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One Year Ago: Blame It All On E-Commerce

By Michael Mahoney
Feb 1, 2002 6:56 PM PT


Originally published on January 31, 2001 and brought to you today as a time capsule.

One Year Ago: Blame It All On E-Commerce

E-commerce is being beaten up with bad press again. First it was babies being sold over the Net, then brokerages being warned for their questionable online business practices.

Throw in the latest round of dot-com layoffs and the current assault on Net advertising, and the e-business is undergoing a genuine public relations nightmare.

But is the recent bad rap justified? Or is e-commerce simply an easy target during uncertain economic times? The answer may lie somewhere in between.

The online advertising market has certainly taken its share of criticism lately, especially as an excuse by dot-com executives for the ongoing dot-com shakeout.

Take the comments by NBCi chief executive officer Will Lansing, who said the changes leading up to his company's recent layoffs were made to account for the "challenges within the online advertising market."

Or consider the comments offered up by AltaVista's executive adviser Peter Mills on letting 200 employees go a few weeks ago: "AltaVista has not been immune to the softness in advertising," Mills said.

But is it the advertising market that's the problem, or the dot-com reliance on ads for revenue?

Plans Gone Awry

Michele Pelino, director of Internet Market Strategies for the Yankee Group, told the E-Commerce Times that part of the motivation behind the assault on online advertising is the industry's outdated belief that Internet clickthroughs equal effectiveness.

"[Online advertising] is certainly easy to pick on right now -– but the bigger picture is the inherent problems in the business models of the online companies," Pelino said.

As is the case in all business models, advertising is only one of the channels online businesses need to use effectively to reach customers, Pelino said.

The criticism of online advertising "is an outward indication that we're not seeing the responses that had been promised for certain online activities, advertising being just one of them," Pelino said.

Don't Kill the Messenger

Two other recent news items have led to ongoing media criticism of the Internet. The first came in the form of a custody battle over two American twins adopted over the Internet by a British couple.

The British couple paid UKŁ800 to a Net-based firm to adopt the twin girls from their American mother. The couple was unaware, however, that the twins' mother had already sold the twins to an American couple. After visiting the girls at the American home, the birthmother secretly took the girls and resold them.

Story number two: in a new report released last week, the U.S. Securities and Exchange Commission (SEC) warned Internet brokerage firms to improve their overall business practices, including online trading technology and advertising, to ensure that consumers are adequately protected and informed.

Scapegoats Aplenty

In both cases, the Internet came under heavy scrutiny for what much of the media saw as gross injustices of a medium in need of some policing. However, the Net criticism these stories have drawn may actually have a lot in common with that of the dot-com layoffs.

"All of the key issues you have to deal with in a traditional business, you are accountable for and need to address online," Pelino said in regards to e-commerce.

The same holds true for online adoption agencies and brokers. After all, one could again ask, is it the Internet medium that deserves blame for the shady actions of some brokers and adoption agencies, or the operating practices of those companies themselves?


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