Online laughing stocks

One irreverent internet site has started a new game: betting on dotcom failures. But it does have a serious side in highlighting foolish investments.

Three months after the plunge in the Nasdaq, the shakeout among internet companies worldwide is still going strong. And in some circles, dotcom failures have now become a serious spectator sport.

One site - based on the celebrity deadpool game, where players get odds on celebrity deaths for a particular year - tracks bad news about dotcoms with a 'told-you-so' relish. The site's name is a satire on US internet magazine Fast Company (replace 'Fast' with the past tense of another F word).

Players are asked to pick five different companies a week, from anywhere in the world. When bad news about any of those companies is reported on the site, the player is awarded points based on the severity of the news and modified by the number of people who have predicted the company's demise. The bad news is reported by the site's users, and many of the rumours seem to come from inside sources.

Asian angle

While most of the posts relate to US companies, there is a growing presence of Asian and European dotcoms. Recent Asian news to make the site include the Hong Kong online newspaper SCMP.com's retrenchment of 17% of its staff and catcha.com's IPO postponement due to 'market conditions'. But news of that type isn't worth as many points as full-blown bankruptcy or even juicier scandals.

There is not much of this on the Asian front right now, but it is only a matter of time before local companies start to make their presence felt in the deadpool. Gartner Group predicted earlier this year that as many as 95% of dotcoms that serve consumers could be out of business by 2002. Forrester, IDC and other research firms have similar forecasts, and not just for the consumer-focused sector.

However, most Asian dotcom companies were funded more recently than those in the US, and so still have quite a lot of cash to burn. Tom.com has HK$900 million ($115.4 million) in the bank, representing 20 months of negative cashflows; Hongkong.com has HK$1.2 billion, which is more than 20 years' worth, according to Greg Feldberg, head of the Convergence team at Indosuez W.I. Carr Securities in Hong Kong.

But Feldberg says he didn't have too much trouble picking his five companies for the week. "The website...tends to focus on American B2C companies with terrible business models," he says. "Asia hasn't had the excess in that sector which the US has had. But we certainly have our share."

Potential internet investors in Asia might be able to learn from the growing number of entertaining failures in the US. BBQ.com is a good example. It started business last August with the aim of selling barbecue equipment and meat online. It also offered barbecuing tips and "articles by industry icons" in an attempt to build an online barbecue community. And suprisingly, venture capitalists came calling despite BBQ's undercooked business plan. Those funds didn't last too long, though, and the company went on a permanent vacation last week.

The value of hindsight

It is easy to deride bad investments in bad business models, however, with the benefit of hindsight. At the height of the boom many investment companies feared being left behind and so jumped into bed with any dotcom that had a decent pick-up line. But looking at some of the lesser-known failures that come to light on sites like this, one of the questions that immediately springs to mind is: when did slightly risky investments turn into ridiculous ones? And more importantly, who funded these laughable concepts?

There is currently no Hall of Shame for the venture capital funds and institutional investors that drove much of the dotcom boom, but if F***ed Company proves popular with the punters, there might well be room for a sister investment site.

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