Yes Virginia, there really is a new economy

One prerequisite for an opinion column is an opinion. There are days when opinions are harder to come by than on others. On those days, there are a number of journalistic tactics that can be used to substitute for actually having an opinion. A favourite of mine is to take a book that has been described as “essential” or “a must-read,” lift a few sentences completely out of context, then rant for a couple hundred words about how the author is wrong, wrong, wrong.

My victim this week was to be 101 Best Dot Coms To Start, by Lynie Arden and the Philip Lief Group. The book profiles successful online businesses, outlines the financial and special requirements, and offers some inspirational prose and interviews with the principals to go along. It was published in 2000; given the dot-com carnage that ensued, I figured it was a sitting duck – go through the book, confirm that most of the companies had since failed, then have a good larf at the outlandish business plans.

A couple hours of typing URLs in later, my phone-it-in plan had gone boo.com. The vast – and I mean vast – majority of the operations were still online.

I can’t vouch for the financial success of the companies, or that their operations hadn’t been substantially scaled back, or even if they were ghost sites of a long-dead business. But a cursory glance told me that these didn’t just seem like a good idea when any half-baked business plan with the word “online” in it seemed like a good idea. Most of them were still viable in the post-dot-bomb world.

Why?

The companies in question have a few things in common. For the most part, they are small operations, often with a regional scope. Start-up costs were well controlled; most were launched for less than US $5,000. Almost without exception, they were niche-market-driven businesses. And almost without exception, their operators had a background or an interest in the subject matter of their businesses.

Take, for example, GreatTapes.com, a Web site selling videotapes for children. The site was launched in 1996 by Margaret Levine from her home. She began with a small inventory of used, hard-to-find children’s programs, an affiliation with Amazon to fulfill more mainstream orders, and a $20 Web site. (Levine had a leg up in that department; a computer and database whiz, she was one of the original Internet for Dummies authors). She’s severed her ties to Amazon and now deals directly with distributors and independent producers. The site posts her own children’s opinions of the movies.

Contrast those factors with one of the failures from the original 101. Makeusanoffer.com was an online auction house. The model wasn’t your standard auction model – Makeusanoffer invited users to make an offer lower than list price, and an online agent would instantly calculate the lowest acceptable price based on inventory and customer demand.

It was different from auction monsters eBay and Priceline, but perhaps not different enough.

Not only did Makeusanoffer venture into a market with a couple category-killing competitors, the haggling house had enormous start-up costs – about $500,000, mostly inventory and custom programming.

I can’t find any references to Makeusanoffer on the Web. I suspect it may have evolved into a software provider, given the useful analytical software developed for the site. Perhaps not. All I know for sure is, I can’t make them an offer.

But apparently a business can make an online go of it in the post-meltdown world. The rules appear to be quite simple: start small, control your costs, have a niche to exploit and love what you do.dwebb@plesman.com

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