What Is a Dotcom?

A dotcom, or dot-com, is a company that conducts business primarily through its website. A dotcom company embraces the Internet as the key component in its business.

The usage of "dotcom" to refer to all Internet-based companies is outdated. Dotcom is now only used to specifically refer to the Internet companies of the 1990's during the dotcom bubble.

Dotcoms are so named because of the URL or domain name that customers type to visit the website to do business with the company, such as amazon.com. The .com at the end of the URL 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. The largest number of startups in the last 20 years have been dotcoms.

Key Takeaways

  • A dotcom, or dot-com, company is a company whose business model is based primarily on a website on the Internet.
  • Dotcoms are named after the .com at the end of their website URLs.
  • A dotcom bubble built in the 1990s burst in 2001 when many of the companies failed to report a profit.

Understanding Dotcoms

The dotcom business model requires an Internet presence in order for the business to function; this is the primary component of its definition. The majority of a dotcom company’s offerings are delivered through Internet-based mechanisms, though physical products may be involved. Some dotcoms do not offer any physical products, offering services instead.

The Dotcom Bubble

The dotcoms or tech companies took the world by storm in the late 1990s, with valuations rising faster compared to any other industry in recent memory. Despite the fact that most Internet companies had limited physical assets, many were given huge valuations on the stock market. Swayed by speculation regarding the dotcom sector, investors began directing a large amount of money to companies that lacked a proven track record of profitability but fell into this category.

Many dotcoms focused on growth and brand recognition with the goal of acquiring the biggest amount of market share possible with significantly less regard for the actual product being offered.

Ultimately, the dotcom bubble burst in 2001 when many internet firms began to report a lack of profits. Some investors began to quickly move their funds to other investment vehicles, 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 took place in the United States and in other developed nations.

Examples of Companies From the Dotcom Crash

A site dedicated to selling pet products called Pets.com became a symbol of the dotcom crash. It was unable to grab enough market share to survive the bursting of the dotcom bubble, even after spending more than $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.

Pseudo.com, a site without physical product offerings, 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.