Nasdaq's precipitous drop over the past year has given us all a business refresher course
Nasdaqs precipitous drop over the past year has given us all a business refresher course. To wit: Companies that dont make money are not only questionable investments, they may not be around that long. Of course, some people made some big bucks by getting in and out at the right moment. Traditional investors who take the buy-and-hold approach werent left holding a lot when the Internet music stopped playing. Still, I think the past year or so has been good for us, if only for these lessons:
- Stock options are not the same as a winning lottery ticket. The growing popularity of "pink slip" parties in Silicon Alley and Valley are filled with out-of-work dot-commers who have learned that an option on a stock that doesnt exist (or is only going down) has more value as a punch line than it does as a shortcut to early retirement.
- In cyberspace, customer service requires the same, if not more, attention than it does in the brick-and-mortar world. Trust and loyalty have to be earned. Every time you ignore a customer, youre probably losing a customer. As I mentioned in previous columns, one domain name registrar ignored me. I returned the favor by switching to another registrar.
- With few exceptions (wsj.com, for example), subscription-based sites work only in the pornography industry. In the next few months, we may learn whether Napster also proves to be an exception.
- Statistics like hits, page views and eyeballs dont necessarily relate to revenue or profitability. When looking at the most-viewed Web siteswhich you can do at 100hot.comyou wonder how many are making a profit. Some of the most popular are notoriously unprofitable.
- The novelty of doing something on the Web just because you can do it on the Web wears off almost immediately. People will use the Web for something only if it makes sense, such as for savings or convenience. My first choice to catch up on current events is to tune my TV to CNNs headline news. Only when theres no TV around do I surf over to cnn.com.
- The network is the computer, and vice versa. Low-cost Internet appliances from big-name manufacturers are becoming quite popular. At first, I thought Larry Ellison was dead wrong when he talked about the $500 PC. I guess thats why his net worth is in the billions and mine isnt.
- Clever advertising guarantees neither profits nor revenues. If you dont offer value, you wont get customers. If you dont offer a good experience and customer service, they wont stay around. If you dont have a formula for turning a profit, you probably wont stay around long.
The Internet, as a business model, is now beyond its infancy. However, its still only a toddler. It may not be spitting up anymore, but it still cant feed itself. By learning from past mistakes, it will slowly begin to mature. As IT managers, we need to make sure that those mistakes arent repeated. The novelty aspect of the Internet has worn off.