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Dot-coms get shot of reality

They face survival of the fittest in the harsh online jungle

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SAN FRANCISCO — Sink, swim or change direction.

That is what some Internet companies are doing, making changes to their product, business plans and even their raison d'etre as the market shakeout eliminates or consolidates weaker dot-coms.

After 18 months, for example, the founder of portal Myownempire. com was forced to admit his nascent kingdom was crumbling.

His $500,000 in funding, given on faith from friends, family and investors, was nearly gone in January, said founder Bob Haya, who carried the job title "king" at the company, based in Redwood City, Calif.

Though he paid some of the workers in stock only, he had to pare back his staff. The site, which promised shares of the company as an incentive to users, wasn't attracting visitors fast enough, Haya said. A meta-portal, Myownempire.com allowed users to search multiple job, portal, and auction sites all at once, but it suffered from a false perception that his online stock giveaways were fraudulent.

Rather than stick to the original concept, though, Haya salvaged the parts that worked and transformed the company into an information software developer, Coportal.com.

From its high of 20 staffers and contractors, six stayed on. Soon after Haya's company changed course, incubator CreateLabs in San Francisco bought the personalization, rules-based software company.

Haya considered seven different directions, including application service provider, business tools maker and private portal developer, before settling on his newest plan.

"We had some neat stuff we didn't know we were sitting on, used in the making of the site itself," said Haya, who brainstormed with his workers on what to save. "What a shame it would have been to let that go to waste."

Other companies who launched in new directions include Vergesoft. com, based in San Francisco, an information software company that turned into Xmarksthespot. com, an online marketing company; Beyond.com, based in Santa Clara, Calif., a computer software e-tailer that now develops software to build online stores; and Mambo.com, based in Menlo Park, Calif., a Net invitation site that spun off PayPlace.com, an electronic payment site in April.

In reinventing themselves, the companies may avoid the fate of upscale e-tailers such as the British Boo.com

and Foofoo.com, online video merchant Reel.com in Emeryville, Calif., and the Viacom-owned toy store Redrocket.com, which shut down, sold off or licensed their expensively developed technology and brand name at fire-sale prices.

The rising dot-com body count — driven by increased pressure for profits, rabid competition and the lure of better prospects — is propelling the change, industry watchers say.

"Entrepreneurs and investors assumed that they would get it right the first time and grow in record time on Internet models not proven or known," said Robert LaBatt of the Gartner Group, a technology market research firm. "But that hasn't happened, by and large."

Change is part of the nature of startups.

Yet the rise and fall of Internet companies happens more quickly and dramatically when compared with other industries.

"Traditional companies have time and space to grow slowly and manage their growth, but lots of dot-coms felt they had no choice but to have big-bang growth," said Andrew Bartels, an analyst at Giga Information Group, a technology research firm. "They're playing with a lot more money, which requires them to adapt more rapidly."