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-------------------------------------------------------------- This story was printed from ZDNetAsia, located at http://www.zdnetasia.com/news/dailynews/story/0,2000010021,20169354,00.htm. --------------------------------------------------------------
'Tis the season to be jobless
By Julian Matthews,
December 28, 2000
There was little festive cheer for dotcommers who found themselves without a job and no pink-slip parties to attend this December. The outlook in 2001 is cautious at best, although bricks-and-clicks hybrids may be in hiring mode.
KUALA LUMPUR - Malaysian dotcoms slashed more staff from their payrolls, bringing to an end a year many of those displaced would like to forget.
Entertainment portal operator MCities.com Sdn Bhd was hit by a spate of about 15 resignations, and laid off another 40 staff from its related club and theme restaurant MCities Live! this month.
On Dec 1, E-One Thousand Dot Com Sdn Bhd, which runs lifestyle vortal e1000.com, lopped off 32 staff, mostly content writers and marketing personnel.
Both companies cited cost-cutting as a key factor for the sudden restructuring. Their failure to shine is telling considering they are linked to business tycoons Vincent Tan and Quek Leng Chan respectively.
Deep-pocketed Tan controls MCities.com's parent company MOL.com Bhd, which made a splash this year picking up stakes in about 20 Internet sites including financial portal 1800 Assist.com, tutorial site MyETutor.com, and hotel bookings portal Asia Web Direct, none of which are known to be profitable as yet.
e1000.com received a cash infusion of US$1.32 million in May from New Zealand-incorporated investment firm Brierley Investments Ltd , whose major shareholder is Camerlin Bhd, a member Quek's Hong Leong group.
Given the slide in the Nasdaq and regional stock markets, investor confidence in tech-related stocks are likely to be shaky in the coming year.
Former Merrill Lynch analyst Yeoh Keat Seng, who founded a dotcom himself this year, says the gloomy outlook is likely to persist in 2001.
"I don't think we've hit the bottom yet. Difficult market conditions have thrown off the IPO and fund-raising plans of a number of Internet companies. Some of the plans were probably not viable anyway, being based on revenue models which are unlikely to materialize anytime soon," said Yeoh, now chief executive of financial portal MalaysiaStreet.com.
Richard Jacobson, manager of B2B Internet Research, with research company IDC Asia/Pacific, speculated that one of the key factors for Malaysian dotcom failures may have been "the inexperience of 20something CEOs".
"A good idea remains only a good idea unless it can be executed by someone with the right business acumen and experience. At the end of the day, dotcom or no dotcom, it's all about doing business," said Jacobson.
The year 2000 was marked by a number of Internet wannabes spending large sums on launches and on advertising of their yet untested business models, only to find Nasdaq caving in on them, and venture capitalists still not biting.
The Malaysian entrepreneurs' rush to copycat, instead of innovate, may have been a factor, although Yeoh says it was hard not to jump on the bandwagon. "When Asian Internet companies were copying the US models, all they could read was success. I wouldn't really blame them. As for creating their own (technologies from the ground up), if you track the development of most Asian economies, that's not how most of Asia was built. Given the nascent stage of the industry, it's hard to learn from anyone except through your own failure," said Yeoh.
Besides Malaysia, various dotcoms region-wide, many of them first-movers in their niche, found themselves suffering the same fate when revenues slowed, investor confidence eroded and fresh funding dried up.
Online retailer adMart, owned by Hong Kong colorful entrepreneur Jimmy Lai, went belly-up early this month putting 334 employees out of work.
On Dec 18, Chinese Web portal Sohu.com Inc announced it would slash 126 jobs, or 20 percent of its workforce. Its stock prices were hammered this year, along with other Nasdaq-listed Chinese portals Chinadotcom, Netease.com and Sina.com, and talks are rife of a four-way merger.
On Dec 12, content developer Asiacontent.com Ltd hawked its flagship brand CNET Asia, along with 84 staff and seven country-specific sites, back to its owner CNET Networks Inc, for US$6 million worth of desperately needed cash.
Asiacontent's stock had nose-dived to less than US$1 per share from a US$15.93 peak since its April listing on Nasdaq, and earlier in the year it had cut 50 staff.
Singapore-based search engine player Catcha.com Ltd also displaced up to 30 staff this year, based on one estimate, while German-based job portal player Jobpilot AG shutdown its Malaysia and Singapore offices with undisclosed layoffs.
Closer to home, Malaysian ezine AgendaMalaysia.com said it would shutter its site come Dec 31 citing failure to attract fresh funds and poor market conditions.
IDC's Jacobson said there was nothing to differentiate the current downturn in the dotcom industry from any other industry in history, albeit in a more compressed timeframe.
"There is nothing that is happening in the dotcom industry that never happened in any other industry throughout history. The only difference is, what took hundreds of years to happen in some industries took just a few years to happen in the dotcom industry," he said.
Jacobson's theory is that every industry goes through five phases. "The first is Fun. I'm sure that the Wright brothers had a lot of fun when they first invented the airplane. The second is Capitalization. Investors see potential in something and start pumping in money even if there isn't a lot of revenues being made. The third is Business. Here is when the serious and well-thought out business plans prove their mettle."
Jacobson said the fourth and fifth phases are Shake Out and Consolidation. "That's when the number of companies starts to drop, but industry revenues continue to grow. Consolidation is when a handful of large market leaders start to merge, and some of them will merge and consolidate."
In Malaysia, the fallout may not be as spectacular, even as the terms "dotcom winter" and "IPO freeze" are being bandied about in the US. One of the main reasons, is many homegrown dotcoms have yet to receive the high valuations of their American counterparts, nor have they been handed hefty VC funding or been able to go public yet. There are no Internet entrepreneurs who have turned dotcom millionaires overnight to speak of.
On the flipside, Malaysian dotcom failures, unlike their American cousins, may be stuck with a stigma they will not be able to shake for years. Those having taken the plunge and flopped may revert to secure, less risky positions, while those still within dotcom ranks take little comfort in an unregulated, non-unionized industry, where sackings without severance packages are becoming commonplace.
The silver lining amid the gloom is that previously cautious Old Economy local companies have warmed up to e-commerce and entered the Internet fray.
They are mirroring the worldwide trend that the one true model that may work is the bricks-and-clicks hybrids. Some are expanding their Internet-related investments and operations, albeit cautiously, and talented webbers may find new openings there.
Both Yeoh and Jacobson believe the click-and-bricks hybrid model may gain momentum in 2001.
"From a global perspective, most e-business investments today are coming from brick- and-mortar companies, not Internet startups. Worldwide investment in building e-businesses will top US$300 billion by the end of 2001. If a large manufacturing company can reduce the cost of procuring raw materials by even five percent, it will invest in B2B," said Jacobson.
Jacobson believes that although pure content plays may be out of favor, the Application Service Provider (ASP) and B2B models are still viable business models in 2001.
Yeoh said companies shifting from bricks to clicks will have an "unfair advantage" in 2001. In the pureplay arena, he points to local operators of JobStreet.com, a recruitment portal and AsiaTravelMart.com, a travel portal and booking engine, as companies that "will do well."