Will the dot-com crisis be over any time soon?

Will the dot-com crisis be over any time soon?

The shakeout of dot-com businesses has been going on, allegedly, for five months since the publication of Barron's March 20 cover story "Burning up."


The article, based on calculations of cash burn rates for some of America's best-known dot-com hopefuls, with forecasts that ranged from several months to a year, scared the heck out of already nervous investors.


Since then, the Nasdaq composite index has plunged to as low as 3,000 from a high of 5,000. Korea's Kosdaq, highly susceptible to vagaries in the US markets, hasn't been immune to such development either. The Kosdaq index has fallen to 110.07 (as of August 22) from an early-this-year peak of 283.44, a whopping 61 percent drop. That means the average dollar of Kosdaq investment in January is worth only 39 cents now.


There may be different versions of explanation to this decline. But one consensus opinion shared by many market watchers both in the US and Korea, is that the Internet industry is finally going through a stage of maturity in which those with questionable revenue models are being wiped out in the process.


It has become extremely difficult now for a tech venture to get necessary funding unless it shows a solid business plan demonstrating that it could recoup the investment within, say, a year. Investors have smartened up so much so that they no longer pour their money into any or every business that ends with '.com.'


In a way, this is taken as an evolutionary process of industrial growth in which a new business field flourishes with thousands of start-ups and then goes through a consolidation phase that leaves, in the end, only the few strongest players. The same pattern has been repeated many times before, for example, in the automobile industry in the early 20th century and in the personal computer market over the last three decades.


Testimony to the same effect is found in a recent report by the nation's premier private think tank, Samsung Economic Research Institute, on the crisis of dot-coms and ways for their survival.


The report suggests five strategies for Internet firms to persevere in an age of natural selection: possess a viable business model, combine online business with offline suppliers, bring in professional managers, globalize your business, or, get out quickly.


There is nothing new to these action plans. However, judging from the timing of its publication, one can infer that there may be several instances of successful domestic firms that adopted the strategies listed above. And, maybe, just maybe, the end of the dot-com doldrums is in the offing.


Who knows? In the coming fall, tech investors may finally be redeemed from what they have endured through a long spring and summer.