Like the Nasdaq stock market, the dot-com landscape has been a wild and unpredictable ride during the past two years. One day, business-to-consumer sites are as hot as Poo-Chi, the robotic dog. The next day, business-to-business sites are all the rage, like Razor scooters.
The fads online change about as quickly as those offline. The only difference is venture capitalists throw millions of dollars at the next big thing. Its sort of like craps at the Nugget Casino in Reno, Nev. On Saturday, youre rolling in the dough; on Sunday, youre looking for the free buffet because all you can afford is the nickel slots.
Venture capitalists will tell you that most of the ventures they fund end up foundering. Its the one or two big hits that help finance all the other speculation and keep the money guys driving Mercedes-Benzes.
And who said online gambling is illegal? It happens every time investors put dough behind a business plan or buy into the hype of an Internet company that claims to revolutionize the way people do business online. In most cases, the reality has disappointed. The obituaries of Web retailers include some well-financed darlings such as Whirlpool-backed Brandwise.com, Amazon.com-backed Pets.com and Walt Disney Co.-backed Toysmart.com.
Despite the gloomy outlook, a few online retailers have managed to turn a profit. Most have done it by working offline connections, keeping their advertising and marketing expenses low and running lean operations with little overhead. Profitable dot-coms include eBay, the worlds largest auction shop; FragranceNet.com, one of the Internets first profitable pure-plays; FTD.com, a spin-off of floral giant FTD; and Homestore.com, a spin-off from the National Association of Realtors.
Just like the Nasdaq, the dot-com industry can be very unpredictable. But some retailers that are playing their cards right have hit the jackpot. So cheer up. Its not all gloom and doom out there.