Is This The

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Mark W. Richards for Time

THE SURVIVOR: Janice Crotty, a Web consultant at InMomentum Group in San Francisco, worked at two now defunct dotcoms last year, including her own

Mark W. Richards for Time
THE PLAYER: An in-demand engineer, Jason Fisher could work at any website he chose. But he took a pay cut to join hopes the options will pay up

In every revolution there comes that bitter moment when the flag-waving has to stop, the grand social theories have to adapt to reality, and a large number of the revolutionaries inevitably find themselves hauled off to the guillotine. The dotcom revolution is no different, except that, true to form, it has accelerated the process. The time it takes to go from hero on the barricades to zero with your head in a basket has shrunk to a nanosecond.

For even the truest of new-economy true believers, bloody April--during which the NASDAQ fell 25.3% and the IPO window slammed shut--has given way to a Summer of Discontent. While most of the big names have recovered a bit from their April depths, they are still down for the year: Yahoo, off 50%; CMGI, down 70%; , off 57%. Just last Friday, amid renewed analyst concerns about disappointing revenues, dropped 19% more to close at $34, off 70% from its December high. Amazon laid off 150 workers in January, Oxygen Media fired 15, and AltaVista sacked 50.

And when these Internet elephants begin to stumble, the mice get crushed. For every Amazon or Yahoo, there are 10,000 smaller Net companies that never got the chance to go public--and now probably never will. For those companies and their employees, who believed just as hard as Jeff Bezos and Jerry Yang but got to the barricades a lot later, the business climate is drastically different. Call it the new new economy.

Consider the case of Tor Thorsen, movie reviewer and employee No. 5 at , formerly one of the Web's largest DVD and video stores. Six months ago, Thorsen was a true believer. Three years' worth of 60-hr. weeks seemed about to pay off. He held 32,000 shares of, which was planning to go public. And he was whooping it up at the Sundance Film Festival. A-list stars like Kevin Spacey, Nick Nolte and Emily Watson granted interviews. "For the first time, we were really part of the film scene," recalls Thorsen. "People knew our name. They were like, 'See you next year.'"

Except there will be no next year. Last week's headquarters in Emeryville, Calif., was like a ghost town. Every last one of the site's 230 employees had got a pink slip the previous week. Some, in a rush or in disgust, hadn't even cleaned out their cubicles. Thorsen and 14 others remained as independent contractors, keeping the site running while its owner, Hollywood Entertainment, based in Portland, Ore., worked out the details of how to give it a decent burial.

In 1998, in the full flush of the revolution, Hollywood ponied up $100 million for Now, with the site's IPO canceled because of lack of interest and venture capital running dry, its e-commerce operations were halted. That left Thorsen's 32,000 shares worthless. "I used to think about buying a house and paying off my student loans," he says. "Now I'm thinking about unemployment."

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 's workers went under the hammer. in Framingham, Mass., laid off 80 employees--that's 41% of its work force. Streaming video site axed 58 jobs in New York City. Planned IPOs were canned by firms including, electronics site in Portland, Ore., and video-delivery site in New York City. , 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 arrived at'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 , 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.

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