Mark Tran
`People laughed at us when we told them that Yahoo! would be worth more than Netscape – `they’re just a bunch of kids’, we were told,” recalls Andrew Nibley, president of Reuters New-Media, a subsidiary of the British news group created in 1994 to position the company for the Internet age.
Nibley, who used to be a Reuters reporter in Washington, can be expected to cite the contrasting fortunes of Yahoo! and Netscape next week when he delivers the second Reuters Annual Lecture at Kent University, entitled The Internet Gold Rush: Winners and Losers.
Yahoo! began life as an Internet search system – a directory for the Net – and is now seeking to cash in on its status as the world’s most popular website by transforming itself into a “portal”, or gateway to the rest of the Web, providing services ranging from personal finance to shopping and news.
Netscape, the company that rose to prominence with its Web browser, Navigator, is now fighting for survival under a determined onslaught from software giant Microsoft, and its rival program Internet Explorer.
By moving into the same field, says Nibley, Microsoft is sucking out the oxygen of the market for Netscape.
This was the main reason why Netscape last month formed a new division to run its Netcenter website. The company’s plan is to cash in on the huge number of users who still begin their surfing sessions at its site by offering and charging for extra services such as news, information and commerce – particularly for business users.
Profits remain elusive for companies trying to make money from the Internet, but that has not prevented corporate giants, such as Time Warner and Microsoft, and upstarts, such as Amazon.com, the online bookseller, and Excite, another search engine, from taking their chances.
The signs are that electronic commerce will take off this year with more people willing to use the Net to buy everything from books and CDs to computers and holidays. Online sales are projected to reach R24-billion this year, double that of 1997, according to Forrester Research, based in Cambridge, Massachusetts.
“The early users liked to surf a lot, but most people don’t have a lot of time,” says Nibley. “Most work hard and play hard. They’ll use it like a utility – that’s where the Internet is headed.” Early winners include companies selling computers and other high-tech equipment. Dell Computer is the leader in computer sales via the Web, with sales averaging R15-million a day, but other lesser known names such as NECX, a reseller in Peabody, Massa-chusetts, are also thriving.
Travel is another hot sector, with the sale of airline tickets, hotel and car reservations booming. Preview Travel, Travelocity and Microsoft’s Expedia are doing good business. By 1999, travel is expected to be the number one electronic commerce category, with R14-billion in total sales, according to Forrester.
While companies like Yahoo! and Amazon.com have grabbed media attention, small outfits have also done surprisingly well. Half of Web businesses with 10 or fewer employees were profitable last year versus just a quarter of those with 51 or more employees, according to a recent survey by research firm ActivMedia, in Peterborough, New Hampshire.
Small entrepreneurs have enjoyed a higher success rate than bigger firms by peddling niche products, launching a Web business for as little as a few hundred dollars and tapping into small but numerous markets spread across the globe.
British expatriate Steve Warrington, for example, has established himself as the Web’s ostrich king. Operating from Elmwood Park, Illinois, Warrington sells ostrich meat, and accessories such as feathers and leather.
Those companies that create a niche early on, and manage their affairs properly will be winners, asserts Nibley. “The winners will be people who develop unique content, preferably leading to transactions,” he says. “They will be doing strategic deals and alliances that will bring enough viewers to their content.”
In the case of Yahoo! and Excite, both have been working since their inception to become more than Web address books. Now they want to become self-contained domains, offering an array of services to keep people lingering and coming back.
“We think of ourselves as a media network these days,” says Yahoo! co-founder Jerry Yang.
Nibley acknowledges the move: “These search engines will do well and may well get acquired,” he says. “They have the eyeballs and it’s an all-out race to capture eyeballs. The numbers for the Net will be incredibly large compared to previous media, much greater than TV or radio.”
Thus America Online provides a model package of news, personal finance, entertainment, travel, weather, sports, health and women’s issues, an increasingly popular area.
As the race to attract customers hots up, Nibley gives the advantage to the big companies like Rupert Murdoch’s News Corporation, Disney and Microsoft. They have brand names, deep pockets and they will squeeze the new players.
While Amazon.com made a big splash by becoming the world’s largest online bookseller, it has yet to make any money and will now face the might of Barnes & Noble, the giant book retailer.
Microsoft, as Nibley points out, doesn’t just produce content through MSNBC, its 24- hour cable news venture, and its Webzine Slate. It has also invested in the “pipeline” through stakes in cable company Comcast, buying WebTV Networks – the company that developed the system for displaying Web pages on a TV – and investing in Teledesic, a R4-billion scheme to create a communications satellite network designed for delivering high-speed Internet access.
Nibley thinks the Internet could be the salvation for cable companies as they can provide the high-speed connections users will increasingly need and demand. Others involved in building the Internet backbone should also benefit, particularly telecommunications companies.
Companies that have anything to do with providing online security and privacy systems should also do well, and firms such as Internet Security Systems have seen their share price soar in recent days.