Dot-com party madness

Forget about return on investment. Bay Area tech companies spend $1 million a month on food, drink and music in exchange for "buzz."


--

Shares

Damien Cave
April 25, 2000 8:00PM (UTC)

Jessica Crolick downs her free drink, grabs a black fleece jacket from the table and darts out of the dot-com party at the San Francisco Museum of Modern Art. She hops into a van with four strangers, who are on their way to another dot-com bash across town. The conversation moves from work to apartments, but conspicuously absent from the chatter is Digital Island, the digital content delivery company that spent over $50,000 for food, drink and fleece to fete its new logo and announce a partnership with Apple. In fact, by the time Crolick and her posse reach the second party -- a tropical-themed and more raucous affair hosted by Beenz.com, an online currency company -- few remember the first company's name, and no one knows or cares what either company does.

"I'm just here to see what goes on at these things," says Crolick, 25, an account executive at SFInteractive, an Internet marketing firm.

Advertisement:

She's hardly alone. Dot-com valuations may have withered, but the enthusiasm for extravagant dot-com parties hasn't, and party budgets show no signs of being trimmed. In any given week, technology companies throw 15 to 20 parties in the San Francisco Bay Area. On average, each costs $30,000 to $50,000, according to party planners and venue owners, although the $250,000 blowout is hardly rare. In March, for example, Salesforce.com, an online sales automation service, and iCAST.com, which offers streaming media tools and content, each ran up tabs greater than $200,000, entertaining more than 1,000 guests each.

Add in a dozen more-modest soirees -- most all of them visited by people without an invite -- and what you've got is a $1 million monthly tab for booze, food and music, all of it paid for by the new economy. Never before, not during the textile, transportation or steel booms, have companies spent so much money on people who don't work for them, and who often have only a passing interest in the company, says Nancy Koehn, a business historian at Harvard Business School.

This week, Elvis Costello will play at a bash hosted by AskJeeves, while a collection of works by Picasso never before shown in the United States will be shown at a much more upscale Hewlett-Packard-sponsored party. Such decadent affairs are in keeping with current party expectations. A Respond.com party late last year featured performers from Cirque du Soleil, and in December, ETour flew the accordion-playing Net celeb Mahir in from Turkey to party with scantily clad Rouze.com models and San Francisco dot-commers.

Meanwhile, Salesforce.com, which provides Web-based sales management tools that it says will replace sales force automation software, threw a 1,500-person party in March, on the night of a competitor's convention. As if the party's headliner, the B-52's, were not enough, SalesForce.com arranged for a roomful of carnival games and a group of caged actors playing imprisoned software salesmen. To drive home the company's "the end of software" tag line, SalesForce.com had staged a "protest" outside a conference held that day by its rival Siebel Systems, maker of sales-force automation software. It filmed "anti-software protestors" shouting and holding software-damning placards, then aired the footage on TV screens at the party.

Extravagant parties thrown by technology companies show no sign of letting up, says Heather Keenan, president of Key Events, a San Francisco events planning company. "My conservative estimate is that it will go on for 10 more years," she says.

"It's simply become part of the way we do business," says Craig Newmark, founder of Craig's List, an online community serving Bay Area residents, and a regular on the tech party circuit.

Advertisement:

Some might consider this cause for joy. Free booze? Free concerts? I sure don't mind knowing that companies are willing to foot my entertainment bills. But what do these companies really gain? Are they wasting their money? Do the benefits justify the cost?

"Yes, absolutely," says Glenn Jasper, vice president of communications for New York's Beenz.com, which "pays" people to visit its partners' sites using its own "currency," called "beenz," which can be redeemed for everything from CDs to hotel accommodations. All the party-hosting companies I talked to agreed, citing buzz as the primary benefit: guest lists that swelled (from 300 invites to 1,400 RSVPs in Digital Island's case), conversations with reporters and positive e-mails received the following day. (And yes, a mention in this story could count as evidence of a party's impact.)

Even venture capitalists who fund these companies seem to think lavish parties are a reasonable corporate expense. Alex Cohen, a consultant for the venture capital firm Kleiner, Perkins, Caufield and Byers, says parties are a "really important way to generate attention."

But Beenz.com and other companies that threw big parties a month ago can produce no evidence -- increased sales, new partnerships, new hires or better retention rates -- that the parties were a success. Meanwhile, veterans of the Silicon Valley scene say the parties have greatly diminished in their usefulness for networking. Some business does indeed still get done at these functions, but not nearly as much as in the past, says Oliver Muoto, co-founder of Epicentric, a portal infrastructure software company, who six years ago started a tech party list. Like the glut of dot-com television advertising, there is now too much similarity: too many parties at too many of the same places, all of them peopled in large part by the same crowd -- including many freeloaders and people like Crolick who are there to check out people, not products.

Advertisement:

"Originally these events got the attention of decision makers -- the press, venture capitalists and other investors," Muoto says. "But the popularity of the Internet gold rush has led these parties to grow out of control. These companies spend a whole lot of money on marketing, but end up with people who just want to eat and drink for free."

Indeed, in the words of Declan Fox, director of business development for Sony Music, who estimated he's been to 30 parties in the past year: "No one cares who threw the party, as long as it's open bar ... They started out on a networking level, then they turned into PR machines," says Fox, holding a drink at a recent party hosted by WiredPlanet. Yelling over a tune from the Sugar Hill Gang, he adds: "Now it's freeloaders and all their friends. If you ask people the next day who this party's for, no one will know."

Clearly, it hasn't always been this way. Historically, companies may have treated their employees and clients to dinner, golf and other perks, but never have they included such a broad public -- footing the bill for people with whom they have little or no relationship. Executives pampered themselves, says Koehn, the Harvard Business School professor, creating elite networking groups like the Lunar Society of 18th century industrial Britain, or the Duquesne Club, a fraternity of Pittsburgh barons.

Advertisement:

Even the most recent boom, the go-go '80s, didn't include the same garish outlays of cash. The Gordon Geckos of the world may have spent time at the Racquet Club or the Metropolitan, and it wasn't uncommon to find SoHo restaurants jammed with loudmouthed young brokers whose companies entertained them with elegant entrees and shots of tequila. But Wall Street never thought to invite half of Manhattan.

And until recently, no one in the Bay Area would have thought of it either. Before the big money rolled in, companies tended to sponsor little more than the annual Christmas party and young people went to nightclubs, not networking events. Tech types who wanted to meet up with their peers went to industry conferences like Comdex or PC Forum. Of course, there were corporate parties before the Internet gold rush, but Keenan, a 10-year veteran of the party-planning industry, says they took place half as often as today, cost one-third (or less) of today's events and usually entertained fewer than 150 people -- people who might have a direct effect on company business. The parties of the past tended to "err on the conservative or upscale side," says Susie Marino, founder of Marino & Associates, a public relations and marketing firm. There were more prawns and jazz trios, she says -- fewer DJs and flashing lights.

Still, people like Muoto, Marino and others did find them useful, downright important. They went to every one, even started lists to keep friends and contacts apprised of the meeting-and-greeting opportunities.

Advertisement:

"Three years ago, industry events weren't prolific like now, and with so few events it was important to be there for networking purposes and to talk shop in a more relaxed environment," Marino says. "I wanted my friends to have this opportunity and thought it was worthwhile."

The worth started to wane when dot-com stocks started to boom, making lavish launch parties as common as nonsensical domain names and quick IPOs. There was no seminal event, no single outlandish kickoff that launched the trend, but by early 1999, the pace had clearly quickened. Party planners like Keenan were suddenly doing as much business with dot-coms as with larger established clients like Oracle or Microsoft. By the fall, venues like Mercury and Club NV, two nightclubs in San Francisco's South of Market District, were getting daily calls from dot-coms, all looking for room to host a party. Mercury shut down a month ago because of a dispute with its landlord, but other locations remain busy. The Bubble Lounge, in San Francisco's Financial District, books as many as three parties a night in its different party rooms. Foreign Cinema, a hip restaurant in the Mission District that shows international films outdoors for patio diners, instituted a policy of not hosting a party for less than $30,000 -- but that didn't deter the flashy dot-coms.

"The parties have really accelerated far beyond what they were," says Michael Whalen, director of sales for Club NV and three other venues in San Francisco. "My business has doubled or tripled. Now, we have a dot-com party here just about every night of the week except weekends."

It's become a whirlwind, says Hillary Adams, events manager for the San Francisco Museum of Modern Art. Of the museum's 105 functions last year, 38 were paid for by Web companies, among them Guru.com, SmartAge.com, Xoom.com, WholealePortal.com, GoToMyDoc.com and Epiphany.com. Keeping track of each one has proven virtually impossible. "It's unbelievable," Adams says. "I used to have a pretty good handle of the corporate business, but now with every other event I'm forced to ask who are they and what they do."

Advertisement:

The more, the merrier

Not every company goes over the top; there are still some small gatherings. But each night seems to have its hot spot, the place with lines outside the door. Last Thursday, the busiest night of the dot-com party week, it was Napster, the maker of the controversial MP3-swapping software and defendant in several lawsuits; the week before that it was Luminant, an e-business solutions company that has 18 employees in San Francisco but entertained 800 guests.

One reason for the crowds is that it's easier to get in than ever before. When parties were rare, Marino and others say, companies screened guests. But these days at the average dot-com party, many of the folks wolfing down canapes and sloshing their drinks never even got an invite. Often, no one checks to see if you're on the guest list.

If they do, "Just say you're from a magazine who they really want there, like the Industry Standard, and they'll let you in," says Mark Sikes, an editor at PC World and regular partygoer. Other tricks include impersonating high-level executives with their business cards, and claiming to be CEO of a nonexistent dot-com. Getting on the guest list isn't that hard anyway; most invitations are electronic, so invitees pass them on via e-mail or post them to Web sites and anyone can RSVP.

Advertisement:

There's a whole bevy of party sites that offer lists of high-tech events and "mixers." Muoto and Marino, who've run informal lists for years, have scaled back, but now there's YABA.net, the DrinkExchange, WorkIt and SFgirl.com -- which has over 2,000 members and offers party listings, party reviews and a bulletin board for messages. The A-List, run by Valerie Britt, a high-tech recruiter, has grown from 180 subscribers in 1998, when most of the listings related to charity, to 8,000 subscribers. Crolick used it to find the Digital Island and Beenz.com parties.

A lot of companies know that their parties are swollen with guests they didn't invite, but no one seems to mind. Digital Island, Beenz.com and Luminant all raved about how their guest lists grew, doubled, even tripled after the invites went out. "We sent out 300 invites and had interest from over 1,000," gushed Jennifer Keller, director of public relations for Luminant's Seattle office.

Interested, yes, but in what? Not necessarily the company. Of the 100 or so people I've talked to at parties in the past month -- hosted by Digital Island, Beenz.com, Salesforce.com, Business 2.0, Military.com, Luminant, WiredPlanet, Napster and others -- the vast majority didn't show much interest in who was footing the bill.

"I've heard of Napster," said Suzannah Saidy, a merchandising assistant for the Gap, who was at last week's Napster affair at the Bubble Lounge. "To be honest, I'm here to meet people and have a good time."

Advertisement:

There are some valid reasons for "the more, the merrier" corporate ethos. Recruiting hovers near the top of the list. "One factor that overrides all this [seemingly outrageous party spending] is that the labor market is so tight," says Paul Tiffany, a management professor who splits his time between the University of California at Berkeley and the Wharton School at University of Pennsylvania. "You could very easily see this as just another variation on running an ad in the paper, or holding a recruiting event."

Indeed, that was the logic of Luminant, which competes with Scient, Razorfish and other e-business consulting companies. The party at Club NV, adorned by 3-foot-tall blocks of cheese and make-your-own sundaes, was designed "to introduce Luminant to the community in a forceful way," says Guillermo Marmol, CEO of the Dallas company, but it was also a tool to woo job candidates. "We're hoping to hire about 60 more employees by the end of the year," Marmol says. "This is a way to let people get to know the company and what we're all about."

But it's not always just the host companies that are trolling the parties for fresh talent. At a party for music site WiredPlanet, (notable for its sparse offering: one drink ticket and no chow), I ran into Ralph Marx, founder and president of Acteva, a San Francisco activities-planning portal, who was on the lookout for "talented new employees."

Sitting on a furry couch in Club NV's VIP lounge, a boa draped over his blue sport coat, Luminant's Marmol, with his slight Texas drawl, pointed out that San Francisco's form of recruiting/networking didn't match the rest of the country's. "It's not representative of what we do in New York or Dallas," he says. Beenz.com and other companies disagree, having thrown parties in other cities. Marmol also distinguishes himself with his belief that a party's benefits could be concrete. "The real test of the party will be in the follow-up," he says, "whether or not we get at least 10 people to join the company."

Advertisement:

Other host companies aren't as concerned with tangible results.

"Our party was a success in terms of who we got to come [reporters from prominent business publications] because it was very well done, but the key was that it was thematic," says Marc Benioff, CEO of Salesforce.com. "We wanted people to remember it was Salesforce.com and it was the end of software. And that's what we did."

Without extras like the faux protest and the B-52's, the party wouldn't have achieved its goal, he adds. "A party alone is probably a bad idea," he says. "There's a lot going on right now in terms of new companies getting started, and what every one of them needs to think of is a breakout strategy. Everybody needs to look for a way to get above the noise level. An event can help, but it can't just be an event, it has to be a whole strategy."

These days, party veterans like Sikes, the editor from PC World, say they don't always even visit the Web site of the company whose free drinks they've been sipping.

Advertisement:

Companies need to "do something smart," says Newmark, of Craig's List. "They need to deliver a message briefly and creatively. Otherwise, they're wasting their money." Newmark says the parties need not be expensive to be successful, but spending more than $200,000 seems to be one of the more common permutations of "smart." That's what Acteva, iCAST, Salesforce.com and others have done, and it works, according to Benioff.

Marx, the president of Acteva -- which brought 2,000 people to Treasure Island in December for a $200,000 party to announce its new name -- agrees. More money, more people and more extravagant ideas are definitely the way to go. It's no longer enough to just "get a few hundred people together and give them a drink," he says, glancing around at the paltry WiredPlanet party.

Indeed, it's easy to get sucked into this line of thought, especially if you're part of a new company trying to also "get above the noise." But if you step away from the bar, the flashing logos, the DJ and the weird mix of young, old, geeky and hip, what you may realize is that buzz doesn't necessarily pay the bills. After all, if you go to enough of them, these parties become boring: the same people, drinking the same drinks at the same places. The only thing different is the company footing the bill.

"The general public is getting sick of the everyday launch party," Keenan says. "So companies are wanting something different" -- as long as it's big. Companies with 400 employees and companies with 40 employees all want to throw parties for 1,000 people, she adds. Instead of scaling back in response to party saturation, they're pushing forward.

But it's not clear that many of them are thinking about the impact that being different might have on their bottom line. A month after enjoying their food and drink, I asked Salesforce.com, Digital Island and Beenz.com for proof that I wasn't the only one who benefited: Were there partnership deals that formed at the party? Increased sales that followed? Did employee retention rates get better? What about new hires?

"We didn't really go out with goals like that in mind," said Kari Moe, director of corporate communications for Salesforce.com.

"These things are really hard to gauge," said Irwin Greenstein, Digital Island's director of public relations.

"The sense is that it's easier for us to get in the door [with potential partners] because of the parties, but it's very hard to measure these things," said Jasper at Beenz.com.

Tiffany, the management professor, says these companies view the parties as advertising. "There aren't methodologies to gauge their success," he says. And in the absence of figures, or an attempt to find them, the trend is riding high on its own fuel; parties spawning parties. After the Salesforce.com party, for example, In-Vision Communications, the
Walnut Creek company that put it on, received calls from three other
companies wanting something similar. In-Vision produces events, video and
new media; the company is not in the party planning business, having done
the party for a former client. But other companies wanted them anyway.

Can this exuberance last? If you listen to party planners like Keenan, or folks new to the party circuit and not yet jaded by the standard-issue $50,000 evening, the answer is yes. But even those who've been around for just a few months of dot-com partygoing seem to know better, often viewing these parties as snapshots of a peculiar moment in time, when dot-com money grew on venture-capital trees.

"It doesn't feel grounded or real," says Crolick of all this excess just before going to the WiredPlanet party two weeks ago. "I kind of have this feeling that I'll talk about it later in life. I go because these parties are such an example of our times: gluttonous, full high expectations, exciting and a lot of fun. But at the same time, it lacks some kind of meaning and responsibility."

Tiffany figures the party scene will get even more outlandish before it faces a correction like the one currently toying with the NASDAQ. "In America we do things until it's absolutely at the stupidest, most absurd level," he says. "You probably won't see these parties stop until you see a bunch of homeless drunks getting in and drinking alongside the regulars."


Damien Cave

Damien Cave is an associate editor at Rolling Stone and a contributing writer at Salon.

MORE FROM Damien Cave

BROWSE SALON.COM
COMPLETELY AD FREE,
FOR THE NEXT HOUR

Read Now, Pay Later - no upfront
registration for 1-Hour Access

Click Here
7-Day Access and Monthly
Subscriptions also available
No tracking or personal data collection
beyond name and email address

•••


Fearless journalism
in your inbox every day

Sign up for our free newsletter

• • •