net.wars: Ten

by Wendy M Grossman | posted on 15 July 2005

Amazon.com is making so much fuss about being ten years old – celebrities delivering packages! (though only in the US) – you'd think no one had ever achieved that venerable old age in business before. Yahoo!'s been ten for a while now; eBay (pic shows founder Pierre Omidyar) will be ten in another couple of months; Java turned ten last year. Either you're ten, in the Internet, or you don't exist any more.

Wendy M Grossman

So it might be a shorter list to say who in the Internet world isn't ten: Paypal (founded 1998); Internet Archive (founded 1996); Linux (first version 1991); and Google, whose founders met in 1995 but whose first version didn't go up even on campus until 1996. I'd add DoubleClick to that list, since it was founded in 1996, except that the pioneer of Internet advertising is never going to be ten: yesterday saw the last of its shares pass into private ownership at $8.50 each, a far cry from the $133 they commanded at the height of the dot-insane boom.

Still, you can understand Amazon's giddy sense of relief: for so much of its history it ran under rivers of red ink and dire predictions of its imminent demise.  Salon is ten years old this month, too, and there's one analyst out there who seems to have spent the last ten years reading Salon's quarterly reports and predicting its demise before the next one is published.

By the way, despite its press release, MP3 isn't ten. When you read the fine print, the file format that changed the music biz, was standardised in 1992. Only the name was chosen in 1995. (Did your parents throw you parties on the day you were christened rather than the day you were born?) But any excuse for a press release and a party.

Where are the press releases to remind us of 1995's follies? For example, December is the tenth anniversary of one of  Business Week's less sane cover stories: "The Software Revolution: the Web Changes Everything". Java and the Web were going to bring in software on demand, "snippets of new programming that come across the Net like email". Internet appliances everywhere, the Web as giant processor, and Big Trouble for PC sales in general and Microsoft in particular.

You also won't hear much about the tenth anniversary of Wired's 1997 PUSH! cover story. This story said breathlessly: kiss your browser goodbye, by 2000 content will not hesitate to find you, and you won't turn it off because it will give you relief from boredom. Content in every remaining quiet nook and cranny in the world! Ugh. The story mentioned companies like Marimba (now part of BMC Software), Pointcast (dead), and so on. But then, we all thought that was pretty silly even at the time.

Charles Arthur did a nice summary in the Independent of the things Amazon did right to succeed on the Web, but missed, I think, two key factors.

First was timing: while "first-mover advantage" is a myth (Google wasn't first and it's taking over the planet), Amazon was early enough to ride the excitement, and had enough money,sales, and investor belief left to weather the crash until profitability. (It also helped that Amazon could go public despite years of losses.)

The second was nothing to do with the Web: great customer service, at least in the US, which built it great customer loyalty. One Christmas – 1998? – I phoned Amazon on the 23rd to tell them they'd shipped the wrong gift book. The right book arrived the next day, Christmas eve.

When Amazon began, it was common to think that only new, small companies would succeed on the Net, because big, old ones would be too slow to catch on. Then, around 2000, the thinking changed to "clicks and mortar" – only companies that had a solid physical-world infrastructure already were going to succeed. Somewhere in there also was the notion that you had to have big brand names and "mind share".

Now, it seems pretty clear that there are no hard and fast rules. Google is winning out not by being first but by being better at what it does than its pre-existing competitors, by giving people what they want in terms of a fast, simple interface, and by figuring out how to make money out of all of it without ruining those two things. Tesco, unlike its Web-only competitors, makes money out of selling groceries online because it could build on its existing infrastructure of stores. Small companies may succeed because of reasonable cost structures; big ones may be able to leverage their existing clout.

But 20/20 hindsight doesn't help anyone who wants to start a Net business now. From talking to the small businesses that I interview for the Telegraph's Starting Out column, there are common factors to the ones that succeed, both online and off.

  •  Find a market niche that's either unoccupied or poorly served;
  • develop a sustainable business model; find good partners;
  • work hard;
  • be prepared to change your business model and approach midstream if things aren't working out;
  • take risks.
  • In ten years, maybe you, too, can have a press release and a party.

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    Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).