Line of fire: 13 companies that could disappear in the next dot-com crash
A slew of digital detritus was swept away in the last dot-com crash in 2000. What tech companies could struggle, or even go under, in the next one?
The news last week that nascent Uber rival Karhoo has gone belly-up just a year after it had grubbed $250m in funding has more than a few echoes of the dot-com crash of 2000 - when the five-year financial orgy of speculation in the so-called 'new economy' came to an abrupt and very bankrupt halt.
E*Toys, Boo.com and, most high-profile of all perhaps, Webvan, all went humiliatingly bust.
For Webvan's CEO, George Shaheen, it had all started so well: he had negotiated himself more than $100m in share options as his price for jumping ship from Anderson Consulting* to head-up Webvan, causing something of an outcry over corporate greed.
Today, such mega-payouts are almost par for the course on Wall Street, but for Shaheen payday never arrived: Webvan went bust just two years later, having burned through $396m in funding, as well as the $375m it had raised in its IPO just months after Shaheen had joined. When the company crashed, it had achieved cumulative revenues of just $395,000.
Webvan was one of hundreds of dot-coms wiped out between 1999 and 2002 as the realisation hit home that "eyeballs" and "mind share" were no substitute for "revenues" and "profits". Some didn't even have making a profit in their business plans.
Today's internet companies aren't run on nearly so cavalier terms. However, with recessions coming round every seven or eight years on average, a downturn is long overdue. And when it hits, it will be the unprofitable and barely profitable technology firms that get blasted. After all, if they can't make money now, when will they?
So, here's Computing's entirely unscientific take on the internet and technology companies most at risk in the next dot-com-style crash. This is, of course, completely our opinion - feel free to flame us in the comments below, or tell us who you think we should have named instead.
* In the process Shaheen also missed out on a whopping payday when Anderson Consulting became Accenture just three years later
Line of fire: 13 companies that could disappear in the next dot-com crash
A slew of digital detritus was swept away in the last dot-com crash in 2000. What tech companies could struggle, or even go under, in the next one?
13. Twitter
Twitter is the epitome of the 1990s dot-com - a one-trick pony whose one trick rarely involves the word "profit", while its growth in new subscribers has also slowed to such an extent that it is unclear whether it will ever "cross the chasm", to borrow an over-used phrase from Geoffrey Moore.
In its last quarterly figures, revenues increased from $502.4m to $602m. But user numbers are stagnating as people get bored of shoe-horning their meagre thoughts into 140 characters, which for the most part are read by barely anyone else anyway, while battling the easily offended, various shades of extremists, the plain stupid, or being baited by trolls.
Attempts to branch out with the acquisition of Vine - one of more than 50 acquisitions by Twitter - and the introduction of Periscope haven't done much beyond providing a temporary boost in interest and usage either. In October, the company announced that it would discontinue Vine as usage has withered under Twitter's control.
Floated in 2013, the company's stock price now languishes well below the over-optimistic prices reached in the heady days after it floated, and are even below its $26-a-share offer price. Verizon, Salesforce.com, Disney (!) and personal-data-Hoover Google all kicked the company's tires and decided it wasn't worth either $20bn or so of anyone's money or the aggro that comes with it.
On the plus side, the company has plenty of spare cash left over from its flotation so it will at least die slowly.
Line of fire: 13 companies that could disappear in the next dot-com crash
A slew of digital detritus was swept away in the last dot-com crash in 2000. What tech companies could struggle, or even go under, in the next one?
12. Spotify
When a comparative minnow makes public its disagreements with a big company, it may elicit some public sympathy, but deep down it represents little more than a muted cry for help - the yelp of an injured puppy stuck down a lift shaft in a deserted building in the middle of nowhere. And that's exactly how Spotify's very public disagreement with Apple this summer should be interpreted.
Following the launch of Apple Music, Spotify has found itself at a disadvantage on Apple's iOS platform, forced to pay Apple a hefty percentage for every subscription paid for on Apple's ecosystem, which it has to pass on to its customers, a cost that Apple doesn't have to bear.
Spotify's complaint is not without merit. The European Commission has been hounding Google over Android over a lot less, and Spotify is that rarest of jewels - a European internet company. You don't get many of them to the euro.
Now, Spotify has Amazon Music to contend with, too.
It's not as if it's a lucrative business. Between users who really don't want to pay a penny if they can help it, on the one hand, and 'artistes' who complain that they only get paid pennies in royalties via services like Spotify's on the other, it's bound to be the middle man that gets squished in the ensuing handbags.
When Google introduces "Android Music", it'll all be over bar the inevitable EU anti-trust investigation, which will take five years and find in Spotify's favour long after the company has either been acquired by Apple or Google, or gone out of business entirely.
11. Deezer
See Spotify. It's French so will probably be taken over by either Orange or Vivendi, before being allowed to fade away and die a quiet, dignified death. A recent €100m round of funding is currently being spent giving Three Mobile users free subscriptions they don't want and a bunch of uninspiring adverts on ITV.
Deezer claims a user base of fewer than 10 million, which is a couple of hundred million short of the number it needs to prosper in a globalised, volume business.
10 Shazam
Quite remarkably, Shazam was founded in 1999 and has therefore already made it through one dot-com crash. However, with the rise of genuinely intelligent artificial intelligence, it wouldn't take too much for Apple, Google or even Amazon to copy the service, incorporate it into iOS, Android or Alexa as a ‘cool' new feature and Shazam will be blown out of the water. If they're polite, they'll offer to acquire the company first.
Line of fire: 13 companies that could disappear in the next dot-com crash
A slew of digital detritus was swept away in the last dot-com crash in 2000. What tech companies could struggle, or even go under, in the next one?
9. AMD
AMD is a company with a great history behind it.
Just 15 or so years ago it was going toe-to-toe with Intel in PC microprocessors, shipping a 1GHz microprocessor before Intel did, for example. But by the end of a decade or so of mis-steps, the company was forced to spin-out its capital-intensive manufacturing facilities, GlobalFoundries, and is a poor number two to Intel in PC and server microprocessors, still largely pumping out budget microprocessors at the value-for-money end of the market.
At the same time, AMD is increasingly looking like a poor number two to Nvidia in graphics processing units (GPUs) too, especially after a year in which Nvidia has scooped up most of the plaudits for its Pascal-architecture-based 10-series GPUs, which have provided a dramatic leap in graphics performance just in time for the opening of the virtual reality age.
AMD, meanwhile, is frantically trying to catch up and, certainly, it's a company with plenty of know-how. It's answer to Pascal is Vega, but these won't start shipping in volume until well into 2017: Nvidia is out conquering the world while AMD is still lacing its boots.
Even before Nvidia stole a march on AMD in GPUs, AMD appeared to be struggling, both in marketing terms, where Nvidia's message was more clear-cut, and in technology terms, where Nvidia was perceived to enjoy a lead with more power-efficient devices.
So, in short, a debt-laden company - one that's even resorted to a sale and leaseback of its HQ - which is up against larger rivals whose finances are in better shape.
Furthermore, in an increasingly post-PC world, one in which organisations are looking to cloud rather than buying servers, AMD will become even more marginalised. Furthermore, its tentative dabbles in the ARM ecosphere, including ARM-based servers, have yet to come to fruition with anything substantial.
The Vega-based GPUs and the Zen-architecture CPUs - which are already late - will have to be exceptionally good and well marketed to arrest the company's current malaise.
Line of fire: 13 companies that could disappear in the next dot-com crash
A slew of digital detritus was swept away in the last dot-com crash in 2000. What tech companies could struggle, or even go under, in the next one?
8=. King, Rovio and Zynga
The games industry is a tough one at the best of times, but the mobile gaming industry, in which but a tiny fraction ever get any traction, is tougher still. King, of course, is the developer of Candy Crush and a multiplicity of much less popular derivatives, while Rovio is responsible for Angry Birds. Zynga, meanwhile, made Farmville, which was once hugely popular on Facebook.
The trouble is, what can any of these companies do for an encore? The answer is, not enough. None of the games that followed up their blockbusters were good enough. Furthermore, mobile gaming is not like mainstream PC or console games in which copious sums of money can go a long way to glitter up what can otherwise only be described as digital excreta.
And, besides, in mobile the only companies guaranteed an income stream, regardless of what's popular, are Apple and Google who rake in as much as one-third of whatever users can be persuaded to fork over to buy the game, or for the increasingly ubiquitous (and hated) in-app purchases.
5. Giphy
It's safe to call the top - or, if you prefer, the nadir - of the market when a GIF company feels the need to raise $150m, but that's exactly what Giphy is attempting to do and, remarkably, not being laughed out of VC boardrooms across New York.
The company values itself at a ludicrous $600m, which would be relatively modest if it weren't for the fact that it doesn't make money and only has vague plans to monetise the valuable service it provides via sponsored search results. Or advertising, as it's more commonly labelled, as if online advertising were a licence to print money for anyone other than Google.
Line of fire: 13 companies that could disappear in the next dot-com crash
A slew of digital detritus was swept away in the last dot-com crash in 2000. What tech companies could struggle, or even go under, in the next one?
4. LinkedIn
Just because LinkedIn's been taken over by Microsoft, doesn't mean that it's safe. Indeed, given Microsoft's record with acquisitions in recent years, that probably means it's more endangered than ever.
But the central point remains: just what is the point of LinkedIn?
More of an anti-social network in which people link with others just because they feel they should, it's dominated by desperate sales people and, well, just desperate people in general.
The only part of LinkedIn that appears to have genuine long-lasting value is Lynda.com, the online training company that LinkedIn scooped up for $1.5bn in cash and stock in 2015, which was a pretty good result for Lynda Weinman and Bruce Heavin, the wife+husband team that founded it two decades ago.
3. Snapchat
The core purpose of Snapchat was perfectly fine: in an age where kids aren't necessarily cognisant of the risk of their fruity photos finding their way beyond their intended audience, why not create an app that will allow them to share photos that are short-lived and self-deleting.
But can you really build a multi-billion dollar company out of an ad hoc idea and an app? Over the past five years, Snapchat (or Snap Inc, as the company has styled itself) has certainly given it a try. Yet at the end of the day, it really is little more than just a craze, like the latest beat combo popular with the kids.
Just like Twitter with "Moments" and "Periscope", Snapchat is experimenting with all kinds of features and gewgaws to try and maintain fickle users' attention. Just like Twitter's efforts to reach out beyond its core purpose and audience, it's doomed to disappear - just like Snapchat users' images.
[/SNAPCHAT]
Line of fire: 13 companies that could disappear in the next dot-com crash
A slew of digital detritus was swept away in the last dot-com crash in 2000. What tech companies could struggle, or even go under, in the next one?
2. Uber
What? Uber? The popular taxi app?
Yes, why not?
The ambitious company positively burns through cash, chasing markets and market share over profitability, while regularly going back to investors for three-figure millions top-ups based on wildly over-optimistic valuations. So far, they've been happy to comply, but what happens when the music abruptly stops?
Uber also doesn't seem to learn the lesson of expanding into emerging markets, where well-connected locals normally expect to be cut in if a large or high-profile company wants to come in, or can set up their own rival and use the resources of the state to lock out the brash upstart.
Uber was chased out of the market in China, where officialdom preferred its rival Didi; and it will likely face the same kind of opposition in India, where it has recently decided to expand and similar unwritten rules seem to apply. Indeed, there's a good reason why even major multinationals often struggle in such markets, so why is Uber throwing shareholders' money away on such vanity expansion?
At the same time, the company faces multiple lawsuits in different jurisdictions around the world, brought by various parties with their own interests and agendas. The only people making a profit out of Uber are its drivers and the legal profession.
Or, as the old saying goes: turnover is vanity, profit is sanity. But Uber is spread too thinly, and likely to run out of money before it can achieve its grand, longer-term ambition to dump its drivers and go all-self-driving.
It may survive a downturn, but to do so it will be forced to slash spending and start focusing.