Internet's fans still cheering for their team

February 26, 2001

BY MICHAEL KRAUSS

After all the bumps and turbulence of the past year and the so-called dot-com bomb, many interactive marketers are feeling a bit confused. By the end of last year, the New Economy bellwethers were all heading south: Year over year, Amazon.com lost 83% of its stock market value, Priceline.com was off 85% and Yahoo! was down 86%. Investors were either licking their wounds or counting their cash on the sidelines, while the short-sellers raked it in. Some who’d jumped to start-ups were out of jobs, and folks who’d stayed put at the established companies were sneering. But many leading Internet luminaries are still committed and unrepentant about their vision of the technology’s possibilities and its ability to create value for marketers.

Take Eric Heneghan, founder of Internet advertising and marketing solutions provider Giant Step: In the early ’90s, Heneghan tried (unsuccessfully) to convince Steve Case to place advertising on AOL. That was back in the days when AOL was a bulletin board service and monochrome monitors were common.

"What has failed is a lot of these dot-coms," Heneghan says. "Unfortunately, the media and everybody else chose to hype them. They’ve really ignored the true stories. It’s the Fortune 500s and how they usethe new technology." Using interactive techniques, "We cut the cost to reach a GM customer by 60-something percent," he adds.

If you’ve been around technology for a while, you know that things move in cycles and that it’s a footrace, not a sprint. It’s about delivering concrete results, not hype.

Recently, I chatted with an analyst from Cambridge, Mass.-based Forrester, who asked where I thought the marketplace was heading. I said it’s heading the same way it’s been heading in each of the technology cycles we’ve seen over the past 25 years: Technology solutions that add value will continue to emerge, companies that build business models on meeting fundamental customer needs will prosper, and organizations that use technology to establish barriers to competition will flourish.

Which may sound mundane and boring compared with the hyperbole-filled language of dot-com marketing polemics like The Cluetrain Manifesto.

The Cluetrain Manifesto, for those who might need a refresher, provided 95 theses for the few who didn’t "get the Internet" and its impact on the rest of us. It’s still a great read, and the underlying thinking about the future of relationships with customers is both accurate and bold. The problem with The Cluetrain Manifesto and much of the dot-com rhetoric, however, was the tone of elitism and arrogance.

What we’re seeing today is consistent with what’s taken place in the past. There’s going to be a continuing evolution of new technology solutions, but surrounded by a lot less hype. Businesses like Pets.com that popularize puppets instead of their core offering will be road kill. We’ll also hear more in the next few months about technology being applied once again to achieve cost reductions and productivity gains. We’ll see the quiet introduction and commercialization of new revenue and value-creating technologies such as mobile wireless, broadband and peer-to-peer computing.

Despite all the Sturm ünd Drang surrounding the dot-coms, e-business will simply become business as usual. A few major new brands will prosper; names such as eBay, Yahoo! and maybe even Amazon will endure.

Go back to the 1960s and recall IBM CEO Thomas Watson Jr.’s bet on the company’s investment in the 360 architecture. Then look at the rise of the glass house of centralized computer processing and how that gave us new productivity. Follow the path down to the inevitable migration from centralized, departmental systems solutions to distributed processing and Ken Olsen’s and Gordon Bell’s VAX minicomputers. Don’t forget the migration from typewriters to office automation brought on by An Wang. Recall the time of Jobs and Wozniak and the Macintosh. Consider Bill Gates’ DOS-to-Windows and Office PC software empire. Computing got really personal. And at the organizational level, we found new ways to link departmental computing solutions and migrate from islands of computing to systems integration and client-server architecture. Enterprise resource planning and true enterprise-wide computing emerged.

In other words, over the years, each new technology trend has given rise to another. For every peak in the technology wave, there’s been a trough. We tend to focus on the New Economy, the Internet and e-commerce, but the story of technology reshaping the marketing and business landscape goes far deeper and far longer than the hype of the past few years. Most marketers tend to grow uncomfortable with ambiguity and the lack of a clear path ahead. Pundits like my pal at Forrester are trying to predict the future and describe what the next blockbuster will be.

And these days, technology empowers marketers in many new ways and enables them to deliver unprecedented value. The next blockbuster may come through the new mobile and wireless technologies, or through Customer Relationship Management software, or through what are called "Metaprise" solutions—nondifferentiating infrastructure systems and technologies that are shared by a group of competitors to enhance productivity without providing a comparative advantage to any one industry player.

There’s still opportunity in logistics and supply chain solutions, and peer-to-peer computing is in its infancy. Or maybe the value is in better overall campaign management and the ability to assess the cost and benefit of each individual marketing investment.

Of course, it could be all of the above. So don’t despair, even if Merrill Lynch Internet analyst Henry Blodget cut his growth outlook for the online advertising industry a second time, predicting it will remain flat at $8 billion for the year. That’s still an $8 billion business.

My take is that we’re in the eye of the storm. It’s time to buckle your seatbelts, because the ride is only just beginning. Those who prepare and invest now will prosper most when the next round of turbulence hits.

Michael Krauss is a partner with DiamondCluster International in Chicago.
He can be reached at news@ama.org.