I thought this was interesting, because Jeff Bezos (Amazon.com CEO) is never usually this pessimistic. If Amazon tanks, that would be the biggest blow yet to the dot-com business model.

                  -TOP STORIES-
** Bezos' Comments Hint At Gloomy Future For Amazon



If there were any doubts remaining that these are scary times for 
Internet darling Amazon.com Inc., they were erased Monday when 
the British Broadcasting Corp. released portions of an interview 
with Amazon CEO Jeff Bezos in which he suggested that Internet 
stocks, and Amazon in particular, might not be a wise investment. 
Analysts reacted with uniform shock that Bezos, historically a 
major cheerleader for the online retail sector, would choose to 
make such caustic comments to a major media outlet.



In taping an interview that will air Wednesday on BBC Two's 
"Money Programme," Bezos cautioned investors to steer clear of 
"volatile" Internet stocks and cast a cloud over the value of his 
own company. "We are not a stock you can sleep well with at 
night," he's reported to have said. The comments were 
particularly revealing when coupled with ongoing reports that the 
Securities and Exchange Commission is looking into Bezos' sale of 
800,000 shares of Amazon stock in early February, just before the 
release of a negative report on the company's future from Lehman 
Brothers. Amazon execs reportedly received an advance copy of the 
report.



Some analysts suggested that Bezos was trying to lower estimates 
for the fourth quarter of 2001. Doing so, they say, would protect 
him from any additional SEC scrutiny should Amazon disappoint. 
During its year-end earnings announcement in January, the company 
predicted it would become profitable for the first time by the 
end of this year. Few analysts are expecting that now. And 
investors seemed to be equally skeptical in the wake of Bezos' 
comments, sending the company's stock (Stock: AMZN) down more 
than 13% Monday to close at $10.63. An Amazon spokeswoman 
downplayed the interview, saying Bezos merely meant to suggest 
that Internet stocks are "not for the weak of heart."



But Kevin Noonan of the Yankee Group says Bezos has a lot to 
worry about, including the realization that Amazon's whole 
business model may have been flawed from the outset. "I've never 
heard Jeff say something so anti-Amazon," Noonan says. "Has he 
finally figured it out?" Gartner's Rob Labatt questions how long 
Amazon can rely on venture capital to subsidize consumer 
E-commerce. Labatt says that Bezos' comments, while surprising, 
should be taken to heart by investors who've largely ignored the 
bottom line when purchasing dot-com stocks. "The laws of 
economics still apply to Internet companies."



Meanwhile, Keenan Vision analyst Vern Keenan went so far as to 
suggest that Amazon's free-falling market capitalization may pose 
a significant threat to Bezos, which would make his comments to 
the BBC all the more curious. Keenan says Amazon's woes are tied 
in large part to Bezos' devotion to the company's famous "grow 
big fast" philosophy. "The reliance on [that] mantra may end up 
costing him his job." - Tony Kontzer

-- Bemused (and_amazed@you.people), March 13, 2001

Answers

This was from Informationweek daily, a mail list I'm a member of. No link, but you could probably find it on their site.

FWIW, I could never figure out exactly how a lot of these strictly-internet companies were ever going to make money, and I'm in the I.T. game. It always seemed to me that these companies were made up of 1) a team of highly skilled programmers, and 2) one or more highly skilled marketers/sales people. The marketers never really fully understood portals, B2B, B2C, etc, but they felt there must be something there, because so-and-so down the street just got $15 million in VC funds for their startup. I think the VC's were in the same boat as the marketers - didn't fully comprehend how these businesses were supposed to make money, but everyone else was getting into the dot-com market and they didn't want to miss out.

The programmers and engineers involved may have been wearing stock-option blinders, and also liked the technology enough that they didn't want to look too closely at the business model.

Amazon may do OK in the end, but I bet there will be very few internet-only companies left when the dust settles.

-- Bemused (and_amazed@you.people), March 13, 2001.

I have a slightly different take on this, Bemused.

At least Amazon HAS something to sell. I think the worst fallout is going to come from dot coms that rely exclusively on advertising dollars (such as Yahoo, Ask Jeeves, etc).

I think that sites that offer information only will have a rough time. I'm looking for information portals to feel the pinch coming up real soon (if they don't already). It's my understanding they generate money solely from advertisements on their site and I don't think that can last.

Finally, for the life of me, I don't know how companies that manage click throughs can make a profit. If they are getting paid by every click through that actually purchases something, I think they're going to starve. (If you've read my past posts, you know that I've never thought enough people shop online to sustain all the dotcoms.)

Speculation is interesting, and my opinion is worth exactly what you paid for it ;-D

-- (Netsc@pe 6.0), March 13, 2001.

At least Amazon HAS something to sell. I think the worst fallout is going to come from dot coms that rely exclusively on advertising dollars (such as Yahoo, Ask Jeeves, etc).

Agreed, dot-com businesses tied to brick-and-morter operations like Amazon and SimonDelivers will be the strongest and most likely to survive. The advertisement-only based companies are going through a slaughter right now. Some companies trying to make themselves into ASP's might actualy make a lot of money at some point, but they will be weeded out also, especially if Oracle, IBM, and Microsoft get into that game.

-- Bemused (and_amazed@you.people), March 13, 2001.

"ASP's might actualy make a lot of money at some point,"

I find it interesting you said that. It's my understanding that ASP's only design software for information applications, and, in my opinion, put them in the same category as the other information dot coms.

If I'm understanding it right, ASP's design forms and questionaires for marketing information. Right now, I'm of the belief that there's WAY too much marketing going on and not enough substance. I think marketing companies are part of the group that's going to feel the pinch...but that's just a hunch.

I don't think most people take the time to fill out polls and questionaires. I think most people think it's a bigger waste of time than filling out those questionaires by those marketing companies in malls. (Which probably accounts for the closure of most of them!)

Do you have the time to explain to me why you think ASP's will make money?

-- (Netsc@pe 6.0), March 13, 2001.

Everyone felt they had the right to profit from products made of Reardon metal. *grin* Ed Yourdone thought he had it figured out, thought it was Y2K, I tried to hint about what was really going on. Technology took off, people decided to jump on the bandwagon and get some of the money. The only problem was the ones who made it big in the first place learned the stuff, the followers never bothered to learn more than the bare necessities, which were not enough. 4 years ago I checked out the courses for IT degrees. It was a bunch of business classes combined with courses on how to take existing software and tailer it to a business. Since business did not generally understand technology they ate up the idea that these were genuses who had the talant of Bill Gates and paid through the nose for them. Y2K exposed a lot of them for what they really were. What some have discovered, (unfortunatly not a lot) is those people whith experience and usually continueing self education are the best people for the job. Unfortunatly the colleges are still churning out 90 day wonders who are in it for the money, not by talant of ability or enjoyment of the field.

There is just so much you can do with "information".

In 1983 I offered to computerize all the information that was done by hand for Flight Crew Training at Boeing. The Head Honcho said no, it would take away the jobs of too many paper pushers.

I remember being amazed at how much information was done by hand. When I saw every part of the cockpit ( every wire, every cotter pin, every washer) being tracked by hand in a conveluted mess of paperwork, I offered to computerize it so it could be sorted and merged and processed for needed data. I got a PIE award. Big WHOP!

Anyway, like I have been trying to say, the glut of "information" technology can only go so far, the new(?), needed it the tie in of hardware controled by software in other than industrial settings. How about a table that will move around a house to deliver beer to Football watching couch potatoes? There are endless possibilities. The idea that all dotcom startups were going to bring in big money is what caused the glut in the stockmarket and money from VC's. But the attitudes of so many of the people developing these startups was to look only as far as going public. They never explained (as has been said) how they were going to make a profit. I just sit back and laugh at those who two years ago had smug attitudes of immortality. I think a lot of them were laughing at the "suckers" they were luring in. Are they laughing now? I gotta ask~~~

-- Cherri (jessam5@home.com), March 13, 2001.

Cherri, I should state up front that I don't have a problem with people who make money...as long as it's legal.

Bemused asked us if the dot-com business models were fundamentally flawed. My answer is "yes", some are. But, you also have to ask yourself what did some business go into business to do? Make money of course! Those dot coms who received VC, did an IPO, made a killing and got out were very savvy business people. Now, the savvy business people have to decide where best to put their money and my bucks aren't going to go to information dot coms (except I would invest in RMDBS companies) or marketing dot coms because I think the market is oversaturated, or they don't have enough value to offer their customers to begin with.

-- (Netsc@pe 6.0), March 13, 2001.

Netscape:

If I'm understanding it right, ASP's design forms and uestionaires for marketing information...

Not exactly as I understand it, unless we have some acronym collision here; ASP's (Application Service Providers) spend most of their time hosting 3rd party applications and application suites for companies who don't wish to build the infrastructure needed to host the applications themselves.

For example, if a companyA wanted to use PeopleSoft's Human Resources software, they could buy the servers, network hardware, software licenses ($$$), and programmers/administrators needed to get it up and running, or they could contract with an ASP to provide all of that, usually in a remote location. The HR employees at companyA would log in to the application, probably over a T1 or some sort of leased line to the ASP, and do their work. It would save companyA the cost of building the infrastructure, and the ASP would have the equipment and staff on hand to rovide ongoing support. There is usually disaster-recovery, performance, and security specifications in these contracts, also, for companyA's protection.

I see the ASP market as one primed for a shake-out, but then once that happens, there might be money to be made. Problem is, Microsoft and other big players are eyeing the market, so sell-or-sink might be the only ASP strategy that works for the smaller ones.

-- Bemused (and_amazed@you.people), March 13, 2001.

I find it fascinating you think that. (I'm not being facitious. I'm very grateful you're willing to discuss this topic.)

I think that's interesting because I can't imagine too many companies wanting to do that. Most CEO's I know what control over their private information and would never consider outsourcing such delicate information, even if it is cheaper. I'm sure there is, and always will be, some need for them... but I can't imagine them doing a land- office business.

Is there a company in particular you like? If there is, it would be fun to watch their progress with you. I'm not going to put any money into one, but watching how it goes in the future should prove enlightening... if not entertaining ;-D

My personal opinion is that the big boys won't get involved in it, but who knows? I've been wrong before!

-- (Netsc@pe 6.0), March 13, 2001.

Netscape,

Large companies probably wouldn't choose to use an ASP for many things, because they have the money to do what they need in house, but what's more important, they probably already have the IT staff and the infrastructure mostly built. Smaller and midsize companies, and especially new companies or spinoffs, may have a hard time quickly finding people who know these packages without resorting to contractors. Bringing in lots of contractors can be expensive enough that the ASP alternative begins to make sense for them.

The service level agreements are very important. Data security and disaster recovery are things that a good ASP could probably do better than most companies do themselves. Sure, these companies could again "get good" at it, but they may find it's cheaper and quicker, and actually safer, to sign a contract with an ASP.

I don't know a lot of ASP companies that are sure bets, though. I know Oracle has an ASP division where they host their application suites (and other vendor's app suites), and I have read that MS is looking at getting in. IBM Global Services was sniffing around.

NetASPx is one that has an interesting split between super fast cluster computing for science, derivatives, etc and regular 3rd party app hosting. No idea how they stand financially right now, though.

I see ASP's becoming more sophisticated until they're an integrated part of what will almost look like a utility market - a CIO could ask for bids for "1000 hits per second during peak hours, we provide the web server structure and DB schema" and then pick an ASP to provide it.

But I could be smoking dope, or something could change tomorrow that could make the whole ASP model obsolete.

-- Bemused (and_amazed@you.people), March 13, 2001.

(I'm chuckling to myself here.) You may be smoking dope and I might be a door knob.

Bemused, I don't think most small businesses will ever use an ASP. It doesn't take much to keep track of a few people. Besides, an ASP would have to do business with a LOT of small businesses because they would have to make up in volume what they couldn't generate otherwise from small ones. I don't think that business model is any better than an info dot com.

Medium businesses might be the ones to use them, but I've noticed that a lot of medium-sized businesses outsource their HR needs and use accountants, financial advisors, et cetera for their financial needs. I think it is only IT people that think (no offense intended) this can be centralized by a computer or dot com company, and this is partly to blame for the dot com fallout.

People are used to doing business the old-fashioned way!

But then again, maybe I think this because I do some things the old-fashioned way.

I guess we'll just have to wait and see. It's fun living in interesting times, isn't it?

-- (Netsc@pe 6.0), March 13, 2001.

Netscape,

Here's a good link to an article that talks about "web services". It describes an environment that I could see ASP's morphing into as they become more sophisticated, and is not unlike the utility market I described.

By "small" companies, I meant along the lines of 100-500 employees, not a mom & pop shop. I think small & medium size companies might benefit from the ASP/web services/application utility model.

There are many companies using ASP's right now, for many types or things. Something like "Web Services" might allow these ASP services and contracts to be smaller and more granular, which would expand the volume of clients for the surviving ASP's.

But this is all speculation at this point. I guess I find that the ASP model passes the smell test more often than most other dot.com schemes, because I think it's positioned better to take advantage of new web technologies. A new web technology probably won't make Amazon manage inventory better or allow an advert-site to charge break-even rates.

But yes, interesting times indeed...

-- Bemused (and_amazed@you.people), March 13, 2001.

Thanks for the link, Bemused. I need to spend a lot of time digesting that information to discuss it with you because I think B2B is definitely one of strong points of the internet. If it's ok with you, I'm going to reserve commenting on it until tomorrow.

-- (Netsc@pe 6.0), March 13, 2001.

First of all, I think we need to determine what a "small" business is. I haven't found a source yet, but years ago I read that a small business was anywhere between 1 - 100 people. I'll try to find that out for certain though...I don't just want to throw around numbers. I think that determination is important because I don't think small businesses will buy an ASP's services. (I could be wrong, but I doubt that many could afford it. Even if a few could, it wouldn't be enough to sustain many ASPs.)

I did a little searching this morning and found this information. (I'm not saying these are the best sources out there...they are just what I happened to find.)

Dun and Bradstreet

19th Annual D&B
Small-Business Survey
Article. May 25, 2000. Latest study sees significant rise in U.S.
small businesses offering healthcare benefits. Internet use found
to be on the rise, but most say Web has had "no impact."

I also found dozens of interesting articles at b2b's.

After considering all of this, I think that only medium-sized businesses will buy ASP services...and I'm not even quite sure why they would do that. Why would they? EDI's, ETN's Intranets, Extranets and whatever, only facilitate communication. Any truly sensitive information is communicated in person or over the phone unless someone can afford their own infrastructure. I may be naive but unless phone companies start selling that, I don't see too many people slinging wire in the future.

But I suppose RFP's (or bids of any sort) and PO's could be considered "sensitive" and that is the kind of service medium-sized businesses would outsource. For that reason, I think a few ASP's will do a decent business. I wouldn't want to risk my money on their stock though.

Heck, if you do a search of AskJeeves top questions, you'll find most people are asking questions about sex and hobbies. I can't find the link now, but I think it's common knowledge that most e-commerce on the web is computer hardware and software, followed by airline and hotel reservations.

Shoot, Bemused...I don't know how all this is going to shake-out, but I do know that I'm going to use Maslow's Heirarchy as a guide.

-- (Netsc@pe 6.0), March 14, 2001.

---

I need to pay a little closer attention to my end tags.

-- (Netsc@pe 6.0), March 14, 2001.