he days of reckoning had to come. The
stock market couldn't climb forever, the well of venture capital
had to dry up, the glut of Internet businesses had to be reduced.
So here we are, facing reality, counting our paper losses, hoping
for a market comeback and wondering how many more Web start-ups
I once used the "gold rush" analogy to describe the first phase
of Internet fever. I suggested that of all the wagons heading West
in search of gold, a few would get rich, some would make it all the
way West but fail to strike gold and some would break down en route
and never get close enough to have a chance.
Now, as we grapple with the transition from the first phase of
the mania, we see the wreckage of the Web businesses that never got
Many were businesses run by people who didn't have an industry
background but had access to money and saw a chance to make a
killing in the market. A few did make a killing, selling their
speculative stock and cashing out options before the market took a
Their business models were all over the map, from selling
airline tickets at rock-bottom prices to offering travel via
auctions, providing databases and videos or attempting to match up
consumers and suppliers. Their "burn rate," the money needed to run
their businesses, was staggering. Their technology investment was a
heavy burden, they hired too many people and their revenue was a
Perhaps the most important lesson we can take from the wreckage
strewn across the Web landscape is that establishing a brand and
driving revenue are no guarantees of business success.
The history of the travel business, both Internet and
brick-and-mortar, is marked by companies that became well-known,
drove their top line, gained market share and crashed.
One observer quoted recently in Travel Weekly made the point
that the growing casualty list is causing surviving companies to
shift their focus to profitability rather than volume and market
The travel industry always has had a superficial appeal to
investors because of the potential for high volume. Even astute
business people have been lured away from a more prudent emphasis
on controlling costs and watching margins.
More than ever, businesses on the Web and in the physical world
must rededicate themselves to basics. They must remember that
volume only is valuable if it is accompanied by careful cost
management and attention to profitability.
If travel businesses, Web or brick, continue to be seduced by
the siren song of brand identity and volume, the days of reckoning
will continue for a long time to come.