Dancing on ‘Dot-Com’ Graves
The waves of nausea rippled through the older crowd at a business conference in Century City last year as a group of black-garbed twentysomethings from Load Media Network pranced on stage, touting the wonders of their new Web technology.
We have the hip new ideas, they proclaimed. We understand the “new economy.” Don’t listen to anyone over 30.
Rohit Shukla, the 43-year-old chief executive of the Los Angeles Regional Technology Alliance, seethed in his seat, thinking to himself: “Who are these snot-faced, body-pierced, spittle-laden boys passing as men?”
He bit his tongue, but several months later when he heard that Load Media had become a financial wreck and its twentysomething chief executive, Morgan Warstler, was gone, he could barely contain his glee.
“Hey! Woo-hoo!” Shukla said of the Hollywood-based company’s troubles. “I was eminently relieved that the crud had been squeezed out of the tube.”
Just a few short months ago, “dot-coms” were the envy of the world, the subject of endless stories about 20-year-old multimillionaires and heartbreaking Porsche shortages in Silicon Valley.
But the collapse of hundreds of dot-coms in recent months has unleashed a loud and significant backlash. Envy has given way to a dark glee that the dot-coms, once so boorishly confident of their futures, have been brought back to Earth.
“People just love it,” said Richard Rosenblatt, head of Los Angeles venture capital firm Prime Ventures, who has watched the ups and downs of the dot-coms from the earliest days of the Internet. “As excessive as the praise was before, so is the gloating.”
Jealousy over all the attention and money lavished on the dot-coms during the last 18 months clearly accelerates the current mood. Even the most strained concepts, such as selling underwear online (Figleaves.com) and women’s pantyhose (now-defunct Gazelle.com), seemed to win millions of dollars in venture capital backing.
But Eli Eisenberg, an Agoura Hills management consultant, said that bad ideas and millions of dollars were not the only things that brought scorn to the dot-coms.
What pushed the situation over the line was what Eisenberg called the “hubris” of the new economy, which held that making a profit was unimportant and spending extravagantly to seize market share was everything.
Eisenberg recalled going on a job interview for an executive position last year with a Los Angeles-area dot-com. Contrary to the prevailing new economy opinion, he stressed his position that profits were important.
The company’s executives shook their heads and issued one of the most biting insults possible in the dot-com world: “You don’t get it.”
“I knew then the interview was over,” he said. “I thought, ‘No guys, I’m the one who gets it. When the shakeout comes, you’re going to get your comeuppance.’ ”
Just recently, he heard that the company had laid off a quarter of its staff. “I’m not going to call them up and say ‘I told you so,’ but when you’re proved right, sure, it feels good,” he said.
Joan DiFuria, a Bay Area psychologist with many dot-com clients, said last year’s frenzy bred an overbearing sense of entitlement--that just being young and technologically savvy was enough to deserve riches.
She said she was on a panel once at a community college in which a young dot-commer gushed that a friend had a deserved a $14 million stock windfall because he had worked and studied hard.
DiFuria gasped at the statement. “Are you kidding me?” she asked. “I know single mothers with two kids working seven days a week who can barely pay their bills. You’re saying they don’t deserve to be wealthy? It’s this whole sense of deserving wealth. Let’s not distort things.”
Oddly, the glee over the failures of the dot-coms is highest in the very centers of technology that have been most affected by the downturn.
While investors are heartbroken over dot-com stock prices and thousands of dot-com workers have lost jobs, the suffering has not lessened the gloating.
Web sites devoted to failure have sprouted like weeds, including Dotcomfailures.com, Dottie Downturn (an advice column in online magazine Salon for the “nouveau poor”), and the dot-com layoff tracker and dot-com flop tracker put out by Industry Standard magazine.
One of the trendiest Web sites of the last few months is named after an adjective that is rarely used in polite company and never in a family newspaper, but has been invoked with increasing frequency to describe dot-com stock prices, lifestyles, stock options, leadership and, well, the entire dot-com world.
FC, as the site is also known, sponsors a contest in which players try to pick the biggest dot-com loser they can think of. If the company goes down or suffers a major setback, they score from one to a few dozen points.
The leaders are already well into the thousands of points.
With no advertising, the site has attracted about 300,000 hits a day along with more than 300 daily message tips on failing companies.
“People are interested in failure just like they’re interested in success,” said Philip Kaplan, a New York City Web developer and creator of FC. “I think more people can actually relate to failure.”
On the site’s message board, the discussion has revved up to vicious, profanity-laced levels.
“Last Friday they let 18 people go and gave everyone else a month’s notice,” one poster wrote about a dot-com. “Too bad. They sucked anyway.”
“They are a bunch of filthy Brits from HK who added to our pollution here in NYC. I am happy to see them die, but it looks like they are alive and kicking,” responded another poster.
“Let me know when it’s officially over--revenge is sweet!”
Another poster ranted about a music company called Platinum Entertainment: “You’re an idiot! . . . It’s over.”
“Calling me a dip . . . won’t get you back any of the money you lost. . . . You ought to take some lessons on how to buy low and sell high.”
The hype over the dot-coms created more problems than just jealousy and hurt feelings.
In Silicon Valley, last year’s dot-com frenzy drove up housing prices, depleted the stock of popular new cars and made it impossible to find a reasonably priced plumber.
“The price of everything went up last year as if people all assumed that everyone here was rolling in money and could be plucked endlessly,” fumed Jakob Nielsen, a Silicon Valley Web site consultant.
Dot-coms have snared every available space and have driven up rents, forcing many families from traditionally low-rent parts of the Bay Area.
San Francisco residents have begun circulating a petition to limit the number of dot-coms in the city to stem the spread of the newly dubbed “e-holes.”
But for all the excesses of the dot-coms, there are already signs that the backlash has entered an unhealthy terrain where any little rumor of trouble can spark a furious round of piling on.
One headline on FC reported that an Internet messaging software company named Criticalpath.com had fired 136 workers, a sign of imminent disaster.
In fact, Critical Path had laid off 125 people--out of 970 employees--and it was done to reduce redundant staff after the company had gone through nine acquisitions in eight months.
“It’s not like we’re a struggling dot-com,” said David Thatcher, president of San Francisco-based Critical Path Inc. “We’ve got a market cap of $4.3 billion and $300 million cash in the bank. Does it make me mad? Absolutely.”
There is still residual gloating over the troubles at Load Media, although the company has aggressively moved to bury its old arrogant image.
The company replaced its twentysomething CEO with a 36-year-old former Naval aviator and legislative assistant to Sen. John McCain (R-Ariz.) named Jack Kennedy.
Kennedy quickly cut spending in half, boosted cash flow, reorganized the company and installed a group of experienced executives, some of whom were pushing 60.
Matt McFee, the president and co-founder of Load Media, said he sometimes misses the heady days when the hype about the company was raging.
Load Media was one of many companies competing to provide video over the Internet, and Warstler’s outlandish behavior helped to generate a buzz over the company.
But ultimately, “Morgan’s personality became our brand, and we were shackled with it,” McFee said.
Warstler’s spirit has been so thoroughly excised from the company that no one, even McFee, his onetime partner, knows where he is or what he is doing, said a company spokesperson.
McFee said the company has learned humility and is ready for the new dot-com era.
“I think the message has gotten out that Load is a different company now, but our image from before still hurts us a bit,” he said. “We get dragged back down into the mire and it does sting.”
