Free Essay

Internet Bubble

In: Business and Management

Submitted By precoush0410
Words 1243
Pages 5
Mini Research Paper: Internet Bubble
Fundamentals of E-Commerce
Professor: Russell Calhoun
Precious Harper

Table of Contents

Introduction…………………………………………………………. 3
Brief Description of WWW and Internet …………………………… 4
Successful Dot.com companies……………………………………… 5
Unsuccessful Dot.com companies…………………………………… 6
Conclusion……………………………………………………………. 6
Work Cited…………………………………………………………… 7

British engineer Tim Berners-Lee developed the world-wide-web in 1989; the World Wide Web became available publically on August 6, 1991. The world-wide-web is a system of resources that allows people to view and interact with a variety of information. A computer that is connected to the Internet can access the world-wide-web. Many people believe the Internet and the World-Wide-Web are one in the same when in-fact they are not. The Internet is a massive network of networks; it connects personal computers, mainframes, cell phones, GPS units, music players etc. The Internet started in the 1960’s and it’s a massive hardware combination of millions of personal, business and government computers all connected like roads and highways. The world-wide-web (WWW) is a system of Internet servers that support specially formatted documents. The documents are formatted in a markup language called Hypertext Markup Language (HTML) which supports and links documents, graphics, video and audio files. Web browsers make it possible to access the WWW examples of web browsers would be Safari, Firefox and Microsoft Internet Explorer. As you can see the Internet and the WWW are not the same thing.

In the early 1990’s people basically used computers for writing papers, playing games, business productivity tracking or accounting but never in that time for communication, shopping, research or paying bills. Berners-Lee changed how we used the Internet and computers when he added the hypertext and multimedia layer to the Internet and named it the world-wide-web.

The WWW was such an amazing attribute to technology and because of it there was a rapid rise in equity markets. The cause of the Internet bubble was the rise and fall of many Internet sites and the tech industry in general. The Internet bubble of the 1990’s burst after more than five years of steady market growth, its growth peaked on March 10, 2000. The collapse of several start-up Internet companies, along with the increase in interest rates led to a mild economic recession, which triggered a decline in the stock market. There were several factors that caused the dot-com bubble; it was a period of investment and speculation in Internet firms, which occurred between 1995 – 2000. In 1995 it was the beginning of a major jump growth of Internet users, because of the boost of users many Internet companies seen them as potential customers or consumers. This resulted in abundance of Internet start-ups these companies came to be referred to as dot-coms. They were called dot-coms because of the .com at the end of the web addresses.

The cause of the downfall was due to many of the investors using daring business practices with lots of money. The US stock market rose quickly and dramatically and hundreds of companies being founded weekly, hence causing the bubble. The issues that began with the. Coms were also multifaceted by outside factors like the rise in outsourcing, which led to unemployment for computer programmers and developers. There were also terrorist attacks, questionable bookkeeping and all around questionable business practices, which then triggered investigations. These cause consumers to loose faith in the tech industry.

Not the entire dot COM companies failed, there where few that remained prosperous. Amazon.com is a company that is still very successful today. Jeff Bezos founded Amazon in 1994 and Amazons introduction came right before the rise of the Internet bubble. Today Amazon is the largest online retailer in the world. In 1995 Amazon made its debut as an online bookstore, with their success they added movies, music, electronics, computer software and many household products. Amazon’s business strategy focused more on brand recognition and less on income; they did not turn profit until the end of fourth quarter in 2001. This company went seven years without turning a profit because they believed in their brand. Today Amazon reports net sales of 9.86 billion.
Besides Amazon there is eBay, which was founded in 1995, they are popular for their online auction and retail presence. EBay is a large on-line store they have more than 17,000 employees with a revenue topping nine billion. Priceline.com founded in 1998 is a travel web site that helps users find discount rates and name their own prices on hotels, car rentals, airfare and vacation packages. Coupons.com founded in 1998 by Steve Boal, it was difficult for the coupon company to adapt to the Internet economy however they where still standing and three years later April 2001 tit launched its own destination website. Shutterfly is an Internet based personal publishing service that allows users to create prints, calendars, photo books, and cards, stationary and photo-sharing websites. Shutterfly was founded in 1999 and the like their counterparts Amazon, eBay, Priceline and Coupons.com they all survived the Internet Bubble crash.

It is astounding how much money was spent, earned and lost in the dotcom era. There where a lot of college graduates that became instant millionaires by investing all their money in dotcom companies. Webvan is a company that was born in 1999 and met its death in 2001. The company became very profitable in 18 month the company raised 375 million in an IPO, it expanded from the San Francisco Bay Area to eight U.S cities, WebVan came to be worth 1.2 billion and had a 26 city expansion, but since all good thing come to an end the business could not accommodate and attract new customer and their run came to a quick end. Another dotcom that failed miserably was Pets.com and eToys.com. Pets.com raised 82.5 million for their IPO but folded nine months later due to recurring losses. The company lost a total of 21.7 million on 9.4 million. EToys.com was a instant success launching in 1997 their shares jumped from $20 to $77 a share on the first day the company was once valued at 8 billion, however they could not compete with their successful counterparts such as Amazon, Wal-Mart. Trying to compete proved too costly since Toys R Us at that time did not have a big on-line presence. By February 2001 the shares where down to $1 each and the company had to file for Chapter 11 bankruptcy.
It is difficult to say that the Internet Bubble would have or could have been prevented we also cannot say that it cannot happen again. Investors tend to flock towards investments that appear to be lucrative or that can be lucrative for a briefly. I think its important for investors to be aware of what they are investing in, to have good business practices and overall build a brand that consumers trust. We must remember that loyal customer will keep a business afloat in their worst of times.

Work Sited

1. Retrieved September 27, 2012, http://www.investopedia.com/financial-edge/0512/failed-ipos-of-the-dot-com-bubble.aspx#axzz285dPMn58
2. Retrieved September 29, 2012, Jonathan Wallace, The Internet Bubble http://www.spectacle.org/0101/bubble.html
3. Retrieved September 27, 2012, Bradley Mitchell
http://compnetworking.about.com/cs/worldwideweb/g/bldef_www.htm

Similar Documents

Free Essay

Internet Bubble

...The Internet Bubble (1998-1999) The internet bubble that burst during the year of 1998-1999 was similar to the housing market affect we saw happen no more than four years ago. In the case of the housing market, you had large market firms offering different types of loans to individuals that really couldn’t afford them (Balloon rate loans, Adjustable rate loans just to name a few). The main objective of these larger companies (Freddie Mac, Fannie Mae included) were to gain a significant profit while the “getting was going good”. In other words, they wanted to cash in on the loans they were lending to people that they knew eventually they wouldn’t be able to afford the loan. Whether the customer could afford the loan or not, wasn’t the main concern of the few that were running this ridiculous scheme. Once they saw that overall situation was going to eventually fall back on the customers who trust them with the loans they were signing up for, the quickly slid out the back door and left the customers in a world of trouble. Regardless if their companies went down, a few of people at the top of the food chain actually got rich off of the downfall of the housing market. Again, this is similar to what happen to the internet bubble before it bust to pieces. There was some research that was done in 2003 that showed how there was a radical transformation in the profile of IPO investors (Entrepreneurs Exploiting the Internet Bubble 1998 to 2001: Do Insiders Abandon Ship at the......

Words: 589 - Pages: 3

Free Essay

Internet Bubble

...The Internet Bubble Fundamentals of E-Commerce Instructor: Scott Howell Student: Lisa Mercer May 27, 2012 Introduction Within the past decades of the internet first being established the lives of everyday Americans and the world have changed greatly. Businesses have changed and evolved greatly with the access to the internet, as many are able to purse dreams of starting a business and possibly making millions. The internet has opened the doors for many to communicate with each other, receive daily news, and to do shopping. The upcoming of possibilities through the internet also led to irrational decisions brought on by greed from investors that made way for the Dot Com Bubble. History of Internet A pioneer of the creation the internet was Tim Berners-Lee. Though the internet didn’t become wide spread until the early 1990s the making of the World Wide Web can be traced back into the 1980s. Berners-Lee tried to sell his creation to the company that he was working for in Switzerland, but they were slow to acknowledge his efforts.(Griffin, 2000) With that Berners-Lee turned to the internet community in 1991 making his World Wide Web browser and web server software available. (Griffin, 2000) Many enthusiasts began setting up their own web servers around the world. Many scientists were already using the internet to share information found it easier to post their information on the web and wait for a reply. With some government agencies having the......

Words: 1606 - Pages: 7

Premium Essay

Internet Bubble

...Internet Bubble Table of Contents 1. The Beginning 2. World Wide Web and Internet-Not The Same Thing 3. Rise of the World Wide Web 4. Fall of The World Wide Web 5. Conclusion The Beginning The World Wide Web was officially introduced to the world on August 6, 1991 by Sir Tim Berners-Lee. The World Wide Web refers to a system of resources that will facilitate individuals using computer to view and interact with different type of information. The concept of the World Wide Web is to combine the methods of computer networking into a dominant and easy to utilize worldwide information system. Tim Berners-Lee formally introduced his project to the world on the hypertext newsgroup. In his own words from a post he said “aims to allow links to be made to any information anywhere”. It linked between different documents using the hypertext method. He made available all of the files necessary for people to replicate his invention. Although invented many years earlier Mr. Berners-Lee’s invention married hypertext with the internet. World Wide Web and Internet-Not The Same Thing The World Wide Web and the Internet are terms that to most people mean the same thing. While they’re related, their definitions are different. The Internet is the structure on which the World Wide Web is based which is at its most basic definition an electronic communications network. The World Wide Web is a part of the Internet “designed to allow easier navigation through the...

Words: 956 - Pages: 4

Premium Essay

The Internet Bubble Burst

...The Internet Bubble Burst Sandra D’Adamo Intro to E-Commerce March 27, 2014 Professor MacKenzie Table of Contents Introduction………………………………………………………………………………..3 How the World Wide Web Began………………………………………………………….4 Tim Berners Lee……………………………………………………………………………4 How the Bubble Inflated…………………………………………………………………..5 How the Bubble Popped…………………………………………………………………..6 What Lessons were Learned……………………………………………………………….7 Could it have been Stopped………………………………………………………………… Introduction The internet bubble history started in 1993 with the public being able to access the World Wide Web. The WWW was inflated with the overpriced investment returns from 1994 through 2000. The bubble of the WWW busted wide open in 2001. At that time the Nasdaq was often quoted as a big indicator of the bubble. During that time the Nasdaq rose from around $750 dollars to approximately $5130 dollars. That was and incredible increase of about 682% from January 1995 continuing through March 2000. During this time the industry was focusing primarily on computer software. They focused on this due to the high profit margin for the software. In this paper I will explore the many avenues of how the WWW was created and the rise and fall of the internet creation. Figure [ 1 ] flatworldbusiness.worldpr How the World Wide Web Industry Began In the beginning ideas for the WWW go back as far as 1946. A gentleman named Murray Leinster wrote a story that talked about Logics also known as......

Words: 1463 - Pages: 6

Free Essay

History of the Internet: Dot Com Bubble

...dot-com bubble that occured in the 1990's through the early 2000's was said to have left some major negative impressions on the world of the internet and our economy, but that is not necessarily true. Because of the dot-com bubble, there have been many great outcomes that often goes unnoticed before looking past all of the businesses and internet companies that went under when this bubble finally burst in the early 2000's. In fact, many say that the dot-com bubble and burst was actually a needed cause and effect that has shaped the internet into what it now is today. Many people believe that a lot of the websites that existed during the dot-com bubble would have had some sort of success if it wasn't for the network infrastructure at the time. The thing is, not many people didn't have access to broadband and the websites weren't getting the exposure and full potential that it could have received. This is especially true for some websites, such as Broadcast.com (Altucher Confidential, 2011). This very same thought occurred during the dot-com bubble and computer scientists and engineers realized that there was a very much needed improvement to the infrastructure of the internet. In order to correct this, many businesses in the tech industry began using tax money to lay high-speed fiber optic cables so that the internet would be more accessible in certain cities and states. This is probably one of the most beneficial things that came about from the dot-com bubble......

Words: 917 - Pages: 4

Free Essay

The Dot.Combubble

...The Dot.com Bubble The mid-1990s marked the beginning of a new form of market environment that one could do business through the Internet. This was also the beginning of the so-called dot.com boom in the Spring of 1995 and it would later go bust in the fall of 2000. A year after the bubble burst, 327 companies remained but every one of them experienced the stock price slide beginning in September of 2000 (Becker, 2006, p.34). Amazon.com is the first major company that attempted to use the Internet to offer and sell products. In addition to the companies that sell online, companies that provided telecommunications and Internet support were also born such as Cisco Systems and Lucent Technologies (p.34). Other companies entered the market to provide web browsers such as Netscape. Another segment in this market is the service providers that provided users access to the Internet such as America Online and CompuServe (p.34). Finally, there are websites that offer web content and information for sale (p.35). These online companies, in order to raise capitalization either approached venture capitalists for financing or offer their stocks to the public. Becker (2006) cited that nature of these IPOs from online companies as “examples of speculative bubble” (p.41). A bubble or boom results from assets being over valued and they continue to rise for an extended period (p.41). In bubbles or booms, there is also the element that involves behavior – crowd or herd. Although many were......

Words: 1667 - Pages: 7

Premium Essay

Bubble History of Www.Com

...Web History Bubble History of the WWW ECOM 210 World Wide Web History Introduction Founded in 1989 the World Wide Web went from an impossible idea to a worldwide phenomenon that has fused itself into the needs of the people. I remember years ago when computers were just those gross green screened monitors that only allowed you to type a report. Now with the help of the internet our use of computer technology has reached amazing heights. We can reach people around the world with just a click of a mouse. “The web has changed the world. It has arguably become the most powerful communication medium the world has ever known” (webfoundation.org). Reading the webs history helps me to really see how the development of this great tool has geared us to an era of becoming completely technically inclined. The web is available everywhere you go from restaurants to coffee shops also with it being a feature on your mobile device it never leaves the side of the consumer. Internet access has become just as much of a need as toilet paper. In most cases jobs, schools and so on has built there curriculum and foundation around it. Without the web we would not have achieved the ability to have direct access to our bank accounts via applications or to send an email picture of friends and family to others around the globe. Although I grew up in the early 80’s at the peak of technology before the internet even existed I now cannot imagine a world without it. “The Internet is here to......

Words: 1744 - Pages: 7

Free Essay

Dot Com Bubbl

...Dot-Com Bubble Table of Contents Abstract ................................................................................................................................................... 3 Introduction ............................................................................................................................................. 4 Causes ..................................................................................................................................................... 4 Effects ..................................................................................................................................................... 5 Lessons learnt.......................................................................................................................................... 7 Conclusion .............................................................................................................................................. 7 Appendix ................................................................................................................................................. 8 Reference List ......................................................................................................................................... 9 Abstract This report presents an analysis of a stock market bubble, well known as “dot-com bubble”, which developed roughly during a period from 1995 to 2000, and ended up in 2001. The report......

Words: 1542 - Pages: 7

Free Essay

The Dot.Com Financial Scandal

...1- The term dot.com The term Dot COM (English .com) appeared before the explosion of bubble Internet to indicate, the madness which seized the “entreprenautes” to the evocation of three sesames of the E-trade: market, customers and Internet. A synonym of E-business. 2- The Internet Bubble The "dot-com bubble" sometimes referred to as the "I.T. bubble" was a speculative bubble covering roughly 1995–2001 with its peak on March 10, 2000 with the NASDAQ peaking at 5132.52 during which stock markets in Western countries saw their value increase rapidly from growth in the new Internet sector and related fields. The period was marked by the founding and, in many cases, spectacular failure of a group of new Internet-based companies commonly referred to as dot-coms. A combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital created an exuberant environment in which many of these businesses dismissed standard business models, focusing on increasing market share at the expense of the bottom line. 3- The growth of the dot.com bubble The venture capitalists saw record-setting rises in stock valuations of dot-com companies, and therefore moved faster and with less caution than usual, choosing to mitigate the risk by starting many contenders and letting the market decide which would succeed. The low interest rates in 1998–99 helped increase the start-up capital amounts. A canonical "dot-com" company's business......

Words: 754 - Pages: 4

Free Essay

The Dot Com Boom

...Dot com boom/bust An economic bubble exists whenever the price of an asset that may be freely exchanged in a well-established market first soars to levels that cannot be justified (Ironman, 2010). ‘Investors’ push the price of the asset up by irrationally purchasing it. Eventually, the market realizes that the asset price is unjustified and the bubble bursts. More often than not, the bust happens in an all-of-a-sudden manner resulting in people losing huge sums of money. At the same time, these boom/ bust cycle has its beneficiaries, institutions and individuals who make huge amounts of money by ‘surfing’ the bubble or by fuelling it. In the case of the dot com boom, the culprits were the investment banks and some venture capital firms. Events leading up to failure One of the issues that I believe to be partly responsible for the dot com boom happened when the Taxpayer Relief act of 1997 lowered the maximum tax rate on capital gains for individual investors from 28 percent to 20 percent for assets held for more than 18 months. This perspective, proposed by Zhonglan Dai, Douglas A. Shackelford and Harold H. Zhang. In “Capital Gains Taxes and Stock Return Volatility: Evidence from the Taxpayer Relief Act of 1997“highlighted the fact that non- and lower dividend paying stocks experienced a larger volatility than high dividend-paying stocks. Stock volatility was substantially higher after 1997 and this may have contributed to the inflation of the bubble. It was not the main cause......

Words: 1428 - Pages: 6

Premium Essay

Why Has Ipo Underpricing Increased over Time

...during the internet bubble years of 1999-2000. Part of the increase can be attributed to changes in the composition of the companies going public. We attribute much of the increase in underpricing, however, to previously latent agency problems between underwriters and issuing firms. We argue that the increase in valuations over time has caused issuers to be more complacent about leaving money on the table. Keywords: Initial public offerings; agency problems; internet bubble; underwriter reputation 1 1. Introduction What explains the severe underpricing of initial public offerings in 1999-2000, where the average first-day return of 65% is an order of magnitude higher than anything previously seen? In this paper, we address this and the related question of why IPO underpricing doubled from 7% during 1980-1989 to almost 15% during 1990-1998, before exploding during the internet bubble period. Part of the increased underpricing can be attributed to changes in the composition of firms going public. We argue that the other part of the rise can be explained by increased valuations associated with the bull market of the 1980s and 1990s, and the effect that this had on the willingness of issuing firms to bargain for a higher offer price. Alternatively stated, agency problems between issuing firms and underwriters that were largely latent in the 1980s increased in importance in the 1990s, before becoming of paramount importance during the internet bubble period.......

Words: 13928 - Pages: 56

Premium Essay

Filter Bubbles

...When referring to filter bubbles I had thought it would be some sort of tool that you, as an individual, would have control over. Some tool that would allow you to filter what you would like to see, and what you would not like to see as you search through sites on the web. However, filter bubbles is something that you do not have any control over. A filter bubble is a tool that each browser, either it be Facebook, Netflix, or even Google, will filter out things you typically do not browse through. It controls what you can and cannot see based on what each browser is seeing you watching or looking for. Pariser said “There is no standard Google anymore.”, and that was where he drew me. It allowed me to see how different the internet is becoming. There are so many risks when it comes to the internet, and you hear that daily. This is moving us to a world where technology is basically controlling our lives, and it's not challenging us. This tool is letting us be comfortable with what we are used to, and we don't get to decide what we want to see or not see because of these filters.. I actually did not even realize the severity of these filter bubbles. I did notice how I wasn't seeing more and more of these acquaintances I have via Facebook. I basically looked right past it, and thought that was just what Facebook did. I didn't realize how in-control these filter bubbles are becoming. Seeing Pariser compare his friends Google searches of the same search, and noticing the......

Words: 397 - Pages: 2

Premium Essay

The Dotcom Bubble

...The Dotcom Bubble Joanna Olmeda Mini Research Paper Fundamentals of E-Commerce INDEX Introduction Page 3 World Wide Web Page 3 Dotcom Bubble Page 4 Dotcom Bubble Pops Page 6 Conclusion Page 7 References Page 9 Introduction The World Wide Web was created by Tim Berners-Lee from an idea that he had in 1989 while working at European Particle Physics Laboratory in Geneva, Switzerland. Throughout 1991 and 1993 Berners-Lee continued to work on the concept and designed the Web during which time he took the feedback of what he was doing and continued to perfect it in a sense using specifications of things such as URLS, HTTP and the HTML coding and just like that the World Wide Web was born. World Wide Web It took a while to get the process rolling by 1991 it brought the availability or the browser and the web surfer software which was barely existent before then. It was mainly a screen in which you just imputed information, there was not variety it was pretty much a blank screen and one size font to put in the information one needed at the time. By 1992 there were a few sites that existed such as the CERN website, ACME Laboratories and even colleges had websites like the University of Illinois and Ohio State University. By the end of 1992 there were just about 26 websites total. Once 1993 hit the World Wide Web was beginning to become a bit more talked about and that is when the directors of CERN made a big impact. On......

Words: 1764 - Pages: 8

Free Essay

Dot Com Bubble

...Dot.com Bubble Christopher Smirnes Professor: Dr. D The Dot.com bubble, otherwise known as the Dot.com boom was one of the most significant events in the Internets history. It brought upon millions upon millions of dollars in losses and many of these start up companies never even made a profit. The business world was flipped upside down, and a whole new world was opening up to entrepreneurs. However, since this was such a new technology, as with anything new, there are always risks. The dot.com bubble can be broken down into three different stages, the investment stage, the failure stage, and the recover stage. It all started in the early 1990’s when the Internet truly got its start. During this time period, everything was very slow and many people did not buy computers due to the extremely high cost. By the mid 90’s everything changed, and the world was going nuts over the possibilities of the Internet. Businesses and investors were part of that group that jumped right on in. With the ability to reach millions of customers with click of a button, the Internet certainly has a huge draw. Everyone was trying to get into the game and investors were dumping tons of money into all of these companies that had to essentially start from scratch. It was during this influx of cash pouring in that everything seemed perfect and profits would just go through the roof. It seemed as if everyone had a domain name and being able to......

Words: 899 - Pages: 4

Premium Essay

House of Cards Crisis

...the burst of the Dot Com Bubble, which lead to a market crash that put the American economy in a recession; and the controversy that surrounded Government Sponsored Enterprises, which lead the American people to lose trust in it’s government’s financial institutes. However, people such as, Ben Bernanke and Alan Greenspan have helped the United States recover from this crisis by implementing new guidelines for the financial market. According to Cashzilla.com, the Internet bubble described in summary was “a rapid rise in equity markets fueled by investments in Internet-based companies. During the dot com bubble of the late 1990s, the value of equity markets grew exponentially, with the technology-dominated Nasdaq index rising from under 1,000 to 5,000 between 1995 and 2000.” Basically, investors started inserting a vast amount of their money into these internet-based companies, which in turn caused the stock market to rise dramatically. “The approach of rapidly growing customer bases before making any real profit was the first mistake”(Dot-Com Bubble: Explained). These Internet companies were running their businesses off of investor’s money and not from real profit, consequently this in turn caused those companies to fail and claim bankruptcy. There are main factors that are said to have lead to the burst of the bubble such as, stock market regulation and bad business practices by these companies, however, many believe that the burst of the Dot COM Bubble was inevitable. “Some......

Words: 1000 - Pages: 4