Breaking the Seal on the Dot-Coms

Cramer saw <I>CNBC's</I> Mark Haines expose the dark side of iVillage yesterday.
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As long as dot-coms are hermetically sealed in their own ridiculous world of page views and eyeballs and "members" (whatever the hell that means), they make sense. The money is all funny, the growth all apples to apples. The matrices we have crafted to value them put them on some plane that allows the companies to at least make sense to each other, if not to the rest of the business world.

But every so often that seal is cracked, and the results are always devastating. Yesterday,

CNBC's

Mark Haines

cracked the seal of

iVillage

(IVIL)

, and what spilled out was a company losing a lot of money -- even if it was "less than expected," as the company says.

This isn't the first time Haines has broken through the mumbo jumbo. A few years back, when

Iomega

(IOM)

was all the rage, he had one of the principals of that tale on and asked a series of questions that had you wishing the emperor of Iomega had thrown something on before coming on "Squawk." Naked ain't cool.

Haines did it again with

Chainsaw Al Dunlap

. Everyone was talking about how much money this guy could save

Sunbeam

(SOC)

as he did

Scott Paper

, but after Haines was through with him, you just wanted to know where the secret warehouse filled with grills was. Turned out to be in Oklahoma, I think.

On Tuesday, Haines & Co. had on Candace Carpenter, the always-ready spokeswoman for iVillage. As a part-time dot-comer myself, I have always been blown away by Carpenter. She has positioned her company, despite massive sniping on the sidelines, as

the

community Web brand out there, the start-from-scratch real revenue brand that got in the door when nobody else could.

She is my kind of exec -- rough and tumble and making it all happen despite lots of backbiting from jealous types who want to claim they were iVillage. The company has accomplished a lot in a very short time, and iVillage's media campaign makes me jealous with rage because it's so effective.

But on "Squawk," there she was talking about -- holy cow -- seasonality. Seasonality? Heck, that's something that happens to old-line companies that don't grow much. Seasonality is something the Net knows nothing about. We are talking about organic growth here, aren't we? Isn't that what makes dot-coms tick? What does organic growth have to do with the months of May, June, July and August?

Suddenly membership had no privileges. This is just another business, I got to thinking, except it has a big period of downtime where lots of marketing dollars have to be spent to keep the momentum going. Check that, looking at iVillage's spending, make that lots and lots.

I kind of went blank over the next few questions. But they were not elucidating answers that had anything to do with profits or return on investment or -- OK, let's say it -- real business.

Next thing I know, Haines was saying something about how he expected the stock would go up today, which was the only false note in the whole interview, because one thing iVillage wasn't going to do is go up. Not after that exchange.

And for a moment, I stood there, naked in my own dot-com, thinking, seal broken, long day ahead.

It sure was.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.