The Internet Bubble Burst 2.0

Just like many of you, I’m constantly seeing the startup with a new twist, a revolutionary way to stay in contact with your friends or a new way to access a plethora of content. Many of these websites and services have great value, some certainly not all.

What amazes me is the mindset of these companies. They are literally going against what I believe to be the very foundation and the history of business.

Let’s look at what a business is. A business operates on the basic premise of the sale of a product or service. Someone has to buy something. Whether it’s a direct sale of goods or the purchase of advertising, something has to be sold in order to generate revenue.

The companies which I see starting up every day ARE NOT following the basic premise of business. They are playing the “get more people” game. The more people we have the more “valuable” our business is. Now, this may be true from a “potential” point of view.

What about from a profitability point of view?

I don’t know about you, but when I see a company in the red having spent millions of dollars already with not a glimmer of profit in sight, I would be a little concerned for their future.

The idea which many of these companies have is to get bought out.

How long would you run your company without making a profit?

The whole scenario is akin to a kid at college. They don’t have a job, they run out of money and then call home to Mom and Dad to get more. In this case Mom and Dad are Venture Capital Companies.

I have to say that maybe I don’t understand the whole process. Maybe there is something more to which I don’t know about, but certainly from an outside perspective it doesn’t look too good.

My point to you is this. In order to stay in business a company has to turn a profit. If it doesn’t turn into a profit after a period of time I believe it’s called a HOBBY.

Is your business a business or a hobby?

Turn a profit and go to bed!


  1. John W. Furst on June 10, 2008 at 4:43 am

    Great point!

    I mean you are someone who leads people to real profits in a short period of time. That’s business! So where is the problem?

    It seems that many of those hobbyists believe selling is evil. They want to come up with something better…

  2. John on June 18, 2008 at 3:18 pm

    Armand, you hit the nail on the head. Some of these social networking sites have implied values of hundreds of millions dollars to over $1 Billion… billion — with a B!?

    Even if some of the sites become profitable, the gold rush
    has enticed so much capital that most will have trouble
    garnering and retaining enough market share to sustain
    a business long-term….

    At some point, people might decide face to face contact
    if more valuable than staring at a computer OR Iphone
    or PDA screen

    John Brack

  3. Kip Bradley on June 20, 2008 at 4:11 pm

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  4. Bill Hibbler on June 21, 2008 at 1:30 am

    I couldn’t agree more, Armand. I’ve seen so many companies leasing high-dollar office space, getting their Aeron chairs and the La Pavoni espresso machine to launch products they don’t even know if there’s a demand for. They spend more time seeking and pitching venture capital companies than they do seeking and selling to customers.

    I’ve always loved the way you’ve done business, Armand, and I’m always learning something new from you. Keep up the good work!

    Bill Hibbler

  5. Captain Lou on June 25, 2008 at 11:19 am

    Hey Armand,

    Recently I was asked to sit on a panel of experts at a marketing meetup in NYC.

    A young “expert” on my right was talking about blogging.

    The “expert” to my left, social networking.

    A 3rd genius, about getting Venture Capital from Angel Investors so their start-up site could reach critical mass.

    And there I was talking about MAKING MONEY everyday, converting sales online an being profitable from day one.

    They all looked at me as an evil 3-headed monster.

    I thought most of their “genius” was nothing more than pop Web 2.0 pyscho-babble.

    Captain Lou

  6. Jane Stutheit on July 3, 2008 at 3:27 pm


    I totally agree. I didn’t realize some real marketing genius I look up to would have the same observation as I do!

    When I visit a site and I can’t find any ads, I just shake my head. I wonder how they can manage to operate and maitain the site.

    It’s true they’re banking on the traffic that adds value to their websites but it’s obviously on the verge of exhaustion because they have downtime most of the time.

    Somebody said, “If you’re doing something that prevents you from making a profit, you’re just wasting your time.” I’d say Amen to that too.

    Jane Stutheit

  7. Shea Ellison on October 15, 2008 at 11:50 pm

    The business model I see a lot of these companies are following is one where they offer an inital product or services for free to build critical mass, then they start to add premium features for which they charge a monthly fee. And if they’re smart they also have advertising on their sites. A number of startups have become profitable with this model, but I think too many others have taken this model over the edge as many have described and they really have no idea of how they are going to monetize the businenss and turn a profit.

    Shea Ellison