Every step has aroused great expectations. Some thought it would usher in an era of cooperation, as both work and play became digitalized. Others saw the “citizen-controlled” Internet as a radical challenge to establishment control of information outlets, or as a civic marketplace. In his book “Life After Television,” supply-side theorist George Gilder says the networked personal computer will transform capitalism into “a healing force in the present crisis of home and family, culture and community.”
But today the Internet itself is being transformed–into something closer to a marketplace. Advertisements and sales brochures are proliferating among the Webzines and newsgroups and bulletin boards. “Cyberstores” offer everything from music CDs to certificates of deposit. The most interesting new technologies are those that foster transactions. As the vendors and the marketers crowd their way into the bitstream, is the Internet on the verge of becoming just one more mass commercial medium? Does anything remain of the original Infotopia?
It is almost a truism that no new communications medium turns out the way its inventors imagined. The developers of the Bell System conceived of the telephone as a business tool; they were both surprised and appalled when their customers diverted it to the “trivial” purpose of social conversation. The radio was meant to be a wireless telegraph, a medium of two-way messaging; none of its creators anticipated broadcasting and mass programming. Television began as radio with pictures; early programs were actually simulcasts, video transmissions of a radio program on a radio set with a radio audience. It took years for broadcasters to discover television as a medium with its own unique properties and powers.
So it is with the Internet. The original goal, in the 1960s, was a sharing of resources. The founders of network computing wanted researchers at Stanford to be able to use software on a machine at MIT, even where the two computers had incompatible operating systems. From there it was a short step to exchanges of messages and documents–the origin of e-mail. Soon the Internet became a reference medium, where research papers could be read by anyone on the network. It was the World Wide Web that brought the Internet into the consumer marketplace. Developed in 1990 as a system for delivering a graphics-rich, pagelike file over conventional telephone lines using Internet technology, the Web lured traditional news and entertainment companies into electronic-publishing ventures. The potential audience was vast: by the end of 1996, according to Jupiter Communications, a New York-based research-and-consulting firm, more than 15 million North American households had some form of online access. In the year 2000, the projection is that North America will have 38 million online households–more than one third of all households, most of them affluent.
But a funny thing happened on the way to Infotopia. The costs of electronic publication proved higher than expected, and the receipts turned out to be negligible. The Web is awash in information, much of it created by small start-up companies, and the competition has made it difficult for traditional media companies to charge for access to their Web sites. Besides, many early Internet users were devout believers in the proposition that all information should be free, and that attitude still lingers. The result is that the Web is a marketplace of fierce price resistance. Last September The Wall Street Journal, for example, began charging a subscription fee of $49 a year for its online edition ($29 for subscribers to the printed newspaper) and saw a dramatic decline in its Web readership. Even Slate, Microsoft’s political Webzine, abandoned its plans to sell subscriptions.
At the same time, advertising has failed to take up the slack. Despite the attractive demographics of online households, the Web is not yet a mass medium. Advertisers are suspicious of the Web, too, because its interactive qualities make it easy for consumers simply to bypass an ad. They are also uncomfortable with audience measurements in the new medium; the industry has yet to settle on a standard comparable to those used in print, radio and television. As reality sets in, many Web-site operators are scaling back expectations. Microsoft officials admitted recently that they expect to lose millions of dollars a year on MSNBC for at least the next four years.
But on another front, Web technology fosters commerce. The same interactive function that makes advertisers nervous leads to a new kind of marketing–the transactional advertisement. An example of this is a Web-based service called Auto-By-Tel, which allows prospective buyers to search for information about car models that match their preferences, then sends their names to the appropriate dealers near them. The dealers pay for the service and in return get qualified leads that would cost them far more to acquire through conventional means. In the case of small consumer goods that customers don’t feel they need to inspect before purchase, the software can actually complete the sale for home delivery. The amazon.com Web site has created a successful market niche by selling books. The model is essentially mail-order retailing.
With the development of secure transmissions of credit information–Visa and MasterCard are jointly testing a system scheduled for introduction by early 1998–transactions will play an increasingly large part in Internet activity. The Web is particularly effective at selling services backed by research, such as discount stock trading, an area with several successful sites already, including e.Schwab and a Web-only company called E*Trade. Financial services generally lend themselves to Web marketing, as do travel services, because the transactions can be supported by extensive computer databases of useful information. And every month sees the introduction of new software to automate transactions.
The latest adaptation of Web technology is for business-to-business marketing. This is done through “extranets,” extensions of a company’s private, internal network (or intranet) to corporate customers and suppliers. Extranets are a hot subject for companies like Netscape, the creator of the most widely used Web browser, and America Online, the country’s largest commercial online service. An example of an apparently successful extranet is the one built by General Electric to sell machine and appliance parts to its customers; GE was expecting 1996 online sales of about $1 billion.
With such a flurry of activity, it’s easy to imagine that commerce will soon drown information on the Internet. That won’t necessarily happen, but almost certainly the Web will contain a rising tide of information subsidized in some way by commercial activity. Advertising has always underwritten the largest share of most media companies’ costs. The question is whether Web advertising will ever reach a volume that can support large investments in reporting news, building deep information databases and creating new entertainment. Many analysts believe the critical mass to be about 30 million households, which suggests that the Web will become a true mass medium about the year 2000. Nicholas Negroponte, founder of the cutting-edge MIT Media Lab and author of “Being Digital,” argues that the Web by its very nature may be too personalized ever to be a mass medium, but he believes that commerce may flourish there anyway, with advertising targeted to small market niches or even individual customers.
This blurring of the line between “editorial” content and advertising is precisely what worries most traditional publishers. The Web is already flooded with “information” sites that are centers of partisan pleading and crackpot theories masquerading as facts. In an environment without many of the traditional markers of high-quality content, how is the hapless consumer to tell the difference? The answer is, once again, a commercial one: brand names. As the Web expands and the number of “publishers” grows, brand names that are known and trusted will become progressively more important. Everything on the Web is ultimately about trust, says Negroponte. “We trust brands, rightly or wrongly. We trust friends… And we trust our own experience, which may be the most faulty of the lot. I have these same three choices in cyberspace.”
In the dog years to come, cyberspace will continue its transformations. We can expect a rash of new “non-PC devices,” such as Internet TVs and Internet telephones. The Internet TV in particular is a promising device, if only because it would benefit from the growing market in Web-based videogames–likely to be a hot area itself by the year 2000, as new video-compression techniques increase the realism of online game-playing. Commerce, too, will continue to thrive, especially in the area of consumer purchases, which will benefit from the development of electronic cash and “smart” cards that allow for “micropayments” of as little as 25 cents. We can also expect that commercial activities will enable further inroads into personal privacy, as customers willingly put more and more of their spending and consumption patterns into databases. Is that a troubling prospect? It depends on our confidence in new encryption techniques, and on Web sites’ sincerity about deploying them. As Negroponte says, everything on the Web is ultimately about trust.
ILLUSTRATION
IT’S A WIDE, WIRED WORLD
The Web has turned out to be a marvelous marketing tool for business. The potential audience is vast, and advertisers are already devising ways to target individual consumers.
HOUSEHOLDS ONLINE (in millions) U.S. and World Canada Total 1995 9.6 15.0 1996 15.4 23.4 1997 22.3 34.0 1998 28.7 45.2 1999 34.6 56.7 2000 38.2 66.6 USE OF THE WEB (1996, in percent*) Browsing 77% Entertainment 64 Education 53 Work 51 Business research 41 Academic research 36 Shopping 19
*Based on the responses of 10,332 Americans, allowed to mark multiple answers.
A DISASTER ON THE HEADSET
DISPATCHES FROM THE FUTURE
SEPT. 21, 2005 A new Internet technology ran into trouble today when a Los Angeles woman filed a $10 million damage suit against a textile manufacturer, charging she had lost a high-prestige job as an interior designer because of upholstery the company sold her through the World Wide Web. The technology, dubbed VirtualTouch, lets prospective buyers examine fabrics as though they were in a showroom–allowing them to “feel” the fabric with a virtual-reality headset linked to the VirtualTouch Web site by satellite.
“I felt the cloth–it was a sumptuous raw silk and just the right color,” said Valerie Pendleton, the designer hired by the chic Hollywood restaurant Black. “But when it arrived, it tore easily and showed even the slightest water stains. It was a disaster.” Said Bruno Mellon, one of the restaurant’s owners, “It was itchy. And when we found out we were out $35,000 on the fabric alone, we canned her.” Pendleton says her reputation was irretrievably damaged by the firing.
“It seemed like a good idea,” said Pendleton. “You subscribe to this service, and they send you the headset. Then you “touch’ one fabric after another, and when you find one you like you press this button on the headset, and it places the order. It made everything so simple. Who has time to go to showrooms anymore? It takes every spare moment just to wait for downloads to these darned headsets.”
