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The Internet Makes Good Business Sense Obsolete

by Charles Morris, November 1998

There's no question that the Internet is changing the business world radically, and that many of those changes will be permanent. Nobody really knows what things are going to look like when the dust settles, and this fact has caused some of the most perfect examples of the herd mentality ever seen. Every few months a new "formula" appears, and everyone says, "This is it! This is the formula that's finally going to make us all a bunch of money!"

Note: This page is a mock-up or replica of an article that I wrote for the (now defunct) Web Developer's Journal, and it is here solely for you to admire my writing. The links no longer work, and some of the information may be out of date (while some may not be).

First content was king. The money men scrambled to buy up content - any kind of content - as fast as they could. Then some pundit said no, nobody's selling any ads, so content was out. A year ago, the word on the cyberstreet was that any Web site that was any good would soon be charging subscription fees, while ads would all be sold on a cost-per-click basis, making them basically worthless as a revenue model. Ha! Yours truly did not agree, and penned a little article called The Web in '98 on the subject. Now, I believe I may say that it's becoming obvious that advertising will be one of the dominant revenue streams after all, with subscription fees bringing up the rear (as has always been the case with most other media).

At first, conventional wisdom was that nobody would ever buy anything over the Web, because of security risks. A few months ago, guess what? The security risks turned out to be fiction whipped up by the press, and people started buying stuff online after all. Now, if you ain't selling something on your site, you're nobody, dude (We plan to start selling t-shirts as soon as we can get our shopping cart to work right).

A year or so ago, AOL and the other "proprietary" online services were ridiculed for bucking the trend towards open systems, and their imminent demise predicted. Now, everyone has decided that "portals" are cool, and AOL is the hero of the hour!

A lot of false starts and blind alleys are to be expected with such a new and complex medium. What I find a little hard to swallow, though, is that many a sound business baby has been thrown out with the bathwater of "old thinking." Sound business principles that have been considered rock-solid wisdom for decades are ignored daily by the very people who trumpeted them before. The giant corporations are the worst offenders. A short surf around the Web will reveal Fortune 500 companies doing the sort of things that business-school types would once have considered the first step to bankruptcy.

Let's take a look at some sound business principles, many of them major buzzwords a few years ago, and marvel at how they are being ignored or contradicted in the Internet era.

1 - Never forget what business you're in.

The theory of "comparative advantage" may be said to be the cornerstone of a modern economy, and it is the driving force behind our evolution into a "service economy." Comparative advantage means that each company does one thing best, so the greater share of their resources they devote to that one thing, the more efficient they will be. Apparently, however, this once-holy doctrine doesn't apply on the Web. The world's largest software company has decided that they also need to be the world's largest wholesale travel agent, as well as one of the largest publishers of travel information. The maker of the most popular browser has decided to convert their site into a search engine, while all the major search engines (which a year ago were considered "one of the few success stories," and scoffed at "content providers") are all scrambling to bulk up on content.

In fact, so many companies have decided that they need a publishing arm that some simpletons predict the end of independent publishers (or "content producers" if you must). "Instead of buying advertising in online magazines, why not cut out the middleman and publish our own mag?" say manufacturers. "We'll become the respected authority in our field, everyone will buy only our stuff, and we'll rule the world!"

I'm afraid the idea is old news. Manufacturers have had their own house magazines since Gutenberg. Some are little more than advertising circulars, while a few do have a certain amount of editorial standing. But consumers don't want to get their info about travel from an airline's inflight magazine, or their mutual fund tips from Fidelity's monthly rag. Independent magazines (or "advertising-supported content plays" if you insist) show no signs of dying out in the paper and ink world, so why should they on the Web?

2 - Don't kill the goose that laid the golden egg.

Everyone agrees that the search engines have a good thing going. Okay, they haven't made much money yet, but they certainly have built some strong brands names in a short space of time, and established a good solid ad-supported revenue model. So, the most logical thing for them to do is:

A - Refine and improve the strategy that has led to their success?

B - Move in the opposite direction?

You guessed it! Having made their bundles selling picks and shovels to the miners, most of the major search engines have decided to become miners themselves. Instead of pointing to content, they're going to provide content, and become "one-stop" closed shops. Only one problem: That's exactly the opposite of what the Web is all about. No one site is ever going to be able to provide the depth and breadth of content that people have come to expect. Why would I want to go to Excite's travel section when trusted names like Frommers, Let's Go, Lonely Planet and Rick Steves are a click away? Why fool with Yahoo's investment "channel" when I can peruse the Wall Street Journal, The Financial Times, and Barron's?

Ah, but Yahoo and the rest don't necessarily want to create content, they just want to serve you up "co-branded" content. In other words, you can still go to the Wall Street Journal, but it will have a tiny Yahoo logo in the corner, and Yahoo will get a piece of the ads that you see. But wasn't helping you find other sites what search engines and directories were originally about? If you think about it, a "portal" is basically just a search engine that charges companies to be listed. Consumers won't go for it.

Portal madness is just that - an unrealistic, silly idea that's been bought into by a lot of people who should know better, egged on by investors and pundits whose only goal is to stir up a scene on Wall Street. AOL is a portal and always has been. Netscape and Microsoft are portals, because they control what gets built into everyone's browser. All the rest of the would-be megaportals are just wasting their time, and somebody's money. A year from now, you'll hear no more about portals (there'll be something else even sillier).

3 - Never settle for less than the best.

I've already maundered on about this subject so much (see A Plea for Editors) that I really mustn't go into too much depth here, but major, respected corporations publish things on the Web that they would never, ever settle for in a printed brochure, much less a TV or radio ad. I'm not only talking about bad spelling, bad grammar, bad writing, and bad-quality graphics, but just overall bad design and whole sites that are amateurishly conceived and executed.

4 - Never insulate yourself from your customers.

I've seen complex and expensive Web sites that have no contact information for the company whatsoever. The ones I like are the sites that have a whole section of pictures of their staff, with paragraph after paragraph about their hobbies, favorite colors, etc…but not a single email address or phone number for any of these fascinating people. Sometimes not even a clue as to what state they work in. In my opinion, a Web site without an email address listed is pointless. Where's the interactivity, the 24/7 availability? Many a company spends thousands on a Web site, but can't seem to get it together to get so much as a single email account set up.

And I've got a news flash for all would-be Web publishers. A "feedback" form is no substitute for a plain old email address. Sure, it makes it more convenient for you, because the messages come neatly packaged, with the subject lines of your choice, and a bunch of intrusive "demographic" information that you may conceivably use for something someday. But do you want to make things convenient for your customer service staff, or do you want to make things convenient for your customers?

True, making it harder for people to contact you may cut down on your burden of spam, but then again, the real spammers will find you anyway, and deleting spam is simply part of doing business on the Web. The hidden email address says "Paying customers click here. Everyone else get lost!", and that is not the sort of message that inspires confidence in your level of service.

5 - Differentiate your product, and build your brand.

Netscape's home page now looks almost exactly like Yahoo's. In fact, since portal madness took hold, everyone's home page looks pretty much like Yahoo's. They all have travel and investment sections, as the pundits-that-be are trumpeting those as the hottest items at present, but few if any offer any reasons why we should choose their "travel section" over the thirty billion other "travel sections," much less offer anything you can't get somewhere else.

6 - First impressions are critical.

Who would buy software from a company that invariably releases products that don't work? You and I, for starters. No computer-savvy person would dream of buying any new Microsoft product until it's been out for at least a couple of months (whatever happened to the quaint old-fashioned concept of beta releases?), but sooner or later, buy it we will. It's understandable that Microsoft can get away with this, since they're a monopoly, but this way of doing business pervades the entire computer world. Most software companies (and hardware too) routinely release products that they know perfectly well are full of bugs, relying on the fact that they can always post bug fixes on their Web sites (also on the fact that many of them have few or no serious competitors).

Often by the time all the insects are shooed away, it's time for the new release, and guess what? The old version, though now free of bugs, begins to accumulate "compatibility issues" as related products are upgraded to new versions that don't work with the old. So every few months, you have to throw away your old product, which (finally) works perfectly well, and buy the new version, which barely works at all! What a great deal!

So keep a great big sack of industrial-grade salt handy as you read about the "latest trends" on the Internet. Everybody out there's got something to sell (or thinks they have), and they're only too ready to dismiss the entire accumulated wisdom of Western civilization as "old thinking," if it will convince you to buy. But human nature does not change, and neither do sound business principles. Keep these in mind, and you'll see that many of the "trends" touted as the next big thing are nothing more than hot air and hype.

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