Reader Question: Why Do (Internet) Businesses Fail?

by tyler on 12/3/2007

If you research why businesses fail on Google, most of the answers have to do with money management or founder experience issues. These explanations seem to be focused on more traditional brick and mortar (B&M) businesses. Since this blog is written by those with internet business experience, it will focus on why internet businesses fail. The cost to startup and maintain a web business (in comparison to a B&M) is relatively cheap, which leads to multiple issues.

First, replicating an existing internet company. Do you have any idea how many Digg-like sites exist? Once someone builds the software that performs the needed operations of a popular site, there are 100 versions. It is so cheap to launch a site that someone will launch a competitor for any site that sees the slightest amount of success. The problem is, these new sites do not provide any features or user interface enhancements (simplified experience) that would intrigue someone to use it.

Second, launching a web business takes time. Everyone reads about the startups that are bought in two years for tons of money. The problem is that is rare and the standard web business might take two years just to get everything working (marketing, UI, sales) in harmony. Many web entrepreneurs get depressed after a few months when they realize it is a struggle. It will take longer than you anticipate.

Third, where to get startup funding. Angel investors and venture capitalist are only relevant for about 1% of the small business/startup community. Once you have exhausted interest free options; friends, family and fools, you should try to get a loan. You need to have an established network, or have a site that came out of know where to get equity funding.

The conclusion of this article is, if you want to start a web business you need to have some sort of a competitive advantage to dethrone the current kings. Google did not replicate Yahoo and everyone just jumped over. Google build a product with a competitive advantage in both the organic engine and in the paid search. You must do the same if you want to compete.

If you have a question you would like to be addressed by Startup Hustle please contact us.

There are 4 comments in this article:

  1. 3/12/2007bizdig.com says:

    Why Do (Internet) Businesses Fail?…

    If you research why businesses fail on Google, most of the answers have mainly to do with money management or founder experience issues. These explanations seem to be focused on more traditional brick and mortar (B&M) businesses….

  2. 4/12/2007Jansie Blom says:

    we started an internet company two years ago, and thought the money was gonna roll in. It’s been a real struggle, but it seems we’re getting the hang of it. it must be said, we knew absolutely nothing about web design or web marketing up until two years ago. it’s been a huge learning experience for us. i would not go back to my previous job though! i think online is the way to go…

  3. 4/12/2007Scott Clark says:

    The sooner people realize that Internet businesses are just “modern” businesses… but still SMBs with all the same pitfalls and risk, the better.

    The book by Seth Godin called ‘The Dip” speaks to this topic. If you know when to quit… before you’ve sunk your life into something that won’t work, you can try something different. Just don’t stop in the middle. Either don’t start, or go all the way.

    The web gives you lots of ways to explore the feasibility of an idea, for both web-centric and product-centric sites. It just takes a good sense of analytics and some knowledge of experiment design. See Tim Ferris’ book for some examples of using Google Adwords to establish consumer interest without surveys.

  4. 4/12/2007Billionaire Business Strategies says:

    Don’t forget that it’s also hard to get noticed in a sea of 60,000,000 plus websites. No matter what you try to do there will already be 10,000 other websites ahead of you who got all their incoming links back in the 1990s when people still gave out helpful links.

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