dot-com shakeout

a.k.a. the bubble burst, dotpocalypse, Internet backlash, Tech Wreck of 2000

It's "survival of the fittest" in the business world, and thousands of dot-com companies have failed in dot-com shakeouts. Considered a necessary part of any ecosystem, each shakeout rids the industry of bad business models, ineffective management, and overvaluation.

Historical perspective: So far, there have been three shakeouts: the first occurred in Silicon Alley during mid 1996; the second, the Nasdaq crash on April 14, 2000, was the worst ever and shook Silicon Valley to its core; the third shakeout lasted for about 4 years and was known as the "Internet backlash." Even though VC money still flowed regularly into the Internet industry, it took the Google IPO in 2004, and later Web 2.0, to get popular opinion thinking about investing in risky high-tech start-ups again.

By 2018, the sentiment was returning that technology is letting us down—again. According to Mark Gimein in The Week "It often does seem to do that, right? In the November issue there were two stories about our troubled relationship with big tech. One is about “unicorns”—companies that haven’t yet issued stock but that Silicon Valley investors claim are worth a billion dollars or more. You will often read that Uber is "worth" $60 billion, that WeWork, the office rental company, is "worth" $45 billion, or that the spy-tech company Palantir, which has never shown a profit in 14 years, is "worth" $20 billion. These numbers are based on the values a few venture capital firms, multibillion-dollar firms that get guarantees and protections unavailable to ordinary investors, will pay for a small slice of an emerging company. Frequently, these sky-high values are a fiction, but the publicity machinery of Silicon Valley keeps these companies in the public eye and builds up their founders as world-changing geniuses.

This is a setup for certain disappointment. After the ascent up the mountain comes the slide down the rocky trail. So that’s the second story, about Facebook. Facebook remains the all-powerful Death Star of social media, a whole category of daily activity that didn’t really exist before it. Once, it was supposed cut out the gatekeepers and spur a bloom of independent thought. That now seem as quaint as predictions that television would beam college lectures into every home. Facebook CEO Mark Zuckerberg is now at war with Congress, the press, and an array of critics. He is also at war with his own audience: Americans still use Facebook en masse, but more than half the country thinks it damages our democracy. Now we are trying to fix the behemoth that was supposed to save us, though no one is quite sure how. Whatever fix we devise for big tech, you can be sure of this: For all the hype, it will not save us from ourselves.

NetLingo Classification: Online Business

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