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Internet Bubble

In: Business and Management

Submitted By precoush0410
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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

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