For today’s millennials, the dot-com bubble and subsequent crash is ancient history. Many people working in today’s tech world weren’t even born when the world’s first internet-based companies took a collective and colossal dive. That period was transformative and we owe much of today’s success to lessons learned from the dot-com crash.
Some history for those born in the 1990’s or after:
Back in the 90’s, people were just starting to get the internet in their homes. Scrappy startups like Jeff Bezos’ Amazon.com sold books out of their garages (pictured above), Craig Newmark launched a new-fangled personal-ad site called Craigslist, and AOL charged $19.95 a month for unlimited dial-up internet access.
Investors took note of this booming, brand-new economy and pumped unprecedented amounts of capital into these budding companies. AOL, at its height, merged with Time Warner, while Jeff Bezos’ garage-based online bookstore saw its stock go to $107 a share. It was a digital gold rush, and people were staking big claims on untested companies.
With the free flow of capital came the free flow of spending, and companies jockeyed with one another for preeminence in the new online age. Super Bowl XXXV, which was played back in January of 2000, featured 16 dot-com companies' advertisements at a cost of over $2 million a pop. Many companies paid for those spots not with revenue, which in many cases didn’t really exist, but with investor’s money.
It all started to come tumbling down in early 2000. AOL was forced to lay off thousands of employees and was eventually spun off from Time Warner. Today, Time Warner is worth around 14 times what AOL is. Amazon.com saw their stock price fall from a high of $107 to around $7 a share. As investors lost interest in lending, other companies without significant revenue and high overhead simply went bust.
Fast forward to today where many of that era’s companies are back — or at least their ideas are back. Powered by faster internet, more robust computers, smartphones and better delivery infrastructure, ideas that failed in the dot-com era are thriving today. Here are just a few of today’s tech successes that have their roots in the dark ages of the dot-com bust.
Boo.com
London-based Boo.com was founded in 1998 to sell clothes online. The company went bust in May of 2000, after having blown through an amazing $135 million in venture capital. User experience on the site was notoriously horrible, and the slow speed of the internet at the time made loading high-quality images a patience-testing endeavor. Imagine shopping online today and waiting several minutes for every page to load. Today’s New York-based online fashion companies like Gilt, Zady and Jack Threads (owned by NY-based Thrillist) aren’t all that different from Boo.com. Today, Boo.com redirects to Hostelworld.com.
WebVan
WebVan was a Silicon Valley-based grocery delivery business founded in 1996 that went bust in 2001. The company guaranteed delivery of products to their customers' homes in a 30-minute window. While this may seem downright common today, at the time it was unheard of. The company raised $375 million in an IPO in 1999, and was valued at over $4.8 billion. At the same time, the company had reported cumulative net revenue of just $395,000, with cumulative net loses of over $50 million. Today, it’s hard not to see FreshDirect as a sort of working, modern version of WebVan — just with trucks instead of vans, and two hour windows instead of 30 minute ones. You can also make a pretty strong case that today's recipe-kit delivery services like Blue Apron and Plated are the next logical evolution of the ideas behind WebVan. Today, WebVan is owned and operated by Amazon.com.
Pets.com
Pets.com was founded in 1998 and sold pet supplies to retail consumers. The company launched, raised $300 million in venture capital, IPO’d on the Nasdaq and then was liquified all within 268 days. During the company’s first fiscal year, they spent an amazing $11.8 million on advertising, while earning just $619,000 in revenue. As it turns out, the profit margin on things like cans of pet food are pretty small (2-4 percent), and Pets.com was unable to turn a profit while absorbing shipping costs on such heavy items. Fast forward to today, however, and pet startups like Bark & Co., have learned a good deal. If you’ve ever received a Bark Box, you may have noticed that they’re not very heavy, or filled with low markup goods. You've also never seen a Bark Box advertisement during the Superbowl.
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