There’s been a lot of talk for the last few years around whether the stock market is currently overpriced. There’s certainly a lot of evidence to suggest it is, including high price-to-earnings ratios and the fact that the S&P 500 has been on the longest bull run in history, reaching all-time high after all-time high.
With so many retail investors also buying into the market, many are beginning to draw comparisons to famous stock bubbles like the dot com boom of the early 2000s. When talking about this, most people focus on the fact that many of the companies that achieved huge valuations at the time eventually failed.
There are, of course, many differences between the stock market in 2021 and the dot com boom, not least because many of the best-performing companies today are also highly profitable.
Another thing that many forget about is the fact that there have been many companies and entire industries that were created during the boom that have gone on to enjoy huge success during the last couple of decades.
Ecommerce
Ecommerce was an alien concept to most people before the early 2000s. Most people still bought almost everything by visiting physical retail stores and anything they bought “remotely” was done through catalogs.
The first-ever ecommerce business actually began operating in 1982, but it was a niche service and looked very different to online stores today.
By the mid-1990s numerous online stores began springing up. You likely haven’t heard of many of them, as names like Webvan, Pets.com, and Boo.com collapsed during the dot com boom.
However, others, like Amazon and eBay weathered the storm and went on to become some of the world’s biggest companies. eBay has reached a market capitalization of $49.66 billion as of July 2021, while Amazon has grown to be worth $1.83 trillion.
iGaming
The iGaming industry was born at around the same time as e-commerce companies began springing up. The possibility of offering casino games through the internet had been theorized for many years before, but it became a reality in 1995 when the first sites began to launch.
Today, iGaming companies generate billions of dollars of revenue each year and compete hard for new customers. Some have chosen to do this by offering exclusive casino games that can’t be found on other sites, such as Sticky Fruits, Diamond Stars, and Tomb of Ra. Others have taken a different approach, using generous bonuses or licensing deals to create branded games as a way to differentiate themselves.
Search
Before the doc com boom, trying to find things on the internet was difficult. Most of the time, you’d have to visit a “directory” website similar to a phonebook. This means you were reliant on the directory owner including the best sites, which often wasn’t the case.
Some early search engines, including AltaVista and Dogpile, began to make it easier by giving you the option to search for a keyword and receive a set of results it thought was most relevant.
However, Google, which was founded in 1998 was one of the big winners of the dot com boom. By the time the bubble had burst, the search engine had overtaken most other sites to become the dominant brand.
Since then, it’s also added other products to its offering, including photo storage, email, online office software, smartphones, laptops, digital advertising, and enterprise services.
In 2004, the company held an IPO which valued it at $23 billion. As of July 2021, that has increased more than eighty-fold to be worth $1.86 trillion.
Through its main web search engine and YouTube, Google has a near-monopoly over online search. While Bing and niche search engines like DuckDuckGo and Ecosia have profitable businesses, they don’t come close to challenge Google’s dominance.
This contrasts sharply with the fortunes of Yahoo!, a company that had the best chance of challenging Google in the late 1990s and early 2000s but has struggled so much in recent years that it stopped producing its own search results and now gets its data from Bing.