Online Retail Officially Profitable?

from the delayed-reality dept

Remember during the dot com boom where you couldn’t find a single online retailer that came anywhere close to profitability? Part of this was due to the VC investment craze, where they were pouring money into dot coms as fast as they could, and telling them that profitability was secondary to growing the top line of their business as fast as possible. Of course, it’s always easy to grow revenue when you’re giving away dollar bills for seventy-five cents, which was basically the business model of many dot coms. Then, the bubble popped and many dot coms suddenly had to figure out a way to become profitable. Many went out of business, but slowly, survivors started to show quarterly reports with a lot less red ink. Now, a new study has found that the aggregate financial results from various online retailers shows that the overall industry is now profitable – not just a few of the bigger players. One of the main reasons for this unexpected profitability? The increasing use of paid search advertising. E-commerce sites have slashed their marketing budgets and have ditched costly (and useless) banner ads in favor of much more targeted text ads on search sites like Google.

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