The life of a business is notorious for having the ability to fluctuate on a regular basis. While at one moment everything may be rosy, this might not last. There have been cases, as this article shows, where a business has gone from market domination to collapse. This has sometimes been due to the rise of competitors, technology changes or even accounting scandals. So, we now take a look at 20 businesses that have gone from success to bankruptcy.
Pets.com for many are the poster child of the dot-com bubble era. As the name suggests, Pets.com aimed to sell a variety of pet food to consumers. They attracted significant funding, helping them to launch an enormous advertising drive. In an effort to create a large customer base, they made a loss on every order. But after spending millions on advertising, Pets.com ran out of cash, and went from an Initial Public Offering to liquidation in under 300 days. These days, Pets.com is mainly used as a case study to show what can go wrong with a business, regardless of however much funds they once had available.
While a range of social networks were set up in the early 2000’s, few managed to attract millions of users. hi5 were an exception to this rule – being one of the most popular social networks for many years. By 2007 hi5 were second only to Myspace for total users. But, the sudden surge in popularity of Facebook led hi5 to lose market share rapidly. They opted to repackage their site as a social gaming platform. They were unable to maintain success, and returned years later to a social network – with a current emphasis on meeting new people. hi5 continues to run to this day, and will hope to make a comeback!
Silk Road was an illegal marketplace that ran purely on the dark web. Silk Road was used as a marketplace for users to buy and sell drugs, along with other nefarious services. By 2013, over 10,000 products were on sale. In the course of its operation, it is estimated Silk Road attained over $1bn in revenue from sales. Unsurprisingly, the mass success of Silk Road caught the attention of the FBI and the DEA. They eventually arrested the founder – a man named Ross Ulbricht. The site was shut down, and Ulbricht sentenced to life in prison without the possibility of parole.
Orkut was a social network launched by Google in 2004. Named after a Google employee who had worked extensively on the project, Orkut enjoyed particular success in India and Brazil. Google had hoped that Orkut would be able to rival the likes of Facebook and Myspace. Despite some success, Orkut found itself in a range of troubles. Hate groups congregating on the site, lawsuits against the Brazilian government, viruses and privacy concerns were just some of the issues that affected Orkut. The site was eventually shut down in 2014, with Google opting to focus on growing Google+.
Woolworths is fondly remembered as a retail chain that offered a wide array of goods – most famously its Pick’n’mix, music, toys and budget range of essentials. Woolworths’ first store opened in 1909 in Liverpool, and over the course of the next few decades, the firm would expand hugely. By 1957, Woolworths had opened their 1000th store. Yet in the 21st century, the rise of online marketplaces like Amazon, the Global Financial Crisis, increased competition and loss of key revenue streams all contributed to causing Woolworths to collapse. By the end of 2008, Woolworths shut down.
SixDegrees.com was one of the world’s first social networking sites. It appeared in 1997, and was based on the Six Degrees of Separation phenomenon. The social network worked like any modern day social network does – with users able to connect online with their friends. But despite attaining 3million users by 1999, the social network failed to maintain its success. With the internet still in its relative infancy, connection costs high, and multimedia devices far from ubiquitous, the world wasn’t quite ready for a social network. Yet the site served as an inspiration for many more social networks.
Borders was an international book and music retailer. Brothers Tom and Louis Borders started the business in 1971 – at first purely a standalone store. Yet the business would quickly open further branches, leading to expansion worldwide. Borders was sold to Kmart in 1991, and success continued. But in the 21st century, Borders opted to end an agreement with Amazon to sell books via Amazon, instead attempting to use their own online store. This backfired hugely, and subsequent financial troubles led the business to collapse. Amazon meanwhile have expanded enormously.
The smartphone application Yik Yak seemingly came out of nowhere to take University campuses and school districts by storm. The app allowed users to anonymously send and view discussion threads to and from other users within a five-mile radius. Enormous investments were made into the app, which had a valuation of $350m within a year of starting up. However, Yik Yak was criticised by many for providing a platform for online bullying. Hate speech, gun and bomb threats and censorship were all other problems. To combat these problems, anonymity was dropped – leading to a sharp decline in the number of users. This led to the app and business ultimately shutting down.
Friendster was founded in 2002, and aimed to do what SixDegrees.com couldn’t – and build a social network that would be used by the masses. Within six months there were 3million users. Google offered $30m to takeover the business, which was rejected. Friendster was the world’s most popular social network until 2004, when Myspace overtook it. But after internal quarreling ended with the dismissal of the founder Jonathon Abrams, and subsequent instability. A large Asian firm eventually purchased the site in late 2009 for $26m. The site repackaged as a social gaming platform, but failed to attract significant traffic. The site eventually shut down in 2015.
Boo.com are well-known for being one of the most notorious failures of the dot-com bubble era. The intention of the site had been to sell fashion apparel on a worldwide stage, with the website launching in 1999. The site attracted funding of $135m – leading to an aggressive marketing campaign. They successfully ramped up interest, though their website had significant problems, putting users off. On the business front, Boo.com wasted significant capital on plush offices, including bases in New York City and London. Boo.com’s attempts to launch in different countries simultaneously also proved problematic, while the number of product returns too affected Boo.com. When combined, these factors were enough for Boo.com to collapse – in the process becoming an iconic case study.
Arthur Andersen is a notorious name in the world of accounting. Once one of accounting’s ‘big five’, the rails well and truly came off this juggernaut in the early 2000s. Preceding this was a history of intra-competition, resulting in the consulting sector of the business being spun off. After the Enron Scandal hit America (more on that later), Arthur Andersen were accused of being complicit in a wide-scale accounting fraud – helping Enron to inflate their assets, thus fooling investors. Employees of the business were told to shred any-Enron related documents, while the firm were implicated in other accounting scandals. Areas of the business were sold off, and Arthur Andersen ceased operations – one of many victims of the Enron Scandal.
Before the age of Netflix and Amazon Prime Video, Blockbuster ruled the film and video streaming roost. Beginning with one store in 1985, Blockbuster launched into a remarkable expansion – with conglomerate Viacom eventually purchasing the business for $8.4bn in 1994. Despite at one point operating 9,000 stores in multiple countries, the business would make a range of mistakes – causing their struggles. These included turning down an offer to purchase Netflix for $30m, ending popular online deals, doing little to stop retailers eating into their market share, and ultimately not moving with the times – film and video are now watched online in huge numbers. While Blockbuster still runs on a small scale, the business looks unlikely to ever return to its former height.
Kodak are famous for supposedly being a business that failed to adjust appropriately to technological advancements. Started in 1888, Kodak were the pioneers of early digital photography. Mass growth would ensue, and it took until the 1990s for their huge market share to be eaten into. Fujifilm were the first of a number of Japanese firms that took on Kodak, with Sony, Canon, Nikon and Olympus among the others. Kodak struggled to compete with their competitors – all of which were embracing new technology. The firm eventually plunged into bankruptcy protection, but, after a careful and methodical approach, were able to emerge from bankruptcy protection in 2013. Since then, the business has managed to return to stability.
WorldCom were a telecommunications business founded in 1983. During the 1990s, the business excelled – as America got hooked on communication technology. But, following a decision to deny WorldCom and Sprint Corporation to merge, WorldCom started to struggle. This coincided with the early 2000s, where technological advancements had slowed, and the communication market had matured. A small number of executives at WorldCom started engaging in accounting fraud in the late 1990s. They had started doing so on a small basis, before ramping up their efforts in the early 2000s. WorldCom had been inflating assets, and overstated their revenues thanks to bogus accounting entries from ‘corporate unallocated revenue accounts’. A small group of internal auditors at WorldCom discovered the fraud and blew the whistle. Court cases loomed, leading to a slew of prison sentences, heavy fines and ultimately, WorldCom filing for bankruptcy in 2002. The firm’s remnants were eventually bought by Verizon.
Microsoft harnessed their position as the market leader for computer operating systems to offer its users the opportunity to chat to friends online. At the time of release, this was a novel prospect, and there was no shortage of users. Each update brought new features, and led to increased popularity. In 2009, over 330m users actively used MSN Messenger. But, as Facebook’s chat service became more popular, MSN Messenger lost millions of users. Purchasing Skype did little to arrest the decline – as Microsoft had hoped. MSN Messenger was one of many victims of Facebook’s rise. The messaging service shut down in 2013.
Pan American World Airways was an airline that enjoyed considerable success throughout the 1900s. Seen as the unofficial national airline of the United States, PanAm developed a reputation as a reliable carrier. PanAm were years ahead of competitors – pioneering several routes – including the first ever around-the-world flight in 1947. But, a series of events caused problems, eventually hastening the airline’s descent into bankruptcy. An oil crisis, an unsuccessful takeover of National Airlines, mounting debt, along with the effects of the Lockerbie bombing and Gulf War, when accumalated, left PanAm in a perilous state. The damage couldn’t be reversed, and PanAm entered bankruptcy – eventually ceasing operations in 1991.
Bebo was yet another of the social networks that struggled to cope with Facebook’s rise. Husband and wife duo Michel and Xochi Birch launched the site in 2005. By late 2007, Bebo had overhauled Myspace as the world’s most popular social network. A sale to media conglomerate AOL for $850m would follow in 2008. But instead of this deal cementing Bebo’s place at the forefront of social media, it actually coincided with Bebo’s decline. Facebook proved to be considerably more popular, resulting in Bebo losing market share. In 2010, AOL sold the site, which has subsequently struggled to ever return to its former glory. Bebo still exists to this day – though currently operating as a all-in-one streaming application. It is a case of what might have been.
Of all of the social networks to have challenged Facebook, Myspace was the closest to ever challenging its domination. Founded in 2003, Myspace thrilled its users with a combination of music and social media. At one point the site was more visited than Google in the United States. Myspace quickly overtook Friendster to become the most popular social network, before battling with Bebo. In 2006, Myspace was acquired by Rupert Murdoch’s News Corp for $580m. But ultimately, Myspace were unable to cope when the clattering hooves of Facebook came galloping past. Myspace largely stagnated as Facebook attracted countless of users with innovative features. Myspace would attempt several redesigns in an effort to compete with Facebook, but struggled to impress users. Further ownership changes would continue as the years passed. In the modern day, Myspace is a social entertainment website operated by TimeInc,
Arguably the most infamous corporate scandal of all time, the Enron Corporation were at point one of the world’s biggest energy firms. Enron was founded in 1985 as a result of a merger. Enron grew enormously in the 1990s, helped by smart reactions to technological advancements. But part of Enron’s mass success had been down to a consistently strong share price. Yet this share price had been based on fraudulent accounting. Assets were inflated, expenses moved into offshore accounts, and accounting loopholes utilised wherever possible. Enron therefore looked profitable – whereas they were actually rapidly losing money in the early 2000s. Their auditor Arthur Andersen appeared to be complicit in the fraud – and as discussed earlier, faced their own repercussions. But various articles in the media raised questions regarding Enron’s actual financial state. Enron’s share price would drop as a result, and issues in the energy sector also contributed to a sharp decline. When Enron admitted to inflating accounts, the price plummeted, leading to Enron filing for bankruptcy. Enron’s collapse caused millions financial losses, and caused many other businesses to collapse, with the damage still being felt to this day.
The Global Financial Crisis had an enormous effect on the world – sending countless nations into a recession, causing endless job losses, and claiming several businesses. One of the key factors however in the Financial Crisis developing was the collapse of Lehman Brothers. Founded in 1850, Lehman Brothers were one of America’s most venerable firms, trading as a global financial services business. Lehman were one of several banks to act haphazardly in the years prior to the financial crisis – offering subprime mortgages to many. After the housing bubble burst, Lehman were in the position where the value of mortgage-backed securities were worth more than four times the value of the equity of the firm. This left Lehman in a perilous financial state, and following the publication of accounts – their share price dropped hugely. While the US Government had helped save Bear Stearns just days before, they opted to let Lehman collapse. The business ceased operations, proving a major incident in the chain of events that would lead to the Global Financial Crisis, and ensuing misery for millions worldwide. A decade on, Lehman Brothers remains America’s biggest bankruptcy, a position that might well be unchallenged for years to come.
So, our list is complete. The collapse of these businesses had a profound effect on the world. The collapse of some, such as SixDegrees and Myspace, helped pave the way for Facebook to become the powerhouse that it is today. Moreover, would Amazon have hit the heights that they have if Borders hadn’t reneged on their book deal? And the world would surely be a different place if WorldCom, Enron and Lehman Brothers had all avoided bankruptcy. There are many lessons to be learned from this list, though these various incidents have all helped shape the business landscape that we see to this day. While some of these businesses remain in operation, the majority are gone – but certainly not forgotten.