Definition
Dotcom, also written as .com, refers to a company that primarily conducts its business over the internet. The term originates from the .com domain extension used by many online businesses. Dotcoms are usually associated with the late 1990s tech industry boom and bust, commonly referred to as the ‘Dotcom Bubble’.
Key Takeaways
- The term ‘Dotcom’ refers to businesses that operate online through a website, with a primary feature being the ‘.com’ at the end of the web address.
- The ‘Dotcom Boom’ and ‘Dotcom Bubble’ refer to the period around the turn of the twenty-first century where a high number of dotcom ventures were founded, leading to rapid growth in the industry, which was then followed by a quick and severe downfall as many of these businesses closed due to unsustainability.
- ‘Dotcom’ companies form a major part of the current global economy, with major examples including Amazon and Google. These businesses offer their products and/or services online and may not have a significant physical retail presence.
Importance
The finance term “Dotcom” is important because it symbolizes a significant period in the financial and technological history.
This term is associated with the economic boom and subsequent bust that took place around the turn of the 21st century, primarily between 1995 and 2001.
This era was characterized by the rapid rise and fall of internet-based companies, or “Dotcoms”. The Dotcom bubble was driven by widespread speculation, as investors were incredibly bullish about the potential of the new internet technology, leading to inflated stock prices and market values.
The eventual burst of the Dotcom bubble resulted in significant financial losses for many companies and investors and fundamentally changed the way that tech startups were valued and financed.
This period serves as a cautionary tale about the dangers of speculation and the importance of sustainable business models.
Explanation
The term “Dotcom,” derives from “.com,” a popular domain name extension often used by businesses engaged primarily in commerce or commercial activities on the internet. The purpose of a Dotcom can range from selling products or services, providing information to potential customers, or promoting a company’s brand identity.
Its main functionality lies in the digital commerce sector, where it acts as a platform for transactions and business interactions to take place, spanning across various industries and sectors. “Dotcom” also refers specifically to the internet companies or start-ups launched during or just before the internet bubble of the late 1990s.
These companies were characterized by their business model which aimed to capitalize on the growing trend of internet usage, and often quickly attained high market capitalization despite their lack of a solid profitability structure. Dotcom companies such as Amazon and eBay, for example, emerged as pioneers in e-commerce, showcasing the internet’s potential for revolutionizing how businesses sell to and interact with customers.
Examples of Dotcom
Amazon.com: This is perhaps the most successful example of a dotcom company. Established in 1994 as an online marketplace for books, Amazon.com has evolved exponentially over the years into an online retail giant selling a wide range of products. Despite experiencing the dotcom bubble burst in the early 2000s, Amazon showed resilience and has remained profitable.
Pets.com: This is a classic example of a dotcom business that did not survive past the dotcom crash. The company was an online business that sold pet supplies to consumers over the Internet. Despite being widely recognized due to an extensive marketing campaign, Pets.com was unable to achieve a profit and therefore shut down in 2000, after just two years of operation.
eBay.com: eBay is another great dotcom example. Founded in 1995, eBay started as a platform for peer-to-peer selling and quickly became popular for online auctions. Today, it has diversified its offerings and remains one of the leading eCommerce platforms globally. eBay survived the dotcom bubble burst by having a business model that promoted customer loyalty and repeated site visits.
Frequently Asked Questions about Dotcom
What does Dotcom mean in finance?
Dotcom refers to a company that conducts its business primarily on the internet using a website with the commercial suffix “.com”. The Dotcom era is specifically tied to the boom and crash of internet-based companies from around 1995 to 2001.
What was the Dotcom bubble?
The Dotcom bubble, also known as the internet bubble, refers to a period of excessive speculation in internet-focused companies in the late 1990s, culminating in a market crash in 2000-2001. This bubble was characterized by rapid rise in equity valuations, driven by investments in internet-based companies during the bull market in the late 1990s.
What caused the Dotcom crash?
The Dotcom crash occurred when it became evident that many internet companies that had significant market valuations did not have a sustainable business model or even a clear path to profitability. This led to large-scale investor panic, triggering a sell-off in shares, and eventual collapse of many Dotcom companies.
Can another Dotcom bubble occur?
While it is hard to predict with certainty, the conditions that led to the Dotcom bubble are generally considered unlikely to recur exactly. However, similar bubbles can and do occur when speculation outweighs the fundamentals in a particular sector or area of the market. It’s always important for investors to assess the viability and potential profitability of a company before investing.
What were some significant Dotcom companies?
Some significant companies of the Dotcom era include Amazon, eBay, and Google. Despite the Dotcom crash, these companies managed to survive and thrive, becoming some of the largest and most influential companies in the world.
Related Entrepreneurship Terms
- Initial Public Offering (IPO)
- Technology Bubble
- Stock Market Crash
- E-commerce
- Internet Company
Sources for More Information
- Investopedia: A comprehensive online financial dictionary containing more than 13,000 definitions to assist individuals in understanding financial terms and concepts.
- Nasdaq: A global electronic marketplace for buying and selling securities, and also a benchmark index for U.S. technology stocks.
- Financial Times: An international daily newspaper printed in broadsheet format and published digitally that focuses on business and economic current affairs.
- Bloomberg: Provides global business and financial information, news and insight around the world.
