Rise and Fall of the dot-com Bubble (Part: 1)

This is the beginning of a 5 part series about the economic dependancy of technology and new media on society. We will look into the history of the internet as well as the evolution of the rise and fall of some of the biggest companies in e-business.

We are encountered and altered by technology every day, of every second of our lives; whether we want it to or not. The evolution of computers and microprocessors is growing at such an accelerated pace that the lifestyles of everyone will be considerably altered between generations. The exponential growth of technology began with the invention of the abacus. This provided people with the resource to solve simple arithmetic problems. Over the course of 2000 years, we have evolved a simple abacus that can calculate simple equations, into a multi-processing personal computer capable of solving millions of equations in milliseconds.

1968 marked a milestone in the technological world which was labelled as the birth of the internet. ARPA, which was developed by the Department of Defence, was launched to network the University of California at Los Angeles, Stanford, University of California at Santa Barbara, and University of Utah. The network was wired together via 50Kbps circuits and was the first public launch of the internet. In 1990 the ARPANET was retired and transferred to NSFNET (National Science Foundation Network) which connected universities around North America and Europe in conjunction with EUnet, which at the time was Europe’s network. Between 1990 and 1995 the US Government transferred management of the internet to independent organizations such as ICANN (Internet Corporation for Assigned Names and Numbers), ISOC (Internet Society), IAB (Internet Architecture Board), NSI (Network Solutions), and many others. This in-turn brought us to where we are today. In the span of 4 centuries, we have revolutionized the way information is shared amongst people all over the world.

The term “Information Superhighway” was coined in the early 1990’s by Al Gore to describe ways of expanding the internet beyond its then-current state. The intention was to expand culture through the use of the internet and led to the development of Mosaic which ultimately led to the beginning of the internet boom. With the advances of the internet growing rapidly, technology took a turn for the best. Companies started emerging which were devoted to developing and advancing technology. Intel produced its first Pentium processor, Microsoft introduced Windows 95 which was the predecessor of Windows 3.1 and DOS, the first GUI operating system of it’s time, as well as the development of Internet Explorer and Netscape Navigator, which were both developed to view content on the internet. Most importantly, the internet became a haven of business and e-commerce. Companies such as Amazon, Yahoo, and AOL grew rapidly over the internet while gaining consistent momentum to keep the internet evolving. This was the crest of the internet wave, coined the dot-com bubble, which inevitably took a crash in 2000.

The dot-com bubble was a speculation of increasing stock values and growth in the new Internet sector. As referred to previously, this period in time was manifested through the growth of companies such as Amazon, Yahoo, and AOL. The Internet became a playground for businesses to be able to reach a worldwide market with little overhead costs. “A study by the US Department of Commerce found that internet traffic was doubling every one hundred days, and extrapolated the trend to predict that internet commerce would be a 300 billion dollar sector by 2002.” The possibility to sell goods and handle advertising, sales, and customer relations led to the realization of new business models and a substantial increase of revenue. The reasons for the large success of these new entrepreneurs wasn’t because of their administrative abilities but the ability to market ideas to investors due to the innovation of the dot-com perception. These effects lead to record-breaking stock value which venture capitalists invested in, with little to no caution, and sequentially let the market decide the outcome of each company rather than its business model.

These outcomes lead to the pop of the dot-com-bubble. There are many theories supporting the facts of why there was a sudden collapse of the dot-com boom. One possibility was the massive multi-billion dollar sell orders on major tech stocks such as Cisco, IBM, and Dell that happened to be filled on the same weekend, resulting in a substantial batch of sell orders that coming Monday morning. Many companies failed to survive the decline of stock value and filled for bankruptcy. The biggest of these was WorldCom who were found to have used accounting tricks to overstate its profits by billions of dollars. When these irregularities were revealed, the company’s stock crashed and within days, filled the largest corporate bankruptcy in U.S. history. Despite the fact of the dot-com crash, there were some large dot-com companies that survived the ordeal such as Amazon, eBay, and Yahoo to name a few.