Facing red ink, dotcoms temper their idealism
Casual dress and foosball may be here to stay, but layoffs force Internet firms to adopt a bottom-line ethos.
The dotcom world's riches-to-rags story this year is measured largely in numbers: more closures and more layoffs.Skip to next paragraph
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But as painful as layoffs are, the souring economics of Internet start-ups is only half the story. The downturn, say a number of analysts, is changing the basic character of the dotcom world, and some presumptions of how America's Old and New Economies interact.
For some social historians, dotcom workers represent a kind of vanguard force, leading but also bearing the brunt of social and economic change as an old industrial world morphs into a new digital one.
And so far, a prevailing lesson appears to be that the process of change will be more about blending than wholesale replacement.
For instance, foosball tables, casual dress, and flexible hours are here to stay, say a number of dotcom experts. In fact, workplace changes pioneered by dotcom firms have spread into traditional companies and are increasingly the norm.
But the "change the world" idealism and get-rich mentality of the Internet workforce are clearly being moderated by the old-fashioned school of economic hard knocks.
A social phenomenon
John Challenger, whose Chicago outplacement firm tracks dotcom layoffs nationally, sees the dotcom generation as a social as well as economic phenomenon. "It's a classic youth movement, not unlike the 1960s in many ways," he says.
And like the often-rocky incorporation of '60s radicals into the social mainstream, a similar cultural reality check is under way with members of the dotcom generation. "They thought the old world would be razed, but they're finding things are going to evolve more slowly than that," says Mr. Challenger.
Traditional economic forces are doing the tutoring.
Challenger, Gray & Christmas reported this week that dotcom layoffs nationally reached nearly 9,000 in November - a record high. Dotcom failures, ranging from online sellers of plants to pet food, are also expected to set a new record this month, according to Webmergers.com.
And analysts see the numbers getting worse before they get better.
For many investors, this holiday season is a make-or-break test for many dotcom companies, says Kirk Walden of PricewaterhouseCoopers, which monitors venture capital investments in technology. Mr. Walden predicts that investors will pull the plug quickly on wobbly firms involved in consumer e-tailing that don't perform strongly during December.
After a spectacular and steady climb that began in late 1998, venture capital investments in dotcom companies offering services online declined by over $2 billion from the second to the third quarter this year.
What's gone wrong? "The cart got way ahead of the horse," says Walden, meaning the proliferation of online services raced far ahead of consumer buying practices.
For many, this economic shock is a just comeuppance for dotcom workers who had found the path to wealth so seemingly easy.
But the picture of dotcom workers as fixated only on money is not complete. Many social scientists now depict the dotcom phenomenon as a social movement as well as an industry.