The Magazine

Irrational Exuberance

Life in the dot-com boom and bust.

Feb 9, 2004, Vol. 9, No. 21 • By DAVID DEVOSS
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Rossetto's magazine and the passions it continues to inspire are remembered in Gary Wolf's "Wired--A Romance." Present at the creation, Wolf, who still writes for the magazine as a contributing editor, deftly recounts its early days in San Francisco when the publication's staff thumbed its nose at mainstream culture and compared the development of digital technology to the discovery of fire.

Rossetto hated politics, but his magazine was far from apolitical. "The issue of Wired that was on the newsstand when Netscape went public had the face of Newt Gingrich on its cover," Wolf recounts. "Inside, Gingrich reported that he had composed his book, 'To Renew America,' on his laptop computer, a notable achievement at this early date when most members of Congress did not type." Gingrich's cover photo, Wolf continues, "signaled the magazine's hope that its pro-business, anti-government sensibility might be the advance wave of a genuinely popular movement."

Wired loved to upset its readers. Referring to Al Gore, Newt Gingrich observed, "He's repainting the den; I want to build a whole new house. My project, frankly, is to replace his world."

Pundits savaged the magazine for its antiestablishment views, but Wired's editor refused to bend. "We are comfortable with change agents at any level of society," Wolf remembers Rossetto admonishing his staff, as critical mail piled up. "Whether they are nerds down at the bottom or whether they are people in corporations at the top, or people like Newt Gingrich: if they are actually provoking change that is part of this large, historical trend, then we talk about them."

The great flaw in Wired and other industry publications was their boosterism. Yes, the Internet had the potential to change the world, but the only websites making money at that time were those providing email, porno, and celebrity chat. Indeed, most web businesses consisted of little more than promotional hoopla. Even Wired. It may have had a market value of $450 million, but under Rossetto Wired never recorded a profit. In 1996, its best year ever, the magazine lost $10 million.

RED INK didn't seem to bother investors. In 1996, the level of venture capital funding stood at $10 billion. By 1999 it had quintupled. The annual number of IPOs jumped from a few dozen in 1996 to more than 200 three years later.

According to Internet publications, web visionaries were responsible for the booming economy. In truth, investment bankers and Wall Street analysts were calling the shots, but they seldom were the focus of stories. Neither did dot-com journalists write much about "spinning," a practice by which web executives were allowed to buy day-of-sale IPO stock for a quick windfall if they promised future business to the investment bank handling the IPO.

Like the Sunday travel page, newspaper technology sections were packed with ads. Tech editors did not want critical reporting to jeopardize this new and robust revenue stream. At Investor's Business Daily, the San Jose-based "Information Society" editor with whom I worked told me not to put a lot of effort into dot-com profiles. He said I should tell what the startup was supposed to do, add a quote from a Gartner or Forrester analyst, and then close with a prediction from the CEO about future growth.

Later, a magazine called Knowledge Management asked me to write about a new web talent exchange called eWork. The site functioned like a virtual job fair where contractors posted their résumés in the hope they would be digitally matched with projects requiring their talents. Internet job boards like Monster.com and CareerPath.com had grown to enormous size offering a similar service. eWork had tweaked the idea by allowing job seekers to pay extra to skew the matching algorithm so their name would get priority when a potential match was found. The problem was that the only person I could find who had ever found employment through eWork was the programmer hired to build the website. My editor was reluctant to kill the story since every analyst he knew said newspaper classifieds were like dinosaurs waiting for the meteor. In the end, my revealing information about eWork's track record was deleted. In its place ran a futurist's rave about the fungibility of knowledge and how employers now would find it easier to outsource projects to India.

The New Economy desperately needed a publication that would cover rather than celebrate dot-coms, and in April 1998 it got one in the Industry Standard. One of the Standard's new editors was a former Village Voice media critic named James Ledbetter, and his account of the magazine's brief but glorious life is "Starving to Death on $200 Million: The Short, Absurd Life of the Industry Standard."