Dotcoms spent beyond their means says PWC

Only 28% of internet companies were profitable in the third quarter; a marked fall from the 41% in the black in the period from April to June.

Yet on average, companies increased their spending on marketing and overheads by 11% at the same time, bringing the total average spend to more than 150% of gross profits.

And they are running out of cash faster: the average burn rate decreased to 18 months in the period between July and September last year, down from the 20 month average earlier in the year.

However, the general trend disguises a widening disparity between the best and worst dotcoms: while the worst performing businesses lost well over 75% of their value over these months, the most successful companies nearly tripled their value.

The polarisation in performance will carry on into this year, leading to further consolidation, according to the report, which provides a quarterly analysis of the top 150 publicly-listed European internet companies.

It adds that belt-tightening by the more profitable dotcoms will affect the advertising industry this year, as the sensible players shift their expenditure away from large promotional pushes towards more targeted marketing activity.