Return of the Dot-Com Bubble
The Dot-Com Bubble, referring to the rapid rise of tech stocks and their inevitable rapid fall, made a lot of people very wealthy, and many more very poor. The rise began around the year 1995 when the Internet was beginning to take off, and the crash occurred in 2000. Many people speculated that the dot-com era has passed, but a new trend in the dot-com speculation market had begun making people thing that a new bubble is on the horizon. We must learn lessens from the past to save us from making the same mistakes twice.
eBay is probably one of the most famous dot-coms in the world. eBay was founded in 1995 as a marketplace for goods and services (Gomes-Casseres, 2001). It didn’t take long before eBay became the premier online auction house on the Internet. Though there have been many online auctions houses since, none have come close to what eBay has become. When eBay opened on the stock market in 1998 it had a share price of less than $5 per share. When the bubble burst just prior to the year 2000 the share price for eBay had risen to over $30 per share before dropping down to about $10 per share. This bursting of the bubble is very much the same thing that happened to hundreds of other dot-comes during this period. Unlike eBay, many dot-coms did not survive beyond the year 2000.
Though it was believed that the dot-com era in stocks was over, experts now agree that there is a new era in the making for dot-coms. For example, eBay stock has now risen again to over $30 per share after peaking at $65 in the year 2004. Likewise, other Internet stocks are also on the rise. Rupert Murdoch's News Corporation recently purchased MySpace.com for $580 million causing stocks to rise (Schifferes, 2006). Speculation is now focused on YaHoo.com and Google as Microsoft is making a bid to buy YaHoo.com, while Google.com is working with YaHoo.com to prevent the takeover. No matter what happens, stock prices of any of these three companies are almost certain to go up for a while.
All things seem to work in cycles, and the stock market is no different. If the past is any indication of things to come then the stock market, particularly Internet based stocks, are certain to follow the trends of the past. Bubbles tend to burst, and when Internet stocks fall, they fall big. It is important that we are aware of this when we spend our hard earned money on something that almost doesn’t even exist, like the Internet.
Gomes-Casseres, Ben. (2001, Spring). The History of eBay. Retrieved on April 15, 2008 from http://www.cs.brandeis.edu/~magnus/ief248a/eBay/history.html
Schifferes, Steve. (2006, Oct. 10). Has the dotcom boom returned? Retrieved on April 15, 2008 from http://news.bbc.co.uk/2/hi/business/6036337.stm
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