What is a 'Dotcom'

A dotcom is a company that embraces the internet as the key component in its business. Dotcoms are so named because of the URL customers visit to do business with the company, such as www.Amazon.com. The com stands for commercial; by contrast, websites run by companies whose primary motivations are not commercial, such as nonprofit companies, often have domain names ending in .org, which is short for organization.

BREAKING DOWN 'Dotcom'

The dotcom business model requires an internet presence in order for the business to function; this is the primary component of a dotcom. The majority of the company’s offerings are delivered through internet-based mechanisms, though physical products may be involved. A portion of dotcoms have no physical product offerings entirely.

[ The dotcom bubble was characterized by high flying tech stocks that eventually crashed. Investors that followed sound investment principles were insulated from much of the decline. If you're interested in learning more about analyzing stocks, Investopedia's Fundamental Analysis Course will show you how to read financial statements, interpret financial ratios, and use the same strategies as financial professionals in over five hours of on-demand video, exercises, and interactive content. ]

The Dotcom Bubble

The dotcoms took the world by storm in the late 1990s, rising faster than any industry in recent memory. Despite the fact that most internet companies had limited physical assets, many were given huge valuations on the stock market initially. Investors began directing a large number of funds to companies without a proven track record of profitability based on speculation regarding the industry as a whole.

Many dotcoms focused on growth and brand recognition with the goal of acquiring the largest amount of market share possible with significantly less regard for the actual product being offered. The Nasdaq surged to a historical high in March of 2000.

Once many dotcoms began to report a lack of profits, the dotcom bubble burst in 2001. Some investors began to quickly move their funds to other investment vehicles due to these reports, resulting in a sell off and subsequent fall in stock prices. A significant amount of the funds invested were lost. As a result, a mild recession set in within the United States and other foreign nations.

Examples of Companies From the Dotcom Crash

A site dedicated to selling pet products, Pets.com, was unable to grab enough market share to survive the bursting of the dotcom bubble, even after spending over $2 million on a Super Bowl commercial in January 2000. Within the first nine months of 2000, the company reported losses of approximately $147 million. While the stock price peaked at $14 a share early in the year 2000, prices fell to below $1 after the losses were made public and, ultimately, the business never recovered.

A site without physical product offerings, Pseudo.com, focused on internet broadcasting services, including live streaming services. Poor business practices ultimately resulted in the failure of the dotcom, as the site never become profitable.

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