Blowing bubbles

Internet - Andrew Brown on crazy money for websites

How much would you pay for the ramblings of a few thousand teenage geeks obsessed with Natalie Portman? A million pounds? Ten million pounds? A hundred million dollars perhaps, in the middle of a bubble? Well, V A Linux, a firm that has been the biggest beneficiary of the Linux stock-market hype to date, has just paid a billion dollars for Andover Net, a company whose main asset is the Slashdot website.

That's right: £600,000,000 for a website that doesn't even sell anything. Slashdot is simply a collection of pointers to other interesting sites and stories, along with discussions among the visitors.

To some extent the story is phoney because the price is largely being paid in funny money, or V A Linux shares. When these shares were launched last autumn, they gained more than 700 per cent in value on their first day on the stock exchange - a record that still stands. But they have halved in value in the past three months. Their share price looks like a graph of church attendance, except that it has a couple of spikes and rallies.

V A Linux makes computers, a business that is not hard to get into and not easy to make money at; it fits them up with Linux, which is free; and sells them with support, which is necessary. It's perfectly possible for such a company to make a profit and perhaps, over a millennium or so, to make a profit that would justify a share price of $120. But it's very hard to see what is to stop other people jumping on the bandwagon, once - and if - it starts to roll. Assembling computers and installing Linux on them does not require huge investments or even great expertise. I'm writing this on a computer I assembled myself with a Swiss Army Knife. I'm not going to put any hardware firms out of business, but so long as you need no more equipment or knowledge to build a PC than I have, no computer manufacturer could ever acquire the sort of monopoly that Microsoft has.

It's true that Linux, and Unix generally, are systems that will always require expertise to run at their best, and that people will make money out of that for as long as these operating systems exist. But it won't be the kind of inexhaustible gusher required to keep this bubble inflated. Every year, almost every month, Linux gets easier for normal people to use. The demand for technical support is much more likely to be met by more intelligent software than by more companies. This is another reason for supposing that these prices are an absurd bubble; and when you look at the software in detail, that becomes even clearer.

One of the most impressive free software projects is the KDE desktop, a sort of Windows replacement for Linux: it provides a pretty and powerful desktop within which useful programs such as word processors and web browsers can do their stuff. The whole thing is free to use and comes with all the source code, in the best tradition of Linux: in fact, its website has just moved from a German university to a site owned by V A Linux. I expect that, in about six months' time, it will in important respects be better than Windows. But no one makes money directly out of KDE. It is simply an association of volunteer programmers and the software that enables them to co-operate across the Internet.

The founder of the project, Mathias Ettrich, recently wrote an analysis of the whole thing for a German magazine, asking what made people put years of effort into such a project despite making so little money from it. It's true that the stars of the movement have made fortunes from the bubble. But they could not have expected to do this when they started, and the great majority of the coders, as Ettrich pointed out, have spent far more on computer books and stuffed penguin mascots than they might ever hope to make back from their software. His answer is brief and terrifying: "The developers of free software are neither easily led, nor willing to toil selflessly for someone else's cause, whether this is the improvement of society or the struggle against Microsoft and all other commercial software publishers. What they really care about is having fun from a wonderful hobby."

And Slashdot.org is a site where they can meet people with the same sense of humour while the owners laugh all the way to the bank. I only hope for their sake that they manage to sell out before the supply of Internet shares balances the demand. Everyone agrees that this is a bubble and that the only question is whether it will subside with a quiet hiss or a deafening bang. But if anyone will pay a billion dollars for Slashdot, I'm putting my hands over my ears.