eCommerce comes in from the cold

2000-07-21

The bubble that is eCommerce may have burst, but that does not downgrade its potential for companies new and old. This is the message that may be garnered from recent events, notably the closure of News International Network News service, the acquisition of CDNow by Bertelsmann and the go-ahead given to LetsBuyIt.com by financial analysts.

Perhaps it is the closure of the Network News office in London (with the result that 30 staff are being made redundant) that is the most telling. The intention is to roll the production online versions of newspapers such as the Times and the Sunday Times, back into the paper-based newspaper development. Clearly running Network News as an autonomous operation did not work, however we can rest assured that online versions of these papers will continue to be produced.

Secondly, Bertelsmann are buying the beleaguered CDNow for $117 million. CDNow’s shares have tumbled from $21 last July to the current levels of $2.8, and the company has been searching for a buyer since early this year. Bertelsmann will be keeping the CDNow brand going, but the company will become just a front for part of its eCommerce division. Ironically, CDNow also recently closed its London office.

Following last minute discussions, banks are now satisfied that the LetsBuyIt.com launch is worth the risk. By the time you read this, the company should have been launched.

Put all these three things together ans a pattern emerges. The launch of LetsBuyIt.com is an indication that, despite the negative publicity surrounding dot-com companies, there is still money in them there hills. The Gold Rush may be over but the gold mines are still profitable. What is interesting though, is the change of perspective. LetsBuyIt.com wasn’t given free rein, based on the (now disproved) assertion that being on the Web was a license to print money. The company had an uphill struggle to convince the banks that it was all worthwhile. The other assertion which can now be laid to rest is that dot-coms are the only way of doing business. Bother Network News and CDNow have found that their new-and-improved business models were no substitute for the old, established methods and both have now been brought back in line.

Things are not as simple as this of course. Bertelsmann has gone through substantial restructuring, not all of it successful, to meet the demands of the Web. However it has shown that it can compete. Similarly, by closing Network News, News International are saying “we don’t need a separate company for this – we can change ourselves to meet the demands of the Web.

This is all sobering stuff and is indicative of the maturity level that the Web has now reached. The promise of eCommerce remains, but not at the detriment of all that went before it. There is still room on the Web for the Bertelsmanns and News Internationals among the Amazons and LetsBuyIts, and vice versa.

(First published 21 July 2000)