![]() The cycle seen in fiber optics and dot-coms in the 1990s and the early part of this decade-a burst of frantic building and excess capacity, outlandish hype, and cutthroat price competition, bankruptcy and consolidation, self-pity and finger-pointing, short-term losses for many and long-term gains for everybody-is nothing new. How much cash do corporations save each year due to falling data transmission and storage costs? What's the value of the time saved-and hence money earned-from instant messaging, file sharing, BlackBerrys, the online phone service Skype, ordering groceries online through Peapod, using Google to conduct research, and outsourcing insurance claims processing to Bangalore? In the years since the bubble burst in 2000, the way Americans work and communicate has changed dramatically, in large part because the technological infrastructure laid down in the 1990s has been put to such remarkable use. Next, add the macroeconomic numbers that are more difficult to crunch. ![]() There's much more to the Web 2.0 phenomenon than Google and YouTube: the virtual universe Second Life Wi-Fi networks the burgeoning blogging industry iTunes the $211.4 billion e-commerce juggernaut, growing at 20 percent per year and the $16 billion online advertising industry. Without near-universal broadband (ever try streaming a video over a 56K dial-up modem?) and the spread of what Forbes publisher Rich Karlgaard calls the continuing "cheap revolution" in technology, teens would not be able to make videos on their PCs and digital cameras, upload them to the Net quickly, and post links on their MySpace pages. YouTube, which went from zero to 100 million videos per day in the time it takes an infant to learn to walk, was likewise built on infrastructure laid down in the 1990s. Web surfers, many whom enjoyed zippy broadband connections by selling ads to hundreds of thousands of online advertisers desperate for leads, links, and clicks and by placing ads on blogs and social networking sites. ![]() ![]() Google prospered by hiring engineers and computer scientists, many of whom had been made redundant after the bust by lashing together hundreds of thousands of cheap servers by tapping into an installed base of 172 million U.S. It had about $9.8 billion in cash and marketable securities on its balance sheet.īut all that code would have been worthless if not for the excess human and technological capacity surrounding the Internet that was created in the 1990s. And while the company used about 2 percent of its high-flying stock as currency, Google could have simply written a check. The stock market valued Google that day at about $128 billion-more than it did most components of the Dow Jones Industrial Average. Superior search algorithms account for Google's astonishing performance and profitability. Google, the dork-powered cream of the Web 2.0 crop, was founded in 1998, gained critical mass amid the postbust tristesse, went public in August 2004, and instantly took flight. Rather, it was a logical and historically resonant result of the 1990s bubble. Could Google's billion-dollar purchase of YouTube signal another dot-com boom?"ĭespite the media's rush to portray the deal as a return to the glory days of 1999, before Lauer's hairline and CNBC's ratings had receded so dramatically, the Google-YouTube tie-up emphatically did not herald a return of the dot-com bubble. Less astute deal observer Matt Lauer seconded the notion, opening the October 11 Today show with this irresistible teaser: "Bubblicious. "It sounds like a tale from the late 1990's dot-com bubble," wrote astute deal observer Andrew Ross Sorkin in the New York Times. (Google's stock rose 8.5 points on the news, creating enough new value to make the transaction essentially free.) The rumors and gossip surrounding the acquisition target's also-ran peers, like Facebook. (YouTube held its financials closely but loudly trumpeted the 100 million videos viewed daily at the site.) The positive reaction in the stock market. A young tech company using its high-flying stock to snarf up, at a seemingly outrageous valuation, a company with little revenues but gazillions of eyeballs. Google, the eight-year-old money machine, announced it would buy YouTube, the eighteen-month-old Web video-sharing phenomenon, for $1.65 billion in stock. On October 9, 2006, with the Dow hovering near a record 12,000, the markets got a jolt.
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