Get a Grip

In the dotcom world, if you haven't already fallen, you're hanging on by your fingernails. Here's how to put yourself on steady ground.

In nature, the only criterion for success is survival. How unnatural, then, was the world of Internet business for its first several years, because many of those considered extraordinarily successful just last year are extinct today.

Now that dotcom business has returned to a more natural state, the hottest topic of conversation among those who fund, advise, sell to and run small dotcoms is, What is it going to take to be one of those who make it? To find out, Entrepreneur talked to a selection of experts and entrepreneurs and came up with the following traits that will allow you to survive where so many companies have failed:

Sell Things Suited to the Internet

"The dotcoms that survive will be ones that sell digital goods and services, where the experience of handling the actual merchandise is not an issue and where logistics of delivery are not much of an issue," says Eugene Lowenthal, a veteran venture capitalist at Sanchez Capital Partners in Austin, Texas. Information, including software and music, is suited to Internet delivery. Bulky items like furniture are not, given customers' propensity to know what they really look and feel like.

Sell Your Internet Expertise and Technology

Last year when funding dried up, customer acquisition costs soared, and the difficulty of finding repeat online customers was clear, Internet companies had to look closely at what they had. Many found their main asset to be their knowledge of what was required to do business on the Internet.

Search engines top the list of online marketing methods preferred by surviving dotcoms, according to a study by marketing research firm ActivMedia. Paid banner ads ranked last among online marketing tools. On a list of offline marketing methods, print ads claimed the top spot, while TV and radio commercials and contests took the bottom slots.

Online promotional methods, by rank in popularity:

1. Search engine and directory positioning
2. Online PR and press releases
3. Buttons and links
4. Reciprocal ads and links
5. Affiliate programs
6. Paid banner ads

Offline promotional methods, by rank in popularity:

1. Paid print and display ads in newspaper and magazines and on billboards
2. Trade shows, conferences and seminars
3. Brochures and other collateral materials
4. Direct mail and catalogs
5. Paid TV and radio commercials
6. Sweepstakes and contests

SOURCE: ActiveMedia Research LLC's "Real Numbers Behind Successful Web Site Promotion 2000"

"Dotcoms saw the specter of death and adjusted their business models; instead of selling products, they [sold] technology to other businesses," explains Lowenthal. "The technology they built to [make themselves] good e-commerce companies are things other companies want to buy. Typically these are brick-and-mortar companies that also have an Internet presence." Many successful offline firms are only now expanding into online commerce. Backed by ongoing revenue streams, they're capitalized better than online-only stores and have money to spend on e-commerce software. And smart dotcoms are selling it to them.

Have a Business, Not an Idea

Many departed dotcoms came on the scene with promises to revolutionize the world through communication, community-building, online trading and so on. Those left standing have ideas for businesses, not revolutions, says Bill Hunt, executive vice president of online strategies at Farmington, Connecticut, consulting firm Outrider North America Inc. "It's not a pie-in-the-sky, whiz-bang idea," Hunt stresses. "It's a business like any other and has to be run like one."

Ideas for promising dotcoms tend to be nonrevolutionary, focusing on transferring activities from the offline world to the Internet in a sensible way, like Yahoo! did with directories successfully until recently. They also look at how people are already using the Internet. Hunt says survivors ask, "How do people engage that product or service offline, and how can we adapt a version of that online so it's better?"
For example, lets readers post their comments.


:: The Party's Not Over
1. What Now?
2. Get A Grip
3. Take My IPO...Please!
Page 1 2 3 4 Next »

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This article was originally published in the June 2001 print edition of Entrepreneur with the headline: Get a Grip.

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