The Internet is NOT going out of business

People keep asking me about the dot-com dream falling apart and asking if I’m worried.

The companies that are failing are those with business plans that read like my kindergartner’s homework. Those companies that built online businesses based on principles that seem absurd in the offline world are finding out that customers aren’t fundamentally different just because they are online.

140 dot-coms did fail in the US last year, but that is a small percentage of the 1700 that were funded in 1999 (according to numbers from PriceWaterhouseCoopers). Venture capital investments are up from $60 billion in 1999 to $80 billion in the first three quarters of 2000.

As for employment, in August of last year, in the midst of dot-com deaths, Anderson Consulting released a study that estimated that the Internet economy would create 10 million jobs worldwide by 2002. 5.8 million of those will be in the US. In contrast, The Industry Standard’s Layoff Tracker counts only 54,167 job losses as of yesterday.

A report from Cisco and the University of Texas finds that employment in the Internet sector grew 10% between 1999 and 2000 and that the Internet economy directly employs over 3 million people. The same report states that only 9.6% of the Internet economy can be attributed to dot-coms. In fact, the “slowdown” of spring 2000 seems to have hardly affected employment. Nearly as many jobs were created in the first half of 2000 as in all of 1999.

Spending is also up. An InternetWeek survey shows that 77% of companies plan to increase their Internet spending an average of 40% in 2001. The University of Texas study reported that Internet Economy revenues were up 58% in 2000 to $830 billion.

So don’t panic the next time someone says that the Internet Economy is failing just because some company realized they can’t turn a profit by shipping 50 pound bags of dog food to consumers.