The Rise And Fall of The Internet Market

It is no secret that the Internet market has grown spectacularly since 1994 and peaked 5 years later at meteoric levels, before declining even more spectacularly. We have all seen the rush of household names desperate to ride the Internet wave, led even more enthusiastically by start-up .com companies funded with millions provided by over eager Venture capitalists. Many have failed, some have made millions and the rest are now stuck in the middle of what can only be described as an extremely uncertain time.  Even the most sceptical of writers will admit that the Internet is here to stay, so when the shake up is complete who will be the winners in the .com market and what will cause the losers to fail?

It is now clear that many of the Internet Pioneers understood only too well the new technology grasping it before the masses, but failed to under pin this knowledge with sensible business plans. The lack of clarity in this fundamental of business concept PROFIT led ultimately to many of the Internets shining light companies running out of cash or being acquired for a fraction of their value. The term “Burn Rate” is synonymous with .com businesses loss making activity and high burn rates were a unique measure of success in the .com economy. The decline in the value of the NASDAQ, where many technology companies rushed to IPO during the late 1990’s signalled the beginning of the .com decline during late 1999. Since then investor confidence fell along with the availability of funds for .com companies and new investments have been associated with a closer scrutiny of business plans and a clear focus on Visible Earnings.

Never before has a new sector of the global economy grown so spectacularly, while at the same time lacking the real business sustainability as that of the Internet sector. Free, Free, Free were the words that drove the Internet economy with the promise of earnings sometime in the future. Those companies that focussed quickly on sales and marketing are the ones that gained the advantage. So what does the future hold for the Internet sector and what will be the business plans of the successful companies.

A sudden reality shift of late has led many of the remaining Internet companies to preserve cash, while striving to reach the holy grail of profitability. Roll out plans have been shelved and capital expenditure curtailed in favour of least risk business strategies Shareholders are no longer prepared to invest today with the hope of returns in 3 years time and IPO’s with values twenty times annual revenues are a thing of the past. This weakness presents the opportunity for cash rich companies to snap up a bargain or two with many of the suffering tech stocks valued at well bellow what they might fetch when the market corrects itself. Combination and consolidation are the certainly going to be the key word for the next 12 moths and the winners will be the ones who have cash or the partnerships and the losers the ones who desperately need it or stand alone.

Sales and Marketing executives are replacing the 20 year old green haired techies of the 1990’s Internet age. Gone are the days of “Cool Technology without a recognised name”, this is replaced with a focus on revenue streams and brand development plans. The recent collapse of PSI net has shown that even big is not beautiful and everyone is susceptible to the .com collapse if business plans are flawed.

The future of the Internet is not predictable in its direction but one thing is clear the Internet is here to stay. The businesses that survive will be those that are profitable and have a clear sales and marketing focus. The others will either die or be acquired by predators.