Dot-coms to make way for mobile era

It’s not surprising the City has a dot-com hangover. The illogicality of its position would have been appreciated even by Karl Marx, 150 years ago.

To start with, the transaction between seller and buyer must be fundamentally unequal, otherwise the seller wouldn’t make a profit. An investment based on unquantifiable opportunities is as sound as buying a National Lottery ticket. Being seduced by a potential future customer base – however large – is an emotional crutch for poor judgment.

It takes time to build a brand. The list of top 100 brands contains more than 50 per cent that have been around for over 50 years. Arguably, new technology helps to accelerate and personalise communication, but it cannot create instant trust in the market or replace customer service.

Several dot-coms have created high brand awareness through above-the-line campaigns, most notably Monster.com, Lastminute.com and Jungle.com. For start-up businesses, this is a fantastic achievement in any sector or channel. But investors and analysts must realise that this is only achieved through a high cash-burn rate that is far in excess of their turnover.

The investment and initial public offering funding based on hyper dot-com valuations has been the chief financial tool for creating these large cash reserves. Dot-com businesses are only now realising there is more to brand- and business-building than high awareness levels. After all, everyone knows where Greenland is, but it doesn’t mean we want to go there.

The true test of any business, including new economy ones, is its ability to generate revenue and profit for all stakeholders. Dot-coms will only achieve this when they can convince customers to buy their products and services. Their conversion rates – the crucial multiplier – are worryingly low and highlight the immaturity of the e-commerce channel. This is partly because customers remain unconvinced about Net security, and, although this is irrational, it is still the driving emotion. Combined with this is the uncertainty customers feel about the new brands themselves – most of which are barely two years old.

The greatest potential for new media channels is as part of an integrated approach to marketing. In a few years’ time, we will all look back on new media in the same way we thought about advertising in the Sixties. Back then, it was the Holy Grail of marketing and, like the Net, it has made a dramatic impact on the way we do business. But, also like the Net, it will be superseded by another medium creating another paradigm shift.

The Net is just another marketing channel. I can reveal that the next new channel is m-commerce. We are on the brink of a mobile era that will change the way we live our lives and do business more than the PC ever did. Bill Gates should be worried. Microsoft is beginning to rapidly look like the IBM of its era – a dinosaur in a sleek new world. My advice to marketers is: don’t wait until you have your e-commerce business model in place before starting your m-commerce platform. It is time to think the unthinkable – are you brave enough?

Ian Ellwood

Strategic director

Cobalt

London SW1

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