Forget the coming-out parties of years past. In 1999, the Net grew up and went to work -- and its long-standing promise to change the way we do business became an inescapable reality. While the year was thin on technological breakthroughs -- with mammoth influences like America Online, AT&T and Microsoft focused on politics (whether to compete or cooperate with each other) rather than innovation -- e-commerce took off. Online retailers selling everything from kitty litter and canned tuna to diamond rings, fine art and haute couture blanketed the Web, while a slew of dot-com companies forged a path toward pay-per-use software rentals, business-to-business auctions of surplus supplies and, of course, comparison-shopping services. No matter how many ideas Net companies came up with, there weren't enough to go around, leaving clusters of nearly identical businesses sprouting up like mushrooms after a rain. We've seen this competitive landscape before -- when hundreds of Internet service providers, or a dozen search engines, or a couple of browsers battled it out -- and we don't think we're going out on a limb when we say consolidation could be the watchword next year.
Of course, there was a little more to 1999 than shopping, although many noteworthy events did seem to revolve around money. Here's our take on all that came to pass in the final year of the millennium.
Microsoft is a monopolist
Could there have been any bigger story in the tech world in 1999 than Judge Thomas Penfield Jackson's definitive declaration on Nov. 6 that Microsoft is a monopoly? Not likely, although Jackson's stronger-than-expected denunciation of Microsoft was considerably watered down just a few weeks later, when he appointed a noted foe of antitrust enforcement, Judge Richard Posner, as a mediator between Bill Gates and the Department of Justice. Even so, Jackson's 200-plus-page learned treatise on Microsoft, the software industry and the game of monopoly proved that the judge really was paying attention to the interminable hearings that have had Wall Street analysts and technology reporters gnashing their teeth for what now feels like a couple of decades. In devastating detail, Jackson set forth an analysis of Microsoft's competitive practices that could only have seemed like a very, very bad dream for Redmond, Wash., lawyers. Still, we're far from closure on this story. Will the two sides reach a settlement? Will Microsoft actually be broken up? Or, worst of all for the Lords of Windows, will the company be forced to give up its all important source code to the greedy scrutiny of the general public and a host of salivating competitors? Check our wrap-up for 2000 -- there's an outside chance we might know the answers to these questions by then.
We may be stating the obvious, but Internet mania this year reached ludicrous heights. Venture capitalists disbursed a boggling $9.67 billion to thousands of Internet start-ups in 1999, and the resultingly flush marketing budgets led to an absurd array of pricey TV ad campaigns -- $2 billion worth of indistinguishable ads, according to some estimates. By mid-year, you could not watch a sitcom, or even pick up a copy of the New Yorker, without being solicited to visit some site you'd never heard of. As the venture capital trickled down (or would that be up?), celebrities, including drag diva RuPaul, made out like bandits as, um, spokespersons for the identity-desperate dot-coms. Even technology journalists were invited to share the wealth -- through a deluge of unbidden PR gifts.
Other consequences: Every news magazine is dedicating half of its coverage to what has been dubbed Riches.com, and wannabe boy billionaires are flocking to Silicon Valley in droves. Worst of all for locals, the cost of living in the San Francisco Bay Area has skyrocketed while, some say, the quality of life has plummeted.
Free software worth billions
In 1999, free software -- software for which the underlying source code is by definition always publicly available and free -- became big business. Before Red Hat (the leading U.S. distributor of packages of Linux-based operating systems) went public in August, you could still dismiss the argument that there was money to be made in free software as so much hype. You would have been wrong, but at least you wouldn't have been laughed out of cyberspace.
But by mid-December, Red Hat's stock market valuation was hovering around $15 billion, and new free software-related IPOs from Andover.net, a publishing company, and VA Linux Systems, a hardware vendor, were rocking the market. VA Linux went so far as to set a new record for the best first-day performance, gaining 698 percent in its first day. Call it a herd mentality on the part of investors or call it day-trader hysteria, but you still can't ignore the reality. Based on stock valuations alone, companies like Red Hat and VA Linux now have the wherewithal to purchase established players in the technology marketplace. Could there be any better demonstration of how passion can affect the economy? These stock market valuations are fueled in part by the belief of thousands of small investors that Linux is well on its way to world domination. Their willingness to pony up their cash is making that belief come true, provided Red Hat and VA Linux use their market clout wisely.
How now, Mr. Dow?
The Dow Jones industrial average started the year at a shade over 9,000. Then for 58 seconds on Mar. 16 it broke 10,000. The euphoria was quickly stamped out by talk of a psychological barrier that was holding traders back from the five-figure mark. Whoever thought investors were afraid of a little bull couldn't have been more wrong. They rallied and the market now looks poised to end the year somewhere over 11,000. We used to think that what goes up must come down. But this year, to be really au courant you had to embrace the notion that what goes up will just keep going up forever. Or, at any rate, nearly forever: "Dow 36,000," one of the year's most influential business books, argued that the Dow will hit a plateau -- years from now, at 36,000. But remember this: Even the authors don't have all their money in stocks.
How to get rich, circa 1999: Quit your job; get an account with a cheap online brokerage like Datek; buy 500 shares of stock in a company that you know nothing about; sell them an hour later; repeat five times a day. It seems that thousands of America's best and brightest have given up on professional careers to turn their extra bedrooms into gambling parlors. The good news is that online trading and lower commissions have made speculating in stocks a lot cheaper and easier for individual investors. That's the bad news, too. When you're wheeling and dealing with tens if not hundreds of thousands of your own dollars, it doesn't take much to bring on your own private Black Monday.
The day-trading bogeyman has been blamed for everything from increasing volatility in the markets to (yes) mass murder.
(In July, Mark Barton opened fire in the Atlanta day-trading office where he apparently had lost a good deal of money.) Day trading has also created its own gurus and celebrities, like New York's Tokyo Joe. Get past the hype, however, and you find that the real danger of the day-trading craze might be that, as study after study has shown, the more you trade, the less likely you are to make money.
Valley of the vanities
If Silicon Valley is like Florence in the Renaissance, shouldn't there be some art and literature to go with all those chips and stock options? Well, there is, sort of. In 1999 we saw the glimmerings of a new literature of the valley, with books like Po Bronson's "The Nudist on the Late Shift," David A. Kaplan's "Silicon Boys" and Michael Lewis' "The New New Thing" all struggling to illustrate the Silicon Valley state of mind. Bronson preaches that Silicon Valley isn't just about money, but found himself in the minority (alas, except for a brief reference in the introduction, we never did get to read anything about the "nudist"). Kaplan and Lewis, by contrast, think that money, in all its dirty glory, is exactly what Silicon Valley life is about, and took palpable pleasure in cataloguing all the permutations of unadulterated greed.
End speed limits
Here is one iron law of the Network Age: Content expands to fill the available bandwidth. No, scratch that. Content expands faster than the available bandwidth. Ever tried to look at some of the newest shopping sites on a pokey home connection? No wonder people are doing more and more of their Net surfing from work. But in 1999, high-bandwidth home connections blossomed. Excite@Home, the leading provider of high-speed access through cable lines, saw its subscriber numbers quadruple, while all the major telcos began offering high-speed access over phone lines. Some, like SBC, sharply cut prices at the beginning of the year, promising cable some serious competition. No one seems to know whether cable or DSL is better, but consumers with either are loving goodies like streaming video and always-on connections.
And there was more good news for consumers: AT&T, now the country's biggest cable service provider, went into 1999 saying that if consumers wanted to get high-speed access over their cable lines, they'd have to do it through Excite@Home, the Internet service provider partly owned by AT&T and other cable companies. Now AT&T -- faced with pressure from local governments around the country -- has decided that open access might not be such a bad idea after all, and has even signed a deal that will let one big ISP, Mindspring, start providing access over AT&T's high-speed lines in a couple of years' time.
Bye-bye beige box
Tangerine? Blueberry? What hue smells best to you? This was the year of color computing. Yeah, we know the iMac hit shelves in 1998, but it was in 1999 that the rest of the market caught on to Apple's ingenuity and began to redefine the computer. The market was thick with iMac copycats -- like the all-in-one computer and monitor in bright hues from eMachines and Future Power that prompted lawsuits from Apple. But even staid corporate computer providers IBM and Dell were touched by the rainbow: IBM turned out an i Series of the ThinkPad, with a choice of seven cover colors. Dell did it up with the Web PC -- a sleek two-tone machine with round edges.
While geeks went nuts for the slim silver Sony Vaio, computer makers plied kids with pink Barbie computers and blue Hot Wheels computers. Of course, we also saw heaps of Nokia's 5100 series cell phones in lime green, cherry red and day-glo orange; and just as 1999 was coming to a close, we got a peek at the Handspring Visor, a handheld organizer running the Palm OS, in a host of vibrantly colored translucent cases. We love the colors and groovy shapes. Now we want to know, what's up with the promise of computer appliances?
If you don't know who Mahir is, you must have had your head under a rock for most of November. The home page of the Turkish Stud was the oddest Net phenomenon of the year, as millions flocked to this anonymous accordion player's Web site to giggle at pronouncements that he "likes sex" and wants to "invitate" women to stay at his home in Izmir, Turkey. It was eventually revealed that the site had been created by an anonymous prankster, but no one seemed to mind, not even the ping-pong-playing Mahir. At last check, Mahir had made appearances in Time and People and was making a two-week tour of the United States, compliments of an Internet company, of course. While his fan pages multiplied like rabbits, his Web site now serves as a pulpit advocating world peace.
Worlds of elves and ogres
Last year, Ultima held the title of most innovative online role-playing game; this year, bored gamers were auctioning off their Ultima characters on eBay -- sometimes for thousands of dollars -- and buying EverQuest instead. By the end of the summer, Sony had convinced hundreds of thousands of players to spend their free time cavorting about as elves and druids in the online land of Everquest. Everquest, in turn, is now being challenged by the release of Asheron's Call, Microsoft's equally massive world of knights and ogres.
Meanwhile, Sega returned from near defeat in the console wars with the release of its own, network-capable game machine. The Dreamcast, which boasts fancy128-bit graphics and an internal modem, was subject of one of the most hyped product launches in history, including a $100 million marketing campaign. The money was apparently well-spent: Barely two months after launch, Sega had already sold a million units, putting it in good shape to compete against the upcoming next-generation consoles from Sony and Nintendo.
Gamers under fire
Before we knew much of anything about what happened at Columbine High School, we learned that killers Eric Harris and Dylan Klebold were avid gamers -- fans of Quake and Doom. This, and a Web site left behind by Harris, sent the media into paranoid paroxysms about how the Internet and video games were breeding violence in America. The Clinton administration jumped in with a summit on teens and violence, dissecting activities like gaming to find their correlation to a plague of playground massacres, even as the gaming community rushed to defend its play. Could the millions of gamers happily shooting it out with animated foes and blowing them to pixelated smithereens really be mass murderers in waiting? they asked. Isn't it possible that blowing off steam through these violent fantasies could actually be good for you?
The debate raged on, but when dial-a-quote "experts" linked violent games to violence, we found that studies didn't back them up. A few rueful gamers reconsidered their love of killsport games, and some game makers toyed with self-regulation. But by year's end -- and after a spate of killings by people who may never have had their trigger finger on a joystick -- the political pressure on gamers seems to have dissipated into the same thin air that brought on the initial panic.
We heard hardly a peep from the Chicken Littles of the world, crying about the sky falling and investing in survival gear to greet the year 2000. That was last year's trend. Instead, in 1999's age of "money money money," we were treated to the smug chuckles of Y2K profiteers, eagerly anticipating a global systems meltdown. Their plan? Convert all your stock and real estate to cash before New Year's Eve, then sit back with a little bubbly and toast the Millennium Bug as it wreaks havoc on power grids and incapacitates manufacturing systems. Once the Fortune 500 has been properly bound and gagged by the ensuing madness and investors have run screaming from the market, you can leisurely pick through the blue-chip stocks going for bargain-basement prices. Consider yourself charitable, they say, when you hand over a couple of thousand greenbacks for an Atherton, Calif., mansion; that ex-millionaire has nothing to eat but the memory of a luscious electronic stock portfolio, converted into a jumble of ones and zeros.
Those more intimately familiar with the systems at risk profess more confidence. Still, scads of programmers and tech execs --including Microsoft's Steve Ballmer and Cisco's John Chambers -- promise to ring in the new year at the office, just in case they're wrong when they say their systems are ready for Y2K. The cops will be on red alert too, to defend an otherwise functional world from kooks who might try to hasten the apocalypse. Most folks, however, say they'll be home for the holiday -- maybe even reading a Y2K romance novel by the fire.