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Dot.com failures easing
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December 27, 2001: 12:57 p.m. ET
Shutdowns more than doubled in 2001, but the pace is slowing, report says.
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NEW YORK (CNN/Money) - The bad news is that more than twice as many dot.coms closed up shop in 2001 than in 2000. The good news is the worst seems to be over.
Webmergers.com, which provides research and services for buyers and sellers of Internet and technology properties, released a report Thursday showing roughly 537 Internet companies went belly up this year. That's up more than 138 percent from 225 in 2000, the report said.
The percentage of electronic commerce and Internet content providers shutting down declined from 2000, with more companies that provide infrastructure, Internet access and consulting services to business customers falling victim to the ongoing industry shakeout, according to the report.
By Webmergers.com's count, e-commerce companies accounted for roughly 35 percent of the failures in 2001, down from 54 percent in 2000, while news, entertainment and other content sites made up 24 percent of the shutdowns in 2001, down slightly from 27 percent in 2000.
Meanwhile, 21 percent of the dot.coms that shut down in 2001 provided network infrastructure, up from 8 percent in 2000. Web consulting services companies accounted for 7 percent of 2001's shutdowns, up from 3 percent in 2000, the report said.
Even so, Webmergers.com said the pace of shutdowns appears to have eased over the past two months, with only 42 shutdowns reported in November and December, the slowest rate since the summer of 2000.
"Despite the carnage this year, the worst is clearly over for Internet closures," the report said.
While it may appear that dot.com shutdowns have declined because there are none left to close, Webmergers.com contends that is not the case.
"We conservatively estimate, based on several data sources, 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," the report said.
Instead, the report argues that it is more likely that the "Darwinian process" has weeded out the weak Internet companies and left only the strongest ones standing. 
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