'90s Dot-Coms — Where Are They Now?

An anonymous reader writes "The Industry Standard has put together a list of 10 dot-com stars from the Internet bubble of the late 1990s, and tracked down what happened to the services and their founders. A lot of the services are still around, albeit under new ownership, including eToys, Garden.com, and DrKoop.com. Others have been completely reinvented — Boo.com, an online clothing retailer that burned through $125 million in funding in the late 1990s, is now an online travel community. Of the founders, many were able to cash out early and/or achieve later online success. Excite's Joe Kraus and Graham Spencer later started JotSpot, which was bought by Google, and Kraus now directs work on Google's OpenSocial initiative. Others did not fare as well, such as two of the co-founders of Garden.com, who declined to cash out at the height of the bubble, and are currently 'between business ventures.' The insiders' post-mortems of the failed dot-coms are interesting — several suggest the concepts were good but too early for their time, while others identify specific factors that led to the failures — ranging from a lack of advertising to 'intense' greed."

Business didn't work because...

' The insiders' post-mortems of the failed dot-coms are interesting â" several suggest the concepts were good but too early for their time, while others identify specific factors that led to the failures â" ranging from a lack of advertising to 'intense' greed."

... lack of advertising and intense greed are generally two reasons ANY business fails. It isn't specific to the dot com bust; if they didn't have a good business idea, or they were too greedy or they didn't advertise ANY business, it would fail.

You don't understand

You don't seem to understand. "Lack of advertising" in the context of dot-coms doesn't mean "we dot-coms should have advertised" but rather "damn, we thought people would pay millions to advertise on our site, and the bastards didn't." It's a different end of that shafting.

To recap, the dot-com bubble was started by greed over advertising money.

In the stone age of the Internet, sites had one ad banner on the front page. That was it. Not animated, not pop-up, no pop-under, and certainly not wall to wall. It also usually had something to do with the site's topic, e.g., a site about games, would likely had a banner to some games shop or publisher. It was easy to target those by hand since, well, you only had one and it stayed with you a long time.

And people actually tended to look at it, and occasionally even click on it. I mean, why not. We hadn't been flooded with ads yet and desensitized to the point where they're mentally filtered out.

And the ad rates were calculated for _that_ situation. A page view for your ad in those conditions was considered worth a lot. More importantly, the ratio between total ads shown and advertising budgets allowed quite a nice price per view. The pie was divided into a smaller number of slices, so to speak.

Unfortunately, that also gave some people the idea that, basically, they could make a site with 10 banners per page, and rake in tens to thousands of dollars (at those rates) per month for just being there. Heck, that there's even room for growth there. If you want twice as much money, just double the number of banners, and there you go, the ad provider surely will keep paying the same rate for them.

Whole sites were _designed_ to be little more than wall to wall ads, with a tiny frame in the middle for the actual content. Heck, I worked for one.

Others had no qualms to just lie to ad provider. (At first most sites hosted the banner themselves, so the ad provider had to just trust them that they actually had a trillion pages served last month.) Others used scripts to refresh the page in a loop, and/or to simulate a click on the ad if they were paid more for a click. Others urged their users to do that for them. Etc.

Basically a whole "industry" and a lot of financial analysts, built a model and started a bubble, based on little more than defrauding the ad providers. And on the bet that the ad providers were drooling retards, and wouldn't recalculate the rates. Most weren't even too secretive about their plans to abuse the system, and built whole projections for the next 20 years based on the underlying assumption that the rates would indeed stay the same, and the rest of the economy wouldn't react when that scam bleeds it dry.

Unfortunately, while the ad providers did react somewhat slower than expected (and it helped further "confirm" the belief that, yep, they're helpless and waiting to be fleeced), react they did. Among other things, because the actual companies advertising their products had a finite marketing budget. You couldn't tell them to pony up 100 times more money than last year, just because the number of ad banners on the web rose 100 times. Most didn't even have that kind of money.

And what happened was, well, basic economics. If there's the same X million dollars on the "demand" side for ad space, but the "supply" side has grown 100 times, then the price per banner dropped 100 times too. In fact, what happened eventually went even further than that, like often is the case in an overproduction situation. The old style plain banner views didn't just become 100 or 1000 times cheaper, they became outright worthless. The ad providers started wanting to buy better stuff instead, like better ads, or clicks instead of views, or unique users.

And that's when the dotcom's dreams of an endless stream of billions in advertising money, started going downhill. Almost none of them got as much advertising as they had built their business plan on.

Stamps.com

There are still ads for Stamps.com.

Of all the Dot Bombs that I would have thought would go tits up, this was one.....guess I was wrong.

Now if only I can get LNUX back to $100 a share, I have a chance to get my IRA back into the black.

Re:Stamps.com

There are still ads for Stamps.com. Of all the Dot Bombs that I would have thought would go tits up, this was one.....guess I was wrong.

Stamps.com actually makes a pretty good product for small businesses. I own my own business and use it, as do many similar businesses. It's not a website but is actually a product that you install on your computer. Simply put, it allows you to print postage from your PC onto envelopes, labels or "net stamps," and it integrates into your word processing software. It's easier to use than electronic postage scales and you don't have to buy individual stamps which are fine if you only have standard sized letters, but a pain in the rear if you send anything which weighs more. With regular stamps, a business needs many different values of stamps which are just lying around.

The fact that Stamps.com is still around is testament to one central truth: good, well implemented ideas escaped the dot com bubble. Junk didn't.

Oh, the ironing.

Ironic, isn't it, that the people who "declined to cash out"(read: take investors money and run) are unemployed, while many of those who pocketed the money are employed elsewhere? I would prefer it the other way around.

In case it's not been said before, thank you for having honor and respecting your investors.

Re:Oh, the ironing.

That's the simple reality of the dot com boom bust experience.

Those who saw what was coming and ran with the cash did well, and in so doing demonstrated that they had a superior grasp of the nature of the dot com boom/bust event.

The IT industry has been seriously cut throat from the start, only those prepared to bend rules and be occasionally brutal to the competition or their investors have emerged as winners.

Someones bound to bring up googles famous 'do no evil' statement. I ask you though, would that ever have been said if the person who wrote it on the whiteboard wasn't aware that either evil had been done, or was likely to happen?

Personally I can't believe that google got to where it is by being all sweetness and light.

Re:Oh, the ironing.

Ironic, isn't it, that the people who "declined to cash out"(read: take investors money and run) are unemployed, while many of those who pocketed the money are employed elsewhere? I would prefer it the other way around.

When you played Super Mario or Donkey Kong, what happened when you stayed on one of those hovering, crumbling log platforms too long? You had to start the level over. Life is sometimes about hopping from one platform to the next, before the first one drops out from under you, and people get rewarded for that.

Instead of seeing it as cashing out, maybe see it like a surfer who knows when the wave is going to break. You get back to shore and people say, "nice ride. here's a better board, go out there and do it again, and this time we'll take pictures!"

Captain going down with his ship is romantic, but maybe not the most practical.

And if I fit any more metaphors into this post I'm going to shoot myself.

Re:Oh, the ironing.

Those crumbling platforms? They're made of people.

Fundamental flaw

I think the fundamental flaw in most of these is that the cash flow was completely disproportionate to the amount the company is valued at (stock price). This is not a trend that is going away either. Is facebook really worth billions of dollars? Really? Suppose someone buys it for a couple billion. Is it possible to recoup that investment without driving all the users away? I would argue no.

I pick on facebook, but there are plenty of other examples to be found.

Re:Fundamental flaw

Is facebook worth billions? Well you have to think it isn't about yearly profit, but about potential future profit. I know that facebook isn't making billions per year but enough investors feel that it has the future earnings potential so that its value IS in the billions, even if its not being realized in the present.

But since no one can see into the future its impossible to tell if the company is over or undervalued right now. Personally, I think facebook is monstrously overvalued and whatever earnings potential investors see is due to a lack of understanding of social networks or the frugality of users. They perceive it as some penultimate repository of personal information that can somehow be funneled into directed-marketing, the 21st century advertising buzz-concept that will revolutionize how all companies do business. Of course they fail to understand that kinds of people on facebook are the same sorts of people that have grown numb to almost all advertising, watch shows online, buy commercial-less dvds etc. A friend recently showed me a rather ridiculous advertisement that was directed at him because of some esoteric and fake interest he had listed on the site. The ad was ridiculous, but more telling was that I was actually surprised there were ads, I'd never noticed them before since I just completely tuned them out.

Re:Fundamental flaw

It's not always about revenue - sometimes companies are bought to stifle competition from entering new areas.

Did Microsoft ever recoup their investment in Internet Explorer?

Re:Fundamental flaw

Looking back too, I wonder how so many of those companies just flat out WASTED sooo much VC cash so fast.

You'll look at some who were really nothing more than a website that did some neat trick. It'll mentioned that they blew through $50 to $70 million in VC in a couple years.

What they hell were they doing with all that!?!? Any business that was thinking of being thrifty at all (which in general: successful businesses will save money where they can) could have stretched that MUCH, MUCH farther.

Re:Fundamental flaw

A lot them did not waste the VC cash - they got to IPO's, and the VCs were rewarded handsomely for their investments.
If you had put down $20M for 50% of a company that bubbled up to $1B, you made quite a cut as a VC company.

Re:Fundamental flaw

'80s - Savings and Loan, Junk Bonds
'90s - Dot Coms
'00s - Housing/Mortgages/More Junk Bonds

The same "entrepreneurs" get away with it every time. The late adopters get there bit, but aren't smart enough to get out.

And then John Q. Public is told (after all the initial investors are ready to entrap them all) that such investments are "sure-fire" and the value will "only go up".

It's not even a question of "How do were prevent this from happening again?" but "What will the next 'big thing' be?"

Re:Fundamental flaw

You forgot one:

'20s - Radio

The 1920s stock market bubble had a number of features in common with the 1990s bubble. There was a trendy new technology, lots of VC folks desperate to throw money at any company that had anything even remotely to do with it, and lots of people lost their shirts when the bubble burst.

...laura

Where are the stupid investors now?

Ahhh the bubble. I'm quite nostalgic about it now.

What I don't miss about the bubble is TV programs documenting some teenage CEO playing at running a business with apparent massive backing from stupid investors. Hey this kid is "worth millions"! (failed six months later of course).

That an generic domain names. I still don't know who is typing those in.

They missed one...

They missed the most influential and groundbreaking site of the whole dot-com era: Zombocom! [zombo.com]

"Too early for their time..."

When I look at the list of dot coms there, I'm struck by the 'normality' of the offerings: pets, holidays, clothing etc.

These are all things that are sensible things to sell on the Internet - and if you compare them to some of the (relatively) completely off the wall offerings that we use on an everyday basis, they don't seem all that odd (or novel).

Maybe "too early for their time" is true, but too early in the sense that at that time the Internet had just emerged from a very geek world and everyone was just settling into the concept of using it for something else.

Books and second-hand crap (and of course porn) weren't really a problem for people. Maybe a dog was.

Downside's Deathwatch, a decade later

Back in 2000-2001, our Downside site [downside.com] ran an automatic predictor for dot-com failure. [downside.com] It was amazingly simple and painfully accurate. The system read through SEC filings, extracted the numbers for cash on hand and rate of losses, and projected when the cash would run out. We called that the "death date". That was a good predictor of when the company would go bust. This is a surprisingly good predictor for companies financed via an IPO. You can only IPO once (yes, secondary offerings are possible, but not when you're failing), so there's a finite amount of cash, and when it's gone, so is the company.

For Deathwatch purposes, "dead" was defined as "investors lost essentially all (90% or worse) of their investment". Some of the companies, like Dr. Koop, hung on for years, but their investors did not. (This, by the way, is a common phenomenon to venture capitalists. Many failing companies hang on as overfinanced small companies, downsized until they are able to make just enough money to cover current operating costs but not to recover their startup costs. VC's call these "zombies".) By our standards, essentially all the companies on the Industry Standard list died.

Cost of Physical Goods

One major problem the early .com's faced was that it was hard to undercut the local brick and mortar store with the additional cost of shipping on top of it. It didn't matter if you could sell dog food $5/bag cheaper if it cost $20 to ship it and waiting 3-5 working days to actually get it wasn't either convienient or cost-effective. Between that and the fact that the consumer buying habits didn't change quickly enough (as you had lots of people without the internet, or those like my dad who are terrified to use their credit card online); They weren't doing enough sales (in volume) to fully utilize their capital investments (warehouse, infrastructure) or lower their shipping costs.

I still think to this day (having developed sites for companies and their affiliate agents) is that insurance is bar-none, the perfect B2C product for the internet, because essentially, you're using a similar program your agent is to get a quote and the insurance company only has to send a single post-letter (or in a lot of cases now, generate a PDF) to send your insurance card, policy number and policy documents. They avoid the high cost of warehousing and shipping which has allowed them to be incredibly profitable (and even reduce their brick and mortar presence in a lot of cases) simply by making a public version of the software they already have (with some features removed).

In any case, it is significantly easier to sell a good (such as insurance or a digital file) or service that doesn't involve a physical product if you're the one shouldering the responsibility of getting it to the customer's doorstep (unless you've got a great way of passing the cost on and still remain competitive or all your competitors have the same situation like a furniture store.)

100 dumbest dotcom moments

An oldie, but a goodie: 100 dumbest dotcom moments [jobfairy.com].

My favourite:

35. Santa Monica-based incubator eCompanies pays $7.5 million for the domain name Business.com in November 1999; explaining the purchase, eCompanies co-founder Sky Dayton tells Internet World, "It is going to be the bargain of the century. It is going to look like we bought the island of Manhattan for $7.5 million and some beads."

Re:100 dumbest dotcom moments

It sold for $345 million [paidcontent.org] last year, so sounds like a smart investment.

Luxury office furniture

There's a used office furniture store in Manchester, NH, filled with the office furniture from failed .coms. Of course, all the employees of the store have Herman Miller Aeron chairs. If you like leather and mahogany office furniture, this is the place to go!

MAIL ORDER COMPANIES!

Even back in the 90's I was going these are not High-Tech companies. They are just freaking Mailorder companies. That they had for hundreds of years. Except for Mailing or Telphoneing and seeing the description your order you did it via the web. But all in all it was just an other mail order company. The problem was people though it was some new way of doing things. It really wasn't Using the web is just an improvement of the Mail Order system.

no IPO until two years of profits

Thats pretty much standard for conventional underwriting. That all went out the door in the dot.com era. Valuations switched to revenue streams, which meant much less. Google waited until it had profits.