The Dot-Com Bubble

In the 1980s and early 1990s, the Internet was being managed by the National Science Foundation (NSF). The NSF had restricted commercial ventures on the Internet, which meant that no one could buy or sell anything online. In 1991, the NSF transferred its role to three other organizations, thus getting the US government out of direct control over the Internet and essentially opening up commerce online.

This new commercialization of the Internet led to what is now known as the dot-com bubble. A frenzy of investment in new dot-com companies took place in the late 1990s, running up the stock market to new highs on a daily basis. This investment bubble was driven by the fact that investors knew that online commerce would change everything. Unfortunately, many of these new companies had poor business models and ended up with little to show for all of the funds that were invested in them. In 2000 and 2001, the bubble burst and many of these new companies went out of business. Many companies also survived, including the still-thriving Amazon (started in 1994) and eBay (1995). After the dot-com bubble burst, a new reality became clear: in order to succeed online, e-business companies would need to develop real business models and show that they could survive financially using this new technology.

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