Hail the big giant head
Summary Description Simon Vandore wonders if anyone is learning from silly Web investments.

Introduction
Some people need to be told that the emperor has no clothes. The emperor, in this case, is the dot com company and the mere mention of his name inspires gullibility and impetuous investment.

Body
The best recent example of this was the worship of Pixelon, a US startup with video streaming technology, which received $US28 million in venture capital last year. As we now know, Pixelon didn't actually have a product -- in demonstrations it used Microsoft's Windows Media streaming format. It took 18 months for everyone to discover that Pixelon was run by a fugitive conman living under an assumed name. Meanwhile, he spent $US16 million on a launch party featuring The Who, Kiss and Tony Bennett, signed his emails "Big Giant Head of Pixelon" and regularly addressed his 100 employees over a public address system with "This is the master speaking". You can read more here.
This was an extreme situation involving fraud. However, a great deal of everyday hype-driven Internet investment parallels this. Many thought it would end with the downturn in technology stocks earlier this year, but not so. Dodgy non-starters still attract cashed-up believers. The share prices are lower and experienced Internet users are onto them, but the nonsense goes on.
Apologies to any dot com founders reading this, but I must take this opportunity to convince the investing public that you are not superior beings. For God's sake, stop investing in stuff you don't understand! Get a clue before you front up and don't settle for jargon or MBA-speak. There is nothing that can't be explained in lay terms.
Simply being engaged in ecommerce, B2B, or online service provision, does not constitute a viable business. Setting up a Web site does not count as trading -- I can make you one in 10 minutes. It's like setting up a physical shopfront by the side of a road in the middle of nowhere. If you build it, will they come? Not unless you have something nobody else has.
Original ideas, new angles and killer apps are downright rare -- most dot coms lack them and will eventually fail. Maybe it's the old "computers are too hard" excuse; the mere mention of technology causes some people to don nervous blinkers and temporarily lose their ability to digest simple facts. The fear of missing out drives them to say "yes".
Or maybe it's a genuine desire to find the one that works: the inventor of the next Hills Hoist, the next Yahoo. There is real opportunity and value in the Internet and some dot coms are genuinely wonderful. The idea that we have only scraped the surface of what the Internet can do holds some truth, as long as investors shake off their clouded vision and become educated.
Learn the lesson of Liberty One. It started at two dollars a share and fell to six cents because at the end of the day it was just plain dumb. Its sites barely existed and offered nothing new, yet a Web search still returns outdated depictions of a rising new media star with a big future. I even attended the virtual press conference where someone purporting to be Greg Norman launched Liberty One's shark.com joint venture, a site where middle-aged men everywhere could come to be browbeaten by marketers of fast cars and golf clubs. "Greg Norman" talked about the importance of leveraging such investment opportunities. Sure, mate.
This week, some loss-making Australian dot coms delayed submitting their financial results to ASIC. Someone else put up tens of millions of dollars to buy a fledgling B2B site. Maybe the long-term news from each will be good, maybe a Hills Hoist has been invented, but I suspect some tough lessons have gone unnoticed.
The emperor is dead. Long live the emperor.
Vandore appears every Friday on Newswire. You can contact Simon Vandore on svandore@acptech.net.