WebBuilding

Events and eras

Dot-com bubble

Summary

The dot-com bubble was the rise and collapse of internet company stock prices from the mid-1990s to the early 2000s. It is often dated from Netscape's stock offering on August 9, 1995. The Nasdaq Composite index set a record close of 5,048.62 on March 10, 2000, fell to a low of 1,114.11 in October 2002 (by the Associated Press and Reuters count), and did not regain its record until April 2015. Pets.com and Webvan closed; Amazon and eBay survived, and Tim O'Reilly later cited them as examples of what he called Web 2.0.

Web Building Encyclopedia · Events and eras · Last reviewed October 22, 2026 · 10 min read

What the dot-com bubble was

The dot-com bubble was a rapid rise, and then a collapse, in the stock prices of internet companies. Britannica dates the boom from 1995 to 2000 and the bust to 2001 and 2002, and notes that the internet firms of the time were commonly called dot-com companies.1 Many carried the .com ending of their web address in their names, such as Pets.com and theglobe.com.

The rise and fall show most clearly in the Nasdaq Composite, a stock index (a single number that tracks the prices of a group of shares) covering companies listed on the Nasdaq market. At its peak on March 10, 2000, the 20 largest US companies on Nasdaq were all in technology, and together they made up more than a third of that market’s value.2 The Federal Reserve Bank of San Francisco calculated that by the peak the index was up 579% from the start of 1995.2 By Britannica’s count it rose from 743 to 5,048 and then fell to 1,139 by October 2002.1

For web building, the era mattered for more than share prices. The crash left behind unused network capacity,3 a smaller set of surviving companies and a new way of thinking about the web, later labeled Web 2.0.4

The Netscape offering, 1995

Many accounts start the boom with Netscape Communications, the company behind the Netscape Navigator web browser. It was formed in April 1994 and had about $700,000 in sales from then to the end of 1994, and $16.6 million in the first six months of 1995.5

On August 9, 1995, Netscape sold shares to the public for the first time, in what is called an initial public offering (IPO), and the shares began trading on Nasdaq.56 KQED, the San Francisco public broadcaster, later reported that the company had planned a price of $14, doubled it to $28 after strong demand, and could not open trading for almost two hours because buy orders swamped sell orders.6

The Associated Press reported that the shares opened at $71, reached $75 and closed at $58.25, valuing Netscape at about $2.9 billion. Nearly 14 million shares changed hands, against 5 million issued.5 The company was 16 months old and had not yet made a profit.6 At the close, co-founder Jim Clark’s 26.5% stake was worth just over $565.8 million, and Marc Andreessen‘s 2.7% stake about $58 million.5

The Computer History Museum says the offering “launched the dot-com boom.”7 KQED wrote that many business historians date the boom’s start to that day.6

The boom years, 1995 to 2000

One measure of the boom is the number of companies that went public and how far their shares jumped on the first day. Jay Ritter, a finance professor at the University of Florida, gives these figures for offers of $5 a share or more (excluding funds, trusts, banks and some other types).89 Technology here includes internet and telecom companies but not biotech.9

YearAll IPOsAverage first-day gain, all IPOsTechnology IPOsAverage first-day gain, technology
199546221.4%20530.8%
199667717.2%27620.2%
199747414.0%17416.9%
199828321.9%11339.1%
199947671.2%37086.7%
200038056.3%26169.2%
20018014.0%2422.7%
2002669.1%208.6%

Ritter’s figures are as of the versions of his tables dated February 20 and May 18, 2026. He puts the money “left on the table” in 1999, the gap between the offer price and the first day’s closing price across all those shares, at $37.11 billion.8

Several of the companies that defined the era went public in these years:

  • Amazon.com. On May 14, 1997, the online bookseller announced an offering of 3 million shares at $18 each on Nasdaq under the symbol AMZN.10
  • eBay. The auction site’s prospectus, dated September 24, 1998, offered 3.5 million shares at $18.11 CNNfn reported that the shares closed the first day at $47 3/8, a gain of 163%.12 eBay was already profitable when it went public: it reported net income of $874,000 for 1997 and about $2.4 million for 1998, and its registered users grew from about 340,000 to over 2.1 million during 1998.13
  • theglobe.com. On November 13, 1998, shares of this New York start-up, which helped people build personal websites, were priced at $9, opened at $87 and closed at $63.50, a first-day rise of 606%. CNNfn cited Securities Data Co. as calling it the best first day of trading for any company with an offering of more than $5 million.14

Personal web pages were part of the boom too. On January 28, 1999, Yahoo announced it would buy GeoCities, a free host where, by its own count, more than 3.5 million “homesteaders” had created over 32 million pages. Yahoo paid in stock, 0.3384 of a Yahoo share for each GeoCities share.15 CNNfn valued the deal at $3.6 billion.16

By early 2000 internet companies were spending heavily on mass advertising. CNNfn counted a dozen internet companies buying commercials in the January 2000 Super Bowl, joining two that had advertised in the previous year’s game. Together they made up roughly 40% of the game’s advertisers, and a 30-second spot cost an average of $2.2 million.17 On January 10, 2000, America Online agreed to merge with Time Warner in a deal worth about $182 billion in stock and debt, which CNNfn called the largest in history. AOL’s side was to own 55% of the combined company.18

On December 5, 1996, Alan Greenspan, chairman of the Federal Reserve (the US central bank), asked in a speech in Washington, D.C., how anyone could know “when irrational exuberance has unduly escalated asset values.”19 Between June 30, 1999 and May 16, 2000, the Fed’s Open Market Committee raised its target for the federal funds rate, the rate banks charge each other for overnight loans, from 4.75% to 6.5%.2021

The San Francisco Fed found that 6 of the 20 largest Nasdaq companies at the March 2000 peak were losing money as of the last quarter of 1999, and that IPO activity rose sharply in 1999 and peaked in the first quarter of 2000.2 Pets.com, an online pet supply store incorporated in February 1999, completed its IPO on February 16, 2000, selling 7.5 million shares at $11.22 The online grocer Webvan offered 25 million shares at $15 each in a prospectus dated November 4, 1999,23 and its shares began trading on November 5, 1999.24

The peak and the fall, 2000 to 2002

On March 10, 2000, the Nasdaq Composite reached 5,132 during the day and set a record closing level of 5,048.62.25 Five weeks later the fall was under way. On Friday, April 14, 2000, the index dropped 355 points, finishing a week in which it lost 25%. The Register linked the selling in part to news that core inflation had risen at its fastest pace in five months, which raised fears of a larger than expected interest rate increase.26

By June 2001 the Nasdaq had fallen more than 50% from its peak.2 The Associated Press puts its low at 1,114.11 in October 2002.25 Reuters reported that the index lost 78.4% of its value from the 2000 peak to the 2002 low, reached 31 months later.27 The timeline in the same AP article gives a low of 1,108 on October 10, 2002,25 and Britannica gives 1,139.1

The wider US economy also slowed. The National Bureau of Economic Research, which dates US business cycles, found that a recession began in March 2001, ending an expansion that had lasted exactly 10 years, the longest in its records.28 It later dated the end of the recession to November 2001, a length of 8 months.29

The crash went beyond websites. Telecommunications companies had laid fiber optic cable for the expected growth in internet traffic. A June 2002 study by the Federal Deposit Insurance Corporation (FDIC) cited a count of 283 million miles of optical fiber laid since the 1980s and estimated that only about 2% to 5% of the fiber in the US was lit, meaning actually carrying data. It listed Winstar, Global Crossing and Williams Communications among the industry’s bankruptcies.3

The AOL and Time Warner merger ended in a record loss. In January 2003 AOL Time Warner reported a 2002 loss of $98.7 billion, mostly from writing down the value of its businesses. CNN/Money called it the biggest loss in history for a US company.30 New offerings fell sharply: Ritter counts 80 IPOs in 2001 and 66 in 2002, against 476 in 1999.8

The Nasdaq Composite did not close above its March 2000 record until April 23, 2015, when it finished at 5,056.06.27

Failures and survivors

Pets.com

On November 7, 2000, nine months after its IPO, Pets.com announced that it would wind down its business and sell its assets, and that about 255 of its 320 employees would lose their jobs. It said efforts to raise money, and then to sell the company, had failed: the bank Merrill Lynch contacted more than 50 possible buyers, and fewer than 8 agreed to meet.31 Chief executive Julie Wainwright said “this is a very, very difficult environment for business to consumer Internet companies.”31

The assets for sale included its web addresses, its content and the Sock Puppet mascot used in its advertising.31 The company’s annual report shows a net loss of about $84.9 million for the first nine months of 2000. Its web store closed on November 10, 2000, shareholders approved a plan of liquidation on January 16, 2001, and the company ceased formal operations on January 18, 2001.22

Webvan

Webvan delivered groceries ordered online in seven markets, from San Francisco and Seattle to Chicago. On July 9, 2001, it announced that it was shutting down, and it let about 2,000 of its roughly 2,600 workers go. Its shares had fallen to 6 cents.24 On July 13, 2001, Webvan and three of its subsidiaries filed for Chapter 11 bankruptcy protection in Delaware, planning to sell substantially all of their businesses and assets.32

GeoCities

Some boom-era sites outlived the crash and closed years later. In April 2009 Yahoo announced that GeoCities would stop accepting new registrations, and it closed the service on October 26, 2009. Computerworld reported that the pages were being deleted, and that data not backed up by their owners would not be recoverable.33

Amazon

Amazon.com stayed in business but its shares fell hard. Jeff Bezos began his letter to shareholders for 2000 by calling it a brutal year for the company’s shareholders, and wrote that the shares were down more than 80% since his letter of the year before. In the same letter he reported 20 million customers in 2000, up from 14 million, and sales of $2.76 billion, up from $1.64 billion.34

On January 22, 2002, Amazon reported a net profit of $5 million for the last quarter of 2001, on record quarterly sales of $1.12 billion.35 CNN/Money described it as the company’s first-ever quarterly profit.36

eBay and Google

eBay, which had reported a profit before going public,13 was still operating in 2005, when Tim O’Reilly used it as an example of a successful web service.37 Google, a search company that was still private during the boom, launched its AdWords advertising program in October 2000.38 When it went public on August 19, 2004, it priced its shares at $85 through an auction-style sale, raised about $1.2 billion, and closed the first day at $100.34. CNN/Money noted that the first-day gain was modest next to the hottest offerings of the late 1990s.39

What the bust left behind for web building

The cable and servers paid for during the boom did not disappear when their owners failed. The FDIC’s 2002 study described most US fiber as unused and pointed to reports of falling bandwidth prices as a sign that supply exceeded demand.3

The software side changed too. Tim O’Reilly of O’Reilly Media described Google’s systems as a large collection of ordinary PCs running open-source operating systems, and wrote that web browsers and web servers had both become commodities, products that are cheap and easy to swap.4

O’Reilly also gave the period its best-known label. His 2005 essay “What Is Web 2.0” begins by saying that the bursting of the bubble “in the fall of 2001 marked a turning point for the web,” a later date than the Nasdaq’s March 2000 peak.4 He wrote that the term came from a brainstorming session between O’Reilly Media and MediaLive International, which led to the first Web 2.0 conference in October 2004.4

The essay argued that the companies that survived the crash shared certain traits, starting with treating the web as a platform.4 It held up eBay, whose product it described as the combined activity of its buyers and sellers, and Amazon, with many more user reviews than its rivals, as examples of services built on the activity of their users.37 It contrasted older and newer approaches in pairs, among them personal websites against blogging and the photo service Ofoto against Flickr.4

Publishing tools of that newer kind appeared in the years after the crash. The first release of WordPress, open-source blogging software, was announced on May 27, 2003.40 By November 5, 2006, the survey company Netcraft counted more than 100 million websites, and the Computer History Museum notes that much of the growth came from blogs and small business sites.41

Timeline

  1. The Nasdaq Composite closes at 5,056.06, above its March 2000 record27
  2. Yahoo closes GeoCities33
  3. The first Web 2.0 conference is held4
  4. Google goes public at $85 a share39
  5. The Nasdaq Composite reaches its low of 1,114.1125
  6. Amazon.com reports its first quarterly profit36
  7. Webvan announces it is shutting down24
  8. A US recession begins, ending a 10-year expansion28
  9. Pets.com announces it will wind down and sell its assets31
  10. The Nasdaq falls 355 points, ending a week with a 25% loss26
  11. The Nasdaq Composite sets a record close of 5,048.6225
  12. America Online and Time Warner agree to merge18
  13. eBay goes public at $18 a share11
  14. Amazon.com announces its IPO at $18 a share10
  15. Netscape's shares begin trading on Nasdaq5

What it means for your website

The dot-com era is history, but two of its lessons apply directly to anyone who owns a website today.

  • Your domain name is an asset. When Pets.com closed, its web addresses were among the assets it put up for sale, next to its stock and equipment.31 Keep your domain registered in your own name, with login details you control, so it stays yours whatever happens to the designer or company that built the site. Our domains guide covers the basics.
  • A platform can close. GeoCities held millions of personal pages, and when Yahoo closed it in 2009, pages that owners had not saved were deleted.1533 Keep your own copy of your content and know how you would move it. See our notes on website backups and leaving your website builder.
  • Check who owns what. Your text, photos and customer lists are worth more than the design around them. Our page on who owns your website explains how to make sure they are yours on paper.

The era also left an idea worth using. If your site collects reviews or questions from customers, it follows the pattern O’Reilly pointed to in Amazon and eBay: a service built on what its users contribute.37 Ask whether your platform supports reviews, and who owns them if you leave. We build on WordPress, first released in 2003, every week,40 and the same advice holds there: back up the site and keep the domain in your name.

See also

References

  1. Dot-com bubble. Brian Duignan, Encyclopaedia Britannica. 2026-09-16. accessed October 22, 2026.
  2. The Stock Market: What a Difference a Year Makes (Economic Letter 2001-17). Simon Kwan, Federal Reserve Bank of San Francisco. 2001-06-01. accessed October 22, 2026.
  3. Telecommunications, Bruised and Battered, Looks to a Brighter Future (Bank Trends 02-05). Stephen C. Gabriel, Federal Deposit Insurance Corporation. 2002-06. accessed October 22, 2026.
  4. What Is Web 2.0: Design Patterns and Business Models for the Next Generation of Software. Tim O'Reilly, O'Reilly Media. 2005-09-30. accessed October 22, 2026.
  5. Netscape gets raves at public debut: its shares doubled in price on their first day being traded (Evan Ramstad, Associated Press). The Virginian-Pilot, archived by Virginia Tech University Libraries. 1995-08-10. accessed October 22, 2026.
  6. 20 Years Ago Today: Captain Trips Died and the Dot-Com Boom Took Off. KQED. 2015-08-09. accessed October 22, 2026.
  7. The Web: Browser Wars (Revolution: The First 2000 Years of Computing). Computer History Museum. accessed October 22, 2026.
  8. Initial Public Offerings: Underpricing. Jay R. Ritter, University of Florida. 2026-05-18. accessed October 22, 2026.
  9. Initial Public Offerings: Technology Stock IPOs. Jay R. Ritter, University of Florida. 2026-02-20. accessed October 22, 2026.
  10. Amazon.com, Inc. announces initial public offering of 3,000,000 shares of common stock. Amazon.com, Inc.. 1997-05-14. accessed October 22, 2026.
  11. eBay Inc., prospectus (Form 424B4). U.S. Securities and Exchange Commission (EDGAR). 1998-09-24. accessed October 22, 2026.
  12. eBay: return of the IPO. CNNfn. 1998-09-24. accessed October 22, 2026.
  13. eBay Inc., annual report for 1998 (Form 10-K405). U.S. Securities and Exchange Commission (EDGAR). 1999. accessed October 22, 2026.
  14. theglobe.com surges 606%. CNNfn. 1998-11-13. accessed October 22, 2026.
  15. Yahoo to acquire GeoCities (press release filed with Form 8-K). Yahoo Inc., U.S. Securities and Exchange Commission (EDGAR). 1999-01-28. accessed October 22, 2026.
  16. Yahoo buys GeoCities. CNNfn. 1999-01-28. accessed October 22, 2026.
  17. Internet companies risk everything on pricey one-shot Superbowl ads. CNNfn. 2000-01-28. accessed October 22, 2026.
  18. That's AOL folks (America Online and Time Warner merger). CNNfn. 2000-01-10. accessed October 22, 2026.
  19. The Challenge of Central Banking in a Democratic Society (remarks by Chairman Alan Greenspan). Board of Governors of the Federal Reserve System. 1996-12-05. accessed October 22, 2026.
  20. FOMC press release, June 30, 1999. Board of Governors of the Federal Reserve System. 1999-06-30. accessed October 22, 2026.
  21. FOMC press release, May 16, 2000. Board of Governors of the Federal Reserve System. 2000-05-16. accessed October 22, 2026.
  22. Pets.com, Inc., annual report for 2000 (Form 10-K). U.S. Securities and Exchange Commission (EDGAR). 2001. accessed October 22, 2026.
  23. Webvan Group, Inc., prospectus (Form 424B1). U.S. Securities and Exchange Commission (EDGAR). 1999-11-04. accessed October 22, 2026.
  24. Webvan shuts down. CNNfn. 2001-07-09. accessed October 22, 2026.
  25. As index touches 5,000 again, what's changed since 2000 (Steve Rothwell, Associated Press). The Globe and Mail. 2015-03. accessed October 22, 2026.
  26. Dotcom genocide in Wall St. The Register. 2000-04-17. accessed October 22, 2026.
  27. Nasdaq surpasses internet bubble peak to set new record (Reuters). Fortune. 2015-04-23. accessed October 22, 2026.
  28. Business Cycle Dating Committee announcement, November 26, 2001. National Bureau of Economic Research. 2001-11-26. accessed October 22, 2026.
  29. Business Cycle Dating Committee announcement, July 17, 2003. National Bureau of Economic Research. 2003-07-17. accessed October 22, 2026.
  30. AOL Time Warner reports record 2002 loss. CNN/Money. 2003-01-30. accessed October 22, 2026.
  31. Pets.com announces plans to wind down online pet retail operations and sell assets (press release filed with Form 8-K). Pets.com, Inc., U.S. Securities and Exchange Commission (EDGAR). 2000-11-07. accessed October 22, 2026.
  32. Webvan Group, Inc., Form 8-K (Chapter 11 filing). U.S. Securities and Exchange Commission (EDGAR). 2001-07-13. accessed October 22, 2026.
  33. Yahoo GeoCities closes on Oct. 26. Computerworld. 2009-10-23. accessed October 22, 2026.
  34. Jeff Bezos' 2000 letter to shareholders. The Seattle Times. 2001-04-14. accessed October 22, 2026.
  35. Amazon.com announces 4th quarter profit, exceeds sales and profit objectives. Amazon.com, Inc.. 2002-01-22. accessed October 22, 2026.
  36. Amazon posts a profit. CNN/Money. 2002-01-22. accessed October 22, 2026.
  37. What Is Web 2.0, page 2: Harnessing collective intelligence. Tim O'Reilly, O'Reilly Media. 2005-09-30. accessed October 22, 2026.
  38. Happy 15th birthday, AdWords. Inside AdWords, Google. 2015-10-28. accessed October 22, 2026.
  39. Google jumps 18% in debut. CNN/Money. 2004-08-19. accessed October 22, 2026.
  40. WordPress Now Available. WordPress.org News. 2003-05-27. accessed October 22, 2026.
  41. What Happened on November 5th (This Day in History). Computer History Museum. accessed October 22, 2026.

Web Building Encyclopedia. First published October 22, 2026. Last reviewed October 22, 2026. Every fact on this page is linked to a source we opened. Spotted an error? Write to [email protected].