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The Way We Boom Now

What this age of Internet euphoria looks like to those of us who were in the game last time around. For one, bubbles aren’t completely bad.

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Illustration by Istvan Banyai  

Twelve years ago, when I had just become editor of this magazine, my friend Walter Isaacson, who was then in charge of Time Warner’s embryonic Internet publishing strategy, advised me to “get the domain name ‘New York’—for the Web.”

He was right, of course, although at the time I asked, “What’s the Web?”

Eight years ago, I wrote a column in The New Yorker called “The Digital Bubble” in which I argued that Wall Street investors and journalists had gotten carried away about the Internet—that “euphoria is not a business strategy.” I turned out to be right, of course.

Nevertheless, six years ago, I helped to create the online news service Inside. One day, my partner Michael Hirschorn said, “We should have blogs on the site. Pretty soon the Web’s going to be all about blogs.”

He turned out to be right, of course, although at the time I asked, “What’s a blog?”

Four years ago, Inside (and our magazine partner, The Industry Standard) had gone kaput. Trillions of dollars of market value had vanished in 24 months. In a conversation with a friend about her little new-media business, I floated my retrospective fantasy about Inside—that by banking the capital we raised, we could’ve used the interest to employ our best dozen reporter-commentators as bloggers in endowed perpetuity. She mentioned that RSS, as a way of informing people of Inside’s breaking news, would have been a boon.

She was right, of course, although at the time I asked, “What’s RSS?”

In other words, I have a history with Internet euphoria and dysphoria that, among other things, confirms William Goldman’s truism about show business: Nobody knows anything. But it also illustrates the staggering speed with which the digital realm shape-shifts. While history may not repeat itself, it does indeed rhyme—and at this rate the rhyme scheme reveals itself quickly.

So here we are in a new techno-paloozaical moment. Once again, a critical mass of money guys and journalists and entrepreneurs are getting awfully excited, and the excitement is beginning to feed on itself. There are the new social-networking services like MySpace and Flickr, with enough millions of users that a real network effect has kicked in. Blogs attracting significant audiences and advertisers. Money flooding into Web start-ups, and blog-conglomerates acquired for tens and hundreds of millions. The nasdaq up 20 percent in the last year. Network TV migrating to podcasts, the collective Utopia of Wikipedia actually working, and follow-on “citizen media” entities (Digg, Newsvine) generating dreamy new visions of cultural transformation.

I phoned some of my bubble-mates from 1999–2001 to find out if this seems to them like déjà vu all over again. “It feels very similar,” said Fred Wilson. He was a founder of Flatiron Partners, the New York venture-capital firm that led the funding of Inside—at the moment the bubble started to deflate, in spring 2000—along with Chase, Lehman Brothers, and Goldman Sachs. He now runs a $125 million fund. He was on his cell phone, driving from San Francisco down to Mountain View. “The money flowing like water, VCs hypercompetitive, the entrepreneurs with grandiose visions. Everybody’s coming out of the woodwork. I’m a rock star again. It scares me a little bit.”

Jerry Colonna, Fred’s Flatiron co-founder, agreed. Although he’s out of the VC business and now a devoted Buddhist, he keeps a hand in the game as a member of the boards of five companies. “People are starting to hyperventilate,” he said.

John Battelle, the founder of The Industry Standard, spent his first post-bubble years teaching and writing. Now he’s started a company called Federated Media Publishing that sells ads for a curated portfolio of high-end blogs. He seems as excited about his new business as he was about the Standard and his aborning media empire at the turn of the century. “I have,” he told me, “the same tingly feeling I had with magazines.” Boo-ya? Or yikes?

The vocabulary and doctrine are different, of course. To call a Web business a “dot-com” in 2006 would be the equivalent of calling a black person “colored.” Rather, people thrill to ideas incorporating the “architecture of participation” and “collective intelligence” (like Wikipedia and Flickr), and companies with “lightweight business models” (Craigslist has eighteen employees).

Everyone wants to believe that things are different this time around, that lessons have been learned and real business paradigms established. If the nineties were a magical-realist gold rush, the ’00s are about the sober build-out of modern California. And there’s plenty of evidence for that view. Back in 1998, I suggested in my “Digital Bubble” article that the $2.7 billion market cap of Yahoo was “nutty,” yet Yahoo now earns almost $2 billion in profit to support its $44 billion market cap. Google, which increased its profits last quarter by 60 percent, is worth $123 billion.


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