We have watched the story of the commercial Internet unfold in the press over the last few months from our vantage point as pioneers who set up businesses on the Net. While we are pleased to see that the story no longer is being ignored, we believe that it is being told in such a way as to mislead the typical business executive into thinking that some sort of latter-day gold rush is taking place and that millions of transactions are already occurring on the Internet.
Someone surveying recent stories on business on the Internet would be led through the following chain of reasoning:
We believe that the premises are true. However, the conclusion is false. The fallacy begins with the fact that the Internet is not a homogeneous market of users all with equal capabilities. The 20 million figure probably under-estimates the number of people who can send electronic mail over the Internet. This group, which may number closer to 40 million, is the Internet at its lowest common denominator.
At the other end of the spectrum, when one is speaking of Mosaic running on the World Wide Web at speeds that really show off its multimedia capabilities, as of July of 1994 there probably were no more than a few hundred thousand of these users on the Internet. While Mosaic could be a standard application that is bundled with most personal computers sold by late next year, today the commercial Internet using Mosaic can best be described as a party where 99 percent of the guests have not yet arrived.
In between e-mail and Mosaic, there are other Internet capabilities such as newsgroups (electronic bulletin boards) and gopher (a menus-and-text interface), which are available to millions but certainly not approaching the numbers of users with e-mail capability. As it stands currently, there is almost an inverse relationship between the number of users with a given capability and the suitability of that capability for business marketing and transaction processing.
With this in mind, we would like to present our vision of the future of commerce on the Internet.
Eventually, companies that use the Internet will gain several advantages over their competitors. By 1996 or 1997, the difference will look like this:
Companies on the Internet Companies not on the Internet
wired to their customers isolated from their customers MIS budgets falling MIS budgets rising creating new business opportunities suffering market erosion
Businesses are going to be on the Internet because it represents an additional and inexpensive resource for finding customers. Using the network, one can market directly, with less advertising and a smaller sales force. The immediate consumer feedback that businesses can obtain when they are wired to their customers is the most powerful strategic advantage conferred by the Internet. It allows you to adapt and tune both your message and your product itself to maximize customer response.
In a larger sense, what on-line marketing represents, on both the Internet and the proprietary information services, is a paradigm shift away from information disseminated through mass media (top down) to information which is customer-driven--a bottom up model of information sourcing. Advertising on line involves two-way interaction. The key word is "participation."
The Internet infrastructure is maintained by dedicated companies and research labs. The leverage you can obtain by using these MIS resources is significant. No matter how much money you feed your MIS department, it never is going to be able to keep up with multimedia computing, communications, and the other technology it would need to provide in order to replicate what already is available on the Internet.
Finally, there are new business opportunities created by the technology. You can reach customers overseas. You can present in-depth information about products, not just a superficial image. You can obtain systematic data on marketing effectiveness, rather than having to guess the impact as you do with mass media advertising.
Business executives who are not familiar with the Internet may think that all they need to do to market in Cyberspace is put up a "home page," the term used to describe the first screen of a server that can be viewed using Mosaic. They have a picture of their home page as a sort of neon sign on the Information Superhighway, which will make everyone notice and stop by. In reality, because of the unstructured nature of the Internet today, and the sheer number of businesses competing for the consumer's eye, attracting attention is a real art. A few businesses are very successful at drawing traffic, but most are not. Several of the most popular Internet services were developed by companies that are relative unknowns outside of the Internet, and some really big-name companies have put up servers which draw no traffic.
What's going on? First of all, what little demographic data that exists suggests that Mosaic users are predominantly males between the ages of 18 and 30. This is not every company's demographic cup of tea. It also suggests a reason why so few business transactions are occurring via existing "home page" storefronts. Many of the "browsers" are low-income students who are not interested in products more suited to older or more-affluent buyers.
Generating traffic is also difficult. How does a user find a useful storefront on the Internet? There is no directory that gets dropped off at every Internet user's door. While bookstores are adding new Internet titles almost daily, these are out of date the moment they come out in print. On-line directories have not yet solved the problem.
Our Internet services have succeeded in generating traffic by offering "free" information as well as opportunities for commercial transactions. In the case of the Electronic Newsstand, millions and millions of accesses have been made to the content "served up" on the Internet. However, while transactions increase every month, only a very small percentage of the people roaming the Internet do so with the idea of buying something or transacting business--at least in 1994. The solution to this will require innovative thinking on the part of businesses wishing to exploit the Internet to market their products.
Despite these current limitations, we believe there is a promising future for doing commerce over the Internet. As we write this, several enhancements to the Internet's commercial infrastructure have begun to take shape: companies that offer Internet access are installing user-friendly interfaces to attract a broader customer base; methods for doing secure credit-card transactions over the Internet are being tested and deployed; and more bandwidth is being installed to accomodate the explosion in demand that some of the more exciting capabilities, such as Mosaic, have created.
In this short article, we could not even begin to explore all of the complex issues facing the future commercial utilization of the Internet. For many businesses, the bset way to learn will be to experiment by setting up a commercial Internet presence of their own. For these companies, our concluding words of advice are:
The Electronic Newsstand (also in gopher version at gopher.enews.com:2500) now has over 175 magazines and newsletters providing selected editorial material free of charge to the global Internet user. The Electronic Newsstand averages almost 50,000 accesses per day. In addition to top quality editorial content, the Newsstand now provides business information as well, including material from Lufthansa, Lincoln-Mercury, and, coming soon, Toyota. The Electronic Newsstand has conducted thousands of business transactions on the Internet, more than any other business application by far.
Mr. Dearth was primarily responsible for convincing both Lufthansa and Lincoln-Mercury to begin marketing themselves through the Internet (the first two most visible companies to participate) and has been invited to present to companies and organizations as varied as the government of Montreal, Prudential, Sallie Mae, General Motors, and the Pharmaceutical Manufacturers Association. He has extensive knowledge of the publishing and advertising industries and is now considered one of the "pioneers" of business development on the Internet. He has been a featured presenter at the Internet World Conference, the Jupiter Communications Online Conference, the SGML Conference, the Magazine Publishers of America Conference, and Circulation Management's Magazine Conference. He has been featured or quoted in Folio Magazine, Open Systems Today Magazine, Educom Review, Computerworld, Advertising Age, Circulation Management Magazine, The Detroit Free Press, Automotive News, American Journalism Review, the Wall Street Journal and on television news shows, including a live hook-up via the U.S. Information Agency with European online developers.
Arnold Kling is President of ASK Real Estate Information Services of Silver Spring, Maryland.
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