The dot-com bubble (also referred to as the dot-com boom, the Internet bubble, the dot-com collapse, and the information technology bubble)〔James K. Galbraith and Travis Hale (2004). (Income Distribution and the Information Technology Bubble ). University of Texas Inequality Project Working Paper
〕 was a historic speculative bubble covering roughly 1997–2000 (with a climax on March 10, 2000, with the NASDAQ peaking at 5,132.52 in intraday trading before closing at 5,048.62) during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the Internet sector and related fields. While the latter part was a boom and bust cycle, the Internet boom is sometimes meant to refer to the steady commercial growth of the Internet with the advent of the World Wide Web, as exemplified by the first release of the Mosaic web browser in 1993, and continuing through the 1990s.
The period was marked by the founding (and, in many cases, spectacular failure) of several new Internet-based companies commonly referred to as ''dot-coms''. Companies could cause their stock prices to increase by simply adding an "e-" prefix to their name or a ".com" to the end, which one author called "prefix investing."
A combination of rapidly increasing stock prices, market confidence that the companies would turn future profits, individual speculation in stocks, and widely available venture capital created an environment in which many investors were willing to overlook traditional metrics, such as P/E ratio, in favor of basing confidence on technological advancements.
The collapse of the bubble took place during 1999–2001. Some companies, such as pets.com and Webvan failed completely. Others lost a large portion of their market capitalization but remained stable and profitable, e.g., Cisco, whose stock declined by 86%. Some later recovered and surpassed their dot-com-bubble peaks, e.g., eBay.com, Amazon.com whose stock went from 107 to 7 dollars per share, but a decade later exceeded 500.〔http://chart.finance.yahoo.com/z?s=AMZN&t=my&l=off&z=l〕
Due to the rise of commercial growth of the Internet, venture capitalists saw record-setting growth as ''dot-com'' companies experienced meteoric rises in their stock prices and therefore moved faster and with less caution than usual, choosing to mitigate the risk by starting many contenders and letting the market decide which would succeed. The low interest rates in 1998–99 helped increase the start-up capital amounts. A canonical "dot-com" company's business model relied on harnessing network effects by operating at a sustained net loss and to build market share (or mind share). These companies offered their services or end product for free with the expectation that they could build enough brand awareness to charge profitable rates for their services later. The motto "get big fast" reflected this strategy.
This occurred in industrialized nations due to the reducing "digital divide" in the late 1990s, and early 2000s. Previously, individuals were less capable of accessing the Internet, many stopped by lack of local access/connectivity to the infrastructure, and/or the failure to understand use for Internet technologies. The absence of infrastructure and a lack of understanding were two major obstacles that previously obstructed mass connectivity. For these reasons, individuals had limited capabilities in what they could do and what they could achieve in accessing technology. Increased means of connectivity to the Internet than previously available allowed the use of ICT (Information Communicative Technology) to progress from a luxury good to a necessity good. As connectivity grew, so did the potential for venture capitalists to take advantage of the growing field. The functionalism, or impacts of technologies driven from the cost effectiveness of new Internet websites ultimately influenced the demand growth during this time.
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