Why the Survivors Survived: Examining the Characteristics of Online Companies during the Dot-Com Era

Abstract

This paper examines the dot-com bubble and the characteristics that enabled certain online companies to survive the crash in March of 2000. The purpose of the study was to examine financial data to understand what enabled certain companies to survive the dot-com bubble, while other companies with seemingly similar characteristics did not. The past few years sparked debate amongst investors on whether or not another bubble formed among technology companies such as Facebook, Amazon, Tesla, and Netflix. Currently, the world is in the middle of a technology boom. Investors care about the future success of technology companies that have a lot of promise baked into their stock price. My thesis attempts to examine the dot-com bubble that "burst" in March of 2000 and the companies that were able to withstand the crash until 2005. My results reveal a few conclusions about the companies in the dot-com era including (1) companies with negative earnings had a lower chance of survival; (2) companies with ".com" had a lower chance of survival; (3) companies with more volatile stock prices had a lower chance of survival; (4) companies that had higher advertising expenses had a lower chance of survival; (5) companies with higher shares outstanding had a higher chance of survival and; and (6) companies with pure online operations had a lower chance of survival.