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  • Ian Ritchie : Unlimited

Slash & burn

Ease up on the pedals, ram raiders. Dot.coms are so ten minutes ago. If you want to make really serious web dollars just turn off your monitor and go down to the wire.

THE E-COMMERCE BOOM is now well into its gold rush stage, as new players try desperately to land-grab areas of commerce for themselves. But there is an old saying about the gold rush: if you really want to make money, get there early and sell shovels. So, who is actually making money out of e-commerce? Here are my top ten:


The e-commerce boom is so explosive, and there are so few people with any relevant experience that practically anybody who can spell “www” is in huge demand. Headhunters are charging up to 50% of first year’s remuneration — next time you get a call from one, ask for a piece of the action.


Cybersquatters are people who have registered domain names and then sell them out to the highest bidder. The domain name was sold for $7.5 million and the web site, has over 300,000 other domain names for sale. But maybe the boom times are over; a New York teenager who registered the web site was taken to court by Morgan Stanley Dean Witter and the big guys won. He’ll need to find another way of paying himself through college.


Companies such as UPS, FedEx and DHL are booming on the back of e-commerce. UPS delivers 12.4 million packages worldwide daily and on-line shopping is fuelling the biggest boom they have ever seen. On the back of all this, the 93-year old UPS went to a $5.47 billion flotation, the largest ever, for only 10% of the company. I’ve got a suggestion — how about delivering in the evening when most of us are actually at home.


Demand for internet issues show no sign of waning, and the sponsors are doing well. More than 200 Internet companies went public in 1999, raising about $20 billion. The management are locked in and can’t usually sell their stock, but the advisers get their bag of cash straight away. That’s the way to do it.


60% of all the venture capital invested in 1999 went to Internet companies, five times more money than during 1998 at around $32 billion. In the current climate many of these companies went pronto for an Initial Public Offering so that the vcs could cash out for a quick killing.


Crooks still make money the old fashioned way — they steal it! Leaving aside the anonymous hyping of stocks on bulletin boards (and if you are daft enough to buy some of those, I’ve got a bridge over the Forth I’d like to sell you) traditional crime is moving into the new economy too. Expedia, the leading on-line travel agency, announced in March that it will take a $4- $6 million charge in its accounts to cover the cost of purchases made by stolen and false credit card numbers. Officially, the credit card companies say that on-line fraud is similar to telephone or mail order selling, but off the record, they are scared.


Have you heard the one about the company that did an IPO on Nasdaq, and promptly blew half of it buying three television adveitising slots during the SuperBowl? “Whatever you have, spend less,” said Dr Johnson, but then he wasn’t running In the last quarter of 1999 Freeserve spent £5 million on advertising itself, about £1.30 for every £1 of gross profits. The equivalent value for was £8, and auction site spent a whopping £46 on advertising for every £1 of gross profit it made. The real winners out of this game are advertising agencies, radio and television broadcasters and that bit of the old economy: posters stuck to billboards with paste.


Cisco, which controls over three-quarters of the kit that powers the Internet is now breathing down Microsoft’s neck for the position of world’s most valuable company even though it has 10,000 fewer staff. To ensure it maintains its position it has set aside $io billion to buy other companies. By these standards, acquiring Cumbernauld-based Atlantech this year for $200 million was small change.


Companies that specialise in m&a are booming as more and more of the old economy wake up, think they are being left behind and that buying a new economy company might be an answer. M&A deals in 1999 amounted to $1.2 trillion, more than the combined total of every other year during the ‘90s. Commission on all that would be around $60 billion, so it’s no wonder the Christmas bonuses were so good.


For any of the above to work, your computer needs a telephone. The winners in the new economy have been telcos, and old monopolies around the world have been milking it for all it is worth while they can. BT still makes £2 billion profit – that’s over £5.5 million a day, or £60 a second, and a huge chunk of that is down to your computer ‘calling home’ to its ISP.

So are companies like, and Freeserve making any money? Are you joking? In the last quarter of 1999, Amazon lost $323 million. Mind you, at Amazon’s results announcement chief executive Jeff Bezos did actually bring himself to talk about future profits.

Everybody was so stunned its share price promptly went up by $2!

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