Epidemic Marketing shut its doors and laid off its 60-person staff this week, the company said. Like many Internet companies of late, the online marketing firm burned through the $7.6 million it raised during its first round of private financing, said national account manager James Wallen.
Other companies that have shut down or been bought recently include online sportswear retailer Boo.com, Net toy retailers Toysmart and ToyTime, specialty boutique Violet.com, craft Web site CraftShop.com, and Nickelodeon's Red Rocket children's e-tailer. All of them ran into financial problems.
Epidemic's merger talks with a California company broke down last week, Wallen said. Employees are still owed two weeks' back pay.
"When the (California) company backed out, there was little for us to do but close," said Wallen, who would not identify the company. "Everybody is disappointed, but nobody is surprised."
Denver-based Epidemic, which launched last September, paid consumers to attach links to Internet businesses on their outgoing email.
The company's strategy was to stimulate "viral marketing," in which information about a company or promotion is spread largely through word of mouth.
In Epidemic's 30-second Super Bowl ad, a man visits a public restroom and receives a gratuity from the washroom attendant, instead of the other way around. It was designed to show that Epidemic would pay people for doing things they do every day.
The commercial drew little response from consumers but helped to attract important business partners, Wallen said.
Football fans got a heavy dose of dot-com fever that day: More than a dozen dot-com companies spent an average of $2.2 million for a 30-second spot, depending on when it ran during the game.
Among the companies were Monster.com, HotJobs.com, Pets.com, OurBeginning.com, Oxygen Media, Kforce.com and Computer.com. Online brokerage firm E*Trade sponsored the half-time show as well as numerous spots during the game.
Start-up Computer.com, which essentially launched its site on Super Bowl Sunday, spent more than $3 million of its $5.8 million in seed funding to flash three 30-second ads before and during the game.
According to Computer.com chief executive Mike Zapolin, the company's Super Bowl bet has paid off in increasing the firm's profile with investors. Since January, Computer.com has received an additional $2 million in a second round of funding.
Companies have long struggled to determine how much ad campaigns help their bottom lines--or hurt them, if they are too costly or done poorly. Even if the ads are good, there is no guarantee that recognition will automatically translate to profits. And large ad budgets can be increasingly difficult to justify when compared with revenues.