THE DOTCOM BUBBLE – The Rise of the Internet Triggered a 'Toxic Bubble'


 The advent of the internet in the 90's has invited a crisis that marked the black history of the world known as "The Dotcom Bubble".

The events of the Dotcom Bubble crisis or also referred to as the 'Internet Bubble' occurred at the end of the 1990s, which is between 1998 and 2000.

It happened as a result of speculation in internet-based technology business investment.

In the beginning, the value of equity grew so rapidly that the Nasdaq index, which is mostly made up of technology companies, rose from less than 1,000 points in 1995 to more than 5,000 points in 2000.

But in 2000, the performance of most technology companies suffered a decline when investors began to realize that the internet-based companies they invested in could not bring them profit.

The ever-growing bubble finally bursts!

The bubble burst occurred in 2001 and 2002 when the equity market entered a 'bear market' phase.

At the end of 2001, most technology stocks were in a slump and only a few survived.

Technology companies such as Cisco, Intel and Oracle which are 'blue-chip' companies are also not exempt from experiencing recession with an 80% fall in value.

The start of The Dotcom Bubble

The advent of the internet has encouraged many technology-based startup companies to be established with the expectation of thriving in the future.

In the early 90s, Mosaic Web Browser first appeared to facilitate internet access for users, but the internet at that time was a luxury.

However, the Netscape company later emerged by providing a free browser for users to explore the raw internet facilities that turned the luxury of the internet into a necessity for users.

Within a year, Netscape's popularity soared and it was later listed on the stock exchange after issuing its company's initial public offering (IPO).

August 5, 1995 saw Netscape's stock performance skyrocket from $28 to $75 on its first day of trading.

This has opened the eyes of many investors who are beginning to see new and profitable opportunities in internet technology companies.

The Peak of the Dotcom Bubble Before the Crisis

Investors have been racing to put their investments into emerging startup companies despite not understanding what the internet is all about.

Not only can the capital be returned, but the investment company expects the profit to be obtained to be multiplied many times over in a short period of time.

Currently, investors will be attracted to any company that uses the name 'dotcom' even if they do not yet know the potential of the company in the market.

Due to receiving large investments, these startup companies acted to use large capital for advertising and marketing to raise their company's brand because the competition was too high at that time and even up to 90% of the capital was spent.

In 1999, the list of IPOs on the Nasdaq was reported to be half of them consisting of internet-based technology companies.

The Bubble Finally Burst!

High speculation on internet technology at that time has left aside fundamental factors in evaluating the performance capabilities of a company.

Due to too much being used for marketing, investment capital began to decrease causing a lack of cash for dotcom companies to continue operations.

The dumping of IPOs of technology companies on the stock exchange that are seen as overvalued without clear potential is increasingly eroding the confidence of investors.

Eventually the bubble burst, a panic situation hit the market and caused the prices of technology companies to plummet as investors began to withdraw their investment capital from the market.

At the end of 2001, the majority of public investment companies dotcom scope, and their trillion dollar investment found the point of failure.

The Nasdaq index which reached a peak of 5,000 points in March 2000 finally plunged to 1,140 points in October of that year.

Nasdaq needs about 15 years to recover to its peak level.

The cause of the Dotcom Burst

High Speculation

Without considering other factors, the expectations placed on future technological advances have disrupted the normal movement of the market

The calculations made against companies using high multipliers cause the results obtained to be unrealistic and overly optimistic

Analysts do not use basic calculation methods and are only guided by website traffic metrics without any other added value

Venture Capital

Low capital and interest rates attract investors to invest in startup companies, especially those based on technology and the internet

Loose restrictions on internet companies to receive funds or capital cause the amount of investment to be too high


The media became the role of encouraging the public to invest in risky technology stocks by promising large returns to investors

Among the companies that successfully weathered the Dotcom Bubble crisis

⦁ The largest online store in the world was founded by Jeff Bezos in 1994

⦁ In the dotcom era, Amazon's IPO was offered at $18 per share on May 15, 1997.

⦁ Their stock price once rose to more than $100 at one time and fell to less than $10 after the bubble burst.

⦁ In November 2021, Amazon's stock price is at $3,545.


⦁ A famous online auction house founded in 1995 by Pierre Omidyar

⦁ eBay's IPO was offered on September 21, 1998 at a share price of $18 and the price went on to rise to $53 on the first day of open trading.

⦁ In 2020, eBay recorded company revenue of $10.3 billion.

Booking Holdings (

⦁ was established in 1997 and is a travel website that helps its users to find discounted prices for hotel facilities and so on.

⦁ In March 1999, Priceline's IPO was offered at $16 per share and rose to $86.25 on the first day of open trading.

⦁ However, their share price plummeted to less than $10 in the following years.

⦁ In November 2021, the share price of Booking Holdings reached $2,400 per share.

The effect of the Dotcom Bubble

In 2001, the equity market entered a 'bear market' after the bubble burst.

The Nasdaq experienced a fall of almost 80% causing billions of dollars in losses in the market.

Most internet based companies fail and only a few survive.

According to the New York Times, approximately 48% of dotcom companies managed to survive the bubble crash phenomenon and this event has become one of the black history or 'black swan' phenomenon in the financial world to teach the new generation.