drug renewal business. The idea was that you would use the web site to input your prescription number, and while at the web site, would purchase deodorant, some bandaids, and mouthwash. In short, the hope was for the online experience to mimic your experience in a brick-and-mortar pharmacy.

There was a real brick-and-mortar, mail-order prescription drug fullfillment business footing the bill for this. It had been started by a father. He was semi-retired and had turned the business over to his two sons. The Web site was their idea and they were in charge.

We had a million dollars in middleware, a couple million in consulting to customize the middleware, an Orcale backend running on a high end Sun (E7500), and the Web site itself running on a top of the line, Sun E10k. At this point there was about $5 million sunk into the project, and we had not yet gone live.

Before going live, management felt the need to run a load test. At that point, you saw the IBM commercials on TV were dot coms went live only to see the site crash due to too much traffic. They didn't want to see that happen. The load tests showed that we could only handle 1000 simultaneous transactions. Clearly, that wasn't enough. So we bought another E7500, another loaded E10k, and another Oracle license. I don't know the exact numbers but I think this was close to another $3 million. With this new equipment and an additional DS3 line, we could handle 2500 simultaneous transactions.

Early in 2000 it comes time to turn the web site live and crank up the advertising. Tension was running high - and expectations were greatly disappointed. The largest number of visitors we ever had to the site was eight. We never had more than one active transaction.

I only stayed around for another couple of months. Before I left, the father, who founded the business and ultimately footed the nearly $10 million dollar tab, said:

It would have been cheaper to have phone operators and advertise that we would wrap every package in $100 bills.

Hardly Accidental

[Markus Registrada]

Scams like BELO, like Pets.com, weren't idiocy at all. They served their purpose to perfection. The only mistake the VCs made was overreaching. Had they kept things toned down, the gravy train could have run on and on.

These companies weren't expected to succeed. The VCs even said so: profits didn't matter, sales prospects didn't matter, even embarrassingly stupid products didn't matter. What mattered was that large amounts of money could change hands with very little oversight. It was money launderers' heaven.

If you want to pay somebody off, buy their company at a massively inflated price. (No company to sell? Start one!) Want to hide paper profits? Stage a stock collapse. Want to reward a toady? Make him CEO or CFO of a startup. (The CEOs were all directors of one anothers' companies.) Want to pocket the investors' money? Have your CEO spend it all at your marketing or advertising service.

None of the money was wasted. It wasn't burnt. Every dollar went into somebody's pocket. Every dollar came from somebody else's. One group got most of it, another lost most of it. The ones who lost were pensioners, whose pension funds were "mismanaged" into oblivion. Did the pension fund managers suffer? Or did they make out like, er, bandits? Which do you think is more likely?

This is not to say that everybody involved was a crook. Lots of people worked really hard to try to make something new, and most of them suffered as much as the pensioners.

How do you imagine W funded his campaign? His father used banking fraud, and had to bait Saddam into invading Kuwait to keep son Neil (Silverado) out of prison. The W crew relied on more modern, less legally-risky securities fraud (Enron). They're not very imaginitive, though: count on the VCs to ramp things back up before the next election season.