The Top 4 Catastrophic Internet Disasters of All Time

Let’s roll the clock back to 2001 and the year of Foot and Mouth, Jeffrey Archer’s imprisonment and the infamous Dot Com crash… In a daring move of staggering stupidity greedy venture capitalists jumped on the Internet band–wagon and created a stock market bubble which then burst to near devastating effect.

However, what is astonishing is that most of the companies which crashed all made obvious and fundamental errors of judgement.  Errors which are so simple to spot it’s hard to imagine that they were over–looked by such highly intelligent people in the first place.  Or was it simply that hubris and the high–life blinded them?

I’ve picked 4 of my personal favourites for your amusement:

#4 – Flooz.com

Total Spend $35–50 million

The founders of Flooz (the Arabic for money) had the breathtakingly stupid idea that people would buy Flooz credits which could be redeemed at any participating online store.  In other words you would hand over your money to a company who gave you credits which you could then use to buy things over the Internet.  Incredibly, they failed to spot that there was already something which we were all happily using to buy things over the Internet called “money”.

Really, why would you want to use that pesky money stuff (which everyone accepts) in place of Flooz credits which you could spend in up to, erm, a few stores?

Whoopi Goldburg headed up their television advertising campaign.  A decision she must have almost instantly regretted after Flooz became embroiled in a crime syndicate and money laundering scheme uncovered by the FBI. 

Flooz and, its competitor, Beenz.com were simultaneously declared bankrupt in 2001.

LESSON: If an idea doesn’t work in the real–world it stands little chance of success on the Internet.  Never loose your objectivity when it comes to ideas: test small first and then roll–out big only when you know it works.

#3 – Pets.com

Total Spend $82.5 million

A simple idea, buy your pet supplies online. 

Imagine spending $11.8 million dollars on advertising BEFORE you’ve done any research to see if a market exists for your product.  Well, Pets.com did just that.  Oddly, the warning signs that the market was just not as large as they thought was clearly evidenced by its total revenue of just $619,000 despite $11.8 million on advertising.  Let’s put that another way, for every $1 revenue they generated they lost $19!

What’s more absurd is that in order to win the customers over they were selling their products at a loss.  I honestly can’t imagine how that one got passed the board as it seems to be the short route to commercial suicide.  And it was!

Pets.com collapsed nine months after it was launched but despite overseeing a business disaster of Biblical proportions the CEO still managed to walk away with a $235,000 severance package.

LESSON: Testing and measuring is the essence of success.  If you know what your Return on Investment is month–by–month you can adjust your marketing accordingly.  This allows you to expand quickly on your successes and kill off any failures before it’s too late.

#2 – Boo.com

Total Spend $135 million (in just 18 months!)

At last we Brits make it into the hit list and utterly outclass the competition for the award of “Customer, what Customer?”.

Boo was a fashion business selling clothes online and it was, to be fair, both amazing and ridiculous.  Brilliant because it really pushed the technological boundaries of the day.  They used JavaScript and Flash extensively to show 3D representations of their stock and even created an animated avatar called Miss Boo who would help you choose your clothes (the implication being that a computer could dress you better than you could).

All this impressive technology meant that the web pages were so big the customer had to wait several minutes just to get the home page started.  Back then we were all still on dial–up connections (Boo hadn’t noticed that).  Needless to say not enough people hung around to see the home page let alone actually buy anything.

It’s astonishing that no one at Boo bothered to test how the site ran on their customer’s computers. 

Their financial ruin was sealed by the most crazy business decisions imaginable like asking staff to put off holidays by offering them 1st Class flights and 5–star hotels.

LESSON: Take the time to understand your customer, their circumstances, what they want and how they want it presented.  The simplest way to do this is to ask them!

#1 Webvan.com

Total Spend $1 billion (in 1095 days or $913,242.01 per day!)

Actually, this was a sensible idea, essentially an online grocery store which delivered to your door (a precursor to Tesco.com).  What was less than sensible was that none of the senior executives or investors had any experience in the supermarket business.

What killed them off was the misjudged desire to grow at a super–charged rate.  Everyone looked to Amazon as a model online business and saw how quickly they had created their infrastructure and assumed that was the way to go.  Unfortunately, this worked for Amazon but with fatal consequences for almost everybody else that tried.

Put simply, Webvan expanded itself out of existence.

At the time only 2% of web users were buying groceries online and Webvan’s problems were not about technology, infrastructure or how clever they were it was the simple fact that they had far too few customers.  They filed for bankruptcy in 2001 and disappeared in a blaze of bank–notes.

LESSON: Even the best idea’s success rests almost entirely on how well it is marketed.  It’s no accident that the top entrepreneurs spend about 50% of their time marketing… and if they do, so should you.


No matter how meteoric the rise or impressive the investment there are simple laws of success that govern us all.  Take them to heart or ignore them at your peril!