Demise of Mall.com Spotlights Online Ad Risks

  |  October 15, 2002   |  Comments

Mall.com e-commerce site disappears, taking with it the hopes, dreams and advertising budgets of a number of online start-ups and smaller entrepreneurs.

You'd think that with a name like Mall.com, any e-commerce site could succeed, but apparently not. The eponymous company has taken down its Web site and disappeared into the virtual dust, apparently taking the ad budgets of a number of smaller online companies with it.

Austin, Texas-based Mall.com Inc., which had aimed to be a one-stop shopping and entertainment destination and once signed an ad deal with Young & Rubicam, had featured shopping by "floors" in a virtual mall that included everything from appliances to wine and spirits.

Google's cache snapshot of what the site used to look like can be found here. The company's phone lines have been disconnected.

Records at the Texas Secretary of State's office show a tax forfeiture in March by Mall.com and the return of a certified letter, dated Sept. 23, as undeliverable, according to an Austin Business Journal article on Mall.com's disappearance. The letter alleged the company had failed to maintain a registered agent as required by Texas law.

Never a big e-commerce player despite its bold name, Mall.com reportedly shut down on or about Sept. 20, laying off about 40 employees and leaving a number of advertisers, including a lot of small businesses, absent their fourth-quarter advertising funds.

An Austin Police Department spokesman was quoted as saying that a fraud investigation has begun. However, one man who lost ad money at the site said he was told by the police to file a civil lawsuit.

One of the businesses that lost a bet on Mall.com was ZeroToys.com, a startup that sells cute little smoke-ring makers.

Ben Moss, a graphic designer and operator of Circle Graphics in New York state, said he was hired as Webmaster and Internet sales rep for the startup.

"We spent $6,000 with them, which was 90 percent of the Internet ad budget," he told internetnews.com.

"I was struck by the name," he said. "It seemed like a hot ticket item -- people just type it in (a search engine.) They claimed 6 million hits a month...."

Apparently an aggressive sales effort was kept up by Mall.com right to the end. Moss said he was contacted by email, and then received a follow-up phone call from a sales rep last June and July. Now his emails bounce and the phones are disconnected.

Mall.com reportedly began experiencing financial troubles in 2000, as the Internet recession that killed so many dot coms began to sweep the Web. Despite the name, it apparently never made an effort to go public and maintained a relatively low profile.

One interesting angle, although certainly not verifiable, is a claim that has appeared on a Texas Web site called Austin XL that says Mall.com, in the end, may have been sabotaged by laid off employees.

Whether that's true or not, one lesson seems clear - if you're a small online business with a limited ad budget, be sure to do your homework before signing on the dotted line. Troubled companies, of course, desperate for revenue, often push their sales efforts right to the end.

"I assumed they were legitimate," Moss said. "There were 100 advertisers in the toy section alone, so we're looking at thousands of advertisers who may have been scammed."

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