The Dotcom Boom, 6000 Close 10 Years After 5000 4000

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Close 500030 25 4000 On March 10, 2000, the Nasdaq peaked at 5,048.62. 20 Then it promptly nose-dived, never to see that level again. Here’s a look back at the era that 300015 launched—and crushed—a million dreams. by Mathew Honan and Steven Leckart $30 B 5000 10 2000 $25 B 4000 5

$20 B 3000 10000 “No ecommerce company has ever made $15 B a profit. Certainly we will, and the analysts 2000 have us making a profit in 2001.” $10 B

—Craig Winn, CEO of “convergence commerce” outfit Value America, May 1999 1000 (The company filed for bankruptcy in August 2000.) $5 B

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Close 500030 25 4000 Still Busted 20 A decade after the crash, VC funding and IPOs haven’t bounced back. 300015

$30 B 5000 10 Venture capital funding 2000 Total offering amount of venture-backed IPOs $25 B 4000 5 Nasdaq Composite Index $20 B 3000 10000

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SOURCES: Bloomberg, National Venture Capital Association, Thomson

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Catching up with some key inflaters of the technology bubble.

Stephan Shawn Bernie Mary George Frank Paternot Fanning Ebbers Meeker Shaheen Quattrone

then Founder, then Inventor, then Founder, then Analyst, then CEO, then Investment TheGlobe.com Napster WorldCom Morgan Stanley known for Leav- banker, Credit known for Net- known for Single- known for Being known for Urg- ing the top job at Suisse First Boston ting tens of millions handedly spark- convicted of con- ing her bank to take Andersen Consult- known for Urging of dollars when the ing the file-­sharing spiracy and pub- ing to lead an online employees to “clean online community revolution from after bilking inves- lic, launching the grocery startup; up” files that proved he started in college his dorm room and tors out of $11 billion. dot­com boom; raising $400 million CSFB got kickbacks produced the larg- dragging the music before pleading being bullish on from VCs and then for slipping hot est IPO in history; business into the the fifth “I believe ­location-based $375 million in an stock to clients. quitting a year later digital era. that no one will con- mobile services. IPO; quitting before months he had to after the stock fell cost of settling clude that I engaged now Still a ­Morgan Webvan filed for behave before his precipitously. RIAA lawsuits in any criminal or Stanley analyst. bankruptcy. obstruction of age at ipo 24 $26 million fraudulent conduct.” Meeker’s annual talk Value of golden justice charge now Angel invest- now Starting a new, He later pleaded at the Web 2.0 Sum- parachute was dismissed by ing; producing films mysterious com- guilty. mit is required view- $375,000 a year a judge 12 like Life 2.0, a doc pany with Facebook now Doing 25 years ing for today’s more now Sits on several now Runs a about Second Life. alum Dave Morin. for nine felonies. sober investors. company boards. merchant bank.

2000 vs. 2010

Philip Josh Sabeer Kaplan Harris Bhatia Unemployment rate 24-Pack of red bull then Founder, then Founder, Jupi- then Cofounder, 4% 10% Fucked­Company.com ter Communications Hotmail $57 known for Run- and Pseudo.com known for Sell- $38 ning a dotcom known for Dump- ing his company death pool that pro- ing millions into to for vided a daily shot a pioneering but $400 million on of schadenfreude; doomed web­casting his 29th birthday, THEN NOW THEN NOW turning the site’s site; lavish ­parties; making a 1,333 software into the Big Brother–ish percent profit off

successful online ad art projects; hold- free Web-based domain Registration Hosting (monthly, per MB) (per year) server AdBrite. ing client meetings email. $2.58 $0.0005 now His new ven- dressed in drag. Now Hoping to ture Blippy shares now Appearing re-create his for- information about in the doc We Live mula for success $129 $10 credit card pur- in Public. Trying to with SabseBolo, a chases with your raise millions for free online telecon- friends. another art project. ferencing service. THEN NOW THEN NOW “The new boy is in town; the new boy is taking over as king of media … I’m in a race to take CBS out of business.”

—, CEO of Pseudo.com, February 2000 (Eight months later, Pseudo.com filed for bankruptcy. As for CBS? Don’t miss CSI Thursdays at 9 pm!)

“What the Walkman did for music, what the cell phone did for telephony, Palm will do for your wireless data world—simply being connected. Anytime, anywhere.”

—Carl Yankowski, CEO of Palm, August 2000 (Yankowski was out by the end of 2001. The company later ceded its leadership of the PDA market to Research in Motion.)

What a difference a decade makes. Note: Numbers adjusted for inflation.

ecommerce sales hard drive storage Aeron Chair Bandwidth for WEb storage (annual) (per GB) streaming video (per GB) (monthly, PER GB) $1,309 $44.56 $1,250 $193 $879 $19.5 B $156 B

$0.07 $0.028 $0.15

THEN NOW THEN NOW THEN NOW THEN NOW THEN NOW

“Obviously there’s some speculative action in the dotcom IPO market, but there isn’t a sign of a fundamental problem.”

—John Skeen, director of portfolio strategy at Banc of America Securities, December 1999 (No fundamental problem, except for all those newly public companies that had no clear path to profitability.) Links to Nowhere Companies come and go, but domain names last forever—as long as someone pays the registration fee. Here’s where a few dotcom classics send you now.

Alltheweb.com (search engine) -> Yahoo-powered

Beenz.com (ecurrency) -> Domain squatter

Bid.com (auctions) -> Server not found

Boo.com (fashion) -> Travel review site

Contentville.com (online magazine) -> Domain squatter

Estyle.com (fashion) -> Server not found

Feedmag.com (online magazine) -> “Site Temporarily Unavailable”

Geocities.com (community site) -> “Sorry, GeoCities has closed.”

Keen.com (personal advice) -> Offers psychic readings

Kozmo.com (snack and movie delivery) -> Server not found

Napster.com (file-sharing) -> BestBuy’s music-streaming service

Pets.com (ecommerce) -> PetSmart online community

Pointcast.com (push information delivery) -> Flash application library

Scient.com (strategic consulting) -> Domain squatter

Snap.com (CNET portal) -> Applet site for Web page previews�

Xoom.com (community site) -> Money transfer service

“We see Time Warner and AOL as the sort of classic one-plus-one-equals-three situation here.”

—AOL president and CEO Robert Pittman, January 2000 (Earlier this year, former Time Warner CEO Gerald Levin said the AOL acquisition was “the worst deal of the century, apparently.”)

Survivors AltaVista iVillage The first killer The stock of Once a large search engine is this women’s portal player and These dotcom pioneers may lack still processing community site owner of Wired the swagger of yesteryear, but they’re queries—and dropped from $114 .com, Lycos is still hanging in there. reminding to less than $1 but now a search site us again why found a lifeline in owned by a South won. buyer NBC. Korean company.

The Knot The Industry The Motley More than a Standard Fool decade after its The dotcom bible Long after the IPO, the Knot starved to death bubble burst, proves that even on $200 million this investment if marriage isn’t a year. Now it research haven always eternal, it’s publishes tech is having the last still profitable. news online. laugh.

Tripod RedEnvelope Salon GeoCities razed A bankruptcy filing The stock costs its online commu- and a new owner less than a candy nity, but the other mean this gift site bar, but this go-to site for free can still help you pioneering Internet Web hosting in find that perfect magazine remains the ’90s remains something for one of the Web’s an option. Mother’s Day. sweetest reads. Great Ideas, Bad Timing The dotcom collapse decimated lots of bad ideas. (Free one-hour ice cream delivery, anyone?) But many great concepts got trapped in the rubble. Here are some that have struggled back to life.

Great Idea Why It Failed Why It’s Succeeding Now Who’s Behind the Rebirth

Free Ad-supported dialup had Wi-Fi lets providers grant Meraki, municipal Wi-Fi Internet its day, until Internet free or tiered access Snap.com (CNET Internet portal) -> Applet site for Web page previews� access advertising dried up and without investing a fortune (NetZero, costs spiraled out of control on infrastructure. Xoom.com (community site) -> Money transfer service BlueLight) just as consumers began flocking to broadband.

Free Jimmy Wales’ first Hey, check out all these (and all the other online encyclopedia venture relied monkeys! We should totally Wiki’d-pedias out there) encyclopedia on professionally edited, give them typewriters. Or at (Nupedia) peer-reviewed writeups least let them edit this stuff from expert sources. Read: themselves. time-consuming and costly.

The Yahoo paid $5.7 billion for YouTube built the bridge .com, Boxee, Hulu, Internet Broadcast.com, but it died to the broadband era, iTunes, Netflix, Vimeo, as TV in the pipe. Internet video while media execs eager to YouTube (Broadcast.com, before broadband was avoid the music industry’s Real­Audio Player like pouring tar through a mistakes agreed to GoldPass) garden hose. distribute content online.

Virtual Consumers weren’t thrilled Let consumers spend AceBucks (Facebook), currency with being paid by one virtual bread the same gold (World of Warcraft), (Beenz, Flooz) site for actions they took place they bake it: inside Linden dollars (Second on others, and regulatory game worlds and on social Life), Offerpal hassles hurt virtual networks. currency’s prospects.

Push PCs with antediluvian x86 Mobile devices, faster CNN mobile app, Facebook, information processors, slow Internet processors, and cheap RAM FriendFeed, iPhone push delivery connections, and paltry now push updates to us notifications, Pubsubhubub, (PointCast) memory struggled to serve everywhere, all the time. RSS, Twitter push applications. Make it stop!

Illustrations by Quickhoney “It’s a piece of shit.”

— Lynch analyst in an email message to a colleague about 24/7 Media, dated October 10, 2000, when Merrill had a Buy rating on 24/7’s stock. (The SEC later charged Blodget with ; he agreed to a $4 million fine and a lifetime ban from the securities industry.) Postmortem A final assessment of the dotcom era.

search advertising

AWESOME iPod Kozmo.com

TiVo genome mapping P2P Jerry , 1996 Johnny Mnemonic Deus Ex The Sims Amazon.com free massages The Matrix rooftop parties eBay buys PayPal daytrading in your pajamas free PCs Netscape Vindigo ringtone business stock options in lieu of pay, 1998 Moby eToys

MONEY- , 2000 LUCRATIVE BLEEDING candy-colored everything pitchwoman: Whoopi Goldberg (Flooz) pitchman: William Shatner (Priceline) typing “http://” optical networking DNA patenting Dutch auction IPOs Pirates of daytrading in public Web TV domain squatting stock options in online greeting cards pop-up ads lieu of pay, 2001 pop-uppop-uppop-up ads ads ads You’ve Got Mail pop-up ads Segway G2G (government to government) P2P (peer to peer) DigiScents Razor scooter Jerry Yang, 2007 Windows 2000 awful non-commissioned credits tk here tk credits non-commissioned here tk credits non-commissioned

0 0 0 MAR 2010 illustration by Firstnametk Lastname search search advertising LU CRATIVE

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non-commissioned credits tk here The technology bubbleforged itsown lexicon. can bust out an obscure acronym or puzzling jargon.Never say something in plain English when you P2P (peertopeer) G2G (government togovernment) illustration by G2C (government tocitizen) G2B (government tobusiness) C2C (consumertoconsumer) B2G (businesstogovernment) B2E (businesstoemployee) B2C (businesstoconsumer) B2 (businesstobusiness) X2Y walled garden vortal portal information broker Media sticky m-commerce marketspace impressions hits eyeballs click-and-mortar brick-and-mortar Commerce etailers eprocurement emarketing emall ecommerce ebusiness eauctions E-Everything Dot-Communication Firstnametk Lastname V supply-chain management OLTP (onlinetransaction processing) OLAP (onlineanalyticalprocessing) ETL (extract, transform, andload) ERP (enterpriseresource planning) EDI (electronic datainterchange) ECM (enterprisecontentmanagement) DSS (decisionsupportsystem) data-warehousing data-mining CRM (customer relationship management) Business Gobbledygook webinar Web conferencing webcast teleconferencing intranet extranet Not F2 AN (value-added network) “Things will pick up again, because not even —Larry Kudlow, CNBC host, February 2000 2000 February host, CNBC Kudlow, —Larry can stop the Internet economy.” (Indeed, not even Greenspan could stop the Internet Internet the stop could Greenspan even not (Indeed, economy—from tanking.)

“We are the good guys. —, CEO of Enron, June 2001 2001 June Enron, of CEO Skilling, —Jeffrey We are on thesideofangels.” (The company’s massive fraud was revealed shortly shortly revealed was fraud accounting massive company’s (The appealing his24-year sentencetotheUSSupreme Court.) thereafter. Skilling was convicted of 19 felonies and is now now is and felonies 19 of convicted was Skilling thereafter.

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