The Burst of the Bubble Called Internet - Research Proposal Example

THE BURST OF THE BUBBLE CALLED INTERNET For the past years, the internet has been home to many advantages- educational, social, and even in economical phases. Through the internet, people socialize, find information they need, connect with far flung relatives and engage themselves in businesses which would give them earnings and incomes. The internet started in the 1970s under the management of the Department of Defense for purposes of military intelligence and from that time, it has boomed into a place where everyone can surf and dig up everything they want. It became a place where people find absolute freedom in doing what they want that was why it became so immensely popular to people of all ages. After several years since its release to the hands of the private and public sectors, it has created a world wide sensation most especially to the business sectors. This event is called the internet bubble. The internet bubble or sometimes called dot-com bubble was a historical event which became so much blatant during kick off of the new millennium. It was marked by the creation of groups of internet companies which failed to last for a lengthier time. Because of the wide popularity of the internet, the tremendous increase of stocks, individual speculation in stocks, and easy access on venture capitals were the most significant factors which contributed to the bursting of the internet bubble. Because of these factors, many internet companies disregarded the codes of ethics in business, standard business models and the like; rather, they gave focus on catching more internet users into their sites and increasing their market shares. This system, however, failed and brought about the hiatus on development during the commencement of the new millennium. Online businesses suffered the long drawn out recession in terms of development. Many online ventures and businesses disappeared from the online map and halted from pursuing their business careers. What were the major causes that contributed to the burst of this internet bubble during the late 1990s First is the widespread belief in the Get-Big-Fast business strategy in the internet (Goldfarb, et al, 2006). Because of this common notion, many business minded persons and companies ventured on marketing online. The vast number of online companies paved the way to heavy competition between them. They move in and invest in a faster manner with less caution therefore taking more risks in doing so. Furthermore, the low rates of interest added up to the increase of start-up capitals which motivated many to engage themselves in this kind of business. The worst part of this is that even though these companies have potentially good ideas and concepts regarding their business, they also failed in doing so because the dot-com concept is still new in the market. The notion of these investors is that they could get more than what they have given so what they did was spend and invest hoping that it would pay-off a hundredfold. But unfortunately, time proved them false because instead, they had a pretty big loss and during that time, they only relied on venture capitals and initial public offerings (Spector, 2000). The great decline of Internet companies is greatly manifested in the event called "Webby Awards" which was initialized in 1995. The primary seasons of this awarding ceremony is usually jam packed with thousands of guests, internet celebrities and the like. However, when the internet bubble burst at the start of the 21st century, the number of participants tremendously decline to only a several hundreds until it was transformed only into a virtual event. Another thing that contributed to the extreme burst of the internet bubble was the great publicity of the stocks in the online world. Because of the stocks that soar high, many have the tendency to take advantage of it and buy that certain stock in anticipation for earning more money through it. Because of this phenomenon, many online companies become overvalued and reach a very high price in the stock market even though the company is not pretty much worthy of the price. Thus, when this rapidly expanding bubble explodes into nothingness, the same thing happens to the companies. They also go out of sight and disappear into thin air. What are the effects of this so called "internet bubble" Over the past few years since the first explosion of the bubble, there have been so much speculations as to whether the bursting of the bubble was good or bad in the social and most importantly, economical context. Kling (2003) interpreted that "the opportunity cost of the investment in Internet-related companies was investment that might have been made in other industries where it might have earned a decent return". True indeed that the investors really risked high amounts of money and that it could have been invested on more reliable investments instead. Because of this, the economy today could have been better had it not been for these kind of get-big-fast con businesses in the internet. Further, Mills (2002) argued that the internet bubble did not contribute to the progress of America's economy, but rather, it brought it down to a lower state and contributed to its regression. On the other hand, Johnson (n.d.) had a positive outlook regarding the bubble that happened. He contended on the brighter side that because of the internet bubble wherein the number of internet users and investors turned to be great, the technology of internet was introduced to more people and the benefits that one can get from surfing it was made known to more people. Moreover, he stated that "It popularized the technology at a very high pace which made everyone explore the possibility space of Net-based models". Meanwhile, economists argue that the detrimental result of this dot-com bubble is a vast case of deflation which happens because of the excess in supplies and products. This happens when the company, because of expecting more consumers produced more products, which however were not sold due to the explosion of the bubble and bankruptcy. Electronic Times (2000) stated in their article that "[] dot.com phenomenon will ultimately prove to be short-lived. But the effect on traditional sectors [] could prove terminally damaging for some." The effects are really chronic and that the phenomenon of internet bubble is still part of the blame in the worsening condition of our economy. Had it not been for the frenzy that these investors felt during the rise of internet businesses, they could have used it in safer means of engaging themselves in businesses, one that would not put their hard-earned moneys at stake. The lesson in this phenomenon that everyone should learn is to check and double check the things they are doing especially if a big amount of money is at risk. Another is that we should be extremely cautious in engaging ourselves in business ventures. We should plan on it carefully and that we should not go on with the flow at all times. It is still recommended, though this sounds like real clich, that we should do things slowly but surely. The fruits of a certain labor would be best cherished if it were earned in a hard and uneasy manner. In no time, analysts predict that there would be another internet bubble, a second one and probably more detrimental. They see the same trend as what was observed during the pre-internet bubble era and that 90% of these pure play sites will soon die (Goldberg, 2000). This only shows that people are not really learning from their own mistakes. The looming economic crisis is a very large threat in our economy and that we should stop. The best thing that we can do right now is to make an advocacy for open-mindedness and wisdom when it comes to matters of engaging ourselves in these situations. It is still better to avoid it earlier before we all do the same lamentations as the aftershock and make another season of analysis and studies as to whether this internet bubble is beneficial or not. This would be another unending loop of failure if not avoided. WORKS CITED: Goldberg, Steven. "The Internet Bubble- Review." Kiplinger's Personal Finance Magazine March 2000. Johnson, Steven. "Dot-con Bubble." PBS. Org. (n.d.) 06 June 2007 Kling, Arnold. "Internet Bubble and Growth." Econlog.Org 07 April 2003 06 June 2007 Mills, D. Q. "Buy Lie Sell High." Salon.com. 06 August 2002. 06 June 2007 Spector, Robert. Get Big Fast. Amazon.com: 2000 "Dot.com bubble is more than just a fad" Electronics Times. 28 Feb. 2000 Read More