dotcom bubble

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A global speculative rise in share prices between c.1997 and 2000 driven by the alleged opportunities for profit presented by the Internet. Access to the Internet, and especially to the Worldwide Web, became widespread in the mid-1990s, and many new companies were established that promised to utilize it in various ways. (These companies were generally based around websites with names ending in “.com”, whence the term “dotcom”.) Because the Internet was a new medium, neither the opportunities nor the limitations of doing business on it were properly understood and new business models that ignored the “old” economic rules were accepted uncritically. Most Internet start-up companies did not expect to make money in the short term, but rather emphasized the scope for major long-term growth. Financed by stock-exchange flotations or venture capital, they sought to build market share by offering free services, with the expectation that they could begin charging and thus making a profit when they were securely established; in the meantime, the rise in their share prices fuelled by this expectation of future success would satisfy their investors. A classic stock-market “bubble” developed: euphoria at rising share values spread to non-Internet shares and drove them even higher, despite there being no profits to justify this. The bubble burst in 2000: Internet start-up companies began to exhaust their start-up capital and go bankrupt, confidence collapsed, and share prices began a long decline that lasted until 2003.

Subjects: World History — Computing.

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