The DotCom Bubble in California Natsumi Sato(2013.1)
What is DotCom BubbleThe DotCom bubble came from 1995 to 2000.Stock markets in industrialized nations saw theirequity value rise rapidly from growth in the morerecent Internet sector and related fields. TheDotCom bubble is meant to refer to the steadycommercial growth of the Internet with the adventof the world wide web. Companies were seeingtheir stock prices shoot up if they simply addedan “e-” prefix to their name and/or a “.com” to theend. A stock market bubble is a self-perpetuatingrise or boom in the share prices of stocks of aparticular industry.
Lack of DotCom Model• A vast number of companies all had the same business model of monopolizing their respective sectors through network effects, and it was clear that even if the plan were sound, there could only be one network- effects winner in each sector, and therefore that most companies with this business plan would fail. Many sectors could not support even one company powered entirely by network effects.
Bubble Burst• Over 1999 and early 2000, the U.S. Federal Reserve increased interest rates six times, and the economy began to lose speed. NASDAQ Composite index peaked at 5,048.62 on Friday, March 10, 2000. NASDAQ had lost more than 10 percent from its peak on March 20, 2000. DotCom bubble was deflating at full speed by 2001.
Bubble Burst• A majority of the DotCom company ceased trading after burning through their venture capital. Investors often referred to these failed DotCom Company as "dot-bombs." When the bubble bursts, the share prices fall dramatically, and many companies go out of businesses.
Company of After Bubble Burst• America Online merged with Time Warner in the second- largest M&A transaction worldwide on January 11, 2011, and the Transaction has been described as “the worst in history”. WorldCom was found practicing illegal accounting, and WorldCom’s stock price fell drastically when this information went public and became brankrupt. A few large DotCom companies, such as Amazon.com and eBay, survived the turmoil and appear assured of long- term survival, while others such as Google have become industry- dominating mega-firms.
Problem of After Bubble Burst• Many DotCom company ran out of capital and were acquired or liquidated. The domain names were picked up by old-economy competitors or domain name investors. Several companies and their executives were accused or convicted of fraud for misusing shareholders money. Several communication companies could not whether the financial burden and were forced to file for bankruptcy.
Problem of After Bubble Burst• The stock market crash caused the loss of 5 dollars trillion in the market value of companies from March 2000 to October 2002. 50% of the DotCom companies survived through 2004. Technology experts such as computer programmers found a glutted job market. University degree programs for computer-related careers saw a noticeable drop in new students.
Conclusion• The DotCom bubble increased market price of many DotCom companies. When bubble burst, many DotCom companies went out of DotCom businesses. After bubble burst, most survived companies are dominating DotCom companies such as Google and Amazon. After bubble burst, both individuals and companies sustained damage.
Reference• WIKIPEDIA, Dot-com bubble, http://en.wikipedia.org/wiki/Dot- com_bubble wiseGEEK, What was the Dot-com Bubble?, http://www.wisegeek.com/what-was-the-dot-com- bubble.htm• NetHistory, History of the Internet – the Dotcom bubble, http://www.nethistory.info/History%20of%20the%20Intern et/dotc om.html• THE FREE LIBRARY, California dot.com boom went bust: the wild variations in California’s revenue stream make budgeting really tough, http://www.thefreelibrary.com/California+dot.com+boom+ went +bust%3A+the+wild+variations+in...-a084669791