An Oral History of the Internet

How the Web Was Won

This article is 6th in a series comprising the “Oral History of the Internet” ….a fascinating story that should be read by everyone as it has become far too easy to take this marvel of science and social networking for granted. Part six, "Boom or Bust," features the opening day of trading for Netscape Communications in August 1995 when its stock price almost doubled in value. Before long, Silicon Valley was the scene of the most frenzied investing in modern times.

VI: Boom and Bust

There were so many start-ups where they’d have a fund-raising party. The company basically would have a business plan and a PowerPoint, no technology. They’d raise $10 million and then there’d be like $250,000 or $500,000 blown away just on the party.

Many of those companies didn’t spend the money in a thrifty way. They would raise $25 million with a single phone call and then spend half of it on Super Bowl ads.

Most investors didn’t understand the Internet. They just knew that these things that have "dot-com" next to them were worth a lot and were going to be really big someday, and they missed the last one. I remember DrKoop.com. And I remember they were losing money, I think $10 million a month or some crazy amount, and they still had an I.P.O. of almost a billion dollars, something really ridiculous.

Upside magazine was the first to cover the Silicon Valley start-up scene.

The hottest job title during the frothy days was—you’d see 25-year-olds who had the title of "vice president, business development." It was like sales without the quota. I remember asking one of these V.P., biz-dev guys how his company was doing, and he says, "Oh, it’s great, we’re into our third round of financing." And I said, Well, how about the revenue side? Are you profitable? He says, "We’re a pre-revenue company."

You know, the dot-com crash was mostly a crash about stock-market perceptions, not about actual growth. If you look at data traffic on the Internet between 2000 and 2001, 2002, 2003—all the way to 2008, there hasn’t been a down year. People think of the dot-com crash, but it wasn’t a crash in the usage of the Internet.

Silicon Valley had been through boom times for sure, but nothing like that Internet boom. Companies were going public—you couldn’t get a corporate lawyer in Silicon Valley. Big law firms were bringing in lawyers from Cleveland, literally. You couldn’t get an underwriter.

The Valley was in such a boom that it was crushing our infrastructure. You couldn’t go out for lunch, because there’d be no parking spaces. The streets would be clogged to get there. You couldn’t get a reservation. People stopped scheduling meetings during the day because it was like Los Angeles. It was a system out of control.

When we went public we raised just under $80 million. We always had a plan for profitability and the company was exceeding its goals. In the first full year of operation we were going to hit about $50 to $55 million in revenue. But it became clear that we wouldn’t be able to close the gap, so I shut it down in November 2000 and actually returned money to shareholders. I didn’t run into bankruptcy.

People think we spent tons of money in advertising. And we didn’t, because I only ran ads in key markets. But people fell in love with the sock puppet. It captured people’s imaginations. When you start thinking about what Pets.com did in that short time period—we actually exceeded PetSmart and Petco and became the No. 1 brand online.

I think the only thing I ended up with out of that investment is a sock puppet. An expensive sock puppet.

And after it all, there was a bumper sticker you’d see in Palo Alto: "Dear God, one more bubble before I die."

When the towers came down, they took out the communications infrastructure that ran underneath them. Power went off in southern Manhattan. A large number of data hotels that support Wall Street suddenly found themselves without power and had to deal with outages. Data hotels are basically large air-conditioned spaces with a lot of power in them where you can rent racks of computing space.

In terms of the Internet, what we saw was the towers come down, and suddenly data connectivity within chunks of Wall Street, bam, forget it, good-bye, shot. Data connectivity in weird parts of the world came apart because it was dependent, knowingly or unknowingly, on the communication lines running under the towers. The most notable instance of that is you couldn’t get traffic across South Africa. In some parts of the Third World it’s cheaper to get a line that goes under the ocean than to get a terrestrial line within certain poor areas, and so you end up connecting countries that are adjacent by running lines—it used to be to New York; I’m told now France is a popular place.

But if you look within about two hours of the worst outages, the Internet was running almost entirely back to normal. Backup routing systems found backup links. The data hotels found power, got themselves back on. The brokerages—many of them had backup locations in the Midwest or the West Coast, and many of the houses were back online within minutes of the disaster.

People used the Internet heavily on 9/11. You couldn’t call your friends in D.C. or Boston or New York within about an hour or so, because the cellular system was overloaded, so people started reaching out via the network. The Internet became extremely important. It was suddenly the key source of news: What do I do? What do I need to be worrying about?

VII: Modern Times

PREVIOUS 1 THRU 5:

Part 1 – The Conception
Part 2 – The Creation
Part 3 – The Web
Part 4 – The Browser Wars
Part 5 – Going Public