It's become repeated so often it's become a mantra. On the Web you're either number-one or you're nowhere.
Look, AOL is number-one, thus everyone else is nowhere. Yahoo is number-one and Amazon is number-one. Even eBay is number-one, in Internet auctions. This makes them "Internet blue chips" and you should buy them despite their ridiculous valuations. They'll get the lion's share of the growth (read all of it) while everyone else gets the leavings. This is the way leading stock analysts actually think.
I'm old enough to remember when AOL was number-three among commercial onliners, behind CompuServe and Prodigy. I'm going to predict right now that before the end of this year Yahoo's traffic will be behind that of both Microsoft's and Disney's sites. Amazon's leads in video and CD sales are narrow, and Barnesandnoble.com is far from dead. Schwab is the number one online trading site - has eTrade filed for Chapter 11 yet? (I didn't think so.)
I would argue that when it comes to Web sites, the proper analogy isn't to software standards or even the cola business, it's fashion. Take Steve Case away from AOL and in five years where will it be? The same is true for Tim Koogle at Yahoo, or Jeff Bezos at Amazon. We are not talking about huge, immovable institutions. We are talking about Ralph Lauren and Calvin Klein. (Get some charts on those two firms when you have time.) As we discussed here last week, if a bus hits Bill Gates (God forbid) Microsoft shareholders will lose $100 billion.
The fact that money moves based on a myth does give those who benefit from that myth lots of opportunities. Without the myth, Bezos could not buy a controlling interest in Drugstore.Com. Without the myth, AOL and Yahoo could not scare investors away from StarMedia, the Latin American community site, by merely growling at it. Without the myth, Verio doesn't pay to host AOL.Com - AOL pays Verio, and pays plenty.
Microsoft has a real monopoly because it controls vital technology. What vital technology does AOL control? What it controls are customer relationships, habits it must continually reinforce. Have Lycos or Excite disappeared because Wall Street anointed Yahoo a "blue chip?" Has Reel.Com or CDNow folded because Amazon has that designation?
In business, any crown hangs heavily, and competitors always lie in wait to snatch it away. On the Web, that snatching can occur in Internet time. Once investors realize this fact, there will be blood on the floor of the markets. Once you realize this fact, you can look at your opportunities in a new light.
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Now back to the show...
Steve Forbes made a big deal out of announcing his second bid for the Presidency online, as a RealAudio file. As a result of this, he's calling himself "the Internet Candidate."
But is he? And what is an "Internet Candidate," anyway? Every candidate in the next cycle will have a Web site. You can expect extensive use of e-mail for recruiting supporters (charges of spamming will fly) and expect extensive attempts by candidates and their supporters to control online political forums (Flame wars will be huge). Before the conventions, I predict, everyone will see a need for moderation - the physical kind, not the kind you put in your position papers.
An Internet Candidate will have to take positions on Internet issues, and I'll further predict they'll be two different types of Internet candidates. You can see that simply by looking at the current controversy over Internet privacy. . Mr. Forbes, do you stand with users or America Online when it comes to Internet privacy?
The same bifurcation will happen on other issues as well:
My guess is that Mr. Forbes will take positions that are friendly to Internet businesses, the bigger the better, while hiding behind rhetorical support for "freedom" and small business. (That's been his Modus Operandi so far, in both his political and business life.) I have yet to see, on the left or the right, a candidate who has taken forthright stands on behalf of Internet consumers and risked the wrath of the Moneyed Digirati.
So let's not talk about who is or isn't the Internet Candidate. Let's talk seriously in this cycle about the Internet's issues, because whomever we select to lead us, that person will be the Internet President.
Straight Talk on Taxes
No one likes paying taxes. But no one likes bumpy roads or getting mugged either.
The fact is that (for good or ill) much of America's state and local government spending is funded by sales taxes. Right now, most Internet transactions are free of sales tax (as are most catalog sales).
The fact is that's going to change. Republican Billy Tauzin is trying to warn people about it. "There should be no differential between what's charged on the Internet and what's charged at retail," his press spokesman, Ken Johnson, told me last week.
Can you argue? Can you still argue (with a straight face) that the Net is young, fragile, and might be irreparably harmed if buyers of its goods paid sales tax? Well, yes, it will be complicated - very complicated - to implement sales taxes on Web sites. AT&T President John Zeglis is sounding the alarm on that. But you know what? Computers can deal with complexity. My wife finished a project for her employer in this area last year. The employer hadn't been charging sales taxes on its transaction processing revenues. It was paying the taxes -- it just wasn't collecting them from merchants. The project saved Jenni's employer millions of dollars and, since they're a transaction processor, the project gave them a head start on doing this job for Internet merchants, too. (Jenni was Clued-in long before she met me, by the way.)
Now there is the problem of "nexus" to deal with. Vancouver, Washington is known as "East Berlin" because Washington State has a high sales tax and Portland, Oregon - just across the Columbia River - has none. Should Oregonians pay no sales tax on the same purchases where citizens of Vancouver pay 7%? It sounds unfair, but it seems to me the place to address that unfairness is the Washington State legislature.
The fact is we can collect sales taxes, and we're going to be made to. A 19-member commission (under Virginia governor James Gilmore ) is trying to hash this problem out, but as Tauzin's press aide said, "In the end, Congress is going to resolve the issue." You have a problem with what I've written here, you take it up with them.
Clued-in is Paul Allen for challenging the myth of number one and putting $750 million into Go2Net.Com . (I can't say whether Go2Net is worth the money, but when someone puts big bucks into a proposition you've just written, give him his props...)
Clueless is Forbes Magazine which apparently can't tell the difference between advertising on search engines and the editorial product those engines provide . Isn't it a shame the boss is otherwise occupied?