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The Dot-Com Crash Didn’t Stop the Internet. What Actually Failed?
Internet use kept growing as technology stocks collapsed. Company records help explain the apparent contradiction.
Between March 2000 and October 2002, the Nasdaq Composite lost approximately 78% of its value. Over roughly the same period, the proportion of American adults using the internet increased from 46% to 61%. The financial market associated with the internet revolution was collapsing while the revolution itself continued spreading.
That contrast makes the dot-com bubble more interesting than a familiar story about excessive enthusiasm. People were adopting the technology, and businesses were finding new uses for it. What broke down was the relationship between those developments, the financial performance of individual companies, and the prices investors were willing to pay for their shares.
Understanding the period means separating those three things. Internet adoption measured whether people were going online. Company accounts showed whether businesses could turn that activity into revenue and, eventually, profits. Stock prices reflected expectations about what those businesses might earn in the future. During the boom, those expectations moved far ahead of what many companies had demonstrated.
