The Rise And Fall Of The Dot-Com Bubble: The Case Of TheGlobe.com

The phrase "the dot-com bubble" is often tossed around very casually when talking about technology and the growth of the internet over the last 20 years. People recall this period with a sense of nostalgia, reminiscing about the days when the internet was new and unexplored. A wave of computer-savvy twenty-somethings became millionaires overnight, flipping the social hierarchy upside down. Those once considered outcasts now basked in their newfound wealth, but as the saying goes, all bubbles must pop eventually. When the dot-com bubble burst, websites and domains that were once hot commodities lost their value almost instantly. This dramatic shift in fortune is epitomized in the story of theGlobe.com, a website that symbolizes one of the most notable failures in dot-com history.

Stephan Paternot and Todd Krizelman met while they were classmates at Cornell University in the early 90s. During this time, chatrooms became popular, and both students saw a business opportunity beyond mere social interaction. In December 1994, they managed to raise $15,000 to launch their programming company, WebGenesis. They developed theGlobe.com, which launched on April 1, 1995. Within a month, the site attracted 44,000 visitors, showcasing its potential. By the end of the year, thanks to their Cornell connections, they expanded their team to 17 employees.

TheGlobe.com quickly gained popularity as a portal for online clubs and chatrooms, making it easier for Paternot and Krizelman to attract investors. In 1997, they received a $20 million investment from Dancing Bear Investments, marking the beginning of the dot-com boom. Investors were eager to fund internet ventures, confident they would yield profits. This newfound wealth allowed the young entrepreneurs to earn salaries exceeding $100,000 each and generated an additional $500,000 from share sales. Their next ambitious move was to take the company public.

A year later, on November 13, 1998, theGlobe.com issued its IPO with an opening stock price of $9. However, shares skyrocketed to $87 on the first trade, ultimately closing at $63.50, setting a record for the highest first-day share price increase of any IPO. The stock's 606% rise remains unmatched even today. Overnight, both Paternot and Krizelman found themselves with a net worth exceeding $100 million, gaining recognition as young millionaires.

After their successful IPO, they expanded theGlobe.com into the gaming sector, acquiring Computer Games Magazine and other gaming-related sites. Unfortunately, their success was short-lived. Paternot became a public figure, notorious for his lavish lifestyle, which included extravagant spending and a flashy appearance. This led to a negative perception of theGlobe.com, earning Paternot the unflattering title of "the CEO in the plastic pants."

By 1999, cracks began to appear in the dot-com industry as investors realized that the anticipated profits were not materializing. TheGlobe.com faced a rapid decline, with share prices plummeting from $90 to less than $0.10 over six months. The company's market capitalization fell from $840 million to a mere $4 million, a staggering 99.52% decrease. The once-promising company struggled to maintain its operations, and by 2000, both Paternot and Krizelman were forced to resign.

TheGlobe.com attempted a comeback in 2003 with GloPhone, a VoIP service similar to Skype, but it failed shortly after launch. Despite efforts to keep other publications afloat, the company faced legal challenges and ultimately succumbed to a $120 million settlement, marking the end of an era. By 2008, theGlobe.com had become a mere shell of its former self, with zero net revenue and no employees.

As a cautionary tale, theGlobe.com exemplifies both the lucrative possibilities and the immense risks associated with the dot-com bubble. This story serves as a reminder of how quickly fortunes can change in the fast-paced world of technology and entrepreneurship.