Com industry crash after the boom
This is a paper examining some of the factors that caused the dot-com crash
Many believe the root cause of the dot-com crash was over valuation of stock prices relative to the actual underlying value of the companies themselves. Stocks of Internet companies traded at Price-Earning ratios of higher then 30, buoyed by a speculative bubble. When reality set in for investors many realized that the companies that they were so heavily invested in were little more then money sucking black holes with no upside potential in the near or long-term future. This triggered mass self-offs of not only Internet related stocks but soon impacted the market value of many companies associated with computer, network or telecommunications industries.
This paper will show in fact that over valuation was more a symptom of the speculative boom and was only one of the multifaceted factors that contributed to the Internet boom turning into the Internet bust.
The investment frenzy in Internet-related companies reached a peak almost exactly three years ago in the first quarter of 2000. Three years ago, almost to the day, the tech-heavy NASDAQ Composite reached an all-time high, fueled in large part by Internet issues and related euphoria. Since that time, the dot.com sector has gone through a radical alignment that has seen nearly 5,000 Internet companies acquired or shut down.
Some pertinent facts:
THEN & NOW The stock market March 10, 2000, vs. March 10, 2003:
THEN: NASDAQ composite reached an all-time high of 5,048.62.
NOW: NASDAQ closed March 10th at 1,278.37, down 75% since the peak.
THEN: Selectica, a San Jose maker of e-commerce software, went public at $30 a share, becoming the 92nd IPO in Silicon Valley in 12 months. Shares rose 371%, closing at $141.23.
NOW: Selectica shares plunged in the dot-com crash, closing March 10th at $2.76. Only three local companies have gone public in the past 12 months.
THEN: Worried about the overheated economy, the Federal Reserve had raised interest rates to 5.75%.
NOW: Worried about the flickering economy, the Fed has sliced rates to 1.25%.
THEN: Chip stocks were roaring. Rambus, up 470% over 12 months, closed at a split-adjusted $105.25.
NOW: The chip industry is in its worst slump ever. Rambus, facing federal antitrust charges, is at $12.97.
THEN: The 304 valley companies still trading today had a market value of $2.9 trillion.
NOW: Those companies are valued at $588 billion, down 80%.
Source: Mercury News research, Bloomberg www.sanjosemerc.com
The casualty numbers for dot-com mania are staggering. In the year since April 2000, the technology-heavy Nasdaq has lost more than $2 trillion in value. Once high flying companies like Excite.com, have disappeared off of the charts, busted, bankrupt and out of business. During the last 36 months, 93,079 Internet-related jobs have been cut nationwide (Cassidy 2002). At least 4,854 Internet companies have either been acquired or have shut down in the three years since the dot.com investment boom peaked in the first quarter of 2000. Of these 4,854 plus Internet companies, at least 962 of them have been substantial Internet companies who have either shut down or declared bankruptcy. Unemployment figures for the San Francisco bay area, once the engine that drove the Internet economy to dazzling heights, now hovers around 7% (U.S. Department of Labor).
The many contributing causes of the crash of the dot.com companies are complex and they can serve as a cautionary tale for investors and would be company CEO’s of the future. Overly speculative investors helped push tech stocks far beyond what the companies’ price to earning ratios should have been. Venture Capital firms with ready cash would throw money at anybody who had an idea for a company that had a “dot-com” attached to the end of its name. Creative accounting practices fueled the boom with inflated earning estimates, while masking the true debt to income ratios of many of the high flyers. The burn rates, (rate of startup capital being spent over a period of time) of many start-ups was staggering. Few Internet and dot.com companies were profitable, but investors never seemed to mind. Many investors looked at the number of customers or subscribers as the basis for valuing Internet stocks. The name of the game became raising capital, not making profits. Even when fashionable stocks dipped, there was remarkably little effect on the rest of the market. (CNN/MoneyLine 2000)
This paper will look at why the Internet boom was successful and the reasons behind its crash. An examination of one failed Internet venture will be examined in a case study. The failed enterprise is representative of why many Internet-based companies failed.
Where Did the Dot-Com Boom Come From?
In 1945, an essay titled “As We May Think” published in the Atlantic Monthly Dr. Vandeaver Bush wrote that the biggest problem facing scientist after the war would be that of information overload. The more knowledge society gained the more specialized people become simply because the breadth and depth of knowledge had become too great. As a consequence attempts of scientists to bridge between fields of specialization could only enable superficial understanding of another field.
Bush proposed a solution which would be based on two relatively new inventions; microphotography – the ability to take pictures so small that an entire encyclopedia could be photographed and the resulting pictures could be stored in a match box, and the cathode ray tube which allowed scientists to transmit pictures and text onto a glass screen. Bush theorized that a device that brought the two together could revolutionize the way information was stored and transmitted. He called his proposed machine a “memex.” He wrote that it would work by using translucent screens, on which material can be projected for convenient reading. The machine would have a keyboard and a set of buttons and levers. All information enter into the memex would be indexed by title and subject, as in a library. People using the machine could move between items of interest more directly, using what Bush called “trails.” Every time a person created a new file, he would be able to link it to a second file of his choosing by tapping in a code. The second file would be in turn linked to a third file and so forth. By this method anybody looking at the first file could retrieve the other files by pressing a couple of buttons. Busch wrote that the great attraction of his filing system would be that it would mimic the human mind and work by “association.” With this method, vast amounts of related information would be grouped together in an easy to access format. Dr. Bush’s memex was never built but his “trails” idea was the intellectual predecessor of the World Wide Web. (Cassidy 2002)
In the 1960s, an iconoclastic engineer name Ted Nelson realized that the technology for implementing Dr. Bush’s ideas now existed. By using the storage, capacity and speed of digital computers technology could turn Bush’s ideas into reality. Nelson postulated that the world’s knowledge could be stored in a giant database and retrieved by anybody who access to a computer. The information would be presented via by a method he called “hypertext,” and computer users would be able to jump from one hypertext file to another based on Bush’s ideas. Nelson’s idea, called Xanadu, never came to fruition but his idea of hypertext caught on.
Doug Engelbart developed the first working hypertext program in 1968. He had come across a copy of “As We May Think” while stationed in the Philippines. The program was called “oNLine Systems” His program allowed users to browse through multiple windows of text using a small block mounted on a ball, a prototype of today’s mouse.
It would take another 20 years before the World Wide Web came into being. The web had to wait for the advent of the central processor, the personal computer and the graphical user interface, developed at Xerox’s Palo Alto Research Center.
The central technological development that lead to the Internet was the invention of package switching The Pentagon had been looking for a way for command control to be able to communicate with its troops in the event of a nuclear attack. An engineer named Paul Baran conceived of the idea. In order utilize packet switching information had to first be digitized then it can be sent to a receiving station in digital form, or packets. Once the information was received, it would be converted back into the forms humans could recognize. Once information was turned into digital form it could be broken down into small pieces called packets. Each packet contains a header, an address that tells routing switches where the packet is supposed to go. When all the packets reached their final destination software could reassemble them into a coherent piece of information.
Using the packet switching technology, the military linked several large research universities together on a network. The network, called ARPANET, short for the Advanced Research Projects Agency (military research arm) network, linked Stanford, UCLA, UC Santa Barbara and the University of Utah together. On October 1st 1969 a researcher at UCLA attempted to send a message across the network to a researcher at Stanford. The network abruptly crashed. Needless to say, they got it up in running over the following months and gave birth to the Internet.
Through a combination of improvements in hardware, networking and software the use of the fledgling Internet grew until it was used by scientists and researchers worldwide. It was a bit cumbersome to navigate and instructions for navigating it could be cryptic at times.
On Saturday, January 23, 1993 a message appeared on several Internet bulletin boards:
“By the power vested in me by nobody in particular, alpha/beta version of 0.5 of NCSA’s Motif-based information systems and World Wide Web browser, X Mosaic, is hereby release
Marc” (Cassidy 2002 p. 51)
Marc Andreessen, a 21-year-old computer-science major from the University of Illinois in Urbana-Champaign had released what was to later to become the Netscape World Wide Web browser. Andressen was working part-time at the National Center for Supercomputing Applications as a programmer. His little browser made it much easier to navigate through the Internet. By the summer of 1993, hundreds of thousands of people were using Mosaic, the precursor to the Netscape browser.
Many people credit the start of the dot-com boom to the success of one company, Netscape. In August of 1995, a generation of investors had been inspired enough to invest in Internet technology based on the market success of Netscape’s initial public offering. (CNN/MoneyLine 2000) Many have described the Internet as being as transformative as the railroad, the automobile or the electrification of the nation.
Marc Andreessen was a $6.50 an hour intern with the government when he created the first user friendly Internet “browser.” His new idea would allow people to more easily access and view content on the fledging Internet.
Andreessen graduated and moved to California where he went to work for a small software company. A few months he received an unsolicited email from Jim Clark, the founder of Silicon Graphics, a computer company, inviting him to join Clark in a new company he was putting together, Netscape.
Netscape was put on the NASDAQ market August 9, 1995 and went from an opening price of $28.00 to has high as $74.00 by that afternoon. That kind of appreciation in an IPO was unheard of. The New York Times wrote the following day that Netscape had the single must successful opening day of any stock on Wall Street. Marc Andreessen and his fellow browser developers at Netscape were worth over $70 million dollars each. Jim Clark, the initial money behind the venture was worth now worth over $660 million dollars on that same day. Many credit the phenomenal success of Netscapes’ initial public offering for igniting the Internet dot com boom.
Following the success of the Netscape browser was the web search engine Yahoo, which enabled people surfing the web to enter a word or phrase and have the search engine search its extensive database of web links to pull up the most likely hits. Two Stanford students, David Filo and Jerry Yang, started yahoo. They were capitalizing on the popularity of their web site called “Jerry’s Guide to the World Wide Web”
The two had incorporated their company in 1994 with a plan to garner revenue by selling advertisements on their Yahoo search engine website. It may sound a tad unsound to expect to make money off of a website that people can access for free by charging companies to advertise on the site, but it should be remembered that in late 1999 Yahoo joined the S&P 500 and was trading on NASDAQ at $228 a share. (Wang 1999)
In the summer of 1995 Jeff Bezos quit his Wall Street job to found a new company created to sell books on the Internet. He decided to call his new company Amazon.com. It was the first time a company used the dot-com in its name. He located the company in Seattle, Washington for several reasons but most importantly because it was not too far from a major book distributor in Oregon, Ingram Book Group.
Amzon.com launched on July 16, 1995. In its first week Amazon.com received about $12,000 worth of orders. The initial public offering of Amazon.com stock the in 1997 gave Bezos a net worth of $180 million. This fueled yet more excitement in an already expanding market.
While the focus of this paper is on the reasons behind the dot-com meltdown there are still many companies that started in the heyday of the dot-com boom that are doing business today. Companies like eBay, who combines a winning idea for allowing people to sell almost anything to almost anybody over the Internet, with sound financial and management practices. Etrade was the first online stock trading company, using the power of the Internet to give people easier access to investing in stocks, options, and mutual funds via the Internet.
The creation of NASDAQ allowed a market for small-capitalized companies to have their stocks publicly traded. The exchange was a magnet for small technology companies seeking to raise capital by going public. Often times these small companies would never be able to qualified on the New York Stock Exchange. NASDAQ helped fuel the dot-com boom in this way.
Like the Tulip investment in Holland in the 1600s, the dot-com was fed in part by speculative investors looking for the next big score. The “New Economy” helped fuel the national economy and was part of the reason for the largest peacetime economic expansion in U.S. history. Like all speculative bubbles, the dot-com bubble burst but it created many millionaires along the way and has changed the world forever.
Price to Earnings Ratios
Currently NASDAQ composite market is worth just 27% of its historic highs.
Over valued stocks were one of the leading causes of the eventual retraction and collapse of the dot-com boom. As investors woke up to the realities of stock prices based on speculative gambling they began to sell off their holdings in these companies. The massive sell offs drove the NASDQ composite from its June 2000 highs of over 5000 to its current composite of around 1370 as of March 28.
Years before the dot-com crash investment professionals noted that many Internet stocks had P/E ratios in the 30s. Most of the companies behind these highflying stocks had negative or nil earnings. (BusinessWeek 1996) PE ratios are important because a firm’s stock price is often determined by multiplying the EPS (earnings per share) times the P/E ratio. Market determined P/E ratios include not only earnings and sales growth but also the risk and volatility of the company’s performance, the debt-equity structure and other factors. Irrational exuberance, as Alan Greenspan, Chairman of the Federal Reserve, famously remark, drove stock prices far beyond their fundamental underpinnings would justify.
An excellent example illuminating Greenspan’s prescient remark can be seen the performance of Broadcast.com. This company billed itself as the leading aggregator and broadcaster of streaming media programming on the Web. Broadcast.com held its initial public offering on NASDAQ exchange in July of 1999. In September of that year, its stock price fell from the mid-60s to the low-30s. It then skyrocketed to 100 at the end of the year. On January 8, 1999, a Friday, it rose from 132 to 197, a jump of 50%. Fearful NASDAQ officials stopped trading and tried to get an explanation from the company, which could offer none. On the following Monday, after the company announced a two-for-one stock split, its price climbed to 278, a 40% gain. Broadcast.com was little more than a name. It was a company in search of a business. Its web site was limited, almost amateurish. It produced nothing itself (it relied on “content providers” in Internet lingo). It simply plays (“streams” to use the jargon again) low-quality audio and video generated by other companies (radio stations, CSPAN, etc.). Even with a high-speed modem, the pictures were choppy, hardly a surprise given the still limited technology of Internet video at the time. (Cassidy 2002)
What happened to this overvalued, over funded and non-profitable company? On April 1st of that year, (somewhat appropriate), Yahoo, the Internet search engine company, agreed to pay $6.1 billion dollars to acquire Broadcast.com. This was in spite of the fact that the company had reported losses of $16.4 million on sales of $22.3 million. Yahoo did not actually pay cash for the company but instead exchanged its own over valued stock.
The sudden distaste for Internet stocks resulted in massive sell offs, delisting of multiple companies from NASDAQ and reluctance to buy any stock remotely associated with the Internet or computer technology. The fall out affected otherwise fundamentally sound companies and companies that had only tangential ties to the computer world.
An Unsustainable Model
The Internet business model seemed to be based not on profit expectations but on the expectations of selling stock to the public at ever increasing prices (Tobais 2001). The boom both followed the development of the Internet but it also accelerated the development as well as contributed to the speed and reach of rapid technological change. The Internet driven boom also accelerated the spread of new technology in the telecommunications industry as well. The optimism of the markets changed the fundamentals of individual businesses and had real and profound effects within our entire economy.
In a normal market, there is a one-way connection in which financial markets discount the future in a more or less accurate way. Instead, a two-way connection in which financial markets shape the future they are supposed to discount. In the place of a single outcome, there becomes a range of possibilities. Which of those possibilities comes into bearing is dependent on both the future direction of the fundamentals and the financial market behavior as well.
With valuation skewed this way it would have been irrational for market participants to base their decisions only on their expectations about the fundamentals, because the fundamentals are not determining the market prices; in fact they are being shaped by the market conditions (Cassidy 2002). What seemed to matter to investors and speculators was the future course of market prices rather then the fundamentals that they should have reflected.
This dot.com mania was an indication of a larger phenomenon. The fundamentals that, in theory, determine stock prices, are not an independent given, rather they are conditional on market behavior. There are many ways that a stock price affects the fortune of a company including; determining the cost of equity capital, influencing whether a company will be taken over by another company or vice-a-versa, and its ability to borrow. Stock prices affect the ability of companies the ability of attracting top employees through their granting of stock options and the price of a company’s stock can be an advertising or marketing tool. This last point means that if the financial markets think a company is successful, the company’s fundamentals improve but when the stock markets change their mind actual, the fortunes of the company can change as well.
When the Internet went from boom to bust it was caused, in part, by an over-extension of credit. People’s expectation of the future value of a company served to pump up the price of the stock, in essence, over-extending its credit. Venture capital firms practically tripped over each other in a rush to throw money at 20 somethings who had a nifty idea for a new dot.com company. Economists know the disconnection between reality and the concepts of efficient markets and rational expectations as the concept of multiple equilibria. The theory holds that constant movements away from a theoretical equilibrium can be explained within by the role multiple equilibrium points within a market can fuel the markets’ decisions for investing or removing money from the markets. (Baldwin 2001).
When the first Internet companies started going bust in the first quarter of 2000, the eyes of investors started having their cataracts removed. The smoke and mirrors that masked the rickety underpinnings of most of the newer dot.com startups was swept away to reveal fundamentally paper companies with little actual product and less economic viability. Venture capital groups withheld additional funding for the bleeding companies, in some cases started to demand their money back from many start-ups. A chain reaction began that eventually lead to the demise of over 4500 Internet-based companies. The Unfortunately, the markets mass exodus from Internet stocks harmed many companies that had real profit potential. Versata, (www.versata.com) is one example of a company harmed by the exodus. Makers of software designed to speed the development of java and/or HTML-based enterprise applications the company went from a small start-up in 1995 to a successful, (like most IPOs associated with the Internet), public offering 1999. Located in downtown Oakland, California the company rapidly expanded its workforce and soon leased four stories of a prime downtown office building. Within months of moving of occupying their newly leased office space, the rug was pulled out from under them. The company’s executives featured solid, mature management with years of experience in both the old and new economies but as businesses shirked away from technology investment, and as the market turned its thumbs down to most new companies traded on NASDAQ Versata’s woes began to increase. The company went public in March of 2000 and reached its highest per share price of 78.38 on March 28, 2000. From that point on it was a slide downhill. It was slow at first, but in 2001 accelerated. Currently the stock is trading around 85 cents a share, and has been doing so for months. They have somehow managed to keep from be de-listed off NASDAQ but it has been nip and tuck for a couple of years now. The company has lain off approximately 80% of its workforce and has gone from occupying four floors of their downtown office suite to sub-letting three of them. (www.Versata.com)
Without money, a company will not get off the ground. Venture capitalists have, (or had), deep pockets from which every young computer geek with an idea and a proposed company name that ended in dot.com came a calling. Venture capitalists are shrewd individuals, in theory, and will look very closely at a business plan that requires investment. They will analyze the technology behind the proposal, the management team of the fledging company, the market conditions in which the new company will operate and how long they think it will take the new company to be able to go public. The spectacular success of earlier Internet-based companies brought more venture capital into the game and helped drive the creation additional Internet startups. Netscape, the grandfather of web browsers became an “overnight” success. It made millionaires out of many 20-somethings and enjoyed unrivaled success until Bill Gates decided to get serious. (Maney 2003)
The $50 million rule caused many dot.com casualties. The temptation to trump up the numbers in business plans so that they could meet a size criterion of typical venture capitalist, created many pie in the sky profit predictions, not based on reality. These profit thresholds to grant start-up money resulted in a lot of often “inspiring” or “revolutionary,” but seldom-profitable business plans. Because typical VC firms needs to justify the time it will spend on an investment, they need to throw buckets of cash at a venture. This will imply that the recipient’s business must be reasonably large and able to generate revenues of $50 million in three years, (thus the $50 million rule). (Buckman 2000) The resulting calculus between the market, venture capitalist and entrepreneur creates a dysfunctional cycle of co-dependency. VC’s hold large amounts of cash out to encourage bigger thinking on the entrepreneurs’ parts, who by nature, is already pre-programmed to think grand thoughts. As a result, many of the business plans were over funded. Most were never destined for the $50 million dollar threshold. Some may have been reasonably expected to make $10 or $20 million had the expectations and financing been firmly planted in reality. It has been suggested by some that angel investing, (smaller investment firms willing to give smaller amounts of start-up financing to promising companies), would have been more appropriate for those small companies that could have made it, if only.
In the profit frenzy of the Internet boom, many VCs were giving money to companies that were not ready for it. What some called a poster child for the dot.com demise, Kibu.com, a web-based company directed towards the teenage girls market, was asked to return large portions of the money it received from its venture capitalists. Kibu was founded in 1999 and attracted a $22 million investment from such Internet heavyweights as Jim Clark, former chairman Tom Jermoluk, and venture capital firm Kleiner Perkins Caufield & Byers. (Musil 2000)
Why did the normally cautious venture capital firms start throwing more and more money at Internet companies without being more cautious? Spinning startups into the public market could be very profitable for many a VC:
We’ve had more deals that we’ve turned down generate a billion dollars of market value than we had total successful deals five years ago.’ (Perkins 2000)
Implications of course are that venture capital firms felt that they could not afford to say no to deals offered that came in the front door. Many corporate and leasing businesses’ investment programs simply suspended due diligence altogether and followed the top venture firms into the fray.
The venture capital firms had access to large amounts of cash and were hungry for ownership. They started to move away from syndication partnerships to spread the risk of financing the first round funding so that they could reap greater rewards when a company went public. Unfortunately, this resulted in many startups only having the benefit of one person from the VC brain trust sitting on their board of directors rather then the usual three or four. Many VCs ended up sitting the boards of 15 or 20 startup companies. This further exacerbated the problems of weak or negligent due diligence. The rapid movement from seed money to IPO, coupled with the public market’s rapid buying of these new issues meant that many companies went public without the benefit of thorough analysis and assessment. (Perkins 2000)
Money To Burn
The many of the Internet startups distended for failure had something in common, they burned through investors’ money at sometimes-incredible rates. Webvan, the online grocery delivery company, admitted to a burn rate of $100 million per quarter, it is said to have burned through $1billion dollars in venture funding. (Patsuris 2001)
Many Internet startups were run by young, experienced, management who little understanding of bottom line issues. Expensive office space, high personal expenses and the “perks” offered to new employees dug deep into the venture capital funds thrown at these new enterprises. Simply put, some dot.coms threw away their money on parties, options, technology, and over-paid staff.
Articles abound on the Internet about the phenomenal burn rates of many Internet startups. An example from Red Herring’s online magazine, (a victim of the dot-com crash itself) illustrates the point:
The venture industry is completely out of control,” says one veteran Silicon Valley insider. “It’s so distorted now, it’s almost unrecognizable.” Nevertheless, the money keeps pouring in. According to the research firm Venture Economics, 1999 was a record year: venture investors sank $48 billion — more than the combined totals of the previous three years — into startups. One company alone,
CarsDirect.com (Proposed: Nasdaq: CRSD), received $280 million in its third round of financing.” (Perkins 2000)
The rational behind the drive to spend money included the need to ramp up operations, as well as to establish brands. To achieve the important advantage of brand recognition the companies allocated huge sums of money to marketing, advertising. The 2000 Super Bowel was littered with many, now defunct, Internet companies’ advertisements.
The average burn rate per startup went from roughly a half million dollars per month to near $1 million or $2 million a month in 3 years. This resulted in a need to raise new funds by venture partnerships at least once a year instead of the more normal every three to four years.
Much of the burn rate also can be attributed to the fierce competition to hire talent. Compensation for senior managers, top programmers and technical staff included meeting expectations of large salaries and fringe benefits. In addition, they all expected generous stock options.
Stock options themselves became a way to “cook” the books later on. Stock options are benefits granted to company employees with the promise that they can buy a specific number of shares of stock after a certain period of time at a price specified at the time the options are issued. Therefore, if the stock exceeds that price, which was often the case in the 90’s, the employee kept the difference, in other words, made a nice profit. The nice thing for the companies is that at the same time that the employees receive their stock options, the company can take a tax deduction when the options have been granted. Current moves in Congress are designed to change accounting practices so that companies will have report stock option grants as expense, in the quarter they are granted rather then taking a deduction down the road. (Pradnya 2002)
The rapid burn rate and the resultant pace of investment left very little time for a thorough due diligence of these companies. The decision cycle was compressed and startups went from seed money to IPO at ever-faster rates. Often times during the heyday of the dot.com boom this whole process, seed money to going public, would happen in 18 months instead of the four to five years it would take in the earlier 90’s. (Hjelt 2001)
Nothing changes overnight. The single most fatal miscalculation investors made regarding the Internet was to massively overestimate the speed at which the marketplace would adopt dot-com innovations. People simply thought that if it is new, Internet based, and is technically nifty; buyers would naturally rush to embrace it. The example of Broadcast.com suffices in this point. As noted earlier many feel that the assumption of speed dictated the rapid pace and scale of investment by both VCs and public investors; and the resulting over-investment led to the inevitable bubble and bust. Many somehow believed it was different this time. Of course, it was not. It will always take time and lots of it for people to integrate innovations into the way they do things. (CNN/Moneyline 2000)
Just because you are technically savvy does not mean the world is going to stick with you because of your dot.com panache. Razorfish.com is a nice example of this fact. Razorfish, a company whose investors had little idea of what they actually did, went was financed initially with $7 million dollars from a VC firm made paper millionaires of its founders, Jeff Dachis and Craig Kanarick. Its financial growth was driven mainly buy its huge roster of clients, businesses such as British Aerospace and Charles Schwab. The fact they had little idea of what the company actually did was of little concern apparently. Somehow, the founders convinced these and other companies that they had the best ideas for old economy companies that wanted to hook themselves to the Internet.
The company’s downward spiral soon came after the two founders decided to appear on a “60 Minutes II” interview in February 2000. The following excerpt from an online article from Wired Magazine best sums up the public’s perception of the whole Internet “thing.” When asked by 60 Minutes’ Bob Simon what it is exactly that they do, Dachis replied,
Simon praised Razorfish as “one of the most successful companies on the Web,” but then his tone abruptly changed. “Successful at what?” he asked.
The camera was now on Dachis.
We’ve asked our clients to recontextualize their business,” Dachis managed. “We’ve re-… recontextualized what it is to be a business-services… And that’ll continually… ”
Simon’s face went blank. It was not the look of helpless confusion millions of Americans were experiencing as Dachis stuttered at them through their TV sets. Rather, it was the sedate, self-satisfied gaze of a 60 Minutes reporter about to yank the lever of the show’s legendary trapdoor.
You know,” Simon said, “there are people out there, such as myself, who have trouble with the word recontextualize.” Anyone who had ever watched the show knew where this was going: “People out there, such as myself” meant “the rest of the goddamned United States.” Dachis was on his own now. Even the chief scientist stood mute.
Tell me what you do,” Simon insisted, “in English.”
We provide services to companies to help them win,” Dachis offered.
So do trucking firms!” Simon snapped. Dachis seemed taken aback – the trucking remark was really uncalled for.
What is it you do?” Simon pressed.
Our talent is to do a certain thing, whereas the trucking firm…”
Yes, but what is – what is it you do?”
We radically transform businesses to invent and reinvent them,” Dachis said. It was his best shot.” (St. John, 2000 (www.wired.com)
When the bottom started to drop out for the folks at Razorfish, nearly 2000 people were laid off. Eventually Razorfish was purchased in January 2003 by privately held IT consulting outfit SBI and Company $8.2 million dollars, the same amount of cash that the company had on had. Unfortunately, they also were holding $12.3 million in debt as well. (Copeland 2003)
The Faulty Business Plan
One of the major reasons for the failure of Internet companies were ill conceived, unrealistic business plans. The Web Mergers, (www.webmergers.com) has created www.businessplanarchive.orgas a website devoted to archive the many business plans of now demised startups. It is conceived as both an historic record and a research tool for studying the dot-com boom and what contributed to its failure. Various Internet entrepreneurs used some of the general approaches in the following overview of what turned out to be eventual failures on the Internet.
The Wrong Technology for the Job
Many believe that the use of narrowcast to broadcast broad content helped speed the demise of the love affair of the technology itself among investors. A large number of entrepreneurs, in all probability in the search for a wealthy payoff, decided to use the Internet, the definitive narrowcasting medium, to reach the widest and most undifferentiated consumer markets conceivable. The entrepreneurs were essentially using the equivalent speed and carrying capacity of a rowboat to deliver the equivalent of a cargo ships worth of Internet enabled content. By doing this, entrepreneurs bypassed the many possible demographic opportunities presented them for profit to extract a fraction of the cost of the big play. Numerous big and broad consumer startups, ranging from Value America to Webvan, went aground on the inherent low margins and the massive marketing and infrastructure costs intrinsic in such ventures. (Webmergers 2003)
Cart before the Horse
Internet company crash and burns were often the result of business models requiring startups to build a critical mass of buyers to sustain income revenue while at the same time developing a critical mass of sellers as well. There were many in the business to business, (B2B), category that fell into this trap. A many-to-many business model requires huge influx of money to create and sustain it until it can become profitable on its own. Successful examples, such as eBay, have spent considerable time and money to achieve their success.
Giving it Away Giving away the company seemed the firms’ first point of business. Many business plans were built with the idea that a company could give something away for free and make it up on charging for services, enhancement, and etc. later. Ziff-Davis, the owner of www.zdnet.comreportedly once received a business plan that would give away free fax machines and then make up the revenue by faxing advertising to the recipients of these free machines, think hard copy pop-up windows. (Businessplanarchive.org)
The numbers did not work out for most free models. The low incremental distribution of costs inherent with doing business on the Internet provided sustenance to a large cadre of freebie web-based business visionaries. The amount of collapsed “freebee” Internet sites includes names like FreeInternet.com; Freerealtimeworld; Freeride; FreeTaxPrep.com; freeWebStuff.com; and freeworks.com.
Startup companies were frequently noncreative and not very “Internet.” Many began with ideas that entailed little else then shoving and existing business model onto a web site. Others simply copied some other company that did it first on the net. “Shovelware,” meant to the content world transferring magazine content or other traditional media formats directly onto their Internet web sites. Catalog retailers followed similar approaches. Online consumer retailing of merchandise was often the most obviously uncreative use of the Internet to showcase their wares. Often time in the early years they failed to take advantage of the interactive strengths of the web, which is what makes the medium so powerful. Instead, they would simply slap pictures of this and that and let potential consumers simply stare. Fortunately for web shoppers the more imaginative – and on occasion successful – e-commerce startups leveraged Internet tools to produce such advancements as pricing “bots,” and/or collaborative purchasing, person-to-person trading, e-procurement systems and name-your-price bidding systems for perishable inventory.
Too Early for the Medium
The timing of web business often was a contributor to their demise. Of the web’s many crash and burns, many attempted to enter the market with high-cost products far too soon for the Internet infrastructure to readily absorb them. Numerous out of business companies in the digital equipment category are a good example, with companies like Z.com, Pop.com, Icebox.com, Digital Entertainment Networks and Pseudo Networks littering the dot-com landscape; not because they had shoddy products, but because they were too early in the development of the broadband marketplace. (Cassidy 2002)
New vs. Old
Just because it is new does not mean it will automatically replace the old. This is especially true when considering that historically innovations almost never replace current products, instead the usually work their way into a market niche. In spite of this general truism, many dot-com entrepreneurs and their funding VCs insisted on business plans that were modeled on the assumption that a zero-sum game existed. Online pet stores Petopia, and its competitors, are an example that will be studied more closely later in this paper. They assumed that online retailing would displace a significant percentage of existing retailing. In hindsight these failed e-tailers simply needed to look at the history of catalog marketing to predict that their ventures might be able to squeeze their way into some small portion of consumer purchases and eventually reaching their natural saturation point. Recognizing historic precedent would have kept huge amounts of venture capital from being mired in the preverbal cat box.
If tools for predicting success on the Internet had been readily available, it is conjectured that many of the bankrupt businesses littering the web landscape would not have ever been started in the first place. (Cassidy 2002)
As previously noted, some of the largest mistakes of the dot-com bubble were mistakes of timing. Miscalculating the direction and speed of development and adaptation resulted in investors placing their bets in misguided fashions. To avoid future mistakes like these better predictive tools for plotting the speed at which new technologies will spread should be developed. Giving a bunch of 20-something business school graduates, the chance to perform spreadsheet gymnastics in order to convince venture capital partners to invest in their spiffy new technology should not replace solid analytical tools needed for predicting the real potential of emerging Internet technologies. “Diffusion of Innovations,” (DoI) was conceived some 40 years ago. DoI Theory is concerned with the manner in which a new technological idea, artifact or technique, or a new use of an old one, migrates from creation to use. According to DoI theory, technological innovation is communicated through particular channels, over time, among the members of a social system. The tools and the history are there and dot-coms would have done well to learn from it. (Clarke 2003)
The Human Toll
The Department of Labor reports that 1.6 million have been out of work for more than six months, the highest level since 1994. Average length of a job search for discharged managers and executives surged 26% during the past 12 months and now stands at nearly four months, a 16-year high. Outplacement firms say a typical tech job search takes six months, up dramatically from a year ago. “This is my third recession, and it’s the worst one,” said Silicon Valley career counselor Patti Wilson “It’s a tech depression, and I don’t see any light at the end of the tunnel.” (Coreman 2003)
Many people who did not benefit from the largess of the dot-com years feel little sympathy for those who now find themselves in more humble circumstances. The San Francisco Chronicle’s web site, in a bit of class envy no doubt, calls Silicon Valley, Silly Valley, whenever it writes, (often in a gloating manner), of news and events in the former economic powerhouse region.
The dot-com crash victims’ stories bare witness to the depth of the dot-com crash as well as the dizzy heights that the boom had inspired:
Kent Haynes, a former technical program manager for Compaq Corp., has more then 30-year of experience in the high-tech world. In October of last year, he took a job as an unpaid volunteer at a small, struggling startup company in Newark, California. He had been laid off from his $90,000 a year job 7 months prior. (Coleman 2003)
Matt Heminger was a senior educational engineer laid off from PeopleSoft Inc. In August of last year. He was making $132,000 a year at the time. He now states that he would take a $40,000 a year job. He sold his 2,400-square-foot home in a town that was a 90-minute commute from his office and has moved into a modest apartment. His son is adjusting poorly to his new school.
Andrew Perfetto once hired 54 people in one quarter for the company he was a technical recruiter for, Commerce One Inc. during the height of the boom. He was laid off a year ago in April, one day shy of his 40th birthday. He did receive two months severance pay for a birthday present.
For many the bleak contrast of before and after the dot-com crash has taken them by surprise. During the weekday mornings during the height of the boom Michael Galpin, a 28-year-old Java programmer, could see and feel the energy and bustle in the air when he would walk the 10 blocks from his subway exit to his office in downtown San Francisco. Now he reports “There really wasn’t the same kind of buzz that was in the air back then.” Instead, he reports that now, “Everyone is in hunkered-down mode. Everyone has just got to survive right now.” One company that he recently interviewed with told him that they had received 800 applicants for the job he was interviewing for. They told him he should feel good about the fact that they even interviewed him. Just to rub salt into the wound they told him that the company wanted to hire him as soon as they had a management meeting about the current budget. A few days later, he received an email explaining that the department did not get funding so they could not hire him after all. (Coleman 2003)
Pets online: a case study
In this paper’s general survey of bad business plans applied to web-based commerce, new vs. old was one of the ill conceived plans considered. To restate, even though it is new, e.g. The ability to sell goods on the Internet, does not mean that it ought to be done. Historically innovations almost never replace current products but instead work their way into a market niche, a subset of the overall market for their particular products. Thorough understanding of the theory of “Diffusion of Innovations” and careful application of it by any of the players involved in the founding and demise of online pet stores like, Petopia.com, may have prevented the company from ever forming in the first place. Of course in the comfort of hindsight this an easy speculation. The times fueled an entrepreneurial frenzy that may have nullified any amount of reason when it came to considering starting a web-based business.
On-line pet ventures, Petopia.com, Pets.com, Allpets.com, and Petstore.com were victims of the sudden and nasty ending to the dot-com euphoria that had been fueling the stock market and this country’s economic expansion. Online pet ventures are a laughingstock of Wall Street now days but to many it seemed like a great idea at the time. (Cassidy 2002)
It took just 18 months for the four main rivals; Pets.com, Petsmart.com and Petstore.com, and Petopia.com, to burn through more than $500 million dollars of their investors’ money. Of the four only Petsmart.com is still in business although its traditional retail partner absorbed it. A smaller company, Allpets.com is still limping along as well. The other players in the online pet business are either bankrupt or little more then a mirage of their former selves.
In early 1999, the online industry appeared to be unstoppable. The online pet-store industry had all the suspect fundamentals as many of the dot-com companies during the boom. These included IPO inspired venture capitalists eager and willing to throw large amounts of money at anything that had the dot-com nomenclature. Business IPO successes like Amazon.com, eBay.com, and eTrade.com had VCs ready to spray cash from fire hoses if that eventually met huge payoffs. The aforementioned successful companies shared another thing in common, they all shunned teaming up with traditional brick and mortar operations, choosing instead to go it alone the laizzere faire world of the Internet. The lack of encumbrance with traditional business allowed these companies to business plans, which allowed them to accelerate from zero to public offerings in lighting fast time. Naturally, everybody wanted to copy this success. Instead, the people who started these businesses believed if you spent huge sums of money to build a brand, and were the first to market, the profits would eventually come.
In February 1999, the three potential online pet supply companies, along with Allpets.com, came to Sand Hill Road, in Palo Alto, California, a nucleus of venture capital bigwigs, to chase funding for their new ventures. Allpets’ former CEO, Niloo Howe pitched the idea to Frank Creer, a partner at Zone Venture, a venture capital firm. He pointed out how pets are a $28 billion a year market at the time, and that sixty percent of all Americans have pets. He pitched how it was not easy to carry a 40 lb bag of dog food home with you when you are wearing high heels and buying online means, you do not have to touch or feel the product. The reasoning was enough for Creer to go for it. He thought it was the perfect business model.
From the venture capitalists’ point-of-view selling dog food on the Internet seemed a perfect plan. Because pet food has extremely thin profit margins, the e-tailers planned to make their profits from selling accessories, such as heated dog beds and pet toys. At the time industry analysts predicted about $2.5 billion from pet focused products would be bought from online stores annual by 2002.
Creer’s firm contributed $1 million to Allpets to get it going. What Creer did not know was that entrepreneurs from four other major pets sites were going after multi-million dollar funding. Allpets.com and Creer were blindsided by companies entering the fray with $100 million funding.
At the very start, Old Town Pasadena, California, was the center of the pet e-tailing wars. Around the corner from the Allpets offices was fellow entrepreneur Greg McLemore who had registered hundreds of domain names, including Pets.com. Soon after the Pets.com founder scored a $10 million investment deal led by the VC firm Hummer Winblad. Around the other corner, Peter McGovern had purchased the domain name, PetJungle.com.
All four groups of pet people had spent the spring of that year selling similar business plans to a host of venture capitalists. Petstore.com VC Bob Barrett noted that, “In hindsight, there was no way to differentiate,” (October 12th 2002 San Jose Mercury Archive files).
In June of that year, Pets.com had received $50 million dollars in additional funding which included money put by Amazon.com. This gave Amazon a 30% stake in ownership of Pets.com. Each of the main rivals rejected merger offers during this time period, each convinced that their own stuffed bank accounts would serve to trash the others.
In the meantime, McGovern, owner of PetJungle.com and other web domains, had worked out a deal to form a partnership with Petsmart. Petsmart is the largest brick and mortar retail pet store in the country. His rationale was that his alliance could cut costs by enabling PetJungle, (changed to Petsmart.com), to leverage the Petsmart brand name as well as the company’s bulk-buying powers and distribution warehouses.
In late June, each of the four companies was ready to enter the e-tailing fray. They stacked up thusly:
Petopia.com had the most cash with $79 million in funding and a partnership with Petco, the second largest traditional pet supply retailer in the nation.
Pets.com was second in funding with $60 million and the Amazon partnership in its corner.
Petstore.com came in third with $10.5 million in VC funding
Petsmart.com was the lowest with a tiny, by VC standards of the day, $8 million
In August 1999, Pets.com launched a price and branding campaign aimed at making them the market leader. Their actions were taken because they figured they could quickly win the most customer traffic and thus sales. Once this was accomplished Wall Street would fall in love with the Pets.com name and they would be able to leverage themselves into an IPO by early that winter. This would happen they figured even if profits were nil. The other three competitors were also racing towards the IPO prize.
Petstore’s chief venture capitalist, Jason Barret, admitted, “We wanted to get to IPO in six to nine months.” (Cassidy 2002 p. 243)
In response the CEO of Pets.com, Julie Wainwright, launched her own $20 million TV blitz featuring a sock puppet, described as a “spokesdog puppet thing” (Cassidy 2003 p. 244). They started to lure online customers with enticing drops in prices. Pets.com thought that the price wars would only last a couple of months but unfortunately it lasted a lot longer.
Pets.com offered 50% off dog food in August of 1999, so Petsmart.com countered with buy one bag get the second one free. Pets.com countered with free shipping.
The highly competitive tactics employed by the dog food vendors was indicative of the cutthroat tactics across the entire e-tailer spectrum. They competition was fierce to entice potential customers to click on their websites.
By the 4th quarter of that year, Pets.com was selling and shipping product at a loss. Irrational exuberance caused even people who were experienced in more traditional business models, McGovern chief among the 4 competitors, to accept what the backers were telling him about launching an IPO even though Petsmart.com was losing money as well.
McGovern’s approach was more conservative, which allowed Petsmart.com to survive the eventual shakeout that was coming. He spent money on things like computers and office supplies, he kept his staff small compared to his competitors and housed the entire Petsmart.com enterprise in a small office space above a Gordon Biersch brewery.
Petopia.com’s CEO, Andrea Reisman, took a more typical Internet company start-up approach. Petopia.com’s office was situated in 21,000 square feet of prime south of Market St. real estate. The headquarters featured doggie doors in the conference rooms, a two-story aviary and an indoor dog park.
The television debut of Pets.com’s sock puppet caused anxious investors to start calling McGovern, worried that Petsmart.com was being out flanked in its marketing. His response was that Petsmart.com was running a targeted campaign in concert with Petsmart’s 500 stores nationwide. McGovern argued that his campaign was more effective as well as cheaper.
Dot-coms were blanketing TV, radio and billboards during the late 90’s and early 2000. The so-called mascot of e-commerce, Pets.com sock puppet, even had its own million-dollar balloon in the Macy’s Thanksgiving Day Parade and the company had a $2 million dollar Super Bowl television ad in the works. (Brick 2000)
As far as McGovern was concerned, TV was a curse that ended up taking a lot of money to get the message out to people who had no intention of buying anything from his company anyway. Nevertheless, McGovern, feeling the pressure, spent $18 million dollars of a $50 million cash infusion he had just received for television in the fall of 99.
At the close of 1999, Pets.com had lost $61.8 million while earning a paltry $5.8 million in sales. For every dollar of merchandise Pets.com sold, it lost 67 cents. While Petsmart.com lost $47 million in the same time frame they managed to take in twice Pets.com’s revenue. (Hobson 2000)
In the all-important “hits” category Petsmart.com and Petopia were first and second in visitor traffic. Pets.com placed third while Pestore.com was in last place.
Even though all of these companies were clearly lacking in the solid fundamentals that make business attractive for market investors the management team at Pets.com, on December 9 that year, filed for a $100 million IPO.
On the morning of February 11, 2000 Pets.com’s founder McLemore was anxiously waiting in his Pasadena office for word of his company’s IPO’s success in the market that day. He had personally invested $400, 000 of his own money and wanted to reap the rewards.
A week prior Petsmart.com had also filed for a $115 million IPO even though the company was receiving huge losses. McGovern was also talking with Petstore.com management about a possible acquisition.
When the market opened, Pets.com sold for $11 a share, raised to $14 a share for a short while, and then declined steadily for the rest of the day. The stock was selling for $6.13 a share by February 22 and it continued to go lower. This may have been the signal that the dot-com party was at its end. McGovern worried that Pets.com sinking fortunes would ruin the IPO market for everyone else before they had a chance to go public. (Hjelt 2001).
Even the IPO market was clearly deterioration Petopia.com went ahead and filed its own $100 million public offering in March 1999. Although they did not know, it fully at the time Petopia.com did not stand a chance in the IPO market.
Market analyst became alarmed when Amazon, consider by many to be the bellwether e-commerce site, had declining numbers for the first time and no profits for the near future. The analyst who were so important in the hyping the market frenzy for doc com stocks had started to question whether the so called “New Economy” dot-coms should be held to the same fundamentals as the more traditional companies have always been. Their very high valuations came into question. This was the start of the slide for the Internet economy. (Hjelt 2001)
Credit Susse First Boston suddenly dropped out as the lead bank for Petopia’s initial public offering. Amazon, it was rumored, had threatened to cut off future work if the bank helped their competitor. Whether this was true the market collapsed before others could get out.
The problems of the pet dot-coms were a prelude IPOs in general being rocked by markets’ dive later that year. On April 14 the Dow dropped 496 points, and Wall Street pounded the overvalued dot-com stocks, investors selling them off as fast as they could. This had the effect of causing funding to dry up.
Petsmart.com’s McGovern scrapped plans for their initial public offering, in part due to urging by Petsmarts, Inc. executives. To stopped plans for TV ads, 2-for-1 promotions, and started trying to find investors willing to pony up an additional $15 million in funds. Because the other pet dot-coms were in the same, predicament meetings were held to discuss mergers. Unfortunately, talks became bogged down over who would be swallowed by whom and which CEO should be dumped. (Helft 2000)
As the cash began to run out the egos that propelled these pet dot-coms began to cave. Petstore.com, which had raised $107 million, largely from Discovery Communications, was the first to hit the wall. In June, rival Pets.com snapped up the Emeryville-based e-tailer’s assets in return for Pets.com stock, which was trading at $2.06. Allpets.com followed merging with PetQuarters, based in Arkansas, to leverage boutique retailing and catalogs.
On Nov. 7, Pets.com earned the embarrassing honor of being the first publicly traded dot-com to die. Its stock was trading at 22 cents a share and the company was unable to find a buyer. They announced immediate layoffs of 255 of their employees.
The company had burned through about $179 million between February 1999 and September 2000, produced $31 million in revenues, and generated $147 million in losses.
Pets.com’s final numbers staggered challengers, since analysts had recently declared Pets.com the fast-growing category leader.
A few weeks earlier Petopia had laid off 60% of its staff in an attempt to make it more attractive to potential suitors, and to try to stay alive. Analyst had initially bet on the Petopia before Pets.com. (Petrin, Woodall 2000)
McGovern managed to lock in a deal with his traditional retail backer by agreeing to allow a 81% stake in the company in return for $30 million in new funding.
Petco, Petopia.com’s traditional retail backer waited until Petopia was in so much distress that it could buy the company’s assets at rock bottom prices. Petco did promise to preserve the Petopia name but it vanished by February of the following year.
Most investors lost all of their money on the online pets industry according to market analysts. Even with the bankrupt companies some managed to still make some money; Pets.com’s CEO Wainwright, along with nine executive officers, where given $1 million in bonuses. For Wainwright’s part, she was handed $225,000 if she promised to stick around until the doors were closed. (Weiss 2000)
These four companies were excellent examples of the points made earlier in this paper. A poor business plan, designed more for impressing potential venture capitalists then for actually securing mapping a route to become profitable. Extravagant burn rates, all four dot-coms burnt through nearly a half billion dollars in just a year and a half. They brought new, gee wiz technology, to a field a traditional market and failed to understand that they would have to establish themselves as niche players at first if they wished to succeed. Moreover, they succumbed to the frenzy fueled by the “irrational exuberance” of the market during this time.
In February 2000, the expansion that started in March 1991 became the longest period of uninterrupted growth in U.S. history. (Miller 2002) The milestone provoked a burst of enthusiasm from journalists, economists, business executives, and investors, both in the U.S. And elsewhere. More and more people were willing to consider the notion that the expansion never needed to end.
Nevertheless, each economic era is afflicted has been affected by its own unique set of circumstances. The New Economy was not simply a more cosmopolitan version of the old industrial economy, it was a faster model, touted by pundits as being unstoppable by the normal constraints of the economic past.
The great strength of the dot com economy was the emergence of a systematic market mechanism which was devoted to seeking out and funding technological and business innovation on a huge scale. A large pool of sophisticated risk-taking capital became available through venture capital funds, which funneled money from pension funds and other large investors into high-risk, high-return startups. This ready flow of cash nourished the dot com boom. NASDAQ, made it possible for smaller companies to go public, facilitated the relatively easy access to public funding through stock sales. Intelligent, highly skilled entrepreneurs attracted a talented workforce willing to take a chance working for new companies in exchange for stock options created an entire subculture of t-shirted paper millionaires. This was the first economy, as Treasury Secretary Larry Summers said in a speech to the New York Economic Club, “…in which entrepreneurs may raise their first $100 million before buying their first suits.” (Summers 2003)
The excesses of the dot com boom finally caught up with the people who were driving it. The rush of investors away from technology stocks plummeted the NASDAQ down more then 3500 points over the last couple of years. Twenty and thirty-somethings who were making $100k plus a year, while counting the days until they could cash in their on-paper riches, can be found waiting tables in San Francisco. But in spite of the rapid deceleration of the “new economy” many people remain hopeful that the next boom is just around the corner. The dot-com boom changed the world and its affects will continue to by with us for a long time.
NAS/NMS COMPSITE (NasdaqSC: ^IXIC)
NASDAQ Chart of 5-year climb to its peak value then decline
Mar 28 A 1,369.60
1y Target Est
Amazon.com vs. Barnes & Noble
Splits: 2-Jun-98 [2:1], 5-Jan-99 [3:1], 2-Sep-99 [2:1
Online pet stores attracted huge venture funding and failed to turn a profit. Here are the major players and what they lost:
March-99 Charting the online pet players:
Source: San Jose Mercury News
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There is a very low likelihood that you won’t like the paper.
- When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
- We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.
In the event that you don’t like your paper:
- The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
- We will have a different writer write the paper from scratch.
- Last resort, if the above does not work, we will refund your money.
Will the professor find out I didn’t write the paper myself?
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
What if the paper is plagiarized?
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
When will I get my paper?
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
Will anyone find out that I used your services?
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
How our Assignment Help Service Works
1. Place an order
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
2. Pay for the order
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
3. Track the progress
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
4. Download the paper
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!