The Information Age soared into existence in the 1990s as more and more of us saw owning a computer as a necessity and no longer simply a luxury. With Tim Berners-Lee inventing the World Wide Web, and making it widely available in 1993, there was a boom in companies being created based on information technology.
People were desperate to invest in Internet companies – and were particularly inclined to do so if there was a ‘dot com’ suffix involved. Companies found it incredibly easy to raise venture capital and those who went on to conduct IPOs could often raise a substantial amount of money even if they had never made a profit.
“Get big fast” is the motto that signifies these new companies’ approach to business: there would be incredible amounts of money funnelled into marketing with the goal of building market share and brand awareness, to increase the value of their products and services.
One staggering statistic from the bubble is that 16 dot-com commercials were showing during the January 2000 Super Bowl. Each of those commercials cost $2million for a 30-second spot.
People continued to invest and promotions pushed the price for shares well above the true value of dot-com companies. Yet by March 2000, predictions hit the headlines that “Internet companies are running out of cash – fast”: higher borrowing rates had come into force and the reality of operating costs for many e-commerce businesses came into full view. People began to rethink their investments.
The crash was dramatic: by November 2000, Internet stocks wiped out $1.755trillion in value.
Eventually growth and investment into information technology stabilised – and today we have a market that more closely resembles other areas of the economy, as the likes of Amazon, eBay and Google saw through the burst of the Dot Com Bubble and gained their market share.
Again, though, the Dot Com Bubble goes to shows the importance of investing wisely according to your objective; not simply jumping on the bandwagon when the latest trend emerges…