When the US tech stock index Nasdaq, soared to a dizzy height of 5,048.62 on 10 March, 2000, champagne glasses clinked and investors patted themselves on the backs. This market value was more than double its worth just 14 months ago.
But the celebration was short-lived. Stock prices on Nasdaq reached their peak that day, marking the start of the end for the dot-com era.
Today, five years after the crash, has the word dot-com become fashionable once again?
During the dot-com bubble in the late 1990s, billions of dollars in venture funding were thrown at any entrepreneur, with little or no market experience, who had a business idea to sell. The bustling investment drive pushed the stock valuations of Internet companies through the roof, until the bubble finally burst in March 2000.
It was only in 1999 that dot-coms started blossoming in the Asia-Pacific region. Research firm Gartner forecasted that the worldwide B2C e-commerce market would generate $31.2bn (£18.2) in revenue that year, almost three times that of 1998.
After the crippling 1997 Asian economic crisis companies in the region searched for a new avenue that would bring in revenues at the lowest cost. The dot-com bubble offered that hope and companies rushed to "e-enable" everything adding a suffix ".com" to their corporate names.
As stories of successful young entrepreneurs making millions of dollars from the Internet filtered out of Silicon Valley, it was not surprising that companies in the region subsequently jumped onto the bandwagon as well.
In June 1999, China.com (now Chinadot-com), a Hong Kong-based portal which had touted itself as a "pan-Asian Internet company delivering content, community and commerce", launched its initial public offering (IPO) on Nasdaq, making it one of the first companies in the Asia-Pacific region to do so. Tom.com, Hong Kong tycoon Li Ka-Shing's Internet venture, followed suit a year later in March 2000 and its share value surged five-fold by the end of its first trading day.
Steve Bittinger, research director at Gartner, looked back on the frenzy. "Allan Greenspan used the term 'irrational exuberance' to describe the dot-com era, suggesting that the high expectations and high valuations of dot-com companies significantly exceeded their real value," he said.
"Many investors and business leaders did not have a sound grasp on the changing business fundamentals that [would] apply in a world where so many...
... people and companies have easy and inexpensive access to the Internet," he said.
By November 1999, Gartner had begun warning that many companies would fall out of the e-business model by 2001, with 75 percent of projects failing to be delivered.
"Dot-com companies based on less-than-successful business models were unable to sustain themselves or generate profits," noted Bittinger. "Investors became more wary and started looking more closely at dot-com business fundamentals."
After Nasdaq's amazing flight to the top, it subsequently crashed to 2,000 within a matter of months and plunged to about 1,000 in October 2002. Jobs were lost and millionaires became paupers, holding onto worthless stock certificates.
The Asia-Pacific region was not spared either. Chinadot-com underwent a retrenchment exercise, while Tom.com suspended trading six months after its IPO.
The ones that made it
But not all dot-coms were brought down by the bust. Five years after the spectacular crash, a handful weathered the storm.
dollarDEX, is one such company. The online wealth management portal was established in Singapore in 1999.
Richard Lai, dollarDEX's managing director, said the key to weathering through the crisis was to have a good business plan. The management team was clear about its strategy to go online, and it stuck with the plan.
"An online platform makes the most sense for us since, even during that time, the Internet penetration rate was quite high in Singapore," Lai explained. "Also, it was one way to distinguish us from incumbents like the banks and insurance companies. We can then provide 24/7 [customer] service."
According to Lai, the boom and the subsequent bust had no effect on the company.
"Frankly, the boom did not really figure into our strategy," he said. "We wanted to be profitable as soon as possible and we did so within the first two years. We focused on cash flow, not fund raising. We kept most of the funds raised (US$7.7m) and used them for expansion during the bust."
Indeed, it appears that dot-coms might not be completely extinct today. "Dot-com euphoria might be dead, but Internet-enabled business networks continue to thrive and make inroads into how businesses operate," noted Gartner's Bittinger.
He pointed out that the "network era" of today is largely driven by three laws: Moore' s, which highlights the growing processing power of...
...computer chips, Metcalfe's, which refers to the growing usefulness of networks and Gilder's Law of the increasing expansion of bandwidth availability.
These laws, explained Bittinger, are set to transform processes, products and services. When put together, the combined effect is "exponential", he said. Enterprises that are focused on these changes hope to capture technology-enabled network-era opportunities before their competitors, he added.
"A new generation of dot-com firms is increasingly focused on harnessing innovation — applying ideas from both inside and outside the company to drive the pace of innovation faster," Bittinger said. "The successes — and failures — of the dot-com era have taught us valuable lessons about what approaches work best for creating, financing and growing new dot-com firms that are more likely to succeed."
With the rise of China's Baidu, which saw its stock value grow 354 percent on the first trading day after its IPO in August this year, and the burgeoning technology industries in India and China, it appears that the dot-com days may be far from over.
Hollywoodclicks, an online DVD rental service provider in Singapore, is a young dot-com company that entered the fray two years ago. Its co-founder, Richard Fan, agrees that learning from the dot-com crash is crucial in enabling new dot-coms to succeed where their predecessors had failed.
"Most companies who went bust then didn't have a proper business model," Fan said. "They relied more on content and had no real revenue model."
"Back in the old days, everyone was just concerned about traffic, trying to build up traffic for the Web sites and believing that somehow, they will be able to make money. But most of these companies just could not legitimise revenue," he said.
Fan noted that those that survived the crash, and continue to do well today, were in reality distribution companies.
"Look at eBay and Amazon.com," he said. "They went out there to get customers and then arranged transport for their products. They made use of the online model [to grow their business]." He noted that it was easier to get customers online, than physically going outdoors to gain new clients. "And it is easier to transport products online than through normal means," he added.
Fan admitted that the business model of Hollywoodclicks is based loosely on companies such as eBay and Amazon.com and he is optimistic that Hollywoodclicks will enjoy longevity in the market.
"Basically, the Internet factor plays a huge part in our decision," he said. "Everybody uses the Internet and broadband penetration is very high in Singapore. So we think that going online is the best way."
According to Fan, Hollywoodclicks broke even within a year of its operations despite having pumped in initial investments totalling a six-figure sum. He declined to reveal specific financial numbers.
The Internet has come a long way since the dot-com bust. Today, consumers can do more than rent DVDs online and choose from a gamut of Web-related services which include travel bookings to Internet banking to retail shopping.
At the end of the day, companies need to realise it is not about buying into the dot-com hype but of careful strategising and having a sound business model.
"We have to be extra vigilant against complacency. In particular, we continue to think that it is customers, not the competitors, that define who we are and why we exist," said dollarDEX's Lai.