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We all know that the revenue side of the Net has been a bust, with growth averaging about the same as growth in the off-line world these days.

But what you don't hear much about is the runaway expenses on the Web. A few years ago, when I detailed why the Web was such a rotten place to do business, I mentioned that it simply cost a ton to put out anything of quality on the Web.

Lots of folks pooh-poohed that analysis, saying that TheStreet.com simply couldn't be that efficient. That, however, was just plain wrong. Expenses for dot-coms subsequently exploded. When we write the epitaphs for all these dot-coms, we still tend to focus on the lack of repeat revenues, but I think the expense side is as much to blame.

Ironically, just as people are starting to focus on how costly the Web is, I'm beginning to see costs come down dramatically. In fact, I would say that one of the things that will go right for the surviving dot-coms in 2001 is that costs are about to be slashed gigantically.

Let me catalog places where I see big declines coming. First, hosting. One of the reasons I issued an Action Alert on Friday against Exodus (EXDS:Nasdaq - news - boards) is because of this column you are reading right now. For the longest time, you had to take all the *()^(^) that Exodus gave you, including massively overinflated rental costs, because they were the only game in town and everybody wanted them. Now, lots of capacity has been built up and I think when companies renew their Exodus contracts, they'll negotiate heavily and get Exodus to come down big-time. A year ago, the idea of even bargaining with Exodus seemed foolhardy. They had a stranglehold on the business. Now, they'll be lucky if they keep the business.

Or how about back-up hosting? There was so little hosting to begin with that backup hosting, if something were to go down, cost a fortune. Now, the surviving dot-coms are renegotiating those contracts and getting that backup price down to a fraction of what it used to be.

Dot-com software for tracking your readers used to cost hundreds of thousands of dollars, as demand seemed relentless. Now demand seems almost nil and the companies that measure traffic are scrambling for revenue. Those contracts are also going to come at a fraction of what they once were.

A year ago, if you had some sort of customer relations management tool, you could charge whatever you wanted, the dot-coms were so desperate to handle traffic. Now, they don't have enough traffic to go around and the suppliers of these products find themselves in a sellers' market. Have you taken a look at Kana (KANA:Nasdaq - news - boards) lately? Or Jeeves (ASKJ:Nasdaq - news - boards)?

So far Sun's (SUNW:Nasdaq - news - boards) pricing has held up, but I think that's one of these "matter of time" situations. Sun hasn't made a lot of friends in the past few years, with its high-priced offerings and unfriendly customer relations. I foresee some lean times, as others are now finally offering something that gets you off Sun for a lot less money.

If there was one aspect of running a dot-com that had gotten totally out of hand, it was consulting help on technology. You couldn't speak to these companies for less than a million dollars a phone call. Now, most of them aren't worth a million dollars and there are plenty of untethered consultants looking for work. I think this is a zero-growth business now and you can get qualified help for a quarter of what you would have had to pay a year ago. That is, if you need help at all.

Finally, the cost of warehouses shot up to about a 5000-year high because of the build-out by dot-coms. That's past. In about six months we'll be drowning in warehouse space. I can envisage a world in which we have to tear down warehouses in order to get some pricing! There are just too many of them.

With all of these costs coming in so low, I suspect that in the second-half of 2001 the remaining Net companies will see some terrific margin expansion. It's still too early to know which ones will remain, but it isn't too early to speculate that the raw costs of running a dot-com are about to get back to reasonable, or even sub-reasonable levels.