sussmanbern's Full Review: Philip Kaplan - F'd Companies: Spectacular Dot-com...
F'D COMPANIES by Philip J. Kapan came out in April 2002. It was a compilation of dot-com horror stories from a website (now defunct) of the same name (except it spelled out the first word).
Looking at this in late 2008, much of it seems quaint -- who could have been so naive or ignorant about how business is done on the internet? But these are stories from the wild and wooly days of early internet, when some of life's hard lessons had yet to be learned.
The book consists of short vignettes, each about a particular dot-com company, what it thought it could accomplish and how it crashed and burned, including the amount of money that it made vanish. One defect is that we occasionally have the dates that a company went broke but very seldom the date or the length of time that it was operating; some of them lasted a year or more but some of them went under in a matter of months, and several of them died even before their official opening day.
One such tragedy whose name might ring a bell is Pets.com. It had a ton of commercial in 2000 featuring an annoying sock-puppet dog. It would sell pet supplies on the internet .... and charge nearly nothing for delivery. In fact it charged so nearly nothing to be attractive to customers that it could not cover the very real and substantial expense of making deliveries. It lasted about 18 months and burned through one hundred million dollars, which is a lot of money even if you say it fast. When it went out of business, Petco bought its merchandise and mailing lists, Petsmart bought its domain name.
Another company that didn't charge enough to cover its unavoidable costs was Webvan, an online grocery store. It went under after less than two years and after losing more than one Billion dollars (yes, with a B).
You probably never heard of WWWRR.com -- World Wide Web Reading, 'Riting, 'Rithmetic -- which was supposed to be a website on which schools everywhere could post their useful information such as class schedules, homework assignments, team scores, and the like. They burned up $15 Million for a website that nobody actually needed, and had even hired 120 people for this enterprise, and closed before they began.
Bizbuyer.com was supposed to solicit low bids for you and everyone else from all sorts of service providers from home builders to software engineers. They spend $68 Million and hired 170 employees to find out that their very modest commission would wipe out the profit margin on most low bids and so contractors stayed far from their website.
Some companies went under because they offered what nobody wanted or needed, and it didn't matter if they offered it for free because nobody uploaded them to read the ads that were paying for them. For example, Impresse.com tried to make a go of offering, for a mere one percent commission, to arrange printing jobs for anyone who wanted stuff printed in mass quantities, such as magazines, newsletters, and leaflets -- except, of course, that there are thousands of printing companies out there, and their potential customers all want to see and handle their samples in person; bang went $90 Million. HeavenlyDoor.com lost only $25 Million before going six feet under, but its intended business was to arrange funerals online. CollegeHire.com would supposedly help potential employers find and hire new graduates of colleges, by visiting the campuses and conducting its own generic interviews and collecting their resumes, and then sending copies of these to whatever business would pay their modest fees -- forgetting that most employers want to do the interviewing themselves.
Some companies simply couldn't deliver on promises: eRegister promised that, if you trusted them with a goodly amount of your personal information, they'd register you for clubs, subscriptions, hotel reservations, all the stuff that might take up two minutes of your life each time you did it yourself. Somehow it never got more than five companies to sign you up with and it died taking $5 Million with it. CharitableWay.com was supposed to raise and distribute money for charities, skimming a percentage off the top for operating expenses -- there was so little to skim from that the company died after spending its own $43 Million. You might remember GO.com - it was a sort of search engine that sucked $815 Million out of the Disney company -- it was really a portal, which meant that it looked like a search engine but instead of being automatic and having access to millions of pages, it was was labor intensive and had access to only hundreds of pages.
Some companies went out with a bang. Clickabid.com was an online auction house that handled its own bankruptcy auction. OnLineChoice.com was a group buying venture for household utilities - except the amount it could save customers was so little that it didn't interest applicants -- in less than four months it went from refusing a buy-out offer of $300 Million to bankruptcy with $10 Million in debt.
And on and on. You may not learn much from this book, but you see a hundred stories of people supposedly cleverer than you who managed to dig themselves into a hole, often spending more than a million dollars doing it.
Read this and feel better about yourself. - - - - PS: This review got only lukewarm ratings. For those who like reading about bum business decisions like these, I recommend a 2004 book of similar size and style, The Dumbest Moments in Business History by Adam Horowitz and the editors of Business 2.0. Unfortunately this book is not on the list of books Epinion has for reviews, so I can only mention it here. Unlike F'd Companies, Dumbest Moments in Business History is not limited to the last two decades nor to internet-related enterprises .... nor does it confine itself to businesses that went bust, although many of them did.
Among its treats is Linda Lay, wife of Enron chairman/conman Ken Lay, telling the Today show in January 2002 that they were teetering on the brink of poverty. In fact, the Lays had $33 Million in non-Enron stock and in real estate. I realize it would be a sacrifice for you, Dear Reader, but I think that, if need be, you could force yourself to live on a mere $33 Million.
A favorite story that does involve a dot-bomb (and is not in F'd Companies) is the tale of Boo.com. This was the brainchild of Swedish wizkids Ernst Malmsten and Ms. Kajsa Leandor. It was supposed to be a super-Amazon of ultra-cool fashion clothing. In 1998 they conceived of this enterprise, and immediately starting attracting investors. Within a few months they had attracted more than $12 Million, from such companies as JP Morgan and Benetton. A good deal of this $12 Million was spent by Malmsen and Leandor on their own creature comforts. Through 1999 the two stirred up more interest with a demo of an animated shopping experience that seemed to imitate a high quality video game. They set up offices in all the fashion capitals of the world and hired well over four hundred people in various countries, and this was before they sold the first bit of clothing. They constantly needed more investment money and their efforts to attract more and more investors infuriated the original investors who saw their expected share of the revenues shrink. Only in the last few months did the two wizkids realize they needed workhorse software to do the actual transactions, and they had teams of geeks working nights and weekends to try to bring the system on by the beginning of the Christmas shopping season of 1999. They barely made it; Boo.com went online on the morning of November 3, 1999. And then it turned out that their animated shopping experience demanded so much bandwidth that only the relatively few (in late 1999) with cable, not dial-up, could do any shopping .... and then only if they weren't using Macintosh computers and only if they persisted despite the website causing numerous browser crashes. And they still spent money like water, a million here and a million there, for overtime consultants, for fashion consultants and for enormous promotional parties. Four months later Boo.com was taking in little more than a Million a month which was a mere fraction of its operating expenses. On May 17, 2000, after little more than six months since going online and after spending something more than $200 Million, they closed down and sold their assets for less than one percent of what they had spent. It is the stuff of legends.
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