The major business story of 1999 will be the battle between "meat space" and "cyberspace" retailers for (they think) control of the Next Millenium. (Say that last with a booming, announcer's voice. Fun, isn't it?)
The "Microsoft" trial of 1999 will open when Wal-Mart gets a full hearing on its charges that Amazon.Com (helped by venture capitalists Kleiner Perkins and Drugstore.com) "stole" its top technology gurus. Amazon has just opened its third distribution center, in Nevada, and needs to dramatically lower its per-order cost of delivery if it's to ever turn a profit.
Wal-Mart built a network integrating handheld scanners, mainframes, and servers in stores and warehouses that let it order new goods from manufacturers whenever store personnel confirmed the evidence of their cash register tapes that they were running low. The challenge here is different (which is why Wal-Mart's not going to win its suit) but the elements of the solution are similar (which is why they're suing). Integration must be achieved between warehouses and publishers, but without sharing enough data with those publishers so they can compete directly in the online channel. Amazon must also re-evaluate its entire warehousing strategy. My guess is they'll learn to put future warehouses near those of the largest publishers, forwarding orders directly to the smaller publishers. The key number is the cost of
As the year evolves we'll see many other "meat space-cyberspace" battles. Here are some examples:
The game will end after the great Internet stock crash. For the real economy, my guess is we're looking at a bang, not a whimper, something on par with the 1987 or (yes, Virginia) the 1929 crash. The failure of past corrections to keep the market down means the end can't come until the real economy falters, so when it does, things will get ugly. You - and the meat spacers who are left - will then be able to buy Internet winners with real earnings and realistic valuations. The present era will end, but the Internet will go on, just as the 1929 crash didn't kill radio or the movies.
SSP (Shameless Self-Promotion)
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I don't like to brag, but in last week's Clue concerning Go.com I made some rash predictions about Disney's URLs, calling them part of its "phase two." Turns out they were part of "phase one." Take a look at the top line of your browser. ESPN.Com is now resolved as espn.go.com, Disney.com is resolved as disney.go.com. Some URLs (like Zoogdisney.com, a special feature of its weekend programming on the Disney Channel) haven't resolved well, and all the old URLs are still being marketed. But that's a minor problem, and it will change.
A second change, easily seen at espn.go.com, lies at the top of the screen. The main Go.Com search box is there, along with tiny links to other Disney sites covering news and entertainment. What this means is that phase two, not phase one, will be the marketing effort. Some time in the next few months, watch for a massive Go.Com campaign on all Disney-owned channels (including ABC) aimed not just at branding the search engine, but at branding subsidiary sites under the Go.Com URL.
Oh, The Horror! (Gotta Get Some)
Corporate America has gone from bemusement, to skepticism, and now to horror over the Internet stock story. Right now, they can't afford even second-tier Internet companies, so they're trying to grab their own pieces of the Internet IPO pie.
CBS will soon have an IPO for its Marketwatch stock data site, a joint venture with Data Broadcasting Corp. BarnesandNoble.Com will follow quickly, as it continues to play Elmer Fudd to Jeff Bezos' wascally wabbit. Next in line is likely Altavista . To make that possible, Compaq this week bought Shopping.Com for $220 million in cash.
Compaq can't beat nemesis Michael Dell at its own game, computers, for fear of cannibalizing its existing re-seller channel. Its Shopping.Com deal only makes sense if Shopping.Com is then spun-off with Altavista, which itself has been struggling in the search engine wars against the better-known Yahoo and now faces the wrath of Disney . Altavista's efforts last year mainly involved improvements to its search technology, adding use of AskJeeves and Centraal to its own spider. Now Compaq wants to have a portal, and what's a portal without an IPO. Now that they've got a mall, expect Compaq to add free chat, e-mail and home pages to Altavista, an online auditorium with celebrity interviews, and then a heavy TV ad buy. (Can you say Super Bowl?)
But it takes more than imitation to grab the lead in a crowded market. So here's a word of advice for Compaq. If you want to get on top, guys, do something different.
Anyone Protecting the Brand Name?
As the Fortune 500 seeks ways to hunt down and kill these Internet high-flyers, before they take them out at a pittance, let me suggest they already have one Clue the high-flyers have forgotten. The Clue is this: Never Damage Your Brand.
Here's a question. How many spam messages have you received through the freemail services of Yahoo, Excite and Lycos, and how frustrated have you gotten when you demanded action? (How many form letters have you gotten from their system administrators?) Now, do you know what Sotheby's reaction is on those occasions when it learns something handled by its auction house had even a hint of fraud attached to it? Look at what eBay does . (If you didn't click, the answer is not much.)
George Schultz, former Secretary of State and chairman of Bechtel Corp., said it best over a decade ago. "Credibility is the coin of the realm." Internet companies aren't doing nearly enough to protect their good names, and they'll pay for that in time.
After The Fall
Open Market was part of the first Internet stock bubble, in 1995. That bubble popped, but Open Market goes on, offering its TRANSACT software to large sites and Commerce Service Providers. It's not what it was, and how far it's gone (down) might be reflected in a recent press release the company issued with iBelong Networks . Look inside the release and you find Open Market co-founder Shikhar Ghosh, who'll now re-sell services based on its software to non-profit organizations that may know little about the wiles of the business game.
If you're old enough to remember the 1980s, you'll remember AST Research as another high-flyer. They fell hard, fell harder after being sold to Samsung, and what's left (very little) has now gone to former Packard Bell CEO Beny Alagem, who plans to build "an Internet-driven company" competing with folks like iDot.Com . Good luck.
I guess your Clue here is the old Clinton campaign song (via Fleetwood Mac). "Don't stop thinking about tomorrow. Don't stop - it'll soon be here." The point is it won't necessarily be better than before.
Clued-in (again) is Reel.Com . Facing intense new competition in the area of videos, it's opened DVD Update, an e-mail newsletter on the technology produced by DVD Insider and E/Town . Grabbing niches, providing unbiased information, and linking leading information sources directly to content are three key Clues to smaller merchants looking to compete in 1999.
Clueless is Joe Firmage , who quit his $2 billion fortune at USWeb in order to prove space aliens gave us our technology. (It almost makes you wish Scientologists went door-to-door.)