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Dot-com failures up from last year

More than twice as many Internet companies shut down or declared bankruptcy in 2001 as in the preceding year as the endangered-species watch continues.

2 min read
More than twice as many Internet companies shut down or declared bankruptcy in 2001 as in the preceding year, according to recent research, but the two-year Ice Age that brought the wave of extinctions may be showing signs of a spring thaw.

At least 537 Internet companies folded in the past year, compared with 225 in 2000, according to Webmergers.com, a company that provides research to the Internet industry.

E-commerce and content sites were hit the hardest over the past two years, comprising two-thirds of sites that failed in the harsh climate of a crashing economy and anemic stock market. E-commerce companies accounted for nearly 35 percent of the failures in 2001, down from 54 percent in 2000, while news, entertainment and other content sites made up 24 percent of the shutdowns in 2001, and 27 percent in 2000.

Webmergers reckons that half of the companies (388 out of 762) that crashed during the last two years aimed to attract the attention of consumers, a trend shown by the flameout of high-profile sites such as Webvan, Kozmo and Pets.com. Sites that targeted businesses as customers accounted for 38 percent of the dot-com casualties.

Despite the gloom, the report did indicate that the worst might be over for the dot-com industry, as the rate of failures has slowed down over the past two months. Then again, given the number of companies that have already failed, the lower number might not be as cheery as it seems at first glance.

In November and again in December of this year, 21 Internet companies succumbed to market realities, compared with the 50 and 49 sites that went belly-up in those months last year, respectively--the lowest tally since August 2000. Web fatalities have also receded on a quarterly basis, with 78 sites crumbling in the fourth quarter of 2001, compared with the 135 in that quarter a year earlier.

The pending springtime in the Internet industry comes as analysts report that surviving retail sites did exceptionally well during the holiday season compared with previous years, when e-tailers got slammed for poor "="" rel="">service and irate customers.

But Internet companies can't breathe easy just yet. Even though the holiday season looks like it will finish better this year than last, the vigorous debate over the sector's fortunes among industry observers will most likely continue.