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The Unpredictable Certainty: White Papers (1997)

Chapter: The Internet - A Model: Thoughts on the Five Year Outlook

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Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
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The Internet—A Model:  Thoughts on the Five-Year Outlook

Ross Glatzer
Prodigy Services (retired)

We've heard a lot of statistics about the mushrooming growth of the "Net." I believe it's much more than a fad. What I see on my radar is a stunning social change as important as anything in this century. You can see signs of it already.

One example is in the area of religion. Devout people are increasingly sharing their faith online. They hold religious services, complete with sermons and music. There are online support groups for every need. By the turn of the century, we may have tithing online by way of credit cards.

In politics, candidates now routinely debate issues online. Citizens have been sending e-mail to their representatives for a long time. Will it be that many years before we have online voting? I think it could be available in a decade. The only barriers are social, not technological.

Consumer access to online medical information is growing rapidly. How long before you can buy prescriptions online? Make medical appointments? Even get consultations?

Clearly, the online medium is taking to a much higher level what started with radio in the 1920s—that is, the dispersal of knowledge, culture, and democracy more directly into citizens' homes. But, unlike radio—or, later, television—now it's two-way. And therein lies the profound significance of this trend.

I'm going to go out on a limb and say that I think the online medium will become a mass phenomenon in 5 years, or very soon thereafter. No, I don't predict that 100 million Americans will be sitting at PC keyboards every night, squinting at their screens, typing in URLs, and watching the hourglass while waiting for a grainy picture of Jerry Seinfeld to paint—ever so slowly. There's just no way, at present course and speed, that the online experience will become the ubiquitous social glue that television and movies are today. Online resources are too hard to use and too expensive.

So why did I say this will be a mass medium? Because I don't think it's a linear world, and we're not going to continue at present course and speed. There's too much at stake and too many smart people seeking breakthroughs. In other words, I'm factoring in major advances—yes, advances in the underlying technology and infrastructure, but also some major breakthroughs in the human interface:

Something that will make going online as simple as hitting the power switch on a TV set.

Something that will replace keyboards.

Something that will improve the resolution of displays by a couple of orders of magnitude.

Something that will make navigation as intuitive as dialing grandma's phone number.

NOTE: This paper is a transcript of Ross Glatzer's remarks at the NII Forum, May 24, 1995.

Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
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It's going to happen. Just look at who's working on it—companies like AT&T, Microsoft, MCI, IBM, the broadcast and cable networks, the Baby Bells, and many others, plus a fair number of smart people in their garages or home offices.

But another type of breakthrough could be the emergence of our industry's Holy Grail: the "killer application." It's happened before without any change in technology. Sony came out with the Betamax in 1975. Everyone thought then that the "killer app" for VCRs would be time shifting. And VCR usage rose steadily—but not spectacularly—toward 10 percent by 1982. That growth curve closely parallels the experience to date of online services. But something changed in 1982. Suddenly, mom-and-pop video stores sprang up in every town. The "killer app" turned out to be movie rentals. Within the next 2 years, home penetration of VCRs approached 50 percent. So we could be nearing a flash point for the online medium. All we need to do is make it easier to use and figure out the "killer app." In my opinion, the ''killer app" is communications.

Sure, I know, online services have had communications from Day One. And these services are still a niche product. But consider this: most online services to date have been built around information, not around communications. That's turned out to be backwards. It's backwards because all people communicate; but only a small percentage of the population really cares about any one topic of information—O.J. Simpson excluded!

Consider this. CompuServe has 2,000 categories of information. But how many of those does the average member use? I know from my experience that it's seldom more than four or five applications. At Prodigy, there's a terrific feature called Strategic Investor, yet only a small fraction of members subscribe.

Given these facts, anyone starting an online service today would probably be advised to build outward from a rock-solid communications core, optimizing everything for subscriber exchanges. And you wouldn't just have bulletin boards, chat, and e-mail. You'd have instant messages, 3-D chat, and easily attached files for sound photos, video, and graphics. You'd also let subscribers create their own home pages on the Web, where they could talk about themselves—even show their cars. Prodigy will do this shortly, and the other services will quickly follow.

After you'd established a firm core of communications, you'd want to start adding information and transactions to it. But the information and transactions would be tightly integrated with the communications. That's important, because getting around online services today is like being the guy who explains where he's calling from by saying he's in a phone booth at the corner of WALK and DON'T WALK.

The leaders in online services will be those who can best integrate communications, information, and transactions. They will build on a core of communications to create communities of interest.

Let me give you an example. A company like Ford spends a fair amount of money each year putting information online. So as a user, I can navigate to Ford's advertising section and read about its new cars. Even see photos of them. OK, fine. But how often am I going to come back to see the same information? Now, if I'm interested in cars, maybe I'll log on to a car enthusiasts' bulletin board. But after a while, I'll get bored talking to the same old regulars. On another day, I might order a subscription to Car and Driver magazine right from my computer. The problem is, all these are discrete activities that I carry out as an individual. They don't create much excitement. They don't involve me very much.

But what if an online service creates communities of interest built around world-class communication functionality? From a single screen, or with hyperlinks, I can see Ford's cars, chat with other car enthusiasts about them, debate with Car and Driver's editors, download model specs, check the archives of the Detroit Free Press for an article about Carroll Shelby, ask Shelby a question, place a classified ad to sell my '67 Mustang, look up the price of Ford stocks, buy 100 shares, and send an instant message to a friend's beeper urging him to get online and join a discussion group.

You can do all or most of this today on the online services. But no one has done a very good job of integrating it to create true communities of interest. That's what I think will make online a ubiquitous medium. And if it is, can advertisers be far behind?

Advertising on the Web is a tricky business, however. Very few advertisers really understand it. The environment differs from other media and will become more different over the next few years. It's an environment where the revenue model will become pay-per-view—or pay-per-minute.

Today, for most users, the Internet is essentially untimed. And, as a practical matter, so are the commercial online services, since the majority of their users stay within the flat-rate time limits that go with their

Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
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monthly subscriptions. But on the Internet, people will not want to subscribe to multiple features. They'll want to dip in and out. And the information providers will oblige by making everything timed, including ads. Very few companies will offer anything free on the Internet.

So-called "free" applications on the Web today, things like online newspapers and Time Warner's Pathfinder, are really just experiments—beta tests, if you will. All these will be timed when masses of consumers arrive. The implications for advertising and transactions are profound. As commercial applications migrate to the Net, they must change dramatically. Even the best of the online service advertisers—and some are very good—must be better on the Net, because most of their customers will be paying for the time to view their applications. An advertiser or merchant on a commercial online service today pays "rent" to be in the service's ''mall." On the Net, advertisers will pay for the number of "footsteps" across their thresholds—and the amount of time those feet stay in their stores. This puts a premium on closing a high percentage of sales. You must be a consummate retailer to prosper.

And it's not easy. You can't just show up and be successful, because your online customers are far more discerning than the typical catalog or retail customer. They simply will not tolerate anything but the highest level of service. Incredible service explains why a few companies have prospered in an online arena where many have not.

Take PC Flowers, for example. In the florist business, a 5 percent error rate is considered normal. At PC Flowers, it is one-tenth of that. And they have a more complex business than any florist. Needless to say, PC Flowers has a fabulous back-end system, one that can easily handle more than $1 million in business on Mother's Day. And on the rare occasion where they do slip up, they move heaven and earth to make it up to the customer … and the customer's customer. That's expensive. It's also profitable.

The PC Financial Network is another online success story—$2.5 billion in stock trades last year with an average trade of $6,000. But to do that accurately, they've invested in 80 full-time employees on the back end.

So while it's easy to set up a business on the World Wide Web, it's not going to be so easy to make it prosper in the long term. You need to make major investments. Successful advertisers and merchants understand this. They understand that information alone doesn't cut it. It takes true relationship marketing. And the relationship has to be based on communications.

If the commercial online services hope to retain these advertisers—and with them, a key part of their revenue base—they will have to change. One way they can change is to become the preferred access providers to the World Wide Web. In doing so, I think they will eventually have to give up the idea of charging a monthly subscription for a defined collection of content.

Users will pay a flat rate for access, billing, customer services, etc. But they will select content seamlessly from anywhere on the Net without caring or needing to know who is integrating it. The online services will need to establish a revenue model by which they receive a fraction of a penny every time one of their users clicks on an advertiser's Net site. Thus, Prodigy's home page might feature an ad pointing users to the home page of PC Flowers. Netcom's home page might include a paid icon pointing users to America Online. All kinds of synergistic relationships are possible.

To summarize, here's what I see happening by 2000:

The Internet, especially the World Wide Web, will become the communications/data transfer standard. It will be the backbone for advanced interactive services, including TV shopping.

There will be breakthroughs in ease of use and input/output technology.

Commercial activity will be an important part of the Web, but not as important as some people predict.

Advertising will be substantially more sophisticated and will be communications centered. A click-stream ad revenue model will replace display revenue.

There will be some consolidation of the online services as we know them, although many companies will offer Net access.

The online services will be forced to become one with the Internet. Their ability to survive as distinct entities and to prosper will depend in part on their success in creating communities of interest.

Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
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For at least a few years, the online services will retain uniqueness in terms of structure, context, back-end transactions, billing, customer service, marketing segmentation, technology innovation, and distribution. But even these advantages will fade over time.

Pricing pressures will be brutal. Consider that only a few years ago, CompuServe could charge $22.50 an hour for access at 9,600 baud. Today, it charges $4.80 while others charge as little as $1 for access at 14,400 baud. This trend will continue, which is great for the consumer, but ominous for the online services.

More than 50 percent of American households will be online. But many of them will use simpler access devices than today's computers.

Like most successful trends, all these changes will be driven by the competitive market.

And finally, if all this doesn't happen in the next 5 years, just remember what Mahatma Gandhi said: "There is more to life than increasing its speed."

Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
×
Page 237
Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
×
Page 238
Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
×
Page 239
Suggested Citation:"The Internet - A Model: Thoughts on the Five Year Outlook." National Research Council. 1997. The Unpredictable Certainty: White Papers. Washington, DC: The National Academies Press. doi: 10.17226/6062.
×
Page 240
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This book contains a key component of the NII 2000 project of the Computer Science and Telecommunications Board, a set of white papers that contributed to and complements the project's final report, The Unpredictable Certainty: Information Infrastructure Through 2000, which was published in the spring of 1996. That report was disseminated widely and was well received by its sponsors and a variety of audiences in government, industry, and academia. Constraints on staff time and availability delayed the publication of these white papers, which offer details on a number of issues and positions relating to the deployment of information infrastructure.

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