updated 2011 Mar 28
|this unit is
in the text
"Current Issues in Marketing in the Information Age, 2nd. Edition"
71 - 78
|.||This Unit used in the
Dot. Com Failures, an overview
A summary of this unit on dot.com failures was videoed January 2009 and posted on YouTube.
click on the screen capture to the left to view the clip
Dot. Com Failures, response by student
a situation where you are teaching people to learn about a subject, it
is always helpful to discuss examples of activities (or companies) that
are successful since this can be a way to bring out the important points
of what you need to do to similarly be successful.
On the opposite side, it is also considered fruitful to discuss examples of activities (or companies) that are NOT successful since this can be a way to show how to avoid the mistakes they made.
In early 2001 the online community has sobered up from the frenzy of adulation and compliments in 1998 and 1999. Many people these days  are discussing the dot.coms that didn't make it and pointing out their specific failures as a way to avoid being caught in that similar situation.
Therefore we will discuss some of these dot.com failures for the purpose of learning how they made "fatal" mistakes.
Did they ignore one of the important 4 P's ?
|Dot.com failures have become so common that there are a number of websites devoted to listing them, and listing links to media sites that carry the story. Student Tasha Pinkerton in BCS 555 found www.itwatchdog.com/NewsFeeds/HeadlinesDotcomDoom.html which carries a number of dot.com bust stories. The story we profile below comes from this list at www.itwatchdog.com.|
this story, based on a report by research firm VentureOne. was widely carried
|Many companies in 1997-1999 received financing from Venture Capitalists (AKA Angels). By 2000, it became apparent that expectations were not going to be met in many businesses. When some of these companies went for second round financing in 2000 and 2001, the Venture Capitalists were more hesitant and as a result many companies did not obtain financing at a critical time.|
failures - examples
Feb 2001 story in Toronto Star
The company was a network of children focused web sites that included an online store Toyboutique.com, educational site and entertainment.
It had attracted 500,000 visitors a month
The day that the site folded, the founder, Isabel Hoffman, posted a bit of a rant about how people don't care about children etc.,
Her main point is that she (an independent content creator) could not get the big players to buy into her plans - therefore she had no "buyer" for what she was producing. www.witiger.com/ecommerce/nikolai1.gif
You may click on the screen
capture to the left and read the story about why the company failed.
|"Egghead to file for
By Troy Wolverton , Staff Writer, CNET News.com
August 15, 2001, 4:40 PM PT (link still works in 2006)
failures - examples."E-tail pioneer Egghead.com is filing for
bankruptcy protection and is selling its assets to retail chain Fry's Electronics,
Egghead announced Wednesday [Aug 2001].
Example of a large sized company that failed - (but not completely since some business taken up by a larger more stable company)
"Egghead failed to release their website until early 2000 when the dot.com boom had already been under way for some time. The only thing that their website offered at this time was high speed internet access... visitors to the website got very frustrated because Egghead didn't offer any of their products on-line nor could an existing customer inquire whether a certain product was available or not. Customers became very frustrated, sales were very low because of their lack of product offering."
contributed by student Sandra W., BCS 555 Oct 2002, Seneca
|when you type in www.egghead.com in Oct 2002, the site does not come up, instead you are automatically directed to Amazon.com|
|June 2001 story
in Business Week by Ben Elgin
Yahoo.com was in serious trouble in 2001 and 2002 because it ignored the
|Business week notes "Yahoo's
problems can't be fixed by a little cost-snipping and an upsurge in the
economy. Its reliance on advertising revenues has turned into a liability
as dot-com advertisers die off like mayflies and corporate advertisers
pony up 50% less for online ads than they did a year ago. Meanwhile, AOL
Time Warner boasts a $221 billion market cap and controls a vast empire
of online properties, magazines, movie studios, and book publishers.
Its advertising and commerce revenues rose 10% last quarter."
"How could things like this happen? Call it the arrogance of success.... The company made no special effort to make traditional advertisers see the value of creating a presence online. It was accustomed to getting the rates it asked for...". "Yahoo salespeople started noticing that advertisers weren't willing to pay the same rates for banner ads....Ad sales dropped ...."
|from a story
written by Benny Evangelista, Chronicle Staff Writer, San Francisco Chronicle
|"Hello Professor, here
is a great example of a dot.com failure.... Musicmaker was an online
site, which offered music to be shared by users at a price.
You had to pay for a song in order to download it. This site only lasted
for a bit, it soon had to be suspended service in January  because
it was unable to compete with free online music trading services
such as Napster when Napster was available without charge. I think
the site failed since there were other online sites offering the same service
as Musicmaker without a price tag. The service from Musicmaker came
too late, customers could get the same service at a cheaper price, and
there ain't anything cheaper than free. The article also offers
a list of other online music services which had to be shut down because
of increased competition and cheaper price offerings."
this was the URL www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/10/09/BU126060.DTL&type=tech
|from a story
posted by "Megaton" at onnintendo.com
|"Hi Prof Richardson,
I found an example of a dot.com failure of a company called Lik Sang.com. Lik Sang is a gaming retailer from Hong Kong which was forced to close down due to various legal actions brought against it by Sony. According to Sony, Lik Sang was liable for infringement of its trademarks, copyright and registered design rights by selling PS2 consoles from Asia to Europe. Recently, there sales of PSP consoles was rendered unlawful by high court of London. I thought I would share this example with you.."
this was the URL www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/10/09/BU126060.DTL&type=tech
|"Top 10 dot-com
This article appeared online in msn Tech ? Gadgets section - written by Kent German
|# 1 Webvan.com (1999-2001)
# 2 Pets.com (2000)
# 3 Kozmo.com (1998-2001)
# 4 Flooz.com (1998-2001)
# 5 eToys.com (1997-2001)
|# 6 Boo.com (1998-2000)
# 7 MVP.com (1999-2000)
# 8 Go.com (1998-2001)
# 9 Kibu.com (1999-2000)
# 10 GovWorks.com (1999-2000)
|German explains in the MSN
"The most astounding thing about the dot-com boom was the obscene amount of money that was spent. Zealous venture capitalists fell over themselves to invest millions in Internet start-ups; dot-coms blew millions on spectacular marketing campaigns; new college graduates became instant millionaires (albeit on paper) and rushed out to spend it; and companies with unproven business models executed massive IPOs with sky-high stock prices."
|BOO.COM fails||Victor L, UTM student in MGD415 in Feb 2009 sent an email saying "I was reading the Dot.com Failures section on the class website. I notice someone listed Boo.com as one of the famous Dotcom failures, but they did not explain in great details "why". I would like to explain the causes of why Boo.com failed and I think it a story to teach students in general why most Dot.coms fail."|
|Victor explains, "Boo.com was established in 1998 and was founded by three Swedish entrepreneurs: Ernst Malmsten, Kajsa Leander, and Pattrik Hedelin. Boo.com intention was to sell branded fashion apparel over the internet. The website provided customers with a shopping assistant “Miss. Boo”. However, Miss. Boo failed to assist customers with the purchasing experience. Boo.com essentially failed because they did not carefully plan their business by considering the 4 P’s (Price, Product, Place. Promotion) and the environmental factors (Social, Technological, Economic, Political, Geography) that might impact their overall success.|
|Victor added that in his opinion "Boo.com failed because they tried to do too much without careful planning. For example, Boo.com established many online shops in many countries without considering the internet capability of the low developed countries. At that time, about 20% of home users used dial-up internet which did not allow them to access Boo.com at a fast rate. Boo.com believes that their business would have succeeded if the internet revolution would have occurred faster, it was just bad timing for Boo.com. I have listed several causes of why Boo.com Fails."|
|BOO.COM fails||Victor suggests,
that in his opinion, these are Causes of why Boo.com
that could of save Boo.com
concluded by saying
"Even though Boo.com failed, one good thing that come out of it is that many online companies has learn from Boo.com mistakes and able to avoid it in the future. A great example is the re-launch of Boo.com “Ultimate Online Destination for Travel”.
used by Victor
|GARDEN.COM fails||Sidra K., UTM student in MGD415 in Jan 2007 sent an email saying "I was looking for some other examples of dot.com failures that you haven't mentioned in class or on your website and I came across the failure of a retailer known as Garden.com."|
|Sidra explains, "The
company was founded in 1995 and went out of business nearly five
years later. Prior to the shutdown, the company had no choice but
to consider 30% lay off of its workforce to reduce the burden. Nothing
worked and therefore, with a net loss of 9.9million, the company
had to shut down. The company did whatever it could to rebuild their
stockholder value and to somehow still keep Garden.com up and running,
but without a surprise, they ended up failing miserably.
In a statement, Garden.com said: 'In short, the company has been unable to raise the additional funding necessary to finance the company's growth moving forward, and our Board of Directors' was forced to make the difficult decision to begin an orderly, staged shut-down of Garden.com's consumer business.' (obtained from out-law.com)"
|In this article, which appeared
online in PROFITguide magazine, May 2001, U.S. tech writer Ann Sullivan
polled the experts to suggest seven classic errors behind 2000's dot-com
some of the points in Sullivan's list are used in our compilation below
|"The 12 Failures
of Web Marketing"
This article appeared online in DIRECTMAG.com, July 2000, written by Tracy Emerick (link still works in 2006)
of Web Marketing
- a combination of points in Emerick's list (found by student Haya) and Sullivan's article
|1.||Customer service meltdown: Neglecting service is always a license to lose customers. One Internet research firm that measured customer service at 79 online sites found 30% of customer service e-mails went unanswered, and only 40%|
|2.||Doing the same thing - Companies that do not make fundamental changes to their corporate goal, and objectives and simply operate according to business as usual, after they begin e-commerce, are going to put themselves in a bad situation when the changes that e-commerce creates begin to effect the company.|
|3.||Inadequate order fulfillment: Too many companies still don't have stock on hand or readily available to meet customer orders — leaving customers in limbo or the lurch.|
|4.||Use of primitive search and transaction tools: Many websites make consumers wait too long or take too many steps to find what they're looking for.|
|5.||Failure to globalize: Many U.S. websites neglected potential customers in other countries. Market-research firm IDC says this is the year  that international surfers will outspend U.S. online shoppers.|
|6.||Building community, not clientele: Too many dot-coms have emphasized building a community instead of clientele.|
|7.||Insufficient budgets: Memo to the accounting department: deploying a website is just the beginning of a company's e-commerce expenditures. Many companies underbudget their needs in website maintenance and marketing. Emerick says "As savings are realized and revenues generated, the Internet must have additional funding from these successes or it will fall behind waiting for the next budget cycle."|
|8.||Channel conflict: Many companies leap into Internet sales without considering the impact on their channel partners, such as dealers or retailers. The resulting chill has set back many e-commerce initiatives.|
|9.||HR problems - need a senior executive - if you want the "e" side of your business to have influence over the company's direction, you need to create a senior staff position for an executive that has authority and can do things corporately, internally and externally, on behalf of the people trying to develop the e-objectives|
|10.||HR problems - compensation - if you start to have company executives bringing in money based on the e-commerce side of the business, you have to make sure you reward them with bonuses or increased pay in proportion to the $$$ they are creating in revenue.|
|11.||Innovation - the intensity of the competitive environment and the continued developments in the technological environment require that a company constantly search for innovative ways to produce and dispense the product and deal with customers|
|12.||Customers to Ambassadors - mass advertising turns people off - if they like your product, they will tell other people - this is desirable. If you can use internet structures and great customer service to turn customers into ambassadors of your product, you will be, in effect, increasing your sales force.|
permission to quote from
PROFITguide magazine given by Editor Ian Portsmouth by email 2004
Copy of email kept on file in permissions binder.
a U.K. based site which discusses mostly companies in England
includes list of failed companies
The IBL includes six subject areas related to large-scale business restructurings targeted to the bankruptcy professional seeking information on the Internet. The IBL currently receives thousands of hits each day. The IBL is cited as a resource link from dozens of Web sites and has been featured as a valuable Internet information resource in scores of directories, newspapers, magazines and trade journals.
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