5 lessons from survivors of the dotcom crash

January 3, 2014, 10:00 AM UTC

By Kevin Kelleher, contributor

Technology stocks shown on monitors at the NASDAQ stock exchange in New York on Nov. 8, 1999

FORTUNE — It’s now been 15 years since 1999, a year that has since become synonymous with crazy Internet excess. The first Internet boom began several years earlier with an overhyped IPO and took a while to reach its febrile climax. Of course, it all crashed down much more quickly.

Today, the lingering memories of the time — extravagant rooftop parties, metoric IPOs, and massive wealth creation (at least on paper) — feel at once legendary and quaint. With Twitter trading at 70 times revenue and costs of living rising in tech centers, the debate rages on over whether another period of irrational exuberance is nigh, if not already upon us.

Just as every boom must have its bust, every bust will see its share of survivors. Many of the hot startups of the late 1990s are still alive and kicking, especially in networking (Akamai (AKAM), Juniper (JNPR)), business software (RedHat (RHAT)), and the consumer web (Angie’s List (ANGI), Shutterfly (SFLY)).

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More notably, other veterans of the first generation of web startups have not only survived, they continue to be big online brands with 11-or 12-digit market caps. Whether the Internet industry is heading for another boom and bust, these five companies offer lessons on how to build a startup with the power to endure.

-Amazon (AMZN): Stick to your vision no matter what, but fine-tune it with data. Jeff Bezos’s annual letters to shareholders haven’t changed much over the years. In 1997, he said Amazon would build shareholder value over the long term. But to do this he would “extend and solidify our current market leadership position” and “focus relentlessly on our customers.”

Even through the bust, Amazon did just that. Long-term shareholders have rewarded this stubborn adherence to an original vision with a $185 billion market value. But Amazon wasn’t too stubborn. It obsessively tracked data on shoppers, how they used the site, what resonated with them to expand and enhance its long-term goal. The focus was so relentless, Amazon may know its customers better than they know themselves.

-Netflix (NFLX): Serve a need that won’t go away, but may change with times. Like Bezos, Reed Hastings had a long-term goal. “When there’s an ache, you want to be like aspirin, not vitamins,” he told Fortune in 2009. “Aspirin solves a very particular problem someone has, whereas vitamins are a general ‘nice to have’ market.”

Netflix may not cure any aches; it’s more like it scratches an itch. But it’s an itch that never goes away. Watch movies and TVs in a low-cost, simple way. Even when Netflix was dominating in DVD rentals, however, Hastings had plans for a streaming-video service once broadband was fast and cheap enough.

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At the same time, Netflix has shown it can nimbly adapt to its users’ demands. The company made an early — and shrewd — shift from a by-the-disc rental fee to a monthly subscription that was more popular. More recently, Hastings branched into original content to increase subscriptions at a time when skeptics questioned whether a move would be too costly.

-eBay (EBAY): Adapt to evolving interests of your users, even if you anger some others. It’s hard enough coming up with a business model that appeals to the masses. It’s even harder to find one that endures longer than a fad. eBay’s auctions were a post-boom fad that helped the stock rise through 2005. Then the fad began to fade.

CEO John Donahoe undertook a multiyear retinkering of the site, quietly gearing it toward fixed-price sales so that consumers who tired of auctions slowly returned to the site. The changes, however, favored bigger, more trusted retailers prompting a vocal backlash among sellers who felt betrayed by the site. Donahoe chose to weather the criticisms to maintain the turnaround.

In some ways, Donahoe was pushing eBay’s marketplace away from the freewheeling idea of auction anything to embrace the security, reliability, and seamless ease of use adopted out of necessity by online-payments pioneer PayPal, which eBay bought in 2002. The reliability, however, was aimed at consumers. PayPal has its own litany of complaints from retailers who use it.

-Yahoo (YHOO): Establish a deep network of big customers and advertisers. Yahoo’s CEO post-bust was Terry Semel, a longtime Hollywood executive who was widely respected, but who failed to lead the company into the era of social networks. But Semel did two things that have helped Yahoo remain a big player in the consumer web.

Semel established early on a close relationship with deep-pocketed advertisers. In the same way that Facebook (FB) is courting big advertisers into mobile ads, Yahoo was the company that brought them onto the web at all. That gave the company a head start that prompted Google (GOOG) to buy DoubleClick to strengthen its hand in banner ads, and the early relationships have helped Yahoo keep growing today.

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Even with that head start, however, Yahoo has struggled to stay relevant in online ads. The second smart thing Semel did for Yahoo came in 2005: helping the company buy a $1 billion stake in then-fledgling Alibaba.com. The returns on that investment have shored up Yahoo’s profits ever since and allowed it to return some of the largesse to Yahoo’s own investors.

In other words, Yahoo’s continued success is one part innovation, two parts lucky investments. Which brings us to the final lesson.

-Priceline (PCLN): If all else fails, buy your way into a better business. Priceline was a dotcom era darling because of its original name-your-own-price business model. It turned out to be modestly popular but nowhere near as transformative as the company once dreamed.

Instead, the real reason Priceline’s stock has outperformed any of the above four companies over the past decade has more to do with its 2005 purchase of Booking.com and, to a lesser extent, its 2007 acquisition of Agoda. Both made Priceline a leader in hotel bookings in Europe and Asia, respectively — two underserved markets.

Americans may know Priceline from William Shatner talking about the name-your-price service. But the reason Priceline is a $60 billion company is because of a couple of key acquisitions that provided handsome returns. They may not have transformed how we travel, but they changed Priceline from a dotcom casualty to a thriving company in 2014.