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Sanjeev Bikhchandani on lessons learnt from The Great Dotcom Bust of 2000

“Many wannabe entrepreneurs and their backers failed to understand that there is one set of competencies needed to build a website and another quite different set to run a web-based business. It was assumed that if you could build a good site you would have a successful web business,” Sanjeev Bikhchandani, founder and CEO of Naukri.com, wrote in an article titled ‘The Story of the Year – The Dotcom Bust’ which was published on 24th December 2000 in The Pioneer newspaper. Bikhchandani recently reproduced the article in his blog. An excerpt:

“Many wannabe entrepreneurs and their backers failed to understand that there is one set of competencies needed to build a website and another quite different set to run a web-based business. It was assumed that if you could build a good site you would have a successful web business,” Sanjeev Bikhchandani, founder and CEO of Naukri.com, wrote in an article titled ‘The Story of the Year – The Dotcom Bust’ which was published on 24th December 2000 in The Pioneer newspaper. Bikhchandani recently reproduced the article in his blog. An excerpt:

“The most fundamental lesson from the dotcom fiasco is that, for most of us, there is still no quick and easy way to get rich… In order to realise value, you have to first create it. You need customers and you need to offer them a value-proposition. You need to sell them something that they want and you need to charge them an economic price for it.

“A problem that industry pundits did not recognise as one, till it was too late was the use of proxies as evidence of success. Hits, page views and visitors were parameters used to value businesses. Whereas conventional logic would suggest that the real health of a business should be measured by revenues, costs and profits.

“Another myth which was perpetuated was that if you spent a lot of money on advertising, you built up brand equity and barriers to entry, which in turn built up your valuation. The net result was that many dotcoms that got funding, spent recklessly on advertising without sufficient scrutiny of how this spending was going to build the business. But that’s easy to do with a clear conscience if you are spending someone else’s money.”

Sanjeev Bikhchandani suggests online entrepreneurs to understand a few ground realities: “They are not running a dotcom but a web-enabled business. The Net is not a business but a channel of communication… That they need to chase the right metrics – customer satisfaction, revenue and profits are in and page views are out. That overheads should chase turnover and not the other way around. That a brand is not built by advertising but by customer experience. And that they cannot spend money that they cannot hope to earn.”

Read the full article here

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