Since last week's collapse of Boo.com, the prophets of doom have been out in force predicting the end of the internet is nigh and are taking bets on where the virtual grim reaper will strike next.
The announcement on Monday that online information provider Netimperative is calling in the receivers only whetted their appetite for even more culling. But Boo's fate was little surprise for senior, wiser figures within the e-world. It's like any business in any sector, if you start off with a fundamentally flawed business model and manage it badly it's highly likely you will go out of business, insists chief executive of Just-sites.com, Allan Davies.
But what was flawed about the business model? After all, when Boo.com was launched it was feted in many parts of the media as a revolution in e-commerce.
"I am amazed that any investor would have believed the stories about this business," says Davies. He says it was like deciding to open a clothes store on the high street with M&S on one side and C&A on the other, then selling a reduced range of goods at the same price and making it very difficult to get in the front door. He admits his comments are more acidic than most, fuelled by the fact that he has spent the last six months working hard to raise money from venture capitalists, despite the fact his online business is making money.
Just-sites.com, is in the more fashionable business to business (B2B) sector and provides information for companies on anything from market research to the clothing industry. Davies suggests there are lots of online businesses based on solid business propositions, but they do not grab the headlines.
Visiting the Boo.com we site now is a sad experience, which highlights the disappointment of its brief but notorious life. Boo.com generated huge expectations but failed to fulfill them: in the About Boo section, the site still predicts it will become the world's leading online retailer of fashion and sportswear, and create an awesome virtual shopping experience surpassing anything else on the web.
Is the merciless criticism justified? Boo has been pilloried, says independent internet consultant, Naunton Dickins. But that is nothing unusual. There are companies going belly up every day of the week. The only difference is Boo made so much noise that everyone wanted it to fail. It was young, attractive , had huge amounts of money and great dreams and the public was keen to see the first public internet failure.
Internet analysts argue that Boo was flawed because it could not offer discounted products, its range was limited, and the snazzy graphics meant pages took ages to download. The service was designed for computers with 56K modems. Without one, you suffered. The company was hugely over-ambitious in its attempt to launch in 18 countries simultaneously and burned cash at rate guaranteed to make any traditional bank manager choke on his lunch.
A nother criticism was that Boo concentrated too much on the glamour side of PR and marketing - including lavish parties around the world - but ignored the boring and essential stuff: ensuring you can efficiently fulfil your customers' orders. Management consultants will probably present Boo as a classic example of how not to launch and run an internet company. But it is easy to put the boot in and ignore any positive contribution Boo could have made to the development of the online industry.
"I think its most positive contribution is to press the re-set button on people's thinking about investing in internet companies," says Davies. "There is a lot of garbage talked about the dot.com businesses. The best thing to come out of this will be that people will be much more aware that fantasy business plans are things of the past. No one is going to invest in silly business ideas any more."
News of Boo's collapse spread panic through the new dot.coms. Morale-raising internal meetings have been held at some, and PR companies have rushed out press releases emphasising the strong business credentials of the companies they represent. Simon Steward, vice president of the venture capitalist company, Think Ventures, says Boo has taught investors a lot.
Now they should know they have to invest in high quality businesses because the perils of unproven internet ventures have been made quite clear. He explains: "You need to be looking for experienced people to operate online businesses. You need to be looking for real talent and well-argued and well-reasoned business models." In the light of the sudden departure of Miss Boo, many industry insiders are suggesting that traditional bricks and mortar companies are starting to strike back. Traditional players like M&S can watch pioneers like Boo fail and learn from them. They can move more gradually as they have more secure funding, and they can also move at the pace of their customers as they become more used to the idea of shopping online.
Bricks and mortar companies have an advantage because they have a brand. People are able to guess the web address and the brand gives some security and trust. E-commerce begins with silicon and ends with trust. They also have a reassuring high street presence where customers can go if they have a problem. Neither do they have to spend millions on brand recognition in each country.
New technology companies are realising that they can learn a lot from old style land-based businesses in the retail sector. Last year Amazon was rumoured to be in the process of striking deals which would have seen Amazon-branded bookshops in supermarkets. Recently ThinkNatural.com, the health and nutrition e-tailer, attracted £3 million worth of investment from Kingfisher, the retail group which owns the Superdrug and Woolworth chains. In chatrooms on business sites, directors of established companies have been reiterating that the internet is no different to any other form of business and needs to follow the same rules. They charged Boo with making the basic business error of not ensuring it had adequate demand and supply to survive its short term start up costs.
Despite Boo's high profile failure, most senior financial analysts remain utterly convinced that e-commerce is the future. "I think the speed of the transition to the internet has been over-hyped but it will inevitably have a huge impact," explains Steward. The internet is fundamentally altering how we communicate: the revolution has just started. "In any promising new market," he adds, "there is a natural tendency for expectations, investments and prices to overshoot."
The growth of the internet is being driven now by the introduction of interactive TV and mobile phones that will all create new markets and new waves of activity. Despite the fact that Boo crashed in the highly-competitive clothing sector, the vast majority of analysts do not think selling clothes on the internet is doomed. They say many people are still stuck in the mindset of a traditional retail environment, but forecast that this will change. For example, it is suggested that people could go shopping offline and take photographs of themselves wearing an outfit. After showing it to their friends, they might make the actual purchase online because it is more convenient.
Some e-commerce directors argue that men can be very conservative in their shopping habits, and could be persuaded to buy online for a reduced price as they know what they like and usually find shopping boring. But it is still not all over for Boo. With the liquidators trying to auction off the company's remains, some people still harbour hopes for Europe's first high profile internet casualty. "Boo is probably the biggest known internet brand now," says Naunton Dickins, an independent internet consultant. "Everyone knows about Boo.com. I have a weird feeling they might rise again."
