There are several kinds of pure click companies – Search engines, Internet Service Providers (ISPs), commerce sites, transaction sites, content sites, and enabler sites. Search engines and portals such as Yahoo! And Alta Vista started as search engines and later added services such as news, weather, stock reports, entertainments, and storefronts hoping to become the user’s point of entry on the Internet. ISPs such as AOL and CompuServe provide Internet and e-mail connections for a fee. Commerce sites sell books, music, toys, insurance, stocks, clothes, financial services, and so on.
Among the most prominent ones are Amazon and ebay.com. Transaction sites such as auctions and brokerages like fabmart.com and others take a commission for transactions con-ducted on their sites. Content sites such as The Street, New York Times, and Encyclopedia Britannica provides financial, research, and other information. Enabler sites provide the hardware and software that enable Internet communication and commerce.
These sites compete using various strategies: automartindia, a leading website for car buying and related services; travelmartindia, the information leader in travel needs. Pure click companies on the web reached astronomical capitalization levels in the late 1990, in some cases for exceeding the capitalization of major companies such as United Airlines or Pepsi-Cola. They were considered a major threat to traditional businesses until the investing frenzy collapsed in 2000.
Dotcoms failed for a variety of reasons: Many rushed into the market without proper research or planning. They had poorly designed Web sites with problems of complexity, poor navigation, and downtime. They lacked adequate infrastructures for shipping on time and for answering customer inquiries. They believed that the first company entering a category would win category leadership. These companies wanted to exploit network economies, namely the fact that the value of a network to each of its members is proportional to the number of other users (Metacalfe’s Law). Some just rushed into the market in the hope of launching an initial public offering (IPO) while the market was hot.
To acquire customers, dotcoms spent large amounts on mass marketing and offline advertising. They relied on spin and buzz instead of using target marketing and word-of-mouth marketing, and they devoted too much effort to acquiring customers instead of building loyal and more frequent users among their current customers. They did not understand customer behavior when it came to online surfing and purchasing.
Many dot-coms did not build a sound business model that would deliver eventual profits. The ease of entry of competitors and the ease of customers switching Web sites in search of batter prices forced dot-coms to accept margin-killing low prices. Webvan, the online grocer, illustrates how dot-coms failed to understand their marketplace.
At the same time, many pure-click dot-coms are surviving and even prospering. Others are showing losses today, but their business plans are fundamentally good.