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1 Case Study: Dotcom Age Companies Amazon, Netscape, Priceline and ebay Professor Rajendra K. Lagu Department of Electrical Engineering ac in Webpage:

2 How Do You Define e Dot-Com Age? Chronologically: Economic Context t Technology Context Social Context 2

3 Economic Context First Gulf War (G.W.Bush senior) 1991 Mild Recession Recovery Collapse of the Soviet Union and East European countries End of Cold War Reduction of defense spending 3

4 Economic Context New Economy Philosophy Grow fast at any cost Profits don t matter, Revenue (Sales) matter Sales don t matter, Market Share matters Market Share does not matter, Mind Share matters Valuation based on Eyeballs Entrepreneurs and operators, VCs and Angels, Wall Street analysts, Merchant Bankers 4

5 Technology Context Web paradigm had just matured Web servers and browsers had stabilized. Web became the most user-friendly way to access the Internet Window 95 Huge acceptance from the user community de facto standard on the desktop CISCO started making boxes and grew to a large CAP company Modem prices crashed. Internet access over phone lines became easy and affordable 5

6 Social Context Counter-culture movement Social isolation and virtual experiences virtual friends, virtual dating e-greetings, e-gifts, e-flowers, e- Chocolates Internet Chat, Multi-User Dungeons Management thinkers and Gurus started heralding dawn of a new era Tom Peters, C.K. Pralhad, Nicholas Negroponte, Dan Tapscott: Nanosecond nineties, Marketplace of the Millennium, Disintermediation, e-tailing 6

7 New Economy Business Strategy Raise Venture Finance (on shaky business plans) Get big names on your board Senior employees of Microsoft, FedEx Hire star employees by paying exorbitant salaries and options Do valuation based on Team Size + IP Spend heavily on advertisement t and promotions Offer freebees on web site and collect eyeballs Need not have revenue models in place Keep burn rate high if you are not spending, you are not growing g Go for IPO before even making a profit 7

8 Amazon.com Prototype e-commerce company B2C Sector Founder and CEO Jeff Bezos Princeton EE, D.E.Shaw Eureka! moment in 1994 Moves to West Coast (Seattle) Time Magazine 1999 Man of the Year Aggressive growth at any cost Bought Junglee browser from Rakesh Mathur 8

9 Jeff Bezos 9

10 Amazon.com Assets: Warehouses, Web site, back-office order processing system Innovations: 1 click shopping (Shopping cart metaphor) Patented idea Discounts on books, free shipping and handling, daily deals, old books Customer reviews People who bought this book also bought Listmania Look inside Other similar items -- CDs, DVDs, toys and games 10

11 Amazon.com Ambitions: i Sell consumer durables on the Web Competitors: Barnes and Nobles, Powells Mistakes: Acquisition of other B2C companies which h were not profitable and had to be written off (Pets.com, Drugstore.com, HomeGrocer.com) com) Future: Uncertain Wall Street Analysts divided 11

12 Amazon.com Financials Exchange Ticker Symbol NASDAQ AMZN Stock price (Oct 2002) $19 Earning Per Share -$0.75 P/E ratio -- Market Capitalization $7.5 Bill 12

13 Amazon.com Chart 13

14 ebay Financials Exchange Ticker Symbol NASDAQ EBAY Stock price (Oct 2002) $62 Earning Per Share $0.66 P/E ratio 96 Market Capitalization $17.5 Bill 14

15 ebay Chart 15

16 Priceline.com Financials Exchange NASDAQ Ticker Symbol PCLN Stock price (Oct 2002) $1.85 Earning Per Share $0.02 P/E ratio 90 Market Capitalization $425 Mill Source: http// 16

17 Priceline.com Chart 17

18 Hotel.com Financials Exchange NASDAQ Ticker Symbol ROOM Stock price (Oct 2002) $56 Earning Per Share $0.66 P/E ratio 86 Market Capitalization $3.4 Bill 18

19 Hotel.com Chart 19

20 Netscape Corporation Protagonists: Mark Andreessen, Jim Clark Current Status: Acquired by America On Line (AOL) Its Netscape Navigator / Communicator source code has been kept in public domain 20

21 Netscape: Timeline March 1994: James Clark is the CEO of Silicon Graphics and Mark Andreessen is an RA at NCSA in UIUC April 4, 1994: Mosaic Communications Corp founded by Clark and Andreessen October 1994: Beta release of Navigator 1.0 November 1994: DEC and MCI become resellers of Navigator 1.0, Name changed from Mosaic to Netscape December 1994: Commerce Server and Communications Server 1.0 released January 1995: James Barksdale becomes Netscape s President and CEO 21

22 Netscape: Timeline. March 1995: Netscape opens a subsidiary in Japan April 1995: Six publishing and high tech companies invest in Netscape May 1995: Netscape licenses Java from Sun Microsystems August 1995: Netscape IPO, valued at USD 2.2 Bill August 1995: Microsoft ships Win 95 with IE 1.0 October 1995: Netscape opens subsidiaries in UK, France, Germany December 1995: Netscape share price reached an all time high of USD 174 January 1996: Microsoft unveils its Internet strategy 22

23 Netscape: Timeline. March 1996: AOL licensed Navigator May 1996: Beta release of IE 3 by Microsoft August 1996: Netscape complains to US Department of Justice charging Microsoft of anticompetitive practices February 1999: AOL-Netscape merger, Netscape value at USD 4.2 Bill End of Netscape IP: Mozilla.org: Public domain software with source code 23

24 References Anthony Perkins, Michael Perkins (Editors, Red Herring): The Internet Bubble, HarperBusiness, 1999 Michael Cusumano, David Yoffee: Competing on Internet Time, Simon and Schuster, 1998 Charles Ferguson: High Stakes, No Prisoners, Random House,

Success of Google A Study

Success of Google A Study In the words of Thomas Freidman, world has seen three major revolutions and the latest revolution is unmistakably the Internet revolution. It is changing the way we work in today