Almost everyone is looking for the next sensational Internet play. So, here's one to consider: www.onlineshakeout.com.
While that's not an actual site (at least it wasn't when I did a search last week, but then, things do change very quickly in cyberspace), the meaning behind this fake Web address is real enough.
There's the smell of a dot.com shake-up out there. That doesn't mean anyone's sounding a death knell for the Internet, nor will a shake-up necessarily mean an end to the proliferation of dot.com startups.
But right now, established dot.coms are lighting the shakeout fuse by burning cash faster than sailors on shore leave.
A recent Barron's article listed 51 Net companies that are likely to run out of money within a year. Among them are some well-known names: merchant Amazon.com, medical service site drkoop.com and locally based flower seller FTD.com.
The article also predicted that Skokie-based Peapod Inc., an Internet pioneer with great timing and lousy execution, would run out of cash by May.
Yet, as Barron's notes, Peapod's day of reckoning may come even sooner, since the online grocery delivery company has about $3 million left in the cookie jar and is scrambling for additional capital.
Peapod isn't the only venture that will have a tough time attracting new investments. So will other older, cash-drained Internet operations Ã¹ particularly those without moneyed parent companies to rescue them.
To remain independent, those Net firms likely will seek to issue more stock or try to float bonds.
When that sort of thing begins, investors will take a different view. They'll no longer see these ventures as entrepreneurial, but as real companies. And real companies make money Ã¹ something most dot-coms aren't doing.
The Net shakeout could shape up in a couple of ways.
Undoubtedly, sites that are under threat from well-heeled competitors will feel the pain first. Despite its damn-the-rules roots, the Internet is no longer a free-wheeling marketplace, and Web sites that don't fill a lucrative niche, or those that aim for large audiences and don't draw them, will fade away.
Marginal sites will have to rethink their business models. Yes, that's been happening all along, but when the money starts drying up, this quest becomes increasingly important.
Other ailing "new economy" sites will opt for "old economy" strategies: cutting costs, merging with other companies or selling. Already, Amazon has laid off workers, and others are sure to follow suit.
And if America Online Inc. and Time Warner Inc. can get together, what's stopping a wave of independent Web companies from linking up to broaden their audiences and gain greater efficiencies?
Selling the whole place is always an option. Maybe the suitor will be one of those stodgy old economy suitors that consistently turns a buck.
Obviously, if a publicly traded Internet site fails, shareholders will get hurt (except for those insiders who got out while the getting was good). If the company survives a consolidation or shakeout, its
backers live to tell the tale.
However the scenarios unfold, the most important point is that an Internet shakeout is not the end of the world Ã¹ nor does it signal the demise of the current economic boom.
Shakeouts happen to the best of industries, and the Web is no exception.
The true test will be how well Net-related sectors and the entire economy Ã¹ lulled by the flood of Internet riches and the proliferation of stock option packages Ã¹ handle the correction.
Robert Reed is editor of Crain's Chicago Business. This column first appeared in that publication´s March 27, 2000, issue.