AKRON (Sept. 26, 2001)—It might be easier to count all the world's tires than all the sites on the World Wide Web. Likewise, though a far more finite number, tallying Web sites devoted to tires, the tire business and the automotive service industry is futile. They come and go like trains at a busy depot.
With the collapse of the Internet's imaginary walls, caused by the demise last year of much of the so-called “dot-com” industry, only the strong, or perhaps the smart, are surviving. More than 31 million sites carrying better than a billion pages certainly make it easy to get lost in the Web. And with an estimated 109 million computers equipped with IP addresses serving as boards for the world's 'Net surfers, it's even easier to understand why so many businesses get caught up in it.
Yet despite all the mouse-wielding, launching a profitable Internet venture is risky business at best. Few have thrived, and some of those that have survived have taken it on the chin for more than a year.
“You talk about bad timing,” said Dan Ogden, president of Appointmentzone.com, which began operating in the spring of 2000, just as the dot-com world was collapsing. “We got through it and were living, not day-to-day, but not knowing what tomorrow was going to bring. Having a huge amount of faith in what we were doing helped.”
The problem for many dot-com companies was that others apparently lacked that faith. Log on to the site for Autovia.net, a former parts buying network, and you get a message stating that due to a lack of financing, operations have been halted. Autovia has been closed since February, less than two years after it was founded.
Hundreds of Internet addresses have been at least mentioned in Tire Business articles in the past seven years. Many were likely start-ups that disappeared before making their way to anyone's monitor. Many more sites whose addresses were printed (and which advertised) in this or other publications are now defunct. A mouse-click after typing a URL often reveals the frustrating but telling message: “The page cannot be displayed.”
Venture capitalists and advertisers withdrawing funds are primary reasons many e-commerce sites collapse. Those not so dependent on outside revenues seem to be thriving, if not completely unscathed.
“Those companies failed because of scale problems,” said Ken Brookings, president and CEO of iCARumba.com. “Before the capital markets crashed, you could assume you could raise x-dollars, say, $80 million. That would get you there. When the market slipped, you could only get $30 million. Businesses could not reach scale; they could not reach the cost of customer acquisition to be profitable.
“Their models weren't bad, but they relied on a greater access to venture capital than what was available.”
Still, poor business plans, at least in some cases, or lack of experience in a particular market contributed to downfalls of many dot-com companies. A business might be Internet savvy but know little about tires. The flipside of that is being knowledgeable about tires but knowing little or nothing about running an Internet business.
“How can you be in this business if you don't understand how this industry works?” Mr. Brookings asked, rhetorically.
Despite the Internet being nearly three decades old at the time of the dot-com Depression, the world of e-commerce is still in its infancy. Prudent use of large amounts of venture capital has helped keep successful ventures afloat. Conversely, irresponsible spending led others to fall by the wayside.
Some businesses that went through their money in rapid-fire fashion began to realize too late that the revenue stream had run dry.
“The reason some dot-coms fizzled is they didn't go in with a good business plan,” said Steve Leffler, president of eTires.com, a Web site that allows consumers to buy tires online. “They didn't know how to scrimp and save. They were out spending money wildly and we weren't.”
Part of what Appointmentzone.com's Mr. Ogden said kept his company afloat was avoiding exactly that. He termed it “cutting our burn.” His site's venture capital was gone by the time of the dot-com collapse. At that time the company was forced to pare its staff from 29 to three, a number it maintains today.
Finally, surviving Internet businesses seem to have a final key link: a viable product or service. Mr. Ogden points out that many companies were content driven, depending on advertising revenues to power them. When those revenues stopped coming in—if they ever even started—there was nowhere for companies to go but down under their own weight.
Further damaging hopes of ad-driven sites was a slumping economy, as advertising revenues are typically among the first slashed from companies' budgets when times are tough.
For thriving dot-com businesses, the largest obstacle in terms of near-future success may be perception. It's easy to shed a positive label, but difficult to lose a negative connotation. The mere mention of the term “dot-com” conjures images of failure and wasted money.
That's especially true from the investor's viewpoint, Mr. Ogden said. “The money that was lost in America was staggering.”
At Mechanicnet.com, which provides Internet products to auto repair shops and tire dealerships, director of marketing Nina Groman was quick to point out her company is really called “Mechanicnet,” and that the dot-com is only part of the business.
The company is an e-commerce entity, but not a true dot-com, and Ms. Groman fully understands the negative aura surrounding that term.
“It's bad for everyone when people say dot-coms are bad,” she said. “They're not.”
Perhaps best summing up the situation, Mr. Ogden said there were many lessons to be learned from the collapse of the first wave of e-commerce companies. He said places like Amazon.com—which is reeling, but which looks like it will survive—failed to realize that even a cyber-business needs real space for its goods.
“If they hadn't invested enough into bricks and mortar to support the Internet part of their business, there were going to be problems,” he said. “And there were problems. Companies are finding the same thing today: The Internet is great. But you've got to have that infrastructure to support it.”