Slow and Steady Wins the Race

For those of us who still live and breathe the Internet for our daily living, it’s a lot like being fans of Milli Vanilli after their public exposure as lip-synching marionettes with funky coifs. A once-adoring media and public have since pulled their GRAMMY Award, and we are now forced to listen to “their” music in private to avoid public humiliation.

Yet if we were true Vanilli fans, we’d enjoy their music whether there was public validation or “milli-vilification.” That’s the challenge put today to the remaining true believers of Internet business: We must continue to follow our beliefs, doing what we’ve been doing, despite the overwhelming tides of unabated greed and subsequent schadenfreude.

Of course, that’s not to say our conceptions of what it takes to be a successful online business must remain static. What defines a successful online business continues to evolve rapidly.

“Sure We Lose $50 per Customer, But We Make It Up in Volume!”

What lessons can we say we’ve learned thus far?

Two years ago, aggregating a broad swath of online users was all that mattered — regardless of your balance sheet. If Media Metrix said your site was immensely popular, even if that popularity came at the price of handing out $50 bills to everyone who visited your site, your initial public offering (IPO) was close to a sure thing.

Today, as we’ve now collectively realized, being popular isn’t an end in itself. Rather, it is only a means. As long as businesses are valued for their profits and cash flow, your site could have only a hundred users and still be wildly successful — assuming that those users spend an enormous amount of money with you.

Whether the death of dot-com freebies (the recent and simultaneous abandonment of free disk space from both i-drive and Xdrive come to mind) or the erosion of Web-based convenience services with razor-thin margins (look no further than Webvan or Kozmo.com), another lesson is that consumers will drive a good thing into the ground as fast as you let them. All the free milk in the world won’t spare the golden calf from becoming victim to someone’s momentary burger binge.

Furthermore, there will always be competitors with more dubious business models who will undercut you. The trick is in knowing where to draw your limits and strike a balance between competing to death and surviving to compete another day. Many of these competitors are doomed to the brief and disastrous path of unsustainable investment.

I Was Dot-Com When Dot-Com Wasn’t Cool

Several recent articles have posed this question: Who’s to blame for the dot-com collapse? But the blame game is an unproductive and worthless exercise.

Stop blaming the fools who inflated the stock prices of worthless companies without a prayer of a business plan. Stop blaming a soft advertising market or weaker consumer demand in the economy or users who won’t pay for what they can get elsewhere for free. Stop finding excuses or reasons to fail, and start taking responsibility for your business direction from this day forward. It may sound trivial, but today it seems that a lot of Internet businesses have lost sight of that approach.

Behind all the pessimistic headlines, there’s actually a lot of good news. The competitive landscape is much more rational. Talented employees are in greater supply. Employees who were in it only for a fast buck, and were far less committed to your business cause, have long since returned to their former employers. And for all the dot-com layoffs in the news, we’d argue that there’s been a steady number of available jobs at legitimate online businesses over the past several years.

So maybe Internet business isn’t the flavor of the month anymore. That’s no reason to lose your focus and stop executing. Internet usage is here to stay, there is money to be made online, and the medium continues to evolve. Internet businesses today should be a little older and wiser — and that is a competitive advantage.

Just don’t call it “new media” anymore.