Easy.Com, Easy.Go

Focusing on Profitability

Even while they cut costs, surviving dotcommers are trying to increase revenue in a new-to-them rush to achieve profitability. It's quite a switch from the days when entrepreneurs like Burlingame were told they weren't spending money fast enough. "The investment community and venture capital industry have shifted from growth at any cost to profitability," says Alessandro Isolani, CEO and co-founder of ebates, a 50-person San Francisco online shopping portal. "The only metric to whether a company is doing well or doing poorly today is whether that company is profitable."

"Monetization" is the term you hear dot-commers use to talk about profits today. Basically, monetization refers to finding a way to make money off all the visitors to your Web site. That has meant a push to sell ad space to companies eager to expose themselves to millions of surfers and site members. While many dotcoms have been laying off staff, Isolani, 34, has actually increased his sales force from one rep to four.

Pursuing profits has also meant, in many cases, hiking prices. Closner breathes a sigh of relief as he recounts this trend. "A lot of companies have started raising prices to decrease losses," he reports. "That's allowed us to act like any retailer in the world and start selling products to make money, as opposed to simply attracting customers."

The hikes aren't always large or easy. "If we're getting a 10 percent commission from a merchant, we're trying to get it to 11 or 12 percent," says Isolani. "But we don't want to be perceived as a leech. So we'll try to tie increased payments to increased performance."

In a trend counter to Internet tradition, dotcom freebies are also drying up. Closner once offered free shipping on every purchase. Now he only ships free on orders of more than $25. "And we're going to be raising that to $75," he says.

Similar trimming is going on at OpenAir.com, a 43-person Boston company that offers an online service for handling payroll and other business management and reporting tasks. The company once offered free subscriptions to its service to as many as five people at any one company, but it has now trimmed that to a 30-day demo account for only one user, says William O'Farrell, CEO and co-founder. "We found that having one user was as good as five, and we were leaving a lot of money on the table," he says.

The first reaction to the bust for many companies was to back away from the troublesome consumer market and start selling to other businesses. Burlingame is one of those; she has accelerated Expat-exchange's efforts to offer online communities tailored to the expatriate employees of large companies, charging the companies for the service.

And while they develop their new B2B clients, dotcoms are benefiting from less intense competition and lower costs for marketing and attracting customers. Weaker and fewer rivals are some of the tastiest fruits of the bust. "A year ago, where there might have been six national companies in my space, now there are probably four," Closner says. That's done more than allow him to cherry-pick customers and raise prices. Fewer advertisers in a given category has meant falling costs for advertising.

Despite all this, few dotcoms are actually profitable. "We're very close," Closner says, reporting that Baby-Universe's sales have been going up despite a shrinking budget.

At ebates, too, "all the key metrics have been climbing at a healthy rate," says Isolani, who, however, declines to describe the company's profit stance.

Domek, whose online venture is a spinoff of a traditional ticket-seller he started in 1991, is hoping to be well into the black early this year, largely due to cost-cutting. Says Domek, "I anticipate doing the same amount of business next year, with at least half a million dollars less in expenses."

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This article was originally published in the March 2001 print edition of Entrepreneur with the headline: Easy.Com, Easy.Go.

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