The Dumbest Dot-Com

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From: Joachim Feise (
Date: Thu Jun 15 2000 - 08:19:39 PDT

This burn rate is astonishing...
I wonder how many people are betting on the burn-out of
AllAdvantage on


Now, the talk
has changed to who will be bought next, who will
die next, who will blow up with the biggest boom,
and what was the silliest idea to start with. In the
last two categories, there is no better answer
than AllAdvantage.
Right now AllAdvantage is the fattest whale on
the dot-com beach. It might take some months
for the game to play itself out, but if you care to
bet on the biggest private company blow-up in
Silicon Valley-- a blowup at least as spectacular
as the ill-fated and Digital
Entertainment Network--put your money on
AllAdvantage. In close to one year of operation,
AllAdvantage raised $135 million and has
already spent the bulk of it, losing $66 million in
the first quarter alone. But sheer numbers don't
really convey the magnitude of the folly. There
are other companies that manage to lose huge
amounts of money. What sets AllAdvantage
apart from the others is that of all the big
dot-coms that have come out of Silicon Valley in
the past two years, AllAdvantage might be the
purest expression of Net frenzy: It signed up
millions of members, and paid them to surf the
Web--literally giving away money in the hope
that simply having enough users would magically
make it profitable.
Meanwhile, the prospect of "highly targeted" ads
that would take advantage of the information that
AllAdvantage collects about users' surfing habits
is still a dream. The information is in
AllAdvantage's data banks, but only a tiny
fraction of it is actually useful to advertisers. And
to top it all off, Internet advertising rates are
falling across the industry.
So where does this leave AllAdvantage?
Depending on whom you ask (citing SEC rules,
the company would not comment because it still
hopes for an IPO), AllAdvantage still has $50
million to $65 million in cash. But much of that
money is already committed to member
payments. In other words, despite the cash on
hand, AllAdvantage still owes members many
millions of dollars for their surfing time in May
and June. On June 1, AllAdvantage announced
that it would reduce member payments (its
contract with members does let it alter the
terms) and pay members on a longer cycle--a
sign that the company is trying to manage its
cash position. But it can't reduce payments so
much that members stop using the advertising
bar because getting paid to surf was the original
idea. And while it can use a number of
techniques to delay payments, eventually
AllAdvantage will have to pay up or go broke.

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