There is a significant error in many conclusions concerning the youthful stages of the Internet. This may lead some businesses into wrong decisions and failure. Those whom proclaim "I told you so" or that dot-coms in general don't understand basic business strategy have one big problem - they obviously don't understand the basic Internet.
In order to understand why the stock market melted in 2000, one should first realize that it had little to do with a dot-com shakeout, but more with a technology and Internet mania that had become irrational. Society over estimated how the Internet would change life in the short term and stocks were driven to immensely overvalued levels. Much of this hyper valuation was fueled by greed. Investors whom had never played the markets before, threw considerable resources at public offerings they understood little of.
The meltdown and recession that began in March of 2000 occurred in part to the Y2K issue. In early 2000 those companies that had frantically resolved the Y2K threat by buying up loads of fresh hardware and software stopped making purchases. The ramp up prior to December 31st caused a considerable over-inflation due to a large volume of product and service sales that in turn drove up share prices. As of January 1st, 2000 all these purchases dried up.
In fairness a significant percentage of the dot-com craze was initiatives that had poor business models. Most of these start ups became overnight multi-million dollar operations and then almost as quickly fizzled. Not because the Internet was a weak business vehicle, but because they had no solid business model in the first place. Prior to their fizzle however came the purchases of much technology further driving the markets. These sales then not only stopped but thereafter saturated the market with barely used equipment further causing technology manufacturing orders to dry up.
There was also a mad scramble to implement telephone, cable and fibre-optic broadband networks. Over 52 million miles of fibre ( more distance than 200 trips to the moon ) costing over $100 billion were laid in North America within the last four years of the last century. Today, little more than 5% of this capacity is being utilized. The network builders are now laden with debt, and most won't survive. The plus side of this is that someday we will have very cheap bandwidth.
Technology revolutions occur often throughout our history. In 1850 there were more than 3500 railroad companies in North America. Today that number is under 300. In the early 1900s there were over 3000 telephone companies. Again that number is now well below 300 with only a handful in Canada. Even the automobile industry had more than 3000 initial start-ups. The recent market correction and mild recession was inadequately anticipated.
The longevity of the current economic slowdown is aggravated due to factors of September 11th, the war in Iraq and a continued terror threat. The weight of 9/11 in the equations of those whom wish to dismiss the potential of the dot-com industry is inadequate. In fact such threats on our society should equate to strengthen the dot-com position.
Looking from a perspective within the dot-com world, our future is laden with opportunities in near parallels to what would recently have been deemed as science fiction. Certainly some ideas are off in left field, yet undoubtedly the quantity of viable ideas waiting conception are immense.
I believe that we are on the verge of another significant economic upturn and technology applications explosion. This time round setting records not within daily trading, but records based upon a volume of world lifestyle change - fulfilling the public expectation for innovative web oriented services has become a crucial component to maintaining credibility in the business place. Businesses need to further utilize their name recognition in the competition of traditional brands to conquer modern market share. The ammunition for market battles is innovation and implementation. This ammunition is stockpiled by those who start sooner than later.
Steve McEachern is the senior applications architect for Status Technologies a leader in web based software development.
