Is This The End.com?

When his contract runs out in a month, Thorsen will hardly be the only dotcom refugee standing in line. Nor will he be the only one cursing his valueless options. This has always been a highly volatile industry, but recent events have been on the scale of a virtual earthquake. Here's a sample of the casualty list for just two days last week: More than a third of Seattle-based Hardware.com's workers went under the hammer. Furniture.com in Framingham, Mass., laid off 80 employees--that's 41% of its work force. Streaming video site Pseudo.com axed 58 jobs in New York City. Planned IPOs were canned by firms including Furniture.com electronics site 800.com in Portland, Ore., and video-delivery site Kozmo.com in New York City. BBQ.com a fully funded San Francisco website offering nothing but barbecuing tips and equipment, went pork-belly up. (Haven't heard of any of these sites? Lack of exposure was part of their problem.)

It's not as if the Internet economy is about to collapse. In fact, most laid-off workers are being recruited by other tech firms faster than ever. (A group of headhunters from Amazon.com arrived at Reel.com's offices a day after the firings and found the company's engineers and management had already obtained employment elsewhere.) It's just that cautious investors have finally forced websites to think about that once blasphemous bottom line.

Talk to upper management at more mature online companies--any more than two years old, say--and you'll hear strange new words like consolidation, restructuring, streamlining, even profitability. "The downturn in the 'stupid' economy is going to precipitate a flight to quality," says Kyle Shannon, co-founder of agency.com a business-support site that lost employees as its stock went from $98 to $17 in seven months. "I can't wait, frankly. I'm so excited."

Shannon's sentiments, if a little overenthusiastic, are fairly orthodox. You would be hard-pressed to find anyone who does not outwardly profess that a market correction and a separation of wheat from chaff are good for Internet business. But a lot of get-rich-quick dreams have died, and it would be surprising if disappointment did not manifest itself.

"Before the last market tank [April's NASDAQ collapse], I could have retired, bought three houses and my dream boat, and had $150,000 a year in interest to live on. Now I'm back where I started," says a senior engineer at a West Coast Web-services company, whose stock was briefly worth $9 million and is currently underwater. That means it has sunk beneath the price at which he originally bought it.

Even more cruel, of course, is when the paycheck stops too. Just ask the 140 former employees at APBnews.com a Wall Street- based crime-reporting website that hired reporters for a salary in the low $40,000s--very low for a New York City dotcom--plus a meager 500 to 1,000 options. Once again, they turned out to be worthless when the site ran out of cash. As with most dotcom firings, the end was as swift as it was ignominious. News editor Jim Edwards returned from a vacation in Amsterdam to find his company had collapsed.