Lessons We Can Learn From The Dot-Com Crash

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With so much news on the coronavirus outbreak and its impact on the global economy, it was very easy to forget last week marked the 20-year anniversary of another global event.

20 years ago the world watched the dot-com bubble ‘burst’, with the once booming online market dropping around 75 per cent in six months.

The two situations could not be more different.

The dot-com crash was driven by excessive speculation and overly eager investors, while the current situation has been caused by a host of different factors, many of which are out of the control of those it has impacted.

But the timing of the 20-year anniversary is hard to ignore and it does raise the questions – are there any lessons to be learned?

“The ultimate triggers for the dot-com crash were poor digital customer experience and retailers overpromising and underdelivering,” said commercetools ANZ territory sales manager Joshua Emblin.

As we now know, the internet and tech industry ultimately recovered from the crash to turn itself into an economic powerhouse.

Coronavirus aside, Emblin believes there are still enough issues with certain modern technologies that put the industry at risk.

“Valuable lessons were learned from the dot-com era and we’ve seen some great success stories rise from the ashes, yet monolithic technology is still the reason history could repeat itself,” he said.

“We’ve already seen a number of high profile brands suffer at the hands of “boring retail” and the market needs to see a shift in this type of behaviour to survive.”

While the coronavirus outbreak has been unprecedented, Emblin is not the only one who has forecasted ‘history repeating’.

University of Warwick professor of practice, associate dean John Colley last year pointed to the ‘app’ boom – which has given us companies loss making companies such as Uber – to suffer a similar fate.

“Fast forward 19 years [from the dot-com crash] and, following a similar “app” boom, investment banks are bringing forward IPOs as they foresee volatile market conditions arriving later in the year,” he said.

“Traditional metrics have been ignored and user growth taken as a proxy for future profitability. But this requires an enormous leap of faith.

“It’s only a matter of time before the app bubble bursts.”

 

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