What were the mistakes of the days of dot-com mania?

Hello,

It is true that during the internet boom, mistakes were made by both investors and entrepreneurs alike. But that doesn't mean the internet doesn't hold some promise. The truth is, the internet does change the way some businesses operate, as transaction costs come down and more specialised "niche" businesses become viable.

There are other advantages for the successful dot com, arising from increased user selection and convenience in the case of Amazon.com, and the possibility of a huge marketplace of buyers and sellers in the case of (profitable) Ebay.

My guess is that many uninformed investors got some sense that the internet held great growth, but without really understanding the sector or the microeconomic factors determining the success or failure of individual companies, many investors blindly invested in the internet sector as a whole, rather than trying to identify superior companies that did have some underlying competitive edge. In this flurry of market action and unbelievable returns, more people subscribed to "momentum investing" and other such methodologies which always eventually crash back to reality when profits fail to materialize.

Seeing this great flow of money to the industry, I think this encouraged entrepreneurs to this modern-day gold field in an effort to speed up their retirements. Of course, this isn't a blanket statement; I know there are entrepeneurs out there that have entered the internet arena due to genuine ideas about viable businesses.

I think the above reasons were the main reason for a prolonged "internet boom". And there are some big companies that are still around today, and I'm sure they will be tomorrow. At the moment, I believe EBay is a company with sound economics that will be around for quite some time; whether it's at an attractive price right now is another story though.

Cheers,

Thomas.

> Greetings,

> Way too much money. It is the smaller
> operations that are still around. Everyone
> here knows the Internet is a great way to do
> business. Christmas retail sales are down
> because of the Internet. But everyone
> "knew" the Internet was HUGE - and
> they didn't take the time to build a base to
> start from and grow. They were willing to
> spend millions thinking the Internet
> couldn't fail. Now they know they can - and
> businesses will start to grow online in a
> more realistic fashion.

> Stephen Dean
> ebizknowitall.com
> Home of the Tombstone Sales Letter