Dot-Com Companies in a Mature Market

Daniel Gross writes about how hard Yahoo! and company are finding it to mature gracefully. Having an exclamation point! in your name doesn't help:

Why Yahoo!, eBay, Amazon, and AOL are tanking. By Daniel Gross: By Daniel Gross: From the ashes of the 2001-2002 crash there emerged four horsemen of the dot-com apocalypse: Amazon.com, Yahoo!, eBay, and AOL. This quartet of iconic companies, wounded but not destroyed in the crash, survived the plague years and flourished when the market recovered. But in recent weeks, at a time when online advertising and e-commerce are enjoying strong growth, all four have pulled up lame.... [E]ach derives the lion's share of its revenues from a maturing U.S. market, each is finding profit margins slipping as it tries to diversify, and each has foolishly reached back to tried-and-failed ideas of the dot-com era for salvation.

On Tuesday afternoon, Amazon, the leading e-tailer, announced its quarterly earnings. The top line was good: Revenues rose 22 percent from the year before. The bottom line? Not so much. Operating income fell 55 percent to $47 million from $104 million in the year-earlier quarter. Why? Amazon ramped up spending on technology and content, slashed prices, and offered more free and reduced-rate shipping. In other words, it had to work a lot harder for the money.... eBay also took some lumps when it reported earnings last week.... Operating income fell 18 percent in the quarter.... Yahoo! reported a similar story. Revenues, 88 percent of which came from advertising, rose a very healthy 27 percent. But operating income fell 12 percent.... AOL's parent company, Time Warner, won't announce its second-quarter earnings until next week. But the first quarter... saw operating income fall—by about 14 percent, from $314 million to $269 million. And on July 11, the Wall Street Journal reported that AOL might soon adopt a new business strategy: It will morph from a subscription-powered Internet-access provider to an advertising-supported portal.... [I]f it can keep people using AOL for e-mail (and hence as a launching pad for the Internet), it might be able to capture more of the Internet-ad-sales market...