The tally on dot-com deaths
The sun has set for nearly 130 Internet companies since January, leading to about 8,000 layoffs, according to a new report.
  What's behind the dot-com declineTim Miller, president, Webmergers.com |
E-commerce sites, such as Furniture.com and Toysmart.com, accounted for 60 percent of the casualties. Business-to-business companies accounted for about 20 percent of the total, with content companies such as APBnews.com making up a quarter of that group.
"This is an industrial strength reality check," said Jack Staff, chief economist for Internet research company Zona Research. "We've had this slow leak, where companies have been consolidating, closing and cutting jobs. But it hasn't been a bubble bursting, it has been deflating down to reality."
The number of deceased dot-coms has steadily increased since April, when the market for Internet-related concerns began to plummet. Before this, many Internet companies lived in a heyday of venture capital courting and record-high public offerings. Countless consumer Internet companies, for example, saw their stock prices soar to highs near $100 before the market malaise; many now are nursing share prices in the single digits.
During the market's trip south, many Web companies faced with waning investor interest have been forced to consolidate, cut employees or close operations.
Online cosmetics site Beautyjungle.com closed shop Wednesday after failing to find additional funding. Home garden site Garden.com also ceased operations this week.
More than 60 companies--including AltaVista, Qwest Communications International and Drkoop.com--have slashed their work forces this year. Content companies and online retailers, such as Oxygen Media, Amazon.com and AllAdvantage.com, make up a large part of the layoffs as well, climbing to a sector record of 5,677 in October, according to a report by outplacement firm Challenger, Gray & Christmas.
Tracking such business fatalities has become a cottage industry in itself. Many publications and Web sites such as Dotcomfailures.com have compiled mounting lists of defunct companies. Analysts predict that the death toll could be much higher than these sites report, however, considering the large number of companies that fail without notice.
Despite the depressed numbers, many other high-tech businesses are growing exponentially. For example, less glamorous industries like Internet infrastructure are creating jobs faster than failing Web companies can eliminate them.
The unemployment rate in some technology niches is less than 1 percent, a stark contrast to the national rate of 4.1 percent in May, according to the Bureau of Labor Statistics. Government studies also project that the top five of the 10 fastest-growing occupations between 1998 and 2008 will be related to technology. Computer engineers, support specialists, systems analysts, database administrators and desktop publishers are expected to see the largest salary growth.
Taking this information into account, analysts view many dot-com closures as a natural progression in an inflated market.
"People were making so much money on nothing that it needed to be corrected," Staff said. "The positive side: There may be people that sold snake oil on the Internet, but the Internet itself is not snake oil. The Internet provides tremendous economic advantages."
According to the study, California was home base for the highest number of failed dot-coms, at 35 percent, with New York second at 11 percent. European companies made up 8 percent of the list.
Webmergers.com gathered the data from more than 50 public and private information sources.