Dot-com bubble, bust, and future

In “Electronic community: From birth to backlash,” Douglas Rushkoff discusses how the internet once was “a gift economy,” (25). This meant that people used the internet to communicate and share information and programs without the anticipation of receiving money. Internet users worked together for “a shared goal rather than financial self-interest,“ (Rushkoff 26). People got satisfaction out of knowing that what they posted on the internet would be available for millions of other internet users to see. Shortly after, the shared community that people worked together for, developed into one of self-interest for monetary returns. While programs and information on the internet was being shared for free, it eventually became a commodity. This information and content was being sold online. However, this was not successful, so businesses then decided to sell merchandise online. This expanded and developed extremely fast. Numerous businesses adopted this new use of the internet, which made the internet become the “World Wide Web,” (Rushkoff 29). Many business people created their own companies on the internet for this purpose, which became known as “dot-coms” because their websites ended in .com.

Even though creating these online companies became popular, hardly any of them made a substantial profit. Thus, the World Wide Web then transitioned into an “investment platform,” (Rushkoff 30). This “investment platform” allowed people to invest in the stock market through stocks on the internet. According to Wikipedia, this became known as the “dot-com bubble,” in which stock markets experienced a rise in their value from these internet companies. After stock prices rose, they became overvalued and were not an accurate estimate of the company’s fair value. Since customers saw the high value of the stocks of the company, so many of them bought shares in the company’s stocks, thinking they would reap profits.
Internet companies were so concerned with increasing their customers and growing that they did this by all means necessary, spending large sums of money, even before they earned substantial profits, generating losses. For example, some dot-com companies spent over 2 million dollars to have a commercial shown on the Super Bowl XXXIV in 2000.

A company’s stocks can’t increase indefinitely, as they must go down at some point. People who invested in the companies’ kept waiting to receive large amounts of money since the companies stock prices were so high and were of high value. After they didn’t receive these large sums of money, they sold their shares, causing the stock prices to fall significantly. Once the companies’ stock prices fell significantly, a good majority of them were forced to go out of business. A major factor that caused these companies to go out of business was that they were so focused on the traffic of their websites. Instead of caring about increasing their profits and experiencing good financial returns, they were so absorbed with using advertising to increase their customers.

Since this unsuccessful internet transition, the internet is now experiencing a transition into social networking. Rushkoff discusses how the World Wide Web is now being used more so for USENET discussions, blogging, bulletin boards, and other social networks. This is known as the Web 2.0. In order to compete with other websites, more and more businesses are creating a social networking business. According to Pcmag, every business now has some form of a social networking aspect, which will contribute to another dot-com bust. In addition, currently companies are buying out social networking companies of estimated high fair value, expecting that they will increase their customers and traffic . In addition, entrepreneurs are also purchasing social networking companies that have an estimated high fair value, expecting they will earn huge profits.

This is the same type of error that was made in 2000, which was that companies were more concerned with increasing their customers rather than earning profits. A quote in an online article describes how this current situation parallels the dot-com bust in 2000. This quote was said by O'Kelley, the Right Media co-founder, which said that “other entrepreneurs had begun to think that the financing game was best played by avoiding actual revenue, since that only limits the imagination of investors. ‘It's a screwed-up incentive structure, just like you had in the first bubble,’ he said.”

After the bubbles bust, or crash, the many people who are employed by the companies that go out of business, become unemployed. If businesses don’t change their ways and keep making similar mistakes they are going to keep creating these dot-com bubbles, increasing the unemployment rate in the United States. I guess businesses haven’t learned their lesson in 2000, since there is probably going to be another bubble currently, caused by Web 2.0.