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Fall 2002
Volume 39, No. 1
Issue Home

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www.pomona.edu

PCMOnline Editor: Sarah Dolinar

 

High Wire Act

“It was a sure sign of the coming apocalypse when I was at two launch parties in one month, on different coasts, and Run-DMC played at both of them.”

Aftershocks from the spectacular collapse of the dot-coms continue to rattle the nation’s economy, but the smoke is finally dissipating, and one thing is clear: There were few survivors. From highly-touted ventures to lesser-known startups, one company after another crumbled under the harsh pressures of fiscal reality. But a few hardy entrepreneurs remain: among them, a digital media firm co-founded by Pomona alumnus Glenn Thomas ’92.

Thomas, who started the Seattle firm Smashing Ideas with Ben Yenter and Evan Clarrissimeaux in 1996, wasn’t taken by surprise by the dot-com bust. “It was a sure sign of the coming apocalypse when I was at two launch parties in one month, on different coasts, and Run-DMC played at both of them,” Thomas recalled with a laugh.

A history major at Pomona, he compared the height of the frenzy over Internet startups with the tulip craze in 17th-century Holland, when a single tulip bulb would fetch the price of an entire house.

“There was a lot of money floating around,” he said. “You would go to parties where it was pretty obvious they had spent a quarter of a million to a million dollars on the party—free sushi, free booze, bands, three levels, several thousand people. Microsoft had one party that had Cirque du Soleil performing.”

Thomas and his colleagues at Smashing Ideas were well-positioned during the boom. In 1996, the software program Flash, distributed by Macromedia, had hit the Web, providing animation and interactive content that completely transformed the Internet surfing experience. “We were lucky in that we were some of the first people to really pick up Flash who knew animation in particular,” Thomas said.

Thomas had met Yenter and Clarrissimeaux at a traditional animation class “in a guy’s basement.” After working together on a pro bono animated TV commercial for a non-profit center for abused and neglected children, the three decided to form a company to provide “rich media”—Flash and other animation—for the Web.

They started out small. “In the very beginning, we were in one of my business partners’ dads’ basements,” Thomas laughed. “He would make us waffles and coffee while he sat up there in his bathrobe and pink slippers.”

Thomas learned about computers and software on his own and at various jobs, but he credits Pomona with giving him the wherewithal to pick up new skills: “The education allows you to go into those situations where you might not know everything, but you feel like you can learn anything.”

In fact, it was a struggle for Thomas to decide whether to continue with his new business or to go back to school. “I actually applied to graduate school to get a Ph.D. in history after the company was already going,” he recalls. “I received a fellowship, accepted it and then decided not to go a month and a half before classes started. The Web seemed like a lot more fun.”

The company Smashing Ideas (the name stemmed from an early cartoon of an anvil dropping on a lightbulb) quickly built a reputation for TV-quality animation. Macromedia itself was one of the firm’s first clients, hiring it to create programming for Shockrave.com, a marketing site to showcase Flash (a plug-in that allows users to download self-running programs onto their computers) and Shockwave entertainment, mostly games and animations. Thomas’ other projects included bringing comics such as “Peanuts” and “Dilbert” to the Web, and creating short Web episodes of the “South Park” cartoon series.

Times were flush, and jobs were plentiful. “We just sat around and the phone rang and people said, ‘Will you work for us?’” recalled Thomas. In early 1998, the company moved to offices in a former candy factory by Lake Union in Seattle.

The success of Smashing Ideas didn’t go unnoticed during a time when acquisitions seemed to be many companies’ main product line. “We would have people just call up and say, ‘OK, we want to buy you,’” Thomas said.

One of the groups that showed an interest in taking over the company was Pop.com, a business venture involving director Stephen Spielberg and his Dreamworks associates, as well as director Ron Howard and Microsoft co-founder Paul Allen. Thomas recalled the experience as being a surreal chapter in the history of Internet mania.

“Up here in Seattle, we’re pretty much outside the Los Angeles entertainment vibe,” he explained. “These guys fly out, and it was pure Hollywood. The whole thing—the T-shirts, the one guy being the good guy, the one guy being the bad guy.”

Because the Pop.com representatives were not offering cash, but stock in the new venture, Thomas asked to see a business plan. He was told that the plan was in a safe somewhere, and that the people who mattered—Spielberg, Allen, Katzenberg and Howard—had all signed off on it. “It’s gonna be huge,” the representatives assured him.

“These guys—having met with them, I could see they had no idea what they were doing. They had already spent $10 million and had nothing to show for it. So I think they were a little bit desperate. They just kept saying, ‘Mr. Spielberg.’ ‘You’d be working with Mr. Spielberg.’ ‘Mr. Spielberg this, Mr. Spielberg that,’” said Thomas.

“Eventually they started saying, ‘We do big deals. We usually don’t even talk to little people like you. We’ll be meeting the CEO of a Fortune 100 company and we just do things on a handshake deal, not this legal stuff.’”

The Pop.com players received their comeuppance a few weeks later, when the investors pulled the plug. “I think Dreamworks, Ron Howard and Paul Allen bailed out because they realized, ‘Well, we’ve lost $10 million, but if we go for it with what we have here on the table, we’re going to lose a hundred. So let’s pull it at ten,’” Thomas said. “Which is too bad, because if they’d hired people who really knew what they were doing, they could have done really well.”

The excesses of the dot-com frenzy are already legendary: startups pouring money into advertising, blowing $2 million on a 30-second Super Bowl commercial, putting on a $10 million Las Vegas trade show party featuring David Spade and The Who. Smashing Ideas remained aloof from such lavish expenditures, partly because it never went public, but largely because Thomas and the others kept their sense of perspective. “We were fairly conservative about it,” Thomas said.

“I never had money in the stock market and dot-com companies,” he continued. “I could never quite logically make sense of most of it. It was like, OK, you’re hoping for revenue in the future, and yet, there’s nothing that shows you’re going to get any.”

The company resisted pressures to go out and raise more money. “Everybody around us was saying, ‘You can go out and get $20 million and do anything you want,’ The question was, ‘Well, I’d get $20 million, but what would we do with it so that we make money in the future?’ It was never a clear situation,” Thomas said.

Referring to his education at Pomona, Thomas continued, “I had the background to understand that maybe this wasn’t as earth-shattering and world-changing as everyone was saying it was.”

As the year 2000 came and went, the high times of the Internet world came to a crashing end. When the troubles hit, Thomas recalled, they hit fast and hard. “There were months when pretty much every week you’d have more friends getting laid off in San Francisco or New York. It was a grim, grim eight months.”

Despite its fiscal conservatism, Smashing Ideas still reeled from the shock of the dot-coms’ collapse. “It was a question of, ‘Have you signed up with people who might survive the fallout?’’” Thomas said. “We thought we had. We hadn’t. Nobody really did.”

The first eight months of 2001 were rocky for the company. “That January, we had a quarter of a million to a half-million dollars’ worth of work disappear in about four weeks,” Thomas said. The loss of revenue was mainly the animation side of the business, forcing the company into its one and only set of layoffs, six members of its animation team. Thomas and his colleagues tried many tactics to try to avert further staff cuts, including switching to partial workweeks during the summer.

Nevertheless, the prospect of additional cutbacks loomed. He recalled one morning when they had basically decided further layoffs were needed and were about to meet to discuss them when a call came from a friend on the East Coast. The friend had just gotten a contract and needed someone to design the Coca-Cola Olympic torch relay site. “So we’re like, OK, guess we don’t need this meeting,” Thomas said.

By late last year, Smashing Ideas had begun to pull out if its slump. But it did not emerge untransformed. The animation work has mostly fallen by the wayside, and now the bulk of its projects are children’s games developed for marketing and advertising purposes. It has switched from using word-of-mouth advertising to taking a more active role: Late last year, the company hired its first sales director. Its list of clients is now mostly made up of larger, well-established companies such as Kraft Foods and Nickelodeon.

Looking back, Thomas believes that a lot of what transpired during the dot-com frenzy can be attributed to simple greed. “There were some guys in Silicon Valley who put up a million dollars and got a billion for it. That’s a big deal in this country. And everybody wanted to have a shot at it. And when you have that much money piling in, and you’re chasing too few good ideas, you get a lot of people who jump in without a whole lot of thought.

“There’s a lot of smart people who lost a lot of money,” he said. “It happened so fast.”
He added: “There were also a lot of people who very cynically, knowing it was a boom-bust situation, worked as quickly as they could to get in, get out, and let somebody else take the fall.”

Thomas himself has not neglected the value of diversification. In addition to his work at Smashing Ideas, he gives lectures, has written two books on Flash and last semester taught a class at Pomona with his former history adviser, Professor Robert L. Woods ’67. The class was called “The History of the Future,” and dealt with transformational technologies, such as, say, the Internet. But the limits of such transformations, Thomas said, are clear.

“Certainly [the Internet] didn’t suspend all rules, everything that had come before it. Which was the classic Web thing: ‘This changes everything—You don’t need to make money.’ I’ve actually heard people say that. And people believed it.”

—Lorraine Wang is an editor at the Los Angeles Times
and a freelance contributor to PCM

Photos by Phil Channing; Photo illustration by Mark Wood.