Santa Clara Valley Historical Association

If 1995's incandescent IPO by Netscape shone a light on the opportunities of the Internet, the closing years of the 20th Century saw Silicon Valley in the global glare of world attention. Anything was possible, expectations were boundless and people were ready for a rocket ride to the heights.

Helping fuel this was the U.S. Supreme Court's rejection of the Communications Decency Act, a much-disputed provision of the Telecommunications Act of 1996. Until that ruling, no one knew if the Internet would be an unfiltered, limitless universe or a government-regulated entity like radio and television. But now, the limits were off and the Net could grow. Anyone could access the network and anyone could decide what went online. The Web became a powerful, liberating force that brought people together and shaped new businesses.

Take Yahoo!, for instance. Founded by Stanford University graduate students Jerry Yang and David Filo in 1995 as a quirky list of favorite links, it became the go-to site of the 90s. A billion Web pages were coming into bloom, and Yahoo! was a favorite way to find them. When Yahoo! went public in 1996, Yang and Filo became instant millionaires.

People also wanted to find other people and to communicate with them. Hotmail, one of the first Web services to give away e-mail for free, went from zero users in 1995 to 30 million subscribers only 30 months later. At the end of 10 years, it would have 215 million users.

And then there was expanding commerce, basic buying and selling. Online bookseller and burgeoning retailing giant Amazon.com, which had been founded within months of the launch of Yahoo!, had proven that people were becoming ready to eschew bricks-and-mortar stores in favor of shopping from home via computers.

Would people also want to sell things to other people through the medium of an online auction? Pierre Omidyar had hoped so when, as a part-time experiment, he launched Auction Web in 1995. Transactions at the site grew so far beyond expectations by 1996 that Omidyar left his full-time job at software maker General Magic and, working with Jeff Skoll, morphed Auction Web into eBay in 1997. When it went public in 1998, stock purchasers made it an instant success and gave eBay the fifth-highest first-day gain in the market's history. Omidyar, Skoll and new CEO Meg Whitman, who had been brought in from Hasbro, joined the ranks of instant millionaires. At the company's San Jose headquarters, employees abandoned their cubicles in a delirious conga line. Whitman's former boss, who had asked her why she was leaving the East for the other coast, called her to say, "Now I get it." The legend -- and the lure -- of IPOs making millionaires of Silicon Valley risk-takers was in full swing.

In the first quarter of 1997 alone, 147 new companies came into being. "It's an elixir that you breathe in the air as you come into this part of the world," Christos M. Cotasakos, CEO of Palo Alto-based online brokerage E*Trade was quoted. His company had gone public itself in 1996, raising $46 million. "I have never seen anything like this. This is Mecca."

BusinessWeek noted in 1997 that five Valley powerhouses -- Intel, Cisco Systems, 3Com, Sun Microsystems and Netscape -- boasted a higher market value than General Motors, Ford and Chrysler combined.

So many people were getting in on what was becoming a Silicon Valley gold rush that few noticed in 1998 when Stanford University Ph.D students Sergey Brin and Larry Page started yet another Internet search engine they dubbed Google. But they'd notice later.

Even a company that had been struggling, Apple Computer, underwent a resurrection in this vibrant climate, although in Apple's case it took the return of Steve Jobs. The charismatic co-founder, who had been pushed out more than a decade earlier, returned to Apple as a consultant in 1996 and took over as CEO in 1997. To stop the company's slide against Microsoft, Jobs cut back or eliminated some departments and research programs, stopped licensing Mac clones, initiated an on-line store and reduced the product line to a handful of desktop and laptop computers. As a result, the company announced in 1997 that they had turned a profit for the first time in three years, and observers felt it had survived -- smaller, but wiser. They were proven right in 1998 when Apple introduced the iMac, a high-design, consumer-oriented personal computer that racked up 150,000 orders before it went on sale in retail stores and gave the company another yearly profit.

Legal troubles caught up with industry giant Microsoft in 1998, when U.S. Attorney General Janet Reno and attorney generals from 20 states and the District of Columbia sued the Redmond, Washington, company for violating anti-trust laws. CEO Bill Gates denied his company had done anything wrong, and Microsoft introduced a new operating system, Windows 98.

When America Online swallowed Netscape for $4 billion, attorneys charged that Microsoft's practices had crushed the latter company and said the deal should be voided. That didn't happen, the deal went through, and AOL's status as a Web portal increased.

As the 1900s drew to a close, technology was everyone's darling. As Time magazine technology correspondent Chris Taylor acknowledged," . . . 1999 was a year of unassailable confidence. With the Internet gold rush in full flow, thousands of us have been seduced by the promise of paper riches at the end of the online rainbow."

At the Super Bowl in January, there were commercials for dot-com companies competing for viewers' attention with those for more traditional products such as beer and automobiles. Revenues in e-commerce -- itself a relatively new term -- were expected to triple during the holiday season. By millennium's end, more than 200 million people were going online for information, business, communications and fun.

Online word-of-mouth made a movie, "The Blair Witch Project a hit. The terms "day trader" and MP3 became common, the latter the result of Napster, a once obscure file-sharing program, that became a global network for trading digital music for free. The music industry responded with multiple lawsuits charging copyright infringement, and the resulting court actions reduced Napster to a mere shadow of its former self. But the genie was out of the bottle, and the traditional music industry would never again be the same.

In Microsoft's ongoing legal battle, Federal Judge Thomas Penfield Jackson issued findings of fact that the company had indeed engaged in monopolistic practices. The U.S. Justice Department had made its charges stick, but the software giant was avoiding being broken up and trading breakup for shakeup. Bill Gates, who had barely recognized the Internet four years earlier, led the charge as Microsoft announced its intention to focus exclusively on Web services.

President Bill Clinton became the first U.S. president to take part in an online chat. His experience with the Web had been less pleasant in 1998 when online gadfly Matt Drudge broke the story of the president's Oval Office dalliances and touched off a political firestorm. The Web was where more people were turning to get their news fast. The term "blog," shorthand for Web log, joined our lexicon.

Video game sales, boosted by the popularity of online gaming, began to top sales of movie tickets for the first time. People were beginning to surf the Net on their cell phones, their pagers, and even some of their game consoles.

Stocks in Silicon Valley firms continued to climb, particularly those of networking equipment companies: Foundry was up 632 percent, Sycamore up 528 percent, Juniper up 702 percent. The Dow Jones Industrial Average got a makeover, with such old-line companies as Union Carbide, Sears, Chevron and Goodyear making way for newcomers including Intel and Microsoft. The latter were the first two companies from the tech-heavy NASDAQ exchange to be invited to join the index of indexes. The NASDAQ itself was breaking records of its own, with the one-time junior exchange topping 3,000, led by Sun Microsystems and Apple. Investors were saying, "Tech stocks rule, industrials drool."

There were fears, though, that a Y2K bug might spoil the debut of the new century. The crisis had its origins in the early days of computing, when programmers writing code for computers decided to save space by including only two digits for the year. Thus, when 1999 gave way to 2000, people worried that many computers would read 1900 instead, causing everything from confusion to computer crashes and mammoth loss of data. But what programmers had done, programmers could undo. New code was written, patches were distributed online, and as the new year approached, most of the worries had eased.

A new year, a new millennium, a new economy, a new optimism.
What could possibly go wrong?

Read how the Bubble Bursts — the Dot-com Story

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