/ 23 December 2009

When the world ended

December 31 1999, and I couldn’t have been further away from a computer. About half-way up the Mozambican coast, in a quaint and daringly beautiful spot called Inhassoro, the closest thing to the internet was a satellite phone at a hotel a 30-minute drive away.

The town had one freezer, running on intermittent electricity and a generator. The local fishermen supplied an endless gastronomical barrage of calamari and curried crab and fish. Life was easy, good, and manual. It was the perfect spot from which to watch the end of the world.

The year 2000, you see, was supposed to bring about a massive, planet-wide computing catastrophe. Computers were only programmed to handle two-digit dates — or so we were told by numerous experts — so they’d think that January 2000 was actually January 1900. Companies spent millions on battening down the hatches. Wild stories ran rampant: I was even informed by a source working in the aircraft industry that a simulation on a Boeing had it flip upside down as the millennium ticked over. Power supplies were due to drop; banks would reverse-calculate 100 years’ worth of interest; stock exchanges would collapse; society would fall into anarchy. It was all very exciting and rather far-fetched.

So when nothing much more than some fireworks went off and a couple of slot machines in Delaware experienced a few hours’ downtime, I admit I was somewhat disappointed. Personally, I relished the thought of subsistence farming in one of the most beautiful locations in the world while the cities were overrun by mobs. We entered the New Year with the uncomfortable feeling that we’d all been taken for a ride by charlatan information technology companies, but could never prove it.

The IT companies insisted that the non-event was simply because of their diligence, but the silent sentiment remained, and fermented distrust of all things IT for the next two years. Budgets were slashed and the industry imploded with a loud whimper.

Just three months later, the internet bubble burst, with the Nasdaq bleeding 9% in just six days. Internet sweethearts such as Boo.com, eToys and lastminute.com were all v­ictims of the blood-letting. Others managed to find buyers, but quickly faded into the dotcom din.

This was at the tail end of a financial ‘bubble” — similar to the housing-market bubble in the United States from which we’re recovering. Before the bust, everyone was an investor, from businessmen to housewives. I couldn’t go to a family lunch without being asked which stocks to buy, and thank God I never gave anyone advice.

The infamous Pets.com — an online store selling pet supplies, and its mascot, a sock-puppet doggie — spent $11.8-million on marketing alone. Its business model was bizarre — it sold its inventory for a third of what it bought it for, and then offered discounts and free shipping. Foolish shareholders ended up losing $300-million and 320 employees lost their jobs when it shut down on November 6 2000. Meanwhile, chief executive Julie Wainwright — nowadays head of SmartNow.com, a website for women’s interests — pocketed a sweet $460  00 in her severance deal.

Locally, B2B portal Metropolis (I’m still not sure what a B2B portal is meant to be — something about ‘eyeballs”, ‘community” and ‘eProcurement” in a mash-up business plan) and news site Woza (founded by Mail & Guardian‘s own Kevin Davie) folded. Dimension Data free-fell out of the FTSE 100 on the back of Cisco’s massive devaluations while Softline and MB Technologies delisted.

While we were grooving to the Springbok Nude Girls on the very first iPods, the slump of 2000, now referred to as the Dot-Bomb, cleared the web of ludicrous valuations, outrageous business plans, (Plan? What plan? We have a sock puppet!) and set up the field for the online world we know today.

From the smouldering ashes emerged a curious triumvirate. Its names were Google, MySpace and Amazon; or if you prefer, search, social networking and online shopping. The first made the internet usable; the second made it fun; the third, profitable. (Amazon’s revenues hit a staggering $19‑billion last year, with shareholders seeing $645-million at the end of the day.) The difference between the new world order and its precursor was who it appealed to: not the ­business world, but rather the guy on the street.

Back in 1998, there’d been talk of the internet killing the ‘bricks-and-mortar” companies, with the cute and useless term ‘clicks-and-mortar” coined to describe the new world order. But in the end, semantics proved an Orwellian dissimulation.

There was no battle between ‘old” and ‘new” — the fight was between ‘new” and ‘newer” and it was as fair as a United States air raid. It was the battle between insane business plans, products and services no one wanted, and stock prices that could only last as long as the market ignored the real valuations versus small, nimble players running on the smell of an oil-rag and driven by what users really wanted.

Looking back, it seems so obvious that the internet’s power was the ability to reach vast numbers of consumers — something possible pre-internet only with Coca-Cola-level marketing budgets. Funny how wrong we all were back in 1999. Wrong about everything.

Of those leading the revolution, only the figurehead, Google, remains completely unchallenged.

Google’s secret has been to become the broker between the social networks and the moneymakers. (Google’s revenues are similar to Amazon’s at $21,8-billion for 2008, but its net income for common shares was more than $4-billion.) Somehow, from the technical aloofness of search, Google has become the central deus ex machina. Most internet users can’t distinguish between Google and the web — the two are synonymous in Average Joe’s mind.

Social media has been diversified by Facebook, YouTube, Twitter, blogs, MXit and Flickr, and a thousand other sites run, not by professional content producers, but by you.

The moneymakers sell everything from gadgets to books to cheap international phone calls. They bring cash into the web, and spend it on advertising on all those social networks.

And so the end of the world did come in 2000 — it’s just that we were all looking the wrong way at the time. The internet imploded, and then exploded, like a terrible mistake at the Large Hadron Collider. A new universe coalesced around a new god. And if we want to know what the next 10 years hold for the internet, it is to Google that we must look.
Unless, of course, the world ends again.