Holding Their Own County Internet Companies Waiting Out the Downturn By Hal Brown The Internet seems less like an information superhighway than a galaxy lately, with a number of 'net-based companies lost in space-but relatively few of them were launched in Norwalk or the rest of Fairfield County. Internet start-ups profiled in the Citizen-News last year are, for the most part, still in business - albeit with some changes. OkayUSA.com is one of the survivors. An Internet retail site, Okay USA started up planning to sell merchandise associated with "American icons" to an international clientele. While there is a market for cowboy gear, Navajo turquoise, Harley-Davidson knickknacks and the like overseas, OkayUSA has made most of its sales domestically. The site, okayusa.com, still has most of its original trappings. With translations into Spanish, German, French, Italian and Japanese, the pages are designed like TV screens to channel customers to their selected icons and a full menu of online offerings. OkayUSA is far from being a household word, though, and for company President Andrew Holster, that had seemed a relatively easy goal. "The biggest challenge that has emerged with the Internet is that most companies went to the Internet thinking it was sort of like a four-lane highway where there was just tons and tons of traffic," he said. "It turns out it's more like outer space. Internet sites are like stars - there's huge spaces between them. There are thousands and thousands of them, millions actually. It's very difficult to find a particular site. Marketing dollars for most of these companies, including us, haven't panned out. It's been difficult to figure out how to get enough traffic to the site to make it successful." Selling online is a particularly difficult business, Holster said, even if people can find the site. "Another big question that's emerged with the Internet is it's not just the security of a site that scares customers away, it's the fact that they can't see and touch the product," Holster said. Even if the prices are better on the Internet, shoppers don't bite as often online as they do at more conventional stores, he said. Internationally, Holster said, the Internet is growing, but the online shopping overseas hasn't caught up to America's. Wendell Minnick, the chairman and chief financial officer at bCrossing.com, can attest to that. bCrossing, founded as USStyle.com, is now in a completely different business. USStyle.com started out by translating and redesigning U.S. companies' Web sites into Japanese, mostly for retailers entering that Asian market. "bCrossing gave up its dot-com retail concept of taking American retailers to Japan," Minnick said. "Even though we were executing flawlessly in every aspect of our business, the one thing was the consumer in Japan was still not healthy enough, or not interested in using their credit cards online, so that business model didn't work." The Internet's international scope is a key part of bCrossing's plans, though. According to the company's Web site, online transactions are expected to reach $5 trillion in the next three years, with more than 500 million users and 183 million buyers. The percentage of English speakers is declining rapidly, and though roughly half the Internet is in English now, the percentage is expected to drop to 30 or so in the next three years. While USStyle.com was designing Japanese Web sites, it also was building software to support multilingual customer service. The company made "a complete change of direction," Minnick said. A beta version of bCrossing's multilingual e-mail program, CrossSite, is in operation on a Massachusetts T-shirt company's site (goodwear.com) right now. "We deal with small to medium-sized companies," Minnick said. "We approach them and say, 'Are there markets which you wish to communicate with and be involved with looking for exports? We can support you with a multilingual solution.' So in 24 hours we change their site into the language of their choice. They work with us to do this." A French or Spanish or Japanese customer can click on boxes on the Goodwear site and e-mail a question to the company. That message is translated en route by a software program. The company's response is relayed to the customer via e-mail by a human translator. Minnick said bCrossing is three or four months away from developing a plug-in module for e-mail programs that could be used in a variety of places. Internet portals are among the companies interested in the software, he said. "We're not into retail at all," he said. "What we're doing now is enabling other people to conduct multilingual messaging. It's not about translating documents, it's not about translation per se, it's providing a solution to enable other portals, other Web sites, other intranets, other software applications to conduct multilingual messaging." Internet marketing consultant Mark Pruner, the president of Web Counsel LLC in Stamford and president of the Connecticut Internet Association, said Fairfield County has faired relatively well in the downturn of Internet stock prices. Layoffs have occurred, he said, but they've been strategic, not desperation moves. "The layoffs we've seen have tended to be more reorganizational and redeployment type layoffs. Companies have looked at what they're doing and they're saying, "Well, this is working and this isn't.' They've been laying off people in the areas that aren't working as opposed to saying, 'We don't have the money; we've got to make 20 percent across-the-board cuts,'" Pruner said. "The businesses that run around here are run in a much more conservative manner, certainly in comparison to the dot-coms that got all the publicity," he said. "There have been very few companies go out of business around here." Most of the Internet companies in the area, though, are not "dot-coms," a term Minnick said signifies online retailers to most people. Few area Internet retailers sell directly to consumers, said Pruner. "We have quite a few application service providers; we are the world's leader in Internet marketing consulting. We have a lot of companies that supply back-end technologies and connectivity and services," he said. Fairfield County, according to the Information Technology Association of America, is considered one of the top 10 information technology centers in the nation. Pruner said that ranking is for technology companies, and if all Internet companies were considered, Fairfield County might be one of the top six areas. "One of the reasons we have problems convincing people of the amount of dot-com activity in this area is the fact that companies aren't marketing to the public and aren't spending these large marketing budgets to reach a mass audience," Pruner said. Large marketing budgets haven't helped in a lot of cases. The infusion of venture capital into Internet companies, which provided the big marketing budgets, had strings attached, too. At OkayUSA, Holster said, "I think one of the advantages we have is that we started small and our infrastructure has grown with our profits or shrunk with our profits. Some companies got a lot of venture capital, built a huge infrastructure and waited for the profits to catch up, and that just hasn't happened. "It was a gamble," he said. Venture capitalists "expected to see their investments pay off within two or three years. The Internet has grown incredibly in the last two or three years, but not that explosively. The initial assumption was that they pick their space, whether it's books or shoes or cosmetics, then get into the space first with a lot of money, establish a brand name, and then just wait for the traffic and the money to start coming in. So many of the companies did that, and it just didn't come. It didn't turn, it didn't work out for them." Minnick said venture capitalists "were trying to make things happen, forcing things to happen, and there's only so much you can handle in terms of one company." Greg Imbruce, the chief executive officer of Bizroad.com, said the crush of companies coming to market made survival difficult. Imbruce and his brother Doug originally founded Buyroad.com, which builds Web sites for small to medium-size companies. Bizroad, the current company, was designed as an exchange to allow small companies to join together in ordering goods and materials to provide them an economy of scale they otherwise would not have. The company now goes by the name Bizroad but concentrates on its core Web-site building business. The exchange idea was dropped, said Imbruce. Dot-com start-ups, he said, "were pressured by the venture capitalists who wanted them to be first mover. But when you have a couple of thousand dot-com companies being funded simultaneously, it's kind of hard to be first mover. I think [the contraction in the Internet stock sector] is a healthy aspect of the market in terms of these companies folding so the real companies can float to the top. "I see there are two recessions going on right now," Imbruce said. "Recession No.1 is technology, technology, technology. The way I see the market, the technology indices, specifically the NASDAQ, are tracking identically to the market environment we experienced in 1973-74, which had a recessionary period of 24 months." The current recession, he said "began in March 2000, so we have by my calculations until August 2001, approximately, to emerge from this technology depression. Also, you have high energy prices, which is very similar to that time frame. "Recession No. 2 is the rest of the market, which is a typical recession of 12 months. I think if you can survive through the end of the summer, I think the capital markets will revisit the technology industry. I think that is going to be a time when there are a reduced number of technology companies, specifically Internet technology companies, and I think those are the companies that will get funded and those are the companies that will make a real business. Surviving the next six months is of the utmost importance. I figure if you can get through this downturn - wait out this downturn as we've been doing - I think you'll have a successful business. The problem is there's been too much supply in the market of these investment opportunities. "There's always going to be demand at a price, so if you can reach that equilibrium, which I think we will do over the summer, I think we'll create another, more tame market," Imbruce said. |
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