Copyright 1995 Richard Seltzer
This is chapter 3 of a book entitled The Way of the Web. Permission is granted to make and distribute complete verbatim electronic copies of this item for non-commercial purposes provided the copyright information and this permission notice are preserved on all copies. All other rights reserved. To correspond with the author, send email to seltzer@samizdat.com Comments welcome. You can buy this book on diskette from Amazon.com.
My Internet: a Personal View of Internet Business Opportunities (B&R Samizdat Express, 2002), on CD ROM, includes the full text of this book plus Take Charge of Your Web Site, Shop Online the Lazy Way, The Social Web, and hundreds of related articles. It is available from Amazon and from our online store http://store.yahoo.com/samizdat.
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Let's presume that the basic infrastructure of the Internet -- the physical connections and bandwidth and communications standards -- will be taken care of. That seems reasonable to expect if we are fortunate enough to avoid major catastrophes like global war and large-scale government regulatory stupidity. Then let's focus on Internet businesses that provide more than just connectivity. What will people actually do with these capabilities? What business models are likely to work? What are the risks and the opportunities?
At a panel discussion at Internet World in San Jose, Calif. (April 1995), one of the participants noted that companies which sell products and services for the Internet face a unique dilemma today. There's no agreement on what's the razor and what's the razor blade -- what should be given away or sold at a very low price to build a customer base and what they can then sell at a profit to those customers.
For instance, some companies are offering Internet access at bargain prices and hoping to make their money by renting Web space. Others are offering free Web space as a come-on to sell Internet access accounts. (I run my own little Internet company on 10 Megabytes of Web space that I receive for free with my $29 per month SLIP account with TIAC, a local provider in Massachusetts. I was just about ready to pay $50 or more a month for just Web space, when they made the free offer. And 10 Megabytes is not trivial -- that's the equivalent of 20 copies of Huckleberry Finn.)
This trend means that the Internet is now and is likely to remain a buyer's market. Second, it means that interesting new capabilities are likely to be provided to end users for free or at low cost, which should fuel very rapid adoption.
For example, early in 1995 personal Web pages were a rarity, except at colleges. Yes, it looked like as the number of home/individual users grew, their interests and desires would expand and eventually large numbers of them would want to experiment with shaping their own Web space -- like buying your own videocamera out of curiosity and then inventing uses for it that justify the expense. Then several Internet access providers decided to give away Web space to subscribers. Many subscribers had been hopping from one service to another to take advantage of the latest low-cost or free offer. Price alone would not keep them. It seemed that in the long run, people were likely to identify themselves with their Web address rather than their email address. Hence giving away Web space would build the loyalty of existing users, and attract new users. And, presumably, the access provider would be able to sell design and consulting services to those who didn't know how to do Web pages themselves or to those who wanted the results to look first-class. Once this started, others had to follow suit to remain competitive; and in a matter of a few months personal Web pages became common place.
The razor/razor blade trend also means that Internet product and service companies need to be very nimble and creative to make real money. Growth in terms of numbers of users is not necessarily an indication of success -- they could be losing money with every new user and banking on eventually making their profit selling something that by then someone else will be giving away for free. Fortunately, many of these startups are turning out to be enormous financial successes, at least in the short run, not by making a profit from on-going business, but from sale of the company itself to optimistic investors.
Some people see the Internet as the present-day equivalent of the gold rush and expect that the real money is to be made not from the gold itself -- not from doing business on the Internet -- but rather from selling tools to the companies that are rushing in. My personal opinion is that the opposite is the case -- companies that focus on trying to make money from the Internet tool business will keep undercutting and one-upping one another, while their customers, who provide useful Internet-based services, rake in the profits. Meanwhile companies like Netscape can succeed by giving away tools (like browsers) to build audience and then creating their real business based on that audience.
We need to make a distinction here between marketshare and audience.
In emerging markets, companies typically make major investments in product development and in awareness activities, like advertising and trade shows, to capture marketshare. They willingly absorb losses for the first few years with the idea that as the market grows, they'll "own" a solid and predictable percentage of that market and reap large profits over the long run.
This time-honored approach assumes that the emerging market is and will continue to be measurable, and that it will follow predictable patterns of growth and maturity. Above all, the market will still exist and be profitable 3-5 years hence and probably much longer.
These assumptions may not be valid in the volatile and bizarre Internet environment.
For instance, whatever market niche you target, some other player may suddenly decide to give away the equivalent of your product or service in hopes of making money in some other way. So regardless of how good your product is and great your marketshare is, your opportunities for future profit could evaporate.
Your Internet audience is the set of people who regularly access your Web pages and/or voluntarily subscribe to your distribution lists. They may or may not ever buy anything from you, but they have a continuing interest in what you are doing on the Internet. You can build your audience in a wide variety of ways, such as giving away products which automatically link the user to your site (like Netscape), providing rich and interesting content, and/or building communities (as noted above). Once you have established a large audience, or a loyal focused audience, then you have the opportunity to create profitable businesses either by serving their needs directly or by charging other companies for access to your audience. Your audience/community becomes the cornerstone of your business.
One of the most evident trends is that customers can connect directly to suppliers, eliminating the middlemen. But at the same time we see the creation of new kinds of intermediary businesses, such as the Internet Shopping Network. Another such business, "WebConnect," recently contacted me. They plan to sell Internet advertising without going to the expense and effort of establishing their own Web site and building its audience. Rather they will act as an agent selling access to other companies' audiences. First they sign up companies that have Web sites, then they go to companies that want to advertise on the Internet and offer them a package deal -- for a fixed monthly fee a hypertext link and brief description of their business will appear on dozens of home pages that tend to attract the kind of audience they want to reach. The Web sites get paid a monthly fee and have the right of refusal. WebConnect takes a cut of the fee.
First we see that writers and readers can now connect to one another directly. Anyone can be a publisher. And at the same time, the amount of material available on the Internet grows unwieldy, and we see a new role for editors, and the rise of on-line magazines, like GNN, and print ones like Internet World, which report on what's happening on the Internet, and sort and highlight what they feel is best.
Meanwhile, we expect to see ever more powerful and intelligent search tools that will help novice users quickly find the Web site or the particular piece of information they need, without the need for an orderly superstructure, such as a mall or a television-style network. Such tools will be able to interpret content, to highlight main points, to do some basic language translation, and to automatically generate summaries to help us cope with the huge amounts of information available. With these tools, users can be actively in control -- seeking what they want and getting it without intermediaries. The Internet increasingly becomes an extension of your own mind, building on your natural powers of association. In this kind of environment, location -- in time or space -- means nothing. Here the user is creator, not consumer.
But then the volume of material becomes simply unmanageable again, and once again we need the help of human judgment.
Recently, my son Michael, a freshman in high school, wanted to write a paper about the music group Nirvana. He checked the Internet (using Yahoo, Lycos, and InfoSeek) and found about a dozen different sites dedicated to that subject. I wouldn't be surprised is a year from now that number tops 100, and within two years tops 1000. And the same trend will probably apply for many other celebrities. Every fan will want to create his or her own Web site shrine, and it will be next to impossible to sort through them all to find the most useful information, without the help of a human guide.
The same trend is likely to occur in almost every field -- even the sciences, where many professors and would-be professors feel compelled to create their own Web pages devoted to their specialty and publishing their papers on-line. So we're likely to see a new upsurge in specialized electronic newsletters and Web sites devoted to reviewing and recommending the contents of other Web sites -- until the next counter-trend.
The Internet is a global phenomenon, and many countries lag far behind the U.S. There's a large and growing non-US audience for pre-Web, plain-text information services, and even the experts don't seem to have a very good handle on the statistics. It's hard to say with any certainty that any part of the world is not now connected to the Internet by some roundabout route.
In Time Magazine's Special Issue, Welcome to Cyberspace (spring 1995), the map of world Internet connectivity on p. 81 indicated Thailand, Bolivia, Cuba, Pakistan, Mozambique, and Ethiopia had no Internet connections. Months before that we already had subscribers to our Internet-on-a-Disk newsletter in all of those countries. In addition, we had subscribers on the islands of Reunion and Vanuatu, which didn't show up on the map. (Our subscribers in Ethiopia and Pakistan work for the UN, and hence their email addresses do not include the country codes for those countries.)
While the number of people who can only access plain text grows, Web masters are tempted to base their page design on the latest and greatest non-standard extensions to html and to include ever more glitzy graphics and video and audio effects, neglecting the needs of the technologically handicapped. As technology advances with 3D presentation of images and virtual reality, the issue of access for those without these capabilities will rise again and again. In all likelihood, only after products have become successful in the mass market will there be an effort to provide some "equivalent" form of the information or experience for the rest of the world. It's natural -- only with huge commercial success will the developers be able to afford the luxury of considering the low-tech masses.
The designers of Web pages should go out of their way to continue to make plain-text versions of their material available when they upgrade to the latest and greatest graphical presentation method. Many sites already provide a choice of graphics or text-only on the first screen. And some design their pages with the understanding that users may be connecting with Lynx, a character-cell browser. We need to encourage more sites to do that now, and to continue that practice as graphical technology advances.
In the next chapter, we'll consider the blind, who have similar needs for plain text presentation of Internet material.
The rest of the Way of the Web
Can we help you build an Internet business? Richard Seltzer is an independent Internet writer/speaker/consultant. Click here for details. or send email to seltzer@samizdat.com
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