Heavy spending becomes fact of life for Web companies

[mandy]

As the big survivors among Internet companies mature, they are learning a painful -- and unexpected -- lesson: Staying in the online game requires heavy, constant spending.

That reality is a far cry from the view a decade ago, when the Internet was seen as a relatively cheap place to do business. Since Web start-ups required little investment in physical facilities or labor, many investors argued that the high spending of those early days was the temporary price of pioneering new markets. Companies needing heavy investment -- like retailer Amazon.com Inc., with its big warehouses -- were expected to profit handsomely once their markets were sewn up.

Instead, it is becoming increasingly clear -- on Wall Street and beyond -- that just as established brick-and-mortar companies must maintain capital spending to remain competitive, Web companies, too, must keep spending for workers and customers, as well as for the technology that keeps their businesses humming: computers, servers, networking equipment, data-storage equipment and the like...

full article: http://www.post-gazette.com/pg/06066/666477.stm