Speaker 1: In text with technology with tech Stuff from stuff works
Speaker 1: dot com. Hey there, and welcome to tech Stuff. I'm
Speaker 1: your host, Jonathan Strickland. I'm a senior writer with how
Speaker 1: stuff works dot com and as you guys know, I
Speaker 1: like to talk tech. This is part two of a
Speaker 1: two part episode about the companies that rose and fell
Speaker 1: during the dot com bubble crisis of one and where
Speaker 1: those folks are now, the people who launched those websites,
Speaker 1: what are they doing? And uh, We're going to continue
Speaker 1: on that train. Last episode we looked at web van,
Speaker 1: pets dot com, the search engine Excite, Broadcast dot com,
Speaker 1: and Boo dot com. But there are a lot of
Speaker 1: other companies that made a big name for themselves, at
Speaker 1: least briefly anyway, before burning out during the crash following
Speaker 1: the bubble's deflation. And there are also a couple of
Speaker 1: notable companies that they're the storm that I think we
Speaker 1: can look at and explore how it was that they
Speaker 1: survived when so many other companies didn't. So let's get started,
Speaker 1: and I think a good place to begin is the
Speaker 1: Globe dot com. This was one of the earliest social
Speaker 1: networking platforms on the web, predated the giants that would
Speaker 1: come later, like my Space, which of course isn't really
Speaker 1: a thing anymore, and Facebook, which is very much a
Speaker 1: thing still to this day. And the Globe dot Com
Speaker 1: was the brainchild of two Cornell students, Stefan Pattern and
Speaker 1: Todd Krisselman. The two were interested in computer programming and
Speaker 1: the commercial possibilities of the Worldwide Web, and they had
Speaker 1: also witnessed how compelling online chat rooms were, and they
Speaker 1: felt that there was probably a way they could monetize that.
Speaker 1: The two students raised fifteen thousand dollars from private investors
Speaker 1: and they used that money to buy computer servers and
Speaker 1: computer equipment to build out their idea. They worked on
Speaker 1: the design for several months and they launched the Globe
Speaker 1: dot Com in April nine. They formed a new company
Speaker 1: called web Genesis, and they hired on the staff of
Speaker 1: about a dozen people or so. And the site acted
Speaker 1: as part news aggregator, part message board, and part chat room.
Speaker 1: So if you went to the site, you would see
Speaker 1: a bunch of different categories of types of interests like
Speaker 1: sports and that kind of stuff, and you could go
Speaker 1: and click into that and read up on things. The
Speaker 1: chat room function was easily the most popular. When the
Speaker 1: site launched, they also launched software that could serve up
Speaker 1: polls and quizzes and surveys, so really the two students
Speaker 1: were way ahead of the curve on this one. As
Speaker 1: today those kind of features are wildly popular on social media,
Speaker 1: and they thought ahead to include it on their early
Speaker 1: social networking platform. The site was a success that had
Speaker 1: very passionate users, not an enormous user base, but they
Speaker 1: were very um frequent users, and in ninety the company
Speaker 1: made a decision to hold an i p O or
Speaker 1: initial public offering, is when a private company goes public
Speaker 1: and becomes a publicly traded company, and right around there
Speaker 1: is when things went a little bonkers. The global investment
Speaker 1: bank bear Sterns set the opening price at about nine
Speaker 1: dollars a share when the market opened. The demand for
Speaker 1: shares was such that the actual opening price ended up
Speaker 1: being eighties seven dollars per share, which is crazy, and
Speaker 1: at one point it even hit nine dollars per share. Now,
Speaker 1: by the end of the day, the price settled a
Speaker 1: little bit, but was still way over the opening price.
Speaker 1: It settled it around sixty three dollars fifty cents a
Speaker 1: share on paper, That meant that everyone who worked at
Speaker 1: the Globe dot Com became filthy rich, and some people
Speaker 1: started to behave that way. But as you guys know
Speaker 1: from this topic and the fact that no one has
Speaker 1: ever heard of this website these days, it was not
Speaker 1: meant to be. The site was not making money, and
Speaker 1: while millions of people were using the site, that just
Speaker 1: meant the costs of running the site remained high while
Speaker 1: there was no real way to or generate what revenue.
Speaker 1: So it was a sinking ship. People didn't shy away
Speaker 1: from blowing the whistle on the Globe dot Com. The
Speaker 1: company went public in the fall of A year later,
Speaker 1: The Street published a piece about the Globe dot Com
Speaker 1: that pulled no punches. Here is a direct quote from
Speaker 1: the Street. We're speaking, of course, of the Globe dot
Speaker 1: Com t g l O and essentially worthless business enterprise
Speaker 1: that has lost six of its value in the last
Speaker 1: five months, yet at its current price of barely thirteen dollars,
Speaker 1: still remains grotesquely overvalued. Ouch harsh words, but as it
Speaker 1: turns out, they were not entirely untrue. The Globe dot
Speaker 1: Com stock price continued its downward trend in nine and
Speaker 1: beyond and by January two thousand, pattern Not and Krizzleman
Speaker 1: stepped down from the company. They resigned. Pattern Out walked
Speaker 1: away with about a one and a half million dollars
Speaker 1: after selling off stock, much most of which he reportedly
Speaker 1: later lost in other investments. Krizzleman invested in some other
Speaker 1: companies and helped secure some of his wealth and more
Speaker 1: on those two in just a second. As for the site,
Speaker 1: it sputtered along for a while under new management, and
Speaker 1: in two thousand one the company had to lay off
Speaker 1: about half of its employees and the shares were trading
Speaker 1: at a dismal twenty five cents per share. It transitioned
Speaker 1: into a voice over Internet protocol company for a while,
Speaker 1: or voipe company, and it had some interests in the
Speaker 1: gaming industry as well, but despite those businesses being more
Speaker 1: stable than the initial website, the company ultimately had to
Speaker 1: shut down in two thousand seven for good. It had
Speaker 1: never fully recovered, and honestly, the social networking part of
Speaker 1: the Globe dot com had died around the time that
Speaker 1: the founders stepped down. Today, Todd Krizzleman is the CEO
Speaker 1: and co founder of a company called Media Radar, which
Speaker 1: is an ad sales application company and Stefan pattern Not
Speaker 1: is the chairman and CEO as well as the co
Speaker 1: founder of a company called Slated Incorporated, which is on
Speaker 1: an online film packaging, networking and investment marketplace. So they're
Speaker 1: doing just fine. Now let's stick to the topic of money.
Speaker 1: While we're chatting about these dot com companies, there were
Speaker 1: a couple of companies that rose up to try and
Speaker 1: become leaders in a brand new space, digital currency. So
Speaker 1: you might have thought that bitcoin was relatively new. This
Speaker 1: idea of digital currencies was new. Now, it's been around
Speaker 1: since the nineties. Shortly after the Web became a real entity.
Speaker 1: There were people who were thinking of ways of creating
Speaker 1: virtual online currencies. Now these were not cryptocurrencies. These didn't
Speaker 1: use the blockchain approach the way bitcoin and some other
Speaker 1: cryptocurrencies do, but they were virtual digital currencies. It's so
Speaker 1: back in the late nineties, a couple of different companies
Speaker 1: were trying to get this going. But they're they're really
Speaker 1: in some ways, we're behaving more like gift cards than
Speaker 1: outright currencies. So the two companies I want to talk
Speaker 1: about specifically are Flus and Beans. Flus is spelled f
Speaker 1: L o O Z and beans B e e b
Speaker 1: e e n Z. You started getting to the point
Speaker 1: where you're getting the e sound and you're thinking, have
Speaker 1: I said too many? Ease one, B two ease and
Speaker 1: in in a Z flus and beans. You just can't
Speaker 1: make this stuff up, guys. Oh, I guess technically you can,
Speaker 1: but you don't have to because someone already did it
Speaker 1: years ago. Now. Flus took its name from an Arabic
Speaker 1: word flus, meaning money, and Robert Levitan, who had a
Speaker 1: successful venture with I Village, launched Flus in nine. The
Speaker 1: idea was that customers would be able to buy flues
Speaker 1: credits that could be used at a couple of dozen
Speaker 1: different online retailers, and it was pretty easy to send
Speaker 1: those credits online to other people, like you could email
Speaker 1: essentially a gift certificate to someone else. So the idea
Speaker 1: was that you could buy flus for someone, give them
Speaker 1: the virtual currency which they could go and then spend
Speaker 1: on something they actually wanted rather than just receiving it
Speaker 1: another ugly Christmas sweater or whatever. Based on all the
Speaker 1: articles I looked over for this podcast, Flus may have
Speaker 1: best been known not for its method of business, but
Speaker 1: for its commercials, which kind of reminds me of pets
Speaker 1: dot com. Honestly, the company booked would be Goldberg as
Speaker 1: their spokesperson, and that move alone costs several million dollars. Meanwhile,
Speaker 1: Levitan was finding it challenging to get customers, both on
Speaker 1: the business side with retailers and on the consumers side
Speaker 1: with people who would actually use the product. Unlike many
Speaker 1: of the other companies I have covered in these two episod,
Speaker 1: Flus never held an I p O. It remained a
Speaker 1: privately held company throughout its existence. In two thousand one,
Speaker 1: it started to really struggle as the bubble was deflating
Speaker 1: and there was a report that the company may have
Speaker 1: been the victim of fraud. In addition to that, according
Speaker 1: to the story, there was a group of Russian thieves
Speaker 1: and hackers who were using stolen credit card numbers to
Speaker 1: purchase three hundred thousand dollars worth of FLUS credits. Now,
Speaker 1: if true, this could have been a real issue for
Speaker 1: FLUS because it would be a company left holding the
Speaker 1: bag when it's revealed that the purchases came from illegal sources.
Speaker 1: It would have caused real cash flow crunch at a
Speaker 1: critical time FLUS would have to cover the the expenses
Speaker 1: given to retailers, and meanwhile, it doesn't have any real
Speaker 1: money to hold onto because of the fact that the
Speaker 1: purchases came from criminal sources. Whether the fraud actually happened
Speaker 1: or not is a moot point. FLUS closed up shop
Speaker 1: in the summer of two thousand one, just two years
Speaker 1: after it had launched. People with FLUS credits found themselves
Speaker 1: out of luck just holding useless digital currency. And this
Speaker 1: is a valuable lesson in currency. And I'm talking about
Speaker 1: all currency, not just digital. Remember, your money is only
Speaker 1: worth something for as long as we collectively believe it
Speaker 1: to be. So if tomorrow we all woke up and
Speaker 1: said that dollars are worthless, dollars would be worthless because
Speaker 1: no one would accept them in return for anything. So
Speaker 1: the only reason this money has any value is because
Speaker 1: we have agreed upon it. Well, in the case of FLUS,
Speaker 1: people no longer had confidence in it, and therefore they
Speaker 1: no longer believed in the power of lows to be money,
Speaker 1: and ultimately it failed. Fortunately, most governments are on slightly
Speaker 1: more firm ground than FLUS was in two thousand one.
Speaker 1: Most sometimes you have a country like Greece that gets
Speaker 1: into some difficult economic times and there are a lot
Speaker 1: of tough questions at that point. As for Levitan, he
Speaker 1: went on to work with several other ventures. In two
Speaker 1: thousand four, he co founded Pando Networks. This was a
Speaker 1: peer to peer networking company that used that peer to
Speaker 1: peer approach to distribute software like games and videos. If
Speaker 1: you don't remember what peer to peer networking is, that's
Speaker 1: when you get a bunch of computers that are owned
Speaker 1: by various people out there. You run a specific type
Speaker 1: of peer to peer software and that allows those computers
Speaker 1: to essentially be their own little database network, and you
Speaker 1: can send files across the network. You can you can
Speaker 1: download stuff from multiple sources, which speeds up your download process,
Speaker 1: and it decentralizes it so if one computer goes down,
Speaker 1: there's still other computers on the network you can still
Speaker 1: get the stuff you need. It's a perfectly legitimate way
Speaker 1: to distribute information. It's just that peer to peer networks,
Speaker 1: over the course of the history of them, have often
Speaker 1: been used to pirate software and other material reels, and
Speaker 1: so it's gotten a bad rap. But there's nothing innately
Speaker 1: illegal about peer to peer. It's just the way some
Speaker 1: people have used it. Microsoft would purchase Pando Networks in
Speaker 1: two thousand thirteen, and then Levitan went on to co
Speaker 1: found the company Live in two thousand and fourteen. This
Speaker 1: is a company that is making a real time local
Speaker 1: events search app. I think I tried tracking it down,
Speaker 1: but I didn't actually have much success. I did find
Speaker 1: a web page where you can sign up for more information,
Speaker 1: but it just showed me a video that looked like
Speaker 1: a cross between Mad Max, Beyond Thunderdome and Fight Club,
Speaker 1: and I'm not sure I want to find that event
Speaker 1: in the first place. There you go. Uh, The actual
Speaker 1: event showed people riding bicycles and jousting with mops while
Speaker 1: a giant trash puppet was moving around in the background.
Speaker 1: I honestly don't know what it was supposed to tell me,
Speaker 1: apart from the fact that I guess if I had
Speaker 1: the app on my phone, I would know that that
Speaker 1: crazy stuff is going down, and maybe I could go
Speaker 1: the other way. As for Beans, that company was the
Speaker 1: brainchild of Charles Cohen, who's not the billionaire Charles Cohen,
Speaker 1: but a britt entrepreneur. At he was an Oxford graduate,
Speaker 1: he had an idea and he was a former speechwriter
Speaker 1: for the Liberal Democrats in the UK. He launched Beans
Speaker 1: in n and Cohen's approach was similar to Levitans in
Speaker 1: some ways. But beans was a virtual currency you could
Speaker 1: not only purchase with real money. You could also earn
Speaker 1: beans through various activities, so you could be paid in beans.
Speaker 1: I guess if you were selling account perhaps you could
Speaker 1: get paid in beans. For example, you might earn beans
Speaker 1: by clicking a specific link, or reading an article or
Speaker 1: watching a video. So it became an incentive to get
Speaker 1: engagement from users. You probably have encountered something like this
Speaker 1: online at some point, where you are allowed to do
Speaker 1: something like inner sweepstakes, but only after you watch a video.
Speaker 1: It's similar to that in many ways. So it wasn't
Speaker 1: just a gift certificate style program, but an actual currency
Speaker 1: you'd receive as a reward in return for specific actions. Now,
Speaker 1: each unit of beans, which was beans, whether it's plural
Speaker 1: or singular, was worth about half a penny. The idea
Speaker 1: seemed fairly solid. Businesses have been attracting customers and keeping
Speaker 1: them loyal with similar programs for years. I mean, there
Speaker 1: are tons of different companies out there that have loyalty programs.
Speaker 1: You know, you buy ten coffees and you get the
Speaker 1: eleventh one free, that kind of thing. So it's kind
Speaker 1: of along those lines, except it was meant to be
Speaker 1: something that would work across multiple companies. So maybe you
Speaker 1: buy a couple of T shirts at one retailer and
Speaker 1: then you have enough beans to buy a cup of
Speaker 1: coffee at a different retailer, or vice versa. You drink
Speaker 1: a lot of coffee and then you can buy some shirts.
Speaker 1: That was the idea, and it seemed like a pretty
Speaker 1: good one, and to this day we see multiple implementations
Speaker 1: of this idea, though they tend to be specific to
Speaker 1: a particular vendor or merchant. So in other words, you
Speaker 1: might have a Starbucks app that allows you to get
Speaker 1: loyalty points whenever you buy coffee from Starbucks, but you
Speaker 1: can't necessarily convert that into anything else, Like you can't
Speaker 1: use those credits to go and buy books at a
Speaker 1: bookstore or music or anything like that. Cohen ended up
Speaker 1: raising a great deal of money from investors in those
Speaker 1: early days. Articles give amounts in the eighty to one
Speaker 1: hundred million dollar range. That's a lot of cheddar and
Speaker 1: investors included Larry Ellison of Oracle fame. The tech of
Speaker 1: Beans depended pretty heavily on Oracle as well. Cohen wanted
Speaker 1: a currency that would work across borders, which meant that
Speaker 1: it had to take into account exchange rates, which are
Speaker 1: incredibly complex and change frequently. So the software that would
Speaker 1: allow for this kind of conversion lived on Oracle database
Speaker 1: servers and Sun Microsystems computers. It was pretty serious tech
Speaker 1: to run this in the background to make sure that
Speaker 1: you had the right prices uh converted into beans. Despite
Speaker 1: having the same problems that Flus did, which namely was
Speaker 1: getting online retailers to participate in the strategy in the
Speaker 1: first place, Beans chugged along for a short while. In
Speaker 1: July two thousand, Beans was big enough news to get
Speaker 1: extensive coverage and Info World magazine the articles pretty interesting.
Speaker 1: Cohen proclaimed that beans would become the universal currency of
Speaker 1: the future. There was even a partnership struck up with
Speaker 1: the credit card MasterCard. They had a thing called rewards
Speaker 1: the card with a Z after reward and it's all
Speaker 1: one word, so rewards the card from MasterCard, which would
Speaker 1: let you shift those beans to real life cash in
Speaker 1: businesses that accept master Card as a form of payment
Speaker 1: so you could earn Beans then use your credit card
Speaker 1: with Beans credits on it to make purchases. Everything seemed
Speaker 1: to be going really well for the company, and they
Speaker 1: scaled up to global operations with offices and numerous countries
Speaker 1: and cities cities like New York or Stockholm, Sydney, Hong Kong,
Speaker 1: and at its height they had about two fifty employees.
Speaker 1: And then things took a pretty sharp turn. Despite its
Speaker 1: presence and its heavy marketing campaigns, Beans failed to generate revenue.
Speaker 1: It would take a few more years before people began
Speaker 1: to use the Internet to really make purchases on a
Speaker 1: regular basis. There was this trust issue people had to
Speaker 1: get past. They were all worried about making, you know,
Speaker 1: purchases online and then having their identity stolen or money
Speaker 1: stolen from them, or maybe they would never get the
Speaker 1: thing they wanted to buy. No one was really eager
Speaker 1: to jump on the internet as a way of buying
Speaker 1: stuff yet, and most people still preferred to do their
Speaker 1: shopping in brick and mortar stores. For the most part,
Speaker 1: Beans just wasn't bulling in the beans as it were.
Speaker 1: According to c Net, Beans also ran into trouble with
Speaker 1: the law. Not all countries were cool with a company
Speaker 1: inventing its own global currency, and it got so serious
Speaker 1: that at one point the u K's Financial Service Authority
Speaker 1: Task Force rated Bean's offices in the UK. By two
Speaker 1: thousand one, the writing was on the wall. The company
Speaker 1: began to scale down, shutting down many of the thirteen
Speaker 1: offices across the world and laying off employees left and right.
Speaker 1: By May two thousand, employees had shrunk down to thirty
Speaker 1: and Beans was clearly trying to squeeze out as much
Speaker 1: money from its assets to pay back investors as it
Speaker 1: possibly could. By August two thousand one, it was all over.
Speaker 1: The company was finished. Charles Cohen went on to become
Speaker 1: the CEO of a company called Probability Plc, which designed
Speaker 1: and published gambling games for mobile devices. He left that
Speaker 1: company in May two thousand fourteen and became a vice
Speaker 1: president of Mobile at I G T for their North
Speaker 1: America Sporting Sports Betting division, and he works out of
Speaker 1: the Bay Area. I think Beings and Flus weren't necessarily
Speaker 1: bad ideas for the record, but I do think they
Speaker 1: were ahead of their time, and perhaps in another five
Speaker 1: or ten years they might have flourished, so it may
Speaker 1: have just been a case of a great idea at
Speaker 1: the wrong time. It's kind of sad because I actually
Speaker 1: like the idea of getting rewards points that are applicable
Speaker 1: across multiple vendors. I don't know how you make that
Speaker 1: arrangement so that not, you know, no single vendor gets
Speaker 1: harmed by this. I mean, if everyone is making their
Speaker 1: purchases at certain vendors and they're all cashing in their
Speaker 1: rewards points at another vendor, the rewards points vendors having
Speaker 1: a rough time of it, unless there's some other money
Speaker 1: exchange on the back end between the agency and the
Speaker 1: the the vendor. I don't know, but I would love
Speaker 1: it because it would really simplify all those loyalty cards.
Speaker 1: Instead of having to have multiple apps or multiple cards,
Speaker 1: you would have just one. Google. Google Wallet has tried
Speaker 1: something similar in the past, so maybe we'll see that
Speaker 1: rise up again in the future. I got a lot
Speaker 1: more to talk about with dot com companies that went
Speaker 1: belly up, but first let's take a quick break to
Speaker 1: thank our sponsor. Rolling right along, let's take a look
Speaker 1: at Cosmo dot com investment bankers Joseph Park and Yong
Speaker 1: Kang launched the company in n It was a fast
Speaker 1: delivery service. The company's pitch was that it could deliver
Speaker 1: lots of stuff like small stuff like coffee or DVDs
Speaker 1: or other small items in under an hour and there
Speaker 1: were no additional delivery charges. Cosmo landed a deal with
Speaker 1: Starbucks early on, and from a consumer side, it all
Speaker 1: looked really promising a man that you no longer had
Speaker 1: to wait. Whenever you ordered something online, you could get
Speaker 1: near instant gratification because within an hour it would show
Speaker 1: up at your door. Cosmo delivery agents rode around New
Speaker 1: York the first Cosmo market, on bicycles, and the service
Speaker 1: was gaining ground with consumers, but the company was losing
Speaker 1: money on every delivery. Now. Their hope was that they
Speaker 1: would be able to stay afloat in the early phases
Speaker 1: as they gathered a customer base before turning on some
Speaker 1: revenue generation generating streams. And it was a risky bet
Speaker 1: and it very nearly paid off. It. It wasn't like
Speaker 1: it was a bad idea. It almost worked. Cosmo was
Speaker 1: growing and by the end of nineteen it was in
Speaker 1: six markets in six locations, and by early two thousand
Speaker 1: it grew to eleven cities and twenty two locations, and
Speaker 1: after eighteen months in business they had three hundred thousand customers.
Speaker 1: By mid two thousand, that was up to four hundred
Speaker 1: thousand customers, and they employed more than twenty six hundred people,
Speaker 1: and all those employees were called Cosmo knots cute. Around
Speaker 1: that same time, publications such as Forbes were warning that
Speaker 1: Cosmo might be expanded too quickly and they didn't have
Speaker 1: enough revenue generation to keep this sustainable. It was going
Speaker 1: to end up collapsing in on itself if they weren't careful.
Speaker 1: An article in June two thousand and Forbes said that
Speaker 1: Cosmo had spent more than twenty six million dollars in
Speaker 1: and they only generated three and a half million dollars
Speaker 1: in revenue, so obviously that can't go on forever. The
Speaker 1: privately held company prepared to launch an initial public offering,
Speaker 1: but between the lead up and the launch, the dot
Speaker 1: com market began to crash, and the company also found
Speaker 1: that it was harder to penetrate some markets, such as Houston,
Speaker 1: which the company had abandoned after trying to make an
Speaker 1: impact there for five months. They just couldn't get enough
Speaker 1: of a customer base to justify the expense of operating
Speaker 1: in Houston, and so they pulled out of the city.
Speaker 1: While Cosmo operated at a profit in four of the
Speaker 1: cities that had a presence in that wasn't enough to
Speaker 1: satisfy ANTSI investors who were watching the world crumble around
Speaker 1: them with every other dot com company falling left right,
Speaker 1: and those profits that they were generating were not enough
Speaker 1: to keep the company going on its own while trying
Speaker 1: to make other locations become profitable. So Cosmo withdrew from
Speaker 1: the I p O. They canceled it, and by April
Speaker 1: two thousand one, all their money had run out and
Speaker 1: the company had to shut down. As for the founders,
Speaker 1: they went on to work on other big projects. Joseph
Speaker 1: Park founded a social networking platform called Askville, in which
Speaker 1: people could post questions to a community and they would
Speaker 1: get answers from other community members, and in two thousand nine,
Speaker 1: Amazon acquired Askville. Park then went on to join HarperCollins Publishers,
Speaker 1: and he became a senior vice president with the company
Speaker 1: and the president of their Bible Gateway division. In two
Speaker 1: thousand eleven, he left to become the CEO of blue Fly,
Speaker 1: a fashion apparel e commerce company. Another company called pe
Speaker 1: Firm scooped up blue Fly, So then Park goes on
Speaker 1: to become the VP of Global e Commerce at Forever
Speaker 1: To he won another fashion company and he stayed there
Speaker 1: for a couple of years. These days, he's the global
Speaker 1: Chief e Commerce Officer of Mattel Incorporated. Busy Guy Young Kang,
Speaker 1: the other co founder, worked at City Banks as an
Speaker 1: investment banking associate for a while, and he was vice
Speaker 1: president at Lehman Brothers for two years, then a director
Speaker 1: at Barclays Capital for another four years, and he founded
Speaker 1: a company called KPK Capital LLC, and equity and real
Speaker 1: estate company. These days, he's the VP of Finance and
Speaker 1: Business Development at Homer Logistics, which is a company that
Speaker 1: looks at last mile logistics, which makes sense. Cosmo was
Speaker 1: all about trying to solve that last mile problem of
Speaker 1: getting a product into consumers hands, and their logistics worked great.
Speaker 1: Their supply chain strategy was working very well. It was
Speaker 1: the revenue side that was the problem, not the supply
Speaker 1: side in this case. So let's contrast that last story
Speaker 1: with one phil with allegations of incompetence. Cosmo may well
Speaker 1: have been able to survive if it hadn't been for
Speaker 1: the fact that all the other dot com companies were
Speaker 1: starting to crumble because it made investors scared and they
Speaker 1: all started to pull out. And that was the rug
Speaker 1: getting pulled out from under cosmos feet. And while they
Speaker 1: had become profitable in four cities, they had yet to
Speaker 1: become profitable and the other ones, and they've never got
Speaker 1: the chance to change that. Meanwhile, you've got other stories
Speaker 1: where you've got all this crazy shenanigans going on. Like
Speaker 1: I said, there are allegations of incompetence, hubris, and mishandling
Speaker 1: of funds. And I'm talking about gov Works go O
Speaker 1: v W O r k S. I was founded by
Speaker 1: a former investor named is Saza Tusman. He was originally
Speaker 1: from Columbia, came over graduated Harvard magnum cum laude. He
Speaker 1: was a very very uh intelligent guy, still is very
Speaker 1: intelligent guy. We're to Goldman Sachs as an investor for
Speaker 1: quite some time. But he came up with the idea
Speaker 1: with for gov works after having a really irritating experience
Speaker 1: he got a parking ticket and he forgot to pay
Speaker 1: it and as a result, the eighty dollar fine that
Speaker 1: was on the original parking ticket bulked up to a
Speaker 1: five dred and forty dollar fine due to late fees.
Speaker 1: Tusman was talking with a former high school classmate named
Speaker 1: Tom Herman about this experience, and they began to brainstorm
Speaker 1: about a new business one if you build a business
Speaker 1: that would, for a small processing fee, pay customer parking
Speaker 1: fines for them, sort of like a line waiting service,
Speaker 1: but for government fines, so you, as a customer would
Speaker 1: actually pay the full fine. It's not like the company
Speaker 1: would pay the fine just out of altruistic love of you.
Speaker 1: You would pay the money for the fine, and on
Speaker 1: top of that you would have a processing fee you
Speaker 1: would add, but the company would take care of everything.
Speaker 1: For this idea, the idea got bigger, So why just
Speaker 1: stop at parking fines. The new company could act on
Speaker 1: behalf of citizens in several government citizen transactions, such as
Speaker 1: applying for a fishing license, or paying property taxes, or
Speaker 1: getting a building permit, or any of another another number
Speaker 1: of government activities you might have to engage in as
Speaker 1: a citizen, pretty much any mundane activity that would require
Speaker 1: someone to go in person to a government office could
Speaker 1: be handled by this service instead, with some obvious exceptions.
Speaker 1: You're not going to be able to get a driver's
Speaker 1: license this way or vote, but you'd be able to
Speaker 1: do a lot of other things. And that's how gov
Speaker 1: works was born. Tusman was able to get some really
Speaker 1: big investors on board early on, and in v works
Speaker 1: became a company. Before long, they started running into big problems, however,
Speaker 1: and according to CNN Money, many of those problems were
Speaker 1: the company's own fault. One of those problems was that
Speaker 1: Tusman really liked and restive strategy for entering into markets,
Speaker 1: so on more than one occasion, gov Works published notices
Speaker 1: that it would soon be working with various cities before
Speaker 1: any official agreements had actually been signed, and that rubbed
Speaker 1: some city officials the wrong way. On top of that,
Speaker 1: the marketing campaigns for gov works portrayed government as a
Speaker 1: hassle and it's inefficient and run by jerks, and that
Speaker 1: didn't help. When the company was trying to form relationships
Speaker 1: with various government entities, Tusman's team were concentrating on potential customers.
Speaker 1: They were looking to get people who would want to
Speaker 1: use the service, but they learned a little too late.
Speaker 1: That they also needed to get the trust and cooperation
Speaker 1: of government officials. So if you spend all your efforts
Speaker 1: winning over one group at the expense of alienating another group,
Speaker 1: and it turns out you need to depend on both
Speaker 1: of them at the same time for your business to succeed,
Speaker 1: that's not great. And that's kind of what one of
Speaker 1: the first problems of works right into Now. In that
Speaker 1: CNN Money piece, it sounds as though gov Works was
Speaker 1: a difficult client as well. The article states that Fallon
Speaker 1: New York, which was an advertising agency, walked away from
Speaker 1: a lucrative forty million dollar contract after producing a single
Speaker 1: TV spot for gov Works. So, in other words, they
Speaker 1: were hired to be the the advertising firm for this company,
Speaker 1: they produced one TV spot and then they say, yeah,
Speaker 1: we're kind of done here, despite a forty million dollar contract. Now,
Speaker 1: that same piece does cite a Fallon employee who said
Speaker 1: that it wasn't a bad parting, it wasn't on bad terms. Still,
Speaker 1: forty million dollars that's a big chunk of cash to
Speaker 1: back out of, so I'm curious what the full story
Speaker 1: is there. Meanwhile, over at gov Works, big chunks of
Speaker 1: cash were really running out pretty quickly. Several sources say
Speaker 1: that the company burned through close to sixty million dollars
Speaker 1: in venture capital without being able to become the profitable business.
Speaker 1: At one point, the company had two hundred fifty employees,
Speaker 1: and like many other dot com startups in this era,
Speaker 1: it ended up having to close down and start selling
Speaker 1: off assets. The rise and fall of the company was
Speaker 1: the focus of an independent film called Startup dot Com.
Speaker 1: Tusman went on to become the president of a company
Speaker 1: called Jump TV, which was an Internet TV venture. Later,
Speaker 1: he founded and became the managing partner of a company
Speaker 1: called Kit Capital k I T, and he went on
Speaker 1: to become the CEO of Kit Digital Incorporated until two
Speaker 1: thousand twelve. The company created a video asset management system
Speaker 1: that was cloud based, and it was in business in
Speaker 1: two thousand seven, although back then it was called the
Speaker 1: Rue Group r OO, and it stayed in business until
Speaker 1: two when it declared bankruptcy. So a year after Tusman
Speaker 1: left the company and these days Tusman's awaiting trial. Wait
Speaker 1: what Well, First of all, this has nothing to do
Speaker 1: with gov Works but rather Kit Digital. Basically, Tusman has
Speaker 1: been charged with some cases of conspiracy and fraud. In fact,
Speaker 1: he and some other executives at Kit Digital have been
Speaker 1: charged with inflating the value of the company by purchasing
Speaker 1: company shares with the company's own money, so essentially using
Speaker 1: the profits of a company to purchase shares in the
Speaker 1: company and drive up the share price. That money was
Speaker 1: allegedly flowing through an investment platform controlled by Tusman. In
Speaker 1: two thousand fifteen, a hedge fund manager named Stephen Maiden
Speaker 1: connected to these charges was sentenced to seven years in
Speaker 1: prison for securities fraud. Tuzman was arrested in twenty sixteen
Speaker 1: in Colombia. He was working on a luxury hotel project
Speaker 1: at the time, and apparently the conditions in that Colombian
Speaker 1: prison were notoriously awful um and it took some time,
Speaker 1: but he was then extradited to the United States in July.
Speaker 1: As of this recording, he has not yet gone to trial,
Speaker 1: but it is scheduled to start in early October. Seen
Speaker 1: he has entered a plea of not guilty. Two of
Speaker 1: his colleagues have pled guilty to the charges, so it'll
Speaker 1: be interesting to see where this goes. Now. I've got
Speaker 1: more to say about some of these dot com companies.
Speaker 1: But before I do, let's take another quick break and
Speaker 1: thank our sponsor. Hey, since we just talked about crime,
Speaker 1: how about we talk about an online crime news site
Speaker 1: that was the pitch of a p B news as
Speaker 1: an all points bulletin a p B news dot com.
Speaker 1: It was to serve up articles covering crime beats around
Speaker 1: the world. Two investment bankers named Matthew Cohen and Marshall
Speaker 1: Davidson partnered with a former investigative reporter and a captain
Speaker 1: in the army named Mark Salter on this venture. They
Speaker 1: raised more than a hundred million dollars in investments and
Speaker 1: they hired a lot of people, including a Pulitzer Prize
Speaker 1: winning reporter named Sidney Schanberg. The company took about two
Speaker 1: years to burn through all of that cash. Two years
Speaker 1: to burn through a hundred million dollars, it's incredible. So
Speaker 1: this company launched in and by mid two thousand it
Speaker 1: was done. It went dark. It was seven million dollars
Speaker 1: in debt and only had fifty thousand dollars in the bank.
Speaker 1: The company went bankrupt and eventually another company called safety
Speaker 1: Tips dot Com purchased a PB news dot com for
Speaker 1: the princely sum of five hundred seventy five thousand dollars.
Speaker 1: Now this was after safety tips dot Com had already
Speaker 1: looked to acquire the assets outright. They bought it at auction,
Speaker 1: but originally they were just looking to purchase a p
Speaker 1: B News straight without having it go to auction. It
Speaker 1: was gonna be a nine fifty thousand dollar price tag,
Speaker 1: and also they were going to back alone to allow
Speaker 1: the site to continue operating through the bankruptcy proceedings and
Speaker 1: perhaps emerge on the other side. But then before they
Speaker 1: could actually sign this n dollar deal, they got a
Speaker 1: look at the books of a p B news dot
Speaker 1: Com and they said, whoa, this is a total dumpster
Speaker 1: fire piece. I might be paraphrasing a little here, anyway,
Speaker 1: if you go to the u r L today, you'll
Speaker 1: see not much. As it turns out, that really isn't
Speaker 1: anything anymore. Mark Salter, the former reporter, went on to
Speaker 1: become the CEO of the Chesapeake Innovation Center, business accelerator
Speaker 1: firm focused on homeland security. He then became the managing
Speaker 1: director of Legend Merchant Group, another defense firm. These days,
Speaker 1: he's the president of or Or Sinus or or a
Speaker 1: Keenness Solutions O r C I n U S and
Speaker 1: I honestly don't know how I'm supposed to pronounce that,
Speaker 1: but this is a company that consults with many clients,
Speaker 1: including you guessed it, homeland security. He's also the managing
Speaker 1: director of Pickwick Capital Partners LLC, which is an invest
Speaker 1: investment firm. So a lot of these people, after they
Speaker 1: got out of building companies that didn't last, ended up
Speaker 1: becoming investors themselves. Marshall Davidson, one of the two investment
Speaker 1: bankers who co founded APB news dot com, is the
Speaker 1: operations manager of Avison Young, a real estate company. I
Speaker 1: have no idea where Matthew Cohen ended up, as my
Speaker 1: research couldn't definitively point me to the right person. I
Speaker 1: found a lot of Matthew Cohen's, but no one who
Speaker 1: was specifically the Matthew Cohen of a p B news
Speaker 1: dot com. So if you know what happened to Matthew Cohen,
Speaker 1: let me know. I'm kind of curious what turned how
Speaker 1: it turned out for him. And we've talked a lot
Speaker 1: about companies that went under as a result of the
Speaker 1: market instability of the dot com bubble crash, But what
Speaker 1: about the few that made it through. What makes them
Speaker 1: so special? Well, probably one of the biggest is Amazon,
Speaker 1: and it's one of the most high profile dot com
Speaker 1: companies of that era, and it was able to weather
Speaker 1: the storms of the dot com bubble, and Amazon itself
Speaker 1: was on shaky ground for a long time. Like other companies,
Speaker 1: it became clear that scaling a business and managing a
Speaker 1: large infrastructure is an expensive undertaking, and that finding the
Speaker 1: right balance of attracting and retaining customers while making sure
Speaker 1: you have sufficient inventory is not an easy task. It's
Speaker 1: a huge logistics problem now. Jeff Bezos founded Amazon in
Speaker 1: ur and the company debuted its online bookstore model. In
Speaker 1: these days, you can buy pretty much anything on Amazon,
Speaker 1: but at the heart of the company was its book business.
Speaker 1: Amazon held its initial public offering in May nine seven,
Speaker 1: just two years after it had gone live, and it
Speaker 1: had an opening price of eighteen dollars per share. That
Speaker 1: price rose up to more than one hundred dollars per
Speaker 1: share before the will burst. Once that happened, the price
Speaker 1: dropped down to less than ten dollars per share. The
Speaker 1: story here is that even companies that were big and
Speaker 1: had sold uh lots of stuff. They had a really
Speaker 1: solid revenue plan in place, They knew what their business was.
Speaker 1: They could tell you what their business was. Some of
Speaker 1: these companies, if you were to ask them, what is
Speaker 1: it that you actually do, people struggled to come up
Speaker 1: with an answer. Not the case with Amazon. It was
Speaker 1: pretty simple. Uh. But even a company like that wasn't
Speaker 1: was not immune to the effects of the dot com bubble.
Speaker 1: Investors had really lost confidence in the tech sector in
Speaker 1: general and anything connected to the web in particular. But
Speaker 1: Amazon was able to tough it out. They had not
Speaker 1: yet turned a profit when the dot com bubble burst,
Speaker 1: but that changed in the fourth quarter of two thousand one.
Speaker 1: That was the first time the company managed to turn
Speaker 1: a profit. While other companies were rapidly disappearing from our
Speaker 1: collective memory, Amazon kept plugging away to convert brand recognition
Speaker 1: strategies into revenue generating ones. And for one thing, Amazon
Speaker 1: had a really solid mission statement as to be the
Speaker 1: Earth's most customer centric company to build a place where
Speaker 1: people can come to find and discover anything they might
Speaker 1: want to buy online. That's a direct quote of Amazon's
Speaker 1: mission statement back in the day. The scaling process for
Speaker 1: Amazon meant that it didn't burn out of investment money
Speaker 1: before turning a profit, and so it succeeded where so
Speaker 1: many other companies failed. And not to get too warm
Speaker 1: and fuzzy here. Amazon was also able to secure its
Speaker 1: place because it became one of the leading authorities on
Speaker 1: customer behavior. They could track customer purchases and customer browsing,
Speaker 1: and the company could fine tune how it presented products
Speaker 1: to people, and it could provide helpful suggestions to shoppers
Speaker 1: and up sell them on additional items they didn't even
Speaker 1: know they needed. Like if you buy something that takes
Speaker 1: batteries and suddenly you get a suggestion, Hey, maybe you
Speaker 1: should buy some batteries. That's clever and it works. It's
Speaker 1: also kind of creepy in a way, but it really
Speaker 1: illustrates how we as human beings are predictable creatures. Maybe
Speaker 1: we have a little less free will than we thought.
Speaker 1: Another dot com that managed to make it through the
Speaker 1: chaos of the bubble was eBay. eBay launched in nine
Speaker 1: out of Pierre Almadyar's living room, and the original site
Speaker 1: was called auction Web. The whole concept was pretty simple.
Speaker 1: eBay was a platform for online auctions. Mark Frasier was
Speaker 1: the first person to buy anything on eBay, So here's
Speaker 1: your trivia. Mark Frasier, out of Canada bought a broken
Speaker 1: laser pointer on eBay as the first purchase ever across
Speaker 1: the site. By nine, goods were valued at seven point
Speaker 1: two million dollars that had been sold on auction Web,
Speaker 1: So that's a pretty incredible and Pierre ended up quitting
Speaker 1: his day job and brought on Jeff Scroll to become
Speaker 1: the president of the company. Auction Web would eventually become eBay.
Speaker 1: In September, the company had grown to the point that
Speaker 1: the two co founders felt they needed to bring in
Speaker 1: an expert in business and branding, and they hired Meg
Speaker 1: Whitman as president and CEO. Whitman led the company and
Speaker 1: attracted executives from multiple high profile organizations, including Disney. In September,
Speaker 1: eBay held its I p O, with initial shares trading
Speaker 1: at eighteen dollars. The price rose to fifty three dollars
Speaker 1: and fifty cents at one point on that first day
Speaker 1: of trading. Throughout nine and into two thousand, the company
Speaker 1: expanded into new offices across the world. So why did
Speaker 1: eBay survive the turmoil? Well, according to Whitman, it wasn't
Speaker 1: that they were able to see what was coming and
Speaker 1: then prepare for it. Instead, it was that the company
Speaker 1: wanted to keep a close eye on what customers wanted,
Speaker 1: and they worked hard to make sure that they were
Speaker 1: able to provide it quickly to those customers. Later, in
Speaker 1: two thousand eight, eBay would change dramatically. The company leadership
Speaker 1: was trying to head off this problem of people moving
Speaker 1: away from the site and a decline and online auctions,
Speaker 1: so the company reached out to foreign partnerships with retailers
Speaker 1: and created an online marketplace for those retailers products. Now
Speaker 1: that move upset some longtime eBay users, but it helped
Speaker 1: keep the site solvent. So I think the lesson there
Speaker 1: is sometimes you've got to really explore options you hadn't
Speaker 1: thought of in order to stay in business, and sometimes
Speaker 1: those decisions might be a little unpopular with your customer base.
Speaker 1: So you have to balance that out how much can
Speaker 1: you do to ensure that you stay in business versus
Speaker 1: how much are you going to alienate your customer base?
Speaker 1: Because if you do it too much, then you've shut
Speaker 1: yourself in the foot. So these are some of the
Speaker 1: interesting stories. I mean, Google obviously also survived the dot
Speaker 1: com bubble. Google in those days was already on its
Speaker 1: way to becoming a powerful search engine, but it wouldn't
Speaker 1: be until the early two thousand's that it truly began
Speaker 1: to become a juggernaut. And when it started in the
Speaker 1: mid two thousand's to become a publicly traded company, it
Speaker 1: became a force to be reckoned with. It was almost
Speaker 1: just small enough and nimble enough to survive the dot
Speaker 1: com bubble bursting to get away without being tanked by
Speaker 1: it the way so many other companies were. And there,
Speaker 1: of course tons of other companies that rose and fell
Speaker 1: during this time. I just touched on some of the
Speaker 1: ones that I thought had some of the most interesting stories,
Speaker 1: ones that often are associated with the dot com bubble burst.
Speaker 1: There are others that rose, fell and then re emerged
Speaker 1: as something else, and I didn't include those because in
Speaker 1: some ways I feel like it's just misleading, because the
Speaker 1: company that came out of it on the other side,
Speaker 1: is so different from the company that went into it
Speaker 1: that it's almost like two different entities in the first place.
Speaker 1: But this was fun, uh, you know, it's looking at
Speaker 1: companies that fail can never be fun. But it was
Speaker 1: interesting to go back and look at the past and
Speaker 1: see how these different companies uh grew, how they fell apart,
Speaker 1: and what happened to the people afterward. Because frequently you
Speaker 1: just hear the names of the companies, you don't really
Speaker 1: understand that most in most cases, the people who founded
Speaker 1: those companies are still very influential people, most of whom
Speaker 1: are still in the tech sector. There their leaders of
Speaker 1: various industries, and they continue to provide leadership. In many cases,
Speaker 1: you could argue that they perhaps learned some very valuable
Speaker 1: lessons from the dot com experience, painful lessons, but valuable ones,
Speaker 1: and that as a result they might be better leaders
Speaker 1: today than they would have been had they not gone
Speaker 1: through that experience. It's kind of hard to say. Obviously,
Speaker 1: we only have the one timeline to work with. We
Speaker 1: can't duck our heads in a parallel universe and see
Speaker 1: if it worked out some other way elsewhere. But I
Speaker 1: find it really fascinating to look at these types of companies.
Speaker 1: If there are any in that list that you specifically
Speaker 1: would like to hear a full episode about, maybe a
Speaker 1: deep dive on the history of eBay, for example, let
Speaker 1: me know it's send me a message. The email address
Speaker 1: is tech stuff at how stuff works dot com, or
Speaker 1: draw me a line on Twitter or Facebook the handle
Speaker 1: at both of those tech stuff hs W. Remember I
Speaker 1: stream live when I am podcasting. You can go to
Speaker 1: Twitch dot tv slash tech stuff and you can look
Speaker 1: at the schedule there. Join me when I'm streaming. I'm
Speaker 1: not doing it today, but that's because, as I record this,
Speaker 1: Twitch is actually experiencing technical difficulties. So it's not my
Speaker 1: fault this time. But most Wednesdays and Fridays you'll find
Speaker 1: me streaming live on Twitch dot tv. I'd love for
Speaker 1: you to join me. You can pop in the chat room.
Speaker 1: I'm happy to chat with you guys and learn about
Speaker 1: what you find interesting and what you want to hear about.
Speaker 1: And uh, that's all for today. I'll talk to you
Speaker 1: again really soon for more on this and thousands of
Speaker 1: other topics. Is it how stuff works dot com? Who
Speaker 1: wonder