Almost a decade has gone past. After the 2000 euphoria in the digital arena, companies started to fall. Reasons? A hype, an irrational mood, lack of business knowledge, total blindness… Now, in spite of the current financial crisis, many start-ups are being created. Will they make the same mistakes?
IE Master in Digital Marketing News.
Last week we had one of the most interesting sessions so far, this time in Digital Trade Marketing & Promotion. We discussed about the past 2.0 failures, but also about the present ones, analyzing if we would repeat some of the mistakes that we made ten years ago. One of the biggest ones that we discussed about was Boo.com
, a fashion e-commerce site that has the most heavily funded start-up in Europe, with 125 million dollars provided by investors like Benetton and Bernard Arnault (LVMH). It sounded great, but it was too ambitious and its managers didn´t make enough tests, so the site faced a lot of technical problems. They had huge preliminary costs
and an excessive spending on consultancy fees, from scratch they set up offices in London, Stockholm, Munich, New York and Paris, they had 400 people from the beginning! And worst of all, it was a complete frustrating shopping experience, with very slow browsing and the founders didn´t have enough experience in the retail market.
It remembered me of Webvan, another big failure, it was an online supermarket that in just one year and a half raised 375 million dollars, but never reached the target consumer number, son the margins for the business never compensated. Results? It closed and 2.000 persons got unemployed. And also Pets.com, Kozmo.com, Flooz.com, eToys.com (which was even bigger than ToysRUs, but failed to serve all the demand, and children didn´t get their Xmas presents!), MPV.com, Go.com, GoWorks.com… Dozens of examples!
In Spain we had also a whole bunch of failures, like Inicia, Jumpy, Ecuality (specially its online shop, Diversia, whose business model was to give money to its clients so they could buy records and books to get revenues… weird!), Viaplus, Teknoland, Aol-Avant, ActivoBank, Guay… There was a neverending list of companies.
In general, they all made very similar mistakes:
• Bad managed business plans (unrealistic sales projections, bad money management, bloated payrolls….)
• Focused on short-term profits.
• Forgot about customers. They were less focused in their clients and more in their leadership and partners.
• Lack of vision: they focused their money in the wrong areas (at first some spent too much in advertising).
So… what will happen now? Will we run into the same brick wall a thousand times? As our teacher Jean François Noual (TradeDoubler) told us, the problem is that now, “dotcom companies business models are very often 100% based on advertising revenues”. And though ecommerce is growing exponentially, “it´s not always profitable, as it´s necessary to reach huge volumes of sales to generate net profit”.
We´ve learnt a lot, but as we saw, failures will keep going. Lycos closed, Advertising.com closed some operations in Europe… even Google layed off employees in 2009! Another sad example of this was Soitu.es, funded in March 2007 with the mission of being an independent online journal. The Spanish bank BBVA invested in it 6 million dollars but… it closed at the beginning of 2010. Why didn´t they wait a bit longer? Were they fearing the crisis in Spain (I´m sure they did), did they think they would never recover their money back? Probably not, but it was a big setback for the digital journalism in Spain. Let´s hope that we learn a bit more from the past.
You have a great report here
Bud don´t check out Dotcomfailures.org
. It was forced to close after it investigated the main failures in the Internet!