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SoHo NEWS & TIPS
Helping You Make the Most of Your Small Office/Home Office
SoHoTIPS.com
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Greetings,
I know everybody remembers the dot com boom and bust of
the late nineties and early 2000s. During this tiny window
hundreds of small business owners became instant millionaires,
and then most of them lost everything. Is the market poised
to do the whole thing over again with a new crop of investors?
Best,
Mandi
P.S. You can discuss this issue or any other topic in the
new SoHo News forum. Check it out... SoHo News & Tips Forum
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NEWS & TIDBITS
- Immigrants in the United States will send more than $45
billion to back to Latin America this year, 50 percent more
than 2004...
- Wal-Mart Stores Inc. is expanding a program offering $4
prescriptions for some generic drugs to 14 more states, two
weeks after rolling out the low-cost program...
- Investors sent the Dow Jones industrial average above
12,000 for a second-straight session as robust earnings from
blue chips offset weakness in the technology sector...
- Shares of eBay Inc. rose Thursday after the online
auctioneer posted a profit Wednesday that beat Wall Street's
expectations...
- Sony Corp. slashed its profit outlook by 62 percent because
of battery recall costs and a larger loss at its game unit...
- The scandal-hit technology company Hewlett-Packard has over-
taken Dell to become the world's biggest personal computer
maker, despite fresh revelations about its unorthodox tactics
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Startups Rely On Web Ad Boom
By REBECCA BUCKMAN
Hundreds of Internet start-ups targeting a wide range of
markets -- such as women, music fans and dog-lovers -- are
now relying on Web advertising to fund their new business
concepts. Online ads, which have become more sophisticated
and targeted since the late 1990s, are now an "instant
business model" for many of these companies, says Brett
Bullington, a local investor. Web sites that are using or
plan to use online ads for revenue include social-networking
sites like TagWorld Inc., online photo and video sites like
Photobucket Inc., as well as Web instant-messaging company
Meebo Inc. Online video company YouTube Inc., which agreed
to be bought by Google Inc. for $1.65 billion last week,
also receives revenue from online ads.
These sites and others, many of which aren't based on any
complex technology, are furiously trying to collect thousands
of "eyeballs," or viewers, which they hope will catch the
attention of advertisers. That will theoretically allow these
companies to emulate the success of firms like Internet
search giant Google, which makes the bulk of its money from
targeted Web ads.
But for every Google and YouTube, there are likely to be
hundreds of Web sites that won't attract enough advertising
to survive. According to research from the Interactive
Advertising Bureau, a trade group, and PriceWaterhouse-
Coopers, the top 10 online-ad sellers currently control
71% of the online ad market. Those companies include giants
like Google and Yahoo Inc. Tiny start-ups will have to
compete fiercely for the remainder of the online-ad pie,
says Joe Kraus, chief executive of Web-media firm JotSpot
Inc. The Interactive Advertising Bureau, however, says some
small Web sites don't report ad revenues to them, so their
numbers may be somewhat understated.
During the first dot-com boom, in the late 1990s, lots of
Web companies also staked their futures on online ads -- and
many of those sites went bust. But back then, Web use and
Web commerce were still fairly new and immature and broadband
penetration was much lower.
Now the online-advertising market is growing rapidly as more
people spend time on the Web instead of consuming traditional
media like reading newspapers or watching TV. In the first
half of this year, Internet advertising revenue hit a record
$7.9 billion, up 37% from the same period last year, according
to the Interactive Advertising Bureau.
All of this has triggered questions about the viability of
many Internet firms recently funded by venture capitalists.
It also raises parallels to the heady days of 1999, when many
investors funded companies with dubious business prospects.
In the first half of this year, venture capitalists -- who
take stakes in early-stage companies with the hopes of a big
payout later -- sank more than $262 million into so-called
Web 2.0 companies in the U.S., such as chat, video and photo
sites, according to research firm Venture One, a unit of Dow
Jones & Co., publisher of The Wall Street Journal. Many of
these Web sites are supported by online ads.
Continued below....
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Though Google forked over a huge sum to buy the ad-supported
YouTube, which was backed by venture firm Sequoia Capital,
investors point out that the site was a clear market leader
and somewhat unique because of the huge, loyal user base it
amassed so quickly. Very few of today's Internet companies
will fetch billion-dollar price tags, skeptics say. Some
will have trouble returning investors much money at all.
That is the view of Vincent Occhipinti, a venture capitalist
with the Woodside Fund in Redwood Shores, Calif. Earlier
this year, his firm rejected an investment in Real Girls
because partners wondered how Ms. Everett-Thorp would dif-
ferentiate her site from rivals. "In essence, it was nothing
somebody else couldn't do...And she hadn't written a line of
[computer] code," he says. Instead, the investors watched a
Power Point presentation outlining her idea.
Ms. Everett-Thorp, 37, acknowledges she didn't launch a
rudimentary Web site before seeking funding and knew the
approach was risky. But she didn't let the initial rejection
damp her enthusiasm and says her company "has a lot to show"
for its work over the last several months. "The people who
are involved are incredibly happy," she says. A 12-year
veteran of the advertising industry, Ms. Everett-Thorp cut
her teeth building up the ad business at CNET Networks Inc.
in the 1990s and later started her own online-advertising
firm, Lot21.
She ultimately snared $6 million in funding for Real Girls
from WaldenVC and 3i Group PLC, a U.K.-based investment
firm. Steve Eskenazi, a WaldenVC managing director, says,
"We don't have much concern that Kate won't be able to
[succeed with] brand advertisers of the world who want to
reach women." He and other investors add that, more
generally, today's Web companies can make money faster
because their costs have fallen so much thanks to cheaper
software and low-cost, outsourced programming.
Real Girls, based in San Francisco, now has 16 employees and
expects to launch its site early next year. Ms. Everett-Thorp
insists her company will offer more comprehensive content --
instead of more targeted material linked to specific events
in women's lives, like getting married or having babies --
than other women-focused sites, such as iVillage.com. It will
also be a high-quality site where advertisers seeking to
reach women can go and not worry about offensive or unpredict-
able content, as they might on blogs, she says. She declines
to go into detail about the possible content on the site
because it hasn't yet launched.
From The Wall Street Journal Online
So what did you think about this issue? Drop me a line and let
me know at: mandi@gophercentral.com
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Viral Videos on the Net at: www.EVTV1.com
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