Dot-com stars shine brightest before they die

Go out of business.

That's the conclusion of a report from Applied Communications, which released Tuesday a list of dot-com "flameouts"--companies that ceased operations in the brightest blaze of print media coverage.

Led by Applied Communications vice president Jim Beakey, the agency's research department found that 33 of the Top 50 now-defunct dot-coms received more print media when they announced they were closing than while they were trying to grow their businesses--testimony to the Neil Young and Def Leppard lyric "It's better to burn out than fade away," at least in terms of publicity.

"Dot-coms as a whole were given to publicity stunts," Beakey said. "The goal was to get as much coverage as possible with a publicity stunt, with the underlying assumption that more and better coverage would follow and help them reach their business objectives. Our research proves that's not a good practice...and publicity stunts alone are not going to create business-critical differentiation as they move forward."

Online fashion mall Boo.com won top billing as "brightest flameout" of 2000, followed closely by defunct niche e-tailers Pets.com and Toysmart.com. In their short life spans, those companies received more publicity than any others, according to the survey.

Researchers compiled the list by determining the number of printed stories each company received during its growth period in more than 6,500 English-language and English-translated publications. Headlines, lead paragraphs and article citations were weighted differently to separate companies that were the main focus of an article from those merely mentioned in passing.

Researchers then assigned each a "MediaShare" score, with the average company receiving 100. Pets.com received 2,280. Living.com received 1,003.

Boo.com, which ceased operations in May despite investments from some of Europe's wealthiest entrepreneurs, received a stunning 5,378. Boo.com's spring closure predated the vast majority of dot-com failures, and its demise became a convenient analogy for articles about the likely deaths of other e-tailers.

"The company's size and its early demise most likely contributed to the vast press attention," researchers wrote.

The survey also found that flameouts burned most brightly in November. Four of the top 10 flameouts died in the 11th month. August and October had eight closures each, and December had seven.

Contrary to logic, researchers determined that the size of the company did not matter for the top 10 flameouts. Rather, the number of printed articles that appeared before the company announced its closure was the leading indicator that it would grab headlines after its death.

The study also found no differences among the 50 failed companies in terms of market category: Consulting services, e-commerce, search engines and entertainment sites were equally represented. "Flameout is an equal opportunity proposition," the report quipped.

Researchers speculated that companies whose public relations staff persuaded journalists that their companies would succeed were doubly wounded when the ventures failed to deliver.

But what about Applied Communications? Is the San Francisco-based public relations agency, which last week won the PRWeek distinction of best mid-sized firm, merely capitalizing on flameouts to increase its own publicity? Might it fall victim to its own thesis--that the more a company touts itself, the more likely it is to fail?

Beakey dismissed the questions by noting that the agency prides itself on its six-person research team and its market data focus--not its hype-generating abilities.

"We work with our clients in another fashion--to further long-term business needs, not short-term publicity needs," Beakey said. "More or less we've stayed away from easy dot-com revenues and focused on companies that had innovation to offer the market. It was a choice we made, and we're in relatively good shape compared to the rest of the PR market out there."