What Happened to theGlobe.com?
Facebook wasn’t the first social media site. There were actually many different sites that came and went before Facebook. None of them showed lasting abilities like Facebook and Twitter, but they did make a splash in their time.
One of the earliest social media sites was theGlobe.com. Two college students started it in the late 1990s, and it had its moment in the spotlight, although that moment was brief.
Today we’re going to go through what exactly happened to theGlobe.com. And we will discuss where the company is today.
In this article you will find out...
What Is theGlobe.com?
Many people believe that the biggest, and most embarrassing, dot com failure ever was theGlobe.com. It was a flash in the pan excitement that turned into a failure, but the story of theGlobe.com is fascinating.
It begins with two Ivy League classmates Stephen Paternot and Todd Krizelman. In the early 90s, the two men were attending Cornell University. At the time, chatrooms were super popular on college campuses, and Cornell was no different.
Paternot and Krizelman became obsessed with hanging out in Cornell’s chatroom. But they saw it as a lot more than just a place to have social interactions with strangers. They viewed it as an incredible business opportunity.
Over the winter break in 1994, Paternot and Krizelman were able to raise $15,000. This was the beginning of their business plan to create a programming company. The men used that money to buy an Apple server. And they then launched WebGenesis.
Then Came the Launch of theGlobe.com
From December 1994 to March 1995, the men worked hard on a site they called theGlobe.com. The launch of the website was in April of 1995. By the first of May, they were already seeing success. The site had reached 44,000 users.
Paternot and Krizelman then got some help from some Cornell computer science grads, and by the end of 1995, they had hired 17 employees.
TheGlobe.com was primarily a site for chatrooms and online clubs, and it quickly became popular. You can think of it as a very early version of Facebook. It was an online community network that allowed users to interact with other people, personalize their profiles, and publish content.
By 1997 a company called Dancing Bear Investments had invested an incredible $20 million in theGlobe.com.
Keep in mind that this was all happening at the start of the dot-com bubble years. At the time, everyone was trying to get in on the internet craze. And wealthy people were all too happy to invest in new sites that they believed could generate a significant return. People had a lot of confidence that these sites would turn a profit.
The timing of Paternot and Krizelman’s launch of theGlobe.com was perfect for attracting big investors (and they did).
It wasn’t long before the 23-year old college students were making bank. They each had salaries of more than $100,000, and they both received another $500,000 for the sale of shares. The next thing they set their sights on was going public.
The Dot-Com Bubble
The growth of the internet over the past 20 years has gone through some troubles, including the dot-com bubble. People often use this term to describe the technology boom of the late 90s.
Watch Video: The Dot Com Bubble – Cheddar Explains
The dot-com bubble happened over a brief time when the internet was brand new. The internet was an undiscovered territory, and people were very excited about it. During this time, a lot of computer-savvy twenty-year-olds became overnight millionaires.
Kids who were computer nerds in high school were now leading the charge into this exciting time. Anyone with money was investing in the internet.
No technology in history has ever spread so fast or so far to so many people.
The problem, of course, is that the dot-com bubble was just a bubble. And bubbles can only get so big. So eventually, that bubble popped.
When it popped, most of the websites and domains that had previously looked like superstars instantly became worthless.
This is exactly what happened to theGlobe.com.
Understanding How to Avoid Another Internet Bubble
We learned a lot from the failures of the dot-com bubble. The ways to avoid another internet bubble include:
- Just because a site has a lot of users doesn’t mean that it will be profitable
- A lot of companies are way too speculative
- You must have a sound business model
- You cannot ignore basic business fundamentals
- The key is to correlate with the stock market
The Rise of theGlobe.com
TheGlobe.com had a lot of early success, getting users and investors. But Paternot and Krizelman had no idea how their worlds would change once they went public.
In November of 1998, the two men issued their IPO. This happened at the peak of the dot-com bubble when there was a frenzy over new sites. They set their target stock price at $9 a share.
The site’s shares were set to open at $9. However, the first trade occurred at an incredible $87. The price shot all the way up to $97 a share as the day went on and then settled at $63.50 by the end of trading.
TheGlobe.com set an all-time record for the most significant increase of initial share price in the history of IPOs. TheGlobe.com’s stock had a first-day increase of 606 percent! They held that record for over 15 years.
That first day of trading on theGlobe.com saw 3.1 million shares traded. On that first day alone, they made $27.9 million. By the end of that day, the market capitalization value of the company was nearly a billion dollars.
In just one day, Paternot and Krizelman were worth more than $100 million each. Not too bad considering they were only 24 years old.
The Expansion Into Gaming
After theGlobe.com went public, they expanded into the gaming world. The men bought Computer Games Magazine, happypuppy.com, and Chips and Bits. All of these sites were about gaming and related paraphernalia.
Unfortunately, the success of theGlobe.com was short-lived.
The youth and immaturity of the two men showed up before too long. After CNN ran an expose about Paternot, their public image suffered. The piece showed that the 24-year old millionaire behaved outrageously. He was spending money like crazy and was seen as being excessive and irresponsible.
Paternot actually said on camera, “Got the girl. Got the money. Now I’m ready to live a disgusting, frivolous life.” He made this declaration while standing on a table in a bar wearing shiny, leather pants.
This stupid statement earned Paternot the nickname of “the CEO in the plastic pants.” The whole incident took a toll on the company’s image.
theGlobe.com saw its success explode overnight. But the downfall was even faster.
The dot-com bubble was starting to pop by 1999. Investors realized that the money they thought they’d make from the internet boom wasn’t a sure thing at all.
It didn’t take long before shares in dot-com businesses started to decline quickly.
TheGlobe.com’s share prices dropped rapidly over the next six months. They went from $90 to $40 to $10 and eventually bottomed out at less than 10 cents a share. This was a drastic fall from the $97 a share they were making just a year earlier.
TheGlobe.com’s market capitalization saw a 99.52 percent decrease and went from $840 million to just $4 million in 2001.
In 2000 board members and investors forced Paternot and Krizelman to resign. The company then brought in the former Vice President of AICPA (the American Institute of Certified Accountants) in a last-ditch effort to save theGlobe.com. But it was no use. The company was doomed.
By the summer of 2001, half of the staff had been laid off, and the site was shut down, although they continued to publish Computer Games Magazine and host a handful of smaller sites.
A Short-Lived Comeback
In 2003 theGlobe.com tried to make a comeback. They introduced a VoIP service similar to Skype called GloPhone. The rally didn’t work because GloPhone immediately failed. It suffered from no sales, poor reviews, and lawsuits. The company was sued for patent infringement by Sprint Nextel, and the short-lived company tanked.
After GloPhone failed, the company was kept afloat by a few publications, including Computer Gaming Magazine, which was considered one of the top magazines for gaming in the country. These small publications kept the company in business.
But even that success didn’t last long. Someone in the company got the greedy idea to send unsolicited messages to users on MySpace.com. That stupid idea ended up getting them sued again, this time for spamming. The settlement was nearly $120 million, and that basically destroyed what was left of theGlobe.com.
After that lawsuit, Computer Gaming Magazine and the others were put on ice.
Sprint sued theGlobe.com for patent infringement over GloPhone. That did a lot of damage to the company. But then they were hurt even further when they were sued under the CAN-SPAM Act, an anti-spam law.
TheGlobe.com went through six different putative shareholder class action lawsuits. They were sued by vendors who felt cheated by GloPhone.
Later in October of 2011, the company was sued again. This time it was related to the company’s connection with the sale of SendTec and RelationServ Media in 2005. Ultimately theGlobe.com was obliterated.
In May of 2005, theGlobe.com attempted another comeback with the purchase of the Tralliance Corporation. For several years after that, theGlobe.com redirected users to Tralliance’s home page.
By September of 2009, the company was forced to sell off all of the assets of Tralliance Corporation to the Tralliance Registry Management Company LLC. The LLC was run by Michael Egan, the Chief Executive Officer of theGlobe.com.
Part of the agreement was that theGlobe.com would receive a 10 percent earn-out from the LLC’s net revenue.
For theGlobe.com, this would be the only source of future revenue. After that, they became just a shell company.
TheGlobe.com’s annual report in 2011 showed that the company had just a little over $6,000 in assets and $3.2 million in liabilities. Without the Tralliance earn-out, the company would have to file for bankruptcy.
At the very end of 2017, Delfin Midstream LLC bought over 70 percent of the shares of theGlobe.com. As of the summer of 2019, theGlobe.com held its status as a fully reporting shell company. And they re-appointed Frederick Jones as CEO for another year.
The Bottom Line
As you can see, the story of theGlobe.com is interesting and even embarrassing. It shot off like a meteor and made millionaires out of two young college students. Unfortunately, the success of theGlobe.com was short-lived.
They are a poster child for the busted companies that came out of the dot-com bubble. Hopefully, tech companies have learned a valuable lesson from the rise and fall of theGlobe.com.