Vultures and Sharks: The Internet's Trash Service

  |  February 27, 2001   |  Comments

The Internet is a knowledge business, and knowledge is always renewing itself. So welcome the vultures, sharks, and anything else that can devour the bones of the dot-bombs. Just don't expect a free ride once your meal has digested.

Vultures and sharks have a bad reputation, but as any ecologist will tell you, they do us all a great service.

They're nature's trash service. When an animal dies on land or is bleeding underwater, they clean up the mess. (You don't hang around your city's landfill, but you're glad the garbage truck shows up.)

Business has its own sharks and vultures; companies that pick clean the bones of dead companies. Some specialize in the merchandise or the office furniture. Others specialize in the business assets and goodwill.

Jeff Arnold, last seen "building" WebMD by buying every competitor in sight (until the whole thing collapsed around his ears), now wants to be one of these vultures, and good for him. Arnold's plan is to either move failed dot-coms into the control of stores or roll them together into viable industry leaders.

Lots of companies are joining Arnold in what are called "roll-ups" of Web niches into what they expect will be market dominance, unassailable market dominance.

Brick-and-mortar retailers who previously shunned the Web are doing the same thing. Webvan, for instance, is bleeding everywhere (not just in Atlanta), so Publix has decided to give Webvan a little push off the cliff. By announcing a Web delivery system (for launch next year), Publix could now force Webvan to sell its local operation to Publix at a bargain price, securing a stranglehold on the Atlanta grocery market.

The question I have is whether, except for capital-intensive areas like grocery delivery, these deals make any sense. The assumption is that the Internet is one giant mall and that buying all the stores gives you market dominance.

But there's another view -- that is, that the Internet is a knowledge business. Talent is the key raw material, and talent can move.

The costs of launching a Web business are going down, not up. You don't need Super Bowl ads, and online CPMs keep declining. Labor costs should now be more reasonable, and the cost of technology is continually falling.

When business infrastructure is cheap (and getting cheaper), the real bottleneck becomes talent, which will always be in short supply. Maybe the Internet isn't like retailing or other capital-intensive industries. Maybe it's more like the law.

While there are many large law firms, the key word is many. A top lawyer can easily quit a firm and hang up a shingle down the street, taking much of the firm's business with him or her. This isn't the car business, where we're going to be left with only a few choices at the end of the day. It's a knowledge business, and knowledge is always renewing itself.

So welcome the vultures, sharks, and even the insects and microbes that will devour the bones of the dot-bombs and the dot-calms. Just don't expect a free ride once your meal has digested. Talent seeks opportunity -- it won't be handcuffed. The Internet will always be a great place to launch a business.

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Dana Blankenhorn

Dana Blankenhorn has been a business reporter for more than 20 years. He has written parts of five books and currently contributes to Advertising Age, Business Marketing, NetMarketing, the Chicago Tribune, Boardwatch, CLEC Magazine, and other publications. His own newsletter, A-Clue.Com, is published weekly.

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