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Upside Today

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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