Web closures more than double in 2001

SAN FRANCISCO, Dec. 27 (UPI) -- At least 537 Internet companies shut down or declared bankruptcy in 2001, more than twice as many as in 2000, according to a report released Thursday.

Webmergers Inc., which tracks the health of the Internet economy, reported 225 dot-com failures in 2000.

Despite the carnage, the worst appears to be over, with Internet shutdowns and bankruptcies declining substantially in recent months.

According to the survey, November and December each saw only 21 shutdowns, the lowest number since August 2000. December's failure rate was less than half the 49 casualties report in December of last year, and the fourth quarter saw only 78 shutdowns versus 135 for the same period a year ago.

Shutdowns peaked between October 2000 and June 2001, the 11-month period that accounted for nearly 75 percent of all shutdowns in the past two years.

"The impact of the shakeout, which began in March 2000, had run its course by the middle of 2001," said Tim Miller, president of San Francisco-based Webmergers.

"We expect to see the rate of failures stabilize in the first half of the year, before declining below the most recent numbers in the second half of 2002," he added.

Content and e-commerce properties account for more than two-thirds of all shutdowns in the past two years, including entertainment sites, online news providers, e-tailer, business-to-business marketplaces and other commerce properties.

Dot-com failures began to migrate from the business-to-consumer sector to the business-to-business sector in 2001. So far this year, companies aimed ay business and general-interest audiences have comprised 48 percent of the closures, up from only 27 percent last year.

In keeping with the shift in audience, the report found the percentage of content and e-commerce shutdown declined in favor of companies that provide infrastructure, Internet access and consulting services to a customer base comprised for the most part of businesses.

Miller estimates that between 7,000 and 10,000 Internet companies have received some sort of formal funding, which suggests that at most, 10 percent of significant Internet companies have shut down or declared bankruptcy.

According to the report the top five states with the highest percentage of dot-com failures in 2001 were California, New York, Massachusetts, Washington and Illinois.

California, for example, had 227 shutdowns or 30 percent of the total failures this year.

"Northern California, including Silicon Valley and San Francisco, accounted for 60 percent of California's Internet failures," said Miller.