Towards the middle of the 1990’s, the internet was finally reaching the mainstream and companies like AOL were quick to pack mailboxes with trial CD’s. It was a new frontier, offering endless possibilities for profit. Sites like Amazon, eBay, and Google were founded, along with forgotten relics like pets.com and boo.com. This was before the user generated boom of Web 2.0, back when sites were jam packed with eye-distressing backgrounds and gaudy animated images that would take forever and a day to load on your 56k modem. The success of these early sites was picked up on by speculative investors, and money was poured in.
It was one of the biggest economic booms in history, but it wasn’t long after the dawn of the new millennium that reality caught up with that overly exuberant spending and sent the market crashing down.
Waking up on January 1st, 2000, those of us who avoided a painful hangover were stricken by a few thoughts. First, the world didn’t end like some of our more hysterical associates had raved about. Second, the Y2K bug didn’t cause as many issues as we’d feared, and computers still worked, and that meant we’d have to go back to work after all. But even though the world hadn’t been reduced to an irradiated wasteland and oppressive spreadsheets continued to stare us in the face, not everything was right.
It's hard to pinpoint the exact moment of the dot-com bubble's pop, but the event that perhaps kicked everything off was January 10th, when AOL merged with the Time Warner corporation. AOL, harnessing the power of their bloated market capital, bought the largest media company at the time for a cool $164 billion. The idea was that AOL would help Time Warner get on board the dot-com bus, and ride it straight to greater success, but the bus was already on the verge of breaking down. On March 10th, the NASDAQ hit its peak at over 5000 points, which was nearly twice what it was the year before. The very next day, there was a quick sell-off of shares in major companies like Dell and IBM.
The technology market soon began looking pretty bleak, and investors were losing faith. In April, industry giant, Microsoft, was declared a monopoly for its constant attempts to set up market barriers. Boo.com, a fashion apparel website, went broke in May. In November of that same year, Pets.com folded, sucking down $300 million of investment capital with it. The whole industry was doing laps in the porcelain pool.
THE BACK OF THE NAPKIN
At the dawn of 2001, the NASDAQ had lost over half its value and was sitting at around 2470 points. The ship wouldn’t stop sinking until it reached its nadir in October 9th, 2002.
The problem was that enthusiasm for the new frontier of technology outweighed its actual viability. Pets.com, an early online storefront for pet supplies, is a common example of this problem. While ecommerce was a new and exciting possibility, the products they offered weren’t any cheaper or different than what could be found at a brick and mortar store, so it was more convenient to pick them up there rather than pay shipping and waiting up to a week for delivery.
Everyone was looking to get in on that sweet internet cash, and investors were willing to heap money on whatever idea was handed to them. What you ended up with is something like Flooz.com, a site that sold online currency that could be used at select stores. It raised $35 million from investors, spent $8 million on an endorsement campaign from Whoopi Goldberg, and went bankrupt in less than two years.
THE NEW LANDSCAPE
There’s a lot of embarrassing stories about startups and a lot of money disappeared overnight, but without the lessons learned from the internet’s awkward adolescence, and without the money eagerly pumped into websites like Amazon and Google, we might not be where we are today. Web 2.0 proceeded the dot-com crash a few years later, changing the way that users interacted with internet sites. Ecommerce was eventually refined into the more convenient services we’ve seen today, and a lot of success was found in providing more power to those who create the content that we consume. The internet of today still is far from perfect, but when you consider how massive the technology is and how recently it has been integrated into our lives, I feel the odd misstep is forgivable.