F’d Companies: Spectacular Dot-Com Flameouts , by Philip J. Kaplan. Simon & Schuster, 191 pages, $18.
dot.bomb: My Days and Nights at an Internet Goliath , by J. David Kuo. Little, Brown, 314 pages, $25.95.
dot.con: The Greatest Story Ever Sold , by John Cassidy. HarperCollins, 372 pages, $25.95.
The dot-com era may have segued into the accounting-fraud era-not that the two are mutually exclusive-but the dot-com postmortems just keep coming. A few yearsago,people rushed to put their stamp on the Internet; now everyone seems to be peddling an Internet tell-all. For those who were intimately involved, it’s a way to justify their actions and salvage a little something from the fiasco. The voyeurs, on the other hand, get a chance to document other people’s indiscretions-which is generally more fun.
J. David Kuo is no voyeur. Once a political speechwriter, he not only went to work for the doomed Value America, but dragged his wife, sister-in-law and brother-in-law along with him after he fell under the sway of the company’s charismatic, megalomaniacal founder, Craig Winn. In Mr. Kuo’s dot.bomb , Mr. Winn comes off more like a televangelist, convinced that God has handpicked him for greatness, than a C.E.O. Using Value America as his “platform,” Mr. Winn planned to run for governor of New Jersey, then President of the United States.
With an old-economy bankruptcy already to his credit, Mr. Winn repeated the same mistakes with his new-economy invention and achieved the same result, proving once again that there really is no new economy. His inventoryless e-tailer hemorrhaged money and racked up losses. “Value America seemed to think that a profit was something that God sent to the Jews in the desert,” Mr. Kuo writes. His account, one of the first of the genre, illustrates how the dot-com bubble served as the perfect backdrop for a deluded egomaniac and his brainwashed disciples.
New Yorker staff writer John Cassidy provides the big picture (perhaps too big a picture) in his encyclopedic dot.con ; there’s even a compelling section on bubble psychology. Individuals see others getting rich on Internet stocks, so they feel like fools if they sit on the sidelines. They’re sure there will always be bigger fools ready to buy their stock at a higher price. Similarly, mutual-fund managers and venture capitalists follow the herd to make money, though not necessarily because they believe in the companies. Wall Street bankers-well, we know what Wall Street bankers want. So, belief in a cause (the blind certainty of Mr. Winn and Mr. Kuo) may kick-start manias, but momentum fuels them.
Ironically, the villain in Mr. Cassidy’s tale is someone who didn’t even stand to cash in on the madness: Federal Reserve chairman Alan Greenspan. Instead of checking the market’s wild ride, he left interest rates untouched for too long and pontificated too freely about the wonders of technology. Still, the message of dot.con is that insofar as there was a “con,” we were all complicit.
Next to Mr. Cassidy’s encyclopedia, Philip J. Kaplan’s F’d Companies is a mere catalog. The book consists of sketches of more than 100 ill-fated companies, but the most interesting part of the story actually takes place off the page. With FuckedCompany.com, the Web site he launched in May 2000, Mr. Kaplan has succeeded in creating a profitable dot-com by covering the demise of un profitable dot-coms.
FuckedCompany.com, which posts tips from employees and others in the industry (“fucknozzles,” as he calls them), reportedly grosses more than $1 million a year on subscriptions to his unfiltered-tips service as well as advertising and merchandise sales. Overhead? One assistant and part of the rent on his Manhattan apartment. So Mr. Kaplan, a former programmer who also runs an e-commerce consultancy, PK Interactive, is uniquely qualified to skewer the business models of failed dot-coms, the “fuckmustards” and “crapweasels” who ran them, and their insane spending.
Mr. Kaplan’s main criticism can be boiled down as follows: He’s an idiot (an “idiot dork,” to be precise), and even he could spot a ludicrous dot-com, so all those experienced V.C.’s and M.B.A.’s should have known better. Like Mr. Cassidy, he concludes that the suits cynically hoped to cash in before reality dawned, leaving investors and their own former employees holding the bag. But remember that Mr. Kaplan gets his information about these companies from former employees. Since the reporting in his book doesn’t go much deeper than the posts on his site, it’s not a stretch to say his conclusions are one-sided: Management has no voice.
So we’re left with a bare-bones recital of what each company was about, how much money it burned through, and how long it took to burn through it-accompanied by Mr. Kaplan’s acerbic commentary and masturbation jokes. (He’s funny, but his juvenile humor would play better in a bar than in a book. Also, his editors could have fixed his spelling and syntax without compromising his authenticity.) The companies are grouped in categories that reflect their main foible (“Solutions in Search of a Problem,” “Quit While You’re Ahead,” “Ahead of Their Time? Or Just Stupid?”), and some of the categories near the end seem to repeat those at the beginning, reinforcing the sense of catalog sameness.
It’s nonetheless instructive to be reminded of the infinite variety of “fiercely stupid” dot-com business models that popped up, how much money was poured into them and who, ultimately, suffered. Mr. Kaplan reserves special ire for the dot-com incubators-“dot-bomb factories” like Idealab. The
excuse that the companies often offered for their failure-poor “market conditions”-incenses him. In fact, the reason most of the companies flamed out is equally simple: They spent more than they made. Even companies with decent ideas manufactured their own demise by trying to scale up too far, too fast.
Take online drugstore Rx.com: “This company had $350 million to build a fucking website and market it a little. I mean, if they spent $1 million a year, they could have been around for hundreds of years without a single sale.” Instead, Rx.com blew more than $60 million on advertising. CarClub.com, “the poster child for reckless dot-com spending,” passed out $5 bills at gas stations to recruit customers for its car-buying referral service. IUMA.com, a community of unsigned bands, offered $5,000 to parents who named their baby Iuma- hence Iuma Carlton of St. Petersburg, Fla., whose dad explained, “It was easier than playing Lotto.”
In a sense, the dot-com era Mr. Kaplan describes is just like Lotto: lots of players madly-and blindly-searching for the right random combination. The big difference is they weren’t gambling with just their own money. Mr. Kaplan’s book may not be weighty, but it sure does capture the mood.
Karen Angel’s Inside Yahoo! (Wiley) will be published this month.