Is Anyone Making Money?

12.03.2001

Daily Dispatch 1 from the South by Southwest Interactive Festival in Austin

"Every panel is probably going to wind up with the question of survival." That's Hugh Forrest, director of the South by Southwest Interactive Festival (SXSW) in Austin, which officially kicked off on Saturday night, Texas time.

Even though this is only my third year here, it's practically become a tradition. I chase down Hugh, who's easy enough to find, a tall guy, on the move, juggling cell phones and a walkie talkie, and nab a quote that sums up his expectations for that year's conference. This year, it's an irresistible opener for my first dispatch from the balmy "Third Coast", from the conference many interface designers, community gurus, venture capitalists, programmers, and of course, journalists, claim is their favorite event of its kind each year.

What jazzes up what otherwise might be just another opportunity to exchange business cards is the fact that the Interactive shindig runs alongside the older and more established SXSW Music and Film Festivals. Countless bands flood the local clubs, films unreel on every screen available, and celebrities and celebrity wannabes of both independent scenes mingle with the Web folk, though the argument could still be made that SXSW ought to do more to encourage even more interdisciplinary mingling.

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In 1999, the mood among the Interactive speakers, panelists and attendees was definitely upbeat. After all, interest in this whole Internet thing, which really did seem to many to be on the verge of fulfilling even the most outlandishly overhyped promises made for it, couldn't have been more intense. What's more, creators of personal narrative or simply gorgeously designed noncommercial had been invited to speak. For a few, it was their initiation to the conference circuit, a track once reserved for suits or academics, and for many, it was their first face-to-face encounter with friends they'd become intimate with exclusively through the Web.

The boom, of course, was in full swing. Keynote speaker Mark Cuban, then CEO of Broadcast.com, preached the broadband gospel just weeks before selling his company to Yahoo! for $6 billion. By the time March 2000 rolled around, SXSW took on a less exuberant and far more anxious tone. Speakers such as Stewart Brand, former New York Times columnist Denise Caruso and Paulina Borsook warned that, while the New Economy bubble had been dangerously overblown, which everyone could pretty much agree on, the bubble was also threatening to become socially destructive.

But of course, within weeks, the Nasdaq would tip into its long dive and hasn't "found a bottom" yet. This year, "Are you feeling it?" has all but become a mantra-like greeting. While Hugh Forrest is quick to point out that registrations for SXSW Interactive 2001 are as high as they were last year, that the numbers for the trade show and program are just as healthy as ever, the overall atmosphere in Austin this year is decidedly far more subdued.

Keynote: John Heilemann and John Battelle

"Is there still an Internet economy?" John Heilemann asked John Battelle on the main stage Sunday morning. Heilemann, who's working on a history spanning the last few decades called The Valley, to be published in 2002, prefaced the question with the observation that just last year, "the notion of the Internet economy was not in any doubt. All that has changed, of course. There's a broad technology recession happening now."

Battelle, a Wired co-founder back in the day, is the founder of The Industry Standard, which bills itself as "The Newsmagazine of the Internet Economy". He replied that his publication had never predicted a dotcom explosion in the first place. The business plan, outlined in 1997, was founded on the idea that there was a thirty-year history that formed the basis of the economy that is struggling in stops and starts to take shape now. The basic premises eager entrepreneurs and investors have been trying to soon to realize, Battelle argues, will eventually take effect but not, of course, over, say, a twelve-month period, but rather, over a period of decades. In the meantime, many of the innovations the dotcommies have come up with are being "tilled back into the soil of regular businesses".

Heilemann agrees that the whole dotcom phase, complete with all its growing pains, was an "enormously important part of a process", and indeed, established companies, the "incumbents", actually reacted quite quickly. This was because, in the 80s, it took these same American companies six or seven years to react to the Japanese challenge. When the Net came along, they recognized and reacted to the new challenge relatively immediately.

All in all, two journalists interviewing each other turned out to be a far more engaging scenario for a keynote presentation than one would suspect.

Panels

Your roving reporter dipped into as many panels on Sunday as possible and found the one entitled "Internet Industry Trends 2001: Is Anyone Making Money?" fairly indicative of the overall mood. When enthusiasm reared its head it all, it did so cautiously and weighted down so heavily with disclaimers it could hardly be counted as enthusiasm at all. Indeed, the panelists spent far more time dissecting the mistakes of the immediate past rather than daring to peer ahead into the future.

Patrick Spain of Hoovers.com ranted about the way new companies are funded: "'We're not interested in raising anything less than $50 million', venture capitalists will tell you, 'You have to tell us how you'll spend it'." A recipe for disaster, of course, for any company with a good $5 million idea. Mike Rosenfelt, a venture capitalist himself, nodded heartily and added, "Don't take money from venture capitalists. Because they are the evil scum of the earth." As the laughter died down, he added more seriously, "My best advice: spend every dollar as if it were your last. The new rules are the old rules, period."

"How to Survive Takeovers, Acquisitions, Layoffs, Mergers and Other Supposed Career Setbacks" was as chock full of sad stories as it was of practical advice for the casualties of the New Economy. Lloyd Walker of Sapient, for example, agreed to appear on the panel long before he learned that his company, which itself had overseen several successful acquisitions and mergers ("even the best, which depend on compatible models and cultures, are hard and painful"), would layoff 720 employees worldwide just last week.

In other news, the future of gaming appears to be miniaturization rather than the immersive virtual realities promised over a decade ago. Top online game designers see their future not so much in broadband as in wireless handhelds and mobile phones. Oh, and a serious long-term business plan is still elusive for most of these companies.

The idea of weblogs as business applications seems to be appealing to panelists and attendees alike, though, apart from using tools such as the beleaguered Blogger as a sort of internal bulletin board or as a sort of add-on feature attraction at a corporate site, it seems tough indeed to imagine a truly innovative use for them as a business app.

Throughout the day, however, peer-to-peer networking kept popping up as The New Old Thing. The general consensus is that, while the fate of Napster as a company is more or less irrelevant, Napster as a 60-plus-million-user phenomenon has obviously signaled a turn in The Road Ahead. Cory Doctorow, evangelist for openCOLA, makes the case most zealously, and his arguments are laid out in detail on the Well.

Web Awards and Fray Cafe

The "Big Bags" of freebies may be thinner this year, but the SXSW parties and evening events are as generous with the free food and beer and just generally as fun as ever. For the second year running, John Halcyon Styn has made the annual Web Awards more entertaining than the Oscars. Halcyon's adlibs still outshine his script in the humor department, but it would nevertheless be a shame not to at least mention a karaoke version of "It's a Beautiful Page" (sung to the tune of U2's "It's a Beautiful Day"), a SXSW-specific remix of "All Your Base" and his own interdisciplinary encounter with SXSW Film guest, porn star Ron Jeremy.

Sunday wrapped at the Fray Cafe where Derek Powazek staged an evening of live readings by contributors to his ground-breaking personal narrative site, The Fray. There could hardly be a more appropriate image of the Web that will remain online and thriving even if the last venture capitalist were to walk away than the open microphone up on stage in a smoky cafe once the featured guests had told their tales. Anyone with a story to tell was free to step up and tell it. The room was packed with those eager to listen.

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