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January 25, 2000

Editorial

It's only e-money, isn't it?

December was a month of unprecedented giveaways for the dot-coms, especially those in consumer markets such as drugs, books and gourmet food. On-line companies threw around gift certificates and promises of free shipping in hopes that consumers soon would be there. Typical was Gourmetmarket.com, which offered new customers $15 off their first order. Another, Vitamins.com, offered $25 discounts.

Of course, it was investors who paid for all of these Christmas gifts. Now that the January bills have arrived, many are finding new respect for Ebenezer Scrooge. Mothernature.com, an Internet company specializing in natural health products, has lost almost half of its share value since going public. Last year the company spent $30 million, and yet managed to attract only 250,000 customers.

Two factors will account for the e-shakeout that seems inevitable: an overcrowded playing field and a drop in the rate of new Internet users. “Once it was a green pasture,'' lamented Henry Blodget, an analyst with Merrill Lynch. “Now there are 150 cows all competing for five blades of grass.'' Expect cheap hamburger meat in the market soon.

-- Dan Silver


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