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Even e-business can't fly without customers
This article was originally published on April 25, 2000 by SignOn San Diego and Copley News Service.
It seems the jumpy stock markets have finally realized what common sense should have dictated from the beginning: Business is business, and you can't make money if you don't have something to sell.
With the recent rapid fall and rise of the high-tech sector of the stock market, the experts in such things (the often-quoted "analysts") are now somberly telling us that the golden age of online IPOs has come to a close. Supposedly the era is over when investors would react to an Amazon.com losing millions of dollars by jacking the company's stock price even higher.
And now we're getting warnings – again, from the supposed experts – that the world of online commerce is due for a thinning out. That most of those companies that are online today will be gone tomorrow.
Looking at some of the companies that are starting up, gearing up or simply trying to stay up, the reaction can too often be: What on earth are they thinking?
For instance, what's the draw for Beer.com? The site has a great name but little that would make me use it. It's touted as a "lifestyle" site, but seems little more than a collection of links. There's nothing much compelling here to draw the kind of traffic you'd need to sell enough advertising to make any kind of profit. (And, no, they don't sell beer ...)
Quite simply, too many online businesses seem to be a URL in search of a business plan.
Which isn't to say that model can't work – IF you come up with a real, viable product or service line.
MP3.com started out as nothing more than a collection of links to MP3 players, and a search engine. It had an easy-to-market online name, to be sure, but there was, in the words of Gertrude Stein in describing Oakland, no there there.
Then MP3.com came up with My.MP3.com, a digital dubbing service where you can virtually store your CD collection on their servers, then listen to your music library anywhere you have Web access. MP3.com, despite the lawsuits from the high-powered recording industry, is much more viable as a business now that it has something to offer customers. While the service is free during an introductory period, MP3.com intends to begin charging a small fee for My.MP3.com – which means, for the first time, it will have an income stream from something other than banner advertisements.
Then there is the latest crop of online businesses, based on the ebay model of serving as a meeting ground for buyers and sellers. Among the latest to hit cyberspace are Rebound.com (a business-to-business excess inventory exchange), MrSwap.com (where individuals can trade music CDs they don't want anymore) and MakeUsAnOffer.com (where you can haggle with the seller over the price).
The main problem with these sites isn't necessarily the business model, it's getting enough people to participate. None of those sites above had more than a couple dozen each of most items – meaning it's not really worth your while to go there, which means you're not likely to sign up or post your own stuff for sale. Kind of a tough Catch 22, trying to build up enough critical mass to become successful.
It worked for ebay, the online auction house which now hosts millions of items for sale (which draws in visitors, which makes more vendors willing to pay for the service), but others are finding the market more crowded now – making it more difficult to get the public's attention.
The online businesses that succeed will be the ones that are able to do what ebay, Yahoo!, and other online success stories have done – match a clever or easy URL ("location, location, location") with a smart business plan.
As to the others and the experts' prediction of a thinning out of e-businesses?
Even in the physical world, most magazines don't last more than three issues, most new restaurants don't make it to their first anniversary.
Usually with good reason.