A Memoir of the Dot-Com Bubble

That was the year of Guided by Voices.

The year of frozen sculptures dreaming Finlandia and lime – the ice luge – and men on stilts in dresses wearing hoops around their necks.

It was the year of free money and business plans that read like situation comedies.

And they were.

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The year of billion-dollar days and SFGirl.com and climbing through the window at the Cypress Club or Jillian’s, betraying wonder.

“Gina put me on the list … Oh, wait, it might have been ….”

“It’s okay, Char – there is no list.”

Billboards north and south on Highway 101 from Novato to San Jose announcing companies without a mist of revenue. People paying one year’s rent up front in cash for the privilege of living 100 minutes from their work.

It was the year of thriving in a shared delusion, borrowed money, so much money, and faith.

There are no atheists in San Francisco: everyone believes in herself.

“If you are cautious in this market,” says the Financial Times, “you’ll miss the train.”

“It’s a new paradigm,” says the New Yorker – the New Yorker! – “and we need to abandon our natural doubts.”

Something’s new, alright. Something is abandoned.

 

Four or five parties a week, all South of Market – SoMa, as it’s starting to be known – two or three some nights … WildCard Wednesday and Glas Kat and Portrero Brewing … Ruby Skye and the Great American Music Hall.

After a while, it doesn’t matter where. The same people, freeloaders, the undecideds and the bored. Fucked company.

The brilliant are all still at work. This is something else at last.

What are the parties for, exactly?

“Really great networking there,” says the founder of Beenz.com, a virtual currency company  … or does it sell coffee?

Parties for no reason other than to say: We’re here. No, here. Right now. In the lobby of the San Francisco Federal Reserve building rusticated with zydeco and jambalaya … Mardi Gras in March.

 

Charlotte raged through most of them, it felt like, and her excuse was the traffic on 280, piling up … the new HQ’s appearing on the 101 and that she’s young – twenty-five or so, let’s say – so young and fairly serious about her drugs-and-vodka rants … but also, yes, an entrepreneur of sorts, working at a dot-com in the marketing division, writing emails to people she would never meet, designing 300×250-pixel banner ads on her computer for the regional campaign.

Her company sold clothing for very thin women. She herself could not wear any of it. What do you expect from a bunch of men who dated models?

It’s a thankless life in ‘99 that’s held up by the free hors d’oeuvres … and SFBayHappyHour and the like-minded … that time Tixtogo changed its name to something else and decided to rent an airplane hangar on Treasure Island and import 3,500 people to watch racing pigs – live pigs! – and artists on the trapeze and Gold Club strippers and a go-go dancing Mayor Willie Brown, in person, live, the man.

That’s supposed to be the so-called “best party ever” of the dot-com era but she doesn’t see how that can be. Who judges these things? That blogging kid called, rather obviously, SFBoy? Who’s he?

Craigslist.com started as a website to publicize dot-com parties. That is a true story there.

 

It was the year of performance art – parties she knew would never happen again, until they did, again and again.

If you want to know what happens at the end of time, remember this time.

And the dead zone of every evening … the point when the over-30 – if always under 40 – co-founder mounts the floor, declines the music, waits until the lull (“Shut up!” “What up?!”) and hums, “It’s great to see you all here tonight. When I started Whizbang dot com last year I wanted to activate what I saw as some blue ocean in the market with a game-changing vision. It was a vision for ….”

Vodka! What?! Nobody remembers. Vision for real? It failed. They all failed.

Dreams die, just like people, but usually before.

 

The Millennium announced itself to Charlotte in two scenes.

First was that night with the cages filled with gerbil girls and that woman in a gold-threaded prom dress climbing, climbing onto the metal structure itself … and falling from the cage onto her face, dragged off, inert … and nobody stopped dancing.

Second was Guru.com.

She remembers that site because she wanted it to work. It let you set up a profile and sell your personal abilities, such as they were; “Be Your Own Boss!” like it says, your own Guru.com … but the party was just a frost on the lawn, because the people who went were actually looking for work – work! – and not enjoying the hedonic backwash of a trenchant IPO or funding round … and nothing, nothing, repels the Valley insider more completely than a person who does not propose to get rich but rather to work for a living … what a pathetic admission of defeat … even if that Valley insider is actually a deadbeat loafing sponge who has no skills herself but an ability to clean up and soft-sell a bouncer … Guru.com, that was the end.

On her way out the door, Charlotte passed two men who were saying, “What’s their margin, anyway?”

“What do you mean?”

“Are they making any money?”

“Their run rate is –”

“So they’re losing money.”

“Well, yes, of course, but –”

Oddly, she reflects, this was the first time the topic of the fundamental business comes up and there’s certainly some truth to the natural assumption that all this raving and excess and pig racing – pig racing announced by the Mayor of the Great City of San Francisco himself – and acrobats and circus freaks can’t all be going anywhere quite real. It has to end. Everybody knows it. We’ve known it since ‘98.

We know it’s going to end.

We just don’t know when.

When.

#

TheGlobe.com went public in 1998 at $9 a share. Within five minutes, it was at $97. Providing an easy way for people to launch semi-customized websites, it was exactly nine months old. The bubble began.

eBay followed and its stock price shot from $18 in September to $241 before Christmas.

“The internet,” said economics writer David Lowenstein, “had now reached the stage in which people cease to think and simply imitate each other without any regard to the underlying economics – in other words, a bubble.”

Broadcast.com provided streaming media over phone lines that turned the stream into a trickle and a wait, like a hot tub on Mars, but somehow Yahoo decided it was worth paying almost $6 billion for it, making a young man named Mark Cuban very rich indeed.

The MGM Grand hosted the biggest boondoggle of all – in Las Vegas, of course – called the iBASH 99. It cost a rumored $10 million and was supposedly staged to promote an unknown company called Pixelon that was either a criminal waste of money or a criminal plot. It was bankrupt in a year, having launched nothing.

Traffic was just unimaginable as kids drove from the city to dot-jobs up and down the path to Palo Alto.

And then it got worse.

 

Advertising was both symptom and cause of the boom. In 2000, 69% of all online ad dollars came from dot-coms. Of course, they advertised themselves.

So the bubble was stoked by dot-coms buying ads, creating media empires like Yahoo that bought dot-coms like Broadcast.com, driving up the value of other dot-coms and inspiring VC’s to fund companies that then, yes, bought ads from online media companies that … and so on.

There were other ideas. Free-PC.com gave away Compaq PCs. In return, its victims watched a stream of ads crawling along their (free) screens. AllAdvantage.com sent customers checks based on how many ads they watched. Its founder was a recent Stanford grad. The week the NASDAQ peaked – at around 5,000 – Credit Suisse’s oily-haired Frank Quattrone took that founder and his team by private jet to Aspen for a weekend none of them can quite recall.

In its most recent quarter, AllAdvantage.com had sold less than $9 million in ads and paid out almost as much to its ad-watching customers, many of which (it turned out) were robots. AllAdvantage.com did not know they were robots. They cashed their checks too.

 

And then came Super Bowl XXXIV. During the course of a strategic dialogue between the Rams and the Patriots, catalyzed by a brilliant Tom Brady, sixteen different dot-coms aired 30-second spots. Each cost about $2 million.

The most telling was the pitch for a company called IWon.com, which had the so-called business model of giving away online games and its investors’ cash in $1 million bundles.

Even as the Pats were celebrating, the NASDAQ stopped climbing. It had muscled up 5X in five years.

One year later, during Super Bowl XXXV, there were only three dot-coms showing ads. Two of them were job-hunting sites.

A research firm predicted that by 2005, the share of internet ads bought by dot-coms would plunge from 69% to 16%. The average price for online banner ads went from $50 to $5 for 1,000.

After March 10, 2000 – as Quattrone towels off after his hot tub luau in Aspen with the soon-to-be-bankrupt AllAdvantage.com team – the NASDAQ index starts falling … and falling … and after thirty sickening months is down 78%.

#

Charlotte joins the exodus. It is a relief, in fact. She abandons her lease in Petaluma in March of 2001 and drives east, by herself, to New Jersey.

There is a man involved in this decision. It takes a moment to recover from a two-year binge. Not working actually helps. Her company – that website for the minus-sized woman – just disappears. One day, the door was locked. There was a note:

“FOR LEASE”

The founders, frat brothers from San Diego, evaporate. She’d seen them nearly every day for two years; she never heard from, or of, them again. Nobody knew. Hard times are like that.

And the man involved, he had attached himself to her along the way and would not, when it came time, let go. Looking back, she sees he was obviously on one of those mental spectrums they have in the technical fields, but psychology did not help her get rid of him, nor did blunt talk and unanswered calls.

It was time to move. She liked the idea of New Jersey. It seemed somehow more adult than SoMa.

Where she ended up was sharing a third-floor one-bedroom dump in Hoboken with a girl named Lauren who wore three kinds of purple eyeshadow and worked in a bar called Lapine’s. She was a walking wreck, this Lauren.

So many of us were in those days.

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