What a difference a few years make. Back in late 1998 and early 1999, the "Internet economy" could do no wrong. Anyone with a business plan and the letters ".com" behind it could pick and choose from a veritable harem of investors. Venture capitalists were lining up to throw money at any online proposal that moved.

Then came the fall. Online companies began to falter in late 1999 and the downward spiral really took off in 2000. Dot-coms began to drop like flies. Suddenly, being a dot-com company in the marketplace was a kiss of death. While the trend has bottomed out, 2001 has still been a hard year for the online world. eCommerce is not the guaranteed indicator of prosperity it used to be.

But is the Internet and online business really dead? Should anyone considering expanding their business to the Web be carted off in a strait-jacket? No, not by a long shot. We simply have to put things in perspective. A vast majority of failures boiled down to two major problems: the plan was a bad one to start with, and the same basic business expenses exist whether you're online or off.

BadIdea.com Is Still Just a Bad Idea
A lot of the businesses that failed were just bad ideas. Too many investors got swept up in the new economy and signed on for things that just weren't viable operations. If a business is not a feasible idea in the "brick-and-mortar" world, then moving it onto the Internet isn't going to save it. The same rules of business apply -- you have to fill a need in a way that still makes a profit.

The history of the Internet is rife with hair-brained ideas that didn't have a chance, but someone threw money at them just because they were online. LifeJacketStore.com sold nothing but life jackets. Is there a brick-and-mortar store in the world that does this? You can buy a life jacket at Wal-mart, why did someone think we need an Web site devoted to it? Not surprisingly, LifeJacketStore.com didn't float for long.

One of the worst ideas that the Internet spawned was the idea of simply giving something away and hoping that this would somehow lead to profitability. Thousands of businesses sprang up and were giving away services. The general idea was that the business could make money with banner ads or it could sell premium (read: not free) services, but these ideas just didn't pan out. The banner advertising market dropped through the floor, and companies found that people were reluctant to pay for Web services (though this is changing).

Nothing can take the place of a good business plan. If it's a bad idea offline, it's probably going to be a worse idea online.

Pure Play Often Means Pure Failure
The dot-com crash was more brutal on so-called "pure plays." A pure-play is a business that exists solely on the Web and didn't exist before the Internet came along, as opposed to a business that just uses the Internet to enhance its offline operations. Amazon.com -- the massive Internet book seller -- is one of the more obvious examples. There are no Amazon retail outlets anywhere in the world. Amazon exists at www.amazon.com and that's it.

A major problem with pure plays is that using the Internet to sell a product doesn't exempt that business from major back end and infrastructure costs. If you sell a book on the Internet, you still have to store it in a warehouse somewhere, hire someone to get it off the shelf and put in a box, and pay a shipping company to get it to the customer.

So, has the Internet saved Amazon.com money? Yes, certainly -- while their Web site is a major investment, it's still cheaper than an equivalent number of retail outlets. But there's more to a business than a retail outlet, and these are things that the Internet can't solve for you.

This point has been amply demonstrated by a distinct lack of "real" businesses that have gone under because of a Web venture. Best Buy is the biggest consumer electronic retailer in the country and they've just recently expanded onto the Web at BestBuy.com. Why would they do this in the current market? Isn't this corporate suicide? No, because they already have all the back end infrastructure in place. They have warehouses, and deals with suppliers, and a massive workforce of employees to manage the demand that will come from the Web.

Always remember if you're selling something on the Web, you're only going to save money on the front, retail end of the equation. The "back room" costs are the same whether you sell through the Web, over the phone, through the mail, or in a store.

What This all Means to You
So are all Internet ventures doomed? No. You just need to approach the idea with some common sense and realistic expectations. The Web can do much more to enhance an existing business than it can to create a new one out of thin air.

If you have an existing business and want to use the Internet to promote it or sell products or services, you're in good shape. Since your business is running now, you're not depending on the Internet to solve all your problems and you apparently have a decent business plan already. You have your infrastructure in place, so the only thing the Internet will change is how you make the sale, not how you handle it afterwards.

Don't let all the bad news scare you. Without a doubt, an existing company that plans to use the Internet to enhance their current operations is in the best position to succeed. In these cases, it's full speed ahead. The Internet is the most cost-effective marketing tool you could hope for. Give us a call, and jump in with both feet. Contact Us