Dot-bomb deluge: Is
Net shakedown only natural?
June 07, 2000
by
Ben Charny
APBnews.com is June's first dot-bomb.
One hundred-plus staffers are out of work while the all-crime,
all-the-time news site looks for cash. Belts have also been
tightened at baby boomer portal ThirdAge Media and the CBS
Internet Group, one of the CBS's Web divisions. (CBS is a
division of Viacom (VIA)
Surfbuzz.com, an online auction site,
joined the dotcom graveyard on Tuesday when it abruptly
announced it would cease operations.
In May, clothier Boo.com ended its
$120 million burn of venture capital and closed. Nickelodeon
killed its e-tailer, Red Rocket. After spending $67 million,
Digital Entertainment Network was shuttered. Party
planners Eparties and arts and crafts portal Craftshop.com
also closed their doors.
In the same month, 10 other
companies, including TurboLinux, CMGI-owned CMGI Alta Vista
and Sony's Internet gaming unit Sony Online also slashed
staff.
Yet, times couldn't be better, says
economist Stephen Levy.
No pin in bubble, yet
The
director of the Center for the Continuing Study of the
California Economy and others who watch the Internet say the
first quarter of 2000 will be remembered for how the same
Internet wunderkinds who raced to market on a cascade of
venture capital had to show something for the millions, or
step aside.
"It's a natural process of trying
to figure out which companies will succeed," Levy says. "I
don't think there are any indications that the industry is in
anything but a strong upwards growth trend."
The recent shakeout's place in
history is likely to be "a blip that won't even be noticed,"
says Kent Kelderman, group vice president of Earthweb Career
Solutions. The company runs Dice.com, perhaps the largest IT
specific job site on the Web.
Some of those getting the ax agree.
A former employee of Petstore.com, which fired a number of
staffers in May, was upbeat. She was predicting a regular
paycheck within a week. Her firing was a "bump in the road,"
she said.
"People have become jaded by
prosperous times," says Jeanne Metzger of the National Venture
Capital Association, whose members shelled out 85 percent of
the available VC capital in the past five months. "They think
more of what's happening now than they should."
Unemployment blues?
Even
bad employment news from the government isn't bad for Internet
businesses, although 18 e-companies have tightened their belts
since January, says Doug Merritt, CEO of Internet employment
specialist Icarion.
The U.S. Department of Labor said
unemployment rose to 4.1 percent in May. Yet, there is virtual
unemployment in Silicon Valley, a scant 1.8 percent, Merritt
says.
"Recent news of dotcom downsizing
because of cautious or dwindling investment has not stemmed
the demand for high-tech labor," he said. The industry is
"maturing," he says.
He's not alone with the rosy job
outlook. Levy believes the computer industry will add more
jobs this year than the 30,000 it racked up in 1999. The U.S.
Senate's joint economic committee is forecasting another five
years of growth, adding an additional 6.2 million IT jobs by
2006.
Even short-term employment figures
are surprising. Dice's Kelderman was anticipating the number
of Dice's want ads would dip in the first quarter, when
Y2K-related jobs that fattened the DICE page disappeared.
Instead, the site has a record 225,000 jobs available this
week, he says.
VC seeing dots
Venture
capitalists still favor dotcoms over anything else and did so
in record levels in the first quarter of 2000, according to
the National Venture Capital Association.
B-to-b, then b-to-c companies led
the way, taking in nearly half of the $17 billion of total
Internet-related investments, the association says. That's
both five times better than the first quarter of last year and
nearly 75 percent of the venture capital parsed out, the
association reports.
The communications sector was a
distant second, with $6 billion in venture cap, followed by
medical and health companies.
Why's the sky
falling?
Perhaps news coverage of faltering
Internet-related companies in recent weeks may be casting an
unfair gloom over the industry, says members of
Myprimetime.com, the former Cable News Network execs whose
baby boomer portal went from startup in January to cracking
the Web's top 500 most visited sites in six months.
Two years ago, playing the Internet
e-commerce or portal game was like shooting fish in a barrel
and "every IPO was popping into the stratosphere," says CEO
Craig Forman.
"With your eyes closed, you don't
have to do any work. People don't have their eyes closed
anymore. They are doing work," Forman says.
Niche competitor MyThirdAge was one
of those suffering cutbacks. It laid off 30 people last week
and brought in a new management team to move the site away
from its original focus of being a portal.
For one of the out-of-work
dotcommers, who left with a month's severance, there's still
lingering anger over losing a job. But she expects to be
picking from two offers in the upcoming weeks.
"It's more frustrating that they
couldn't make it work than anything else," she says.
A Healthshop.com employee, one of 60 canned in
April, says the firing was "a blessing." She's moved onto a
more interesting job and a shorter commute, she says.
Ben Charny
is a general assignment technology reporter at UpsideToday.
You can reach him at bcharny@upside.com.
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