The Rise and Fall of Dotcommania

"I have no opinion--and just continue shopping." Genc Greva

Disclaimer: From the perspective of critical cyberculture, there is little reason to take malicious pleasure in the massive downfall of Internet startups, however silly their business plans may have been[1]. Although populist anti-speculative sentiments and moral anti-capitalist stands are on the rise, history is not on the side of those who predicted the failure of the New Economy and, for whatever reason, stayed out of business. Let’s leave the bashing of failed millionaires to IBM: “Enthusiasm is great, experience is better,” it says on one of its billboards in early 2001. Another one reads: “Bad ideas don’t get better online.” The dotcom backlash turns into an authoritarian call for “fundamentals,” as in the following New York Times quote: “We’ve just gone through this huge dot-com-Internet-globalization bubble–during which a lot of smart people got carried and forgot the fundamentals… It turns out that the real secret of success in the information age is what it always was: fundamentals–reading, writing and arithmetic, church, synagogue and mosque, the rule of law and good governance.”[2] It is time “e-business gets back to business.”(IBM add)[3]

No matter how crazy and fraudulent the dot.bomb schemes were, what will replace them is certainly not going to be any better. AOL/TimeWarner and Microsoft are poised to come out of the tech crash as the big winners. The dialogue between activist techno-anarchists and libertarian entrepreneurs is a fierce one, while the one between corporate media and IT-moguls is nonexistent. Those who care about civil liberty, open standards and social change, the creation of an innovative, technological culture through software development, capital investment and cultural activity should prepare for a phase of flat nihilism, dominated by just a handful of players. “Dotcom is the weakest link, goodbye.” The potlatch chapter of the Internet story is over. Have a fair laugh over the build-to-flip schemes of those who lost fortunes and move on. An age of brutal normalization has set in, seen as necessary to make up for the losses and failed investments. But first, let’s look back at the speculative phase of the Internet economy, also known as tulipomania dotcom.

The magic year 2000 turned out to be a turning point. The internal contradiction between the fascinating lure of the “free” and the pressure on Internet companies to come up with real revenues, finally hit the surface. Many startups found themselves in a downward spiral after the first quarter, with tax payments due, high marketing costs (billboards, TV commercials and ads in other old media) and, first rounds of venture capital drying up quickly. Costs grew exponentially: “It takes $10 to create a technology, it costs $100 to create a product and $1000 to take it to market with distributor channels and marketeering materials.” (Cisco CEO John Chambers) The burn rate of concepts, friendships, health and communities was a high one. With stock options ‘deep out of the money’ the fun was over soon. It was time to think conservatively again and put the fairytales of risk-taking heroes aside for a while.

By mid 2000 the e-commerce hype had died, meaning that its modest growth had proven unable to reach the predicted revenues the overall Internet economy needed to go to the next round of hyper growth (and VC funding). The dependency of the IPOed companies on their overvalued stocks was the main reason why the downward spiral set in so rapidly. The speed religion of the New Economy (“Not the big will eat the small but the fast will eat the slow”) turned against itself: the higher you fly the deeper you fall, with the unfortunate, some would say inevitable result that the mammoth chewed the hasty.

Forget the “business porn” (Paulina Borsook) of Red Herring, Fast Company and Business 2.0. Perhaps with the exception of the Industry Standard, the Watchtowers of the New Economy have willingly been blind after what happened in the aftermath of the April 2000 NASDAQ downfall. The resemblance to Communist party news media in the former Eastern Bloc is remarkable: organized optimism, neglect of basic figures mixed with portraits of its heroes while celebrating their miraculous breakthroughs at the forefront of financial schemes. The dotcom propagandists kept on repeating their mantra of bankruptcy as a spiritually cleansing experience, hoping that the storm won’t be that bad after all. The blindness of the e-commerce Pravdas is bewitching, even one year after the crash. The showcased denial of reality is worth a thorough anthropological study, assisted by clinical psychologists. Morgan Stanley analyst Mary Meeker about Priceline: “It wasn’t troubled until it was troubled. It was fine on Wednesday, bad on Thursday.”[4]

“We are bullish on everything positive.” What was striking about New Economy believers was not the paranoia, the greed and goldrush hallucinations but the blatant lack of self-reflection. There was a collective refusal to analyze the broader economic and political context of information technology, taking basic economic laws into account. The general news media were actively propagating the speculative bubble. As Robert J. Schiller puts it in Irrational Exuberance: “the role of the news media in the stock market is not, as commonly believed, simply as a convenient tool for investors who are reacting directly to the economically significant news itself. The media actively shape public attention and categories of thought, and they create the environment within which the stock market events are played out.”[5]

The presumption of the dotcom era has been that the individual entrepreneur, together with his company will succeed no matter what, as long as the Will remained unspoiled and focussed. Success would come from the unlimited growth of users and their ever growing hunger for online services. As with other religions, reflexivity can be dangerous and bring the whole enterprise into trouble. Says Robert J. Shiller about the upward bias of stock analysts: “it is the vague, undifferentiated future, far beyond one-year forecasts, that lie behind the high market valuations. Analysts have few worries about being uniformly optimistic regarding the distant future; they have concluded that such generalized optimism is simply good for business.”[6] According to data from Zacks Investment Research only 1.0% of recommendations were ‘sells’ in late 1999.[7]

Doubts were not allowed. Setbacks simply happened. The dotcom attitude remained one of disbelief over the size of the tech wreck, summarized in the response on the VC site , dated May 19 2000, after’s spectacular downfall: “Learn, evolve and prosper.” If they did there were others to blame (mainly the ‘old media’ press). Internal criticism was nonexistent because it could potentially undermine a company’s strategy to gain value (measured in click rates) as soon as possible. Through the distribution of stock options, dotcom workers were made complicit to this ‘post-democratic’ business model. The atmosphere was one of organized optimism, a self imposed dictatorship of the positive, comparable to a religious sect. Internal discipline was handled in ways known only in former communist parties: dissidents simply did not exist. Everybody is happy, can’t you see? Shut up and party. Think of your stock options, the football table and free breakfast buffets. Don’t worry, be happy. Unleash those positive energies within!

Dotcom management went like this: be playful and don’t think about anything other than accomplishing your task. Do your ping pong and write the damned code. ‘Negative elements’ had to be marginalised and were labeled as simplistic, one-dimensional, outmoded ideologues.[8] Critique was essentially viewed as a dinosaur phenomenon, coming from those who could not keep up with the pace. Feedback, a fundamental mechanism of cybernetics, was banned because it could endanger a precarious market position. The rigid ‘new era’ ideology of permanent success was the main reason why the dotcom crash was not anticipated by most insiders of the network revolution. It simply could not happen. Hadn’t we got rid of dialectics a long time ago? Differentiation and rhizomatic growth had replaced the linear thesis-antithesis-synthesis model. In the existing age of viral guerilla marketing there is no place for ordinary ups and downs. Long and short waves, crisis and recession, irrational exuberance, all constructs of evil minds, attempting to play down and deny the seemingly endless growth potential of the Internet economy and the global market in general. Those pointing at possible signs of a downturn are secret agents of negativism. Their constant talk of ‘overvalued stocks’ eventually brought down the stocks.

Blame it on the Other. Sabeer Bhatia, founder of Hotmail who sold out to Microsoft, saw his second enterprise,, go down the drain. In April 2001 it closed operations. Bhatia: “this was necessitated by a severe downturn in the US economy which has resulted in a slowdown in corporate spending especially for any new product and services. This is not the right time to introduce such a service to our corporate partners–all of whom are engaged in what some call a ‘ruthless cost-cutting’ exercise.” Arzoo a victim of a ‘ruthless exercise’? Not that its business plan was flawed. The world was simply not ready for Arzoo. Bhatia aimed at creating a virtual pool of talent that would help solve the problems of those who might encounter any IT-related troubles. “Arzoo will be used across the world by corporations to seek instant answers to their pressing technical problems. It will provide online problem-solving assistance for engineering and information technology applications to corporates,” Bhatia told the Times of India on September 8, 2000. Fucked Company, a message board where rumours about down spiraling IT-firms are exchanged: “Never used em, but, according to their press releases, they provided ‘live, real-time interaction with experts’ hmm. sounds like Usenet and EVERY FUCKING OTHER MESSAGE BOARD ON EARTH.” Second Sux, responding on Fucked Company: “Anyway, I’m glad this ‘genius’ founder of hotmail got slapped in the ass. I mean, it was amazing enough MS gave him millions for a Web-based email service that are as commonplace as dirt right now. From the interviews I saw, this mothafucka thought he was the damn Messiah after scoring that load of $$, and the IT media whores treated him as such. Well, 2 years later, what do you fuckin know?! BTW, this didn’t have shit to do with the economic downturn, it had more to do with something more universal–reality.”

In the meantime venture capital moved on from the unsafe, open and free web to the next big thing, the proprietary wireless systems where at least a payment system already was in place. However, the VC world remained as rigorous as ever, blaming “over publicized dotcom failures and an unfriendly stock market” ( ) for the overall malaise. Lacking critical assessment it proved hard to redirect struggling companies, stubbornly sticking to the Darwinist survival-of-the-fittest world view of winners, losers and leaders. There was no time left for an evolutionary end game. For most players the curtain fell too early. Nasdaq’s radical move down left behind a scattered field with no winners to identify. There was a lack of serious competitors after all. Only mature markets know serious competition, so they say. “It’s the customer, stupid,” is another popular post-dotcom wisdom. The users either did not come at all to a site, or, if they did, “just looked, window-shopped, compared prices, took advantage of the free stuff on offer and moved on. In dotcom speak, they failed to ‘monetarise eyeballs.'”[9]

Who dares to portray Netscape as a ‘winner’? Michael Lewis’ Silicon Valley Story “The New New Thing” wisely stops at the moment Jim Clark is becoming an after-tax billionaire after cowardly selling off Netscape to AOL. Mid 1999 Clark declared: “I’ve gone over the to dark side,” after having purchased shares of Netscape former arch rival Microsoft. Founder Marc Andreessen doesn’t mention his former darling Netscape anymore, whose IPO in 1995 kicked off the dotcom Wall Street rally. He is too busy keeping his venture new LoudCloud alive. “The jig is up”, he told The Washington Post of December 28, 2000. “we are now in a time of great seriousness.” LoudCloud reported a net loss of $60.3 million in the first quarter of 2001 and in May 2001 laid off 122 employees, 19% of its workforce. A LoudCloud press release: “We are beginning to recognize the leverage in our business model, which is designed to replace human capital with technological automation.” By then its stock prize had dropped from $6 to $1.70. The Industry Standard: “the results were disappointing for a company that boasts the Internet equivalent of a blue-blood pedigree. Andreessen, one of the Web’s first celebrities, assembled a high-powered team of former AOL and Netscape heavyweights, including AOL exec Ben Horowitz. LoudCloud sailed through early venture rounds last summer, amassing a valuation of more than $1 billion. As the Internet bubble burst, however, rain clouds formed over the company. When it went public on March 9, the company was valued at $450 million. The company is now worth $249 million and holds $205 million in cash.”[10]

Jim Clark’s new new thing after Netscape, the health industry portal Healtheon, merged with WebMD and fell from $105 in 1999, where Michael Lewis’ account ends, to a mere $6 in mid 2001. In 2000 Clark stepped down from the board. No more talk of Healtheon/WebMD taking over IBM or Microsoft, as Michael Lewis had been speculating about at length. ‘Serial entrepreneur’ Clark dropped from the billionaires list, ranking 334 on the Forbes 2000 Rich 400 list, from 132 in 1999. According to Forbes, Clark’s wealth had shrunken from 1800 to 875 million in one year. The whole clue of Lewis’ ecstatic story, Clark becoming an after tax billionaire, has fallen into pieces. Clark’s latest new thing, an online service for the rich,, is not listed on the Nasdaq. The sector was cured of compulsive IPOism, as was the ‘anarchist outsider’ Clark. Since mid 2000 no public statements of Clark could be found on the Net. Michael Lewis also wisely shuts up. He is just the piano player, isn’t he?

Cynicism has set in. Under the title “Pinnacles and Pitfalls of the Internet” Joseph Nocera and Tim Carvell sum up “50 sharp lessons.”[11] Many of them do not go any further than stating the obvious: “A website is not the same as a business,” “Banner ads don’t work,” “Nobody wants to buy shampoo over the Internet,” “Physical stores are wonderful things” and “We should have listened to Warren Buffett after all.” The one-liners are not quite ironic nor show any vision for how to deal with the current setbacks. Rather, the business paparazzi is armoring itself for a backlash campaign against the entrepreneurial big mouths. “Youth is not the same thing as intelligence,” “‘Cool’ is not the same as ‘profitable’,” “Day trading is a sucker’s game,” and “The Internet has been a gift to charlatans, hypemeisters, and merchants of vapors.” The mood is getting resentful: “If you have to ask “What’s the business model?” there shouldn’t be any stock” and “People who left good jobs for speculative options got what they wanted.” In the same way as all these virtues were praised one year ago they are being denounced here. No sign of anti-cyclical intelligence. One ‘lesson’ disturbed the traditional business community most: “Giving stuff away is an easy way to make friends and a lousy way to make money.” Related is the secret wish of many CEOs that “some day e-mail will not be free,” resulting in the statement “the person to figure out e-cash will be a billionaire,” thereby showing that this duo hasn’t learned a thing from dotcom.mania.

Dotgone entrepreneurs lacked patience to work on sustainable models. It was presumed that Moore’s law would automatically apply to the Internet economy: a doubling of customers–and revenue–every 18 months. More likely every week. The rule was: become a first mover, spend a lot of money, build traffic, get a customer base, and then figure out how to make money. No time to lose till the IPO-merger-sell out. Get out as quick as you can and leave others with the mess you created. Presuming there are others. Value accumulation was believed to grow at the speed of light:  “The people and companies of the new economy–from Bill Gates to Bangalore programmers–are today’s global revolutionary vanguard. And the change they are spreading moves at literally the speed of light.”[12] The dotcom answer to all your doubts: “you ain’t seen nothing yet.”

Spring 2000, with the NASDAQ losing half its value, tech stock owners must have wished Baudrillard’s saying “The Year 2000 did not happen” had come true. If there is no Short Profit you can always point at the solid long-term trends, as the authors of The Long Boom did. The IPO fund (connected to Long Boom): “Pessimistic pundits call the New Economy a ‘fad,’ and today’s great bull market a ‘speculative bubble.’ They ignore the great trends that define the New Economy.” Let history be the judge. The meta marketeers have to admit that there are ups and downs in the markets. In accordance with their libertarian ideology they blame the recession on government policy. “It’s always possible for something to go terribly wrong. Intense regional conflicts have the potential to reduce the value of the post-cold war peace dividend. And while the dominant role of governments has diminished around the world, there remains the ever-present possibility of serious blunders in fiscal or monetary policy–especially in the area of taxation of new communications technologies and of international trade. But there is virtually no risk that the potential for innovation, production and wealth creation by the five billion citizens of the New Economy is anywhere near exhausted.”[13] Not that anyone had suggested the end of the Internet. The libertarian presumptions of the Long Boom didn’t quite work. It was the dotcom model that failed, not the Internet.

Most likely to survive are small e-commerce companies not on the dotcom radar, with modest growth expectations and real revenues, or even profits, not listed on the stock market. “Cash will be king” as Shannon Henry stated in his 2001 outlook in the Washington Post (December 28, 2000): “The gleeful, easy, everyone-is-getting-funded attitude has been replaced by skepticism, gloom and massive reversal of fortune. The shakeout will continue until many companies’ pockets are completely emptied.” (cover of Fast Company, February 2001). There won’t be many bubble ventures any time soon. What actually happened after April 2000 is the integration of the dotcom work force and expertise within the existing corporate structures. Some call it a necessary restructuring of the sector. I would rather call it a process of silent (dis)integration, disrupted and exhilarated by bankruptcies and scandals. A commentary in The Economist describes how the New Economy increasingly act like the old. “Yahoo! looks more like a media company every day, especially now that AOL/TimeWarner has defined the genre. At its root eBay is just a marketplace, and they are rarely valued in the bricks-and-mortal world. Eventually the two worlds begin to blur. The leaders may well be among the great companies of the future, but increasingly they will not be thought of as a class unto themselves. Nor, one suspects, will their shares.”[14]

It will take a while to unravel the dark side of the electronic gold rush. Dirty deals are being uncovered made by lawyers, stockbrokers and accountants who all had multiple roles in IPO deals with firms acting as auditors, advisers and independent experts at the same time.[15] Internet business consultants, at the center of these allegations, are always right. In rosy times they will predict infinite growth of stock values because of predicted hyper growth. In times of recession they will blame the very same market they trusted a few months earlier. Is there anyone to blame here, one wonders? Arthur Andersen, Accenture, Deloitte & Touche, etc. seem to get away with everything. There is no accountability whatsoever. It is like suing the weatherman for a bad prediction.

Take Mr. Nicolas Tingley of Morgan Stanley. In the midst of the NASDAQ crisis the Australian Financial Review of December 1, 2000 portrays this investment banker as an “interested bystander at the downturn of the technology sector”. I am sure he would not have presented himself as such a year or so ago. Tingley is portrayed as a high tech skeptic. He is commenting in the “Six Myths of Technology Stocks,” an article in the Wall Street Journal (October 17, 2000), written by E.S. Browning and Greg Ip. “People desperately wanted it to be true, wanted it to be a new era. And it always is different–until it turns out it isn’t.” Tingley is trying to talk himself out of the episode of the short boom of 1999, blaming the overvaluation of tech stocks on “psychology”. However, the agents of “psychology” remain anonymous. Morgan Stanley is certainly not one of them. No. They are, as Tingley explains, only interested in “fundamentals”, focussing on “opportunities that it can understand and adequately forecast.” Who then, if no US American investment banks such as Morgan Stanley were the driving force behind the speculative dotcom.mania? The current business rhetoric cannot answer this question, not even Wall Street Journal’s six myths. I will quote them here, leaving out the explanations:

“Myth No. 1: Tech companies can generate breathtaking gains in earnings, sales and
productivity for years to come. (..)

Myth No. 2: Tech companies aren’t subject to ordinary economic forces, such as a slower
economy or rising interest rates. (..)

Myth No. 3: Monopolies create unbeatable advantages. (..)

Myth No. 4: Exponential Internet growth has just begun and, if anything, will
accelerate. (..)

Myth No. 5: Prospects are more important than immediate earnings. (..)

Myth No. 6: This time, things are different. (..)”

It is funny to see how the global financial discourse brokers of the Wall Street Journal debunk their own belief system. An unconscious collective call for punishment for those who made, and are losing millions of dollars these days, might be too simplistic. The question is rather who talked up these stocks in the first place. Most likely the same journalists, column writers, analysts and consultants, now predicting further losses. How can experts get away with such a lack of memory? Peace, love and understanding for the poor messengers and running dogs. As Carl Gunderian wrote in a private response to my call for accountability on the nettime mailinglist: “Before we start marching these paid dot.flacks to the scaffold, we should remember that they merely fed the investors’ capacity for greed and self-delusion. Or, as W.C. Fields once put it, you can’t cheat an honest man! On the other hand, self-delusion can survive even this downturn.” Dave Mandl responded on nettime: “During the New Economy mania, almost NOBODY involved in the biz (money people, dot-com entrepreneurs, financial journalists) was a nay-sayer. Virtually ALL of them made fun of stuffy old guys who wore ties to work and people who owned stocks in old-economy companies. There’s no doubt in my mind that when the dust settles, it’ll turn out that “no one” was responsible, no one really believed that Amazon was worth $600 a share, everyone thought allowing dogs into the office was silly, etc. Most of all, Wall St. will deny that they had anything to do with it. Dot-com mania “just happened” somehow.”[16]

I would therefore propose to add one myth to the Browning/Ip list:

Myth No. 7: Financial analysts, consultants and business reporters are merely

In the Internet economy, technological change is a complex, dynamic, integrated system. Its direction is increasingly dictated by financial markets, which are no longer just “feeding” the IT industry with capital from the outside. Investment decisions of venture capitalists direct the way in which technology is being developed, thereby affecting the course of technology. A cloudy, dense information structure is intrinsically intertwined with its object (Internet technology, wireless applications, telecoms, hardware etc.). This hypersensitive environment is also open to a variety of factors such as currency exchange rates, interest rates, and even, to some extent domestic and foreign policy. And let’s not forget the price of crude oil. Factors which have to be closely monitored. The media, be it television, print magazines, or Internet, are in constant feedback with both the financial markets and the technological sector; one big PR marketing machine. Competition does not lead to a diversification of opinions and formats. Within this turbulent climate of ‘digital convergence’ there is little interest in independent reporting and critical research in new media and IT development.

Analysts are being called to account for a massive conflict of interest, Pamela Williams reports from New York in June 2001. “Analysts are now on trial for advising investors to buy when they themselves were selling; for propping up the prices of worthless companies; for issuing booster reports to create share price spikes while their own investment banks dumped stock; for acting as rain makers and issuing bullish reports to help win business for their investment divisions; for poor disclosure standards on personal share holdings; for regurgitating corporate press releases as independent research, and for sharing in the vast bonus pools born of the investment side of the business.”[17] Analysts kept rating “a strong buy”, ignoring the stormy market weather. Williams, referring to a speech of the Securities and Exchange Commission chief Laura Unger, argues that in 2000, with the Nasdaq index dropping 60 percent, “less than 1 percent of analyst recommendations were ‘sell’ or ‘strong sell’. Analysts pushed the ‘buy’ recommendations to look after their company’s clients while protecting themselves by issuing occasional warnings to investors about the tech sector as a whole.

Thomas Frank, a Chicago social critic, has written a critique of the nineties New Economy craze, “One Market Under God, Extreme Capitalism, Market Populism and the End of Economic Democracy.” He must have been finishing his manuscript in early 2000 when the NASDAQ was about to head South. Frank’s analysis is merciless and systematic. He is clearly not into net activism, nor is he involved in any of the debates over Internet standards or digital rights issues. It’s Frank vs. the Titanic forces of right-wing politics. A heroic tale of the Critic against the Wall St. Dragon–with insightful outcomes. Frank points out that market populism is riven by contradictions. “It is the centerpiece of the new American consensus, but that consensus describes itself in terms of conflict, insurrection, even class war. It decries ‘elitism’ while transforming CEOs as a class into one of the wealthiest elites of all time. It deplores hierarchy while making the corporation the most powerful institution on earth. It hails the empowerment of the individual and yet regards those who use that power to challenge markets as robotic stooges. It salutes choice and yet tells us the triumph of markets is inevitable.”[18] Contradictions which worked at some stage–and then lost their magic.

For Thomas Frank the New Economy is a fraud. “We did not vote for Bill Gates; we didn’t all sit down one day and agree that we should use his operating system. The logic of business is coercion, monopoly, and the destruction of the weak, not ‘choice’ or ‘service’ or universal affluence.” The trick then becomes entrancing the public and making them believe in the benefits of a manic bull market, through “relentless incantation,” a veritable army of pundits and PR men to engage in a ‘process of reassurance,'” as Frank writes, quoting Galbraith’s The Great Crash.[19] Remember 1998 and 1999, when nothing was capable of stopping the People’s Market? “Winging above it all were the leaping, soaring Internet shares. Scattered notes of caution were far overpowered by a decade of promotional hype, of talk about the magic of communication ‘mind to mind,’ the technology that ‘changed everything,’ the place where the ‘old rules’ no longer applied, where the inevitabilities of Moore’s Law, of Metcalfe’s Law, of Gilder’s Law ensured that hundred-bagger appreciations would continue to fall from the heavens.”[20]

The overall picture points at some real contradictions within digital capitalism, without a synthesis or compromise in sight. There is no Third Way solution for Digital Discontent. On the electronic frontier there is a real (conceptual) battle going on, with little or no room for the (originally Dutch) Polder model of consensus. Whereas more and more data are floating over the networks, there is a similar hyper growth of data stored away behind password protected IP-walls. The pressure on the New Economy to finally come up with a real cash flow bumps into the marketing tactics of the very same breed of people who put out free content, attracting new audiences in order to build up a customer base. Two contradictory strategies, coined by Arthur Kroker as the ‘facilitating’ and ‘harvesting’ aspect of new technologies are colliding in a spectacular fashion. What remains from the dotcom era of wonderful nonsense is the pressing question of how information on the Internet is going to be paid for. The billions of venture capital dollars, thrown on startups didn’t bring the solution of a secure payment system for content and services one step closer. It only further consolidated the ideology that everything has to be free.

Sloganism: “All hope, design could bring salvation should be eliminated.” (Genc Greva); Don’t stop thinking about the Internet; You are only human once; Open Monopolies for an Open Society; After the Culture Crash (book title); The Global Province: Rhetoric after Heidegger (Why do we remain in the Internet?); Virtual Failures (conference title); Empire Internet: Its Golden Dawn, Conceptual Renaissance, Nihilistic Moment; Rack Space Squatters, Unite; “I have written six theories on cybercities. They can’t all be true.” (Johan Sjerpstra); “We will be where the consumers are” (Chinese saying); The Will to Design: Overcoming Entertainment; T-shirt: “Resistance is Fertile”; Fighting Download Syndrome; Decide or Consume; Toolkit: Build your own Internet Observatory; “Extend your cozy feeling” (Baleno); Have you heard about Minorspace?; Revolution ‘R’ Us; “No reconciliation with artificial nature” (graffiti); Lead me to the wrong side of virtuality (song); Download Your Personal Downturn Now!; “Each age has its own fight against capitalism.”; Back to Golconda; “Accenture board of directors sentenced to death for millennial dotcom fraud. {now it gets interesting}” (add)

“Napster This!” The decentralized Napster exchange of MP3 music files has put the recording industry upside down. With the Metallica vs. Napster court case still on, Bertelsmann and a few other record labels announced deals with Napster. By stepping up their “Zuckerbrot und Peitsche” (punish and reward) strategy, the media giants managed to even more increase their pressure on Napster to take out copyrighted material and alter its model of free content exchange into a subscription based, money making operation. Whereas post-Napster initiatives such as Gnutella and Freenet are gradually establishing themselves as true “peer-to-peer” models without any central server, announced it would pay back the recording industry hundreds of millions of dollars for loss of copyright.

In 2000 e-commerce was scheduled to break through. A certain percentage of the created client base was supposed to reach the trust level of buying goods and services online. As an avant-garde of the free grazing herd, the early adapters would create a true Internet economy, based on real dollars, extracted from the old money economy, inserted in the Net via the credit card system. Presuming that the early-mid nineties of growth would repeat itself, thousands of business were hastily founded, first in the United States, soon followed by likeminded entrepreneurs in Europe and Asia, ready to receive the first electronic consumers. Some indeed showed up. The ‘prosumers’ purchased a bit here and there, mainly software, books and flight tickets; not enough to match the wildly optimistic predictions. In a next round of acceleration, the B2B (business-to-business) model was introduced as a form of hype to compensate for the not fast enough growing business-to-consumer B2C revenue stream. The hugely expensive development costs for B2B were projected to be profitable only in the long run and only postponed the upcoming lag in demand of IT products and services. Hardware and infrastructure giants such as Dell and Cisco got into an overproduction mode, resulting in net losses, tumbling stocks and massive lay-offs.

The Napster madness of mid 2000 did not help to establish the badly needed stream of real dollars. According to the prophets of ‘free,’ services such as Napster would crumble the old, in this case the recording industry, and install a new economy with new rules and new players. The first may have happened to some extent but the latter certainly is a long way away. E-commerce offspring from Napster, Gnutella, Freenet and other peer-to-peer networks have been disappointingly few. Even though sales may have been substantial in individual cases for independent artists offering work for free on the web, the overall economic situation of ‘content providers’ remains bleak. With no e-cash/micro payment system in place users will only pay for essential information. Attempts to sell .pdf documents online (such as Motley Fool’s tried for a while) remained promising but did not make it outside of the banking and finance sector and closed down in the wake of the dotcom shakeout. At the end of the tech wreck phase, ‘free’ was still the only model around.

First, in the eighties, it was software code, and then the written word (essays, articles) which got ‘napsterized.’ With the increased capacity of chips and pipes, technology then enabled us to turn music into files of a reasonable size. The MP3 files Napster users download seem really tiny by today’s standard. It will only take a few years until the free exchange of compressed feature MP4 films with a fabulous screen quality will be a fact. Watermarks against copying could split the consumer base in two–with the ones who don’t care about copyright on the one hand and those who are not that techno savvy on the other hand. This is a similar split known in the case of software. Those who are somewhat clever and think they can get away with pirated software will do so, even state in public that they do not want to further financially support the Microsofts. The innocent majority will by and large agree with this but won’t know what to do, until an (offshore?) Napster kind of service enters the stage. It will offer free video porn, software, exclusive financial information, anything people now pay a lot of money for.

Artists who have withdrawn (or stayed) into the world of the material objects seem to be the only ones not being affected by the inevitable napsterization of all “content”. All the rest will be drawn in endless fights between the freedom of distribution and intellectual property. The answer of the libertarian gurus is a simple one: give it all away and make your living with dish washing. You may get invited to participate in some conference, exhibition or performance, if you’re lucky. The alternative is to create a micro-payment system outside of the credit-card-based old economy. That seems to be the only truly utopian option if we want to get beyond the Napster deadlock. The gift economy communities are ideal candidates to develop an open source, global platform for e-cash, a creative value clearing house, thereby making the gesture of giving away code and content a truly altruistic act, not the single remaining option.

The cultural arm of the Internet (media, the arts, academia) did not closely monitor the rise and fall of dotcom.mania. “Nothing is spectacular if you aren’t part of it.” The Western media intelligentsia had not jumped up full of joy over the idea of stockbreeding masses. Numbed by Third Way post-Thatcherism there was no alternative developed against the tidal wave of market populism. The slaughter by greedy commerce of everything public on the Net seemed inevitable. The Napster debate was the only issue where the cultural industry, faced with diminishing expectations, plagued by budget cuts and stagnating income, met the dotcom bubble. Content producers seemed divided and confused over the exploding MP3 exchange amongst millions of Internet users. Debates on nettime, for instance, did not show any direction or conclusion over the Napster issue.[21] Independent Internet culture, fighting over definitions what might or might not be, had virtually no connections to the dotcom world.

“Information wants to be free” is coined to be the single dominant ethic in the hackers community. In his etymology of the aphorism, Roger Clarke goes back as far as John 8:32, You shall know the truth and the truth shall make you free.” In 1984, at the first hackers conference, Stewart Brand formulated the mantra in its present form. Brand:“Information wants to be free (because of the new ease of copying and reshaping and casual distribution), AND information wants to be expensive (it’s the prime economic event in an information age)… and technology is constantly making the tension worse. If you cling blindly to the expensive part of the paradox, you miss all the action going on in the free part. The pressure of the paradox forces information to explore incessantly. Smart marketers and inventors quietly follow–and I might add, so do smart computer security people.”[22] Eventually, the free part of paradox triumphed, leaving freelance content workers in despair how to earn living AND publish on the Net where giving away had become the only available option.

Critique of the ‘free’ is always in danger of being associated with media industry interests and their obsession with intellectual property. Has anyone heard the phrase “art wants to be free”? Or theory? Apart from specific censorship cases, no. Culture wants to be paid. It has to constantly fight for its existence. The free software advocates have taken the avant-garde position and see themselves on the opposite side of artists and other ‘content’ producers such as bands, journalists and film makers. The last group is, sadly, only discussing the consequences of technologies, not shaping them, trying to keep, at best, early adapters.

“This is not an economy.” (Johan Sjerpstra) The ruling ‘free’ paradigm is a spill-over from the free software movement, whose spokesperson, Richard Stallman, once said: “ When information is generally useful, redistributing it makes humanity wealthier no matter who is distributing and no matter who is receiving.”[23] Against this cyber-libertarian ideology, embedded into prime code and core network architecture, there is only a weak call for content workers rights to get properly paid. Stallman’s distinction between “free as in free beer” and “free as in free speech” is irrelevant for their situation. The free software movement works on the presumption that its members have a regular income. Software engineers are not short on jobs and do the voluntary free software work in their own time. In some cases they even let their bosses pay for free software development.

The few content websites which paid its content providers closed in the dotgone aftermath. There is a ‘tragedy of content’ in an era where the ‘triumph of technology’ levels out and ‘change’ has become an everyday phenomena. The Medium is still the Message, despite all marketing gurus predicting that one day, Content will be King. Despite the phenomenal growth of webpages and users, 429 million by mid 2001, the Web is hardly producing unique content. Most of the web content is microwaved leftovers of old media, related to television and print media. Take the hugely popular website of the Big Brother Reality TV series. Despite its success it is not “the television program to the website.” A report on the malaise in the streaming media sector from February 2001 states: “The problem with the story of streaming media is that it started on the wrong end of the spectrum. Success will come first and foremost in enterprise and advertising. Streaming will then eventually branch out to more entertainment consumer content. Advancing content towards the general public was a mistake and the early founders have paid for it.”[24]

In October 1999, at the height of the dotcom fad, the Free4What website was launched to discuss the business model behind ‘free’ services. The rage reached astonishing levels. Not only did free Internet providers such as FreeServe reach stock value levels of billions of dollars, users could even be paid to surf, on computers they had gotten for free. Free4What was developed during the Temp Media Lab project in Kiasma, Helsinki.[25] The starting point was a discussion the wider impact on art and culture of the free operating system Linux and open source/copyleft. There had been a steady rise of free services on the Internet, starting from e-mail (Hotmail), web space (Geocities) until free access services. Free4What raised issues such as privacy concerns of those using free services. If you can get paid to surf, you can as be seen as an employee, which, in theory, should have workers rights. Can users of free services complain, like consumers, about the quality which is offered to them? And the ultimate dotcom4all question: “If there can be free Internet services, why can’t there be free food, free cars, free money, free houses, free electricity?” If anything remains from the dotcommania period, it is the question of ‘free’ and how a sustainable Internet economy can be developed.

  1. Written in late 2000-mid 2001. Parts were published as The Rise and Fall of Dotcom.mania, in: Sarai Reader 01: The Public Domain, Delhi: Sarai, 2001. The critique of the New Economy presented here got its shape in late 1999 while preparing the Tulipomania conference which I organized together with Eric Kluitenberg in De Balie, Amsterdam and Frankfurt (organized by Andreas Kallfelz), 4-6 June, 2000 ( Ted Byfield, Felix Stalder and David Hudson were instrumental in gaining a critical understanding of this quickly changing, fluid economic environment most cultural theorists, sadly, have little knowledge of.
  3. The cynical logic of such contemporary backlash rhetoric is well documented in: Robert Greene/Joost Elffers, The 48 Laws of Power (concise edition), London: Profile Books Ltd., 1999. Some examples: Law 31: Control the options, get others to play with the cards you deal; Law 45: Preach the need for change, but never reform too much at once.” Whereas the dotcom religion has been idealistic, utopian and arguably revolutionary in nature, the culture of cynical power, on display in the 48 Laws, has to positioned at the opposite of the spectrum. Dotcom business culture actually missed an accurate power analysis.
  4. Fortune magazine, quoted in Pamela Williams, Can You Trust Brokers? The Australian Financial Review, 16-17 June, 2001. On August 3, 2001 The Industry Standard’s Media Grok reported about two lawsuits against Mary Meeker. “Some investors say Meeker ‘offered biased research and slanted investment advice about eBay and Seattle-based Amazon as a way to secure lucrative banking business for Morgan Stanley,’ according to Bloomberg. Analysts are under the microscope right now, and Merrill Lynch recently settled arbitration against famous bull Henry Blodget. Unlike the Blodget arbitration, the cases against Meeker and Morgan Stanley are ‘designed to go to court,’ said the New York Daily News. It may not be a coincidence that these suits were filed the day after a congressional hearing that gave analysts the what-for. The SEC revealed that that 30 percent of analysts owned pre-IPO shares of companies they covered. Testimony from’s Adam Lashinsky suggested that financial journalists like himself aided and abetted analysts’ wrongdoing. CNBC always plugged stocks ‘because rising stocks meant greater viewership,’ he said. pointed out analyst conflicts, Lashinsky said, but ‘at the same time we did our share to hype the momentum stocks of the era.'”
  5. Robert J. Schiller, Irrational Exuberance, Melbourne: Scribe Publications, 2000, p. 95.
  6. Ibid., p. 31.
  7. Ibid., p. 30.
  8. More the working conditions in the dotcom sector: Andrew Ross, Mental Labor in the New Economy, posted on nettime, June 12, 2000, published in: Geert Lovink/Eric Kluitenberg (ed.), Tulipomania DotCom reader, a critique of the new economy, Amsterdam: Uitgeverij De Balie, 2000; See also: Bill Lessard and Steve Baldwin, NetSlaves: True Tales of Working on the Web, New York: McGraw, 2000. and Dana Hawkins, Lawsuits and Workplace Monitoring, posted on nettime, August 10, 2001.
  9. “Reports of the dotcom industry’s death may have been exaggerated,” writes John Huxley (Down but not Out, Sydney Morning Herald, March 7, 2001) an article full of truisms such as “the dotcom disaster will look like an aberration, a mere blip, in the rise and rise of the Internet.”
  10.,1922,286292,00.html and LoudCloud Lowers the Boom, June 12 2001,,1902,27107,00.html .
  11. Fortune Magazine, reprinted in The Australian Financial Review, 29 December, 2000.
  12. Quoted from Wired’s Encyclopedia of the New Economy, written by John Browning and Spencer Reiss, A general approach on Internet time describing the hurry sickness from the users point of view: James Gleick, Faster, London: Abacus, 1999, pp. 83-93.
  13. Website of, January 2001.
  14. Is there life in e-commerce? The Economist, February 3, 2001, p. 18.
  15. The Australian Financial Review, 28 & 29 December 2000, a survey of 106 floats over a two year period.
  16. Geert Lovink, The Seventh Myth, nettime, December 2, 2000, David Mandl, re: The Seventh Myth, nettime, December 5, 2000.
  17. Pamela Williams, Can You Trust Brokers? The Australian Financial Review, 16-17 June 2001.
  18. Thomas Frank, One Market Under God, New York, Doubleday, 2000, p. xv.
  19. Ibid., p. 104.
  20. Ibid., p. 158.
  21. The ‘Napster’ thread in the nettime archive started on July 23, 2000 with a posting called “Terror in Tune Town.” A summary of the debate in: Geert Lovink (ed.), net.congestion reader, Uitgeverij De Balie, Amsterdam 2000.
  22. . The Stewart Brand quote comes from an e-mail to (Tasty Bits from the Technology Front, edited by Keith Dawson), June 22 1999.
  23. Quoted on Roger Clarke’s webpage (see above).
  24. Paul Kushner, newsletter, February 26, 2001.
  25. Free4What was part of the third “Nokia Country/Linux Land” week of the temp media lab project, and produced by a team of The Society for Old and Media, Mieke Gerritzen, Jan van den Berg and Geert Lovink. URL: . Richard Barbrook, Kevin Kelly, DeeDee Halleck, Patrice Riemens, Drazen Pantic, Joost Flint, Howard Rheingold and Rishab Aiyer Ghosh joined in the debate, which was also posted to nettime, October 29, 1999.