dot.life

The new dot.com survivors

• Rory Cellan-Jones
• 14 May 09, 16:32 GMT

I've been indulging in nostalgia today, talking about the events of 1999 and 2000 for an Open University programme about the dot.com bubble. They were heady times, when one aspiring online retailer flew New York's top coiffeur to London just to fix the hair of an important member of the team - not a real person, but the "avatar" who welcomed visitors to the online store.

That boom was of course followed by a crash which left the dot.com landscape in Britain riddled with corpses and barren for some years to come. Then there was another much less spectacular boom for technology companies, which ended last year as the rest of the economy plunged into recession. This time, however, the landscape looks a lot brighter and there are some notable survivors still making progress online.

I received a press release this morning headlined "Media Momentum Top 50 Shows the Media Industry Defying the Credit Crunch". As ever with these things, it was a rather over-written account of an award ceremony celebrating digital media successes across Europe. But there did seem to be evidence of three UK firms - Shazam, Seatwave, and Moneybookers - weathering the storm rather well. What I wanted to know, however, was something rather simple - do they, unlike just about every dot.com I met ten years ago, make any money?

Shazam is the company that's received a lot of positive buzz for a service which allows you to hold your phone against any music source and get back a message telling you what that song is. The company was founded in 2001 and it sounds like an amusing gimmick which will never become a sustainable business.

"Three years ago, when all you could do was name that tune, that was probably true," admitted the chief executive Andrew Fisher when he called me from Los Angeles where he's on a business trip. But he says that adding more bells and whistles to the service and a change in the business model have delivered outstanding growth - users are up from 20 million to 35 million since September 2008 - meaning that Shazam is now profitable.

Revenues used to come from phone customers who paid to use the service. But last year, Shazam launched its first free service, an iPhone app, and is now earning plenty of money from advertising and from its share of digital downloads - when you find a song's name, you're pointed at Apple's iTunes store. Just as other online companies are deciding that "free" is not a sustainable business model, Shazam appears to be returning to dot.com economics - and making it pay.

Seatwave was launched in February 2007 as an online exchange where fans can buy or sell tickets for major events. It sounds as if it might have two problems - first, launching just as the economy was heading into problems, and second, being seen as little more than a paradise for touts.

But when I got the chief executive Joe Cohen on the phone, he dismissed the second problem - "we don't get hung up on who's selling on our site as long as they obey our rigorous code of conduct" - and said that building a business during a recession was a positive advantage.

"All my costs have come down, my labour costs in particular, and there's far less competition for good staff than 18 months ago." There followed a blizzard of statistics - "Q1 sales up 300% on last year, burn-rate cut by 60% - but what I really needed to know was the bottom line. Mr Cohen said the business would be profitable next year - and its path to profitability had actually been smoothed by the recession.

Still, let's wait and see whether Seatwave delivers on that promise in a competitive market where regulatory uncertainty and poor customer service have been major issues.

Moneybookers is in that increasingly fashionable area, online money transmission. Its website tells me it "enables any business or consumer with an e-mail address to securely and cost-effectively send and receive payments online - in real-time!"

That exclamation mark is presumably supposed to reflect our astonishment that you don't have to wait three days for your cheque to clear. In effect, it's Europe's PayPal, and is taking advantage of the deficiencies of the old-fashioned banking system in the UK and and other European markets.

Martin Ott, the co-CEO, told me that the company, which he and his fellow German Nikolai Riesenkampf founded in London in 2000, was growing very rapidly. Last year its profits - at least on that slightly dubious EBITDA measure - more than doubled to 18.7m euros. And he says that the recession isn't slowing that growth: "What we see is that, during this financial crisis, customers spend more time at home, going online to seek a bargain. And there are more people starting small web-shops, which need a payments system like ours."

So three UK-based companies either making money - or on the path to profits - in the online world. Two out of three of these dot.com survivors are not dependent on advertising for their revenues, but on good old-fashioned cash paid out by their users. And, as far as I know, none of them is spending money on hairdressers for their avatars.

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