(written in 1996)
is big. Really big. Spilling onto the desktops of millions of people,
gathering more news coverage than your average natural disaster, the
Internet siphons bits from the most remote pockets of the globe. But
no matter how big it seems today, tomorrow the net will be even bigger.
Doubling every year since the late
1970's, today's 30 million surfers will grow to 60 million in 1996,
120 million in 1997, 240 million in 1998 and a globe girdling 480 million
image reproduced with permission from http://www.cybergeography.org/atlas/atlas.html
fearless abandon, Nicholas Negroponte, director of MIT's Media Lab,
in the June, 1996, issue of WIRED magazine that the Internet
will boast nearly one billion users by the year 2000!
why stop there -- why not extrapolate a third decade of unbroken growth?
Well, for one thing given current growth rates, by 2003 there will be
more people surfing the net than living on the planet. For another,
in 2001 (when there is nearly half as much Internet as people), the
next four billion users thoughtlessly live a day's journey from a phone.
As much as I enjoy peering into our collective electronic psyche, the
next two billion users might prefer eating over navigating the web.
growth is real, but so are limits to growth. A single bacteria dining
on a vat of sugar water can double every hour until it's progeny run
out of food. Even if you aren't fluent with exponential growth, common
sense dictates if you start with 100 pounds of sugar water and one bacteria,
you can't rear more than 100 pounds of bacterial offspring.
if you want to estimate how many people could possibly attend a Swirlies'
concert, you might extrapolate ticket sales from the last few year's
performances. But no matter how many people like their music, realistically
you can't sell more tickets than actual concert seats.
to surf the net you must have a seat at a computer. As long as there
are fewer surfers than computers, it's a day at the beach for Internet
growth. But the number of PCs are growing by about 17% a year, while
the number of web surfers are exploding at about 200% a year!
that's 17% at best; in reality only 7-10% a year are sales of PCs to
new users. The remaining PCs are replacements for out-of-date hardware
or a second machine for the kids. And a mere one in four computers is
connected to a network.)
something's got to give. By 1998, when there are more surfers than surfboards,
the net's growth will be terminally limited.
problem, you say, all we have to do is invent some other device to surf
the net instead of a computer. And since computers are expensive and
frustrating, might as well make them cheap and simple to use at the
same time. (Hmmm, wonder why nobody thought of that before?)
every PC sold, ten appliances like TVs, radios and cellphones are shipped.
So, why not slap some software and a modem in a TV, and watch the market
explode? Netscape browsers in every new car! Microsoft Explorers in
every phone! Internet appliances in every TV!
Internet appliances eventually catch on (and there are sound underlying
social and economic reasons to think they won't) there are limits to
how fast any new electronic gadget can be adopted. Earlier networked
devices, like color TV's or cellular phones, took over a decade to reach
10 million units -- even VCRs took five. Which means even the most attractive
internet appliances can't short circuit the collision of '98.
we can't get more devices into people's hands, perhaps we can get more
hands onto the same number of devices. In the early days of the telephone
and telegraph, small stalls popped up on every street corner selling
communications services. Even today, community phones are a common sight
in emerging countries.
you might imagine a hundred people sharing one computer, surfing the
net to see the world or bring down a local dictatorship. Community centers
might serve up an e-zine with the morning coffee. Schools could put
each student on line for their shot at fifteen minutes of fame. With
sharing, a few hundred million people might touch the hem of the Internet
before the end of the decade.
wandering down to the corner stall for a daily fix of e-mail and hot
links isn't the total immersion experience we think of as Internet access.
You need time, disposable income and a computer. And this distinction
matters. It matters to the people with money.
you expect advertisers to subsidize on-line costs as they do with toll-free
numbers and TV, expect them to get a lot more excited if they can reach
a billion active users rather than one hundred million tourists. If
you expect Internet programmers to stay up through the night, abandoning
all hope of a normal life to build the latest cool site, you must lure
them with the promise of unimaginable wealth. And the best source of
unlimited wealth is the stock market of the 90s.
the 60s the market backed solid, dependable blue chip stocks which yielded
safe, consistent dividends. In the 70s the market was stagnant while
the country reexamined its priorities, and in the 80s junk bonds gave
non- traditional companies a new infusion of cash. This cash ignited
a fire storm of innovation and real stock appreciation. But in the 90s
people started packing for Pluto, searching for a market rooted outside
the grimy world of profit and loss, for one orbiting a virtual space.
A universe where profit, even the prospect of sales, is irrelevant.
The ultimate triumph of mind over money, the 90s are the era of concept
launch a concept stock, cook up an idea over late night pizza (say,
the first Internet virtual reality/bowling alley/laundromat). Then hack
together a prototype, put it up on the net, and wait for the venture
capitalists to descend. And descend they will -- the market is flooded
with baby-boomer cash just crying for a good time. Bring the concept
public in an IPO and watch the money roll in. No customers required,
of course, not even a plausible revenue stream to justify the stock's
astronomical value -- why bother when the concept sounds so good? And
this gold rush, this South Sea Bubble, will burst when the net's
growth is a more reasonable 25 percent a year.
here's my prediction. Sometime around the middle of 1997 the market
will wake up, alerted up by the deafening sound of imploding Internet
appliances. Articles heralding the demise of the web will soon fill
the papers like so much soggy fish and chips. Concept stock prices will
plummet, even though a hundred million people are still out surfing
the net. And a new paradigm will emerge.
market in the last 30 years has shifted from steel to services to speculation.
The next step is clear -- the watchword for the double-zero's decade
will be Eureka stocks.
of investing in a product or a service, you'll invest in people who
might someday have a good idea.
could buy a share in Jim Clark Commodities. He'll take your money
while you wait for him to have a good idea. The stock rises when Jim
is observed staring thoughtfully into a spectacular sunset; it falls
on a report that Jim is having trouble deciding what to eat for dinner.
Mutual Funds. Huizenga Hedges. Diller Derivatives. No messy
customers. No pesky balance sheets.
in this world nobody ever asks if there are enough surf boards to catch
the next wave.
Blonder is a scientist in the communications industry. He works with
computers all day long and enjoys their company. Really.
can be sent to author here