Dot Com Bubble
During the nineties, the internet opened up many opportunities for growth, but one thing that people struggled with was creating a business online. The first people to attempt online commerce were Jeff Bezos and Pierre Omidyar, who started up the businesses known as Amazon and Ebay, respectively. Although they had different intentions, Bezos focused on the market research aspect and Omidyar focused on the code of an online auction site, both believed that the web could be used for business. Both dot-com websites struggled at first, but since they were the first of their kind, it did not take long for them to rise to the top.
Their success was being noticed by Wall Street and proved how powerful the internet was. After the launch of their IPO in 1998, Ebay was able to gain a proper business person to help them during a time of wavering economy and valued at 2 billion dollars. At the same time, Amazon grew rapidly due to Bezo’s motto of “Get Big Fast” and its shares were predicted to double in the next year. This prediction, made by Wall Street analyst, Henry Bloget, was a media sensation that caused a buying frenzy on Wall Street that actually doubled Amazon’s stock price, not in the next year, but in a few weeks.
The frenzy was the jumpstart of the manic, dot-com bubble. In 1998, inspired by Amazon and Ebay, many new faces were ready to create their own dot-com websites and millions of people and investors were willing to put up shares on any company with a dot-com to their name. No one no longer cared about the previous experience; it allowed for people to do what stock market professionals only do, buy and sell stocks from the comfort of their homes. Unfortunately, they were not going about it the right way; the dot-com websites had no strategy or efficient approach to ecommerce. They only cared about making money fast. Although venture capitalists knew that most ecommerce companies would not do well, they still risked millions of dollars because they knew at least one would score big. There was too much building, spending, and too many identical companies with no thought for consequences. The stock market grew to its highest point in 1999, but this is when chairman of the Federal Reserve Bank, Alan Greenspan, knew he had to do something about it.
February 2000 brought higher interest rates and signaled the end of the dot-com bubble. Companies would easily fall, since the client would spend millions to start, but barely made anything in sales. By April 2000 on what was known as “Black Friday,” the stock market collapsed and dot-coms were dead. After 9/11 occurred, almost 3 ½ trillion in paper wealth was gone in a year. Luckily out of a tragedy comes something good; a handful of companies were able to survive, like the ones who remained on top during the crisis, Amazon and Ebay. To some, the bursting of the dot-com bubble was tragic, but it allowed for billions of dollars to build out the internet’s infrastructure from fiber optic cables to Amazon’s customer database. This success would’ve happened anyways but instead of 15 it took only five years to accomplish, a huge advantage to the world.
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