Dot.Con by John Cassidy

Author:John Cassidy
Language: eng
Format: epub
ISBN: 9780061841781
Publisher: HarperCollins

IV

Two days after Priceline.com’s IPO, Yahoo! agreed to pay $6.1 billion for Broadcast.com. Appropriately enough, the deal was announced on April Fool’s day. The previous summer, Broadcast.com had gone public at a valuation of $300 million, and its business hadn’t changed much since then. It still didn’t own any content. The sound on its audio feeds was still tinny; the pictures on its video feeds were still small and blurred; and its financial losses were still mounting. In 1998, Broadcast.com lost $16.4 million on sales of $22.3 million. The price that Yahoo! agreed to pay was about 275 times these revenues. It wasn’t real money, of course. Yahoo! was paying for the deal in stock, just as it had paid for its $3.6 billion purchase of GeoCities earlier in the year.

The flood of Internet IPOs continued. On April 8, Value America, an online retailer based in Charlottesville, Virginia, went public at $23 a share, and the stock closed at $55, valuing the company at more than $2 billion. Craig Winn, Value America’s founder, was a former salesman who had already led one public company into bankruptcy. These days, he flew around in a private jet and saw himself as a possible candidate for president in 2008. He promoted Value America as the Wal-Mart of the Internet, but a Wal-Mart without any inventories, a truly “frictionless” company. In Winn’s vision, whenever a customer bought a television, or a personal computer, or even a bottle of aspirin, on Value America’s Web site, the firm would pass the order onto the manufacturer, which would ship the goods to the customer direct. In reality, most manufacturers had neither the capacity nor the inclination to ship individual items. Winn and his backers, who included Paul Allaire, the cofounder of Microsoft, didn’t seem disturbed by this discrepancy, and neither did investors.

Between the start of 1999 and the middle of April, the Dow Jones Internet Composite Index doubled. In its issue of April 12, 1999, The Industry Standard captured the mood of the moment with a cover featuring Priceline.com’s Jay Walker and Mark Cuban, the founder of Broadcast.com, next to the headline “THIS WEEK’S BILLIONAIRES.”16 Inside the magazine, an article pointed out that America Online, which had been added to the S&P 500 at the start of the year, now had a market capitalization of $137 billion. A hundred thousand dollars invested in the stock eighteen months ago would now be worth $1.3 million. In a column entitled “I Want to Believe,” Michael Parsons, the Industry Standard’s executive news editor, pointed out that investors were “wagering billions of dollars on complex business stories, and many might as well be putting their money on red or black in Las Vegas.” Parsons continued: “A skeptic might find that a sad testament to human folly. A believer will point out that Las Vegas is the fastest growing city in America.”17

On April 26, The New Yorker published its profile of Meeker, complete with her prediction of a big fall in Internet stocks sometime in the next year.

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