Remembering the Last Big Tech Layoff Bloodbath, the Dot-Com Bust of 2000-2001

As hundreds or even thousands of tech layoffs are back in the daily news this week, we look back to the dot-bombs of 22 years ago, when the Bay Area became the graveyard of f*cked companies.

In just the first ten days of November, we have seen hundreds of layoffs at Lyft and Stripe, thousands of layoffs on Twitterand more than 10,000 layoffs on Facebook / Meta. And if that doesn’t bother you, a certain historical analogy might at least cross your timeline: The SF Business Times wondered “Is the Bay Area headed for another dot-com-scale meltdown?” The SF Standard Notes, “Wide layoffs have fueled predictions of a ‘dot-com 2.0’ bubble.” The Information has perhaps the cleverest wordplay of the bunch, in a conversation with the Secretary of the Treasury at that time Larry Summers, who they say predicted “the level of pain likened to the dot-com bust. ‘Peloton is like Pets.com,’ he said.

But before we leave the ledge, it is important to remember that we have actually lived through this before, and we have lived through it. quite new. yip Bloomberg paid attention to Tuesday this week, layoffs are “close to the levels seen in the early stages of the Covid-19 pandemic.” Despite the media coverage, the current layoff rate is minimal what we hold in March and April 2020 – although high-profile tech companies may be spared then.

What’s happening in the tech sector right now has clear similarities to the dot-bomb bust: It’s affecting the Bay Area more than any other nation, it’s the decline of the “smartest guy in the room” type of founder spoiled by years of indolence. critical. media coverage, and the gig was basically up when billions of venture capital ran out before even a smattering of profits ever appeared on the horizon.

Screenshot via Archive, org

Back during the dark days of the 2000-01 recession, we would wake up, toast a slice of Valu-Save white bread, pour some hot water over three-day coffee grounds, and peruse the latest news on the website. Bastard Company. That site no longer exists, but there are several those bits are available on the Wayback Machine. This is an incredibly crude gallows-humor news aggregator about recent layoffs, filled with unfiltered and unverified rumors, and giving profane, NC-17 nicknames to the companies it covers. (Remember how they used to refer to Accenture as “Ass-Enter?” That never gets old!)

Like the current downturn, it was after the bubble peaked with lots of Super Bowl ad money-wasting from companies that are drowning in VC cash, but have an iffy-at-best business model. But different factors lead to this; New generations of web browsers such as Netscape and Mosaic made the internet accessible to ordinary people, people left their jobs to become online investment “day traders” and discount brokers, and the record went on and on. 457 IPOs in 1999 seemed to offer guaranteed riches.

And these new geniuses claim to understand this “new economy” better than seasoned analysts. Consider the extremely popular Redwood City-based web portal exciteThat was done so that in 1997 they turned down the opportunity to acquire a new search engine for less than $1 million. That search engine is Google.

Binksternet via Wikimedia Commons

Remember this Webvan box? Do you still have it? Those boxes are a symbol of the “new economy” model of just giving away a ton of free shit, in the face of a big-business model where all that matters is getting your name out there. Surely the income will follow! After all, Webvan had a stunning $178.5 million in sales in 2000. The problem was, as we learned when they Filed for Chapter 11 next Julythat they had $525.4 million in expenses.

Screenshot: via Reddit

And oh, the dot-com party! The company above, Emeryville-based Ask Jeeves, had Elvis Costello play at a company party in April 2000. “What you have is a $1 million monthly tab for booze, food and music, all paid for by the new economy,” Slate wrote at the time. “Never before, not during the textile, transport or steel boom, have companies spent so much money on people who don’t work for them, and who often have only an interest in the company.”

Booking Elvis Costello seems good – after all, Ask Jeeves’s stock IPO’d in 1999 at $14, and it’s at $77.81 by the end of that day. It will rise to $190 a share by December 1999, but in 18 months, it will trade at 86 cents a share. (Everyone remembers when Facebook and two other companies all threw un-ironic Great Gatsby– themed holiday parties in the heyday of 2015?)

Amid irrational exuberance, the tech-heavy NASDAQ index hit an all-time high of 5,048.62 in March 2000. But it would drop 35% in just one month, as the failure to generate profits began a grim harvest of mass layoffs across the Bay. The area, and the recovery will take years. NASDAQ will never reach 5,000 again for another 15 years.

Screenshot: SFGirl.com

With tens of thousands of Bay Area employees being laid off, those of us who are stuck, at least, are trying to make the best of it. There is what is called Pink Slip Party so proud of the newly unemployed. “Those who are fired are given a red dot to wear, those who can offer a job a green dot, and those who want to party – who are relaxed instead of being laid off – get a yellow dot,” The Guardian published in January 2001, using proper English lingo. “Parties are now held monthly, entry is free, and the bars where they are held charge excessively friendly prices: $2 (£1.35) for a pint of beer or a martini cocktail.”

The level of job losses in 2001 was far greater than what we see today. Two million people were laid off in 2001Per Silicon Valley Business Journal, as the dot-com bust led to the economic shock of the September 11 attacks, and to a lesser degree, Enron and the accounting scandal.

Screenshot: St. Louis Fed

So, today’s tech decline is nowhere near the scale of what happened in 2000-01 – at least not yet – or for that matter, what happened during the Great Recession of 2008-10, or the early months of COVID-19. pandemic.

During the dot-com bust, companies went belly up completely, putting gluts of office equipment on the market. In the current slate of layoffs, established companies are only downsizing. In fact, some have only reduced to pre-pandemic levels, after all Tech companies made banks while the wider economy suffers mightily. Consider Facebook, which just laid off 11,000 people, but grew its staff by more than 20% during the pandemic.

And we can’t help but notice another factor: The bleeding has been severe in companies that have invested heavily in this. nebulous concept of Web3. Companies that sink millions into crypto, blockchain, and decentralized metaverses have pretty much lost their shirts lately. Who knows, maybe this Web3-whatever will work for one day, the same way that “dot-com” businesses will eventually become the way of the world and not just a new ad during the Super Bowl. But any form of new web may not resemble the current dreams of crypto evangelists, and it cannot be called Web3.

In fact, in the future, “Web3” may be a short-hand term that proves every bit as negatively loaded as “dot-com bubble.”

Related: Twitter Evokes Dot-Bomb Memories With Pricey World Series Ad Campaign [SFist]

Image: The pets.com sock stuffed dog stars in a commercial for the company, Los Angeles, California, January 11, 2000. The San Francisco-based pet product company announced on November 7, 2000 that it was shutting down after failing to secure. a financial backer or buyer. (Photo by Bob Riha/Liaison/Getty Images)

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