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AskTog, May, 2001
Internet Perspective
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The sky is falling.
It has been falling for about a year now, and it feels like it won’t stop falling until every business associated with the Internet is dead, dead, dead.
What is happening now happens with every new explosion of technology. When the sky has finished falling, it will leave behind an industry with far fewer, but much healthier players. And then things will get better than they ever were.
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Automobiles
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When automobiles first came out, there were a couple dozen brands, all very expensive. Ford and others caused prices to drop rapidly, and a frightening shake-out occurred. Then roads got built, and millions more people bought cars than ever had before.
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Movies
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Around the same time as automobiles arrived on the scene, the Lumière brothers were presenting their first short films. Within five or six years, however, the bloom had faded from the rose. Movies were dead, so dead, in fact, that vaudeville houses were showing them after their first round of acts in order to drive people out of the theater so the next audience could be invited inside. With the advent of The Great Train Robbery, movies made a significant recovery and they have done quite well in subsequent years.
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Television
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Televisions came out in the late 1940s. There were all sorts of brands—Admiral, Philco, Emerson, Dumont. A frightening shakeout occurred. Prices dropped, new channels appeared, and millions more people bought TVs than ever had before.
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Personal Computers
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Personal computers came out in the mid-1970s. Brands proliferated and prices were high: 4 thousand bytes of memory cost more than 40 million bytes now. Prices dropped, software appeared, and millions more people bought computers than ever had before.
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Video Games
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About the same time that PCs arrived, video games appeared on the scene. Within four or five years, video games were the hottest thing on the market. They rivaled the internet for shear excitement. Every kid in America had a game machine, and overseas sales were going gangbusters.
Myriad game companies sprang up to feed the hungry hoards. Hundreds of titles flooded the market, all with scores of “game variations” to ensure that no one would ever get bored. Giants like Activision were forecasting wildly profitable futures, with millions upon millions of new games to be sold.
Then, one day, the whole thing collapsed. Every kid in America woke up to the same realization. The “game variations” were a hoax. Every variation was the same. It didn’t matter whether the cactus you were hiding behind was green or blue. It didn’t matter whether you were using a six-gun or and eight-gun, you were still shooting from behind a cactus. What was worse, there weren’t hundreds of games at all. There were really only two games: Pong and Space Invaders. Adding an occasional cactus, turning the paddle into a low-res gun didn’t change that. Sales collapsed and people went out of business.
Of course, the press pointed out that, in the grand scheme of things, this was just a temporary setback. As technology improved and new generations of kids came along, the game industry would return to new and better profitability. In a pig’s eye they did! No, according to the business press, video games were over. They were yesterday’s news. This industry had come and gone and would never rise again. Wall Street turned its back forever.
Well, not really. A couple years later, when the video game market came back, stronger than ever, the financial community once more hitched their wagon to the video game star, and they've been comfortably riding it ever since. When they had said it would "never" come back, they hadn't meant never, ever. They only meant in the forseable future. On Wall Street, that works out to around 90 days.
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The Internet and the "New Economy"
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Do all these crashes sound familiar? The same thing is happening today. In our case, kids aren’t disillusioned, advertisers are, along with people actually trying to find useful information and services on the net. A shakeout is going on, and the people who squandered half their venture capital on a single Superbowl ad are going away forever. What will be left when all the dust has settled—and it hasn’t settled yet—are a few solid, well-managed companies that will form the core of the Web and the Internet’s future.
The day of endless free stuff on the web is coming to a close. It may be replaced with a foolish economic model requiring endless and expensive subscriptions to services most people would rarely use. It may be built on a model that allows a whole lot of people to pay a tiny price for accessing those tiny pieces of information they actually need, either through micropayments or some sort of collective purchase system, a la AOL. If it is the former, the Web will grow slowly. If it is the latter, it will grow vigorously. Either way, it will grow.
With people actually getting paid for information, the quality of that information will grow. Today's low-yield glimpses of what you are searching for will be replaced with solid, well-written material you can really use. Of course, the ideosyncratic tidbits that have so democratized the web will continue unabated.
Ads will eventually be a solid revenue stream, but only after we face up to a growing bandwidth crisis. We’ve been sold this bill of goods that bandwidth is somehow free and soon everyone will have broadband to their house or business. Poppycock! The DSL system is collapsing. The phone companies want nothing to do with real broadband, which would require laying millions of miles of fiber. Satellites can’t help; along with cable, the more subscribers they get, the worse the service gets.
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"The Missing highway is a fiber network that reaches every building in America"
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Al Gore’s daddy was responsible for America’s highway system. Al Gore got it in his head to be responsible for the “Information Highway.” Unfortunately, he never realized how literal that term should be used. The missing highway is a fiber network that reaches every building in America. Once the highway is there, private industry is ready and willing to supply the vehicles to run upon it—all the sources and services.
Unfortunately, the highway is not there, and, as far as I can see, the government is the only entity with the clout and incentive to do something about it. The incentive? It is matter of national defense: We are in danger of being left behind in the information world.
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A Rosy Future
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When we finally have a real broadband system (perhaps ten gigabits/second to start) in place, along with true high-def screens, we’ll think nothing of downloading a webzine that has detailed, high-resolution advertisements. We’ll skip over most ads, just as we do today, but the occasional one will catch our eye, we’ll click on it and sometimes end up buying the product. Unlike today’s “banner ads” that we’ve learned to scan around, these future ads will be as much an integrated part of the page as ads in magazines today, commanding as much or more revenue than today’s magazine ads.
The next “killer app” of the Internet, video phone/video conferencing, will join Internet phone and email, telegraphy for the rest of us, causing the Internet to slow down, forcing folks to buy more high-speed servers, routers, etc., etc., etc. People will spend less time watching TV and more time watching and interacting with each other.
Meanwhile, the browser manufacturer will have finally brought out some kind of Internet OS that will support real weblications. Services will be able to go beyond having you fill out some laborious form, only to kick it back because you entered today’s date using a two-digit year, and the system is a little unclear on what century we’re in. Instead, we will be using weblications that look and feel like real applications. In fact, that line will blur to nothingness, as traditional applications learn how to update themselves seamlessly in the background.
Who knows, if thing progress far enough, maybe someone will even make money selling internet appliances. Or maybe that’s just too sci-fi to consider.
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