New Economy: The drowning goes on

After attending a presentation by an Internet publishing house two years ago, one of those present received a «Titanic» film gift. Ironically, many of the investments in the buoyant wave of the New Economy then, such as those of Lambrakis Press (DOL), the Intracom group, the Germanos group, Imako and others, have since met the same fate as the ship. The alliances formed lately, which were seen as an antidote to the crisis that has beset the sector since, do not seem to be doing much to stop the rot. Last week, it became known that a plan by Intracom and Pegasus Publishing for a joint Internet venture had foundered. The two had announced a joint venture last June, with a share capital of 2.94 million euros. Intracom announced it would maintain its portal, despite rumors to the contrary. But sources say that DOL, which had sought to dominate the sector through a wave of acquisitions, is considering shutting down its portal. Dismissals The three portals, including Pegasus’ e-go, responded to the crisis with a large number of dismissals but now seem to be realizing that even this is not enough to stem rising losses. In the last four months, DOL Digital shed 50 of its 58 holdings in Internet companies. DOL Digital is the group’s Internet subsidiary whose accumulated losses are estimated at around 26.5 million euros, after it had a total of 45 million euros. Its attempt to dominate the domestic Internet market through acquisition of holdings in all apparently promising sectors, from information technology to financial services, seems to have boomeranged. The joint ventures with powerful groups such as Altec, InfoQuest, Pouliades and Telesis are now being liquidated or sold for peanuts. Market observers have not forgotten that Goldman Sachs and its Greek representatives put the then-value of DOL Digital – which was planned for listing on a foreign bourse – at between 1.2 billion euros (400 billion drachmas then) and twice that amount. Most people who hastened to ride the wave of the New Economy expected similar capital values. But the heady days of 1999 and 2000 are definitely gone. Germanos is now looking into ways of shedding its holdings in companies such as Opticum and B-Best (which operates the electronic department store Oops!), but there are rumors that these are on the way to liquidation. Market players hold the view that large investments in new technologies, in combination with the emphasis on creating capital values rather than on the content of sites, did damage to the Greek Internet. Successful examples are few and far between and the rest are looking for ways of salvation. They also consider that alliances such as the failed one between Pegasus Interactive and Flash Multimedia are difficult to maintain. «The models are different and so are the interests,» one market player said. No funds Analysts, such as McKinsey consultants, say the basic problem with portals is not the huge amount of investment but the inability to find revenue sources. Investment per user remains at lower levels than that of competing television channels and newspapers. But revenues are also much lower. «Despite everything that is written about the Greek Internet advertising market, the corresponding revenues of domestic portals totaled no more than 3 million euros in 2001,» said one analyst. Subscriber services, a potential alternative revenue source, has not been very successful abroad. According to McKinsey, only 22 percent of the revenues of Internet portals comes from subscriptions or sources other than advertising. Moreover, international experience shows that companies with very strong content, such as the Financial Times, meet with difficulties in selling it. According to the American company WebMergers, about 1,000 web enterprises shut down last year, and more were sold or merged. The latest example is the acquisition by Infospace last November of [email protected] for just $10 million, against an earlier stock market value of $6.7 billion.