The Dot-Com Boom, Bust, and Rebirth

Internet-related businesses were started with
more than $100 billion of investors’ money. In an extended burst of optimism and what
many came to describe as irrational exuberance, investors feared that they might miss the
money-making opportunity of a lifetime. As more investors competed for a fixed number of
good ideas, the price of those ideas increased. Worse, a number of bad ideas were proposed
and funded. More than 5000 of these companies went out of business or were acquired
in the downturn that began in 2000. The media coverage of the “dot-com bust” was
extensive. However, between 2000 and 2003, more than $200 billion was invested in purchasing
electronic commerce businesses that were in trouble and starting new online ventures,
according to industry research firm WebMergers. This second wave of financial
investment has not been reported extensively in either the general or business media, but
it is fueling a rebirth of growth in online business activity.
 After seeing so many news stories during the period from 2000 through 2002 proclaiming
the death of electronic commerce, many people are surprised to learn that the growth in online B2C sales had continued through that period, although at a slower pace than during
the boom years of the late 1990s. Thus, the “bust” that was so widely reported in
the media was really more of a slowdown than a true collapse. After four years of doubling
or tripling every year, growth in online sales slowed to an annual rate of 20 to 30
percent starting in 2001. Most experts expect this growth rate to continue through 2010.
One force driving the growth in online sales to consumers is the ever increasing number
of people who have access to the Internet.