mathNEWS Issue 85.1: Friday, January 19, 2001

Tech Specs: Critical Analysis of the Tech Industry

Failing State of E-Business

Tech Specs is a new regular column featured here at mathNEWS. Each issue, Tech Specs will take an aspect of our ever-changing tech industry and cast a critical eye on its behaviour. If you get bored easily, I suggest you turn to something a little more light for your Friday read, but if you are seriously interested at what turns our evolving industry are taking, sit back, grab yourself a cup of coffee, and enjoy the column.


"Dot Com companies think 'Oh yeah, Dot Com, New Business Model, We're Invincible!'. No No No, ladies and gentlemen. Warning warning, danger danger, there is NO New Business Model."

Larry Smith, ECON101, F00

With the above quote clearly printed, I venture into the dark marketplace known as "Dot Com Land", where once mighty companies with huge IPO cash infusions now drop dead in a pool of misconceived ideas. What happened between the bright outlooks of yesteryear and the gloomy forcasts of the months and years to come?

Strategic mergers and acquisitions were the name of the game last year. Large companies swallow smaller ones whole, creating larger "information networks" on integrated hardware. In simpler terms, smaller companies were bought out by larger ones in fear of bankrupcy. When these companies merge, the clientelle from both companies must compete for attention and service from one company with the resources of half a company. In fact, 60% of merged companies had less resources per client than before the merger. Thus, the 'sardine can' syndrom set in, where clients are packed tightly in service queues for long periods of time without service at all (READ: ROGERS @ HOME, the lack of internet on cable). To make matters worse, the "Technological Depression" forced these networks to decrease bandwidth availabilty and cut paycheques.

Small information websites that cater to a specific interest group, mainly techies like students here at the Math Faculty, depend on these large networks, now merged with larger and smaller ones, to provide bandwidth, webspace, and resources to keep their informative websites up for viewers. These website administrators also depend on the revenue these networks pay out, in the form of banner advertisements.

These networks had a vision: To sell these banner advertisments like television commercials, bound with old rules of the televised media. However, the rules of televised media did not fit the situation at hand. People often ignored these banner advertisments, or shut them off altogether. Hence, real-life companies that actually make a profit, which had hopes that online banner advertisements would bring in immediate and unmentionable profits, soon pulled out of their contracts once they found out that people didn't pay attention to these banners. When the real-life companies pulls out, the networks has no revenue to upkeep the servers and bandwidth, and has no money to pay the smaller website administrators to upkeep their sites. The trickle effect starts right up at the top, and affects the online front-line worker.

One example of this trickle affect can be found in the recent happenings at a tech website called "Somethingawful.com" (Affectionately known to its readers as "SA"). SA formed a 'strategic alliance' with eFRONT a few months back. eFRONT is a prime example of a merged mega-network that provides bandwidth and resources to website administrators, as well as sending out cheques for "banner advertisment" to the website administrators. Earlier this year, unfazed by the Technology Depression, eFRONT merged with a smaller troubled network provider called "GameFan", which was unable to deliver money and resources as it was contracted to do. The new eFRONT tried to attract website administrators to sign on to their network, promising to provide regular paycheques and website resources, and in return, these websites will place banner ads on their front page. Many smaller websites, including SA, signed up with eFRONT in hopes of making some small cash to keep their website running. For the first few months, eFRONT executives and its clients held a friendly relationship, and paid out cheques on time. However, as time progressed, eFRONT sucummed to the Technology Depression, and suffered various fatal blows, one of which is a major pullout of a company that had been doing major advertising over eFRONT's banner advertising. With one of its major sources of income vaporized, eFRONT was strapped for cash to a point where keeping their own internal network running was in jeopardy. Needless to say, eFRONT's smaller affiliates felt the strongest blow. SA and other eFRONT affiliates stopped recieving banner cheques, and many had to close because eFRONT's financial incompetence and inability to fulfill their end of the bargain. According to eFRONT, the best way to keep afloat is "Not to fulfill any debt requirements to clients." SA, fortunate enough to have a loyal fan base, recieved resource donations that kepted minimal operational revenue going to maintain SA under life support. However, life support can only keep a website alive for so long.

After winning worldwide acclaim for its controversial and uplifting content, and atttracting readers from all over the globe, SA announced this week that the site will have to close down for good due to a lack of funds. Other websites are beginning to feel the pinch, as one of the largest and well-known sites such as SA is being to forced to close down because of a reason that has so far only affected smaller websites. As SA administrator Rich Kyanka put it himself in an exclusive interview with mathNEWS: "There isn't much anybody else can do short of telling the people who owe eFRONT money to pay them... Hopefully eFRONT will be able to scrape together enough cash to pay me by the end of this week, and SA will be able to stay alive a little longer." The bottom line is that eFRONT took on too much responsibility when they saw themselves as unsinkable. However, like the Mir Space Station, it was slowly decaying in orbit and was on life-support even before the merger took place. In fact, the entire E-Industry had been decaying ever since the NASDAQ took a dive last March when investors suddenly remembered that earnings should be the only indicator of company performance. When eFRONT and other networks took on too much for their own good, the only sufferers are the poor souls who signed on to these networks in hopes of providing quality informative content.

What exactly can remedy this situation short of a divine miracle? The only solution is to live out the current abyss and wait for its natural recovery. Like a forest that was recently razed by a wildfire, the E-Industry must be given time to rebuild itself naturally and without hinderance from investors. No magic cash injection can save this thing in the long term. The fix must be self sustaining, and must come naturally from within the industry. Once the industry has bottomed out, new standards, hopefully realistic ones, will be set to sustain long term business. In the meantime, we can only pray and hope that the websites we frequent and take granted daily such as Arstechnica.com and Slashdot.Org will stay alive and live through the bottoming out of the E-Industry.

However, SA can escape the stigma of being "Just another E-Casualty". Rich Kyanka and SomethingAwful.com can be helped. Show you care, show you give a damn, show the world that UW students care about sustaining the future E-Industry. Email Rich at lowtax@somethingawful.com and offer your support. Tell him you feel his pain, tell him you love his site, tell him that eFRONT should die, tell him you'll give him money, whatever. Show some support to a fellow techie. Even if you don't read the site, you'll inevitably find out that one of YOUR favourite website will face eventual shutdown due to a lack of funds. Act now, and it IS A LIMITED TIME OFFER.

What can YOU do if you own a website? Start praying to your god, pray for a sustainable E-Industry to evolve soon, and hope that your website is still alive to see that eventual evolution.

Until that day arrives, hold on to your hats folks, because we're in for a rather bumpy rollar coaster ride of dot com death.

-Raymond CT Lai
mathNEWS Technology Columnist (Until Pete decides to fire me, that is.)



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