How the World Got Wired · Sock Puppets and Pet Food

The Peak

The dot-com era reached its highest moment in the first ten weeks of the year 2000.

On January 10, 2000, AOL — which was, at that time, the way most Americans connected to the internet, the company whose voice said You’ve Got Mail when an email arrived — announced that it was buying Time Warner. Time Warner was an enormous old media company: it owned Warner Bros. movie studio, Time magazine, CNN, HBO, and many other things that had existed for decades. AOL, on the other hand, was about fifteen years old, and was a smaller company than Time Warner by almost every measure that mattered — except one.

AOL’s stock was so absurdly valuable that its total market value was much higher than Time Warner’s. So AOL was able to use its stock as currency to buy the much bigger and older company. The deal was valued at $165 billion. It was the largest corporate merger in American history.

The chief executives of both companies — Steve Case of AOL and Gerald Levin of Time Warner — shook hands on national television. It was supposed to be the symbolic moment when the New Economy and the Old Economy joined together. It was supposed to be the future.

Less than a year later, the deal would be widely considered the worst merger in American business history. Time Warner’s old shareholders would lose hundreds of billions of dollars as AOL’s stock — used to pay for the deal — collapsed. But on January 10, 2000, none of that had happened yet. Everyone was still smiling. Champagne was being poured.

Three weeks after the AOL deal, on January 30, 2000, the Super Bowl was played in Atlanta. Seventeen different dot-com companies bought thirty-second advertisements during the game. Each ad cost between two and three million dollars. Pets.com ran one. So did Computer.com. So did OnMoney.com, Epidemic.com, Lifeminders.com, and many others you have never heard of, because most of them no longer existed by the time of the next year’s Super Bowl.

Six weeks after the Super Bowl, on March 10, 2000, the NASDAQ stock index — the index that tracked most technology stocks — reached a number that it would not see again for fifteen years. It closed that day at 5,048.62. It had more than tripled in eighteen months.

That afternoon, in millions of brokerage accounts across America, people felt very rich.

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