Dotcom Bubble

From iGeek
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The Internet was not a flash in the pan, and changed the Global Economy.
People on both sides of the dot-com bubble can be wrong at the same time. The Internet IS changing the global economy, and this IS NOT just a "flash-in-the-pan" fad that's going to be gone tomorrow. But the other side is that investors CAN overreact to hype, get way ahead of returns, and that can cause a big pullback. But in the long term, this is the new normal.
ℹ️ Info          
~ Aristotle Sabouni
Created: 2001-09-10 

What's happening?

Recently, there's been the flurry of news stories about the death of so many ".com" companies. But don't let the hype fool you. Most of the problems were not with the Internet Industry at large, they were with how these companies were operated, or invested in.

Most of these dot-com's just released some grandiose plans, and ventured capitalists and the stock market poured in the money. Then the hype inflated those coffers even more. This money was thrown into immature organizations, often run by immature management, that were ill equipped to handle that influx, and with few plans about how to spend it wisely. So they wasted budgets on advertising or rapid development, assuming that next year they would be 100 times their size. When they only grew to 10 times their size, and they never had a good business plan for a revenue stream, they crumbled under their own weight. And what incompetence didn't finish off, market hype (and the bulls stampeding away from dot-com's) trampled many of the rest -the realization of this over-hype dried up all the money (for the good organizations as well as bad).

But don't let the "dot-com crisis" fool you. There has been huge growth in the Internet, and the survivors are likely to be in good positions for the continued growth of the Internet, and will be some of the biggest companies in the world. It is just going to take more time and maturity than the first wave of investors realized.

Overcoming barriers to success[edit | edit source]

The biggest barrier to the Internet is humanity itself - what computer geeks refer to as "wetware" (people). Society and humans need to adapt, and humans adapt slowly. But they do adapt, and those that don't are still replaced by younger generations that have adapted - so it is only a matter of time.

Already, the Internet is totally changing the way many people do business, it has created new businesses, is altering our whole market and economy. And many are getting disrupted (crushed) by not keeping up.

For example:

  • if you go to Nike.com, you can built your own custom tennis shoes. You get to pick color, size, and even your own little embroidered name.
  • Levis offers hundreds of size and color combinations - way more than any store could afford to stock.
  • Some other places (like ic3d.com) are offering custom Jeans, made to fit your body.
  • Apple and Dell Computer (among others) will custom configure computers to your specifications.
  • Cars and even houses can be bought on-line as well.

The Internet is enabling more customization and selection, because more customers are able to be drawn to one place. Thus making it more viable to customize or cary more stock. But this goes further than just that. What this is doing is enabling all sorts of small market businesses to become viable that could never have been before the Internet.

For example:

  • AmishShoppingMall.com is a viable business because it can draw orders from people all over the world
  • there are many more businesses like this, smaller businesses, or personalized businesses like an internet businesses to handwrite personalized letters and greeting cards
  • there are even sites to sell and ship people dried tumbleweeds.

There's always been a market for these things, but without the Internet, there just wasn't enough of a market in any one place, or advertising costs were too high to actually get to those customers.

This more direct interaction is allowing for a whole new barter economy to spring up - as is demonstrated by the on-line auction crazes. The direct manufacturer-to-client or seller-to-buyer interaction, is pressuring middle-men. Distributors and Sales outlets need to both add services and value to keep their customers from going elsewhere. And this is improving service, selection or lowering costs. Expect these trend to continue.

The area most broadly impacted is information and media:

  • Support infrastructure is being turned upside down, with manuals and automated help systems on-line.
  • Magazines have been very hard hit, as have newspapers.
  • Advertisers don't know where to put their dollars to attract customers - and some types of advertising are just going away.
  • There used to be a market for career ads in the papers - but the job websites (monster.com, hotjobs.com) have eaten that market alive.
  • The Music industry is battling to suit everyone to stop the flood of pirated or cheaper or even free music from eroding away their entire business.

But fighting the tide is a futile effort - they need to adapt quickly (to the new cheaper information costs and distribution models), or they'll be replaced completely. Expect more casualties.

Conclusion[edit | edit source]

Humanity is learning that all sorts of new businesses are suddenly viable - because their market pool is no longer just their community, but the entire world. But all sorts of old business and markets are suddenly no longer viable (at least not in the same ways). The costs of distributing information just crashed to near zero. The levels of distribution are flattening. The demand for custom services is going up. There is a commoditization of many markets, because shoppers have far more choices at their fingertips.

This is just the infancy for this new information age. We haven't even seen some of the bigger impacts, because the wet-ware (humans) haven't adapted fully to the Internet yet, and the infrastructure (broadband and wireless) isn't fully in place.

One barrier right now is creating better ways of finding information (search engine issues and content filtering capabilities) - but that will only hold us back for so long. Every 18 to 24 months our computer hardware capabilities are doubling (and have been for the last few decades). Computer limitations are evaporating, which helps out software problems evaporate (at a slightly slower pace). In a few more years the next generation is going to be kicking in. Kids that grew up always on the Internet will be making the decisions, and we'll have an infrastructure that can handle whole new forms of information distribution.

Be prepared to change and adapt quickly... or else.

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