@LARGE
Circular logic

By Scott Kirsner

HAYWARD, Calif. - Earlier this month, I went to visit a friend who works at Yahoo. She's thinking about starting her own company eventually, and she told me about one of her latest hobbies: going to liquidation auctions of failed dot-coms to buy office equipment.

''I went to the auction for Riffage.com'' - a now-defunct online music site - ''and got 75 whiteboards for $150,'' she told me, above the clacking of an air hockey game in Yahoo's employee cafeteria. She was stocking up on supplies for her prospective start-up rather than buying them at full price later on.

It sounded like a Silicon Valley version of the Circle of Life: a new group of entrepreneurs feasting on the remains of their predecessors.

''You should check it out,'' my friend advised me.

Since she was wise enough to take a job at Yahoo four years back, I decided to heed her advice. Last week, while in the Bay Area, I drove out to Hayward, Calif., to witness the liquidation of AllAdvantage.com's 80,000-square-foot headquarters.

The company was started in 1999 with an innovative - and dubious - business model: Pay people to surf the Web.

While you surfed, you could earn 50 cents an hour for looking at ads that AllAdvantage displayed on a special ''viewbar'' on your screen. You could also earn 10 cents an hour for surfing done by anyone you recruited into the network. (Chuck Ponzi would have been proud.) AllAdvantage collected demographic data about all its surfers, as well as information about what sites they visited, and it planned to charge advertisers a premium to reach its users.

The plan worked perfectly until the venture capital - more than $100 million of it - ran out last year and there wasn't nearly enough revenue to keep the company afloat. AllAdvantage shut down Feb. 1 after multiple rounds of layoffs.

I arrived at AllAdvantage's headquarters, a one-story, warehouse-style building, at 9:30 in the morning.

Before taking a look at the merchandise being offered, I stopped at the registration table to get my bidder's number. The person registering next to me turned out to be Carl Anderson, one of the company's founders, who had come to the auction with a small group of fellow AllAdvantage employees.

For them, it was like a wake. They looked across the expanses of empty gray cubicles and commented ironically on how nice the auction catalog looked, with the AllAdvantage logo on the front cover.

On tables throughout the headquarters were meticulously numbered lots of laptops and monitors, Sprint flip phones, and Ricoh laser printers. There were 3Com hubs and Cisco routers, Sun servers and Polycom speaker phones - all the tackle essential to a tech start-up.

The strangest thing of all - it was like looking at a stopped clock on the submerged Titanic - was a half-erased whiteboard in the company's old supply room.

''How can [AllAdvantage] make money by repackaging software we already know and understand?'' it asked in faded blue marker.

Below the question were a few smudged attempts at answers.

Most of the people I bumped into while I was surveying the goods were dealers who would buy and then flip AllAdvantage's cubicles and cabinets and copiers. But at least two of my fellow bidders were entrepreneurs looking to snag some bargains for their own young companies.

The scrappy approach is back in vogue. People are actually starting companies in garages again, not expensive downtown office space with faux garage doors installed by interior decorators. And they're buying their office equipment at deep discounts, not shelling out for first quality.

When the auction got underway at 10 a.m., there were about 100 people in the room, with 400 more tuned in and ready to bid on the Web. The second lot, a Swingline stapler, went to Carl Anderson, who wanted a souvenir, for $2.

''You know this is gonna be a good auction, because we bought that [stapler] for a buck this morning at Wal-Mart,'' joked Ross Dove, the auctioneer and CEO at Dovebid.com, which had organized the sale.

In the back of the room, I found Peter Allen of the Los Angeles advisory firm Sherwood Partners, which had helped to dissolve AllAdvantage when it became clear the company couldn't survive. Allen had hired Dovebid to conduct the auction.

''I'm old school,'' Allen said. ''I believe in real businesses. When I first got there, there were four employees playing doubles ping-pong in the middle of the day. I couldn't believe it. I think there's a difference between running a playground and running a business.''

As we were talking, AllAdvantage's phone system, which Allen said was worth about $300,000, sold for $45,000. Allen said he'd been supervising dot-com dissolutions all over the country, including DrDrew.com in Austin, Texas, and iChristian in Wilsonville, Ore.

''I felt like the devil doing that one,'' he quipped.

I asked him about the Circle of Life concept - whether he thought that one generation of dead technology start-ups would foster another generation of (hopefully) smarter new businesses.

''Oh, absolutely,'' Allen answered. ''All this stuff will get spread around, and maybe the people here who buy it will have learned some lessons before they build their companies too fast. This place had 500 employees last year, and not all that much revenue. The only way I can live with this job is that I know it generates new businesses that will hopefully be better at what they do and more competitive than the old ones were.''

I had to leave before the Titanic whiteboard came up for bid. As I got into my rental car and hopped onto the highway, Elton John was singing in my head.

Scott Kirsner is a Boston freelance writer and a contributing editor at Wired and Fast Company magazines.