The Dotcom Dinosaurs Are Becoming Extinct
By Terry Dean
The playing field is quickly
being equalized for the small low budget Internet web sites.
The past several months have
been host to one largeover funded company after another having to shut
their doors online.
Petstore.com & Reel.com
are the two most recent sites which have fallen by the wayside...with
many more sites still to come.
You can keep an eye on the
recently departed Internet through the Dotcom Graveyard set up by Upside
Magazine:
http://www.upside.com/texis/mvm/story?id=392ec4c10
One company has even set up
an entire domain dedicated to keeping you up to date on the most recent
web sites which are failing online:
http://www.dotcomfailures.com/
Money has also put out an article
concerning the demise of several large web sites:
http://www.money.com/money/depts/techinvestor/archive/000613.html
If you pay any attention to
the stock market, then you can also note that the past several months
have been extremely hard on companies with big dreams and no profits.
Stocks with high flying prices but no real profits quickly dropped in
April by up to 60% or more.
In other words, the investment
community is waking up to the fact that the Internet needs to be treated
just like any other business. Large ad budgets and millions of visitors
do not equal a successful web business.
Profits equal a successful
web business...
I am pretty sure that your
own web site does better than most of the major companies on the web.
You aren't losing 100 million dollars a year, are you? Well, if you aren't
losing millions, you are more profitable than 95% of the major dotcoms
currently out there.
As a matter of fact, in the
above articles, one of the top CEOs was quoted as saying, "Profit?
Are you kidding?"
I have had to earn a profit
from day one in my own little web business. My web sites have become successful
without financial backing, a large advertising budget, or dozens of staff
members.
You can build a successful
and profitable web business in just a few months if you follow the successful
business models.
Here are a few of the lessons
that we as small businesses can learn from the recent collapse of these
web sites.
1. Don't Compete With Wal-Mart.
One of the biggest mistakes
many of these companies are making is that they are trying to have the
lowest price on low margin items.
They are not leaving themselves
any money for profit. They are trying to run their sites, pay their staff,
ship products, and grow a business while earning only 5% on the products
they sale.
Several companies are now even
trying to sell at their cost so they can have the lowest prices. It doesn't
do you any good to sell to millions of customers if you lose money on
every single one of them (especially if you don't have a plan to earn
profits on the backend either).
These unsuccessful sites are
selling products such as pet supplies, toys, consumer electronics, and
the like. There is a store on every block and thousands of them on the
web selling these exact same products. So, they are trying to sell one
price without having enough profits built in to pay the bottom line.
Look at sites which have become
profitable...both large and small. Large companies such as Yahoo and Ebay
invented new business models and do not compete on price.
For example, Ebay doesn't make
any claim or effort to have the lowest listing fees for your auction.
What they have done is create the largest auction house in the world and
have become a household word. Plus, they have received much more word-of-mouth
advertising than they could have ever purchased on overpriced advertising.
Many of the most successful
home based entrepreneurshave succeeded through creating their own information
products such as books, ebooks, audios, videos, etc. These have large
mark-ups since people are paying for information and not the packaging
it comes in.
No matter whether you are selling
information or a hard product, you need to make sure that you have the
necessary profit margins built into your web site selling system. Don't
just try to compete on price. Develop a Unique Selling Position of having
the best tech support, highest quality products, or most up-to-date information.
2. Don't Waste Money on
Ineffective Advertising.
The second mistake that these
companies are making is that they are wasting millions of dollars on advertising
with no way of testing or tracking the results.
The going rate for a commercial
during the Superbowl this year was $2 million per 30-second spot. If you
watched it, I am sure that you noticed that most of the airtime was being
taken up by Internet newcomers...A few of which we are now watching quickly
run out of money.
They never tested their ads
before they ran them on the most expensive TV ad time available. They
had no idea whether the ads would work or not. It is simply a gamble,
which many of them lost.
You should be testing the results
of every ad even if you only spent $10. As a small business, you can't
afford to spend one penny on ineffective advertising.
Test two different ads in a
newsletter. Test different newsletters. Test banners. Test places you
can use to advertise your banner.
The key to spending money on
advertising is to test many different avenues as cheaply as possible.
Then, roll out your campaign when you find something that is successful.
If a banner ad produces $200 in profit for every $100 spent, then it will
often produce $2,000 for $1,000 and $20,000 for $10,000 spent.
The expense in advertising
is testing the different processes until you find the working solution.
Once you find advertising that works, run with it!
Many of these large companies
don't do any testing of their advertising. They can't tell you where their
sales are coming from or even if their $1 million a day in advertising
is even producing any of the results (or if they are getting all of their
sales by word-of-mouth).
Even if you spend several hours
a week marketing your site and don't spend a single penny on advertising,
you should still be testing your response. You need to know how you can
spend your time most appropriately.
Do the search engines produce
traffic for you? How about submitting articles to ezines and web sites?
Maybe press releases are bringing in your traffic. If you are testing
your methods, you will know which portions of your time are most effective.
3. You Must Plan and Adapt.
Some of the CEOs of these major
corporations have publicly announced that they have no idea when or if
their sites will become profitable.
You can't afford to make this
mistake. You should have a written business plan for your business including
sales, advertising, expenditures, and profits.
Do you know what your competition
is doing? Have they come out with better prices or a more unique position
for their business than you? If so, then you need to study them and adapt.
Find ways that you can show your uniqueness in the marketplace again and
exert dominance over the competition.
In my own business, we are
just been reviewing the past two years and have noticed that the best
use of my time (in profits) is in creating new information products. Whenever
I dropped my attention and starting working on other types of projects,
our income would suffer. So, by keeping track of my time and income, I
am going to be able to focus more time into the most profitable area of
my business.
If you don't keep track of
what is going on and be willing to adapt, you are going to find that the
future online will become increasingly hard. There are two sides to having
a worldwide marketplace. The good side is that you have worldwide customer
base. The bad side is that you have worldwide competition.
How do you plan to profit and
adapt in this new world economy?
Terry Dean, a 27 Year Old Indiana
Farm Boy, Reveals His Secret Formula for Generating New Automatic Streams
of Internet Income For Any Business In 72 Hours Or Less...Free Report:
mailto:formula@bizpromo.com
http://www.bizpromo.com
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