Downturn claims 5,000 dot-coms

Thousands of Internet companies have disappeared since 2000, but now a 'rediscovery' of the Internet has been joined by a second wave of growth for mainstream dot-com companies, according to a survey

In the three years since the peak of the dot.com frenzy, nearly 5,000 internet companies have either been acquired or shut down in a massive sector consolidation, says a new study of mergers and acquisitions. But the analysts also spot evidence of the Internet's "rediscovery" among investors.

According to the findings of internet data analysts Webmergers, in the three years since the dot.com investment boom peaked in early 2000, buyers have spent $200bn (£126bn) to acquire 3,892 internet properties. This figure excludes the exceptional $157bn merger of AOL and Time Warner in January 2000 which would otherwise obscure the ability to view meaningful trends.

During the same three-year period, at least 962 substantial Internet companies have shut down or declared bankruptcy. Webmergers defines "substantial" companies as those that have received significant funding from venture capitalists, angel investors or other formal sources.

Internet sites -- i.e. destinations -- dominated the early years of the Internet's rationalisation. Since then, infrastructure properties have claimed much of the spotlight in recent years as acquirers invested in the building blocks for the next-generation Web.

A view of activity by quarter shows internet M&A spending peaking in early 2000 while the dot.com purge reached its nadir in the first half of 2001 when 333 companies folded.

Webmergers has identified a recent rebound of M&A in the e-commerce niche as investors "rediscover" the potential of on-line services such as travel, employment, ticketing and financial transactions.

The company believes that the Internet sector is currently in the last stages of a boom-bust cycle that has been exaggerated relative to other normal technology cycles.

It concludes: "We are also certain that the shakeout is nearly over and that it has cleared the decks for a second wave of rapid, but sane growth that will surprise many observers who have all but dismissed the Internet as a viable tool. In recent weeks we have seen evidence of a 'rediscovery' of the Internet in the form of a flurry of articles commenting with surprise on the positive earnings of several mainstream dot-com companies."

OUT-LAW.COM is the e-commerce and new media arm of Masons, an international legal practice with a long-standing interest in new media, IT and the Internet.


See the Finance News Section for the latest financial news in the high-tech sector.

Let the editors know what you think in the Mailroom.


For all job and work-related news, or to search for a job and get information on training, go to ZDNet Jobs.

Let the editors know what you think in the Mailroom.