eWEEK at 30: How Amazon Survived the Dot-Com Crash to Rule the Cloud

 
 
By Rick Dagley  |  Posted 2013-12-27 Email Print this article Print
 
 
 
 
 
 
 


And one thing customers like are low prices. So Amazon took a page out of Walmart's playbook, according to Scott Strawn, an IT analyst with IDC. "When they first were getting started, they approached a large number of executives from Walmart to help them better understand how to create a low-margin business," Strawn told eWEEK.

"What they were able to do is build out a massive organization based on the idea that if you go to Amazon, you can reasonably expect to find relatively inexpensive prices because there are efficient processes for basically connecting buyers and sellers. That approach was being able to provide these goods at a low cost, even taking shipping costs into consideration."

Survival of the Fittest

When the dot-com boom started in the mid-1990s, it wasn't just Internet startups that saw the value of the Web. The tech giants of the day also understood its significance. On May 25, 1995, then-Microsoft CEO Bill Gates warned his executives that his company was not prepared for the approaching "Internet tidal wave." In an internal memo to them, Gates made the Internet the "highest level of importance," saying their "focus on the Internet is crucial to every part of our business. The Internet is the most important single development to come along since the IBM PC was introduced in 1981."

It was a time when the common belief was that if a company operated online, it was going to be worth millions of dollars. So Internet companies were being launched at a high rate, and investors were backing them. If you had ".com" at the end of your name, investors were interested.

The boom hit a peak in January 2000 when 19 online businesses bought very expensive Super Bowl ads ($1.1 million per 30-second ad spot) to herald their arrival. Perhaps the face of this boom was Pets.com's sock puppet. The sock puppet was so popular that the year before, it even appeared as a 36-foot balloon in Macy's Thanksgiving Day Parade.

It was also in 2000—on May 8—that PC Week changed its name to eWEEK (with the tagline "Building the .com Enterprise")—to better portray its coverage for and of companies undertaking e-commerce and Internet-based business initiatives.

And while Amazon still was a couple years away from making a profit, it was the darling of the e-commerce world. Because of Amazon's role in popularizing online shopping, Time in 1999 named Bezos Person of the Year (an honor he was again nominated for this year).

Then it happened. The dot-com bubble burst. Many of the dot-coms didn't have a sustainable business model and so didn't survive the crash. Pets.com folded in November of that year. Grocery delivery service Webvan, perhaps the biggest dot-com bust, managed to hold on until July 2001. By the time it announced it was closing shop, its stock, which peaked at $30 a share, had fallen to 6 cents a share. Investors lost $5 trillion. Amazon wasn't immune either, with its stock price plummeting from $107 to $7 a share. But, unlike many other dot-coms, Amazon had a solid business plan and so survived.

 



 
 
 
 
 
 
 
 
 
 
 
 
 

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