What was the dot-com boom/bust like?



Was it basically the wild west era of the internet where so many people were making websites that it was impossible for all of them to stay around? That’s what it sounds like, but I love to hear from somebody who was around back then.

In: Economics

it wasn’t that the market wasn’t necessarily there, it was more that the sustainable business models weren’t.

I was stopped as I was walking in a neighborhood on my way to get my first tattoo. Some rando came out of his garage and asked ‘what would some young ins like you be interested in, in websites?’ I said I’m not a computer dork, nerd! And he said: what if you could order a pizza from your computer?! And I laughed about that ridiculous idea for the next 15 years. And now, if I can’t exclusively order a pizza from a website without having to talk to someone I will probably not order the pizza

I remember when it started…. the Internet was around when I started college but the WWW didn’t even exist until later. Mostly it was text-based. Email, telnet, FTP (file transfer).

The WWW/HTML/HTTP protocol (basically what most people think of the Internet) was invented while I was in college, but I didn’t know of it. The first really useful web browser (NCSA Mosaic) came out in 1993 right after I started my first job. It could display images and was the first major browser available on Windows. But there wasn’t really anywhere you could go with it. All the sites you’d think of, Amazon, Google, Facebook didn’t exist yet. There was IMDB (Internet Movie Database) and someone put a coffee machine online via webcam (static images not video). The websites were…. basic to say the least. Still mostly text-based.

Netscape Navigator came out a year later and really took off. It became THE browser to use. Suddenly everyone wanted to be on ‘The Net’ and have some sort of website presence. Netscape went public in 1995 and the stock price went soaring despite having no profits….

Since the Internet was so dispersed and unregulated and more and more sites were being created all the time, search engines were created to help people find information on sites. Yahoo, Altavista, Lycos were the first major search engines.

Google wasn’t around until 1998 but by then the dotcom surge was already in full swing. Companies were being created without a business plan other than X.com written on a napkin and investors were throwing money at them hoping to strike it rich. Kids out of school were getting massive stock option grants which made them millionaires (on paper) overnight when the stock went public. Stock prices were doubling, tripling, quadrupling. It definitely was the wild west and it’s the time when most some well known websites were created. Amazon originally started off only selling books. ebay, Expedia & Priceline for travel, etc.. But also some companies that aren’t around anymore… pets.com, etoys.com, webvan.com (an early instacart).

All these companies were buying up expensive offices in Silicon Valley, paying huge bonuses and salaries, yet still had little to no income. Venture capitalists started wanting some return on their investment and stopped funding. Stock prices started falling in early 2000 and plunged in July that year. I had cashed out some of my stock options and bought a house in May…..

Once the investors left and the stock price in the toilet, more companies started failing. Once they failed all those millions in stock options became worthless.

Any idiot starting up a company could say “Internet” and people would throw money at them to fund the company regardless of whether they knew how to run a business, or even if they had a viable business model. You could have a bad business plan that a funder would normally look at and say “You’re an idiot, I’m not funding this,” but put “Internet” and “dotcom” in front of it, and the money flowed in rivers. A huge amount of money went to lavish spending on offices. $1,100 (about $1,800 today) Aeron office chairs were pretty much standard.

I was buying DVDs from a company that offered drastic discounts and even ran a little contest where you could get about a free DVD a week with no payment. With their prices and free stuff, there was no way that was a sustainable business model. They stayed open, sending me lots of cheap and free DVDs, until they finally ran out of money and closed up near the time of the bust. Some venture capitalist out there bought me a huge DVD collection.

There was this weird idea that if you just got a lot of people using your site, that would magically mean massive profits, but a whole lot of companies never really attempted to devise a mechanism to turn users into profits.

I remember my sisters would sign up for websites and they would send free stuff like tshirts, etc. it was crazy how much free stuff they got registering for websites. A lot of the items lasted longer than the companies that created them!