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Please Note: This blog post is a cartoon feature I had authored in 2003 as a retrospective view of the first Dotcom Bubble (1998 – 2000). I am publishing the article exactly as it was written 12 years back. Would request the readers to read it as if they are in 2003, and while reading they relate its contents to the contemporary dotcom boom (please note, I didn’t call it a bubble).
Abstract:To an average person what might seem logical now, was the biggest shock to the leading Business Gurus then. To a trained eye, it might even seem like the case of a balloon growing out of control and the wise ones preparing for the inevitable. One can’t exactly do much to comfort those who lost significantly in the following economic slowdown but this article delves into the reasons why the biggest bubble of all times – Dotcom – went bust .
It was the 14th of April 2000, when some people were dreaming of striking it big with their startups, aspiring entrepreneurs placing their well-established careers at stake, youngsters looking for a fantastic technology career and venture capitalists disbursing their corpus in diverse dotcoms when the so-called ‘inevitable’ happened – NASDAQ crashed! A lot of dreams were devastated and many fortunes wiped out. That was one time when the words we dread, were heard the most – “I told you so”, but did anybody really see it happening so abruptly?
The dotcom bubble was characterized by a radical business approach inherent to that period (1998-2000) where parameters of success went against conventional business thought. Even though that was one of the key reasons for its undoing, there were eight salient aspects of the bubble and their eventual negative impact, which brought an end to its meteoric rise.
Explosive Phenomenon – Confusion Continued
The global expansion of the World Wide Web (WWW or Web) happened at a pace the human race had never experienced before. The number of websites and their audience (netizens) grew like a chain reaction. Today, in hindsight, the common denominator of their varying degrees of comprehension perceives the Dotcom bubble as a craze and therefore was bound to die out.
But at that time, the dotcom BIG BANG had most of the world bewildered of its potential and the possible impact in their lives. Every conventional company wanted a brand new website and aspired to do BIG business online. Many real word companies wanted to diversify in online ventures. Every bit of news and every new dotcom success story brought incremental learning in an otherwise mostly unexplored space. Portals became the most used, misused and abused word of the time.
Even the non-believers just decided to go with the flow. It was presumed by all involved that something revolutionary was unfolding, which was going to challenge the very essence of human lives and shake the foundations of the traditional economy. How else could you explain it catching the imagination of people worldwide?
It was left to the limited exposure and comprehension of every individual on how they came to grips with the fact that they existed in two worlds (Real and Virtual) and to realize how their lives were going to be influenced by the online medium (ever heard the blind men and the elephant story!). For some it meant free music, for others it was discounted shopping, it was HTML and Java for some and an opportunity to manifest money dreams for others.
Technology was the focal point of the period and web professionals were highly sought after. There was always a dearth of competent and qualified individuals despite the hordes who kept joining the industry.
The burgeoning base of dotcoms had truly heralded the Information Revolution as Alvin Toffler had predicted, where the ingredients for success were known to very few and ignorance and half-baked knowledge ruled the rest. Even those who were successful were wading in uncharted waters but good fortune and prudence placed them on the right side.
Fabled articles by hotshot authors and respected opinion makers at that time had convinced one and all that the way humans think, work, live and communicate was going to change forever. Not that they didn’t speak the truth but they said too much too soon and people started scrambling to get their share of the pie. The inherent advantages of the medium convinced even the skeptics and thus began the gold rush! Fantastic success stories added fuel to the fire and a new genre of celebrities hogged the limelight… those who made fabulous fortunes overnight.
Funding and technology jargon became buzz words for the uninitiated, and tech wizards gave an inferiority complex to the bigwigs well established in other professions. Tech workers drew huge pay packets much to the amazement of their conventional counterparts who rued their not being able to make most of this wave.
Margins were not important for dotcoms, attracting huge traffic and expanding the audience base was considered a good enough substitute, all done with the objective of future anticipated earnings! The same was the premise and promise for investors – buy in today to benefit tomorrow, and surprisingly even the shrewdest of money minds didn’t seem to mind.
It is said, “If you can’t convince somebody to do as you say then put the fear of god in them”. Such was the incredible hype surrounding the medium that it made traditional businesses believe that without a good virtual presence they would perish. Web services companies had so many customers lining up that it almost seemed like patients queuing outside a doctor’s clinic in an epidemic.
Parents wanted their kids to go through whatever training it took to become a Cyber Architect (reminds me of a tale of a teacher who claimed to make men out of donkeys).
It was also the time when professionals across the industry spectrum sacrificed their long and lucrative careers to jump onto the bandwagon by putting their time, effort and money into wacky DOT COM ideas. It almost seemed like the dotcom bubble was spread by a bug that seemed to infect healthy people to convert them into zombies oblivious of right or wrong and incapable of rational thought.
Technology and innovation gave life to an otherwise impersonal and inanimate medium and their use was limited only by ones imagination. Thus, began one of the most extraordinary experimental learning phases in human history.
Dotcoms, one after the other, tried to look, feel and work differently and tried to attract audiences with their uniqueness. So much was expended to be an innovator, a pioneer and get the first movers advantage that prohibitive costs incurred in the process were also a critical reason for the downfall.
Innovation and entrepreneurial activity was at its peak and the more distinctive the idea, better were its chances of getting funded. In fact, peculiarity of an idea was considered as the benchmark of its ultimate success irrespective of the competency of the idea holder to actually take it there. Every dotcom idea claimed to satisfy a diverse set of needs, wants and desires of potential customers and impact their lives for the better.
Whether you like to believe it or not but the medium was highly effective! One can’t ignore the success of Hotmail, a mail solution for the masses, which grew into a phenomenon and catapulted its creator into the hall of e-fame. Behind every success story was an astonishing tale of how the numbers came so fast and strong that its promoters were caught dumbfounded by the deluge of visitors.
One reason definitely was that everything on the web was free or heavily discounted – A puzzling situation for the economists who believed that anything of value comes at a price. Purchases were subsidized by the dotcoms in the hope that customers will become loyal to them but then came along another dotcom came with an even better deal making it into a shopping carnival for the buyers.
The dotcom promoters were like evangelists of the online medium who went right ahead and built traffic, eyeballs, hits, visits etc. and left the rest to the number crunching abilities of the financial wizards. Can we say they were wrong because the most powerful man in the world bought Hotmail?
Since the online medium attracted almost everybody, those who claimed to know anything about it made windfall gains by serving the novices. They didn’t do the reputation of the medium any good by only serving their personal interests. This was the time when fly-by-night operators were mushrooming. All web companies professed to have the powers to make profitable portals and lured unsuspecting customers to spend their precious resources in getting themselves their new shiny e-toy.
The young and inexperienced were contributing heavily to the revolution just by being tech friendly and enthusiastic, and were getting enough takers for their exuberance. It was a time when just the degree of a reputed technology school was enough for fresh graduates to get funds for their business ideas much to the awe of seasoned professionals. Many customers and investors burnt big holes in their pockets by associating with these amateurs who couldn’t assist them in fulfilling their aspirations, and then rubbished the medium.
The web was definitely a great leveler and offered an equal footing to all real entities seeking a virtual presence. The progressive ones made it work for them by plunging into it wholeheartedly but the victims were the ones who made a hesitant entry, that too without adequate preparation and worst of all via the wrong web companies.
The expectations, irrespective of what went into the effort, were to achieve windfall gains and not surprisingly many hopes were dashed. They say a good word spreads to four but a bad word spreads to eleven and that was the undoing of a dream run for the medium. It was clearly sentiments that expanded the bubble so rapidly, and sentiments which broke it ultimately.
However the cloud of dust has settled and the online medium has the potential to still provide the same benefits it promised earlier but not to those who considered it a lottery ticket.
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