Dot-Com Turns 25: Commercial Blockbuster Just Gets Started - InformationWeek

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3/12/2010
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Dot-Com Turns 25: Commercial Blockbuster Just Gets Started

The bubble burst wasn't as bad as people made it out to be, and the new business models, services, innovations, and economic growth it spawned are unprecedented.

The dot-com Internet turns 25 today. It was on this date in 1985 that a now-defunct artificial intelligence company out of MIT registered something called symbolics.com. It was an unheralded event, and at least a decade passed before the public really began to catch on.

Remember trying to "surf the Web" in the early 1990s? If so, you were well ahead of the curve. Once you got there, you might have wondered if all the waiting and listening to dial-up modem screech and whine was worth it. "Maybe this thing will go the way of CB radios," you might have thought. Luckily, it didn't.

Today, there are a quarter billion Web sites, 80 million of which are dot-coms. Most of us can barely imagine a world without the commercial Internet. The Internet used to be a place we would visit from time to time and then get back to the real world. Now, many of us feel we are away from the real world when we are not online. In response to this phenomenon, a new generation of mobile devices is erasing the very idea of "online."

Buying movie tickets at Fandango. Finding an old friend on Facebook. Knocking off Christmas shopping at 2 a.m. Attending college classes in your pajamas. All of this is neat, but does it matter? Didn't the burst of the dot-com bubble suggest that there is a lot of novelty but not that much value to the commercial Internet? And isn't there a certain amount of elitism to think other countries aren't as cyber happy as Americans? The answers to some of these questions may surprise you.

A new study by the Information Technology and Innovation Foundation shows that the bubble's burst was neither unusual nor even bad for the development of the dot-com economy. Rather, it was part of a normal process of sorting out what works and what doesn't that has similarly accompanied the commercialization of other technological breakthroughs throughout history. After all, the telegraph remained the most efficient way to communicate long after the companies that built its original infrastructure failed. And we still managed to create an automotive industry even though the 253 automakers in existence in 1908 winnowed down to just three commanding more than 80% market share by 1929. Moreover, the dot-coms' transition was actually less rife with failure than what is commonly believed.

The spectacular implosions of 10 years ago detract from the myriad successes that emerged. Amazon.com and Google are the most obvious examples. What's more, the failures were not as pervasive as originally thought. A study by the University of Maryland's David Kirsch and Brent Goldfarb revealed that the five-year survivability rate of the approximately 50,000 companies, most of them dot-coms, that sought venture capital to exploit Internet commercialization opportunities was 48%. That's actually a pretty good track record -- a little better than the chances for a non-dot-com new business to make it.

After this sorting out period, the commercial Internet took off with incredible economic consequences. If growth in both business-to-business and business-to-consumer e-commerce continues to expand at even just half the pace we have seen over the last five years, the global value of e-commerce could reach $24 trillion by 2020. As businesses have adopted new products and services on the commercial Internet, ITIF estimates that the annual global economic benefits equal roughly $1.5 trillion. Granted, not all of this activity takes place through dot-com domains, but it is still substantial. ITIF estimates the dot-com-only benefits at roughly $400 billion, and that figure is likely to double in the next 10 years.

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