Among those retailers who did survive, news continues to improve. The report finds that online retailers have been able to reduce their losses as a percentage of revenues. Operating losses decreased as a percentage of revenue from 19 percent in 1999 to 13 percent in 2000. As for elusive profitability, even more happy tidings. By Internet retail type, 72 percent of catalogers (sites owned by offline catalogs), 43 percent of store-based retailers (sites owned by brick stores) and 27 percent of Web-based retailers (Net-only retailers) are profitable at an operating level.

The report finds that movement toward profitability is due, in large part, to online retailers placing tighter controls on their marketing budgets. You think?. As a result, customer acquisition costs for all online retailers fell from an average of $38 in 1999 to $29 in 2000. Web-based retailers (the stickiest of wickets), in particular, were able to bring them down from a high of $82 (ouch) to $55 (still not great) over same period. The best-performing Web-based retailers (the top 50 percent) reduced acquisition costs to an average of $14 (yea!) per customer rivaling performance of catalog-based retailers.

The report concludes that Internet retailing is alive and very much healthy. Yet it also warns that each category of Internet retailer still has plenty to learn about running online stores. "Web-based retailers need to learn basics of retailing," said Peter Stanger, vice president and leader of Boston Consulting Group's business-to-consumer topic area. "Store-based players are new to home delivery and selling to consumers one-on-one from a distance. Catalogers have a leg up in many dimensions, but they need to perfect ways to exploit relationship-marketing opportunities. The winners will be those companies that can most effectively acquire or develop capabilities they lack and integrate them with their existing strengths." Amen.

Hats off to Net boom. They say king is dead. We say, long live king.

Napster was a wonderful example of this. A teenager was able to create a service that was quickly utilized by millions upon millions of users. Of course Napster had a glaring flaw: company was trading in products created by others, and trading without consent of those who produced products. But heart of matter is that someone without substantial resources could build a highly-used, well-recognized brand out of little more than a creative idea. Using same infrastructure, surely someone will come up with another intriguing idea that will capture our imagination and a big audience, and it will probably happen soon. And next wave of creative Internet entrepreneurs will have learned from Internet crash and its aftermath.

The Internet isn't dead. It's just stumbling a bit while taking its toddler steps. Internet start-up ideas will continue to attract creative people, simply because free infrastructure invites innovation and resists control. Control is deathword to creativity. Creative people have shunned business for that reason alone. Yet in a world where creativity and innovation become critical elements for success, you bet creative people will begin to see commerce as an avenue of expression.

During high days of Internet exuberance, I used this column to make claim that business will be creative medium of early 21st century. I still believe it's true, simply because basic elements still exist a encourage a creative approach to business. The resources to support a new company do not require control so much as creative manipulation. Given this free and open canvas, creative people will rush in, despite lingering notion that business is somehow anti-creative.