Dotcom bubble burst – a decade on
By Dean • Mar 11th, 2010 • Category: Industry News
10 March 2000 is widely considered the day the dotcom bubble burst. Its Nasdaq index, having grown an astonishing 24% since the end of 1999, peaking at over 5,000, began its slide downwards, taking the hubris that accompanied technology stocks with it.
The new economy vs. the old economy
The dotcom bubble came about as a result of unbridled enthusiasm for the new Internet economy. Analysts and commentators argued the rules of engagement had changed and those who stayed with traditional companies were betting on the wrong horse, given technology was where the profits of the future would come from. Billion dollar companies with zero revenue were born virtually overnight.
- Photo: Google
But soon, on 10 March specifically, this all tapered away with commonsense investing indicating zero value existed in companies that could not turn a profit. Ten years on, looking at the Nasdaq as an indicator, the technology industry has yet to recover to having half the success it enjoy a decade ago.
Great companies were born
Though it is easy to paint the dotcom boom as a time of chance taking, many great companies emerged out of the wreckage. Google was founded in 1998, lived through the dotcom boom and bust and eventually filed for IPO in 2004. Amazon, eBay and Cisco are also examples of companies that were hammered during the dotcom bubble burst and came out on the other end as better companies.
A new bubble
Rumours coming out of Silicon Valley suggest another dotcom bubble of sorts is forming. This time, however, the over-enthusiasm is not on the parts of stock market trading, but rather venture capitalists and investors.
- Photo: Amazon
Several companies with zero revenue strategies are being backed and pundits are arguing that venture capital as an industry is no longer sustainable since too much money is chasing too few investments and those investments it is chasing are not viable companies.
Thankfully, the dotcom bust is not too far back in people’s minds, meaning the stock market disaster on the Nasdaq in 2000 is unlikely to happen again.
