For Web Crowd, Stock Market’s No Party Pooper

What, e-worry?

Amid some of the most disconcerting stock market signals the Internet economy has seen, the estimated 50,000 people attending the vast Internet World trade show in Los Angeles this week coped by throwing the most lavish celebrations venture capital money can buy.

They formed convoys of limousines, served up lamb and lobster, ogled such hired guests as Pamela Anderson-Lee and danced to the tunes of Carlos Santana and the Goo Goo Dolls. They dropped hundreds of thousands of dollars throwing dozens of parties at venues from the Mayan downtown to the House of Blues on the Sunset Strip.

In perhaps the most extravagant display of all, a start-up called Streamsearch.com rented the grounds of the Playboy Mansion in Holmby Hills, paid former Playmates to lead drooling guests on tours of the estate, and capped the evening with a concert by the Brian Setzer Orchestra.

One investor in Streamsearch surveyed the spectacle and joked, “I’m sure at least half of [my investment] is going toward this event. Professionally, I think it’s frivolous. Personally, I think it’s cool.”

The series of bashes surrounding the Internet World show--which ends today at the Convention Center--found a “dot-com” crowd so accustomed to good fortune that even the brief prospect of a market meltdown barely dampened their enthusiasm.

At Tuesday’s Playboy party, for instance, guests lined up at Internet terminals overlooking the pool to steal glances at how their portfolios fared on a day when the Nasdaq index plunged 13.6%. But most were focused on more pressing matters, such as getting their photos taken with Playmates or learning the whereabouts of Hef’s bedroom.

Investors and executives attending this week’s show almost uniformly proclaimed undiminished optimism about the economic opportunities on the Internet. Only a few would acknowledge nagging concerns that this Gatsbyesque era might ever come to an end.

“There’s a definite possibility that this could be a peak in the lavishness of Internet World parties,” said Kathey Hale, an analyst at GartnerGroup in San Jose. “That Playboy mansion rental could be cited in some business school study someday as something that shouldn’t have happened.”

But even Hale said she was not alarmed by the series of troubling signals in Internet stocks in recent weeks.

The Nasdaq composite index, heavily weighted with technology shares, was subjected to its most violent downturn in years earlier this week. The index quickly rebounded, and closed Thursday at 4,267, up 98 points on the day. But the experience unsettled thousands of investors who had come to expect nothing short of steady surges upward in Nasdaq.

That tumult came after auditors for CDNow, Drkoop.com, Value America and several other companies cautioned in public filings that the sites are burning through cash at such a rate that their survival is in “substantial doubt.”

Meanwhile, a growing number of dot-coms have seen their stock prices plunge well below their initial public offering levels. Some, such as Drkoop and Salon.com, are now trading below $5 a share, falling into the “penny” stock category shunned by analysts and brokers. Wall Street sponsorship can disappear for such stocks, making it impossible for them to raise capital.

A broader downturn in Internet stocks would threaten the lifeblood of the dot-com economy. Almost universally unprofitable, online companies depend on the buoyancy of their shares as currency for hiring employees, acquiring other companies and marketing their sites.

But those grim possibilities were hardly weighing on the minds of the Internet entrepreneurs sponsoring this week’s galas.

“There’s got to be a reality check someday, but not today,” said William Mutual, founder of Popcast.com, a streaming media company that sponsored a party Wednesday night at the Mayan, where a barefoot violinist played while attendees sucked down French brie and Mexican beer.

“Was this [party] expensive? Yes,” Mutual said. “Was it worth it? Who knows. But I do know one thing: The new economy is going strong and I don’t expect it to stop.”

At the House of Blues, limos unloaded droves of party-goers at an event hosted by Internet giant CMGI Inc. and 24 of the companies that it either owns or holds investments in.

Inside, guests loaded up plates with ribs and corn bread while Dan Aykroyd and John Belushi look-alikes sweated through a Blues Brothers routine onstage. Talking over drinks in an upstairs lounge, CMGI venture capitalists said they are actually relieved that some tech stocks have been yanked back down from the stratosphere.

“There has been years of speculative excess,” said Josh Daniels, a venture capitalist in Menlo Park, Calif., for CMGI. “Right now, that speculative froth is coming off the market. In the short term, it’s scary. But long term, it’s healthy.”

Like other investors interviewed for this story, Daniels is confident his companies will escape any future carnage because they are fundamentally sound.

There were at least half a dozen other parties underway Wednesday and Thursday nights. Even at the Convention Center itself, a giddy atmosphere prevailed. One company, Netzero.com, attracted people to its booth by hiring a bartender to pour martinis and allowing guests to take turns stepping into a cylindrical booth and snatching $1 bills that swirled about them in a green cyclone.

But the big-ticket event of the week was Streamsearch’s party at the Playboy mansion, which was ostensibly structured around an awards show for musicians and filmmakers whose works were featured on the St. Louis-based company’s Web site.

The bash cost well over $100,000, which covered dinner for 500 people, a bar staffed with 10 bartenders, buses shuttling people to and from the mansion, as well as half a dozen Playmates grinning through clumsy conversations with wide-eyed party-goers.

Robert Shambro, chief executive of Streamsearch--which runs a search engine for audio and video content on the Net--said the lavish event was actually a carefully calculated marketing expenditure. The company has quietly built a loyal following online, and $32 million in venture investments, but wanted to raise its profile in the entertainment industry.

“If we didn’t get you to come because of the company or the awards,” he said, “we knew we’d get you because of the location.”

Movie director Garry Marshall, who emceed the event, struck a nerve when one of the statuettes he was handing out to award winners fell apart, prompting him to shout, “You people are going to go out of business.”

But most guests, including the venture capitalists who indirectly funded the event, were too caught up in their dot-com dream worlds to notice. The only evidence of any apprehension was at the cluster of computers overlooking the swimming pool, where some guests stole glances at online stock quotes.

One venture capitalist surveyed the damage for the day, then flipped over to his e-mail account, typing: “Here I stand, a few feet from the hallowed ground of the grotto of the Playboy mansion.”

A bit later, investment banker Jonathan Henning scanned the online financial news and checked his e-mail. One message, filled with questions about Tuesday’s market roller coaster, caught his eye.

His reply was simple: “Don’t worry. Everything’s going to be fine.”