|
|
|
from the big meltdown
Raging Bull's Martin sorts out good from the bad
By Jeremy Schlosberg
A veteran of the internet scene, Bill Martin is CEO of Unstrung.com, editor of the "eFinance Insider" and co-manager of Silicon Ivy, a venture firm that targets student-driven startups. Martin, who is 23, remains best known as co-founder of the pioneering financial community site Raging Bull. Started in 1997 while the three principals were still in college, Raging Bull caught CMGI’s eye within a year. The internet holding company bought 50 percent of Raging Bull for $2 million in 1998 and would help it attract some $22 million in funding at the height of the internet financing craze. Martin moved on from Raging Bull in 2000 to pursue other interests. Raging Bull has since been purchased by Terra Lycos.
Many of the web's first-generation commercial sites have crumbled. What was the biggest mistake or two these sites made?
I don’t think you can pinpoint the problems these companies are having down to one or two mistakes. It was so much deeper than that. First, Wall Street hyped these companies to the moon, which led to over-investment in the sector.
This led, in turn, to a hyper-, and in many instances, stupid-competitive environment. Think about sites like AllAdvantage, or iWon, where no one had the scale or pricing power to make money.
Also, Wall Street’s excitement created unrealistic expectations, making it difficult for even the most successful web companies to live up to their lofty market valuations.
Finally, business models have been slow to emerge.
Do you see any solid business models out there at this point?
In the consumer-driven internet world, business models based on advertising have been slow to develop except for sites that appeal strongly to ROI-driven marketers.
The web is a direct marketer's dream, particularly in this kind of depressed CPM environment. As a result, sites like Goto.com or Bankrate.com that can drive click-throughs and qualified leads for a quantifiable cost are excelling.
Sticky sites that require "branding" advertisers are getting crushed. They can't drive clicks to direct marketers, and the branding marketers are still resistant to advertise online.
E-commerce is generally bad news, unless you are a frictionless player like eBay or a multichannel company like a Citibank that is leveraging the web as an additional sales, relationship and delivery channel.
The web hitched its wagon rather closely to Wall Street from the beginning, for better or worse. What are your thoughts about the stormy relationship that has existed between the market and the web?
You can look at it two ways. Yes, Wall Street’s short-term mentality has created unrealistic expectations and led many companies to make stupid decisions to please the stock market.
But Wall Street’s money has also fueled technological innovation and infrastructure build-outs that would have taken much longer to occur otherwise.
For example, Wall Street’s investment in optical networks has unleashed a flood of cheap bandwidth that is ultimately a huge enabler for you and me.
Is there any lesson in the general meltdown that has been going largely unlearned so far?
Well, I think people continue to miss the underlying driver behind all of these market ups and downs. It's human psychology.
Go back and read "Reminiscences of a Stock Operator" from the 1920s and you’ll see nothing has changed.
Whether it’s railroad or dot.com investments, Wall Street is a herd that goes from one extreme to another. To be successful you need to keep a level head and be willing to go against the tide--easier said than done, of course.
Internet advertising in particular has taken a beating in recent months from analysts and observers. What's your view of the current climate on the web for advertising?
There is no climate on the web for advertising right now.
What exactly do you mean when you say there’s "no climate" for advertising? There are obviously still a ton of ads on the web and ad spending has just been projected by eMarketer to grow 7 percent this year and over 30 percent next year.
EMarketer is on crack if they're claiming that real-dollar web advertising is going to grow in 2001. All the major consumer portals are reporting sequential declines, some as large as 30 to 40 percent.
When I say there’s no climate for web advertising, I, of course, didn't mean that there is zero advertising, but it sure is down. And if your business is based on an ad-dependent model, you better be No. 1 or No. 2 in your category or figuring out how to get there quick or you're dead.
It's a nasty shakeout, but at least it's happening quickly. If you can survive this period standing, you'll be well positioned to prosper in the future.
The irony is that two or three years ago all the experts were on the "stickiness" bandwagon. Today if your site is sticky it means your customers aren’t clicking on banners and leaving the site to buy things.
Ultimately I think stickiness will be a good thing, but today it’s a death knell for an ad-dependent web business.
In the end, I do believe the advertising dollars will follow the eyeballs and that the web is a superior medium to target, track and transact in real-time.
Does Chase bank have any clue how many people read their advertisement on page B17 of the Wall Street Journal? And can the people that read that advertisement request more information and open an account in real-time?
In the short-term, however, the web’s accountability is probably working against it, since marketers are so focused on clicks. And, of course, there is so much negativity about web advertising that most traditional ad buyers are simply avoiding spending money online so they don’t have to defend their actions.
What if anything has surprised you on the web over the last year?
I’m surprised by something on the web every single day. It’s an awesome medium, particularly for a media/information junkie like myself.
I continue to be enamored by web communities and stars. It’s why I started Raging Bull and still spend hours every day reading the posts and cruising the sites of web stars.
One person with a web site—like Matt Drudge or Jim Romenesko—can influence an enormous number of people. That’s why I recently launched the "eFinance Insider" email newsletter.
Every two weeks I reach 20,000-plus people in the industry with my thoughts on e-finance and interviews with the industry’s leaders. This is my own little attempt to have a voice online.
Also, I think the wireless space is very interesting. 3G is going to blow people way, once it arrives. That’s why I recently purchased a wireless property called Unstrung that covers wireless industry personalities and companies.
Finally, I’m surprised that so many of the major off-line media companies have given up on the web. That’s a very shortsighted decision they will pay heavily for later.
What do you make of their reasons for doing so, for giving up on the web? And how do you think this will come back to bite them?
Traditional media companies are abandoning the web for a whole host of reasons, including:
1) They never got "it." Most tried to reappropriate broadcast content to a grassroots, interactive world.
2) It's difficult to use traditional corporate branding mechanisms--such as $200 million of NBC primetime advertising--to build a web brand.
3) They launched web businesses with Hollywood cost structures, even before a clear web business model was developed. I could go on.
That said, if traditional media companies think that they’re safe now that the internet storm has passed, they're dead wrong.
People are spending more and more time online and watching less and less television. Just look at my brother who is in high school--he's got 150 buddies on his AOL instant messenger and they're all chatting online every night instead of watching "Friends" on NBC.
That's still growing, and it's not a fad. Advertisers will follow the eyeballs, particularly when they begin to understand all of the wonderful targeting and interaction they can combine into their advertising.
It seems like the first growth spurt on the web depended rather unrealistically on people looking for easy money from venture capital firms. What will the next growth spurt depend on?
I think venture capital will continue to play an integral role in providing the risk capital needed for the development of the web.
Certainly the days of easy money are gone for now. But, as always, they will return in new and unexpected ways in the future.
There are numerous growth opportunities moving forward.
First, the crash has created numerous opportunities to consolidate and acquire assets on the cheap. Those survivors who take advantage of this opportunity to consolidate will be poised to profit handsomely once the nuclear winter clears.
Secondly, as competition dissipates, companies will be better able to monetize their audiences with subscription and premium offerings.
Finally, we are in the midst of a profound global technological transformation that will create more change in the next 100 years than in the past 20,000 combined.
Imagine, in just a few years, we’ve had the rise of e-commerce, optical networks, and the web—while huge advances were made towards producing fuel cell engines, DNA computers and more. Those who can calmly ride the technology and market volatility will prosper.
I think it’s a great time to be alive!
May 14, 2001 © 2001 Media Life
-Jeremy Schlosberg is the senior editor for new media.
Send to a
Friend| Printer-Friendly Version
Cover Page | Contact
Us
