Roughly between 1995 and 2001, a speculative bubble known as the "dot-com bubble" occurred, during which Western stock markets saw an increase in value from the growth of the Internet sector. Bubbles such as this have occurred through out history: in the 1840s, for example, manic buying in the field of railway building lead to a stock market bubble which burst devastatingly in the 1850s. When the dot-com bubble burst in 2001, the result was a mild but long-lasting recession in the Western world.

Because of the unknown and innovative nature of online business, many standard business models were abandoned in the early 90s in favour of radical new models which focused on brand-building and networking before profits were even considered. The idea was to increase market share whilst operating at a loss. The novelty value of these companies, and the difficulty in valuing them properly, led to an incredible exuberance with which stocks in the new dot-com companies were purchased. This in turn led to them being increasingly over-valued, perpetuating the enthusiasm for buying stocks.

The bursting of the dot-com bubble occurred, numerically, on 10th March 2000; the NASDAQ fell slightly after this peak, but this was attributed to correction by most market analysts.

The averse findings of fact in the United States vs. Microsoft case may have contributed to pessimism regarding the IT industry. Massive coincidental sales by large technology businesses such as Cisco, Dell and IBM may also have affected the resultant panic sales. Other possible factors which may have contributed include the failure of many dot-coms to turn a profit over the Christmas period of 1999, and a fall-off in spending after January 1 2000 passed without incident, despite the worries of a "millennium bug".

After the bubble burst, many dot-coms liquidated or were acquired by other companies; the domain names were snapped up by domain investors or businesses with more traditional business models who had survived the crash. A few of the larger dot-com companies did survive, however: Amazon and eBay are good examples. According to some sources, about 50% of dot-coms survived. Unfortunately, there were still thousands of technical experts such as programmers and web designers who were laid off and found themselves in a highly competitive job market.

The acquisition of YouTube by Google, Skype by eBay, and others, has led to speculation that there may be a second, similar bubble on the horizon.

By Natalie Catchpole