A look back at the dotcom bubble

Just over a decade ago, the dotcom bubble burst, and for the next 3-4 years, the IT industry (and IT job market) was in a slump.

During the last presentation I did for Game On 2.0 on August 29th, one of the audience members asked me what the dotcom bubble actually was. I supplied the standard Web answer of “overspending in the IT market” and “mismanagement of IT resources” (or something like that).

As odd as this sounds, I’ve never actually been asked that question before……and I’ve taught IT classes for a decade since the dotcom bubble. So, this question hasn’t sat well with me these past several weeks. This blog post is essentially a much better explanation of what the dotcom bubble was, so that I don’t think about it again ;-)

To understand what the dotcom bubble was, first imagine all of the technologies that we take for granted today. They all revolve around the Internet. We spend an incredibly large amount of time on the Internet - Googling anything and everything, buying stuff online, using Facebook, tweeting photos, watching more YouTube than television, etc. We access the Internet from computers, tablets and smartphones - it’s access anywhere, anytime, and it’s become such an ingrained part of our life:

• When I’m at a store and see an item I want, I’ll Google it to see if I’m actually getting a better deal elsewhere. Plus, I’ll check the store website for coupons, which the cashier will scan right from my phone.

• I post pictures I take with my phone on Facebook and Twitter daily, and well as cool articles I’ve seen in my news feed (what’s a newspaper?). I read other peoples posts and repost them too.

• If I want to see an episode of something, or a part of a movie I remember from years ago, I’ll YouTube it. Plus, who doesn’t use YouTube for music? Nobody.

• I buy stuff online - lots of it - books, collectibles, nerdy things. Whatever. And I pay with Paypal. I also pay my bills, renew my license plates, and book reservations online.

• I play games online, as well as read forums and blogs online. If it’s cool, it will be reposted on a ton of sites like Reddit. And if I find it cool, I can repost it with my comments to Facebook, Twitter or Google+ with a single click.

• And much much more…..

Chances are that you probably do 90% of the stuff I just listed above. This is what the Internet was always intended to be, and people knew this back in 2000 - they knew it would be big and that everyone would be using it. They also knew that business models would be Internet-based, and that Internet-based advertising would be the way of the future.

The problem was that everyone wanted today’s Internet back in 2000. It was a time of intense optimism for Internet-based technology. Everyone invested a ton of money into trying to make it happen, but it didn’t. We just weren’t ready back then. The dotcom bubble burst around 2001/2002. Many technology companies found that their ideas and investments were not going to make enough money to stay afloat, and ended up going bust. Other companies became overly-cautious about investing in technology and systems for the next 3-4 years - they made sure that any technology investments made would result in a return that justified the investment. The term ROI (Return on Investment) lined every technical product white paper.

So, in short: The dotcom bubble was a situation caused by technological optimism - technology companies wanted today’s Internet culture back in 2000. Many of them invested heavily in it, found out that they couldn’t make a sustainable return on their investment, and folded.

I’ve often wondered whether the companies that folded when the dotcom bubble burst would have been successful today. Probably…provided that some other company hadn’t beaten them to the punch and saturated the market. I remember companies back in 2000 that had ideas similar to Facebook and YouTube. These were small companies, with talented people and big plans. Too bad those companies were 5+ years ahead of their time.