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Technology

Web Boom 2.0

Part II � Vive la difference

Last Updated January 2, 2007

Part 2 of a two-part series by internet writer Joanna Pachner that examines the latest surge in interest around the internet and social networking sites. In Part 1, she looks at the similarities between the current boom and the "dot-com bubble" of the late 1990s. In Part 2, she investigates the causes and symptoms of the latest bout of digital fever.

The current tech boom has many hallmarks of its late-1990s predecessor. A rock-and-rolling stock market? Check. Obscene prices for money-losing companies? Check. Snot-nosed gazillionaires? Check. A new cultural zeitgeist?

Actually, no — that one is missing.

Unlike the original tech craze, which permeated everything from business to entertainment to social and intellectual life, this time the ripples are more subtle.

In the years since the dotcom bubble, internet use has become widespread and the gee-whizness has worn off. But as people are drawn online more and more in their lives, the net's effect is quotidian rather than groundbreaking (with the possible exception of its place in the lives of teenagers).

Digital excitement today resides in personal tech — iPods, home theatres, cellular gizmos. If the '90s were a revolution, promising to transform the world with technology, this is merely a change in government.

There are other major differences between the tech bubble of the late 1990s and the current boom. Let us count the ways:

No mythical centre

The San Francisco Bay Area circa 1999 has passed into the annals of history, with its own legends and artifacts. Many of its seminal companies — such as Netscape and Wired magazine — are gone or off the cultural radar, while dotcom parties and dogs in the office have congealed into cliches.

But San Francisco's electric atmosphere remains a visceral, enduring memory for those of us who were there. An intoxicating mix of competition, energy and rapaciousness, it made the place feel like it was on speed.

Other new-media centres had their own localized versions of the vibe. New York was more gritty, with dotcoms drawn to the "authenticity" of semi-renovated lofts with creaky freight elevators.

In L.A., tech ventures had more Tinsletown flash: since most were started by Hollywood people, dotcom parties tended to get the best cull of celebrities � essentially movie premieres sponsored by designer vodkas.

In comparison, the current boom lacks a geographic hub. Silicon Valley still exists, yet its name lacks the resonance it once had.

As for San Francisco? Isn't that where the real-estate bubble is loudly bursting?

No ostentatious spending

Back in 2000, one of the most hyped show-business startups was DEN (Digital Entertainment Network), an online portal for Hollywood insiders.

After it went belly up, I took a tour of its offices the day before an auction of all their contents. Money-losing web companies could be truly epic in their hubris.

At its height, DEN had about 60 employees, but it seemed to have three of everything for each of them.

My favourite was the sight of some dozen luxury cars parked in the lot. (I ended up buying a mini espresso maker — my own piece of the entertainment portal dream.)

Now, in the post-Enron, post-Dennis-Kozlowski, mid-option-backdating-scandal days, it's hard to imagine that kind of indulgence. The mantra isn't so much frugality as prudence and social responsibility.

The cool companies today follow Google's lead in being lavish not in perks but in philanthropy.

No easy money

One of the companies I worked for in 2000 was launched with $35 million in venture-capital investment, which one of the founders boasted was "easier to round up than getting laid in the '60s."

Today, investors aren't as easy to seduce.

Online ventures are more likely to grow organically, by building streams of advertising cash. According to eMarketer, online advertising in the United States alone will reach $16 billion US this year.

To get it, however, sites have to prove they're getting actual eyeballs, not just project future IPO windfalls.

In fact, the typical exit strategy these days isn't going public — it's luring Google with a nifty technology or attracting one of the old-media giants desperately seeking new audiences.

No Canadian leaders

In this go-around, so far anyway, Canada seems to be the branch plant or the spinoff market for mainly American ventures. Where is the next RIM? The new Nortel or JDS Uniphase?

There are numerous startups, granted, but the high-paying research-and-development jobs and the out-of-the-ballpark hit ideas are missing.

Last week, Dell Inc. opened a 1,000-worker facility in the Ottawa area, creating much hoopla about a local technology revival. Unfortunately, most of those jobs are for call centre operators.

No stomach for innovation

Web 1.0, with all the original content and promotion it demanded, was expensive, so it's no surprise that many of the larger ventures were backed by big media companies.

Disney launched the huge Go.com portal, TV networks blew tens of millions on lavish digital spinoffs � and most lost fortunes.

Those flameouts have made the giants reluctant to build from scratch. The answer? Buy outfits that look like winners.

From NBC spending $600 million US on popular women's destination iVillage to The New York Times Co. paying $410 million for About.com, the U.S. media conglomerates are on a shopping spree.

Back in March, one of Rupert Murdoch's lieutenants told a conference of web entrepreneurs, "We're buying everything…. I'll bet you we'll buy five companies in this room."

The same thing is happening in Canada: Rogers and Transcontinental are snapping up websites they could easily duplicate in-house at a fraction of the cost.

But buying an audience is safer than trying to build one.

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