Lessons from the tech boom-bust: overpromise and overspend, and you will likely overreact.

Position:Executive Suite

FOR A WHILE IN THE 1990S, WE FORGOT that the mortgage industry doesn't move at the same breakneck speed as consumer electronics, the computer chip sector or online sales of books and CDs.

A number of mortgage industry dotcoms hit the Web amid fanfare and with the backing of venture capital. Today, most of those portals continue to exist, but not with the same owners and, in many cases, not with the same mission. Gone are the venture capitalists (VCs) and all the promises that most consumers will soon be buying homes and financing them online by 2010.

Our industry, perhaps, was subsumed by the hype of the day. What kind of hype? Type www.cdnow.com in your browser and you'll notice that you are redirected to Amazon.com, the very company CDNow.com fervently competed against throughout most of its existence. The brand "CDNow.com" is now a part of Amazon.com as the result of a co-branding deal that preserves the CDNow.com name but gives it the platform and marketing power of Amazon.com. The fact that CDNow.com now operates within the Amazon empire is not what's important; it's how it got there that gives us the lesson we should take from the 1990s tech-boom bust.

CDNow and then

CDNow.com was created in 1994. In August 1997, the company raised $10 million in a private placement. Just six months later, in February 1998--at the peak of tech-stock euphoria--the company raised $66 million in an initial public offering (IPO). Over the next several months, in the spring and summer of 1998, CDNow.com would sign multiyear distribution and advertising deals with the likes of Lycos, MTV and Rolling Stone to the tune of more than $40 million. In July 1998, the company launched an ad campaign with MTV and VH1.

By the end of 1998, CDNow was at the top of the tech world. Shares hit the street earlier that year at $16 a share and roared to $35 a share over the summer. The name was gaining traction. The joint marketing deals were clicking, and sales were rolling in. The company raised $56.4 million in revenues in 1998, but like most dot-corns, it posted a net loss--$43.8 million.

By mid-1999, the cookie had begun to crumble (no computer pun intended). CDNow was to merge with Columbia House, but the deal fell apart, leaving CDNow's stock in a freefall and its future ability to compete with Amazon.com seriously in question. By March 2000, the stock had fallen to less than $7 a share.

CDNow's platform was a real asset, capable of generating $56 million in sales. It...

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