The anti-bubble of 2001-2004

Us old timers remember 2001-2004 when anything related to the internet was ridiculed as a ponzi scheme.  The conventional wisdom was no internet company would ever make money and all the ideas of the dot-com boom were stupid.  Turns out 2001-2004 was one of the best times to invest in internet companies.

An artifact of that era is a board game called Burn Rate:

Mail-5

fittingly, this game came out at the trough of the web downturn, 2002:

Mail-7

central to the game are “bad ideas” that players try to get rid of.  

one bad idea is name your price auctions:

Mail-6

Today the leading name your price auction is Priceline, which has a $20B market cap and made $750M in profit in 2009.

The next bad idea is an online computer store “eggbrain computers.”

Mail-1

The leading online computer store is NewEgg, which is profitable and had $2B in sales in 2009.

Mail-2

Internet money sounds a lot like Paypal, which was sold to eBay for $1.5B and has since been eBay’s fastest growing profit center.

Mail-3

The leading online ad server was DoubleClick, bought by Google in 2007 for $3.1B.

Mail-4

Finally, we have the perennial punching bag “group discount auctions,” – basically Groupon, which is reportedly getting offers now for more than $3B and is generating over $50M a month in revenues.

Lesson: When the mocking gets the loudest, double down on your investments.

 

 

About these ads

8 thoughts on “The anti-bubble of 2001-2004

  1. Lukas_Hartwich says:

    Chris, I agree that we probably aren’t in a bubble (at least not yet). The problem I have with your post is that unlike in the early ’00s, the overwhelming majority of tech press is positive, not negative. While I’m not so worried about things at the moment (there are good reasons to be optimistic), the future is what worries me.

  2. James Harradence says:

    Chris, neat to reflect on this and you are definitely on to something.What I find interesting is that you have one example for each idea (I realize there are tons of groupon clones, at the moment..).I have always found tech to be rapidly Darwinian. Seibel crushes all enterprise CRM (for us real fogies) and then gets muscled out by ERP category leaders, etc.I find tech to be one of the fastest maturing industries. The acceptance, copycatting (bubble), consolidation, dominance cycle takes 5-7 years, tops.Maybe VC fund structures impact this? ;-)

  3. loganb says:

    Eggbrain Computers is a reference to Egghead Software which closed their retail stores at the end of the 90s, not NewEgg.

  4. Kin Lane says:

    Those years I did the most learning and growing I’ve down in 20 years….and wrote the most code I’ve ever written.Backside of bubbles rock!

  5. Paramendra Bhagat says:

    Wow. An eye opener.

  6. queenie2010 says:

    The young generations are great fans of such means of joy and fun. You not only play free games from these online gaming portals, but download games of different genres free of cost, so that you play them at your leisure on your PC. Free online games have become quite popular throughout globe and also been appreciated as the best ways to have fun in spare time. bubbles

  7. erickennedy says:

    Yes, sentiment toward startups hit an extreme pessimism in 2002 that has not been matched in the recent recession. Many publicly traded Internet companies were trading for half of the cash on their balance sheet, but without an end to the massive burn rates it was hard to see if those companies could turn around.It’s easy to forget how much slower servers were back then, how much more colocation cost (since VPSes didn’t exist), and how few ways there were to monetize a site in 2002 and 2003 since online advertising had crashed. (AdSense didn’t exist until 2003, and it took at least another year or two before the payouts could match a normal salary.) I used AP credits to skip the fall semester of 2001 at Yale to work on starting a SaaS business (ASP back then). After 9/11, things were so bleak and I wasn’t really passionate about my original idea that I decided to get a “real job” instead of trying to start a company. If I had graduated in 2001 instead of 2002 I would have already been committed and would have eventually pivoted to something that worked. That’s why a lot successful web business started in 1999 – 2001 but very, very few started in 2002. It was a tough year.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: