Dot-com Bubble – 2000-2001

Every so often, something happens to change the world, from invention of the wheel through the first smelting of iron to gunpowder and the development of the steam engine. But none of the many discoveries that transformed the way people lived could hold a candle to the biggest innovation of them all – the internet, aka the worldwide web.

The personal computers that became increasingly available from the early 1980s made it all possible. In 1988, the internet arrived – and within a decade this interconnected global system of computer networks using a common protocol was reaching billions of individuals and growing fast. Possibilities were infinite and a Wild West mentality took hold – this was a new frontier and plenty were willing and able to join the technological gold rush.

All sorts of clever ideas for exploiting this exciting newcomer were devised and – just as a gold rush rewards the fortunate few who come up with nuggets that make them rich – prescient backers of some internet start-up companies saw relatively modest investments increase in value beyond their wildest dreams. Massive returns soon led to feeding frenzy and there were plenty of young entrepreneurs happy to put forward imaginative proposals for dot-com enterprises (named after the ‘com’ suffix that completed universal website addresses).

Normal commercial caution went out of the window as a combination of ignorance of the new medium and greed saw the rapid inflation of a financial bubble as dot-com stocks boomed for two heady years from 1998. But confidence in the potential of technological advance rather than more traditional methods of assessing investment potential proved to be unsustainable, and after reaching a high point in March 2000 the dot-com bubble burst. In the next 12 months dozens of dot-com companies failed and their investors lost billions.

When was the Dot-com Bubble: 2000-2001

Where was the Dot-com Bubble: International

Toll: Numerous over-hyped internet start-ups where hard-headed analysis would have shown that they could never make a fraction of the profits dazzled investors were prepared to bet on.

You should know: The business model that fuelled the dot-com bubble (and so singularly failed) is summarized by the phrase ‘get big fast’. The idea was to spend vast sums establishing public awareness of a new dot-com enterprise, on the assumption that once a large number of regular users had been hooked they could subsequently be profitably exploited.