January, 2001
January 16, 2001:
Transcription:
Chicago eBusiness Year in Review: A Report
(Part 1 of 3)
Event Date:
Tues., Jan. 9, 2001
Location:
IIT's Rice Campus, 201 East Loop Road, Wheaton, Illinois
Attendance: Around 50 people
Rating:
Speakers:
-
Gary Ruderman: Editor-in-Chief,
I-Street Magazine
-
Brian Timpone, Chief Content Officer,
ePrairie
-
Ron May,
The May Report
(Speakers are listed in order of appearance)
Hosted By:
Lawrence Lerner, President
The Association of Internet Professionals (AIP) - Chicago Chapter
Story:
Part One
|
Part Two
|
Part Three
Transcript:
Part One
|
Part Two
|
Part Three
Transcribed by
Doug Elwell
Gary Ruderman: I'm Gary Ruderman, editor of
I-Street Magazine. On January 1st of 2000, the New Economy to me was a
detergent that was new and improved. And then someone said to me, 'no no no, it's not 'New Era', it's
'New Economy'. I understood the 'Digital Economy', I understood the 'Internet
Economy', but I did not understand the 'New Economy'.
I joined i-Street in March, on Thursday I was the editor
of the
Sun-Times
, on Friday I was the editor of i-street.
Basically, the year 2000 was the perfect economic example. When I started the day before I started i-street
I called a business friend of mine in Calgary, the business editor in Calgary, and I said, 'Do you know any
business journalist anywhere who got rich from an investment in the New Economy?' and she said 'No'. So I
knew that I was going to stay at the same salary for the rest of my life.
The promise was, if you got into the
New Economy, in six months you could retire, okay? The only person I know who [was that successful], worked for a
company called
Home Depot.
And he started with Home Depot as the director of public relations, worked there for
eight years, lived on 25% of his salary, and then called me one day and said, 'Gary, I'm retiring.' because his
stock split. It took him eight years, but he became a millionaire. The expectation last year was, 'Just give it
six months.' Now the reason for the tech crash in April, I don't know.
Some people call it a tech crash, I call
it 'the return to sanity'.
I have been covering business actively since 1979. I started with a little company called
Crain's Chicago Business — now they're my
competition. I've worked for the
Financial Times of London and
Time Magazine.
At all of these entities I worked for, there was no "get rich quick" scheme. The Internet was the get rich quick
scheme — and it was a
Ponzi scheme. It was, 'who is the next greater fool', 'who else can we get to invest'. And the reason why is
people didn't understand the technology. We still have advertisers that call and say,
'Can I fax you a TIFF file?'
[Response] 'No, no you can't — you have to e-mail me a TIFF file.'
'Well, can I e-mail it to your website?'
[Response] 'No, no you have to e-mail it to me.'
People still don't understand the technology today.
I'm not a technologist. I had a very hard time in March and, let's say, the 28th of December, convincing people that
B2B, end to end solutions, you know, I'll throw in
CRM,
throw in
TFT,
throw in anything else... doesn't really help
my reader in any way, shape and/or form. So I spent a long time pissing off people because I didn't understand the
technology, and I asked them to translate. So, I made a lot of enemies last year. But what I did, and what we did,
was we were able to deliver to readers something that they could understand. Now, some people say well, 'You're
making it too easy for them. Fifty-two percent of our readers — we have a circulation or readership of about 62,000
now — are CEOs. And the CEOs know what
MP3
is — they don't know how it works. We have to deliver that.
We have to deliver the definition of
XML,
of
HTML
— where is it going? Where is HTML going? Where is it migrating to?
That is what people need to know. So, come April, and the stocks went through the bottom, and everybody thought,
'My God, I've still got to get into this economy, because, although it failed, I still can make a million dollars.'
Folks are still going to get in.
People were saying, 'Well, the reason I can't get funded is because the VCs in Chicago stink.' I came into this
market with not much in the way of information, so I said, 'Fine, the VCs in Chicago stink.' Well, they really don't.
The difference between Silicon Valley and Chicago is that there is no trading pits — there's no commodity pits in
California. So if you need a buzz, if you need a 'danger high', well you invest — you invest in startups. Well we
never had that — we've had stability in Chicago. So the venture capital firms invest in what? Mergers and
acquisitions — instability. Except for the big disruptor last year — you know,
divine
— my apologies sir
[referring to DE, who previously identified himself as former divine]. Divine invested in 51% of i-street.
They owned 51% of us, but now we are our own people.
But divine invested over $300 million in 50 companies in Chicago over the last year. [Nobody ever did that.]
The biggest investment in Chicago was what — $200 million? In one company. divine spread $300 million over 52
companies. Now, a lot of those companies were kind of weird, I mean,
Buzz divine, eXperience divine, Talent divine,
they each got $10 million. We got less than two, and we're making money, and they burned — those four companies
each burned $10 million — and they did it with really beautiful furniture [laughter].
Which brings me real quickly to December 28th of last year. People said, 'What in the hell is going to happen next year?'
Well, the layoffs had already started at
marchFIRST
and all the other layoffs — my apologies to marchFIRST formers
who are in the building — the layoffs just started, and everybody said, 'Well, what's going to happen?' I really don't
know. But last week, and I think Monday of this week, every hour on the hour was an announcement of people being
laid off.
When I was in Texas at the turn of the century as a young cub reporter, we were reporting on busts of
marijuana. When I first got there in 1972, an ounce of marijuana rated three paragraphs of a story. Then as
marijuana got more and more and more popular, it got to be five pounds got three paragraphs.
How do we report layoffs today? Do 15 layoffs deserve three paragraphs? Do 100,000 layoffs deserve, you know,
20 paragraphs? We don't know. We don't want to be the bearer of the bad news. I think we serve our readers the best
by giving the interpretation of what the hell is going on. But we also feel deadline pressures from our colleagues
over here, and my colleague who is not here — well, he will be, I hope [referring to
Ron May
].
The year 2001 I started reporting on what I think is going to happen this year. Economically it's like a dog who got
water dumped on him in April of last year, and you know, when dogs get wet they shake, they shake from the front to
the back, to the tail. From what I heard, the first quarter is going to be the great shakeout because, actually by
the end of February there aren't going to be that many companies left. And the companies that will be left will have
P2P — Path To Profitability. Now, why didn't these companies have P2P before? Because everybody was talking about
Napster — peer to peer. But the real truth was a lot of them didn't have a profit idea. They had a revenue idea, but....
There was a Christian site that was funded by Madison Dearborn Partners for $30 million. It had 500,000 subscribers,
but no idea of how to make revenue — so they shut down! Give me $30 million — we'll be moving the magazine to Maui,
but after that.... There was no idea of profitability. There is profitability today because people aren't coming up
with the money to invest anymore. So you've got to turn around real quick, and you've got to start making some
money. How do you make money? I don't know — that's really up to you.
The companies I thought were going to make money this year, didn't. There was a company by the name of BeautyJungle
which sent out cosmetics over the Internet, decently priced, it would arrive in a beautiful gift box, but they were
missing one element, and I didn't know about that element until after they closed. Did you know that
Estee Lauder
controls 50 percent of the cosmetic distribution in the United States? If you don't have Estee Lauder as a partner,
you don't have business.
Clinique
— you can't buy Clinique off of BeautyJungle. I didn't know that until they shut
down — then I started realizing it.
So, I am in a period right now of analysis. What went wrong, what went wrong with
Whiplash,
what went wrong at
FOB,
I know what went wrong at FOB but they didn't tell me until they made the decision. Sorry about that story,
the story was written, went to press, and then they made that change, so I'm sorry.
The year 2001 is going to be a very sane year. At the moment, people are telling you that venture capitalists are not
putting any money in any sector whatsoever. If they are putting money in it has to be follow-on money. They've already
made their large investment and they've got to keep those companies alive, or kill 'em. So, the year 2001 is a year of
sanity. Hopefully I'm going to take a vacation in the year 2001. I came from the Old Economy of the Sun-Times
whereyou had to take your two weeks. Now, I get home maybe 7 o'clock or eight o'clock and I think, 'I'm home!'. That's
a long time. And we're going to start working more weekends, to get stuff done. Now anybody who is not a
subscriber to i-street Magazine, or to the i-street newsletter, you can do that tonight for the price
of absolutely nothing. I appreciate this opportunity, if there are any questions, fine, I will handle it.
Brian Timpone
Well, I'll just tell you a little about me. I work for
ePrairie,
I'm in charge of all the content, I do do some
business related stuff and I do do VC so I kind of keep a perspective in addition to doing commentary though
which is actually manage the content of the day. I used to be a TV reporter, I worked for a
CBS
affiliate,
NBC
affiliates, I was all over the place. I worked at
CNN
in Washington,
CNBC
in New York, I did a short stint as a spokesman for the minority leader of the Illinois House, Lee Daniels. Then I
went to work for
Zacks.com....
I started a news operation there.... They're based in Chicago.
I did that for a year, and then I started working for startups. Because I'm single, and I don't have a family, and I
could afford to take all the risks, I went to work for a startup called
golfspan.com
last year, last summer, right when it was hot. I thought it was a great idea. The idea was we were actually
going to actually take golf videos — we had videos of all these golf instructors — some of the best guys in the world —
Jim McLean ... I don't know if any of you guys play golf at all. I didn't, but I thought it was a good idea. We were
going to put these golf videos online. And, you didn't know how it would make money, it didn't matter — it wasn't
germaine.
So we put the golf videos online, we started to build this website, we started to look for venture money, and raised
about a quarter million dollars, which isn't much..
And that's when it occurred to me, that you couldn't really
watch the videos online because no one really had a modem fast enough to watch them, and it was just as easy
to pay ten bucks and to go buy the videos yourself. You could play them over and over again, and you could
stop, and ... it was like my first lesson in the Internet.
And I think that this has kind been the recurring theme we've seen over and over in the last year.
If you want to
look at Internet ideas, you want to be sure whether or not they will work. Look at the idea and then ask yourself, 'Is
it really that hard to get your money back'. Because if it [is], that idea isn't going to work. I'll give you an example.
Webvan —
have any of you guys used Webvan? I use
Peapod
— I don't have a car — that's why I use it. But most people do have a car. And, if you go grocery shopping online, its
free. When you get on there, your whole list is waiting for you, there's no, like, box of Cheesits sitting
by the side that kinda tickles your fancy and makes you buy it, it's right in the middle of the store.
But the problem is that its really not that hard
to go to
Dominicks
to buy the same stuff. In fact, people like to go to Dominicks to buy that same stuff. And
because the Internet is not so ubiquitous, available everywhere at every time, these ideas aren't flying. And
Webvan — here's my prediction, if you want another one — is going to go out of business. There's no question about it.
They spent gobs and gobs of money building these warehouses, and paying big salaries, and luring away
Andersen Consulting
CEO
George Shaheen
... for Lord knows how much money, and there's no way they could afford that. People still like
Dominick's and
Jewel.
And I bet there are people here who probably never even heard of Peapod or heard of Webvan, who
even knew that it existed. And believe me, they spent plenty of money on marketing to try to make sure you have.
I think that's the problem with the Internet — people try to do things that just aren't that much more compelling than
the way it is now.... BeautyJungle is another good example. I mean, this
company was lauded up and down — you know, you could buy cosmetics online. This is a great company, you can buy
anything you want. You can put your face up there and they can tell you what you need, and everything else, but,
you know,
Walgreen's.
is right next store.... I think that's another example. A lot of B2C e-commerce sites have that
problem. Now, there is a promise of what is called B2B that's a little different, because businesses have a bottom
line — they are profit driven. Even if its not the best decision for them to make, regardless, they're going to have
to make a decision as to productivity. [They're looking for the most efficient means to maintain a competitive edge.]
fob.com,
presumably, is the best way to procure ... from than any other B2B site. It's the best way to actively exchange for
your business. You have to use it because, if you don't, your competitor is going to.
I think that with B2C, the problem is that we all make arbitrary decisions all the time. I will go out on Friday
night, and I'll walk up to the bar, and I will buy an Amstel Light. And I couldn't tell you how much it will cost.
Maybe it will cost $4.50, maybe it will cost $5.25. Maybe Miller Light is a better deal. Maybe there's another
import, I don't know. But consumers make arbitrary decisions, and they're not a great market, especially [now].
Now, looking forward to 2001 I think, basically, we caught a lot of heat in Chicago for not getting on this
bandwagon earlier. At the golf company I was working with in California, we were in Silicon Valley all the time,
and we used to say that we wanted to actually relocate the company to Chicago and we were laughed at and it was
like, 'What's in Chicago? There's nothing in Chicago.' But the egg's really on their face now. I think Chicago was
never really all that far behind to begin with. We were more prudent, we're more used to using Old Economy ideas,
The VCs out west funded so many awful ideas, it was hilarious. I could start naming them off:
theman.com
is a
hilarious one. It was a site for men, where men could go learn, like, what to get their girlfriends for Christmas....
ehow
was a site for when you had a question, you wanted to know how to do something, you could go to ehow. theman
went through $20 million....
AIP Moderator
ehow is something I am very familiar with, but we need to jump to the 'real world' so to speak to more of a
publishing of the website in book form. It's kind of an interesting thing a lot of people take their catalogs
and books and put them online to keep them fresher. What do you think about something like that?
Brian Timpone
Well, I mean, I think that, again, the question is that it's so hard to get it the way life currently exists. I just
don't think it is. I know this great site called
howthingswork.com.
I go to it all the time. But I don't know how they're making any money off of it. Really, if they tried to charge
me, I would probably go ask my dad something like that. [Laughter] I'm not going to pay for it.
AIP Moderator
We're starting to see a lot of companies make this shift, [where they are saying] 'Well, the Internet model doesn't
work. We see the real world'....
Brian Timpone
Yeah, I think that we shouldn't get caught up on the difference between 'Internet companies' and 'regular companies'.
It's all the same — there's no 'New Economy'. It's the same economy, there's just a new twist on it. There's this new
invention called the 'Internet', and it changes physically, but it doesn't make physical [things] cease to exist. I mean,
there's no way you can start a company, I mean, ehow makes content — that's what they do — they produce how to do
things as content. And that's their business. And whatever channels through which they want to distribute it, if its
on the radio, if its on the Internet, just because you get off the Internet doesn't mean that all of a sudden you've
gone old school. I think that's kind of a problem.
Overall, I kind of share some of Gary's sentiments. I think this year there will be a shakeout because so many
bad ideas were funded. I think that we should really take a close look to figure out which ones they are. A lot of
people overspent. Media stories, have you guys ever heard of
Vation,
do you guys know Vation, the ASP? They laid off like 15 people. And I was thinking, we had just done a story like
maybe three months ago, about how cool their offices were and...
Audience Member
What about their launch party? That must have cost a fortune!
Brian Timpone
Yeah, that was hot. I was standing there looking at this wall, at this poster of Jamaica. I think the problem is they
got a little ahead of themselves, they got into the hype, they thought the stock market, thought individual investors
would continue to drive the stock market up, and it was just not that way.
So we're here. Chicago's a great place to be because there's so much experience here. If you want to be involved in
the economy, 'New Economy', 'Old Economy', whatever you want to call it going forward, Chicago's the best. It is
such a diverse economy. There are so many people who know so much about so many different things. If you go out west,
to Silicon Valley, it's not that way. If you go out east, to New York, its even not that way. So I think that the
future really is bright for Chicago. It's a good thing that we didn't blow all of our cash on all these bad ideas,
and at e*prairie we're going to try to cover good stories, not just bad ones. I feel sometimes that reading
e*prairie is like watching a car wreck. So, if you have any good news, bring it on over.
Gary Ruderman
Just a couple quick thoughts here. You talked about Internet, and then catalogs, and then updating.
FTD.com,
the original flower site, did away with their catalog when they came out with their website, and they lost
30 percent of their business. So they made a realization that the Internet is a tool. I was listening to a
radio show on the way over here, and the new conductor of the Philadelphia orchestra [was speaking, and said]
orchestras can no longer make money selling records, or CDs, or subscription concerts. That's kind of hit
the wall. He's looking for access to the Internet — to move the recordings to the Internet.
Now, the Internet is not going to die. The Internet is just going to get more robust. One thing that I
anticipate this year, and this is something that I am going to have to work on, is that technology is
going to continue to grow. B2B, B2C, PDQ, and the other thing may fall by the wayside right now, because
nobody made money in B2C. The B2Bs, the
Transora,
it's going to be a hell of a test. But Transora is going to make people, does everyone know what Transora is?
Forty-five of the world's largest consumer products companies, like
Kraft,
like
Sara Lee,
Unilever,
those big companies, are all going to start buying online, and sourcing online, okay? And Transora is their
umbrella site. That's going to help the B2B world not because Transora is going to make all this buying happen,
but all those people who have the small B2Bs for orange navels, or cherry pits, are going to be acquired....
The idea today is that you have to have partners. Old World partners are fantastic. I'm an Old World guy.
I don't know how old you have to be to be 'New Economy'. You know, one of the things that I didn't do Mike,
[to fit into the] 'New Economy', I don't have a black shirt [laughter]. And I thought it was so cool to interview
people who had black pants, a black coat, a black shirt, black shoes, and shades. And I really wondered, was this
the New Economy 'uniform'? Because I come from a tie uniform, you know?. There was this cool guy named
'Munch'
standing next to him, screaming.... [laughter]
One more thing that I see in 2001 is that the real technologies will start coming to the fore. As Brian says,
Chicago is the place where basic technology, basic programming, is really hot. You will see
IIT,
The University of Illinois,
they're doing basic programming — real, cutting-edge, computer programming — called
'Computer Science'
is going on here. And that technology is what's moving everything forward.
[Make sure to read Part 2 of the Chicago eBusiness in Review transcription, where
Ron May makes his grand entrance and the discussion turns even more lively.]
Story:
Part One
|
Part Two
|
Part Three
Transcript:
Part One
|
Part Two
|
Part Three
Brand Warfare: 10 Rules for Building the Killer Brand
David F. D'Alessandro
Rating:
Powerful lessons on how to build and sustain your own "killer brand".
Creating and sustaining a good brand is the most complex and perilous task any business will ever face, yet nothing is as misunderstood. Under the direction of marketing wizard David D'Alessandro, John Hancock transformed itself from a sleepy old life insurer into a leading financial services giant, with a sustained 20% annual rate of growth. In Brand Warfare, D'Alessandro draws on his personal experience as a brand-builder and examples from America's smartest and most foolish corporations, developing principles that you can use in any market. At the same time, he creates an entertaining picture of the marketing business with anecdotes that convey a keen sense of the absurdities of corporate life, balanced by a tremendous respect for the consumer.
This tough-minded, funny, and refreshingly candid book gives you a proven roadmap for marketing success as you learn:
Why every business needs a good brand to compete
Why consumers need good brands as much as good brands need them
Why sycophancy from the agency and meddling from inside the company will sink your campaign every time
About sponsorship: how to avoid being taken, and how to make the investment pay for your brand
Why it's as important to market your brand to your employees as it is to your customers
Why every business decision should be filtered through the prism of the brand
Gonzo Marketing: Winning Through Worst Practices
Christopher Locke
Rating:
The coauthor of the no-more-business-as-usual blockbuster
The Cluetrain Manifesto — which basically told Net-age marketers to stop talking at their markets and start conversing with them — follows up with a book that's more a highly entertaining, nimbly erudite screed against our current mass-market, mass-media culture than it is a recipe book for e-commerce marketing success in the post-cyberboom era. Writing in a paler imitation of the profanely irreverent, freely associative "gonzo" journalism style pioneered by his obvious idol
Hunter S. Thompson,
Locke starts with the by-now-familiar idea that old-style mass-marketing "broadcast" advertising just won't work on the Web. Indeed, he says, conventional print-ad tactics as embodied online by banners and pop-ups might actually generate more ill will than sales, and that's why companies must use the Web to somehow enjoin their products and services to the quirky niche interests of the gazillion individual cybercommunities (or "micromarkets") whose greatest advantage for marketers is how freely and speedily their members talk among themselves, touting a brand when and if it's truly deserved.
The Virtue of Prosperity:
Finding Values In An Age Of Techno-Affluence
Dinesh D'Souza
Rating:
In The Virtue of Prosperity, former White House policy analyst Dinesh D'Souza offers the first
in-depth analysis of the spiritual and social crisis that has been spawned by the New Economy and
new technologies.
The chief problem societies have faced "since the time of the Babylonians," writes Dinesh D'Souza,
has been the problem of scarcity. "But now that age has passed, and America has a new problem: coping
with prosperity." It's a good problem to have, but also a serious, even debilitating, one. "The moral
conundrum of success," the author continues, means that all too often, "the body is flourishing, but
somehow the soul still feels malnourished." D'Souza is well known for his bestselling conservative
books
Illiberal Education,
The End of Racism,
and
Ronald Reagan.
On these pages, however, he seems to
set politics aside to ask deep questions about the meaning of life in a world of material abundance.
(Review by Amazon.com)
The Monk and the Riddle:
The Education of a Silicon Valley Entrepreneur
Randy Komisar, Kent L. Lineback (Contributor)
Rating:
Prospective entrepreneurs may think they know everything there is to know about starting a business in Silicon Valley. They can draw up business plans, have meetings with venture capitalists, maybe even get funded and actually launch a start-up. However, in The Monk and the Riddle, Silicon Valley sage Randy Komisar reasons that's only half the equation for success. And it may not be the important half. Komisar has worked with a number of companies — Apple, LucasArts Entertainment (the gaming division of George Lucas's empire), and WebTV among them — and has come to a rather startling conclusion: if you can't see yourself doing this business for the rest of your life, don't start it. In other words, he wants to see passion and purpose in business, not just spreadsheets and a by-the-numbers business model.
To illustrate, Komisar takes the reader through a hypothetical Silicon Valley start-up, with an eager entrepreneur named Lenny trying to get funding for an online casket-selling business. As Komisar helps Lenny find the real purpose of the business, the passion behind the revenue projections, he reflects back on his life as an entrepreneur. Komisar emerges as a master storyteller, the kind of guy you'd feel honored to share a bottle of wine with. And you believe his conclusion: "When all is said and done, the journey is the reward." It's great if you've made billions on the journey, but the important thing is that you do something you can truly throw yourself into.
(Review by Amazon.com)
Burn Rate
Michael Wolff
Journalist Michael Wolff is a recognized pioneer in the business of cyberspace, meaning he has been developing products and services for the online world since the dark ages of 1994. During the intervening years, however, not all the activities he engaged in, nor all the people he dealt with, left a pleasant taste in his mouth - although, to be sure, his cumulative adventures certainly have been very lucrative.
In Burn Rate: How I Survived the Gold Rush Years on the Internet, Wolff pulls few punches as he candidly and methodically recounts the single steps forward and multiple steps back that marked his experiences while trying to transform a fledgling print media enterprise into a towering New Media colossus. After developing a series of
"NetGuide"
books that proved hugely successful, he attempted to transfer the concept to a variety of online offshoots and in so doing connected with
Wired
magazine, Time-Warner's Pathfinder, the late Robert Maxwell's media empire,
AOL
, assorted venture capitalists, sundry competitors, and numerous would-be partners. Burn Rate is a fascinating tale
that might best be characterized by the old adage that warns us to "be careful what we wish for, for we just might get it."
(Review by Amazon.com)
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