JDN, dot.coms had a fixed amount of time in which to demonstrate viability as a business entity. For many, it was a big pyramid scheme. One company backed another, and another company backed it with advertising revenue. So forth and so on. When the advertisement rates collapsed, so did their business plans. As did the streets confidence in their long term success.
In other cases, although the business was flourishing, the cost to continue their brand awareness and grow was out of control. Amazon being a good example. They demonstrated they could make money in books, but as the Wall-Marts of the worlds stepped up to the plate to compete in their newest endeavors. They found themselves without the resources and sales to keep up.
We will never know for sure if it was Greenspan's tightening, or the streets realization that corporate plans were not working as hoped for, relative to the companies PE ratio which collapsed the dot.com stock prices. My instinct tells me it was more a case of the street losing confidence in the dot.coms success long term.
Think about this, how many of us who are avid web surfers really click those banner adds and purchase something because of them? Not nearly as many as was originally believed possible.
As a side note, amidst all this gloom and doom regarding dot.coms, a new website is about to be fully launched which promises to revolutionize the online air travel industry.
Expedia, TravelCity.com and the travel agent industry tried to shut it down as a monopoly even before the first page was built. But built it they have. If you travel a lot or a little, this site is a must bookmark. It's linked (similar to the travel agents computers) to every airlines reservation system in the world. orbitz.com
Something tells me when these guys go public, the street will value them appropriately. One thing which is still booming, is online ticket sales.
May the Bull return!
Michael |
