The dotcom ad noise

If you're not yet brain dead, and have been following the trends in the stock market, it was hard last week to miss an obvious point.

The big consumer product and industrial companies of America, grouped broadly in the Dow Jones Industrials, were getting hammered, while the tech stocks clustered in the Nasdaq Composite Index were enjoying record highs. The Dow took a merciless beating last week, dropping down below 10,000 for the first time since October. The writing seems to be on the wall, and a lot of people are selling off their usually reliable Blue Chips.

I received some insight into how serious the split in the stock market had become when a good friend of mine, a guy I think of as a savvy general-market investor, called me in a bit of a panic. "Help! I'm getting killed in all my Dow Jones stocks. Help me get into some tech stocks," he pleaded.

Of course, it's not that simple. Many tech stocks, like those of iVillage and Disney's Go.com, are also getting hit bad, no matter what exchange they trade on. IVillage was perilously close to hitting a 52-week low last Thursday. But a pattern does seem to be emerging, in which The Street seems to like best those companies that are engaged in providing tech services to other companies. Intel was the hot stock on Thursday, a typical example of the kind of company most in vogue today.

The interesting thing about this is that it parallels what I've been hearing on The Street-that VCs have totally soured on what are known as "b-to-c" e-commerce businesses (business to consumer.) What VCs like now are b-to-b companies, those engaged in selling tech products, hardware and software to other businesses. This is one of the reasons that CMGI has been such a market darling, because it's heavily concentrated on such stocks.

What's wrong with b-to-c? After all, b-to-c e-commerce companies include Amazon.com, Priceline, and eBay. These stocks are high-flyers, even if they lose money. What a lot of analysts seem to have concluded is that the traditional way to "success" in b-to-c, in which companies like Amazon and Priceline spend hugely in marketing and portal positioning in order to basically buy clicks and market share, is risky and troubling, especially for startups. In other words, it worked for Amazon, and we will forgive Jeff Bezos every time he launches a new product and spends all his profits in marketing and promotion, but we don't want any startups to try that approach.

And there's a point to be made there. Because increasingly all those promotion dollars are just cluttering TV, radio and magazines with a lot of dotcom noise that blends together into indistinguishable mush. For example, I can tell you that I personally have heard dozens of ads for a company called Gomez.com, but as of this writing I could not actually tell you what their shtick is (and I anticipate an angry e-mail from someone at Gomez.com). Amazon advertising works because you already know what Amazon does, and if they're offering a new service or product, you'll probably retain that information. But if you don't even remember what Gomez.com actually is, you're unlikely to remember to surf there. (Eventually I did go to Gomez.com, and they seem to rate e-commerce sites. But believe me, I didn't know this before writing this column, even though I know I've heard their ads dozens of times.)

So the current market trend actually makes some sense to me, unlike most market trends. Ignore it at your peril.