eWEEK at 30: Web Expansion Drives Frenzied Dot-Com Boom and Bust

eWEEK 30: The rapid growth of the Internet in the 1990s sparked immense investments in new e-commerce ventures, the so-called "dot-com" companies, many of which collapsed as spectacularly as they grew.

In mid 1990s, the Internet was just beginning to take shape as a global business juggernaut. The Netscape Navigator Web browser had been launched, and it would soon be followed by Microsoft Internet Explorer, allowing anyone with a computer and modem to go online to see what there was to discover on the World Wide Web.

Quickly, entrepreneurs around the world saw that the Web would support new e-commerce ventures based on the new idea of selling goods online and shipping directly to buyers.

During this period, suddenly it seemed brilliant to sell dog food, groceries, toys and anything else online to consumers. The sky was the limit to what could be sold on the new global marketplace because the fledgling Internet was the secret sauce that seemed to promise instant profits and riches.

This period gave rise to the concept of supposedly "frictionless" retailing that would enable online marketers to sell goods of all kinds without having the massive overhead of brick-and-mortar stores staffed with battalions of shelf stockers and checkout clerks.

Venture capitalists appeared ready to throw cash at anybody with a vaguely plausible e-commerce business plan on a PowerPoint presentation. This gave rise to what came to be known as the dot-com boom, which rapidly saw hundreds of companies get massive influxes of cash from venture capitalists and investors to build Websites and the distribution infrastructure required to sell any conceivable commodity or service

The only problem, however, was that lots of investors and companies jumped into the abyss without any experience of knowing how these newly minted e-businesses would find a path to sustainable profitability.

The businesses were started without the hard-nosed business planning that typically went into the creation of entirely new business venture. But the problem was nobody really had any experience starting a sustainably profitable e-business. The founders of these ventures thought they would figure out how to do it as they went along. The main goal was to get the business started before someone else put a stake in the ground and then figure out how to make a profit later.

Although this is the period when the likes of Google, Amazon.com and Salesforce.com were founded, there were many more companies that were organized, funded by venture capitalists, issued initial public stock offerings and collapsed all within three or four years or less.

Among the big dot-com names to initially soar and later crash-land were Webvan.com, which hoped to make a fortune delivering groceries to consumers who placed their orders online; Pets.com, which started up operation in August 1998 selling pet supplies to retail consumers; and Boo.com, which was a short-lived British-based Web company that sold clothing and fashion online.

Also well-known at the time was Kozmo.com, which promised home or office deliveries of food, movies, CDs and more after users placed their orders online; Flooz.com, an online gift currency business; and Drkoop.com, a health and medical information site. All of these Web ventures have the distinction of going into business and failing on the Web from 1997 to 2001. These are just a few examples of the dot-com companies that rose and collapsed during this period.