This is a non-technical view of business opportunities on the Internet. It is appropriate for all audiences, but works best for business managers who are responsible for presence on the Internet.
The objective of this
presentation is to help change the mindset of the
audience, helping to recognize that the Internet is a
radically different business environment, and that
success is best achieved through taking advantage of
that environment.
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What is the Internet?
The Internet is a network of networks. It grows a network at a time, as new companies and institutions connect their networks to the Internet. Designed for the U.S. Department of Defense, the architecture was intended to make the Internet safe from nuclear attack.
The Internet has no central point of control.The institutions originally connected to the Internet were able to connect other institutions to the Internet, and those institutions were able to connect others, without the oversight or permission of any governing body. Hence the Internet grew rapidly and became a global phenomenon. Today there is no central registry or controlling authority. The only way to determine the size of the Internet is to conduct experiments. At last count there were over 7 million computers connected, and estimates of the number of users typically range from 40 to 60 million.
When entering this environment, it is important to keep its origins in mind and respect the basic culture. Entering this space is like entering any other culturally foreign environment. Imagine a Western firm doing business in Japan. To succeed, understand and respect the culture -- the etiquette (called "netiquette") and the expectations of potential customers.
For example, on the Internet, one does not send unsolicited advertising material. People request information and are happy to receive that information, but raise a storm of protest when a company or individual intrudes upon their space when uninvited. (This effect is partly cultural and partly economic. Commercial services often charge recipients for the mail received beyond some minimal level.)
Here people often freely share their creative efforts, with no expectation of financial return. I liken it to a frontier spirit -- people tend to be independent, self-reliant, but ready to lend a hand to a neighbor in need. Surprisingly, new users, even commercial users, often adopt many of the basic tenets of this electronic society with great enthusiasm. Recent announcements from Netscape and Microsoft are an interesting example of this phenomenon. These competitors tried to outdo one another in appealing to the Internet community, professing that they would make technology freely available across all platforms.
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What Has Changed?
Early users who have used the Internet for years sometimes ask -- what's all the excitement about? For a long time there's been an enormous wealth of valuable free information and software available over the Internet. What's different today?
But the main difference has been the availability of "Web browsers," which can open up the information of the Internet to everyone, regardless of whether they have any knowledge of computers. In addition, over the last two years, the US Federal government has taken a leading role in making enormous amounts of information readily available over the Internet -- information that is important to business and that was previously difficult to find or expensive to retrieve. And while in the past the U.S. governmenttried to restrict use of the Internet to research, education, and non-profit activities, now the Internet has been turned over to the private sector and commerce is encouraged.
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The World Wide Web -- developed by researchers at CERN in Switzerland -- makes it possible to link information from computers anywhere on the Internet in a hypertext environment. For example, a word in a document on a computer in France could be connected to a document in Australia.Web browsers, such as Mosaic and
the Netscape Navigator, allow use of a computer mouse to
point-and-click your way freely through that Worldwide
Web.[Today's most popular browsers are Internet
Explorer, Chrome, and Fire Fox].
When a hyperlinked word is clicked on, that is the equivalent of typing in the address of another document -- whether it's on your hard drive or on a computer in China.
My favorite example of the use of hypertext is the Hillside School in Minnesota. One of the first elementary schools on the Web, back in the spring of 1994, the sixth grade teacher had her class use the Internet for research and then posted their papers on the Web. For example, when the word "dinosaur" is a hyperlink, click on it for an immediate connection to the U. of Calif. at Berkeley, with a wealth of information and pictures of dinosaurs and hyperlinks to other dinosaur resources around the world. Instead of a traditional footnote which sends you back to the library, a hyperlink connects directly to the source.
Today [1995] most of the information available on the Web is in the form of text or graphics. Audio and video are available, but very few users are equipped to access such files and business use of those capabilities are now just beginning. We'll talk about that further later.
Information resides on server computers on the Internet. The individual user accesses that information by way of browser software, available in 2017 as Internet Explorer, Fire Fox, Chrome and more.
Now new applications, such as Digital's Workgroup Web Forum, are making it possible to let users interact with one another and with experts in a Web environment, opening a whole range of new business possibilities.
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What is unique about the Market?
Rapid change --
Suffice it to say that new business models and new technology, often a unique application of technology that was already available, can make an enormous difference over night -- changing your whole mindset as to what is possible over the Internet.
For example, in the spring of 1994, the Internet Shopping Network appeared on the Web. This was about a dozen people, operating with no inventory -- simply forwarding to distributors the orders they received for computer hardware and software to distributors. Rather than wait for technology to provide a secure way to transmit credit card information over the Internet, they asked users to FAX or phone their credit card information; and they gave them passwords for them to use. So "members" with credit card information already on file could simply and securely use the Internet for shopping. It was a simple, obvious idea, with tremendous power. Just because you are using a new medium doesn't mean you can't mix it with the old. Their common-sense approach was extremely successful. In 4-1/2 months they sold their company for $4-1/2 million to Barry Diller's Home Shopping Network.
Pace of development/standards --
If it works, people will use it. And if it works well, it could become a standard over night, without having to wait for months or years for official standards bodies to go through their procedures. Within a few weeks of when the first version of the Netscape browser came out, it became the new de facto standard.
Level playing field --
In an old New Yorker cartoon, two dogs are looking at a computer monitor and the one says to the other, "On the Internet, no one knows you're a dog." The smallest of companies can compete with the largest on an equal level. And in fact, unless large companies take steps to by-pass their normal procedures and become more flexible and fast moving, they could be at a distinct disadvantage here. Here the barriers to entry are close to zero, and many people are starting new businesses in their basements.
Don't try to invent it all yourself --
If someone else has developed the right technology or a useful business model, take it and run with it, don't waste time trying to tweak it and make it perfect. For instance, the browser software lets you see the source code for the Web pages you visit and to copy them down to learn the tricks and cut and paste to do what you want with it.
Free information, free software --
Enormous libraries of information are available for free over the Internet, and lots of very useful software is available for free as well. You need to take this into account when trying to develop business models. You need to realize that sometimes giving away what you might have charged for the best way to win in the long run. Remember this is a new medium -- and your main objective to start with might well be to win an audience. This is like providing free programming for a radio or TV station with idea of building an audience, and then fashioning a business around that audience.
"Under construction" --
Putting a page on the Internet is not like publishing your annual report. It should not take months to get approval. You should not wait until every "I" is dotted. Rather it is common practice to post what you have -- even though it may be incomplete -- and indicate what you intend to add in the future. Even major corporations, like Apple, have gone on line with "under construction" signs. This approach lets you get started quickly and modify your content and your plans based on feedback from users.
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Benefits of Doing Business on the Internet
The Internet puts you in touch with resources and information around the world, and puts others in touch with you. Potential customers in distant markets can now find you and reach you, even though you do not distribute your marketing literature there or advertise there, even though you don't have a local office or representative there. They can check out information about your products and services without you incurring any cost.
Of course this isn't magical. Simply putting pages up on the Web doesn't bring customers to your door. Creativity, hard work and careful planning are required to build an audience and make your Web presence successful. But the opportunities are enormous and the barriers to entry are extremely low.
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Risks of Not Doing Business on the Internet
If you don't do it, obviously you lose out on the opportunities -- both the obvious ones of saving money, for instance, in the printing and distribution of your marketing and product support information; and the not so obvious ones that involve creatively taking advantage of the unique characteristics of this new environment.
If you are in a "middleman" business, you could find yourself cut out of the loop altogether as suppliers connect directly to customers. And you could miss out on opportunities to develop a new and lucrative value-added roles for yourself.
Search capabilities -- like Altavista, a free service provided by Digital Equipment -- let you check virtually every word or every page on the Web, so you can locate a document on a computer in China or anywhere else in the world probably far quicker than you could locate it on your own hard drive. This makes it easy for you to identify resources and for others to find you, and then for you to use the communications capabilities of the Internet to build new kinds of partnership and collaboration, and new ways of serving customers and making money.
And if you don't do it, someone else will. Just as you can enter distant markets, distant companies can enter yours -- at virtually no cost, overnight, and without warning.
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Long-Term Business Effects
For the short-term, it may seem like you have a choice, but long-term the Internet and the new business environment it is creating will turn entire industries upsidedown. Basic assumptions, rules of the game which everyone has taken for granted, are changing. The ways people relate to people and businesses relate to customers and to other businesses are changing.
Businesses that depend on information are affected first and most profoundly. But over time nearly all businesses -- large and small -- will have to adapt to this new environment to survive.
Let's take a look at some sample industries to see how this might play out.
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Publishing Industry
example = Encyclopedia Britannica -- the on-line edition
Over the Internet, distribution becomes virtually free. This means that anyone with a manuscript can become his or her own publisher and reach global audiences -- without the need for a traditional publisher.
The publisher in the past acted as an intermediary between author and audience. Now, suddenly it is not clear that that role is necessary at all.
Publishers need to establish what value they add in the process -- through selection, branding, editing. And they need to be aware that others, using the Internet, might well fill those roles as well.
And when they price their products, they now need to do so in an environment where similar or equivalent information might be available for free over the Internet. For instance, with Project Gutenberg, hundreds of volunteers around the world are donating their time and effort to scan and proofread all the world's great literature that is now in the public domain, and are making these texts available for free over the Internet.
So if a publisher wants to sell an edition of Shakespeare or Melville, the customer has to clearly recognize a difference in quality above and beyond what's available for free and be willing to pay for it, if the publisher expects to get any revenue at all.
This doesn't mean that all print publishers will go out of business. But it does mean that they have to wake up quickly and redefine their role and make creative use of this new medium and also find creative ways to mix this medium with others -- including CD ROM.
Not just book publishers, but newspapers as well need to redefine their role. When news service information is available directly to the consumer -- instantaneously and in searchable form on line -- why should the consumer value a printed newspaper that consists largely of those same stories delivered late? When classified ads of all kinds are available for me to view for free on the Internet, readily searchable, and constantly updated, why should I use a newspaper to get that same kind of information?
Some newspapers, like the Boston Globe, are rushing to establish themselves in cyberspace -- creating an on-line presence through a separate business entity, which is creatively looking for new business models. The Globe has also joined forces with other newspapers to establish a mega on-line classified ad business to compete with the Internet startups in that field.
Other newspapers are throwing up barricades and trying to defend their old business models -- refusing print ads from Internet businesses which run classifieds. That's not likely to be effective for long.
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Broadcast Industry
example = Up to the minute Boston weather from Intellicast, in collaboration with the local TV station WHDH, and with on-line advertising.
For now, the broadcast industry seems to love the Internet. Many TV shows and stations have Web pages which supplement and promote their regular programming. I can get background information on the stars of Xena Warrior Princess and find out what stations carry it where and what episodes will play when. My six year old can send email to the Cartoon Network to take part in contests or provide feedback.
The major content providers for TV are creating major Web sites, capitalizing on their content and reputations and also on TV-based advertising to build audiences for their Web sites, which in turn could become sources of advertising revenue.
And Internet entrepreneurs are using radio and TV advertising to promote their Web sites.
In a broader sense, the available audience has only so much time to devote to TV or the Internet, and hence they do compete for time and attention. But a business has both broadcast and Web-based programming can win whichever way the consumer prefers to go.
Long term, however, the changes here too are likely to be profound. In the not too distant future, the typical PC will be sold with a video camera built in and software for making video available over the Internet will be relatively inexpensive. In that environment, the barriers to entry will be very low, and virtually anyone could become a video broadcaster.
Already interesting audio applications, like RealAudio, are making it relatively easy for anyone, with a minimal investment, to set up the Internet equivalent of a radio station -- without the need for FCC approval, without any of the bureaucratic regulatory hassle that in the past served as a major barrier to entry. And such Internet-based stations are not at all limited by geography. A basement shoestring radio operation in India could reach the entire world.
And remember, too, that in this environment there are new incentives for investing in creative programming. In the past, the audience had to be tuned in when the program was aired; now the audience can hear/see any program at any time they choose. So a little public radio station in Oswego, NY, could produce a radio drama, which could be available on demand to a global audience for years to come.
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Banking/Finance
example = Wells Fargo, one of the pioneers
Money is basically nothing more than information -- bits that indicate how much money you have in this account and how much you owe to that account, bits that already can be transferred from one account to another and one bank to another and across national boundaries over secure leased lines. As confidence grows in encryption and security methods over the Internet, an increasing amount of this traditional financial traffic will take place over much less expensive and much more flexible Internet connections.
Today, banks like Wells Fargo are using the Internet to market their services to the general public.
In the not too distant future, a wide range of banking services -- including transferring money from one account to another and paying bills -- will be available over the Internet. The bank on the Internet will be closer than one just a block away from you.
Meanwhile a number of mechanisms are available and under development to allow people to pay by credit card directly over the Internet. The major credit card companies already operate globally, so credit card payment eliminates the need to convert currency, and makes it easy for individuals in distant countries to buy from you. The Government of Liechtenstein already holds a weekly multi-million-dollar lottery on the Internet, with players buying tickets on-line by credit card.
Some of the new Internet payment mechanisms involve the creation of new forms of money based on credit or deposit accounts or even barter accounts. They will allow information merchants to charge very small sums of money -- fractions of a penny -- for particular pieces of information, with the payments being aggregated and automatically handled in ways that were never before possible.
Basically, the ways we distribute credit and value globally are being redefined, in ways that are much more difficult for governments and existing financial institutions to regulate and control. We expect there will be much lower barriers to entry in businesses related to banking and finance, and new creative players will enter the field.
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Telecommunications Industry
first example -- NYNEX Yellow pages -- trying to extend its existing yellow page advertising business to the Internet
Telecomm companies have been in the business of delivering other people's information. But now numerous lower cost delivery alternatives are opening up.
Companies like Vocaltec have developed software that makes it possible to carry on voice conversations lives over the Internet. Right now it's a bit like ham radio. Each party needs an Internet connection, needs the same software, needs a sound card and a microphone. And the quality isn't great.
On the other hand the quality is good enough for most personal and business conversations. And this is one important message that telecomm companies and others need to learn -- when you no longer have a monopoly, the consumer rather than the provider determines the needed level of quality. If I can use my regular Internet account to make a "phone call" to China, it costs me no more than what I normally pay for Internet service (in my case that's about 30 cents an hour). If we can carry on a useful conversation at that price, there is no way that I would pay $100 or more an hour to talk to the same person and be able to hear a pin drop in the background.
Because of the enormity of this opportunity, numerous companies are rushing to provide this kind of Internet-based phone capability -- across all platforms, with increasing levels of quality, and probably soon with connections to local telephone systems so long distance calls could be made as local calls using ordinary telephones.
Eventually telephone traffic, with and without video images, will pass over TV cable lines, and power lines, and by wireless mechanisms as well as traditional phone lines. And at the same time, with fiber optic cable becoming widespread, bandwidth is becoming so inexpensive as to be virtually free.
Even in traditional businesses, like Yellow Pages advertising, the telecomm companies are under fire. For instance, recently, a little company called Central Source in Omaha, Nebraska, purportedly made available over the Internet a directory of all business phones in the U.S.
Here survival depends on changing your mindset, and moving away from your traditional ways of doing business.
About a year and a half ago, AT&T put a directory of 800 numbers on the Internet. Often when watching TV, an ad will reference an 800 number and I won't write it down in time and would like to follow up. When I heard about AT&T's service, I tried to use it that way. I was surprised that I couldn't find the number. Then I probed deeper and found out that they had only listed their own 800 numbers, not MCI, not Sprint, not anyone else. When I hear an ad, it doesn't say what phone company provides the 800 number service. That should be irrelevant. But AT&T was thinking in the old mode -- they get paid for every 800 number call made on their service, so they were looking for ways to increase that old revenue stream. They had a tremendous lead on everyone else, and that could have become a very heavily trafficked site, opening up new opportunities for new advertising revenue from every business with 800 numbers, not just their own. Instead they created a service that was of little use to the public and led to nowhere.
second example -- And meanwhile a startup company like Central Source can do an end run around the telephone companies and post all their listings in easy to use form.
And soon someone else will probably try to put all the residential as well as business phones on-line. Or all the businesses of the world. Or all the phones of the world. Those are businesses waiting to be created -- and by anyone, since the courts have ruled that the directory information in phone books cannot be copyrighted.
If the phone companies limit themselves to delivering other people's information, they will soon shrink to a handful of people pushing buttons. The real money will be in the information, not the delivery.
So phone companies need to think about what information they have to deliver -- what expertise they can and should charge for -- and how to build loyal audiences of individuals and companies who want that information. They could create on-line environments focused around telemarketing and 800 number service and 900 number business models and knowledge of telecomm infrastructures. They could start to build new businesses based on making creative use of the Internet, rather than providing the infrastructure that makes others rich.
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Education/Training
example -- Harvard Business School, "Marketspace" curriculum -- using the Internet to market courses that focus on the new opportunities that are opening on the Internet, to share course materials with students on-site, and eventually using the Internet to deliver such courses to remote audiences
example 2 -- Kathleen Gilroy Associates, a distance education company, which produces seminars about the Internet and is moving toward using the Internet as a means to deliver training as well.
Education and Training are the interactive delivery of information, where the participant has the opportunity to ask questions and carry on discussions with the instructor and other students and where the instructor has the opportunity to elicit responses form students to provoke them, in Socratic style, into the right pattern of thought and to test what they have learned. The objective is to transfer not just information, but understanding -- resulting in changes in the students' perceptive, perceptions, and/or behavior.
Today the Internet is being used by educational institutions largely as a marketing tool, for disseminating information about their existing courses and as a way of distributing course materials. The Internet is a vast, searchable, interconnected library, which can be readily accessed from anywhere. So small remote schools without much money can use the Internet to provide their students with access to the best, most current information resources in the world. And professors at such small remote schools can make themselves known in a global arena.
Those are enormous capabilities and opportunities.
But the next stage is even more interesting, with the Internet becoming the basis for new and lucrative businesses, which, once again, have low cost of entry.
When the interactive element is added to the Web -- through the use of collaborative tools like Digital's Workgroup Web Forum -- the Internet, in conjunction with other distance learning media like satellite broadcast TV, makes it inexpensive and easy to deliver true education and training to global audiences.
With these capabilities, innovative schools and training companies will be able to reach global audiences. And on the flip side of the coin, all educational institutions will face global competition.
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Manufacturing
example -- Thomas' Register of Manufacturing companies -- the industry-standard directory is now on the Web
(Another interesting example is Industry net http://www.industry.net/ which has lots of useful information about a wide variety of companies available in searchable databases.)
While manufacturers produce hard goods, not bits and bytes, timely, accurate information is essential to them in their efforts to reduce costs and deliver goods quickly to customers.
For years, manufacturers have been restructure to link them more closely with their suppliers and customers -- working on every link of their supply chain, to reduce time and cost, and to derive as much valuable feedback about their own processes and their customers' needs as possible. The Internet is a natural tool to allow them to accomplish this more quickly and inexpensively. Secure communications over public Internet lines -- using products like Digital's Internet Tunnel -- have opened up enormous opportunities here. We'll talk about this aspect of the Internet in more detail later.
There are also interesting applications for use of the World Wide Web in process control.
Example -- One of the first sites on the Web was the Trojan Coffee Room at Cambridge University in England. Students rigged up a video camera, so when you click on the right link, no matter where you are in the world, you can see how full or empty that coffee pot is. Presumably that has some marginal value if you are in that building and want to know if there will be coffee waiting for you before you bother to walk down the hall. More important, that coffee pot could just as easily be the reactor core of a nuclear power plant, or a key step in some chemical process. In other words, the Web can be used to remotely monitor a wide range of activities -- for security or process control -- with video or audio or data input and video or audio or data output, using low-cost, ubiquitous public Internet lines.
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example #1 -- Federal Express -- click on the line "Track a Package" to see a second screen -- This Web site lets users check on the status of their own packages, reducing service costs for Fed Ex, while increasing customer satisfaction.
example #2 -- "Thomas" -- is a Web site set up by the U.S. House of Representatives to provide all the detail anyone would ever want about bills that are pending and about the process of making laws in the United States.
The majority of businesses in the U.S. are based on service. And in a service business documentation and the people needed to produce, provide, and deliver that documentation are by far the major cost. And nearly every business has some service component to it.
The Web is a natural environment for inexpensively delivering and managing documentation. The consumer of the information retrieves it directly -- and with hyperlinks and search tools is often able to get what he or she wants without human intervention. This results in both lower costs and better service.
By adding on-line Forums -- with software such as Digital's Workgroup Web Forum -- you can set up an interactive environment so customers cannot find what they need on their own, they get an answer quickly from an expert or from another user and the answer remains in searchable form, so you only have to answer the same question once.
example #3 -- elections -- Foster's Daily Democrat -- an experiment in grass-roots on-line democracy, which uses Workgroup Web Forum to set up dialogue among citizens and among candidates.
For government, the benefits are even greater, because ready access to information -- being able to get the answers you want when you want them, as well as the ability to interact with knowledgeable people in government, fosters participation and cooperation with government, rather than alienation, frustration, and hostility.
On the government side, accessibility builds community spirit. And on the business side, it builds customer loyalty. (And studies show that it is a lot less expensive to retain existing customers than to win new ones.)
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Healthcare
example -- a major publisher in Germany is using the Internet and Digital products to create a global network of doctors, as the basis for new business.
Today Internet applications in this area are in their infancy. The main use today -- outside of teaching institutions -- is probably by support staff, who use Internet to connect to medical, government and insurance information.
But this is an area where timely information and the ability to collaborate on-line with experts could mean the difference between life and death. So we would expect that -- especially as higher resolution images and sound and video can be delivered more quickly, easily and inexpensively -- the Internet will become a valuable tool for doctors as well, who will team together in new ways, creating new global businesses, perhaps independent of today's hospitals and clinics.
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Retail Industry
example -- Shopping 2000 -- on-line shopping for a wide range of products from over 60 vendors (scroll down to get a feel for how much there is)
This is the area of the Internet that gets all the hype in the newspaper. But on-line shopping for hard goods (as opposed to information and software) is just barely beginning.
For now, in this industry, the Internet is far more important as a tool for providing timely and useful information that reduces costs and puts you in closer touch with the wants and needs of customers.
There are also interesting creative opportunities to use the Internet provide customers with on-line access to inventory information -- so they know an item is available before they drive to the store, or can search across a variety of stores to find the nearest source and/or the lowest price. The Internet can also be used to set up gift registries for weddings, Christmas, and other such occasions.
And eventually, on-line shopping will catch on, with the companies that have already experimented and built audiences in the best position to take advantage of the opportunities.
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Keys to Success
There are two main uses of the Internet -- public and private. Some companies make good use of both.
And in both cases the main ingredient for success is understanding the environment, and creatively adapting to it.
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What is the "Public Internet?"
You do business on the "public Internet" when you want to reach a general audience, when you want to welcome any and all people to come to your Web site. You may not have had any previous contact with these people. And the information you are going to provide them you would be willing to give to anyone.
Here you find all manner of interests and activities competing with your own. This is like the village common -- with jugglers in one corner, strip tease artists in another, gambling in another -- everything that might interest and entertain a human being. And it's global. And it involves tens of millions of people.
Where the public gathers that's where they'll do business. So that's where you'd like to set up shop.
But when you do so, you need to keep in mind why those people are there. You need to find ways to attract them to your space and induce them to come back again and again. Tourists and curiosity seekers who happen to click to your space once, but have no real interest in what you are doing and who will never return are not your target. You want to attract and hold the people who are likely to be seriously interested in your kinds of products and services.
And you also need to be aware that you are not in Kansas anymore, that this is a truly strange and new business environment, where you need to expect the unexpected and be prepared for major changes to occur over night.
To understand that point, let's take a look at a few examples of the kinds of changes that have occurred over the last couple years.
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Internet Shopping Network --
We talked about this one earlier (s05.html) -- What's important here is that a simple business idea -- that you can use phone and FAX, non-Internet means to transmit credit card information -- opened up an enormous business opportunity. There was no need to wait for the great on-line secure transaction solution. And another important point -- while on the one hand the Internet seems to do away with the middleman, putting businesses into direct contact with their customers, it also creates opportunities for new kinds of "middleman" businesses, like this one, where an Internet-based business gathers orders for a variety of companies and forwards them to distributors for fulfillment, without the manufacturer of the goods being involved at all.
Netscape Navigator --
This is now so commonly used as an Internet browser that it's easy to lose sight of how revolutionary it was when it first appeared around September of 1994. At that point in time it was virtually impossible to use the Web from at home. With a 14.4 modem, the browsers of that time simply timed out before you got anything useful. It was a frustrating experience. I could get everything I wanted using my connection from the office over the corporate network. And there were many users at other corporations and educational and research institutions, but the home market simply didn't exist. To really connect to the Web from home, I would need to get an ISDN line and buy about $1000 dollars worth of hardware to make that work with my PC. Or I'd need some other high-speed expensive solution. Then out of the blue appeared the Netscape Navigator, which was optimized for the 14.4 modem, and which was six times faster than anything else at the time. It was like getting a six times faster modem and Internet connection for free. All of a sudden, it was easy to use the Web from home, and home use started to grow at a phenomenal rate, opening up a wide variety of business opportunities.
Yahoo --
Around that same time -- early fall of 1994 -- the number of Web sites had increased to the point that it was becoming very difficult to find what you wanted when you wanted it. This problem had led to the development of the electronic mall as a business concept. The idea was to host or link many separate Web sites in an organized fashion -- to impose order on the disorder of the Web at large. The idea was to create the ideal "on-ramp" -- to invite people to come in to this particular site because here they could easily see -- organized like a mall -- all the kinds of things that they might be interested in; and like in a mall, the visitor could be attracted to wander into this or that other store because of its proximity to the one they were looking for. That looked like a good business model. And then a couple of students from Stanford put together their Yahoo site. This didn't involve any fancy technology, no search engines that would go out and actively check what's on the Web. Basically, their service was just an outgrowth of the lists of interesting sites which they had compiled for their own use. They made it available for others, and made it easy for people to submit info about their own Web sites to be added to the data base. All of a sudden it was very easy to find a Web site that you wanted when you wanted it. Yahoo grew at an astronomical rate -- both in terms of the sites it listed and in terms of the number of users. There was tremendous pent-up demand for such a service. Eventually, they got funding and became a very successful Internet business, still allowing free searches -- to attract audience -- and selling advertising. This simple and effective solution made the "electronic mall" obsolete over night.
Disney movie clips --
For the most part, video on the Internet has been a curiosity, not a business tool. You show it to impress newcomers that this medium is in fact "multi-media", but you don't really use it much. This was especially true for the first generation kinds of video that were the best available about a year ago. These were silent mpeg video clips. It took about 5-10 minutes to download a one minute video, and you had to wait for it to download before you saw anything. And what you saw was a tiny low-resolution image, with jittery movement. But there was a whole artform based on that technology, which flourished for about a year -- there was great stuff, including such classics as "Fred's Nightmare" and fractal images and supermodels. Then Quicktime became available for the PC, and it was possible to get audio in synch with video. My first reaction was once again that there's no real use for this. Who is going to want to spend that long downloading something that's that short? Then my five year old found the Disney site, and we downloaded a Quicktime clip from The Lion King -- the song Hakuna Matata. Timmy played that back hundreds of times -- both forward and backward -- and delighted in it every time. And it finally occurred to me that there are market niches for quality of this kind. Just because the quality doesn't match other media, doesn't mean there isn't a market. Open your imagination to the opportunities.
Internet Phone --
This is the product from Vocaltec that we mentioned when talking about the Telecommunications Industry (s17.html). It first appeared early in 1995, and suddenly sound became an important part of the Internet. The Internet became an alternative to the telephone and "chat" on the Internet -- strangers gathering to talk to strangers -- which had flourished in plain text form, now had sound -- in real time (without waiting for a file to download before you could hear it). The implications to phone companies are immense. And the opportunities are also immense for creative use of this capability by Web sites as a way to attract and retain audiences.
RealAudio --
A few months later came the capability to store audio files in a way that they could be retrieved in real time. While, like with video, from the beginnings of the Web it had been possible to access audio files in delayed fashion -- you clicked on a hyperlink and the sound file downloaded to your system -- painfully slowly -- for playback once you had received it all. There were some sites like National Public Radio with fun clips to demo to newcomers. But it was just a curiosity. RealAudio made it possible to hear audio files in real-time -- shortly after you clicked you began to hear the audio stream as it arrived. This made it possible to set up Internet-based radio stations -- where the content is available whenever people want to hear it, not at some fixed broadcast time, and where it is available to a global audience. The sound quality isn't great. Music lovers tend to be disappointed, but it's plenty good enough for intelligible voice. And users are coming up with some unexpected applications -- such as sound effects for on-line interactive videogames. And this technology allows you to embed hypertext links in an audio stream, which means that you can make the equivalent of a slide show or film clip with the voice explanations in synch with the images. Or alternatively, you could link free voice content with graphic ads, or free graphic content with voice ads.
Crayon --
As the number of news sources available over the Internet increased, it looked like there would be interesting business opportunities in providing tailored news culled from these sources to meet the needs of individuals. Then in late spring of 1995 a couple students from Bucknell created Crayon, which basically provides that service for free. You connect to their Web site and fill out a form, which includes choices of many dozens of different news sources -- for weather, business news, world news etc. You pick what you want, and software automatically generates those choices as a hypertext list, which you can download to your machine for future use.
That's an important aspect of the Internet to keep in mind -- the service that you plan to charge for may soon be offered by someone else for free. Perhaps that free service won't have all the bells and whistles and quality that you have in yours, but kind of competition will affect the size of your audience and the rates that you can reasonably charge.
VDOLive --
We first saw this at Internet World in Boston at the end of Oct. 1995. VDOLive provides both video and audio in a realtime stream. It does for video what RealAudio does for sound. The video quality is very low at 14.4, but the very fact that you can see anything at all at that speed is phenomenal. And for programming in the format of "live interview" it's quite acceptable and has immediate applicability.
Workgroup Web Forum --
For the first couple years of its existence the Web was largely a mechanism for linking documents to documents. Now a new generation of software is appearing that makes it possible to link people to people through your Web site. Workgroup Web Forum from Digital lets you do this in a way that allows threaded discussions, with statements or questions and replies and replies to replies, etc., and with the ability to search for the information that you want. With a tool such as this, you can set up an on-line user group, or handle product support questions in an environment where you only have to answer the same question once, because previous questions and answers are saved. You can also stage events with experts or celebrities to attract traffic to your site, or as special services for which you charge. And you can offer training and distance education that use this tool as one of a variety of components. And you can encourage the participation of users in a variety of discussions on subjects related to your basic business -- letting users provide content which attracts and holds other users. Instead of being trapped on the treadmill of having to provide fresh content every day yourself, at considerable expense, your users help do that for you.
Altavista --
This new free service from Digital once again breaks the mold. It is now possible not just to find a Web site you might be interested in, but to search the full text of every document on the Internet. On the one hand that means that you can find documents on the Web probably easier than you can find them on your own hard drive. On the other hand, this changes the whole concept of a Web site. People no longer have to navigate by way of your "home page". You no longer have the ability to control the context and experience of the user who visits your site. Rather people will find the documents they want directly -- diving straight into files you buried deep in subdirectories. So suddenly you have to rethink how your structure and present your information, and how you present it so people doing searches of a certain kind see your site at the top of their list.
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New Business Environment
So how do we make sense out of all this rapid change? How do you plan and build a successful Web site?
I find it helpful to visualize the Internet business environment in terms of concentric circles. At the center -- where all the gravity and attraction is -- we find people to people, everyone to everyone -- direct interaction, through email and newsgroups and Web-based discussion areas, like Workgroup Web Forum. That's the main reason people come to the Internet -- to relate to other people.
The next circle out is the Free Zone -- all the libraries of free information -- all the good stuff that libraries and educational institutions, and governments and well-meaning individuals and companies make available for free.
The next circle out is where businesses start to see revenue. This is the realm of value-added Internet-based services. This includes information by subscription and tools and services that let you find just what you want when you want it. People are willing to pay more to get less -- if it's just what they want. Even if the raw information is free, it's can be worth a lot be able to find the right needle in that monstrous haystack. This could also include limited access to specialized data bases, and participation in special on-line events that involve celebrities or experts or training. There are a wide variety of new businesses that can be built here.
The outermost circle is where we find on-line shopping -- where the consumer buys hard goods with credit card from the Web. This is what gets most of the media hype, but it's still in its infancy. This is not the main reason people come to the Internet today. They come mainly for the direct personal interaction and the free stuff.
So how do you build a business here?
My advice is to focus first on building an audience. To construct a Web site that follows this basic model -- with lots of good free information that would be of interest to the kinds of people you want to attract, and with opportunities for them to interact with one another and with experts in the field at your site. Then add some value-added services that would interest them. And once you have attracted a loyal audience -- people who return again and again -- and have learned from interaction with them what they really need and how to serve them -- you can offer them all manner of goods and services for sale.
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Digital's Experience with the Public Internet
Digital was fortunate in discovering this model very early. For years, we had offered enormous resources of free information and public domain software. Our researchers in Palo Alto wanted to attract vast numbers of users to their Internet site -- long before there ever was a World Wide Web -- as an enormous testbed for networking products and capabilities. Their site known as "gatekeeper" became one of the busiest and most important hubs on the Internet.
Then when the Web started to open up, back in October of 1993, we set up a Web server on gatekeeper and made our marketing information available there, as well as continuing to provide access to all the other free information and software. We were the first Fortune 500 company to use the Web for marketing. And the loyal audience that we had already built made our Web site an instant success. Today there are over 14,000 Web pages outside of Digital that have hypertext links to the Digital Web site -- because this is a place that people want to come to and return to.
We also, very early, made creatively use of the Internet -- making Alpha computers available as "kick the tires" demo systems that anyone could connect to and try. Potential customers could check out the performance first hand, running their own benchmarks on it. And software developers could use these systems to port their applications to the Alpha platform. Traditional thinking might say "Why did you give this away for free?" But the benefits to Digital were enormous. The Alpha system was far superior in performance to anything else in its price class -- so we let customers convince themselves of that, on their own terms, at times of their own choosing. And letting ISVs use these machines for development cut down on the number of loaner systems we had to send out, greatly reducing our costs and encouraging more rapid porting. [NB -- At its high point, more than one customer per minute connected to kick the tires. But that program is no longer in effect. We is now evaluating options for the next generation follow-on.]
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Communities Today
We often refer to a loyal audience of Internet users who return again and again to the same site as a "community." Such an audience is often basis for a successful business. We've seen how Digital built its community. Now let's take a quick look at some other examples.
Palo Alto --
There are electronic communities which are based on physical communities -- providing access to local information and resources -- about schools, local government, local issues, local transportation, and local businesses. Digital helped Palo Alto, California, build an on-line presence in anticipation of the arrival people from all over the world for the World Cup soccer matches which they were hosting. Out of town visitors were able to check schedules and local accommodations, etc. prior to arrival. And after the event, the site has continued and grown as a local community resource.
Village Group and One Place --
A company based in Medford, Mass., and founded by Wes Kusmaul, the founder of Delphi, is in the business of franchising the "village" concept. They have a model for establishing on-line communities centered around areas of common interest, and using Workgroup Web Forum as a tool. They have helped set up communities for teachers and the armed forces and also a "Christian Community" known as One Place.
Boston.com --
Rather than simply put the content of its newspaper on line, The Boston Globe is trying to create a business-to-consumer community. Their site is meant to appeal to the general consumer who lives in or travels to Boston and provides them easy access to information about events and local resources and local businesses and also opportunities to interact with one another.
ToBoston.com --
Another venture of the Village Group, this time in partnership with the local convention bureau, ToBoston is intended as a business-to-business community. They link together meeting planners from corporations who are looking for sites and resources in Boston, with the hotels and other vendors who have those resources for sale. And they do this by creating a mega-site -- an environment that smoothly links together a variety of business that may already have their own separate Web sites -- with the ability to do interesting searches as well as group interaction, using Digital's Workgroup Web Forum.
Fosters Daily Democrat --
This small newspaper in Dover, New Hampshire, with the help of Digital, has set up a Web site to provide comprehensive coverage of the New Hampshire Primary and the 1996 presidential campaign. They are providing this free service and using Workgroup Web Forum, to attract and hold an audience, which they hope will provide the basis for future on-line business.
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What is the "Private Internet"?
While the Internet can be used to reach the general public, it can also be used for private purposes -- providing information to employees and providing the environment for interacting with partners, suppliers, and regular, known customers.
Here an audience is known and controlled, and secure communications is important.
This use of the Internet is far more extensive than the public use.
For instance, Digital has eight Web servers outside its firewall, for public use, and several hundred Web servers inside.
In other words, public use is just the tip of the iceberg.
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Benefits of the "Private" Internet
Recent advances in security -- such as Digital's Internet Tunnel -- make it possible to establish secure connections between facilities or between businesses using public Internet lines. This approach can lead to cost savings from using public instead of leased lines for your internal network. And it can also mean increased flexibility -- allowing to add or delete facilities or business partners very quickly and simply.
We sometimes refer to this as "softwiring" a company instead of "hardwiring" it.
And the personal version of the Tunnel makes it possible for employees working at home or on the road to make secure connections of network resources inside their companies -- simply and inexpensively, by sending their encrypted traffic over public Internet lines by way of ordinary local Internet access providers.
These capabilities -- combined with tools such as Workgroup Web Forum -- open interesting new ways to securely collaborate with partners and to serve important customers.
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Digital's Experience with the private use of the Internet
At Digital the Internet is a common utility, like phone and FAX. Everyone can send and receive email, and increasingly large numbers of employees can browse the Web as well.
Much of the sales force now works at home. And the availability of the Internet is an important factor in making that possible.
For over ten years we have run an on-line store -- the Electronic Connection -- which allows distributors, VARs, and major customers to place orders on-line and to check the status of their orders. This is quite different from on-line sales to the general public in that all the users are well-known in advance, with established accounts and password-secure access. That service began as a direct dialup operation and two years ago expanded to include access over the Internet as well. And the Internet access alone generates hundreds of millions of dollars in sales.
There are also a wide variety of cost-saving applications involving Internet connections to fixed sets of known customers and partners. This includes providing software patches on-line to customers who are under warranty or have service contracts. And it also includes replacing or supplementing 800 number information services with Web-based services. For instance, in the UK, providing information to a few dozen partners by phone was costing the company about $400,000 a year; and switching to a Web-based information system reduced that cost to about $40,000, while better satisfying the needs of the audience.
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Getting Started -- The Human Side
When ready to get started on the Internet, first consider the human factors.
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