Dot-Com Companies in a Mature Market

Daniel Gross writes about how hard Yahoo! and company are finding it to mature gracefully. Having an exclamation point! in your name doesn't help:

Why Yahoo!, eBay, Amazon, and AOL are tanking. By Daniel Gross: By Daniel Gross: From the ashes of the 2001-2002 crash there emerged four horsemen of the dot-com apocalypse: Amazon.com, Yahoo!, eBay, and AOL. This quartet of iconic companies, wounded but not destroyed in the crash, survived the plague years and flourished when the market recovered. But in recent weeks, at a time when online advertising and e-commerce are enjoying strong growth, all four have pulled up lame.... [E]ach derives the lion's share of its revenues from a maturing U.S. market, each is finding profit margins slipping as it tries to diversify, and each has foolishly reached back to tried-and-failed ideas of the dot-com era for salvation.

On Tuesday afternoon, Amazon, the leading e-tailer, announced its quarterly earnings. The top line was good: Revenues rose 22 percent from the year before. The bottom line? Not so much. Operating income fell 55 percent to $47 million from $104 million in the year-earlier quarter. Why? Amazon ramped up spending on technology and content, slashed prices, and offered more free and reduced-rate shipping. In other words, it had to work a lot harder for the money.... eBay also took some lumps when it reported earnings last week.... Operating income fell 18 percent in the quarter.... Yahoo! reported a similar story. Revenues, 88 percent of which came from advertising, rose a very healthy 27 percent. But operating income fell 12 percent.... AOL's parent company, Time Warner, won't announce its second-quarter earnings until next week. But the first quarter... saw operating income fall—by about 14 percent, from $314 million to $269 million. And on July 11, the Wall Street Journal reported that AOL might soon adopt a new business strategy: It will morph from a subscription-powered Internet-access provider to an advertising-supported portal.... [I]f it can keep people using AOL for e-mail (and hence as a launching pad for the Internet), it might be able to capture more of the Internet-ad-sales market...

Comments

[Jack]

Coca-Cola does alright with its, er, dated name.

[jerry]

It's not quite fair to put AOL in that group. AOL was a loser from day one and that day was long before the dot-com boom. Did it ever make a legitimate buck and post a legitimate non-accountant-trick aided profit?

I would like to think that Yahoo's troubles are due to their inability since netday + three months to add any value.

I am glad to hear that AOL is going to move from their own non-business model to Yahoo's (and Netscape's and Excite's and Pathfinder's, and Persian Kitty's non-business model.) Hmm, Persian Kitty is actually successful.

A 55% hit at Amazon over the prior year is pretty severe, but I wonder how their costs compare to their competitors costs. Are they tanking or regressing to the mean as their size grows?

If a stock price is the npv of future dividends my question is why Yahoo! or AOL ever had a high stock price. I would think that an efficient market would have thought long ago that companies fundamentally need to add value in order to provide future earnings and dividends.

[jerry]

Brad, do you have control over when the word verification word appears?

I tend to click "post" and assume the silly thing has posted. Perhaps the word verification can appear on the submission page, or the word "post" on the button can be changed to "verify author"

[Emma Anne]

On the verification word: can you use a "font" that isn't so hard to decipher? More than once I have gotten the word wrong and had to type in another one.

[Cranky Observer]

> On the verification word: can you use a
> "font" that isn't so hard to decipher? More
> than once I have gotten the word wrong and
> had to type in another one.

That is by design. Otherwise the spammers would just add character recognition algorithms to their spam generators to read the word from the verifiction box. The contents of the box are chosen to have so much information damage that character recognition doesn't work, but not so much that a human can't read them. Most of the time.

Plus I think Brad uses a canned verifiction package that he doesn't control.

Cranky

[Arf]

I had some dealings with AOL in the mid-90's. I was surprised by the arrogance. Nothing since then has made my first impression diminish.