Dot-coms

Dot-coms are businesses that operate primarily or solely on the INTERNET. The term dot-com comes from the suffix for business domain names (.com). Dot-coms compete with traditional store-based businesses (called “bricks and mortar”), providing alternatives to consumer and business markets. Dot-coms have been more successful in fulfilling the needs of business customers who make repeat purchases of similar items and need relatively little customer assistance in making purchase decisions. Because there are relatively low start-up costs associated with many dot-com businesses, the industry has attracted a wide array of entrepreneurs. In the late 1990s, the United States experienced a dot-com frenzy. Any business with even a whimsical Internet MARKETING STRATEGY was able to register a domain name and begin promoting itself as a global enterprise. Initially dot-coms used registration with Internet search engines and traditional media promotion to attract visitors and potential customers to their sites. Some dot-coms then used their click-rates (number of visitors to the site) to sell banner ADVERTISING to other dotcoms. Other early dot-coms also offered wireless modems, specialty hand-held gadgets, and Internet currencies for consumer purchases. One dot-com offered up to 100-percent rebates for highly overpriced merchandise, betting few customers would collect the paperwork necessary for reimbursement. Another company’s hand-held device offered entertainment and dining listings. When the company went bankrupt, the devices, which were not compatible with other hand-held technology, became worthless. The possibilities seemed endless, and almost any dot-com entrepreneur could find financial backing. INITIAL PUBLIC OFFERINGs (IPOs) of dot-coms created huge sums of money for businesses with meager sales and no PROFITs. Many companies with an Internet strategy changed their names, adding dot-com, hoping to attract investor interest and stock-price escalation. The industry coined the term burn rate to quantify the rate the dot-com was using up investor CAPITAL in their quest for profitability. In March 2000 the dot-com “bubble” burst as investors finally recognized the lack of earnings and lack of prospects for future earnings among the vast majority of dot-coms. Media reports described the demise of dot-com millionaires whose paper WEALTH vanished as stock prices dwindled. Many successful dot-coms use drop-shipping (taking orders from customers and then forwarding them to producers that ship directly to customers) along with traditional wholesaling channels to offer a wide array of products while maintaining minimal inventory. Amazon.com became the most successful dot-com using this business model.
See also ENTREPRENEURSHIP.