Dot-Com...Dot-Bomb!
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Dot-Com (dotcom or also dot.com) refered to a collection of start-up companies selling products and/or services directly or indirectly related to the Internet. A start-up company is a company that was just recently formed and is therefore still very new.
These start-up companies proliferated in the late 1990's benefiting from the stock market boom where the world saw a new boom skyrocketing. The dot-com boom. A speculative investing frenzy in anything that was somehow related to the Internet.
Dot-Com derives from the fact that many of these companies have the ".com" suffix built into their Internet domain name.
In the late 1990's during the dot-com boom much stock market speculation and hype surrounded small hi-tech startup companies seeking early initial public offering (IPO) and promising enormous future profits. Many such start-ups started as spin-offs from university research groups. A spin-off is a new organization or entity formed by a split from a larger one such as a new company formed from a university research group.
The dot-com boom peaked in 1999 and ended rapidly in March 2000 drawing all major stock markets world-wide into a 3 year drop. That's where the term dot-bomb derives from!
Overview
In 1994 the Internet came to the general public's attention with the public advent of the Mosaic web browser and the nascent World Wide Web, and by 1996 it became obvious to most publicly-traded companies that a public web presence was no longer optional.
Though at first people saw mainly the possibilities of free publishing and instant world-wide information, increasing familiarity with two-way communication over the "web" led to the possibility of direct web-based commerce (e-commerce) and instantaneous group communications world-wide.
These concepts in turn intrigued many bright young, often underemployed people, who realized that new business models would soon arise based on these possibilities, and wanted to be among the first to profit from these new models.
The sudden low price of reaching millions worldwide, and the possibility of selling to or hearing from those people at the same moment when they were reached, promised to overturn established business dogma in advertizing, mail-order sales, customer relationship management and many more areas.
The web could instantaneously bring together unrelated buyers and sellers, or advertisers and clients, in seamless and low-cost ways. Visionaries around the world grabbed friends, developed new business models that would not have been possible just 3 years before, and ran to their nearest venture capitalist.
The venture capitalists saw the fast rise in valuation of other such companies, and therefore moved faster and with less caution than usual, choosing to hedge the risk by starting many contenders and letting the market decide which would succeed. The low interest rates in 1998-1999 helped increase the startup capital amounts. Of course a proportion of the new entrepreneurs were truly talented at business administration, sales and growth, but the majority were just people with ideas and didn't manage the capital influx prudently. This majority formed the bulk of the "dot-com" companies.
Ricky Schmidt
October 21, 2005
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