I wrote this a year ago (there’s a three-month lag from writing to pub date with monthly magazines). I was sick of the press hammering the internet, with the presumption that everything we did over the past four years was a waste. Turns out, it wasn’t.
THE MESSAGE
Alive and Well
From content providers to dog-food retailers, Internet business has moved to a new stage of stable growth. That’s the real story — so why aren’t we hearing it?
By John Battelle, March 2003 Issue
Any avid reader of the business press has seen endless variations on this tired theme: Internet business is dead. It was all a dot-con, and it dot-bombed.
Eager for an easy target and brimming with schadenfreude, many business reporters (and a few opportunistic book authors) continue to tear down the Net with nearly the same enthusiasm they displayed while building it up. But the facts tell a different story.
Let’s start with the flashing VCR clock of all dot-bomb maxims, the Internet pet-food industry. There’s no better proof of dotcom stupidity than the fact that venture capitalists funded not one but at least four pet-food websites at the same time. Thank God for us all, they are dead.
Except … they’re not. In fact, type “buy pet food” into Google and you’ll get scores of active merchants selling pet food online. I put in a call to one of them, Geoffrey Walker, CEO of PetFoodDirect.com. Surprise: His business grew 22 percent last year, and he expects similar growth this year. In fact, he and his three or four biggest competitors — yup, there are still that many players in this category — are all doing well. As for Pets.com, the now-defunct Sock Puppet company, Walker is thrilled about all that exposure, which let consumers know that they no longer had to lug around 40-pound bags of kibble. Pets.com now redirects to Petsmart (PETM), whose stock price has rung up a 44 percent increase since a year ago. Woof! (for more click link below)
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OK, so maybe that dog does hunt, but surely the Internet content business is dead. Nope, publishing on the Web is starting to work. Businesses from Yahoo (YHOO) to the New York Times (NYT) are making money online. Internet advertising — which had a “terrible” year in 2002, with some $6 billion in billings — is estimated to grow by 5 to 10 percent or more this year, on track for faster growth than any other medium. And consumers seem to be willing to pay for content: A recent survey reports that they spent $975 million in just the first three quarters of 2002, up from $670 million for all of 2001.
Well, at least the online travel business is a mess. Wrong. Expedia reported more than $30 million in profit last quarter — not bad in a post-9/11 world.
OK, how about the biggest joke of them all: broadband interactive TV? Fact is, broadband is taking off. Recent figures in the Wall Street Journal show a net addition of 100,000 DSL and cable modem subscribers a week, with total U.S. penetration closing in on 19 percent of all households toward the end of this year. Couple that with the fact that one of the hottest segments in entertainment right now is interactive games, with PlayStation 2 alone selling more than 50 million units so far. Personal video recorders like TiVo (TIVO) and ReplayTV have forced both Hollywood and New York to rethink their business strategies. And lest we forget, MSNBC.com, CNN.com, and others are streaming millions of video feeds a week, most to broadband connections at the workplace.
Certainly the dotcom bubble hurt many individual investors and erased a huge amount of market wealth. There were too many hucksters and too many suckers. Anyone who seriously believed that Priceline at $104 would pay their kids’ college tuition has learned a painful lesson. The rest were speculators who knew what they were getting into.
Now-defunct dotcoms tried a lot of dumb things. But that doesn’t mean the fundamental ideas they believed in are dumb. Thanks to the more than 100 million Americans who now have access to the Net, and the hundreds of millions more Web surfers worldwide, Internet business has moved on to a new stage of stable growth. That’s a real story, and it’s only going to get more interesting.
John Battelle (john@battellemedia.com) is a visiting professor at the UC Berkeley Graduate School of Journalism, where he directs the business reporting program. He was the founder of the Industry Standard and a co-founding editor of Wired.
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