Remembrance of dot-com idiocy past

At least Enron and WorldCom went down because of greed. But as James Ledbetter's "Starving to Death on $200 Million a Year" reveals, the Industry Standard pissed away a fortune out of mere carelessness.

Published January 10, 2003 8:32PM (EST)

An ancient Greek playwright, you might think, could have had a lot of fun with the story of the rise and fall of the Industry Standard.

You've got your obvious case of self-damning hubris: founder John Battelle and his dream of global media domination. You've got an especially painful episode of vengeful Furies hounding your ass: Rarely indeed in this world does the founder of a magazine, in this case Battelle, fail twice (first at Wired) at storming the heights of Mount Olympus (usually you only get one try, and then you're done). You've even got that primal high note of tragic denouement -- a parent killing the child. Just as the obstinate and puritanical King Pentheus ended up murdered by his own mother, Queen Agave, who had been driven mad by the god Dionysus, so too did IDG, the Industry Standard's corporate backer, assassinate its own spawn. And even worse, in an act of humiliating revenge that is just so like a Greek deity, IDG rubbed salt in the Standard's wounds by purchasing the remaining assets of the magazine at a bankruptcy auction. Euripides would have been proud.

But if not a classic to grace the amphitheater at Corinth, well then, at least a riveting TV movie, right? Look at the numbers! In the year 2000, the Industry Standard grossed $200 million in revenue, and boasted more advertising pages than any other magazine ever, in all of publishing history. But less than a year later, the magazine's subscription renewal rates had plummeted to an astounding 35 percent -- a figure lower than anyone in the publishing world could remember seeing. And then in August 2001, it was over: The Standard ceased publication. How could such a fall from grace happen? In the summer of 2001, as the new economy shuddered to a halt, the question begged for an answer. And ever since, there's been a nagging puzzlement: Could a close examination of the Standard's entrails explain the delirium that swept over Silicon Valley, Wall Street and the publishing world?

Although he's not a writer with the chops of Sophocles, James Ledbetter, a former media critic for the Village Voice who was plucked to run the Standard's New York office and then head its ill-fated attempt to start a European edition, sounds at first like a good choice to handle the postmortem. The Industry Standard, under the leadership of editor in chief Jonathan Weber, produced some of the better journalism to be found in the plethora of new-economy mags that polluted the magazine landscape at the turn of the century. So who better to chronicle its own meteoric circuit than one of its own journalists? Neither a self-serving dot-com booster nor the even more annoying opposite, a told-you-so naysayer à la Michael Wolff, Ledbetter spent his year of post-Standard unemployment summing it all up.

But Ledbetter doesn't quite deliver the goods. Part of the problem is his location at the periphery. The story of the Industry Standard is both physically and psychically a Silicon Valley/San Francisco Bay Area story. As a writer at Salon, when I drove to work one day across the San Francisco Bay Bridge and saw, running across the Standard's giant downtown electronic billboard sign, a headline announcing a round of Salon's own layoffs, it was like a punch to the solar plexus delivered by the heavyweight champ: It meant something. Likewise, when the news came that the billboard itself was shutting down, all of San Francisco had to concede that the boom was really, truly over. But as a New Yorker, parachuting into town every now and then, Ledbetter isn't able to effectively evoke the visceral sense of how crazed the technology media world became in the late '90s, especially in California.

Even worse, while all hell was breaking loose in the spring and summer of 2001, Ledbetter was in London, an awfully long way from the scene of the crime. The flaw could have been remedied if the book was reported from more of an outside perspective, but Ledbetter chooses instead to tell a mostly personal story -- the rise and fall of the Standard as Ledbetter saw it, at the time. Thus, at the most dramatic period in the meltdown, the narrative in the book is taking place 6,000 miles away, with chapter after chapter focusing on extraneous minutiae, such as a libel suit that never actually materialized in the U.K.

"Starving to Death on $200 Million a Year" is also a title that promises more of an edge, more of a sarcastic, Michael Lewis-style skewering. But this is no "Liar's Poker" or even "Burn Rate." Ledbetter is a capable writer, but his tone is breezy, treating both the important and unimportant detail in the same monotone. There is little drama.

The lack of excitement isn't Ledbetter's fault. The story itself is the culprit. In 1999 and 2000, to those who lived and worked in it, the dot-com explosion and its attendant media frenzy seemed like a huge, world-changing story, whether one was a fan or a detractor. But in retrospect, while the rise of the Internet was truly earth-shattering, the economic frenzy that surrounded it was just so much froth, an excuse for public relations companies and advertising agencies to suck from the venture capital teat. The fact that the Standard sold 7,000 pages of ads in 2000 to a horde of companies that didn't even exist a year later isn't a tragedy, and it isn't even a farce.

In light of what has happened since, it's hardly more than a footnote. When the news of the Standard's bankruptcy in August 2001 hit the media world, yes, it was startling. But that was before Sept. 11, before Enron, before WorldCom, before the public embarrassment of Wall Street's most famous stock analysts or such crimes against nature as Harvey Pitt's appointment as SEC chairman. Today, less than two years after the Standard's demise, "The Short, Absurd Life of the Industry Standard" (as the subtitle to Ledbetter's book reads) has lost much of its ability to shock. It's as if Oedipus was revealed to be a used car salesman forced by a malign destiny to drive one of his own clunkers. Big deal. At the end, the Standard was a badly run business that published competent stories about a great many badly run businesses. There's nothing to see in these entrails except a mess.

There was a time, somewhere in late 1999 or 2000, when I personally was receiving multiple FedExed copies of the Industry Standard each week, as were several other reporters in cubicles next to me at Salon. Meanwhile, the same mail that brought the Standard brought boxes and boxes of promotional goodies from the very companies that were advertising in the Standard. It was a deluge of meaninglessness.

Most of the promotional material was thrown out. And, sad to say, most of the copies of the Standard joined the same pile of unread magazines where Business 2.0, Red Herring, Upside, eCompanyNow, and Wired were accumulating. One problem was that the fatter these magazines became, the more intimidating they were to read. But a deeper challenge was that, even for those of us whose job it was to cover this world, the details of each new start-up with a nutty new business model just weren't that compelling, no matter how professional the journalism was.

For example, nobody covered the ongoing consolidation of the online retail pet supply sector better than the Industry Standard. The Standard was (usually) critical, broke more stories than its competitors, and delivered a higher quality of analysis. (Disclaimer: I wrote one freelance story for Grok, a spinoff of the Standard.) But who, outside of day-traders, or truly obsessive animal lovers, really cared about the question of which of four different start-ups was most likely to emerge as the Wal-Mart of cat toys and doggie-door accessories?

And who at the Standard thought I needed more than one copy a week of the magazine expedited to me ASAP from a company whose headquarters were just a few blocks away? I won't pretend that during that particular period Salon was a model of parsimonious financial management -- we were all trying to grow as fast as we could, and spending vigorously was the order of the day -- but the scale of our own operations was much, much smaller. Just the real-estate lease obligations that the Standard had entered into by the time of its demise are mind-boggling. As Ledbetter writes, finances were not John Battelle's strong point.

One can only imagine what the corporate bean counters at IDG made of the balance-sheet nuttiness engendered by the Standard's lack of bottom-line accountability. Much has been made in the press of the culture clash between IDG, a longtime publisher of information-technology trade magazines, and the freewheeling journalists at the Standard. Depending on whom you talk to, IDG either played an ungenerous role of stolid penny pincher raging with envy at the Standard's high profile, or the Standard sowed the seeds of its own failure by arrogantly acting as if it was better than its mundane trade press counterparts. Clearly, there was no love lost between the two counterparts.

This clash is a major part of the narrative in "Starving to Death." As Ledbetter writes in his preface: "Did The Standard cause its own demise, through lavish overspending and poor financial management? That is, was it an overdose? Or did the death of the publication come about because a onetime partner, IDG, decided that if it couldn't own The Standard then no one could? Was it a murder?"

The case for murder would make a compelling story, and as I read through Ledbetter's account, I found myself marking up each page on which IDG was mentioned, matching it up with what I had heard from my own contacts in the industry, and trying to puzzle out the truth for myself. But by the end of the book, the question lost its relevance. Sure, IDG could have done more to keep the Standard alive, and there are some interesting details about flimflam with tax liabilities that the various corporate partners owed each other that don't make IDG look very good. But, even if the Standard had been well-run from a financial standpoint, which it most assuredly was not, one could also argue that IDG, with decades of experience tracking the ups and downs of the technology sector, could see quite clearly that the Standard was a money pit that would not survive the coming technology media recession, in any form.

The Standard's lack of respect for budgets (or, for that matter, its lack of budgets to begin with), as documented by Ledbetter, is eyebrow-raising. Two hundred million dollars is quite a lot for a magazine to piss away in one year but piss it away it did. And when the first indications of a storm on the horizon started to appear, the Standard was still in full-throat expansion mode. No brakes were applied until it was far too late.

Perhaps the most annoying aspect of the fiscal-management part of the Standard's failure is that there was no good excuse. At least with Enron and WorldCom we know why fraud occurred -- because executives were criminally greedy. That doesn't appear to be the case with the Industry Standard. Sure, Ledbetter recounts the requisite episodes of luxurious corporate retreats and business-class flights and expensive meals and parties, but the sin here does not appear to be one of venality but rather of carelessness.

And it's hard to care much about carelessness. As one reaches the end of the story, it's difficult to drum up much anger at any supposed maltreatment by IDG. Instead, the predominant feeling is of annoyance. Ledbetter bridles at the obvious take that so many press accounts of the Standard's ill end followed: the chronicler of dot-com excess brought down by its own dot-com excesses. But it's inescapable. With its sponsored rooftop parties, its FedExed complimentary copies, its conference businesses and doomed venture into the arcane world of customer relationship management, the Industry Standard was just as much perpetrator as it was victim.

And all the while, there was, and is, a really big story going on. The emergence of the Internet and the rise of digital technology continue to have an extraordinary impact on commerce and culture, Hollywood and government, individual lives and mass movements. The world will never be the same, and there are a lot of good stories (and books) still to be written on the topic.

Ledbetter undoubtedly is aware of this, but the inherent amazingness of the Internet does not come through in "Starving to Death." There is a telling moment early in the book where he describes going to a party in 1998 held to celebrate the purchase of a free home-page site, Tripod, by Lycos. After hobnobbing with a "stylish, attractive crowd" for several hours, and boggling at the dollar figures being thrown around by various in-the-know digerati, he goes home and has something of a crisis.

"As I tried to describe the evening to my girlfriend, I was practically in tears. I could hardly articulate why I was so upset, but it boiled down to fear -- fear that I was losing touch ... Here were enormous sums floating around to create a medium I didn't understand -- but my younger, more energetic colleagues seemed to ... The Internet had invaded my life."

The Internet? Lycos' purchase of Tripod for $50 million-plus in stock wasn't the Internet. It was a joke: a second-rate search engine company buying a mediocre "community" site. In retrospect, it was part of the beginning of the end -- the point at which media attention began increasingly focusing on the deals, the IPOs and the mergers and all the rest of the dot-com bubble, instead of on the underlying technocultural trends and their implications for how we will live our lives in the future.

Which will end up being more important? Take a guess. All those ad pages and all those ad dollars, and yet, as Ledbetter points out, in the end a complete set of Industry Standards was sold on eBay for $20.50. Meanwhile, according to the Wall Street Journal on Tuesday, 100,000 Americans are signing up for broadband access to the Internet every week. That's kind of exciting, isn't it?

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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