Most dot.coms doomed, Cuban says Mavericks owner

Mark Cuban may have made his fortune with a hot Internet stock, but when he surveys today's dot.com landscape, he doesn't like what he sees.<br><br>"Most of the ones you see out there won't

Friday, April 7th 2000, 12:00 am

By: News On 6

Mark Cuban may have made his fortune with a hot Internet stock, but when he surveys today's dot.com landscape, he doesn't like what he sees.

"Most of the ones you see out there won't even be in business in two years," the Dallas billionaire said, following a luncheon speech at the Infomart to entrepreneurs looking for advice on running Internet businesses.

"If they can't raise more and more money, they're toast. There's not three of them I would buy right now. Other than Yahoo, of course," he said.

Mr. Cuban told entrepreneurs that it would be more difficult to start an Internet business now than it was in September 1995, when he co-founded AudioNet based on what was then a radical notion: sending radio programs over the Internet. Soon, the company was transmitting video as well. The company went public in 1998 as Broadcast.com and was sold last year to Santa Clara, Calif.-based Yahoo Inc. in a deal worth almost $6 billion.
Mr. Cuban, now the owner of the Dallas Mavericks, was asked whether he thinks dot.coms are overvalued.

"Ninety-nine percent of them, yes," he said, reflecting an increasingly prevalent sentiment that has been tanking many technology stocks this week.

In his speech, Mr. Cuban offered his 10 rules for running a dot.com business. All are based on creating an aggressive, viable company where success is measured in traditional ways, such as growth in revenues and net income.

"You really have to have an angle. You have to have something that's compelling and differentiated. ... There have probably been 50,000 or more dot.com-related businesses started in the last 12 months. There's only been 300 or so that have gone public. What about the other 49,700? You're not going to see 50,000 dot.com companies go public" over the next two to four years.

His rules are:
1. Design the company to be profitable. "Today, people think they need an exit strategy," he said. "But that requires that you have a market to exit to. After the past week, that may not be the case. ... You need profits to pay back investors and yourself."

2. Culture is critical. Broadcast.com enjoyed a wildly successful initial public offering in 1998, but the founders were reluctant to celebrate. "How the market responded to the IPO was a reflection of supply and demand for the stock," he said. Executives felt humbled by investors' expectations for the company. "We celebrated big sales, not the fact that we went public."

3. Do not under any circumstances listen to your customers. "By the time a company asks for a service or feature, it's too late. Learn to anticipate the customers' needs."

4. Build barriers to entry. "We built exclusive relationships with content providers and customers. We would lock out competitors."

5. Differentiate. "Changing the way a Web site looks is easy to do. Focus on things that truly make you different."

6. Traffic is king, not content. "If you don't get the traffic, it doesn't matter what the content is. ... It's the most expensive asset to create on the Net. You need to be guerrillalike in going after traffic. We went out and found things that had big audiences and became aggregators."

7. Make it easy for customers to complete a purchase. "When all is said and done, it better be close to one-touch buying."

8. Sales cure everything. "If you've got sales people selling, you can generate revenue."

9. Focus, focus, focus. "You can drown in opportunity in this business. Be specific. 'Here is our mission.' ... But you're going to be wrong, and you might have to change focus."

10. Either you're disrupting the competition or they're disrupting you. "If I saw somebody who I thought was going to be a key account for them, I went after it."

Mr. Cuban offered an addendum to his list: Have some fun.

"All the sleepless nights, the long days. I wouldn't change a minute. It was a blast."

The luncheon was part of a one-day course called "e-Startup: How to Launch the Next Great Internet Company," presented by the Edwin L. Cox School of Business at Southern Methodist University and by Strasburger & Price LLP, a Dallas-based law firm.