The big chill sets in

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The Independent Online

If you want to know what's in store for the UK internet scene, it's worth keeping an eye on events across the waters because whatever happens to our American cousins is sure to happen to us very soon after. While the UK may think it has been in the wars of late and lived through venture capital-funded start-up failure, it's nothing compared with the current state of the US market. Every day a start-up finds itself in the uncomfortable position of having to lay off staff or close down completely.

If you want to know what's in store for the UK internet scene, it's worth keeping an eye on events across the waters because whatever happens to our American cousins is sure to happen to us very soon after. While the UK may think it has been in the wars of late and lived through venture capital-funded start-up failure, it's nothing compared with the current state of the US market. Every day a start-up finds itself in the uncomfortable position of having to lay off staff or close down completely.

Granted it's a much bigger market over there, and the venture capital has been around much longer, but now that stock markets are pretty much mirroring each other, it can be safely assumed that whatever is going on there is now going on here. The harsh reality of all this is that we just didn't have as much time to enjoy the boom as the Americans did.

In the past week hundreds of staff in US new media companies have been given the elbow, namely staff at consulting giant Marchfirst, born out of the merger of Whittman-Hart and USWeb/CKS; crime news site APBnews.com, and Salon.com, one of the stronger content sites. We can presume the tightening of belts at Salon.com will impact on its European expansion strategy, which was due to take place later this year. Now a Salon.co.uk looks very unlikely, given Salon.com's aim to cut its operating expenses by 20 per cent and the closure of its Seattle office.

While this is a very sensible move by a company wanting to survive the downturn of internet stocks, it raises questions about the long-term sustainability of ad-supported content sites. A consultant I spoke to last week made the interesting point that content sites will never make a profit on ad revenues alone, citing The Wall Street Journal's subscription-paid site as the best example of a profitable Web-based content business. Given that consumers now expect content for free, and e-commerce clearly isn't working on content sites, the prospects look dismal for those sites in this sector that don't have tons of money in their back pockets. Having missed the IPO window to raise cash, to keep them alive, many sites are now finding themselves forced into holding merger meetings with competitors and ridding themselves of non-core staff.

Streamlining is a fact of life. I doubt that anyone who wasn't closely involved with retailer Great Universal Stores batted an eyelid when they heard it was slashing over 800 jobs. Why? Because that's what we've come to expect from traditional businesses that are losing out to new, faster moving retailers that shift tons of stuff on-line. But to have it happen to new media so soon after the boom and the much talked about skills shortages, comes as a bit of a slap in the face.

Of course, for every one person that is made redundant, there are four employers waiting to snap them up, although this might not last forever.

Amusingly, the research firms are still churning out reports; only last week a report came out of Spectrum Strategy Consultants and Andersen Consulting informing us the UK faces an internet skills shortage, and that some 80,000 vacancies will be left unfilled in three years' time. It's good to know that there'll still be an internet industry in three years' time.

After the goldrush

It was something of a refreshing change to turn on the TV last week and watch a programme about the dot.com boom that wasn't obsessed with the bubble bursting or the endless number of disaster/scam stories. The reason for this could have been something to do with the fact that the BBC2 series Inside Dotcoms: Tales of the Electronic Goldrush wasfilmed six months ago at the height of dot.com mania.

Since then, well, we all know what has happened.

Some of the businesses profiled in the series are going from strength-to-strength. Firebox.com, for example, has now moved into proper office space, taken on seven new staff members and is close to securing more funding. Some of them are far from that - everypromotion, for example. If anyone needs proof that you'd better sort out your business plan before going on TV and allowing a film crew to follow you to venture capitalist meetings, then everypromotion was it.

Nevertheless, it was an interesting programme, particularly the meetings with venture capitalists. If only they had followed boo.com, though. That would have been unmissable television.

amy@wagswell.co.uk

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