http://www.washingtonpost.com/ac2/wp-dyn/A42489-2001May17?language=printer

For the Press, Too, a Fall From the Hypes

Tech Crash Derailed Careers of Many Who Covered Silicon Valley

By Howard Kurtz, Washington Post Staff Writer

Friday, May 18, 2001; Page A01

SAN FRANCISCO -- Last fall, Jason Pontin was being hailed as a "Gucci-loving," "Jag-driving" "New Economy titan" for his stewardship of the thick, hot and happening Red Herring magazine.

"They wanted to portray me as a rock star," Pontin says of the Details magazine profile, chatting in a crisp British accent that the Californian acquired at English boarding school and Oxford. "I was squirming through a lot of this. I said I'm just a hack."

No one is treating Pontin like a journalistic Jagger these days, now that Red Herring has fallen on hard times. "The unpleasant part is, like everyone, we built a business last year on the assumption of a growth pattern that has not been sustained," he says. "The extent of the industry correction was literally inconceivable in the Valley. None of us thought it would be this bad."

Things got significantly worse for Pontin yesterday as Red Herring announced its second round of layoffs, cutting 54 of its remaining 260 staffers. For legions of editors and reporters who specialize in technology and finance or were magnetically drawn to the Web, the spectacular boom and bust of the Internet economy is more than just a compelling story. It is a roller-coaster ride on which they themselves are passengers, strapped to the fate of the very culture they are covering.

The challenge, for them, goes beyond merely coping with the Silicon Valley swoon. It is watching paper fortunes disappear, neighborhoods change, employers go belly-up, friends get tossed out of work -- and wondering whether they, in ways large and small, became part of one of history's great hype machines.

"We were going to be huge and unstoppable and take over the world," says Peter Gumbel, a Wall Street Journal veteran who quit to join Business.com, which recently cut a quarter of its staff. "Now the question is, can we make it? The moment of truth has arrived."

That moment is nothing short of surreal. Like the forty-niners of an earlier century, tech journalists came here to stake their claim to an economic gold rush that many believed would make them fabulously wealthy. What they discovered, said Pontin, is that "there is no new economy. The new economy was never anything more than a justification for outlandish stock prices."

The bursting of the dot-com bubble has produced a certain gallows humor. At a recent conference, Jeff Bezos, the Amazon.com founder who rode the wave to Time's Man of the Year honor, approached Kara Swisher, who writes the Journal's "Boom Town" column. "I have a new name for your column," he cackled. "Kaboom Town."

Before things went kaboom, Swisher says, "pretty much everyone in our office got offers from pretty much everybody," with most dangling salaries of $150,000 to as much as $300,000. Almost everyone in the media universe got caught up in the frenzy.

Panting after cyber-advertising, Time launched the spinoff magazines Time Digital and eCompany Now. The New York Times was publishing 70-page e-commerce sections; The Washington Post launched a weekday Washtech page; the Wall Street Journal grew to mammoth size. With glowing cover stories from Fortune ("Dot.com Fever") to Business Week ("The Internet Age") to a Newsweek special issue on the Net "transforming how Americans live, think, talk and love," the press whipped up enthusiasm for this brave new world.

Indeed, the rising economic waters lifted most boats -- at least until the tide turned. A year ago, David Tuller, who had quit the San Francisco Chronicle, was writing for the Web site Petopia.com. But it was soon sold. Undaunted, Tuller started peddling his wares to CaregiverZone.com. But it stopped using him. Last September, Tuller signed on as a full-time editor with Salon.com. He was let go four months later during a round of layoffs.

"You could make an extremely nice living for a brief, shining moment in high tech," Tuller says. "Now there are fewer sites and they're all cutting back on what they can spend."

The shift has been equally dramatic for employers. David Yarnold, editor of the San Jose Mercury News, lost 11 business reporters to the dot-com world in 1999. Since then, Yarnold has hired back two of the defectors, has turned down two others and is talking to a fifth. This, he admits, has given him "a great deal of enjoyment."

Jon Ann Steinmetz quit the paper two years ago to join Women.com. Her stock options were worth $5 a share, and the company went public months later at $18 a share. Now shares are selling for 28 cents. Steinmetz returned to the relative safety of the Mercury News. "It's hard to watch from the sidelines now," she says. "The people I worked with, they feel like sitting ducks."

Not every Internet company has imploded, but most are ailing. Gumbel, the former Journal reporter, recalls venture capitalists supporting outfits like Business.com, a search-engine site. "Money was no object," he says. "All these VCs out there were throwing money at anything with '.com' in the name. Now, even if you've got a brilliant idea, it's hard to get money."

Michael Dolan, a former Details editor, moved to San Francisco from Brooklyn last summer to join BigWords.com, a site aimed at college students. "The salary was excellent," he says, and the site's 24-year-old CEO agreed to pay Dolan's first six months' rent on a high-rise waterfront apartment on the Embarcadero.

BigWords declared bankruptcy two months later. Dolan's wife joined him, and both tried freelancing. But when the lease came up for renewal -- and jumped to $3,000 a month -- they abandoned their dream and returned to Brooklyn.

A 3.4-Pound Magazine

If there was a moment that seemed to crystalize the craziness, it came last June, when Red Herring published a 648-page issue, the largest business publication in history. It weighed 3.4 pounds. "There was a cult-like atmosphere surrounding it," Jason Pontin says, digging into an omelet at an upscale cafe. "The real mission was this: what's new in technology and why it matters. What I didn't anticipate is that the subject matter should very quickly become not just professionally important, but the single most important subject to strategic businesses."

Circulation soared from 30,000 to more than 325,000. "This is not hype at all," Pontin told Forbes in 1999. By last year Red Herring was billing itself as the world's fastest-growing magazine. Oddly enough, says Pontin, "I hated last year to some degree. Last year people wanted good news."

With many companies "we thought were crap" drowning in cash, Pontin says, "this had every sign of a speculative mania. Here's the crucial mistake even Red Herring made. We believed that the real tech companies -- Intel, Cisco, Nortel, which created the basis of our advertising -- that their business was by and large real."

Spurred by the excitement, Red Herring bought a software company called Stockmaster.com last year. "That was probably a mistake," Pontin says. With advertising down 56 percent last month compared with a year earlier, no longer will the average senior writer make five overseas trips each year. In the first round of firings in 2001, seven writers were among those let go. "One is laying off people one has hired, in many cases friends. . . . It wasn't easy," Pontin says.

Finishing his breakfast, Pontin is heading off to Lake Tahoe for an annual technology conference sponsored by the magazine. In 1999, 60 companies raised $946 million after being showcased at the event. Last year, says Pontin, "we were turning people aside: 'No, I'm afraid you can't attend.' " This year, fewer companies are showing up.

The next morning, the Wall Street Journal reports that Red Herring is shopping itself to potential buyers. A company spokesman denies the story.

Worth a Billion

Larry Kramer vividly recalls the days when his company was preparing to go public. "Our roadshow was like the Stones tour," says the chief executive of CBS MarketWatch.com. On the first day of trading in January 1999, the stock, priced at $17 a share, closed at $97. The company was valued at a billion dollars. "It was totally insane," he says.

The press coverage, as with many stock offerings of that period, was breathless. "Reporter scoops big bucks from Net," said USA Today. "There's something about Larry," said the San Francisco Examiner. On paper, Kramer was worth $20 million. He went out and bought a $40,000 Mercedes-Benz.

That was then. Now the stock is selling for $2.43 a share, Kramer has lost his multimillionaire status and the financial news service is struggling. At first glance, the state-of-the-art offices on Battery Street suggest otherwise. But Kramer doesn't rule out layoffs, and he has already shrunk the MarketWatch staff from 270 to 250.

"We have this fabulous new newsroom, a lot of which is empty because of the plans for expansion that we can't afford now,"says reporter Victoria Fung. She was hired from a Web portal called Looksmart.com, whose stock has dropped 90 percent, to $1.43 a share. Says Fung: "We all kind of cringe around here when we hear about layoffs. We look at the earnings reports and wonder, How long will we be here? Will it last?' "

A year ago, rivals were raiding the place. "I was talking to kids who were still in school and were getting $50,000 and $60,000 to work at the Industry Standard or Business 2.0, and that was twice what we were going to offer," says Editor David Callaway. "They'd pay anyone who could string a sentence together."

Now MarketWatch's biggest source of income is the financial data it sells to 250 other Web sites. The inevitable question: Should this company have gone public in the first place? "What did we know?" says Kramer, a former Examiner editor. "You have analysts telling you what your company should be worth. In fact it was air; analysts were basically making it up as they went along. But the banks were backing them.

"Who am I to say they're wrong? How could I look at bankers from the biggest brokerage houses in the world and say they're wrong to take me public? The hysteria kind of takes over." Kramer shakes his head at the memory. "Nobody knew how much gold there was in the hills. It sure looked endless."

Money and Happiness

The huge color mural on the side of a Pacific Street building makes no pretense of modesty: "Welcome to the Epicenter of the Internet Economy." It lists seven addresses for the Industry Standard -- three of which are no longer in use.

Inside a former toy factory, two floors above the receptionist with the nose stud, Editor Jonathan Weber is surrounded by a wall of covers that conjures up a bygone era: "The Net's Bull Run." "King Jeff?" "Yahoo Steps Up."

Launched in 1998 with a staff of 30, the Industry Standard quickly ballooned to as much as 300 pages a week and a 200,000 circulation, forcing Weber to quadruple the staff. "We were in a constant battle to be able to fill the pages and produce a big enough magazine to satisfy the demand for advertising space," he says. "I'd look at what we were paying relatively inexperienced reporters and think, 'My God, it took me 10 or 12 years in the business to get to that level.' "

The magazine became known for its luxurious, $3,900-a-head conferences. People still talk about the spectacular fireworks display at last year's summit in Laguna Niguel, Calif. "We're believers and we think this thing is huge," Weber said in 1999.

Flush with success, the Standard launched a European edition and a spinoff magazine called Grok; both have been shut down. Advertising plummeted 72 percent last month compared with April 2000. Seventy of its 400-plus employees have been laid off. "A huge bummer," says Weber, a former Los Angeles Times reporter. "With the boom, the Internet economy became synonymous with the dot-com thing, and we became associated with that. That perception has hurt us." One editor says many people are job-hunting.

Weber pulls last September's 342-page issue from a file cabinet. "People don't want this much," he says, arguing that today's slimmer issues are better. More telling, perhaps, is the smug cover headline: "Money = Happiness." Now, it seems, many journalists here have neither.

© 2001 The Washington Post Company

-- Swissrose (cellier3@mindspring.com), May 17, 2001