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Dot.Bombs The Internets New Growth Sector

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Dot.coms" became "Dot.Bombs" late last year, and they continue to drop even now. reported that at least 210 Internet companies folded in 2000, with nearly 60 percent of the deaths occurring in the fourth quarter of 2000. The staggering cost of December 2000's shutdowns alone rang up at $1.5 billion in sunk investments. The new year did not bring new hope to the industry, since another 225 Internet companies folded in the first four months of 2001.

No one is immune from the failures. Mom-and-pop dot.coms are going under just like the "big name" players. For example, deaths included Disney's,, and even—a company backed by notables John Elway, Michael Jordan and Wayne Gretsky.

Bankruptcy is the new buzz word in the "" world. Sites are popping up everywhere to keep tabs on the companies that have thrown in the towel. ABI World joined in to track this trend as well. Check out the Death Watch web page at, where we dedicated an entire page to providing links to many of the sites tracking these failures.

Bankruptcy headlines featured on ABI World ( todayshead.html) also provide up-to-date information regarding who's failing each day. It reports the day-by-day adventures of the dot.bombs and "regular" companies that find themselves in financial distress.

One of the links on the Death Watch page is the Graveyard (www., which comes complete with tombstones that list both the company's life span and "burn rate" (the amount of money they went through—with some really spectacular amounts).

Those interested in tracking these downfalls and looking for the latest news, surveys and a sounding board can log on to This site tracks the daily activity of dead and dying dot.coms.

If you are optimistic, bills itself as being for entrepreneurs riding the start-up roller coaster. Its primary philosophy appears to be that you can always bounce back from being with a start-up business.

For employees (and soon to be involuntary alumni), there is even a site dealing with employee issues. Its name is, frankly, unfit for print. It is also unlikely to be accessible from large-firm computers that have "locked down" many of the sites on the net that appear to contain inappropriate subjects or contents (but those types of restrictions are another story in and of itself).

A site that studies failure is www. It bills itself as looking "at Internet business failure, the causes of failure and how best to avoid it...provid[ing] valuable information on this subject area and...encourag[ing] more transparency around failed businesses and projects. is not celebrating failure; quite the opposite, it is learning from it."

The twin problems faced by most dot.coms are a lack of tangible assets coupled with the absence of profits. (Apparently profits are irrelevant if you are going for volume.) As everyone reading this knows, a business needs a positive cash flow to hope to reorganize and repay their debts. Many dot.coms lacked cash flow, and profitability was a dream for the future. Without a profit after paying all expenses (including interest), a company can almost never repay old debts.

Other special problems and complications arose from days gone by. Dot.coms expanded much faster than both their record keeping and the experience of management. A server's IP (internet provider) address is important to a "techie" (or network engineer), but not nearly as important as its street address when the assets have to be sold by the trustee. Bankruptcy trustees have had significant problems in just finding tangible assets to be sold.

One asset that dot.coms have in abundance is customer information. Between the standard "customer list" type information and the data captured during customers' visits to their web sites, dot.coms should know more about who their customers are and what they like than any other business. Frequent-flying and frequent-shopping "memberships" only track customer purchases. Dot.coms know exactly what the actual potential customers saw even if there was never a sale. With specifically designed cookies and tracking software, customer-specific data banks were created.

Monetizing this information is an issue of its own. The information can become the most valuable corporate asset—exactly the problem that arose when the data was up for sale in its bankruptcy case. In that case, at issue was whether its customer database could be considered an asset that could be sold to repay creditors. Let's just say that this kind of information is not truly valuable unless you can use or sell it.

Ironically, some companies have even auctioned off their assets on their own site before the dot.bomb goes off. For others, their losses have opened up more potential business on the Internet, with online listings of auctions and asset sales of residue, including ABI's own

Perhaps "Dot.Bomb" really is the most accurate description for these former high fliers. Bombs are frequently dropped in a "free fall" from high altitude. And then (thankfully!), someone has to come in to clean up the mess.

Journal Date: 
Friday, June 1, 2001

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