Why the Internet collapsed

Good Morning folks!!

Are you with me so far? Does this all make sense? Are you ready to see why the Internet collapsed?

Image008Before we go forward we must STOP and look back. In 1999 things were popping and it seemed you could do no wrong. Surprise!

I predicted an Internet collapse back then and of course they laughed and thought I was exaggerating. It was inevitable as I weighed the mounting evidence. Just a matter of time, but few could see it coming. I saw a storm brewing and my job was to survive and thrive while others were washed away.

While I have heard dozens of reasons there was one or two CORE reasons from where I sit. One was because advertising on the net was based on "IMPRESSION BASED ADVERTISING." This type advertising was the root of all evil on the net imo. It was charging you for a customer whether he got to your website or not. It was more like "Billboard advertising" or static magazine ads and folks basically paid for NOTHING. But it was based on traditional advertising formulas and that did not exactly match up with Internet characteristics. So folks would overpay and get a bag of smoke. Any rational person would do it once, get burned and never do it again.

Ahhh....bring in the "KNOW NOTHINGS" for reason #2. The KNOW NOTHINGS did the rational businessman one better. They had "Burn" money and they did a GREAT job burning it. They burnt it so well that advertisers actually believed in the Impression based advertising model and so everyone was so happy. Until of course the KNOW NOTHINGS ran out of money because thru all the plans and all the MBA's they never built a machine to turn a profit. They had no formula. Just some dream based on NOTHING but a fancy and phony business plan and a bunch of other people's money that they could care less about. Nobody ever told them in school that to run a successful business you need to turn a profit. That you can't give everything away for free.

So it was only a matter of time before the collapse. And I said back in 1999 that "AFTER the crash, from the burning embers, will rise the REAL INTERNET." And today you are witnessing the the real Internet. The new Internet based on "CLICK THRU ADVERTISING." With this type advertising you actually get a physical visitor to your site and you have a shot at closing him if your mousetrap (Website) works. If it works you buy more and if your mousetrap works, you will outbid your competition because you will close more sales.

Maybe you are seeing things connecting. The next thing you might ask is why is a domain owner so concerned with closing more sales? GREAT QUESTION!! You are paying attention if this is on your mind. The simple answer is I am just copying folks like AT&T. When they came out with their 800 numbers some 30 plus years ago, they trained folks for free. They had all types of schooling and wanted to help you answer the phone and do it in a professional manner so that you would close more sales. WHY?? Because then you would spend more time on the phone and your 800 bill would go up and so your sales would go up and so they would sell you a bigger yellow page ad and they would all MAKE MORE MONEY! So by explaining how to increase sales by buying TARGETED and potent traffic and having an effective mousetrap that can close more sales translates into added value to the traffic that they produce and at the same time increases the value of domain names. EVERYONE comes away a winner!

That is why the future is bright and payouts will continue to rise for years to come. When traffic was selling for a fraction of a cent my only question was "What is the value of a click if I sell a $20 million plane?" How much is that visitor worth? I believed then and I believe NOW that a clicks value is directly proportionate to the product or service you are selling. That is directly related to the value of a domain name. That is why I STRONGLY believe that anyone selling their domain for a multiple of "X" TODAY is short changing themselves more than they realize. Sometimes the best way to make the most money is to DO NOTHING!

Have a GREAT Day!
Rick Schwartz

5 thoughts on “Why the Internet collapsed

  1. kamal

    I read about an investor who sold all his stock holdings the day his shoe shine boy gave him stock tips. This was right before the Great Depression.
    I was part of the dot com world during the Internet collapse and remember how everyone and their mother seemed to know which tech stocks to buy. To me, that was an indicator that things were going to pop.
    I remember thinking something similar when, last year, the woman who cuts my hair left to become a real-estate agent because all her friends were making easy money in that industry. That’s when I decided to not invest in real-estate for the time being.
    I like the way you tied advertising and the results from it (click-through, sales) to the collapse. Makes perfect sense.

  2. Franky

    Great pic of Lady Liberty pal. The know nothings went away and this school is getting better but they’re still not quite there yet IMO. Then again, some of the infrastructure needed to make domains truly shine isn’t here yet either IMO. We’ve still got a bit to go but time is on the nameholder’s side. Price increases browser/engine traffic-shaving and all.. I think nameholders are in the best spot (my projection runs to 2050)

  3. Gustavo

    Dear Rick
    So you say in your text:
    “I believe NOW that a clicks value is directly proportionate to the product or service you are selling.”
    and I wonder if you have coined a term to descrbe this particular click-value ratio?

  4. Tia Wood

    I enjoy reading yours and Frank’s (and others) blogs. The dots are starting to connect for me. I am also learning how to read inbetween the lines. The only true way to know if I”have it” is to try it, which I’m currently doing. I’ll let you and Frank know the results when the time comes. :)

  5. Domain Investing Writer

    The Value of a Click

    Rick Schwartz asks:
    What is the value of a click if I sell a $20 million plane?
    on his April 7th, 2007 blog post.
    That struck me as odd and made me realize that domain investors are one of the lowest paid sales representatives in the worl…


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