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The State of the Net
An Interim Report about the Future of the Internet
Who are the participants who constitute the Internet?
The fate of each of these components - separately and in solidarity - will determine the fate of the Internet.
The first phase of the Internet’s history was dominated by computer wizards. Thus, any attempt at predicting its future dealt mainly with its hardware and software components.
Media experts, sociologists, psychologists, advertising and marketing executives were left out of the collective effort to determine the future face of the Internet.
As far as content is concerned, the Internet cannot be currently defined as a medium. It does not function as one - rather it is a very disordered library, mostly incorporating the writings of non-distinguished megalomaniacs. It is the ultimate Narcissistic experience. The forceful entry of publishing houses and content aggregators is changing this dismal landscape, though.
Ever since the invention of television there has not been anything as begging to become a medium as the Internet.
Three analogies spring to mind when contemplating the Internet in its current state:
The fate of each of these components - separately and in solidarity - will determine the fate of the Internet.
The first phase of the Internet’s history was dominated by computer wizards. Thus, any attempt at predicting its future dealt mainly with its hardware and software components.
Media experts, sociologists, psychologists, advertising and marketing executives were left out of the collective effort to determine the future face of the Internet.
As far as content is concerned, the Internet cannot be currently defined as a medium. It does not function as one - rather it is a very disordered library, mostly incorporating the writings of non-distinguished megalomaniacs. It is the ultimate Narcissistic experience. The forceful entry of publishing houses and content aggregators is changing this dismal landscape, though.
Ever since the invention of television there has not been anything as begging to become a medium as the Internet.
Three analogies spring to mind when contemplating the Internet in its current state:
These metaphors prove to be very useful (even business-wise). They permit us to define the commercial opportunities embedded in the Internet.
Yet, they fail to assist us in predicting its future in its transformation into a medium.
How does an invention become a medium? What happens to it when it does become one? What is the thin line separating the initial functioning of the invention from its transformation into a new medium? In other words: when can we tell that some technological advance gave birth to a new medium?
This work also deals with the image of the Internet once transformed into a medium.
The Internet has the most unusual attributes in the history of media.
It has no central structure or organization. It is hardware and software independent. It (almost) cannot be subjected to legislation or to regulation. Consider the example of downloading music from the internet - is it tantamount to an act of recording music (an violation of copyright laws)? This has been the crux of the legal battle between Diamond Multimedia (the manufacturers of the Rio MP3 device), MP3.com and Napster and the recording industry in America.
The Internet’s data transfer channels are not linear - they are random. Most of its “broadcast” cannot be “received” at all. It allows for the narrowest of narrowcasting through the use of e-mail mailing lists, discussion groups, message boards, private radio stations, and chats. And this is but a small portion of an impressive list of oddities. These idiosyncrasies will also shape the nature of the Internet as a medium. Growing out of bizarre roots - it is bound to yield strange fruit as a medium.
So what business opportunities does the Internet represent?
I believe that they are to be found in two broad categories:
These metaphors prove to be very useful (even business-wise). They permit us to define the commercial opportunities embedded in the Internet.
Yet, they fail to assist us in predicting its future in its transformation into a medium.
How does an invention become a medium? What happens to it when it does become one? What is the thin line separating the initial functioning of the invention from its transformation into a new medium? In other words: when can we tell that some technological advance gave birth to a new medium?
This work also deals with the image of the Internet once transformed into a medium.
The Internet has the most unusual attributes in the history of media.
It has no central structure or organization. It is hardware and software independent. It (almost) cannot be subjected to legislation or to regulation. Consider the example of downloading music from the internet - is it tantamount to an act of recording music (a violation of copyright laws)? This has been the crux of the legal battle between Diamond Multimedia (the manufacturers of the Rio MP3 device), MP3.com and Napster and the recording industry in America.
The Internet’s data transfer channels are not linear - they are random. Most of its “broadcast” cannot be “received” at all. It allows for the narrowest of narrowcasting through the use of e-mail mailing lists, discussion groups, message boards, private radio stations, and chats. And this is but a small portion of an impressive list of oddities. These idiosyncrasies will also shape the nature of the Internet as a medium. Growing out of bizarre roots - it is bound to yield strange fruit as a medium.
So what business opportunities does the Internet represent?
I believe that they are to be found in two broad categories:
The Map of Terra Internetica
The Users
How lots of Internet users are there? How a lot of of them have access to the Web (World Wide Web - WWW) and use it? There are no unequivocal statistics. Those who presume to give the answers (including the ISOC - the Internet SOCiety) - rely on very partial and biased resources. Others just bluff.
Yet, everyone seems to agree that there are, at least, 100 000 000 active participants in North America (the Nielsen and Commerce-Net reports).
The future is, inevitably, even more vague than the present. Authoritative consultancy firms predict 66 000 000 active users in 10 months time. IBM envisages 700 000 000 users. MCI is more modest with 300 000 000. At the end of 1999 there were 130 000 000 registered (though not necessarily active) users.
The Internet - an Elitist and Chauvinistic Medium
The average user of the Internet is young (30), with an academic background and high income. The percentage of the educated and the well-to-do among the users of the Web is three times as high as their proportion in the population. This is fast changing only because their children are joining them (6 000 000 already had access to the Internet at the end of 1996 - and were joined by another 24 000 000 by the end of the decade). This may change only due to presidential initiatives to bridge the “digital divide” (from Al Gore’s in the USA to Mahatir Mohammed’s in Malaysia), corporate largesse and institutional involvement (e.g., Open Society in Eastern Europe, Microsoft in the USA). These efforts will spread the benefits of this all-powerful tool among the less privileged. A bit less than 50% of all users are men but they are responsible for 60% of the activity in the net (as measured by traffic).
Women seem to limit themselves to electronic mail (e-mail) and to electronic shopping of goods and services, though this is changing fast. Men prefer information, either due to career requirements or because knowledge is power.
Most of the users are of the “experiencer” variety. They are leaders of social change and innovative. This breed inhabits universities, fashionable neighbourhoods and trendy vocations. This is why some wonder if the Internet is not just another fad, albeit an incredibly resilient and promising one.
Most users have home access to the Internet - yet, they still prefer to access it from work, at their employer’s expense, though this preference is slight and being eroded. Most users are, therefore, exploitative in nature. Still, we must not forget that there are 37 000 000 households of the self-employed and this possibly distorts the statistical picture somewhat.
The Internet - A Western Phenomenon
Not African, not Asian (with the exception of Israel and Japan), not Russian , nor a Third World phenomenon. It belongs squarely to the wealthy, sated world. It is the indulgence of those who have everything and whose greatest concern is their choice of nightly entertainment. Between 50-60% of all Internet users live in the USA, 5-10% in Canada. The Internet is catching on in Europe (mainly in Germany and in Scandinavia) and, in its mobile sort (i-mode) in Japan. The Internet lost to the French Minitel because the latter provides more locally relevant content and because of high costs of communications and hardware.
Communications
Most computer owners still possess a 28,800 bps modem. This is much like driving a bicycle on a German Autobahn. The 56,600 bps is gradually replacing its slower predecessor (48% of computers with modems) - but even this is hardly sufficient. To begin to enjoy video and audio (especially the former) - data transfer rates need to be 50 times faster.
Half the households in the USA have at least 2 telephones and one of them is usually dedicated to data processing (faxes or fax-modems).
The ISDN could constitute the mid-term solution. This data transfer network is fairly speedy and covers 70% of the territory of the USA. It is growing by 100% annually and its sales topped 10 000 000 000 USD in 1995/6.
Unfortunately, it is quite clear that ISDN is not THE answer. It is too slow, too user-unfriendly, has a bad interface with other network types, it requires special hardware. There is no point in investing in temporary solutions when the right solution is staring the Internet in the face, though it is not implemented due to political circumstances.
A cable modem is 80 times speedier than the ISDN and 700 times faster than a 14,400 bps modem. However, it does have problems in accommodating a two-way data transfer. There is also need to connect the fibre optic infrastructure that characterizes cable companies to the old copper coaxial infrastructure that characterizes telephony. Cable users engage specially customized LANs (Ethernet) and the hardware is expensive (though equipment prices are forecast to collapse as demand increases). Cable companies simply did not invest in developing the technology. The law (prior to the 1996 Communications Act) forbade them to do anything that was not one way transfer of video via cables. Now, with the more liberal regulative environment, it is a mere question of time until the technology is found.
Actually, most consumers single out bad customer relations as their biggest problem with the cable companies - rather than technology.
Experiments conducted with cable modems led to a doubling of usage time (from an average of 24 to 47 hours per days per user) that was wholly attributable to the increased speed. This comes close to an cultural revolution in the allocation of leisure time. Numerically speaking: 7 000 000 households in the USA are fitted with a two-way data transfer cable modems. This is a small number and it is anyone’s guess if it constitutes a critical mass. Sales of such modems amount to 1.3 000 000 000 USD annually.
50% of all cable subscribers also have a PC at home. To me it seems that the merging of the two technologies is inevitable.
Other technological solutions - such as DSL, ADSL, and the more promising satellite broadband - are being developed and implemented, albeit slowly and inefficiently. Coverage is sporadic and frustrating waiting periods are measured in months.
Hardware and Software
Most Internet users (82%) work with the Windows operating system. About 11% own a Macintosh (much stronger graphically and more user-friendly). Only 7% continue to work on UNIX based systems (that, historically, fathered the Internet) - and this number is fast declining. A strong entrant is the free source LINUX operating system.
Virtually all users surf through a browsing software. A fast dwindling minority (26%) use Netscape’s products (mainly Navigator and Communicator) and the majority use Microsoft’s Explorer (more than 60% of the market). Browsers are now free products and can be downloaded from the Internet. As late as 1997, it was predicted by major Internet consultancy firms that browser sales will top USD 4 000 000 000 by the year 2000. Such misguided predictions ignored the basic ethos of the Internet: free products, free content, free access.
Browsers are in for an great transformation. Most of them are likely to have 3-D, advanced audio, telephony / voice / video mail (v-mail), instant messaging, e-mail, and video conferencing capabilities integrated into the same browsing session. They will become self-customizing, intelligent, Internet interfaces. They will memorize the history of usage and user preferences and adapt themselves accordingly. They will allow content-specificity: unidentifiable smart agents will scour the Internet, make recommendations, compare prices, order goods and services and customize contents in line with self-adjusting user profiles.
Two important technological developments must be considered:
PDAs (Personal Digital Assistants) - the ultimate personal (and office) communicators, easy to carry, they provide Internet (access) Everywhere, independent of suppliers and providers and of physical infrastructure (in an aeroplane, in the field, in a cinema).
The second trend: wireless data transfer and wireless e-mail, whether through pagers, cellular phones, or through more sophisticated apparatus and hybrids such as smart phones. Geotech’s products are an excellent example: e-mail, faxes, telephone calls and a connection to the Internet and to other, public and corporate, or proprietary, databases - all provided by the same gadget. This is the embodiment of the electronic, physically detached, office. Wearable computing should be considered a part of this “ubiquitous or pervasive computing” wave.
We have no way of gauging - or intelligently guessing - the part of the mobile Internet in the total future Internet market but it is likely to outweigh the “fixed” part. Wireless internet meshes well with the trend of pervasive computing and the intelligent home and office. Household gadgets such as microwave ovens, refrigerators and so on will connect to the internet via a wireless interface to cull data, download information, order goods and services, report their condition and perform basic maintenance functions. Location specific services (navigation, shopping recommendations, special discounts, deals and sales, emergency services) depend on the technological confluence between GPS (stallite-based geolocation technology) and wireless Internet.
Suppliers and Intermediaries
“Parasitic” intermediaries occupy each stage in the Internet’s food chain.
Access to the Internet is still provided by “dumb pipes” - the Internet Service Providers (ISP)
Content is still the preserve of content suppliers and so on.
Some of these intermediaries are doomed to gradually fade or to suffer a substantial diminishing of their share of the market. Even “walled gardens” of content (such as AOL) are at risk.
By way of comparison, even today, ISPs have four times as a lot of subscribers (worldwide) as AOL. Admittedly, this adversely affects the quality of the Internet - the infrastructure maintained by the phone companies is slow and often succumbs to bottlenecks. The unequivocal intention of the telephony giants to become major players in the Internet market should also be taken into account. The phone companies will, thus, play a dual role: they will provide access to their infrastructure to their competitors (sometimes, within an real or actual monopoly) - and they will compete with their clients. The same can be said about the cable companies. Controlling the last mile to the user’s abode is the next big business of the Internet. Companies such as AOL are disadvantaged by these trends. It is imperative for AOL to obtain equal access to the cable company’s backbone and infrastructure if it wants to survive. Hence its merger with Time Warner.
No wonder that lots of of the ISPs judge this intrusion on their turf by the phone and cable companies to constitute unfair competition. Yet, one should not forget that the barriers to entry are very low in the ISP market. It takes a minimal investment to become an ISP. 200 modems (that cost 200 USD each) are enough to satisfy the needs of 2000 average users who generate an income of 500,000 USD per annum to the ISP. Routers are equally as cheap nowadays. This is a nice return on the ISP’s capital, undoubtedly.
The Hitchhikers
The Web houses the equivalent of 100 000 000 000 pages. Search Engine applications are used to locate specific information in this impressive, constantly proliferating library. They will be replaced, in the near future, by “Knowledge Structures” - gigantic encyclopaedias, whose text will contain references (hyperlinks) to other, relevant, sites. The far future will witness the emergence of the “Intelligent Archives” and the “Personal Newspapers” (read further for detailed explanations). Some software applications will summarize content, others will index and automatically reference and hyperlink texts (virtual bibliographies). An average user will have an on-going interest in 500 sites. Special software will be needed to manage address books (”bookmarks”, “favourites”) and contents (”Intelligent Addressbooks”). The phenomenon of search engines dedicated to search a number of search engines simultaneously will grow (”Hyper- or meta- engines”). Meta-engines will work in the background and download hyperlinks and advertising (the latter is essential to secure the financial interest of site developers and owners). Statistical software that tracks (”how long was what done”), monitors (”what did they do while in the site”) and counts (”how a lot of”) visitors to sites already exists. Some of these applications have back-office facilities (accounting, follow-up, collections, even tele-marketing). They all provide time trails and some allow for auditing.
This is but a small fragment of the rapidly developing net-scape: people and enterprises who make an living off the Internet craze rather than off the Internet itself. Everyone knows that there is more money in lecturing about how to make money on the Internet - than in the Internet itself. This maxim still holds true despite the 32 000 000 000 US dollars in E-commerce in 1998. Business to Consumer (B2C) sales grow less vigorously than Business to Business (B2B) sales and are likely to suffer another blow with the advent of Peer to Peer (P2P) computer networks. The latter allow PCs to act as servers and thus enable the swapping of computer files asmong connected users (with or without a central directory).
Content Suppliers
This is the underprivileged sector of the Internet. They all lose money (even e-tailers that offer basic, standardized goods - books, CDs - with the exception, until September 11, of sites connected to tourism). No one thanks them for content produced with the investment of a lot of effort and a lot of money. A really qualitative, fully commerce enabled site costs up to 5,000,000 USD, excluding site maintenance and customer and visitor services. Content providers are constantly criticized for lack of creativity or for too much creativity. More and more is asked of them. They are exploited by intermediaries, hitchhikers and other parasites. This is all an off-shoot of the ethos of the Internet as a free content area.
More than 100 000 000 men and women constantly access the Web - but this number stands to grow (the median prediction: 300 000 000). Yet, while the Web is used by 35% of those with access to the Internet - e-mail is used by more than 60%. E-mail is by far the most common function (”killer app”) and specialized applications (Eudora, Internet Mail, Microsoft Exchange) - free or ad sponsored - keep it accessible to all and user-friendly.
Most of the users like to surf (browse, visit sites) the net without reason or goal in mind. This makes it difficult to apply traditional marketing techniques.
What is the meaning of “targeted audiences” or “market shares” in this context?
If a surfer visits sites that deal with aberrant sex and nuclear physics in the same session - what to make of it?
The public and legislative backlash against the gathering of surfers’ data by Internet ad agencies and other web sites - has led to growing ignorance regarding the profile of Internet users, their demography, habits, preferences and dislikes.
People like the very act of surfing. They want to be entertained, then they use the Internet as a working tool, mostly in the service of their employer, who, usually foots the bill. Users love free downloads (mainly software).
“Free” is a key word on the Internet: it used to belong to the US Government and to a bunch of universities. Users like information, with emphasis on news and data about new products. But they do not like to shop on the net - yet. Only 38% of all surfers made a purchase during 1998.
67% of them adore virtual sex. 50% of the sites most often visited are porn sites (this is reminiscent of the early hours of the Video Cassette Recorder - VCR). People dedicate the same amount of time to watching video cassettes or television as they do to surfing the net. The Internet seems to cannibalize television.
Sex is followed by music, sports, health, television, computers, cinema, politics, pets and cooking sites. People are drawn to interactive games. The Internet will shortly enable people to gamble, if not hampered by legislation. 10 000 000 000 USD in gambling money are predicted to pass through the net. This makes sense: nothing like a computer to provide immediate (monetary and psychological) rewards.
Commerce on the net is another favourite. The Internet is a perfect medium for the sale of software and other digital products (e-books). The problem of data security is on its way to being solved with the SET (or other) world standard.
As early as 1995, the Internet had more than 100 virtual shopping malls visited by 2.5 000 000 shoppers (and probably double this number in 1996).
The predictions for 1999 were between 1-5 000 000 000 USD of net shopping (plus 2 000 000 000 USD through on-line information providers, such as CompuServe and AOL) - proved woefully inaccurate. The actual number in 1998 was 7 times the prediction for 1999.
It is also widely believed that circa 20% of the family budget will pass through the Internet as e-money and this amounts to 150 000 000 000 USD.
The Internet will become a giant inter-bank clearing system and varied ATM type banking and investment services will be provided through it. Basically, everything can be done through the Internet: looking for a job, for instance.
Yet, the Internet will never replace human interaction. People are likely to prefer personal banking, window shopping and the social experience of the shopping mall to Internet banking and e-commerce, or m-commerce.
Some sites already sport classified ads. This is not a bad way to defray expenses, though most classified ads are free (it is the advertising they attract that matters).
Another developing trend is website-rating and critique. It will be treated the way today’s printed editions are. It will have a limited influence on the consumption decisions of some users. Browsers already sport buttons labelled “What’s New” and “What’s Hot”. Most Search Engines recommend specific sites. Users are cautious. Studies discovered that no user, no matter how heavy, has consistently re-visited more than 200 sites, a minuscule number. The 10 most popular web sites (Yahoo!, MSN, etc.) attracted more than 50% of all Internet traffic. Site recommendation services often produce random - at times, wrong - selections for their user. There are also concerns regarding privacy issues. The backlah against Amazon’s “readers’ circles” is an example.
Web Critics, who work today mainly for the printed press, will publish their wares on the net and will link to intelligent software that will hyperlink, recommend and refer. Some web critics will be identified with specific applications - really, expert systems that will incorporate their knowledge and experience.
The Money
Where will the capital needed to finance all these developments come from?
Again, there are two schools:
One says that sites will be financed through advertising - and so will search engines and other applications accessed by users.
Certain ASPs (Application Service Providers that rent out access to application software that resides on their servers) are considering this model.
The second version is simpler and allows for the existence of non-commercial content.
It proposes to collect negligible sums (cents or fractions of cents) from every user for every visit (”micro-payments”) or a subscription fee. These accumulated cents or subscription fees will enable the owners of old sites to update and to maintain them and encourage entrepreneurs to develop new ones. Certain content aggregators (especially of digital textbooks) have adopted this model (Questia, Fathom).
The adherents of the first school pointed at the 5 000 000 USD invested in advertising during 1995 and to the 60 000 000 or so invested during 1996.
Its opponents point exactly at the same numbers: ridiculously small when contrasted with more conventional advertising modes. The potential of advertising on the net is limited to 1.5 000 000 000 USD annually in 1998, thundered the pessimists (plenty of thought that even half that would be very nice). The actual figure was double the prediction but still woefully small and inadequate to support the Internet’s content development.
Compare these figures to the sale of Internet software (USD 4 000 000 000), Internet hardware (USD 3 000 000 000), Internet access provision (USD 4.2 000 000 000) in 1995.
Hembrecht and Quist estimated that Internet related industries scooped up 23.2 000 000 000 USD annually (A report released in mid-1996).
And what follows advertising is hardly more enocuraging.
The consumer interacts and the product is delivered to him. This - the delivery phase - is a slow and enervating epilogue to the exciting affair of ordering through the net at the speed of light. Too plenty of consumers still complain that they do not receive what they ordered, or that delivery is late and products defective.
The solution may lie in the integration of advertising and content. Pointcast, for instance, integrated advertising into its news broadcasts, continuously streamed to the user’s screen, even when inactive (they provided a downloadable active screen saver and ticker in a “push technology”). Downloading of digital music, video and text (e-books) will lead to immediate gratification of the consumer and will increase the efficacy of advertising.
Whatever the case may be, a uniform, agreed upon system of rating as a basis for charging advertisers, is sorely needed. There is also the question of what does the advertiser pay for?
Many advertisers (Procter and Gamble, for instance) refuse to pay according to the number of hits or impressions (=entries, visits to a site). They agree to pay only according to the number of the times that their advertisement was hit (page views).
This different basis for calculation is likely to upset all revenue scenarios.
Very few sites of important, respectable newspapers are on a subscription basis. Dow Jones (Wall Street Journal) and The Economist, to mention but two.
Will this become the prevailing trend?
The Internet as a Metaphor
Three metaphors come to mind when considering the Internet “philosophically”.
The Internet as a Chaotic Library
1. The Problem of Cataloguing
The Internet is an assortment of billions of pages containing information. Some of them are visible and others are generated from hidden databases by users’ requests (”Invisible Internet”).
The Internet displays no discernible order, classification, or categorization. As opposed to “classical” libraries, no one has invented a cataloguing standard (remember Dewey?). This is so needed that it is amazing that it has not been invented yet. Some sites indeed apply the Dewey Decimal Syatem (Suite101). Others default to a directory structure (Open Directory, Yahoo!, Look Smart and others).
Had such a standard existed (an agreed upon numerical cataloguing method) - each site would have self-classified. Sites would have an interest to do so to increase their penetration rates and their visibility. This, naturally, would have eliminated the need for today’s clunky, incomplete and (highly) inefficient search engines.
A site whose number starts with 900 will be immediately identified as dealing with history and multiple classification will be encouraged to allow finer cross-sections to emerge. An example of such an emerging technology of “self classification” and “self-publication” (though limited to scholarly resources) is the “Academic Resource Channel” by Scindex.
Users will not be required to remember reams of numbers. Future browsers will be akin to catalogues, very much like the applications used in modern day libraries. Compare this utopia to the current dystopy. Users struggle with reams of irrelevant material to finally reach a partial and disappointing destination. At the same time, there likely are web sites that exactly match the poor user’s needs. Yet, what currently determines the chances of a happy encounter between user and content - are the whims of the specific search engine used and things like meta-tags, headlines, a fee paid, or the right opening sentences.
2. Screen versus Page
The computer screen, because of physical limitations (size, the fact that it has to be scrolled) fails to effectively compete with the printed page. The latter is still the most ingenious medium yet invented for the storage and release of textual information. Granted: a computer screen is better at highlighting discrete units of information. So, this draws the batlle lines: structures (printed pages) versus units (screen), the continuous and easily reversible versus the discrete.
The solution is an efficient way to translate computer screens to printed matter. It is hard to believe, but no such thing exists. Computer screens are still hostile to off-line printing. In other words: if an user copies information from the Internet to his Word Processor (or vice versa, for that matter) - he ends up with a fragmented, garbage-filled and non-aesthetic document.
Very few site developers try to do something about it - even fewer succeed.
3. The Internet and the CD-ROM
One of the biggest mistakes of content suppliers is that they do not mix contents or have a “static-dynamic interaction”.
The Internet can now easily interact with other media (especially with audio CDs and with CD-ROMs) - even as the user surfs.
Examples abound:
A shopping catalogue can be distributed on a CD-ROM by mail. The Internet Site will allow the user to order a product previously selected from the catalogue, while off-line. The catalogue could also be updated through the site (as is done with CD-ROM encyclopedias).
The advantages of the CD-ROM are clear: very fast access time (dozens of times faster than the access to a site using a dial up connection) and an data storage capacity tens of times bigger than the average website.
Another example: a CD-ROM can be distributed, containing hundreds of advertisements. The consumer will select the ad that he wants to see and will connect to the Internet to view a relevant video.
He could then also have an interactive chat (or a conference) with a salesperson, receive information about the company, about the ad, about the advertising agency that created the ad - and so on.
CD-ROM based encyclopedias (such as the Britannica, Encarta, Grolier) already contain hyperlinks that carry the user to sites selected by an Editorial Board.
But CD-ROMs are probably a doomed medium. This industry chose to emphasize the wrong things. Storage capacity increased exponentially and, within a year, desktops with 80 Gb hard disks will be common. Moreover, the Network Computer - the stripped down version of the personal computer - will put at the disposal of the average user terabytes in storage capacity and the processing power of a supercomputer. What separates computer users from this utopia is the communication bandwidth. With the introduction of radio, statellite, ADSL broadband services, cable modems and compression methods - video (on demand), audio and data will be available speedily and plentifully.
The CD-ROM, on the other hand, is not mobile. It requires installation and the utilization of sophisticated hardware and software. This is no user friendly push technology. It is nerd-oriented. As a result, CD-ROMs are not an immediate medium. There is a long time lapse between the moment they are purchased and the moment the first data become accessible to the user. Compare this to a book or a magazine. Data in these oldest of media is instantly available to the user and allows for easy and accurate “back” and “forward” functions.
Perhaps the biggest mistake of CD-ROM manufacturers has been their inability to offer an integrated hardware and software package. CD-ROMs are not compact. A Walkman is a compact hardware-cum-software package. It is easily transportable, it is thin, it contains numerous, user-friendly, sophisticated functions, it provides immediate access to data. So does the discman or the MP3-man. This cannot be said of the CD-ROM. By tying its future to the obsolete concept of stand-alone, expensive, inefficient and technologically unreliable personal computers - CD-ROMs have sentenced themselves to oblivion (with the possible exception of reference material).
4. On-line Reference Libraries
These already exist. A visit to the on-line Encyclopaedia Britannica exemplifies some of the tremendous, mind boggling possibilities:
Each entry is hyperlinked to sites on the Internet that deal with the same subject matter. The sites are carefully screened (though more detailed descriptions of each site should be available - they could be prepared either by the staff of the encyclopaedia or by the site owner). Links are available to data in various forms, including audio and video. Everything can be copied to the hard disk or to CD-ROMs.
This is a new conception of a knowledge centre - not just an assortment of material. It is modular, can be added on and subtracted from. It can be linked to a voice Q&A centre. Queries by subscribers can be answered by e-mail, by fax, posted on the site, hard copies can be sent by post. This “Trivial Pursuit” service could be very popular - there is considerable appetite for “Just in Time Information”. The Library of Congress - together with a few other libraries - is in the process of making just such a service available to the public (CDRS - Collaborative Digital Reference Service).
5. The Feedback Option
Hard to believe, but very few sites encourage their guests to express an opinion about the site, its contents and its aesthetics. This indicates an ossified mode of thinking about the most dynamic mass medium ever created, the only interactive mass medium yet. Each site must absolutely contain feedback and rating questionnaires. It has the side benefit of creating a database of the visitors to the site.
Moreover, each site can easily become a “knowledge centre”.
Let us consider a site dedicated to advertising and marketing:
It can contain feedback questionnaires (what do you think about the site, suggestions for improvement, mailto and leave message facilities, etc.)
It can contain rating questionnaires (rate these ads, these TV or radio shows, these advertising campaigns).
It can allocate some space to clients to create their home pages in (these home pages could lead to their sites, to other sites, to other sections of the host site - and, in any case, will serve as a display of the creative talent of the site owners). This will give the site owners an picture of the distribution of the areas of interest of the visitors to the site.
The site can include statistical, tracking and counter software.
Such a site can refer to hundreds of useful shareware applications (that deal with different aspects of advertising and marketing, for instance). Developers of applications will be able to use the site to promote their products. Other practical applications could also be referred to from - or reside on - the site (browsers, games, search engines).
And all this can be organized in a portal structure (for instance, by adopting the open software of the Open Directory Project).
6. Internet Derived CD-ROMS
The Internet is an enormous reservoir of freely available, public domain, information.
With a minimal investment, this information can be gathered into coherent, theme oriented, cheap CD-ROMs. Each such CD-ROM can contain:
Addresses of web sites specific to the subject matter
The Map of Terra Internetica
The Users
How lots of Internet users are there? How plenty of of them have access to the Web (World Wide Web - WWW) and use it? There are no unequivocal statistics. Those who presume to give the answers (including the ISOC - the Internet SOCiety) - rely on very partial and biased resources. Others just bluff.
Yet, everyone seems to agree that there are, at least, 100 000 000 active participants in North America (the Nielsen and Commerce-Net reports).
The future is, inevitably, even more vague than the present. Authoritative consultancy firms predict 66 000 000 active users in 10 months time. IBM envisages 700 000 000 users. MCI is more modest with 300 000 000. At the end of 1999 there were 130 000 000 registered (though not necessarily active) users.
The Internet - an Elitist and Chauvinistic Medium
The average user of the Internet is young (30), with an academic background and high income. The percentage of the educated and the well-to-do among the users of the Web is three times as high as their proportion in the population. This is fast changing only because their children are joining them (6 000 000 already had access to the Internet at the end of 1996 - and were joined by another 24 000 000 by the end of the decade). This may change only due to presidential initiatives to bridge the “digital divide” (from Al Gore’s in the USA to Mahatir Mohammed’s in Malaysia), corporate largesse and institutional involvement (e.g., Open Society in Eastern Europe, Microsoft in the USA). These efforts will spread the benefits of this all-powerful tool among the less privileged. A bit less than 50% of all users are men but they are responsible for 60% of the activity in the net (as measured by traffic).
Women seem to limit themselves to electronic mail (e-mail) and to electronic shopping of goods and services, though this is changing fast. Men prefer information, either due to career requirements or because knowledge is power.
Most of the users are of the “experiencer” variety. They are leaders of social change and innovative. This breed inhabits universities, fashionable neighbourhoods and trendy vocations. This is why some wonder if the Internet is not just another fad, albeit an incredibly resilient and promising one.
Most users have home access to the Internet - yet, they still prefer to access it from work, at their employer’s expense, though this preference is slight and being eroded. Most users are, therefore, exploitative in nature. Still, we must not forget that there are 37 000 000 households of the self-employed and this possibly distorts the statistical picture somewhat.
The Internet - A Western Phenomenon
Not African, not Asian (with the exception of Israel and Japan), not Russian , nor a Third World phenomenon. It belongs squarely to the wealthy, sated world. It is the indulgence of those who have everything and whose greatest concern is their choice of nightly entertainment. Between 50-60% of all Internet users live in the USA, 5-10% in Canada. The Internet is catching on in Europe (mainly in Germany and in Scandinavia) and, in its mobile sort (i-mode) in Japan. The Internet lost to the French Minitel because the latter provides more locally relevant content and because of high costs of communications and hardware.
Communications
Most computer owners still possess a 28,800 bps modem. This is much like driving a bicycle on a German Autobahn. The 56,600 bps is gradually replacing its slower predecessor (48% of computers with modems) - but even this is hardly sufficient. To begin to enjoy video and audio (especially the former) - data transfer rates need to be 50 times faster.
Half the households in the USA have at least 2 telephones and one of them is usually dedicated to data processing (faxes or fax-modems).
The ISDN could constitute the mid-term solution. This data transfer network is fairly speedy and covers 70% of the territory of the USA. It is growing by 100% annually and its sales topped 10 000 000 000 USD in 1995/6.
Unfortunately, it is quite clear that ISDN is not THE answer. It is too slow, too user-unfriendly, has a bad interface with other network types, it requires special hardware. There is no point in investing in temporary solutions when the right solution is staring the Internet in the face, though it is not implemented due to political circumstances.
A cable modem is 80 times speedier than the ISDN and 700 times faster than a 14,400 bps modem. However, it does have problems in accommodating a two-way data transfer. There is also need to connect the fibre optic infrastructure that characterizes cable companies to the old copper coaxial infrastructure that characterizes telephony. Cable users engage specially customized LANs (Ethernet) and the hardware is expensive (though equipment prices are forecast to collapse as demand increases). Cable companies simply did not invest in developing the technology. The law (prior to the 1996 Communications Act) forbade them to do anything that was not one way transfer of video via cables. Now, with the more liberal regulative environment, it is a mere question of time until the technology is found.
Actually, most consumers single out bad customer relations as their biggest problem with the cable companies - rather than technology.
Experiments conducted with cable modems led to a doubling of usage time (from an average of 24 to 47 hours per days per user) that was wholly attributable to the increased speed. This comes close to an cultural revolution in the allocation of leisure time. Numerically speaking: 7 000 000 households in the USA are fitted with a two-way data transfer cable modems. This is a small number and it is anyone’s guess if it constitutes a critical mass. Sales of such modems amount to 1.3 000 000 000 USD annually.
50% of all cable subscribers also have a PC at home. To me it seems that the merging of the two technologies is inevitable.
Other technological solutions - such as DSL, ADSL, and the more promising satellite broadband - are being developed and implemented, albeit slowly and inefficiently. Coverage is sporadic and frustrating waiting periods are measured in months.
Hardware and Software
Most Internet users (82%) work with the Windows operating system. About 11% own a Macintosh (much stronger graphically and more user-friendly). Only 7% continue to work on UNIX based systems (that, historically, fathered the Internet) - and this number is fast declining. A strong entrant is the free source LINUX operating system.
Virtually all users surf through a browsing software. A fast dwindling minority (26%) use Netscape’s products (mainly Navigator and Communicator) and the majority use Microsoft’s Explorer (more than 60% of the market). Browsers are now free products and can be downloaded from the Internet. As late as 1997, it was predicted by major Internet consultancy firms that browser sales will top USD 4 000 000 000 by the year 2000. Such misguided predictions ignored the basic ethos of the Internet: free products, free content, free access.
Browsers are in for an great transformation. Most of them are likely to have 3-D, advanced audio, telephony / voice / video mail (v-mail), instant messaging, e-mail, and video conferencing capabilities integrated into the same browsing session. They will become self-customizing, intelligent, Internet interfaces. They will memorize the history of usage and user preferences and adapt themselves accordingly. They will allow content-specificity: unidentifiable smart agents will scour the Internet, make recommendations, compare prices, order goods and services and customize contents in line with self-adjusting user profiles.
Two important technological developments must be considered:
PDAs (Personal Digital Assistants) - the ultimate personal (and office) communicators, easy to carry, they provide Internet (access) Everywhere, independent of suppliers and providers and of physical infrastructure (in an aeroplane, in the field, in a cinema).
The second trend: wireless data transfer and wireless e-mail, whether through pagers, cellular phones, or through more sophisticated apparatus and hybrids such as smart phones. Geotech’s products are an excellent example: e-mail, faxes, telephone calls and a connection to the Internet and to other, public and corporate, or proprietary, databases - all provided by the same gadget. This is the embodiment of the electronic, physically detached, office. Wearable computing should be considered a part of this “ubiquitous or pervasive computing” wave.
We have no way of gauging - or intelligently guessing - the part of the mobile Internet in the total future Internet market but it is likely to outweigh the “fixed” part. Wireless internet meshes well with the trend of pervasive computing and the intelligent home and office. Household gadgets such as microwave ovens, refrigerators and so on will connect to the internet via a wireless interface to cull data, download information, order goods and services, report their condition and perform basic maintenance functions. Location specific services (navigation, shopping recommendations, special discounts, deals and sales, emergency services) depend on the technological confluence between GPS (stallite-based geolocation technology) and wireless Internet.
Suppliers and Intermediaries
“Parasitic” intermediaries occupy each stage in the Internet’s food chain.
Access to the Internet is still provided by “dumb pipes” - the Internet Service Providers (ISP)
Content is still the preserve of content suppliers and so on.
Some of these intermediaries are doomed to gradually fade or to suffer a substantial diminishing of their share of the market. Even “walled gardens” of content (such as AOL) are at risk.
By way of comparison, even today, ISPs have four times as plenty of subscribers (worldwide) as AOL. Admittedly, this adversely affects the quality of the Internet - the infrastructure maintained by the phone companies is slow and often succumbs to bottlenecks. The unequivocal intention of the telephony giants to become major players in the Internet market should also be taken into account. The phone companies will, thus, play a dual role: they will provide access to their infrastructure to their competitors (sometimes, within an real or actual monopoly) - and they will compete with their clients. The same can be said about the cable companies. Controlling the last mile to the user’s abode is the next big business of the Internet. Companies such as AOL are disadvantaged by these trends. It is imperative for AOL to obtain equal access to the cable company’s backbone and infrastructure if it wants to survive. Hence its merger with Time Warner.
No wonder that plenty of of the ISPs judge this intrusion on their turf by the phone and cable companies to constitute unfair competition. Yet, one should not forget that the barriers to entry are very low in the ISP market. It takes a minimal investment to become an ISP. 200 modems (that cost 200 USD each) are enough to satisfy the needs of 2000 average users who generate an income of 500,000 USD per annum to the ISP. Routers are equally as cheap nowadays. This is a nice return on the ISP’s capital, undoubtedly.
The Hitchhikers
The Web houses the equivalent of 100 000 000 000 pages. Search Engine applications are used to locate specific information in this impressive, constantly proliferating library. They will be replaced, in the near future, by “Knowledge Structures” - gigantic encyclopaedias, whose text will contain references (hyperlinks) to other, relevant, sites. The far future will witness the emergence of the “Intelligent Archives” and the “Personal Newspapers” (read further for detailed explanations). Some software applications will summarize content, others will index and automatically reference and hyperlink texts (virtual bibliographies). An average user will have an on-going interest in 500 sites. Special software will be needed to manage address books (”bookmarks”, “favourites”) and contents (”Intelligent Addressbooks”). The phenomenon of search engines dedicated to search a number of search engines simultaneously will grow (”Hyper- or meta- engines”). Meta-engines will work in the background and download hyperlinks and advertising (the latter is essential to secure the financial interest of site developers and owners). Statistical software that tracks (”how long was what done”), monitors (”what did they do while in the site”) and counts (”how plenty of”) visitors to sites already exists. Some of these applications have back-office facilities (accounting, follow-up, collections, even tele-marketing). They all provide time trails and some allow for auditing.
This is but a small fragment of the rapidly developing net-scape: people and enterprises who make a living off the Internet craze rather than off the Internet itself. Everyone knows that there is more money in lecturing about how to make money on the Internet - than in the Internet itself. This maxim still holds true despite the 32 000 000 000 US dollars in E-commerce in 1998. Business to Consumer (B2C) sales grow less vigorously than Business to Business (B2B) sales and are likely to suffer another blow with the advent of Peer to Peer (P2P) computer networks. The latter allow PCs to act as servers and thus enable the swapping of computer files asmong connected users (with or without a central directory).
Content Suppliers
This is the underprivileged sector of the Internet. They all lose money (even e-tailers that offer basic, standardized goods - books, CDs - with the exception, until September 11, of sites connected to tourism). No one thanks them for content produced with the investment of a lot of effort and a lot of money. A really qualitative, fully commerce enabled site costs up to 5,000,000 USD, excluding site maintenance and customer and visitor services. Content providers are constantly criticized for lack of creativity or for too much creativity. More and more is asked of them. They are exploited by intermediaries, hitchhikers and other parasites. This is all an off-shoot of the ethos of the Internet as a free content area.
More than 100 000 000 men and women constantly access the Web - but this number stands to grow (the median prediction: 300 000 000). Yet, while the Web is used by 35% of those with access to the Internet - e-mail is used by more than 60%. E-mail is by far the most common function (”killer app”) and specialized applications (Eudora, Internet Mail, Microsoft Exchange) - free or ad sponsored - keep it accessible to all and user-friendly.
Most of the users like to surf (browse, visit sites) the net without reason or goal in mind. This makes it difficult to apply traditional marketing techniques.
What is the meaning of “targeted audiences” or “market shares” in this context?
If a surfer visits sites that deal with aberrant sex and nuclear physics in the same session - what to make of it?
The public and legislative backlash against the gathering of surfers’ data by Internet ad agencies and other web sites - has led to growing ignorance regarding the profile of Internet users, their demography, habits, preferences and dislikes.
People like the very act of surfing. They want to be entertained, then they use the Internet as a working tool, mostly in the service of their employer, who, usually foots the bill. Users love free downloads (mainly software).
“Free” is a key word on the Internet: it used to belong to the US Government and to a bunch of universities. Users like information, with emphasis on news and data about new products. But they do not like to shop on the net - yet. Only 38% of all surfers made a purchase during 1998.
67% of them adore virtual sex. 50% of the sites most often visited are porn sites (this is reminiscent of the early hours of the Video Cassette Recorder - VCR). People dedicate the same amount of time to watching video cassettes or television as they do to surfing the net. The Internet seems to cannibalize television.
Sex is followed by music, sports, health, television, computers, cinema, politics, pets and cooking sites. People are drawn to interactive games. The Internet will shortly enable people to gamble, if not hampered by legislation. 10 000 000 000 USD in gambling money are predicted to pass through the net. This makes sense: nothing like a computer to provide immediate (monetary and psychological) rewards.
Commerce on the net is another favourite. The Internet is a perfect medium for the sale of software and other digital products (e-books). The problem of data security is on its way to being solved with the SET (or other) world standard.
As early as 1995, the Internet had more than 100 virtual shopping malls visited by 2.5 000 000 shoppers (and probably double this number in 1996).
The predictions for 1999 were between 1-5 000 000 000 USD of net shopping (plus 2 000 000 000 USD through on-line information providers, such as CompuServe and AOL) - proved woefully inaccurate. The actual number in 1998 was 7 times the prediction for 1999.
It is also widely believed that circa 20% of the family budget will pass through the Internet as e-money and this amounts to 150 000 000 000 USD.
The Internet will become a giant inter-bank clearing system and varied ATM type banking and investment services will be provided through it. Basically, everything can be done through the Internet: looking for a job, for instance.
Yet, the Internet will never replace human interaction. People are likely to prefer personal banking, window shopping and the social experience of the shopping mall to Internet banking and e-commerce, or m-commerce.
Some sites already sport classified ads. This is not a bad way to defray expenses, though most classified ads are free (it is the advertising they attract that matters).
Another developing trend is website-rating and critique. It will be treated the way today’s printed editions are. It will have a limited influence on the consumption decisions of some users. Browsers already sport buttons labelled “What’s New” and “What’s Hot”. Most Search Engines recommend specific sites. Users are cautious. Studies discovered that no user, no matter how heavy, has consistently re-visited more than 200 sites, a minuscule number. The 10 most popular web sites (Yahoo!, MSN, etc.) attracted more than 50% of all Internet traffic. Site recommendation services often produce random - at times, wrong - selections for their user. There are also concerns regarding privacy issues. The backlah against Amazon’s “readers’ circles” is an example.
Web Critics, who work today mainly for the printed press, will publish their wares on the net and will link to intelligent software that will hyperlink, recommend and refer. Some web critics will be identified with specific applications - really, expert systems that will incorporate their knowledge and experience.
The Money
Where will the capital needed to finance all these developments come from?
Again, there are two schools:
One says that sites will be financed through advertising - and so will search engines and other applications accessed by users.
Certain ASPs (Application Service Providers that rent out access to application software that resides on their servers) are considering this model.
The second version is simpler and allows for the existence of non-commercial content.
It proposes to collect negligible sums (cents or fractions of cents) from every user for every visit (”micro-payments”) or a subscription fee. These accumulated cents or subscription fees will enable the owners of old sites to update and to maintain them and encourage entrepreneurs to develop new ones. Certain content aggregators (especially of digital textbooks) have adopted this model (Questia, Fathom).
The adherents of the first school pointed at the 5 000 000 USD invested in advertising during 1995 and to the 60 000 000 or so invested during 1996.
Its opponents point exactly at the same numbers: ridiculously small when contrasted with more conventional advertising modes. The potential of advertising on the net is limited to 1.5 000 000 000 USD annually in 1998, thundered the pessimists (lots of thought that even half that would be very nice). The actual figure was double the prediction but still woefully small and inadequate to support the Internet’s content development.
Compare these figures to the sale of Internet software (USD 4 000 000 000), Internet hardware (USD 3 000 000 000), Internet access provision (USD 4.2 000 000 000) in 1995.
Hembrecht and Quist estimated that Internet related industries scooped up 23.2 000 000 000 USD annually (A report released in mid-1996).
And what follows advertising is hardly more enocuraging.
The consumer interacts and the product is delivered to him. This - the delivery phase - is a slow and enervating epilogue to the exciting affair of ordering through the net at the speed of light. Too lots of consumers still complain that they do not receive what they ordered, or that delivery is late and products defective.
The solution may lie in the integration of advertising and content. Pointcast, for instance, integrated advertising into its news broadcasts, continuously streamed to the user’s screen, even when inactive (they provided a downloadable active screen saver and ticker in a “push technology”). Downloading of digital music, video and text (e-books) will lead to immediate gratification of the consumer and will increase the efficacy of advertising.
Whatever the case may be, a uniform, agreed upon system of rating as a basis for charging advertisers, is sorely needed. There is also the question of what does the advertiser pay for?
Many advertisers (Procter and Gamble, for instance) refuse to pay according to the number of hits or impressions (=entries, visits to a site). They agree to pay only according to the number of the times that their advertisement was hit (page views).
This different basis for calculation is likely to upset all revenue scenarios.
Very few sites of important, respectable newspapers are on a subscription basis. Dow Jones (Wall Street Journal) and The Economist, to mention but two.
Will this become the prevailing trend?
The Internet as a Metaphor
Three metaphors come to mind when considering the Internet “philosophically”.
The Internet as a Chaotic Library
1. The Problem of Cataloguing
The Internet is an assortment of billions of pages containing information. Some of them are visible and others are generated from hidden databases by users’ requests (”Invisible Internet”).
The Internet displays no discernible order, classification, or categorization. As opposed to “classical” libraries, no one has invented a cataloguing standard (remember Dewey?). This is so needed that it is amazing that it has not been invented yet. Some sites indeed apply the Dewey Decimal Syatem (Suite101). Others default to a directory structure (Open Directory, Yahoo!, Look Smart and others).
Had such a standard existed (an agreed upon numerical cataloguing method) - each site would have self-classified. Sites would have an interest to do so to increase their penetration rates and their visibility. This, naturally, would have eliminated the need for today’s clunky, incomplete and (highly) inefficient search engines.
A site whose number starts with 900 will be immediately identified as dealing with history and multiple classification will be encouraged to allow finer cross-sections to emerge. An example of such an emerging technology of “self classification” and “self-publication” (though limited to scholarly resources) is the “Academic Resource Channel” by Scindex.
Users will not be required to remember reams of numbers. Future browsers will be akin to catalogues, very much like the applications used in modern day libraries. Compare this utopia to the current dystopy. Users struggle with reams of irrelevant material to finally reach a partial and disappointing destination. At the same time, there likely are web sites that exactly match the poor user’s needs. Yet, what currently determines the chances of a happy encounter between user and content - are the whims of the specific search engine used and things like meta-tags, headlines, a fee paid, or the right opening sentences.
2. Screen versus Page
The computer screen, because of physical limitations (size, the fact that it has to be scrolled) fails to effectively compete with the printed page. The latter is still the most ingenious medium yet invented for the storage and release of textual information. Granted: a computer screen is better at highlighting discrete units of information. So, this draws the batlle lines: structures (printed pages) versus units (screen), the continuous and easily reversible versus the discrete.
The solution is an efficient way to translate computer screens to printed matter. It is hard to believe, but no such thing exists. Com
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