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This is, as speakers at an Industry Standard conference last summer dubbed it, an "era of permissive capital." The offspring of permissive financial parents tend to lack self-control; they want instant gratification. (Their VC parents often want it, too, in the form of fast returns.) The life plan all these companies have adopted is an accelerated version of the one the Silicon Valley venture capital world pioneered for technology companies: Fund a start-up, bring a product to market fast (18 months in the old days, six months or so today), see if it sells, and then cash in if it's a success and bail out if it's a flop. That model made sense for chip innovators, game developers and storage-device manufacturers. The trouble is, it is now being applied to Internet ventures that are, at heart, media companies or retail firms that happen to be doing business online. And building a following for an online store or a Web portal or a content site isn't a single roll of the dice; it's a game that needs to play out over many seasons. A site's traffic rarely soars overnight. Most successful Web sites find that their number of visitors and volume of pages viewed grow over time, as Internet users spread the word, links multiply across the Web, URLs circulate on mailing lists, and so forth. Overnight sensations do happen, of course -- like the Hamster Dance, or Mahir the Turkish accordion player. But sustainable long-term online businesses take time to grow; their life trajectories are snowballs, not skyrockets. Today's start-ups, though, lack the patience to wait for their businesses to grow organically. Some are spooked by the idea of an Internet "land grab," in which he who spends the most first supposedly walks off with the spoils. Some are prodded by impatient backers looking for the shortest distance between first round of investment and IPO cash-out. Many, I think, are simply following the genetic program of the Silicon Valley start-up, which dictates fast results or death. The CEO and the board of, say, Ecommerce4U.com look at the disappointing traffic figures for the site they've just launched. They look at the money they have in the bank. They think, "How can we get large numbers of people to our site, fast?" Their eyes drift to the TV set in the conference-room corner. "AS SEEN ON TV" -- bingo! Too bad for Ecommerce4U.com that the exact same sequence of events is simultaneously taking place in the offices of dozens of its competitors. And too bad for all of them that TV ads are neither the most cost-effective nor the most efficient tool for attracting Web users. Venture capital pooh-bah John Doerr, of the pioneering VC firm Kleiner Perkins Caufield & Byers, is widely quoted describing Silicon Valley as "the single greatest legal creation of wealth in the history of the planet." But what's happening this winter is more like the single greatest legal transfer of wealth from venture capitalists' pockets to media corporations' coffers in the history of the planet. In this transaction, the Internet firms are mere middlemen, passing the cash along. For now, the TV networks, radio stations and Internet-ad-
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About the writer Sound off Related Salon stories Boom or bubble? Net honchos don't know whether it's the best or the worst of times -- but they're hiring and "monetizing" too fast to worry.
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