During the 1990’s, Internet-related businesses were viewed as a way for investors to make quick profits, and millions of dollars were pumped into nascent businesses. After the bubble burst and many of these businesses failed, dot-coms were regarded as bad investments. Ultimately, as the markets settled, it became clear that Internet stocks offered both good and bad investment opportunities.
The period from 1995 to 2001 saw a stock market bubble develop in the
The Pets.com sock puppet, shown in 2000, was a familiar figure during the dot-com boom. The puppet spokesperson, like many in his industry, soon found himself out of work.
Investors had become enamored with the industry. Following the rise of Netscape and its massive initial public offering (IPO), they were more than willing to invest venture
The index tracking the value of stocks on the NASDAQ stock exchange, which includes many technology stocks, reached its all-time high, 5048.62, on March 10, 2000. The index had stood at less than half that value just a year earlier. However, online retailers reported poor results from the previous Christmas season, and some of the bellwether technology stocks processed massive sell orders for billions of dollars. March 13 saw the NASDAQ decline in value by four percentage points, triggering a long slide in the Internet sector.
Some companies were found to have used accounting tricks to overstate their profits. The public quickly lost its faith in technology, and by October, 2002, the NASDAQ had lost 78 percent of its peak value to close at a low of 1114.11. The Federal Reserve cut interest rates to stop the decline, and the economy entered a recession. Ultimately, the bubble wiped out $5 trillion in market value. Very few Internet companies survived the dot-com bubble, with some of the notable exceptions being Amazon.com and eBay. Although the losses in market value and jobs were tremendous, many analysts view the dot-com bubble as a necessary part of learning about the new technology of the Internet and its effect on the economy. As many Internet-only companies disappeared in the wake of the bubble, many brick-and-mortar retailers developed major Internet presences, using their established brands and resources to succeed where firms relying solely on venture capital had failed.
Cassidy, John. Dot.Con: The Greatest Story Ever Sold. New York: HarperCollins, 2002. Kuo, J. David. Dot.Bomb: My Days and Nights at an Internet Goliath. Boston: Little, Brown, 2001. Munroe, Tapan. Dot-Com to Dot-Bomb: Understanding the Dot-Com Boom, Bust, and Resurgence. Moraga, Calif: Moraga Press, 2004.