Doing Business on the Internet - Part V

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Doing Business on the Internet - Part V

By Sam Vaknin Author of "Malignant Self Love - Narcissism Revisited"

These essays were published by the Israeli (Hebrew) edition of PC Magazine back in 1996, when the Internet was in its formative epoch. I have left them essentially unchanged, except for a few minor errata I corrected. I find time travel fascinating. It is interesting to recall the mainstream view, ten years ago, about the Internet, its goals, its role, and its future. So, here goes:

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 which rent out access to application software which 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 million USD invested in advertising during 1995 and to the 60 million 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 billion USD annually in 1998, thundered the pessimists (many 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 ($4 billion), Internet hardware ($3 billion), Internet access provision ($4.2 billion) in 1995.

Hembrecht and Quist estimated that Internet related industries scooped up 23.2 billion 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 many 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?

(continued)

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AUTHOR BIO (must be included with the article)

Sam Vaknin ( samvak.tripod.com ) is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He served as a columnist for Global Politician, Central Europe Review, PopMatters, Bellaonline, and eBookWeb, a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory and Suite101.

Until recently, he served as the Economic Advisor to the Government of Macedonia.

Visit Sam's Web site at samvak.tripod.com