Re: Ad market growth forecasts

From: Collico Savio, Daniel <COLLICOD_at_advance.com.ar>
Date: Tue 27 Feb 2001 21:49:22 -0600

Subject: Re: Ad market growth forecasts

>
> DANIEL COLLICO SAVIO <COLLICOD_at_advance.com.ar> WROTE:
> > You know what happened with dot.com companies, which
> > were by far the best online advertising clients.
>
> BRANDI JASMINE wrote:
> >I saw an article in the paper the other day that said
> >20 out of 120 new dot.com startups failed in the first
> >two years and they were using terms like "bloodbath"
> >and "implosion" and "disaster" to describe it.
>
> >I got to thinking ... gee, isn't it pretty much the
> >accepted wisdom that most small businesses - up to 60%
> >fail in the first two years? In any other industry they
> >would be spinning the same stats as an amazing sector
> >for growth and opportunity.
>
Hi Brandi. I do not agree with your 20/120 estimation; it
could be helpful to exhibit whatever reliable information
you have to back up this assertion.

In April 2000, Wall Street analysts and CMGI's VC
newsletter wrote that the web boom was over. Throughout
Summer 2000, NASDAQ went into a long decline. By the end
of the year, it was 40% lower than the start of the year.
Tens of billions of dollars in market cap value have
evaporated.

The silver bullet is the fact that VC funding for pre-IPO
startup dotcoms (such as content, B2B, B2C, and ecommerce)
collapsed from Q2/2000 to Q3/2000. This is documented in
November 2000 by PriceWaterhouseCooper's quarterly VC report,
MoneyTree http://www.pwcmoneytree.com. I wish we had some
graphics here, but anyway...here are the statistics:

Sector Q2/2000 Q3/2000 %
Services $3.08b $2.23b -28%
Content $1.01b $0.70b -30%
B2B $1.59b $0.99b -38%
B2C $1.36b $0.80b -41%

(November 2000. PriceWaterhouseCooper's Moneytree, Q2 and Q3
2000. Numbers in billions. Q4 not ready... )

All of these sectors had seen years of continuous increased
funding. But now, they have been abandoned, falling by more
than a third. Because dotcoms -generally speaking- have no
profits and few revenues, and because dotcoms have high burn
rates (the speed at which they use up their VC funding,
often at several million dollars per month). More reasons?
They are funded entirely by VCs, and sinceVCs are pulling out
of the dotcom market, most of the dotcoms will go bankrupt
very fast, very soon, very hard.

So, analysts expect that 50-75% of dotcoms will close. A
final word: the main issue here is not the dotcom debacle,
but how this effect influenced the online advertising
industry, which now should be focused in "brick & mortar"
clients.

Yours sincerely,
Daniel Collico Savio
collicod_at_advance.com.ar
Advance - Telefonica








Received on Tue Feb 27 2001 - 21:49:22 CST