Commentary
Lessons From The Dot-Com Bubble, One Decade Past
- by dave.b , Max Kalehoff , April 9, 2010
It's hard to believe it's been 10 years since the dot-com bubble burst. The actual date, March 10, passed quietly a few weeks ago. I remember those times as if they were yesterday.
I was a 24-year-old marketing guy at an upstart called Media Metrix, the first Internet media audience ratings firm. I led a team of analysts and communications managers that reported ratings, trends and cultural narratives we surfaced from the ratings data. We had a weekly spot on CNBC to report on the fastest-growing Web sites. We wrote the seminal report that revealed women had surpassed men online, leading to a cover story in USA Today. We reported on the rise of Napster, with the first authoritative data showing that file-sharing was rampant. Our most notorious output was the monthly Top 50 Online Media Properties, a ranking of companies with the highest number of unique visitors to their Web sites.
It was always fun to surface new trends, but the Top 50, alone, would prompt new entrants to do such crazy things as run prominent, celebratory Wall Street Journal ads. Companies that dropped in, or off, the rankings would protest with extreme force, or go into denial. Henry Blodgett, a prominent Internet analyst at Merrill Lynch, told The New York Times in 2000, "Media Metrix's monthly reports definitely move stocks...It's the closest thing there is to a standard.''
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Who ever thought the audience ratings and research business could be so much fun and central to a new growth industry? Well, it got more fun, despite the bursting of the bubble. In June 2000, three months after the burst began, our publicly traded company became Jupiter Media Metrix through a $414 million merger with Jupiter Communications. But after the party, the hangover arrived and things quickly went downhill as our customers struggled through the tech downturn.
A few months later the Federal Trade Commission blocked our biggest competitor, Netratings, from buying us for $71 million. Jupiter Media Metrix then sold the Media Metrix service to comScore for a little more than $1 million.
I was part of comScore's acquisition and helped the company build the marketing organization, which was a great experience. The other divisions of Jupiter Media Metrix were sold off individually.
Despite the anxiety of the burst, which was exacerbated by 9/11, I learned some important personal and business lessons:
1. Don't take anything for granted, for what you have today may be gone tomorrow. Embrace luck and serendipity when it's on your side.
2. Make good and decisive decisions on time -- don't be too early or too late. Timing is as critical as execution.
3. Be nimble, roll with the punches and learn to get up quickly after you fall. You have the choice to succeed, or be crushed.
4. Do good and be consistent because your actions define your reputation -- and your reputation follows you everywhere, forever.
5. Nurture your work relationships in the best and worst of times, because you'll probably reunite with many -- as colleagues, customers, partners, competitors, advisors or investors. (Indeed, the core Media Metrix team still organizes periodic happy-hour reunions.)
6. Keep your cool, because losing it will cause people, including yourself, to lose confidence in you. Losing your cool also leads to health problems.
7. Align the purpose of your work with yourself, if you want to be happy and fully invest in yourself.
Where were you on March 10, 2000? How do you remember it? What were your takeaways?
Max, I would suggest that the lessons you cite from the dot-com bubble burst are all important life lessons for sure, but not terribly specific to the digital marketing industry. I have my own lessons from the same dot com collapse (and subsequent financial and real estate industry collapses) to offer:
1) no one wants more ads and everyone is equipped to avoid them.
2) The mid-90s exchange of our ability to reach an audience for our ability to target an audience was a shitty deal for everyone except the intermediaries (media agencies, online ad networks, data brokers, and targeting technologists). Everyone else -- advertisers, content owners and publishers -- got screwed.
3) the last time we handed development of a powerful technology over to a generation of twenty-somethings we wound up in a nuclear arms race that bankrupted and destroyed one empire and now threatens another (us).
4) our continued fealty to the same digital technologies that produced three trillion-dollar bubbles and collapses in the last decade alone is now wrecking the advertising and media industries.
5) There's no such thing as a relevant ad and no way to predict who would possibly want one.
6) Human behavior is irrational and unpredictable by nature. It's easier and just as productive to time the stock markets...
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It was the best of times; it was the worst of times. It was besieged by over exuberance and the most sarcastic of cynicism. Whilst attorneys and Wall Street tycoons pumped up portfolios in M&A transactions and IPO’s and young companies garnered their future fortunes on napkin presentations. Traditional media was stunned into submission with the doom and gloom of a perceived but real threat ten years too early. In an instant and snap of the fingers, a transformation to backroom jousts of laughter and snide comments with companies holding liabilities and investors holding a big bag of public nothingness. This is the climate I had to work within to launch. Oh the challenge and pain of a fledgling technology and company. I was speaking under NDA’s of widgets, applets, and site independent applications, apps that would aggregate advertising and transform any website into a fun social interactive game to the adversity and pessimistic comments of, “who would pay for a click through” and “why would anyone advertise around or within a game”. In retrospect, I am blessed not to have found funding, I am blessed to have such pessimism be an obstacle, I am blessed not to have a minority share in IP I created, I am blessed not to have been diluted only to find my efforts on the whole sale chopping block to salvage something more promising in the 1 in 10 ratio of perceived trends of success. I have lived to see another day for my dream, a world with a site independent app that can aggregate advertising and transform any website into a game or game element within a browser or on a mobile device. I am blessed to hold the patent and associated IP. I am blessed to be working with an awesome development team that understands the business and IP strategy. To live another day and implement a dream. For those of you who are struggling there is a reason, press forward and work to keep the dream in focus.
Great post - brings back a lot of memories. In March of 2000, I was just settling into life in Silicon Valley, having moved my family there 1,000+ miles from the midwest. I had left a stable, Fortune 500 company to take a job with a small Cupertino startup which had "secured" financing from some major VC's. In March we had been planning a major launch announcement and marketing plan to grow the business. When the bubble burst, that "secure" financing disappeared - it simply dried up like all the sunny optimistic press Silicon Valley had been enjoying. I remember how the "Industry Standard" magazine went from 200+ pages of ads down to a skinny little skeleton of it's former self as all the dot.com's ceased placing ads. Everything went out the window and we had to reinvent the whole business approach. Executives were overwhelmed and stress levels went through the roof in that little company. They managed to build a cool software product and some key partnerships, but were eventually sold. It was a wild ride, but I sure learned a lot about managing a business and working with incredibly small budgets under some extreme conditions.
Good post. Only one complaint - making decisions "on time". If ONLY it were that easy. LOL.
That's like saying "buy low and sell high". Who the heck knows WHEN?
Great post, and great lessons learned (for any time). I remember the days fondly. I was just starting my Internet business (which turned 10 years old in December) and people thought I was nuts to be starting an Internet business as the dot com world collapsed. In retrospect, it was a great time to start one, just as today's recession is a great time to start a business, because our competitors were struggling and many did not survive. I believed in digital for the long-run, and the bet has paid off. There were some scary and dark days in there though.... ;). Keep up the good articles!
I saw the bust coming and cashed out (ecommerce figures for 1999 were dismal). Didn't have to work again for several years and I could literally be found on the beaches of the Riviera. Ironically, ecommerce picked up in January 2000, but I knew the journalists would soon be learning about the 1999 numbers and not see the big picture. A correction was necessary in any case but the one that came was an overreaction. It was like nuclear winter to me until 2009.