Glenn, this is what Andreesen thinks.
>Published: January 14 2001 21:45GMT | Last Updated: January 15 2001 00:48GMT
The swift change in sentiment towards internet stocks could leave Amazon.com, the US online books and CD store, as the only real start-up e-tailer that survives, according to Marc Andreessen, one of the pioneers of the internet.
In the early 1990s, as a 21-year-old engineer, Mr Andreessen helped revolutionise the internet and Wall Street through his part in the creation and buoyant flotation of Netscape, developer of the web browser.
In an interview with the Financial Times, he said: "The US is in the middle of a massive champagne hangover, with retrenchment and retreat. A lot of people are having their heads handed to them."
Of the leading US internet stocks, he expected Amazon to be able to "make the economics work" of internet retailing. "In the dotcom frenzy, companies were told to go big, or go home. All the companies formed like that, except for Amazon, are failing."
He remains sceptical of companies that have got into the habit of offering discounts and free shipping of goods. "The era when everything will be free is over."
Mr Andreessen, 29, is doubtful too of the proliferation of business-to-business (B2B) exchanges. Asked about the future of the B2B model, he responded by blowing a raspberry, then said: "The vast majority of these B2B start-ups have failed. They will bite the dust."
These doubts helped prompt him to quit investing in the public markets in 1998. For him, the turning points of the boom came when Amazon hit its peak and with the flotation of iVillage, a women's portal.
He has few regrets about the latter's fall from grace on the stock markets, however. "A few years ago they said something rude about Netscape. I thought, just wait. What goes around comes around."
Mr Andreessen now believes attitudes are shifting back to where they were in the early 1990s. "Then, it was taken as a given that companies had to have earnings and revenues. At Netscape, we were cash flow positive in less than a year."
That sentiment, towards creating a business with revenues and a clear road to profitability, has governed his latest venture, Loudcloud. This offers a blend of software, hardware and services, designed to help companies set up and run their e-business operations on an outsourced basis. Its clients include Nike, and Britannica.com, the online encylopaedia.
Part of the rationale behind Loudcloud, is Mr Andreessen's belief that the software industry is due for a fundamental shake-up. "The system of packaging software worked for a while, but what it did was allow vendors to dump on their customers, who had the responsibility to make it work. It incented bad behaviour on behalf of the vendor, because they got their money up front."
Customers, however, also recognised that the marginal cost for a software vendor of issuing more copies of their software was tiny, allowing them to put pressure on vendors to reduce costs. "It has not been a healthy industry."
Mr Andreessen believes that the emergence of broadband networks allows software to run over telecoms networks. Software vendors can charge companies on a monthly basis.
"The software vendor will now have responsibility for making the software work, so needs to have a better relationship with his customer. It is a more financially stable model. But it will be a tough transition for software companies to make."
Loudcloud raised $120m last June in venture capital funding, from investors such as Benchmark Capital. Last autumn it filed its SEC listing for a potential flotation this year.
Mr Andreessen declined to give further details, but said Loudcloud had signed up about 50 customers to its service. |
