Dot Dot Dot Start a dot.com . . . twiddle your thumbs . . . the money rolls in--there's a hell of a lot left out of <i>that </i>story.

It seems so simple. Buy a $100 Web-authoring program, pay a fewmore bucks for a domain name and space to put up your site, thenwatch out--you are on the fast track to a cool billion dollars . .. or at least a couple million. It happened at Amazon.com, eToys,Autobytel, and more e-businesses than you could click a mouse at.Except it's not that easy. "I'd say 75 percent of Websites are inadequate; they won't succeed," says JanetAsteroff, director of e-business services with The Concours Group,a Kingwood, Texas-based e-business consulting company.

Too pessimistic? Not according to some experts. "At least70 percent of Web sites are just up there and don't do much atall," says Wally Bock, a Wilmington, North Carolina,e-commerce consultant.

Keep talking to experts, and the general guesstimate is that atminimum, two in three e-businesses are doomed. Andthat's because it's just not as simple as it seems to erecta smoothly functioning Web site that makes money, too.

Robert McGarvey is BIZ Experiences magazine's monthly"Web" columnist

The Hard Truth

Chew on this: Beyond.com, one of the real superstars ofcyberspace, logged sales of $36.6 million for the fiscal quarterending September 30, 1999--and $25.9 million in net losses. For thesix months ending September 30, 1999, eToys notched sales of $23.3million and a net loss of $82.3 million.

Swallow those losses, then inhale this sobering reality:"It's easier to lose $1 million overnight with a Web sitethan to make it," says Stephan Moen, a vice president at AspenConsulting, a Rolling Meadows, Illinois, e-business consulting andresearch firm.

"It is hard to do a Web site right," adds Phil Terry,CEO of New York City-based Creative Good, a Web strategy consultingand research firm. "And there are so many ways to do onewrong."

For instance?

Undercapitalization. "This is a chief reason whye-businesses fail," says Moen. "They don't budgetenough money to build a site that can succeed."

The days are long gone when a few kids in a dorm room could putup a Web site and have it become an instant hit. Big money isneeded to get a site off the ground today because the technologybar has been raised dramatically higher. That's upped the antein site design and hardware necessary to operate the site. Howmuch? "Anywhere from $300,000 up to $1 million," Moenestimates. That amount would cover hardware, software and initialsite design.

Some sites targeting well-defined niches can get by on less. Butjust as often, much more cash will be required, particularly whenthe goal is creating a national brand. "We're budgeting$20 million to build our brand," says Andrew Brooks,37-year-old CEO of Furniture.com, a Framingham, Massachusetts-basedonline furniture start-up. "Building a national brand isessential."

And getting ahold of the money needed to create national brandrecognition--despite what you read about venturecapitalists--isn't easy. "Raising the first money istough," says Kathy Morell, 26, co-owner
of MakeUsAnOffer.com, an online haggling site based inLawrenceville, New Jersey. So many tech start-ups are now seekinginvestors' cash, says Morell, it's difficult to rise abovethe noise level. While she managed to raise about $1 million infirst-round angel funding and currently is closing a larger venturefunding round, she reports, "this takes a lot of hardwork."

And don't count the money until it's in your pocket,says Andy Oldham, 36, co-founder and CEO of eHome, a Web site wherereal estate sellers pay lower fees than are charged by conventionalRealtors. Once he'd put together a business plan, Oldhamshopped it around and quickly found a large escrow company thatwanted to be the sole investor for eHome: "They agreed to putup $4 million," he says.

Oldham thought he was home freeuntil . . . "At the 11th hour, they pulledthe plug," says Oldham. "Right there, we lost threemonths--that's how much time and energy we had put into thatdeal." Oldham eventually bounced back and got start-up fundingfrom Garage.com (http://www.garage.com), which matchesgood ideas with money sources, but the sobering moral is: Internetfunding can vanish, and until a deal is signed, never startspending any investor's money.

Security alert. "Security remains a key issue, maybethe critical issue, and it's where many e-businessesfall down," says Jeff Johnson, president and CEO of MetaSecurity Group, an Atlanta technology security consulting firm.

How can that be when most Web browsers and e-business servercomputers use encryption technology that scrambles a customer'scredit-card information? Johnson laughs: "That's not theproblem. The problem is that hackers break into the Web site'scomputers and steal the whole credit-card database. It happens moreoften than you'll ever read about."

When he tells that to clients, many scoff. "[But then] welook through their access records and show them when and howhackers already have broken into their system," says Johnson."Maybe they haven't accessed the credit-card database, butthey've been inside and looked around. Probably, they'll beback, too."

The cure: "Work with security experts," says Johnson."Usually inexpensive solutions can be implemented that willsafeguard your data."

Help wanted. Putting up a professional-quality e-commercesite is rarely a do-it-yourself project. Few BIZ Experiencess have theknowledge and time it requires. But "hiring talented techiesis difficult," says Morell. "They are in such greatdemand."

They're also expensive: Morell says a $70,000 to $150,000salary is standard in her central New Jersey location, and highersalaries are common in hotspots like Silicon Valley and Seattle.And as the demand rises for qualified help, you can expect salariesto do the same.

No traffic. Put up a site, and the next step is gettingthe money bags ready, right? Not hardly. "Nobody will come toit," says Jason Foodman, the 32-year-old CEO of Atlanta-basedTrexar Technologies, a software developer that e-tails through itsMacAlive Web site (http://www.macalive.com)."Putting it up is only the beginning."

Worse, Foodman debunks the notion that once you get your sitelisted by the main search engines, the work is behind you."Search engines won't bring you much traffic," hesays. And while he's made certain his site is listed in thevarious engines, "out of 5,000 visitors on an average day,maybe 30 come from the search engines," he says."That's no way to build a business."

How to lure eyeballs? "You have to promote your site,"says Foodman, who buys advertising exposure online and in printmagazines. "That's the only way to win on theWeb."

They don't buy. But once you've got traffic,profits are within reach, right? You know what's coming. Thestartling news is 75 percent of online customers who fill shoppingcarts bail out before clicking the "buy" button,according to research from BizRate (http://www.bizrate.com) and NPD Group(http://www.npd.com).

"For most sites [the conversion rate] is under 2percent," says Phil Terry, referring to the percentage ofvisitors who actually buy something.

In other words, a site can be jammed, but the cash register maynever ring. "Most sites focus on the wrong thing--they seektraffic, not customer experience," says Terry, who adds thatthe remedy is to build an e-tailing site, from the ground up, withthe goal of enhancing and simplifying the shopping experience.

Outages. Many major Web sites have had them, and theinevitable result is a flood of bad publicity. Sometimes outagesare flukes--bugs that surface in software or that occur during asite upgrade. But often, "the problem is implementation of apoor plan at the beginning," says Moen.

Even worse, outages often happen exactly when a Web site beginsto catch on. "Many sites simply don't scale," saysMoen, meaning a site that works fine when there are 100 visitors aday may show strains at 1,000. "You need to build a site thatreadily scales as traffic increases," he adds.

Doing so requires nothing more than planning. Always ask yourtechnical consultants, if traffic goes up tenfold, how will wehandle it? Make sure you know the answer before putting up your Website, because once a Web site catches on, it's likewildfire.

Fraud. A dirty secret about the Web is that crooks loveit due to the comparitive anonymity afforded by the Internet. Justlisten to Jonas Lee, the 33-year-old founder and CEO ofGiftCertificates.com (http://www.giftcertificates.com):"From Day One, we've had problems with fraud, but everye-tailer does. Fraud is part of selling on the Internet.

"We're lucky we started slow. As we grew--as publicawareness of us grew--we also grew more expert at detecting fraud.Every e-tailer has to do the same."

Fighting off the big dogs. Larry Cuneo, the 48-year-oldCEO of Minneapolis-based CarSoup, knew he had big problems from theday he launched his site in 1998. The space he coveted--sellingcars on the Net--had already been staked out by big players,including Microsoft (with CarPoint) and Autobytel.com. But Cuneothought he had a unique twist: His site would be local, targetedstrictly at nearby dealers and car buyers. But it was rough going."We had considerable difficulty gaining credibility,"says Cuneo. "That's lowered our recognition and ourrevenues--from advertisers and e-commerce partners."

Cuneo didn't quit, though. For one thing, he budgeted 50percent of his gross revenues for marketing and promotion. He alsoinvested substantial time in coming up with local promotions thebig boys couldn't
rival. "We'll sponsor cars in parades and little localevents," says Cuneo. The upshot: Today his site, http://www.carsoup.com, holds agenuine lead in its market over the national rivals. "Butwe've had to work hard to get here, and we'll have to workto hold this spot," says Cuneo.

Making partners. For many start-up e-businesses, thesurest path to prosperity is to hook up with established businessesand hope their reputations will help. (See https://www.bizexperiences.com,"Find Your Partner," February.)

The biggest problem Jonas Lee at GiftCertificates.com struggledwith was finding companies willing to do business with him. Hisidea to sell gift certificates redeemable at major retailerssounded terrific, but he had problems persuading retailers to dobusiness with him. He now has deals with over 350 major retailers,but "we knocked on many doors before we signed the firstdeals," he says.

Why? Start-ups are potential pathways to wealth, but they arealso fly-by-night, and major, established businesses don't wantto risk tarnishing their brands by partnering with start-ups thatgo bust. "It took me two or three months of persistent callingand explaining," Lee recalls. "You may have a good idea,but you have to also convince people you're a good businessperson, and that takes time." The broader point: Partnershipsare wonderful, but convincing partners to ally with you is nothingshort of hard work.

Worth The Effort?

Are all these tribulations too much to suffer? Of course, theupside is the potential for fantastic wealth. But another take isoffered by Oldham. "Although I never would have imagined howmuch energy and anxiety go into building a dot.com business, thisis a great way to pursue business success," he says."There's a lot of tension--but it also is a lot offun."

Contact Sources

Aspen Consulting, (847) 806-1220, steve@asp.com

Wally Bock, (910) 343-8661, http://www.wallybock.com

Carsoup,http://www.carsoup.com

Creative Good Inc.,http://www.creativegood.com

META Security Group, (678) 250-1250, http://www.metasecuritygroup.com

Trexar Technologies, (770) 442-8045