Wednesday, July 10, 2013

the last book I ever read (dot.con: How America Lost Its Mind and Money in the Internet Era, excerpt five)

from John Cassidy's dot.con: How America Lost Its Mind and Money in the Internet Era:

In late 1995 and early 1996, few were willing to consider the possibility that Internet advertising might prove to be a bust. Kevin O’Connor, a Michigan-born engineer and entrepreneur, had recently started DoubleClick, the first Internet advertising agency, in New York’s Flatiron District, which was rapidly becoming known as Silicon Alley because of the large number of Internet-related companies that were springing up there. DoubleClick was a joint venture between O’Connor and his partner, Dwight Merriman, and the advertising agency Bozell, Jacobs, Kenyon & Eckhardt. Its software allowed ads to be targeted to specific groups, based on occupation, geographic origin, and several other characteristics. DoubleClick sold banner ads on most of the popular Web sites, including Netscape, America Online, and Yahoo! To begin with, Netscape’s home page, the default home page for anybody who had a Netscape Navigator browser, was the most popular ad buy. DoubleClick’s success prompted other agencies to set up Internet divisions. Disappointing results from the earliest online advertising were either ignored or reinterpreted in a positive manner. Forrester Research, a company that was making a name as a bullish interpreter of Internet trends, estimated that online advertising would increase from an estimated $37 million in 195 to $700 million in 1998. (Later in 1996, Forrester would raise its 1998 forecast to $1 billion.)

The growth of service firms like DoubleClick and Forrester Research demonstrated how the growth of Internet industry was starting to feed on itself. Every new Internet venture employed a new group of people with a vested interest in boosting the online economy. The most powerful boosters were to be found on Wall Street, where the Netscape IPO had legitimated a new business model—one to which earnings and balance sheets didn’t matter. In the Internet era, the game was to raise money from investors, clamber aboard an exponential growth curve, and worry about revenues and profits later. Mary Meeker, a thirty-five-year-old stock analyst at Morgan Stanley, was one of this strategy’s strongest defenders. Meeker was supposed to provide Morgan Stanley’s clients with objective advice about the technology companies she covered and about the wider trends affecting the computer industry. Traditionally, stock analysts were pretty low down the Wall Street pecking order, since they didn’t bring in any money directly, but Meeker would help change that.

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