The Myth about the Dot.com Bust in 2001
The Myth about the Dot.com Bust in 2001
I couldn’t understand why these individuals would think that there was no money to be made through the internet. From my personal experience, I get most of my information on the internet about virtually everything; I commonly purchase products and service on it, and it is my main mode of communication with my friends and family. So I decided to do a little research on the state of the internet and its related industries. What I found was, although it is true that there was a major setback regarding the internet, commonly called the dot.com bust, the myth that it has never recovered, and that it is not, or will not be, a profitable industry is simply untrue.
Prior to 2001, there were billions of dollars being invested into the internet all around the world. Ideas for start-up companies were abundant, and individuals who wanted to sink a massive amount of money into them were abundant, as well. For most of these venture capitalists, they predicted that the internet boom would happen quickly, that once these companies were up and running, customers would flock to use them. This did not happen. History tells us that in terms of new technology, society tends to accept it at a snails pace. Even the printing press, despite the fact that it was a fundamental and life changing invention, took decades to become part of mainstream society. So, with the customers not banging on the doors, the overinvestment of money into the dot.com era forced a lot of companies to go bankrupt and lose their money and some, their livelihood.
Fortunately, this is not the end of the story. Despite the fact that many individuals and companies lost a lot of money during the dot.com bust, it laid the ground work for the growth we are seeing today, and has allowed the internet to become integrated into our culture. In his new book, The World is Flat, author Thomas L. Friedman argues that the trend towards overinvestment in the dot.com era (specifically the laying down of fibre-optic cables) allowed cheap access to high-speed internet around the world, and helped to lay the foundations for the growth of the internet and industries related to it.
Take, for example, the fibre-optics companies. Prior to 2001, these companies invested billions laying down fibre-optics (these are cables which allow a lot of information to pass back and forth at lightning speed whether it is video, audio, text or images). When the customers didn’t arrive to pay for it, most of these companies went bankrupt and banks foreclosed on them. The banks turned around and sold the fibre optics to other companies for a fraction of the price, and these companies eventually began offering cheap access to the internet (specifically high-speed), making it more affordable for individuals and companies all over the world to take advantage of it.
In western economic history, there are many examples of bubbles and busts which eventually turn into advantages for future economic growth. An example of one is found in the 19th century transportation industry in the United States. In an article in the February 2006 issue of Wired Magazine, Daniel Gross compares the dot-com bubble and bust to the laying of the railroad tracks between 1870 and 1890. In this case, a massive investment in railroad construction took place; so much so, that all of the investors went bankrupt, as increased rider ship did not happen overnight.
Eventually, however, the railroad became the norm and revolutionized commerce in the United States and, until air and road transport, was the main means of transporting goods cheaply and quickly. This cheaper and faster way to transport goods allowed many products to become drastically lower in price, making more products available to more people. We can see a similar trend from the dot.com bust in 2001 to present day. At the height of the dot.com bubble, investors simply expected that the customers would get on the internet bandwagon quickly, which did not happen.
The good news is, like so many times in history, customers have slowly but surely been catching on to the internet and what it has to offer, especially with the development of powerful search engines, such as Google, which made the content of the internet easily accessible. In fact, in an article in the same Wired Magazine, Chris Anderson points out that there has been great growth in technology despite the bust, and “it’s hard to find a technology-adoption projection from 1999 that hasn’t come true.”
Consider that in 2004, a report from the Canada Internet Project called ‘Canada Online’, stated that e–commerce in Canada had reached $28.3 billion dollars, up from $4.2 billion in 1999. The report also stated that “72% of all Canadians use the internet from various public and private locations”, and 67% have access at home. The average amount of time Canadian users spend on the internet is 13.5 hours a week. The report also concluded that users “value the internet much more as a source of information than as a source of entertainment.” And it is not just the younger generation using the internet anymore; as Ipsos Reid reported in 2004, 60% of Canadians age 55 and older are now using the Internet.
So, just with these few facts, one can see that the internet and its related industries are alive and well, and show great potential for growth. Ask yourself when you last used the internet (if you are reading this, then the answer is now). How many times do you go to the internet for information or to purchase something, or at least find out what you want to purchase?
There are many more reasons why the internet has become a powerful force in our society. To mention them all would require writing a book, and I worry that you don’t have the time at the moment. But I hope you now have a better idea of the reasons why the myth of a dying internet industry is false.
If you are interested in reading more about the information provided in this article I highly suggest reading the book The World is Flat, by Thomas L. Friedman; it can be found in most bookstores or online. Friedman covers virtually the entire history of the development of the internet.
Whether we like it or not, the internet is here to stay and has become a powerful force to get individuals and company’s messages across. It is also a powerful mode of communication that allows people of all languages, countries, and social classes to collaborate and come together as a global community. And, like everything else that has been created by humans, the internet will only be as good as what we use it for.
The Myth about the Dotcom Bust in 2001 - To learn more about this author, visit Kevin Virtue's Website.
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A couple of years ago, when I began to mention to people that I wanted to start my own website and database development company, so many of them asked me why I would want to. “There is no money to be made in it,” one stated. “Didn’t the whole internet industry go bust a couple of years ago?” another asked.
I couldn’t understand why these individuals would think that there was no money to be made through the internet. From my personal experience, I get most of my information on the internet about virtually everything; I commonly purchase products and service on it, and it is my main mode of communication with my friends and family. So I decided to do a little research on the state of the internet and its related industries. What I found was, although it is true that there was a major setback regarding the internet, commonly called the dot.com bust, the myth that it has never recovered, and that it is not, or will not be, a profitable industry is simply untrue.
Prior to 2001, there were billions of dollars being invested into the internet all around the world. Ideas for start-up companies were abundant, and individuals who wanted to sink a massive amount of money into them were abundant, as well. For most of these venture capitalists, they predicted that the internet boom would happen quickly, that once these companies were up and running, customers would flock to use them. This did not happen. History tells us that in terms of new technology, society tends to accept it at a snails pace. Even the printing press, despite the fact that it was a fundamental and life changing invention, took decades to become part of mainstream society. So, with the customers not banging on the doors, the overinvestment of money into the dot.com era forced a lot of companies to go bankrupt and lose their money and some, their livelihood.
Fortunately, this is not the end of the story. Despite the fact that many individuals and companies lost a lot of money during the dot.com bust, it laid the ground work for the growth we are seeing today, and has allowed the internet to become integrated into our culture. In his new book, The World is Flat, author Thomas L. Friedman argues that the trend towards overinvestment in the dot.com era (specifically the laying down of fibre-optic cables) allowed cheap access to high-speed internet around the world, and helped to lay the foundations for the growth of the internet and industries related to it.
Take, for example, the fibre-optics companies. Prior to 2001, these companies invested billions laying down fibre-optics (these are cables which allow a lot of information to pass back and forth at lightning speed whether it is video, audio, text or images). When the customers didn’t arrive to pay for it, most of these companies went bankrupt and banks foreclosed on them. The banks turned around and sold the fibre optics to other companies for a fraction of the price, and these companies eventually began offering cheap access to the internet (specifically high-speed), making it more affordable for individuals and companies all over the world to take advantage of it.
In western economic history, there are many examples of bubbles and busts which eventually turn into advantages for future economic growth. An example of one is found in the 19th century transportation industry in the United States. In an article in the February 2006 issue of Wired Magazine, Daniel Gross compares the dot-com bubble and bust to the laying of the railroad tracks between 1870 and 1890. In this case, a massive investment in railroad construction took place; so much so, that all of the investors went bankrupt, as increased rider ship did not happen overnight.
Eventually, however, the railroad became the norm and revolutionized commerce in the United States and, until air and road transport, was the main means of transporting goods cheaply and quickly. This cheaper and faster way to transport goods allowed many products to become drastically lower in price, making more products available to more people. We can see a similar trend from the dot.com bust in 2001 to present day. At the height of the dot.com bubble, investors simply expected that the customers would get on the internet bandwagon quickly, which did not happen.
The good news is, like so many times in history, customers have slowly but surely been catching on to the internet and what it has to offer, especially with the development of powerful search engines, such as Google, which made the content of the internet easily accessible. In fact, in an article in the same Wired Magazine, Chris Anderson points out that there has been great growth in technology despite the bust, and “it’s hard to find a technology-adoption projection from 1999 that hasn’t come true.”
Consider that in 2004, a report from the Canada Internet Project called ‘Canada Online’, stated that e–commerce in Canada had reached $28.3 billion dollars, up from $4.2 billion in 1999. The report also stated that “72% of all Canadians use the internet from various public and private locations”, and 67% have access at home. The average amount of time Canadian users spend on the internet is 13.5 hours a week. The report also concluded that users “value the internet much more as a source of information than as a source of entertainment.” And it is not just the younger generation using the internet anymore; as Ipsos Reid reported in 2004, 60% of Canadians age 55 and older are now using the Internet.
So, just with these few facts, one can see that the internet and its related industries are alive and well, and show great potential for growth. Ask yourself when you last used the internet (if you are reading this, then the answer is now). How many times do you go to the internet for information or to purchase something, or at least find out what you want to purchase?
There are many more reasons why the internet has become a powerful force in our society. To mention them all would require writing a book, and I worry that you don’t have the time at the moment. But I hope you now have a better idea of the reasons why the myth of a dying internet industry is false.
If you are interested in reading more about the information provided in this article I highly suggest reading the book The World is Flat, by Thomas L. Friedman; it can be found in most bookstores or online. Friedman covers virtually the entire history of the development of the internet.
Whether we like it or not, the internet is here to stay and has become a powerful force to get individuals and company’s messages across. It is also a powerful mode of communication that allows people of all languages, countries, and social classes to collaborate and come together as a global community. And, like everything else that has been created by humans, the internet will only be as good as what we use it for.
The Myth about the Dotcom Bust in 2001 - To learn more about this author, visit Kevin Virtue's Website.
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Excellent info.
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