Into the Valley of Death, rode the dot-coms
Analysis/Commentary
The battle between the dot-coms of light and heavy cast call to mind
the historic Charge of the Light Brigade in 1854. Six-hundred-and-seventy-three crack troops of British cavalry charging over half a mile into impregnable Russian positions defended by cannons and machine-guns. The result of the historic lunacy was 272 casualties. Heavy casualties will be reckoned too from the anticipated foray into cyberspace.
The dot-coms have begun their charge.
Half a league half a league
Half a league onward
The Crimean conflict consisted in an attempt by the British Empire to
retain its grasp on world affairs, and ended rather miserably. Lord Tennyson, the official Victorian poet, wrote a rousing poem, and Florence Nightingale saw her baptism of fire. Like Khartoum and other vainglorious episodes, Crimea involved a shaking-out of world power in favor of the British, who maintained their grasp on world politics well into the second half of the 20th Century. Likewise, today's Web skirmishes foretell a resettling of powers. Experts say this year will be a hecatomb.
Theirs was not to reason why
Theirs was but to do and die
Like the ill-fated soldiers in the Battle of Balaclava, the dot-com cavalry
divides into light and heavy brigades. The light horses are the pure-plays,
businesses that offer products and services only on the Net. These are the
Amazons and Yahoo!s, the eBays and Etoys. They ride with the wind at their back, in full stride and momentum. The heavy cavalry are the brick-and-mortars and earth-based businesses -- companies that maintain a foothold in so-called reality; they own facilities, run stores, and can and often do exist outside of cyberspace. To name a few: Disney and barnesandnoble, AOL and Toysrus, Sony and Petsmart. (AOL we include because it preceded the Web, and may yet postdate it.)
The heavy cavalry gallops aloof, but the light brigade throws caution to
the wind. What will happen when the dot-coms who have little to show for
their heavy site traffic encounter the real world of competition and costs?
What will happen to them when they meet the ire of investors seeking net
profits? How will they fare in a new world of mergers and alliances among
traditional giants?
Businesses of each kind will face tough going half a league down the
valley. Already, the traditionals are getting trounced by the pure-play
discounters. But the light brigade faces cannon to the left -- fulfillment
and customer service expectations -- and cannon to the right -- an established network of supplier relationships. Some will pass safely, but others will fall.
Part of the problem involves the difference between cumulative income and immediate cash returns. These kinds of profits tend to vary enormously on the Web. Site traffic doesn't always serve as a clear indicator of profitability, and a business needs something to sell besides its name or advertising space. Companies like Wal-Mart that have a wealth
of items to sell and a bottomless pocketbook begin to rise on the rankings.
Watch who emerges: some of the sophisticated; some of the lucky. Then, beyond the vainglory of conquest and majesty, new channels of power will run deep and wide. An economy we can only imagine darkly, but with hope.
March 8, 2000
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