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Dot Com Bubble

Last Edit: 10/01/17

The 'Dot Com Bubble' was a speculative bubble - in stocks related to the Internet - that lasted from 1997-2000. A speculative bubble is an economic bubble, where stocks or other economic assets are traded in high volume, and at a value that is considerable higher than their innate value. The Dot Com Bubble was fueled by investment in technology companies who operated at a loss, but with the assumption, that with time, their market share would equate to long-term profitability.

In the early 1990's, the Internet was transitioned from a U.S. federally funded network (backbone) to a commercial one, and the World Wide Web was launched as a service on the Internet in 1991. Only by 1994, was it clear that revenue could be generated by websites, and investment into start-up technology firms began in 1994. Some of the technology companies that received investment during this period, included: eBay, Amazon, Pets.com, Yahoo!, Excite, Lycos, Inktomi, and Paypal.

The majority of technology stocks that were traded during the Dot Com Bubble were listed on the NASDAQ stock market: based in New York, the NASDAQ focuses upon technology companies. Due to the Dot Com Bubble, the NASDAQ index climbed from 1000 points in 1995, to over 5000 points in 2000. When the Dot Com Bubble popped in 2001-2002, the NASDAQ index crashed from 5000 points to nearly 1000 points.

While some companies managed to survive the Dot Com Bubble - most notable: Amazon, eBay and Paypal - other companies failed, or never recovered their value. For example, during the Dot Com Bubble, Lycos was purchased for over $12 billion, but was eventually sold for $95 million in 2004: losing over $11 billion in valuation. Some of the companies that failed were: Boo.com, Broadcast.com, Den.com, eToys.com, Flooz.com, Kozmo, Pets.com, Razorfish, theGlobe.com and Webvan.