Dot Comedy Hour: How Long Will It Last?

Well, I just bailed out of my second dot-com company in less than a year. What a roller coaster.

We all know that direct marketing skills are immediately applicable to the Internet and that dot-com companies need us and our expertise in customer acquisition and retention. But that doesn’t mean we direct marketers can easily find a happy home in dot-com land.

I’ve learned a lot in the past year. Here are some highlights:

There’s too much money around. Cash is landing in the laps of business ideas that wouldn’t have earned a foot in the door a few years ago. I suppose the venture capitalists have to do deals to put their money to work or just to keep busy. But some of this stuff is nuts. Worse, the venture capitalists don’t seem to ask basic questions about management skill and experience. Some of my colleagues are reporting to youngsters who shouldn’t be running companies.

The market is changing fast. Plenty of business ideas that were plausible, even great, 18 months ago have come to market and fizzled. Business plans need constant revision in light of market trends.

Adaptability counts. When the market shifts, it’s essential to shift with it. You can’t hold on to a vision when the market has moved beyond it. But you can rethink what you’ve built, whether a technology or a marketplace, and figure out ways to reposition it for success in the new environment.

People are everything. The greatest business model will fail under the wrong leadership. And at the end of the day, we all need to be working with good people whom we like or at least respect. For those of us who in the past worked at well-managed companies, the absence of a professional working style is particularly trying.

The stock valuations reflect no understanding of return-on-investment-based marketing. We all know that you can acquire a customer profitably for only less than the net present value of all the future cash that customer will contribute. When we read that dot-coms are acquiring customers for hundreds of dollars and selling them $50 worth of merchandise before they jump to price-shop elsewhere, we know they’re doomed. What’s even more amazing is the dot-coms that do not even measure the cost of customer acquisition. And shame on Wall Street, which is barely asking ROI questions.

Stock options are illusory. Get your compensation up front, in a solid salary, bonus and signing bonus package. The days of taking pay cuts to join the Internet start-up world are over.

There’s no sin in moving. Everyone understands it’s crazy out there. Far from being castigated for frequent resume updates, I am more often congratulated for the courage to cut and run when things aren’t working out. My mother wonders about my ability to hold a job, but my colleagues know better.

So will I never work for another dot-com again? Not necessarily. But I have refined my must-know questions to ask before signing up. Here’s the list:

* Is there really a business here? Is there really a market need for this so-called solution? Where is the revenue coming from? How will we acquire and retain customers profitably?

* What’s the competitive situation? What are the barriers to entry? Who has tried in this space and failed already? What’s our unique competitive advantage?

* What’s the skill and experience of the management team? Let me talk to people who have worked with that team in the past, to explore its working styles, its flexibility and its management experience.

* How many months of funding do we have to prove this business model? What’s the monthly burn rate? What is the sales and marketing expense budget?

* Is the technology in place? Does it actually do what is promised?

And then breathe deeply and jump in.

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