As badly as most media miss Internet stories, Wall Street misses them worse. When lazy reporters follow Wall Street, you get the parallel universe so many of us live in.
Let’s take, for instance, that hoary term “shake-out.” A shake-out is actually just the third phase of a market’s evolution. First you have start-ups, then Wall Street falls in love, then Wall Street falls out of love and there’s a so-called shake-out.
Lazy reporters leave the story after Wall Street shouts “shake-out,” but we know the story in fact continues. In 1995, for instance, there was a “shake-out” among Internet service providers (ISPs), and predictions there would soon be just a half-dozen or so.
In fact, there are more than ever – 6,000 in the U.S. alone. Some specialize in local service, others in broadband, others in hosting, and still others provide application services. Even within the residential service market (really a niche within a niche) there are free ISPs, paid ISPs, filtered and unfiltered ISPs, a flavor for every taste. You don’t hear of most because Wall Street has moved on.
The same thing is true with search engines, which had their supposed shake-out in 1997. Back in 1997 we didn’t have Direct Hit, or Ask Jeeves, or Google, or Mamma, or a host of others, most of which are wildly profitable. You seldom read about search engines because Wall Street isn’t in love with them anymore.
A Wall Street “shake-out” is a little like that time in a relationship where the love hormones subside, the blinders come off, and you realize “the love of your life” is just another woman (or man) with all the faults (and wonders) that come with that. If you’ve ever lived, you know this is when the relationship starts, not when it ends.
So it is now in the e-tailing space. The blinders have come off on Wall Street. It’s no longer enough to say you’re selling books, or pet food, or perfume through a dot-com. You need to be able to sell it, deliver it, and (most important) make money off the process, not just talk about it.
So a lot of the easy money in e-tailing is moving on – to which I say thank goodness. Pets.com – which faces bricks-and-click competition from Petopia (retailer PetCo), Petsmart.com (retailer Petsmart) and Petstore.com (backed by the Discovery Channel and its retail network) – saw its IPO tank. Jewelers Jewelry.com and Jasmin.com were snapped up by, respectively, Miadora.com and Ashford.com.
It’s happening at the top of the industry, too. As I wrote this, you could buy stock in Amazon.com for $67 a share. That’s the same price (minus splits) that share would have cost in January 1999. For all the company’s expansion into new lines of business, all the press, and all the schmoozing of Wall Street it has done in the meantime, Amazon has basically gone sideways for a year.
This does not mean you should forget about online retailing. It just means the swains of Wall Street won’t throw money at you just for walking down the runway – you’ve got to prove yourself.
That’s fine with me, and it should be fine with you. In the long run, a good marriage is much more satisfying than mere puppy love.
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