Black Dotcom Shake-up

Many Internet start-ups that gambled on a big payoff are now rolling snake-eyes

It was just last year that brash dotcom upstarts were the toast of Silicon Alley and Silicon Valley. Everyone-from venture capitalists to John Q. Investor-had caught dotcom fever. If you were an entrepreneur with a catchy name and a glimmer of a good idea, money was yours for the taking.

What a difference 12 months make. As many start-ups burned through capital at a phenomenal-and alarming-rate, investors started stepping back. The gamble no longer seemed worth the risk.

Now, when it comes to making an investment in an emerging dotcom, investors ask: “Where’s the return?”

Experts say it was inevitable that the tide would turn. And African American-focused Websites have not been immune to the investment community’s cold shoulder. One by one, the black and urban Websites that sprang up-fed by venture capital and spurred by technology and the thriving economy-have been forced to close shop or partner with major corporations.

Here are some of the sites that have been shook up by the shakeout:

In August, BlackFamilies.com ceased operations.

After an April launch, Onelevel.com pulled the plug on its site in August.

The launching of HBO’s Volume.com has suffered a series of delays.

In September, hip-hopreneur Russell Simmons finalized a deal with BET.com to keep his 3-month-old company, 360hiphop.com, alive.

DME Interactive Holdings Inc., one of the first black publicly traded Internet firms, is crippled by a severe cash crunch.

World-renowned historian Henry Louis Gates decided not to go solo and sold his cultural site, Africana.com, to Time Warner for an undisclosed sum.

As industry stalwarts like NetNoir, BlackVoices.com, and BET.com strike deals with major corporations-and the crowded field thins considerably-many question whether, in the future, any money can be made online.

But analysts say that recent events are simply a natural evolution of the space, similar to what was seen in the women’s market more than a year ago or among general-market entertainment sites today.

Once the dust settles among African American-focused sites, there’ll be one major player in the arena, predicts Ekaterina Walsh, senior analyst at Cambridge, Massachusetts-based Forrester Research. She places her bet on BET.com.

E. David Ellington, NetNoir’s pioneering chairman and CEO, puts the number at four, including his own venture, of course. “It’s a normal process,” says Ellington, who’s been in the Internet game since he developed his site in 1995. “There were too many sites that launched without developing a realistic business model, way too many.”

Adds BlackPlanet.com’s executive director, Omar Wasow, “There are some trends that are about the whole industry, and there are some that are about the black space. For example in the magazine space, there are relatively few that remain independent; most usually join with large entities because of economies of scale.”

Another challenge, maintains Wasow, has been “confusion in the market about sites that aren’t sure whether they’re ‘black’ or ‘urban.’ Those are two different markets. They both have their respective audiences, but some [sites] are trying to appeal to both, and you really can’t.”

Urban Box Office’s (www.UBO.net) co-founder and executive vice president, Frank Cooper, agrees. “One problem is that the term ‘urban’

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