Dot-Bombs

Brandweek, Nov 27, 2000

This year's wild dot-com ride screeched to a halt as a plethora of pure plays ran out of gas. The IQ staff looks at some of the more spectacular crashes.

What goes up, must come down. Spinnin' wheel, got to go "round."

Maybe we should've listened a little closer when the Internet's first icon, the Pets.com Sock Puppet, began singing his favorite '70s tunes to us. After a year of skyrocketing valuations for anything dot-com, dozens of pure plays-like Nickolodeon's e-commerce shop RedRocket-soon crashed back to Earth over the course of the year.

What was it that the Sock Puppet sang during a Super Bowl spot? "If you leave me now, you take away the biggest part of me?" Turns out he was singing to the venture capitalists, who after months of accepting staggering losses in exchange for marketshare are now marching to the tune of profitability.

That certainly doesn't mean success can't be found on the Internet, however, or that all VC money has completely dried up for Web entrepreneurs. But if IQ's list of this year's dot-corn casualties is any guide, it does mean that in 2001 Web companies will require more than just a cute idea to survive. They'll need real business plans, real business experience and real business profits. And for any company that does business with them, they'll need to show real money upfront--at least for the time being.

REDROCKET.COM, NEWYORK

Lifespan: Jan. 1997 to May 5, 2000

Investment: RedRocket.com was Nickelodeon's toy sales site

Still standing: EToys, Toyrus.com/Amazon.com, FAO.com

Lowlights: Acquired by Viacom in Feb. 1999, RedRocket was originally managed by Viacom's Simon & Schuster publishing unit. In Oct. 1999, Viacom formally unveiled Nickelodeon Online, a Web network for children encompassing, among other sites, RedRocket, Nick.com and Nick-at-nite.com. RedRocket was expected to contribute to Nickelodeon's e-commerce revenues, but despite generally postive reviews, those expectations were not sufficiently realized. Proving once again that online toy selling is not kid's stuff, RedRocket fizzled in May.

BBQ.COM, SAN FRANCISCO

Lifespan: June 15, 1999 to May 15, 2000

Investment: Received $1.68 million in first-round funding

Still standing: Barbequemall.com--O.K., so they only sell BBQ sauces, but that's as close as we could get

Lowlights: BBQ.com is another victim of Wall Street's vacillatin', mendacious way of turning away from B2C folks who need help getting through that Q3 and Q4 pass. Or perhaps it was BBQ's own audacious notion that folks would happily surf for items to burn on the turf. BBQ.com, an Internet purveyor of grills, meats, sauces and fixins for auteurs, amateurs and desperadoes of backyard grilling took about 11 months to bake all the beans in its rucksack. The little site that mighta coulda, dropped off the face of the Earth on May 15, sliding under the horizon quicker than the sun sets in the Pecos.

DIGITAL ENTERTAINMENT NETWORK, SANTA MONICA, CALIF.

Lifespan: 1996 to May 17, 2000

Investment: $50 million-plus

Still standing: The entire entertainment space online--what's left of it

TOYSMART.COM, WALTHAM, MASS.

Lowlights: Digital Entertainment Network, or DEN, was the brainchild of Marc Collins-Rector, Chad Shackley and Brock Pierce, who believed success involved delivering original entertainment to the 5- to 24-year-old demo. Too bad, then, that Collins-Rector found himself facing charges of engaging in sexual activity with a minor in 1999, which resulted in a settlement and his forced resignation (along with Shackley's and Pierce's). Subsequent management teams were brought on board and paid exorbitant salaries-$1 million to president David Neuman and $300,000 to CEO Jim Ritts--despite the fact that DEN didn't register one penny of revenue in 1999, according to published reports. A planned $75 million IPO earlier this year was shelved for a host of reasons, the most likely being that even overzealous investors saw a train wreck in the making. The result: 150 employees were terminated in May.

Lifespan: Jan. 22, 1999 to May 19, 2000

Investment: The Walt Disney Co. took a controlling stake in toysmart in August 1999 reportedly worth up to about $50 million. Other investors included Zero Stage Capital, Imperial Bank and The Holt Co.

Still standing: See RedRocket.com

Lowlights: This toy story ended when Disney retracted its wish upon this fading star. Taking the high road, toysmart.com had refused to deal toys of a destructive nature or buy into the latest fad, ala Pokemon. Instead, it carried what its $21 million ad campaign touted as "good toys," and encouraged parents to "Click on your child's potential." Repeatedly, however, the site failed to post traffic and sales numbers anywhere near those of competitors eToys and Toysrus.com.

PIXELON, SAN JUAN CAPISTRANO, CALIF.

Life span: 1996 to Aug. 2000

Investment: $80 million

Still standing: Ibeam, Akamai, FastForward Networks, MSN

Lowlights: Like Heracles in Women of Trachis, who gets devoured by the poison his wife thought would keep him faithful, Pixelon was doomed from the start by the hubris of David Stanleyer, Michael Fenne--who founded the company in 1996 with tainted cash bilked from naive investors. Stanley, alias Fenne, managed to raise $30 million while living in his car in California, where he had gone to beat an investment scam he operated out of his dad's church in Virginia. He burned through that cash with expensive launch parties; late last year, Pixelon spent nearly half its nest egg on an old-fashioned $12 million launch romp at MGM Vegas, featuring The Who. Then in April, he turned himself over to cops, who a week later booked him for fraud. In early May, creditors sought bankruptcy, prompting the company to lay off much of its staff.