The Internet: Dead or Alive?

We’ve all heard the media herald the death of the Internet. Legendary and highly visible failures of once stalwart Internet luminaries as pets.com, etoys and wine.com cast a shadow of doubt on this one time darling of investors and business analysts.

So, where’s the Web going and why is it still part of a marketing presence for many businesses?

The answer can be found in the early days of flight. It was barely a century ago that the thought of man flying in the air was ludicrous – the fancy of science fiction writers and borderline lunatics. Who hasn’t seen the almost comical attempts at first flight: cardboard-winged men jumping off rocks and multi-winged monstrosities breaking in half as they taxied along a runway?

And then came good old Wilbur and Orville. They had a different idea; one patched together with wood, fabric, wires and surplus bicycle parts. It was a fragile and precarious craft, one that today’s pilots say shouldn’t have been able to even fly. But it did. On that fateful day in December, the Wrights took to the air, setting in motion a transportation revolution that continues to change the world today.

The Internet is like that Wright Flyer. It isn’t very sophisticated. In many ways, it’s downright primitive and a wonder it even works. The pioneers of the Internet came up with some ideas for changing the way we connect and communicate. Like the early airplanes, some of these ideas were brilliant while others were inane. Some daringly took flight while others crashed and burned.

Like other watersheds of innovation – the airplane, the automobile, telephones, radio or television – the Internet is still growing and developing. Over the years innovation hasn’t changed. Only our expectations of it have.

If we were to apply our Internet logic to the early days of flight, it wouldn’t have been Wilbur and Orville taking their dreams to the limit. Leading the way would have been a "twenty-something" MBA grad with a good PowerPoint telling investors that he could take that same wood, fabric and cable and build a 777 back in 1903.

Sounds stupid, huh? But yet that’s what we all expected of the Web. Instant riches. The death of bricks and mortars. New money where none existed before. The new Gold Rush.

And, of course, like those early pioneers of flight, many of us fell flat on our faces.

So if the post "dot-bomb" environment, why should businesses still funnel resources to the Internet. How does it fit into today’s marketing and communication strategies?

The answer lies in the same entrepreneurial spirit that first led us to the air nearly a hundred years ago.

For every highly visible failure of venture capitalized start-ups in the Golden Age of Dot-coms, there are many smaller operations blazing new trails to redefine how their businesses operate. These companies make a profit because they have to and because they don’t have huge public relations-generating machinery behind them to fuel expectations. And they’re claiming the territory that the highly publicized dot-bombs left behind.

A good example of this is evineyard.com. In the early days of selling wine online, Wine.com and WineShopper raised approximately $200 million. Their strategy was to sell wine with via highly publicized "partnerships" with distributors. Their 1% profit margin would be offset by volume, a strategy lifted from the grocery business.

eVineyard.com took the slow route, seeking liquor distribution licenses in 38 states. With only $21 million in capital, the company couldn’t afford the partnerships or the bells and whistles of a media blitz. It simply went about executing its own business strategy, which was based on becoming a distributor in states that allowed wine shipments. This allowed them to have the higher margins distributors enjoyed: 38% instead of wine.com’s 1%.

Seeking to stimulate greater investment, wine.com and WineShopper merged in August 2000. By spring 2001, the merged entity crumbled, laying off its work force and shutting its doors. In April the company’s domain name, customer lists and site content were picked up by eVinyeard for somewhere between $1 and $10 million.

Wine.com gambled that eyeballs would turn into sales. It was a fatal miscalculation that played right into eVineyard’s hands.

This same scenario is being played out over and over by other companies as well. Contrary to what the pundits predicted not so long ago, the Internet didn’t become the exclusive playground of those who were first to market in a category. There’s plenty of room for companies with great ideas to carve out a niche in the marketplace.

Take netflix.com, for example.

Netflix.com is a San Jose, California company that does one thing but they do it very well: they rent DVDs.

"So what?" you say. So does the corner video store.

But netflix.com’s 500,000 plus devoted customers have discovered the simple beauty of their business plan. For as little as $19.95 a month, you can have three DVDs out at a time from the company’s10,000 + collection. Keep them as long as you want – there are not late fees. When you’re through, simply send it back using the postage-paid return envelope and they’ll ship you the next moving on your list. You can watch as many DVDs as you want. For true videophiles, the service offers plans that range from as few as two movies out at a time to eight.

As one who’s been bitten multiple times by excessive late fees at my neighborhood video store, I can’t tell you how much I love netflix.com’s service. I can take them with me on the road, watch them while I wing my way across country, and pop them in the mail anywhere for one low price.

The strategy is simple. The execution perfect and customers just keep coming because the company offers a valuable customer service and fills a void in the marketplace.

Sure, the Internet is still in its infancy. There will be many more success stories to share. And there is still plenty of room for innovation for those entrepreneurs that have the drive and the moxy to pursue their idea. The big boys didn’t kill off the little guy. They simply paved the way for those of you with great ideas that are willing to learn from the mistakes of others.

Wilbur and Orville would be proud.


By Robb Zerr, EIEIO – Mister Know-it-All
CommuniCreations, Inc.

Robb Zerr is Mister Know-it-All at CommuniCreations, an award-winning creative agency providing clients worldwide with innovative and creative solutions in an increasingly templated world. CommuniCreations’ services include digital video development, graphic design, online marketing counsel, writing, web design and on-demand creativity consulting. The company is based in Port Orchard, Washington, a rear view mirror community looking back at Seattle across the Puget Sound.