Consumers Blame Investors, Entrepreneurs for Dot-Com Woes

Americans familiar with the difficulties of dot-coms blame overeager investors and poor business plans, according to a survey by the Pew Internet and American Life Project. A smaller number say the youth and inexperience of management of Internet companies are major reasons behind the shakeout.

Among the findings of the Pew poll:

  • 67 percent of Americans who are aware of dot-coms’ financial woes subscribe to an “irrational exuberance” theory of what has caused the dot-com downturn, namely that investors in Internet companies took too many risks because they were looking for quick payoffs from the dot-com stock run-up.
  • 56 percent of Americans who are aware of dot-coms’ financial woes say the dot-coms’ business plans were a problem; Internet companies did not have a clear plan to profitability, and this contributed to subsequent financial problems.
  • 38 percent of Americans who are aware of dot-coms’ financial woes say the youth and experience of those running Internet companies was a reason behind the dot-com downturn.
  • 26 percent of Americans who have heard about the dot-com’ troubles believe they will have a major impact on the U.S. economy. More than 60 percent say it will have a minor impact on the overall economy.

“Americans are saying that greed and haste made waste among dot-com investors,” said John Horrigan, author of the Pew Internet Project report. “The desire to chase a huge windfall overshadowed clear thinking about how Internet companies would actually make money. But even if speculation got the better of a lot of Internet investors, Americans do not see the dot-com shakeout affecting the entire economy very much.”

Americans seem to have a high awareness of the reversal of fortune among Internet companies. Two-thirds of all Americans have heard of layoffs, closings or falling stock prices of Internet firms, with 30 percent having followed the story closely. Most Americans (57 percent) think that some dot-coms closing is a good thing, because the Web had too many sites with too little to offer. About one-quarter (28 percent) lament the closure of dot-coms, saying they believe it will result in fewer choices of content on the Web.

In terms of the downturn’s impact, 31 million Americans have been directly or indirectly affected by the dot-com downturn. Only 9 percent know someone who has been the victim of a dot-com layoff, 7 percent of Americans said their family has lost money in a dot-com investment, and 8 percent of Internet users have had one of their favorite Web sites vanish during the shakeout.

According to Challenger, Gray & Christmas, which tracks employee movement in the Internet industry 11,649 employees were laid off in February, down 0 percent from January’s record 12,828 cuts. By comparison, there were 303 and 101 cuts in January 2000 and February 2000.

Hardest hit in February 2001 were employees at online retailers. The February tallies on jobs eliminated hit a staggering 2,874, up 57 percent from the 1,829 layoffs from January. Technology support and customer services were also among the hardest hit sectors, followed by job cuts at firms that build and maintain the Internet’s infrastructure, and at online consumer services.

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