March 12, 2005
Seattle Times series on InfoSpace
The Seattle Times did a remarkable multi-part expose of InfoSpace. The series is particularly unflattering to Naveen Jain, InfoSpace’s founder and chief huckster. There’s a thin line among entrepreneurs between visionary and crook, and the Seattle Times marshals plenty of evidence to deem Jain the latter if you want.
The series also describes several common but deceptive practices of the dot com boom, especially the “lazy Susan” deals (also known as “roundtripping” deals). In a roundtrip deal, party A invests in party B but, at the same time, party B buys products/services from party A. The net effect is that money starts with party A, goes to party B, and goes right back to party A (hence, “roundtripping”). A variation of these deals would involve the parties each buying the other’s products (instead of an equity investment starting the cash moving).
Roundtripping deals are not inherently wrong, but treating them as revenue-producing absolutely can be. The first article in the series describes the great lengths that InfoSpace went through to manufacture revenues from roundtrip deals.
Reading the series, it’s impossible not to feel that the star companies of the dot com boom exhibited a certain duality. Some of the most celebrated entrepreneurs showboated for the press claiming to be a new, smarter breed of entrepreneurs ushering in a new era of business; while at the same time, they worked behind the scenes to prop up their exorbitant claims using all-too-traditional artifices.
Posted by Eric at March 12, 2005 04:18 PM | Internet History