Dot-com bubble
Overview
 
The dot-com bubble was a speculative bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

 covering roughly 1995–2000 (with a climax on March 10, 2000, with the NASDAQ
Nasdaq Composite
The Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. ...

 peaking at 5132.52 in intraday trading before closing at 5048.62) during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more recent Internet sector
Quaternary sector of industry
The quaternary sector of the economy is a way to describe a knowledge-based part of the economy which typically includes services such as information generation and sharing, information technology, consultation, education, research and development, financial planning, and other knowledge-based...

 and related fields. While the latter part was a boom and bust
Boom and bust
A credit boom-bust cycle is an episode characterized by a sustained increase in several economics indicators followed by a sharp and rapid contraction. Commonly the boom is driven by a rapid expansion of credit to the private sector accompanied with rising prices of commodities and stock market index...

 cycle, the Internet boom is sometimes meant to refer to the steady commercial growth of the Internet with the advent of the world wide web
World Wide Web
The World Wide Web is a system of interlinked hypertext documents accessed via the Internet...

, as exemplified by the first release of the Mosaic web browser
Mosaic (web browser)
Mosaic is the web browser credited with popularizing the World Wide Web. It was also a client for earlier protocols such as FTP, NNTP, and gopher. Its clean, easily understood user interface, reliability, Windows port and simple installation all contributed to making it the application that opened...

 in 1993, and continuing through the 1990s.

During the mid-to-late 1990s, Cisco Systems
Cisco Systems
Cisco Systems, Inc. is an American multinational corporation headquartered in San Jose, California, United States, that designs and sells consumer electronics, networking, voice, and communications technology and services. Cisco has more than 70,000 employees and annual revenue of US$...

, Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...

, Intel, and Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...

 were known as "the Four Horsemen of the NASDAQ" because of their dominant market capitalizations.
Encyclopedia
The dot-com bubble was a speculative bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

 covering roughly 1995–2000 (with a climax on March 10, 2000, with the NASDAQ
Nasdaq Composite
The Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. ...

 peaking at 5132.52 in intraday trading before closing at 5048.62) during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more recent Internet sector
Quaternary sector of industry
The quaternary sector of the economy is a way to describe a knowledge-based part of the economy which typically includes services such as information generation and sharing, information technology, consultation, education, research and development, financial planning, and other knowledge-based...

 and related fields. While the latter part was a boom and bust
Boom and bust
A credit boom-bust cycle is an episode characterized by a sustained increase in several economics indicators followed by a sharp and rapid contraction. Commonly the boom is driven by a rapid expansion of credit to the private sector accompanied with rising prices of commodities and stock market index...

 cycle, the Internet boom is sometimes meant to refer to the steady commercial growth of the Internet with the advent of the world wide web
World Wide Web
The World Wide Web is a system of interlinked hypertext documents accessed via the Internet...

, as exemplified by the first release of the Mosaic web browser
Mosaic (web browser)
Mosaic is the web browser credited with popularizing the World Wide Web. It was also a client for earlier protocols such as FTP, NNTP, and gopher. Its clean, easily understood user interface, reliability, Windows port and simple installation all contributed to making it the application that opened...

 in 1993, and continuing through the 1990s.

During the mid-to-late 1990s, Cisco Systems
Cisco Systems
Cisco Systems, Inc. is an American multinational corporation headquartered in San Jose, California, United States, that designs and sells consumer electronics, networking, voice, and communications technology and services. Cisco has more than 70,000 employees and annual revenue of US$...

, Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...

, Intel, and Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...

 were known as "the Four Horsemen of the NASDAQ" because of their dominant market capitalizations. As the bursting of the Internet bubble approached, Cisco Systems, EMC
EMC Corporation
EMC Corporation , a Financial Times Global 500, Fortune 500 and S&P 500 company, develops, delivers and supports information infrastructure and virtual infrastructure hardware, software, and services. EMC is headquartered in Hopkinton, Massachusetts, USA.Former Intel executive Richard Egan and his...

, Sun Microsystems
Sun Microsystems
Sun Microsystems, Inc. was a company that sold :computers, computer components, :computer software, and :information technology services. Sun was founded on February 24, 1982...

, and Oracle
Oracle Corporation
Oracle Corporation is an American multinational computer technology corporation that specializes in developing and marketing hardware systems and enterprise software products – particularly database management systems...

 were known as "the Four Horsemen of the Internet."

The period was marked by the founding (and, in many cases, spectacular failure) of a group of new Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...

-based companies commonly referred to as dot-coms
Dot-com company
A dot-com company, or simply a dot-com , is a company that does most of its business on the Internet, usually through a website that uses the popular top-level domain, ".com" .While the term can refer to present-day companies, it is also used specifically to refer to companies with...

. Companies were seeing their stock prices shoot up if they simply added an "e-" prefix to their name and/or a ".com
.com
The domain name com is a generic top-level domain in the Domain Name System of the Internet. Its name is derived from commercial, indicating its original intended purpose for domains registered by commercial organizations...

" to the end, which one author called "prefix
Prefix
A prefix is an affix which is placed before the root of a word. Particularly in the study of languages,a prefix is also called a preformative, because it alters the form of the words to which it is affixed.Examples of prefixes:...

 investing".

A combination of rapidly increasing stock prices, market confidence that the companies would turn future profits, individual speculation
Speculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...

 in stocks, and widely available venture capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...

 created an environment in which many investors were willing to overlook traditional metrics such as P/E ratio
P/E ratio
The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share...

 in favor of confidence in technological advancements.

Bubble growth

Venture capitalists saw record-setting growth as dot-com
Dot-com company
A dot-com company, or simply a dot-com , is a company that does most of its business on the Internet, usually through a website that uses the popular top-level domain, ".com" .While the term can refer to present-day companies, it is also used specifically to refer to companies with...

companies experienced meteoric rises in their stock prices and therefore moved faster and with less caution than usual, choosing to mitigate the risk by starting many contenders and letting the market decide which would succeed. The low interest rates in 1998–99 helped increase the start-up capital amounts. Although a number of these new entrepreneurs had realistic plans and administrative ability, many more of them lacked these characteristics but were able to sell their ideas to investors because of the novelty of the dot-com concept.

A canonical "dot-com" company's business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...

 relied on harnessing network effect
Network effect
In economics and business, a network effect is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service is dependent on the number of others using it.The classic example is the telephone...

s by operating at a sustained net loss to build market share
Market share
Market share is the percentage of a market accounted for by a specific entity. In a survey of nearly 200 senior marketing managers, 67 percent responded that they found the "dollar market share" metric very useful, while 61% found "unit market share" very useful.Marketers need to be able to...

 (or mind share
Mind share
Mind share, or the development of consumer awareness or popularity, is one of the main objectives of advertising and promotion. When people think of examples of a product type or category, they usually think of a limited number of brand names. For example, a prospective buyer of a college education...

). These companies offered their services or end product for free with the expectation that they could build enough brand awareness to charge profitable rates for their services later. The motto "get big fast" reflected this strategy.

During the loss period the companies relied on venture capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...

 and especially initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...

s of stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 to pay their expenses while having no source of income at all. The novelty of these stocks, combined with the difficulty of valuing the companies, sent many stocks to dizzying heights and made the initial controllers of the company wildly rich on paper. This combined with a period of relative wealth, with many "ordinary" people with spare cash investing and day-trading, which caused a lot of money to chase the available investment opportunities.

Soaring stocks

In financial markets, a stock market bubble
Stock market bubble
A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation....

 is a self-perpetuating rise or boom in the share prices of stocks of a particular industry. The term may be used with certainty only in retrospect when share prices have since crashed. A bubble occurs when speculators note the fast increase in value and decide to buy in anticipation of further rises, rather than because the shares are undervalued. Typically many companies thus become grossly overvalued. When the bubble "bursts," the share prices fall dramatically, and many companies go out of business.

The dot-com model was inherently flawed: a vast number of companies all had the same business plan of monopolizing
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 their respective sectors through network effects, and it was clear that even if the plan were sound, there could only be one network-effects winner in each sector, and therefore that most companies with this business plan would fail. In fact, many sectors could not support even one company powered entirely by network effects. American news media, including respected business publications such as Forbes
Forbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...

and the Wall Street Journal, encouraged the public to invest in risky companies, despite many of the companies' disregard for basic financial and even legal principles.

In spite of this, however, a few company founders made vast fortunes when their companies were bought out at an early stage in the dot-com stock market bubble. These early successes made the bubble even more buoyant. An unprecedented amount of personal investing occurred during the boom, and the press reported the phenomenon of people quitting their jobs to become full-time day traders
Day trading
Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions are usually closed before the market close for the trading day...

.

Free spending

According to dot-com theory, an Internet company's survival depended on expanding its customer base as rapidly as possible, even if it produced large annual losses. For instance, Google and Amazon did not see any profit in their first years. Amazon was spending on expanding customer base and alerting people to its existence and Google was busy spending on creating more powerful machine capacity to serve its expanding search engine. The phrase "Get large or get lost" was the wisdom of the day. At the height of the boom, it was possible for a promising dot-com to make an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...

 (IPO) of its stock and raise a substantial amount of money even though it had never made a profit — or, in some cases, earned any revenue whatsoever. In such a situation, a company's lifespan was measured by its burn rate
Burn rate
Burn rate is a synonymous term for negative cash flow. It is a measure for how fast a company will use up its shareholder capital. If the shareholder capital is exhausted, the company will either have to start making a profit, find additional funding, or close down.The term came into common use...

: that is, the rate at which a non-profitable company lacking a viable business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...

 ran through its capital served as the metric.

Public awareness campaigns were one of the ways in which dot-coms sought to expand their customer bases. These included television ads, print ads, and targeting of professional sporting events. Many dot-coms named themselves with onomatopoeic nonsense words that they hoped would be memorable and not easily confused with a competitor. Super Bowl XXXIV
Super Bowl XXXIV
Super Bowl XXXIV featured the National Football Conference champion St. Louis Rams and the American Football Conference champion Tennessee Titans in an American football game to decide the National Football League champion for the 1999 regular season...

 in January 2000 featured 17 dot-com companies that each paid over $2 million for a 30-second spot. By contrast, in January 2001, just three dot-coms bought advertising spots during Super Bowl XXXV
Super Bowl XXXV
Super Bowl XXXV was played on January 28, 2001 at Raymond James Stadium in Tampa, Florida to decide the National Football League champion following the 2000 regular season. The American Football Conference champion Baltimore Ravens defeated the National Football Conference champion New York...

. In a similar vein, CBS-backed iWon.com
IWon
IWon.com is a free casual game site and web portal that offers the chance to win cash and prizes through activities such as clicking through links or playing online games...

 gave away $10 million to a lucky contestant on an April 15, 2000 half-hour primetime special that was broadcast on CBS.

Not surprisingly, the "growth over profits" mentality and the aura of "new economy
New Economy
The New Economy is a term to describe the result of the transition from a manufacturing-based economy to a service-based economy. This particular use of the term was popular during the Dot-com bubble of the late 1990s...

" invincibility led some companies to engage in lavish internal spending, such as elaborate business facilities and luxury vacations for employees. Executives and employees who were paid with stock options instead of cash became instant millionaires when the company made its initial public offering; many invested their new wealth into yet more dot-coms.

Cities all over the United States sought to become the "next Silicon Valley" by building network-enabled office space to attract Internet entrepreneurs. Communication providers, convinced that the future economy would require ubiquitous broadband access, went deeply into debt to improve their networks with high-speed equipment and fiber optic cables. Companies that produced network equipment like Nortel Networks were irrevocably damaged by such over-extension; Nortel declared bankruptcy in early 2009. Companies like Cisco, which did not have any production facilities, but bought from other manufacturers, were able to leave quickly and actually do well from the situation as the bubble burst and products were sold cheaply.

In the struggle to become a technology hub, many cities and states used tax money to fund technology conference centers, advanced infrastructure, and created favorable business and tax law to encourage development of the dot com industry in their locale. Virginia's "Technology Corridor" is a prime example of this activity. Large quantities of high speed fiber links were laid, and the State and local governments gave tax exemptions to technology firms. Many of these buildings can be viewed along I-495
Interstate 495 (Capital Beltway)
Interstate 495 is a Interstate Highway that surrounds the United States' capital of Washington, D.C., and its inner suburbs in adjacent Maryland and Virginia. I-495 is widely known as the Capital Beltway or simply the Beltway, especially when the context of Washington, D.C., is clear...

, after the burst, as vacant office buildings.

Similarly, in Europe the vast amounts of cash the mobile
Mobile phone
A mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...

 operators spent on 3G
3G
3G or 3rd generation mobile telecommunications is a generation of standards for mobile phones and mobile telecommunication services fulfilling the International Mobile Telecommunications-2000 specifications by the International Telecommunication Union...

 licences in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...

, and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, for example, led them into deep debt. The investments were far out of proportion to both their current and projected cash flow
Cash flow
Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.Cash flow...

, but this was not publicly acknowledged until as late as 2001 and 2002. Due to the highly networked nature of the IT
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...

 industry, this quickly led to problems for small companies dependent on contracts from operators.

The bubble bursts

Over 1999 and early 2000, the U.S. Federal Reserve increased interest rates six times, and the economy began to lose speed. The dot-com bubble burst, numerically, on Friday, March 10, 2000, when the technology heavy NASDAQ Composite
Nasdaq Composite
The Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. ...

 index, peaked at 5,048.62 (intra-day peak 5,132.52), more than double its value just a year before. The NASDAQ fell slightly after that, but this was attributed to correction by most market analysts; the actual reversal and subsequent bear market may have been triggered by the adverse findings of fact in the United States v. Microsoft case which was being heard in federal court
United States federal courts
The United States federal courts make up the judiciary branch of federal government of the United States organized under the United States Constitution and laws of the federal government.-Categories:...

. The findings, which declared Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...

 a monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

, were widely expected in the weeks before their release on April 3. The following day, April 4, the NASDAQ fell from 4,283 points to 3,649 and rebounded back to 4,223, forming an intraday chart that looked like a stretched V.

On March 20, 2000, after the NASDAQ had lost more than 10 percent from its peak, financial magazine Barron's shocked the market with its cover story "Burning Up". Sean Parker
Sean Parker
Sean Parker is an American technology businessman and entrepreneur. He co-founded Napster, Plaxo, Causes, and Airtime, and was Facebook's founding president. His net worth is estimated at $2.1 billion.-Early life:...

 stated: "During the next 12 months, scores of highflying Internet upstarts will have used up all their cash. If they can't scare up any more, they may be in for a savage shakeout. An exclusive survey of the likely losers." The article pointed out: "America's 371 publicly traded Internet companies have grown to the point that they are collectively valued at $1.3 trillion, which amounts to about 8% of the entire U.S. stock market."

By 2001 the bubble was deflating at full speed. A majority of the dot-coms ceased trading after burning through their venture capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...

, many having never made a ″net″ profit
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...

. Investors often referred to these failed dot-coms as "dot-bombs."

Aftermath

On January 11, 2001, America Online, a favorite of dot-com investors and pioneer of dial-up Internet access, merged with Time Warner
Time Warner
Time Warner is one of the world's largest media companies, headquartered in the Time Warner Center in New York City. Formerly two separate companies, Warner Communications, Inc...

, the world's largest media company, in the second-largest M&A transaction worldwide. The transaction has been described as "the worst in history". Within two years, boardroom disagreements drove out both of the CEO
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...

s who made the deal, and in October 2003 AOL Time Warner dropped "AOL" from its name.

Several communication companies could not weather the financial burden and were forced to file for bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

. One of the more significant players, WorldCom, was found practicing illegal accounting practices
Accounting scandals
Accounting scandals, or corporate accounting scandals, are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations...

 to exaggerate its profits on a yearly basis. WorldCom's stock price fell drastically when this information went public, and it eventually filed the third-largest corporate bankruptcy in U.S. history. Other examples include NorthPoint Communications
NorthPoint Communications
NorthPoint Communications was a CLEC , focused on data transmission rather than voice...

, Global Crossing
Global Crossing
Global Crossing Limited was a telecommunications company that provides computer networking services worldwide. It maintained a large backbone and offered transit and peering links, VPN, leased lines, audio and video conferencing, long distance telephone, managed services, dialup, colocation and...

, JDS Uniphase
JDS Uniphase
JDS Uniphase is a company that designs and manufactures products for optical communications networks, communications test and measurement equipment, lasers, optical solutions for authentication and decorative applications, and other custom optics. It is headquartered in Milpitas, California in the...

, XO Communications
XO Communications
XO Communications is a telecommunications company owned by XO Holdings, Inc...

, and Covad Communications. Companies such as Nortel
Nortel
Nortel Networks Corporation, formerly known as Northern Telecom Limited and sometimes known simply as Nortel, was a multinational telecommunications equipment manufacturer headquartered in Mississauga, Ontario, Canada...

, Cisco
Cisco
Cisco may refer to:Companies:*Cisco Systems, a computer networking company* Certis CISCO, corporatised entity of the former Commercial and Industrial Security Corporation in Singapore...

 and Corning were at a disadvantage because they relied on infrastructure that was never developed which caused the stock of Corning to drop significantly.

Many dot-coms ran out of capital and were acquired or liquidated
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

; the domain names were picked up by old-economy competitors or domain name investors. Several companies and their executives were accused or convicted of fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...

 for misusing shareholders' money, and the U.S. Securities and Exchange Commission fined top investment firms like Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...

 and Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...

 millions of dollars for misleading investors. Various supporting industries, such as advertising and shipping, scaled back their operations as demand for their services fell. A few large dot-com companies, such as Amazon.com
Amazon.com
Amazon.com, Inc. is a multinational electronic commerce company headquartered in Seattle, Washington, United States. It is the world's largest online retailer. Amazon has separate websites for the following countries: United States, Canada, United Kingdom, Germany, France, Italy, Spain, Japan, and...

 and eBay
EBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...

, survived the turmoil and appear assured of long-term survival, while others such as Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...

 have become industry-dominating mega-firms.

The stock market crash of 2000–2002 caused the loss of $5 trillion in the market value
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...

 of companies from March 2000 to October 2002. The 9/11 terrorist destruction of the World Trade Center's Twin Towers, killing almost 700 employees of Cantor-Fitzgerald, accelerated the stock market drop; the NYSE suspended trading for four sessions. When trading resumed, some of it was transacted in temporary new locations.

More in-depth analysis shows that 50% of the dot-coms companies survived through 2004. With this, it is safe to assume that the assets lost from the Stock Market do not directly link to the closing of firms. More importantly, however, it can be concluded that even companies who were categorized as the "small players" were adequate enough to endure the destruction of the financial market during 2000-2002. Additionally, retail investors who felt burned by the burst transitioned their investment portfolios to more cautious positions.

Nevertheless, laid-off technology experts, such as computer programmers, found a glutted job market. University degree programs for computer-related careers saw a noticeable drop in new students. Anecdotes of unemployed programmers going back to school to become accountants or lawyers were common.

List of companies significant to the bubble

For discussion and a list of dot-com companies outside the scope of the dot-com bubble, see dot-com company
Dot-com company
A dot-com company, or simply a dot-com , is a company that does most of its business on the Internet, usually through a website that uses the popular top-level domain, ".com" .While the term can refer to present-day companies, it is also used specifically to refer to companies with...

.

  • Boo.com
    Boo.com
    Boo.com was a British Internet company, founded by Swedes Ernst Malmsten, Kajsa Leander and Patrik Hedelin, which went bust following the dot-com boom of the late 1990s....

    , spent $188 million in just six months in an attempt to create a global online fashion store. Went bankrupt in May 2000.
  • Startups.com
    Startups.com
    Startups.com was the "ultimate dot-com startup", founded in 1998 by Donna Jensen, a former VentureOne executive. Startups.com was a venture-backed accelerator which had a niche market during the dot-com bubble boom where it would partner with other startup companies to handle many of the details of...

     was the "ultimate dot-com startup." Went out of business in 2002.
  • e.Digital Corporation
    E.Digital Corporation
    e. Digital Corporation is a public company based in San Diego, California. Founded in 1988 as Norris Communications, it is one of the publicly traded companies started by inventor/entrepreneur Elwood "Woody" Norris...

     (EDIG): Long term unprofitable OTCBB traded company founded in 1988 previously named Norris Communications. Changed its name to e.Digital in January 1999 when stock was at $0.06 level. The stock rose rapidly in 1999 and went from closing price of $2.91 on December 31, 1999 to intraday high of $24.50 on January 24, 2000. It quickly retraced and has traded between $0.07 and $0.165 in 2010 .
  • Freeinternet.com
    Freei
    Freei was a free Internet Service Provider from 1998-2000. In 2000, FreeInternet.com was acquired by United Online, Inc. . In 2008, United Online re-launched FreeInternet.com as a Web site dedicated to free and discounted retail offers...

     – Filed for bankruptcy in October 2000, soon after canceling its IPO. At the time Freeinternet.com was the fifth largest ISP
    Internet service provider
    An Internet service provider is a company that provides access to the Internet. Access ISPs directly connect customers to the Internet using copper wires, wireless or fiber-optic connections. Hosting ISPs lease server space for smaller businesses and host other people servers...

     in the United States
    United States
    The United States of America is a federal constitutional republic comprising fifty states and a federal district...

    , with 3.2 million users. Famous for its mascot Baby Bob
    Baby Bob
    Baby Bob is an American sitcom that aired on CBS as a midseason replacement in March 2002. The Baby Bob character had previously been on television since February 2000, appearing in commercials for FreeInternet.com...

    , the company lost $19 million in 1999 on revenues of less than $1 million.
  • GeoCities
    GeoCities
    Yahoo! GeoCities is a web hosting service, currently available only in Japan.GeoCities was originally founded by David Bohnett and John Rezner in late 1994 as Beverly Hills Internet . In its original form, site users selected a "city" in which to place their web pages...

    , purchased by Yahoo! for $3.57 billion in January 1999. Yahoo! closed GeoCities on October 26, 2009.
  • theGlobe.com
    TheGlobe.com
    theGlobe.com was an internet startup founded in 1994 by Cornell students Stephan Paternot and Todd Krizelman. A social networking service, theGlobe.com made headlines by going public on November 13, 1998 and posting the largest first day gain of any IPO in history up to that date...

     – Was a social networking service, that went live in April 1995 and made headlines by going public on November 1998 and posting the largest first day gain of any IPO in history up to that date. The CEO became in 1999 a visible symbol of the excesses of dot-com millionaires.
  • GovWorks.com – the doomed dot-com featured in the documentary film
    Documentary film
    Documentary films constitute a broad category of nonfictional motion pictures intended to document some aspect of reality, primarily for the purposes of instruction or maintaining a historical record...

     Startup.com
    Startup.com
    Startup.com is a 2001 documentary film that chronicles the dot-com start-up phenomenon and its eventual end. The film follows e-commerce website govWorks and its founders Kaleil Isaza Tuzman and Tom Herman from 1999-2000 as the Internet bubble was bursting.-Production:The film was made by...

    .
  • pets.com
    Pets.com
    Pets.com is a former dot-com enterprise that sold pet supplies to retail customers. It began operations in February 1999 and closed in November 2000. A high profile marketing campaign gave it a widely recognized public presence, including an appearance in the 1999 Macy's Thanksgiving Day Parade...

     - a former dot-com enterprise that sold pet supplies to retail customers before entering bankruptcy in 2000.
  • open.com - Was a big software security producer, reseller and distributor, declared in bankruptcy in 2001.
  • InfoSpace
    InfoSpace
    Infospace provides metasearch and private-label Internet search services for consumers and businesses.InfoSpace's flagship metasearch site is Dogpile; its other consumer brands are WebCrawler, Nation, DoGreatGood and MetaCrawler.-History:...

     – In March 2000 this stock reached a price $1,305 per share, but by April 2001 its price had crashed down to $22 a share.
  • lastminute.com
    Lastminute.com
    lastminute.com is an online travel and leisure retailer. The company was founded by Martha Lane Fox and Brent Hoberman in 1998 and became an icon of the UK internet boom of the late 1990s, floating at the peak of the dot com bubble and trading on the London Stock Exchange under the symbol...

    , whose IPO in the U.K. coincided with the bursting of the bubble.
  • The Learning Company
    The Learning Company
    The Learning Company is an American educational software company, founded in 1980. It produced a grade-based system similar to Knowledge Adventure's JumpStart series. The products for preschoolers through second graders feature Reader Rabbit, and software for more advanced students features The...

    , bought by Mattel
    Mattel
    Mattel, Inc. is the world's largest toy company based on revenue. The products it produces include Fisher Price, Barbie dolls, Hot Wheels and Matchbox toys, Masters of the Universe, American Girl dolls, board games, and, in the early 1980s, video game consoles. The company's name is derived from...

     in 1999 for $3.5 billion, sold for $27.3 million in 2000.
  • Think Tools AG
    Think Tools AG
    Think Tools AG was a Swiss IT company that rose and fell with the dot com bubble in Europe.The company was founded by the philosopher Albrecht von Müller as a consultancy company in 1993....

    , one of the most extreme symptoms of the bubble in Europe: market valuation of CHF 2.5 billion in March 2000, no prospects of having a substantial product (investor deception), followed by a collapse.
  • Webvan
    Webvan
    Webvan was an online "credit and delivery" grocery business that went bankrupt in 2001. It was headquartered in Foster City, California, USA, near Silicon Valley. It delivered products to customers' homes within a 30-minute window of their choosing. At its peak, it offered service in ten U.S...

    , an online grocer that operated on a "credit and delivery" system; the original company went bankrupt in 2001. It was later resurrected by Amazon.
  • WorldCom
    MCI Inc.
    MCI, Inc. is an American telecommunications subsidiary of Verizon Communications that is headquartered in Ashburn, Virginia...

    , a long-distance telephone and internet-services provider that became notorious for using fraudulent accounting practices to increase their stock price. The company filed for bankruptcy in 2002 and former CEO Bernard Ebbers
    Bernard Ebbers
    Bernard John "Bernie" Ebbers is a Canadian-born businessman. He co-founded the telecommunications company WorldCom and is a former chief executive officer of that company....

     was convicted of fraud and conspiracy.
  • Xcelera.com, a Swedish
    Sweden
    Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....

     investor in start-up technology firms. "Greatest one-year rise of any exchange-listed stock in the history of Wall Street."

Terminology

  • Bankruptcy
    Bankruptcy
    Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

  • Digital Revolution
    Digital Revolution
    The Digital Revolution is the change from analog mechanical and electronic technology to digital technology that has taken place since c. 1980 and continues to the present day. Implicitly, the term also refers to the sweeping changes brought about by digital computing and communication technology...

  • E-commerce
  • Irrational exuberance
  • The Long Tail
    The Long Tail
    The Long Tail or long tail refers to the statistical property that a larger share of population rests within the tail of a probability distribution than observed under a 'normal' or Gaussian distribution...

  • South Sea Company
  • Stock market bubble
    Stock market bubble
    A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation....

  • Tulip mania
    Tulip mania
    Tulip mania or tulipomania was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed...

  • Techno-utopianism
    Techno-utopianism
    Technological utopianism refers to any ideology based on the belief that advances in science and technology will eventually bring about a utopia, or at least help to fulfill one or another utopian ideal...

  • Technology hype
  • Web 2.0
    Web 2.0
    The term Web 2.0 is associated with web applications that facilitate participatory information sharing, interoperability, user-centered design, and collaboration on the World Wide Web...

  • E-learning
    E-learning
    E-learning comprises all forms of electronically supported learning and teaching. The information and communication systems, whether networked learning or not, serve as specific media to implement the learning process...

  • Dark fiber
    Dark fiber
    A dark fiber or unlit fiber is an unused Optical fiber, available for use in fiber-optic communication.The term dark fiber was originally used when referring to the potential network capacity of telecommunication infrastructure, but now also refers to the increasingly common practice of leasing...


Economic downturn

  • Financial crisis of 2007-2010
  • Subprime mortgage crisis
    Subprime mortgage crisis
    The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

  • United States housing bubble
    United States housing bubble
    The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...


Further reading

  • Cassidy, John. Dot.con: How America Lost its Mind and Its Money in the Internet Era (2002)
  • Daisey, Mike. 21 Dog Years Free Press. ISBN 0-7432-2580-5.
  • Goldfarb, Brent D., Kirsch, David and Miller, David A., "Was There Too Little Entry During the Dot Com Era?" (April 24, 2006). Robert H. Smith School Research Paper No. RHS 06-029 Available at SSRN: http://ssrn.com/abstract=899100
  • Kindleberger, Charles P., Manias, Panics, and Crashes: A History of Financial Crises (Wiley, 2005, 5th edition)
  • Kuo, David dot.bomb: My Days and Nights at an Internet Goliath ISBN 0-316-60005-9 (2001)
  • Lowenstein, Roger. Origins of the Crash: The Great Bubble and Its Undoing. (Penguin Books, 2004) ISBN 0-14-303467-7
  • Wolff, Michael
    Michael Wolff (journalist)
    Michael Wolff is an American author, essayist, and journalist. He currently writes a regular column for Vanity Fair magazine. He is well known for his acerbic, combative, and humorous style...

    . Burn Rate: How I Survived the Gold Rush Years on the Internet
    Burn Rate (book)
    Burn Rate: How I Survived the Gold Rush Years on the Internet, by Michael Wolff is the account of Wolff's dotcom company, Wolff New Media, in 1997.-Content:...


External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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