Dot-coms seeking to become profitable should focus on cutting operating costs instead of sales and marketing costs, according to a study by Getzler & Co. Inc., which specialises in corporate restructuring.
The study showed that from the second to the third quarter of 2000, average losses remained constant at companies that cut operations costs but more than doubled at dot-coms that cut marketing costs. The study's authors claimed their finding might come as a shock to many restructuring firms, which typically cut marketing, advertising and public relations staffs and budgets when looking to shave costs.
While sales growth among the two groups remained approximately the same, there was a dramatic difference in profitability said Getzler analysts. These results indicate that marketing costs remain a far greater driver of profitability for dot-coms than operations costs.