Sadly I am old enough to remember the dot com bubble and crash of the late 90s/early 2000s. Investors, lured by the potential that the internet would change everything, were shovelling money into any company that showed it could demonstrate innovation – despite whether it was ever likely to make money or not.

When lastminute.com – surely still the flag bearer of all thing’s dotcom bubble – was floated on the stock exchange in March 2000, it was valued at £571 million; this on revenue of £37 million and profit of less than half a million. By April the share price had halved. Ultimately investors understood the hype but not the business: lastminute.com was first and foremost a travel agent. And even in 2000 these companies did not make much money.

A trip down memory lane

From a personal perspective I worked with several dot coms in the late 90s and early 00s. One, synchronisation software company Paragon Software, was acquired just before the lastminute.com float for $500 million. At the time of the acquisition the company was two years old. A less rewarding experience was working with another dot com – CitiKey – which burned through $12 million in funding in around one year before running out of money. The concept – digital guides to European cities – is something technology companies are still trying to monetise 20 years later.

A fitness machine:

Having lived through one hype bubble perhaps made me more cynical about the excitement over the Peloton brand over the past 24 months. In 2019 the idea of a connected exercise machine that helped people exercise around the world seemed niche. The subsequent pandemic – and closing of gyms around the world – turbo charged the brands development and enabled the company to sell an increasing number of connected bikes and – most importantly – subscriptions.

However, the fundamentals remained simple: Peloton was a range of exercise equipment – easy to copy and relatively low margin despite the high cost. Little wonder then that shares that were trading at $150 each a year ago are now trading in the $20 range. The FT is now reporting that shareholders are asking the chief executive to resign and for a sale of the business.

Sadly investors seem to have a blind spot for any brand that applies technology in a different way, without really focussing on the core business. Peloton was remote exercise classes on expensive equipment. This made it simple to copy and meant the brand had to work hard to justify growth expectations. When you see Peloton retail outlets on the King’s Road and in Spitalfields market in London, it makes you question the strategy. Peloton made its name by being a home-based, online and connected device, not by trying to sell in high-end boutique stores.

Focus in the USP

Ultimately the Peloton story is one of diversifying outside too quickly and too far from its home territory. This may have helped secure short term benefits, but this could come with a long term cost to the brand. Time will tell if it is more of a Paragon Software or a CitiKey.