The Dot-Com Kids

Last February, before the market dipped and tech stocks stumbled, 60 Minutes II Correspondent Bob Simon profiled some of New York's cutting-edge Web scene. Below is the original story. For an update on what has happened since, scroll down to the bottom.

"I think this definitely is not a fad, what's occurring right now," said Jeff Dachis, co-founder of Razorfish, one of New York's leading Web companies. "This is absolutely real; this is a revolution; we're packing rifles; and this is going to be something that's going to change the course of the way the world is functioning."

The nexus of all this energy is called Silicon Alley, a group of old sweatshops in lower Manhattan. Kanarick and his partner, Jeff Dachis, started Razorfish there. The company is now worth $4 billion and is one of the most successful companies on the Web.

What does Razorfish actually do? Dachis, who is worth about $180 million, has a little trouble with that question. "We've asked our clients to recontextualize their business," he said. "We've recontextualized what it is to be a services business."

Which means? "We radically transform businesses to invent and reinvent them," he said.

Razorfish helps established companies make more money and reach more customers through the Internet. It helped design the site for brokerage firm Charles Schwab and has also worked with Nissan, Nokia, Nicklodeon and NASA.

Silicon Alley is full of people like Dachis and Kanarick. Out of the 1,200 people who work at Razorfish, more than 20 are millionaires, Dachis says. Kanarick says that the number may top 100. The average age of these people, Kanarick says, is probably mid- or upper-20s.

Calacanis recently spoke to a class at Harvard Business School. "The piece of advice I gave them was: Take whatever money you have left that you haven't paid Harvard for your tuition and leave school tomorrow and start an Internet company," he said.

"What you'll see a lot of in the Internet community is there's a lot of drive," said Rufus Griscom, who with his girlfriend Genevieve Field puts out nerve.com, an online magazine that covers sex. They call it "literate smut." It includes articles and pictures about sex and a feature called "position of the day."

"This is the first magazine that has been directed to both women and men that's about sex," Field said.

They began Nerve in their bedroom. "We had like a 20-foot commute," Griscom said.

Eventually they moved into a loft. In the past few months, the staff has more than doubled. The company intends to go public soon and use the new investment to pay for technology that will make personal ads even more personal.

"You will be able to go online and say, 'I'm looking for someone who loves Faulkner, hates their mother, lives in rural Mississippi, is 5' 11'', has green eyes,' and 500 different people come up on the screen," said Griscom. "And you click on one that looks interesting, and a full, high-resolution picture of them in video comes up. And you can talk to them, you know, through live, two-way televideo."

Nerve hasn't made a profit yet. Most Silicon Alley companies haven't. Despite this, the companies have high stock prices and little trouble finding backing. Wall Street believes that the Internet is the future and that these kids are planting their flags on beachfront properties.

One of those trying to plant a flag is Josh Harris. He runs Pseudo.com, which produces 60 online shows a week.

Harris is, to say the least, confident: "The new boy is in town; the new boy is taking over as king of media," he said.

Pseudo now has 10 channels, including a hip-hop channel. In a year, Pseudo will have 25, Harris said. "What's happening with us is, we're starting to realize we're in the business of programming people's lives."

The programming so far would probably not make it on a major network. There's a show about wrestling called "And Justice for Brawl," a cartoon game show, and one about hip-hop.

Compared to network TV, Pseudo's show and all Web shows, have small audiences. And the programming is low budget. But the dot-com kids say that isn't the point. Unlike the TV networks, they're not interested in mass appeal. They're going for specialized subjects with small, specialized audiences. This is called microcasting.

"The balance of power shfts on the Internet to the individual," Calacanis said. "This is a two-way medium. For three or four decades, we've been sitting here in front of this TV consuming a one-way medium that we had no control over."

"And the Internet is about the exact opposite. The Internet is about giving the consumer exactly what they want, whether there's an audience of one or 1,000 or 10,000 and then figuring out how to make money on it later."

Harris wants to change the entire media terrain. "I'm in a race to take CBS out of business," he said. "That's my focus. That's what my bankers are telling me to do. The race is on. We're in the hunt."

Some call this attitude arrogant. Calacanis, however, sees it as confidence.

"It's a religion for the people who started this thing," he says. "It's religion; it's a mission; there's something to be proven here."

At Razorfish, stock prices have tanked. The Razorfish CEOs, Craig Kanarick, and Jeff Dachis, are worth about $100 million less than they were in February.

Nerve.com has started publishing an old-fashioned sex magazine, printed on paper. Pseudo.com has had to reconsider its plans to become a media giant: In June, about 50 employees were laid off.