Dot.con: The Greatest Story Ever Sold
John Cassidy

review by: Chelan David
Date: 12/1/03

The remarkable thing about Dot.con: The Greatest Story Ever Sold is that it reads like a work of fiction. Not that John Cassidy’s facts are inaccurate – it is simply hard to imagine just how out of control Internet stocks were less than five years ago.

Priceline.com serves as an example of a cautionary fairy tale. The company started operations in 1998 and by the end of the year promptly lost $114 million. Although Priceline.com was losing three dollars for every dollar it earned, the start-up retailer went public on March 30, 1999. The shares which were issued at $16 soared to $68 by the close of trading and after one day on the market the company was valued at more than United Airlines, Continental Airlines and Northwest Airlines combined.

A few weeks later Priceline.com’s shares reached $150, making a start-up whose assets consisted primarily of some software and a few computers, worth more than the entire U.S. airline industry. Just two years later the stock was trading at less than $2.

During the Internet gold rush I primarily stayed on the trading sidelines, marveling and cursing at the fortunes people were making. The riskiest investment I had among my boring mutual funds was a tech growth fund in my 401 (k). In 1998, I remember thinking such stocks as Yahoo! and Amazon were incredibly overpriced, but by 2000 the sky seemed to be the limit. No one seemed to care anymore about revenues or profits; as long as a company had .com attached to their name, they were gold.

Kozmo.com, an online convenience store named after the character in Seinfeld, was certainly a reflection of the times. This enterprise delivered such items as batteries, gum, condoms and videos to "half the potheads in New York" according to the company’s founder. Unfortunately, Kozmo.com did not charge a delivery fee and since each delivery cost $10 in labor and overhead and the average customer order was for only about $12 it was mathematically impossible for the company to turn a profit. Of course this minor fact didn’t stop Amazon.com from investing $60 million in Kozmo.com.

At least companies like Kozmo.com and E-Stamp, a business which raised $31.5 million to sell stamps over the Internet, were trying to sell something. Many Internet start-ups with huge cash infusions from investors were content providers with no hopes of making revenue other than selling advertising. The advertising that was sold was typically to other on-line companies who had no hopes of making profits. In 2000, just prior to the bust, 17 Internet advertisers paid $2 million each for a 30 second spot in the Super Bowl, including such obscure companies as kForce.com, Onmoney.com, Lifeminders.com and Ourbeginning.com. The E*Trade ad featured a dancing chimpanzee and the line, "We just wasted two million bucks."

Throughout the book Cassidy does an excellent job tying various aspects of the Internet and investing phenomenon together. He provides the history of the Internet, the creation of the 401 (k), the advent of day trading and documents other speculative disasters in history. The first recorded speculative craze occurred in Holland in the 1630s with tulip bulbs when the price of Croenen bulbs jumped from 20 guilders to 1200 guilders before the tulip market crashed in 1637.

Interestingly, the Internet was not created by private enterprise but rather by the U.S. government, although Al Gore did not invent it. A European academic invented the application that turned it into a mass medium which eventually led to Netscape’s creation of Mosaic, the first user friendly web browser. From these humble beginnings a new economy was created.

This book was a very interesting read for me because although the boom was just a few years ago it seems like it was from another era – an era based on optimistic speculation reminiscent of the 1850s gold rush rather than a new millennium marked by terrorists and war. With the uncertainty surrounding the world right now it’s hard to imagine another extended period of peace and prosperity. Hopefully this time will come sooner than later but one thing is certain: there will be never another Internet boom like the 1990s.