Digital Marketing CyberTrends

Professor John M. McCann
Fuqua School of Business
Duke University
Additions to this document since March 25, 1997 are preceded with the icon.

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• Rise of the Gift Economy
• Rise of Interactive Marketing
• Rise of Particle Marketing
• Rise of Electronic Commerce
• Rise of the Locationless Marketing Function
• Demise of Old Media
• Rise of Mass Customization
• Demise of the Middleman
• Rise of Disintermediation
• Rise of Cybermediaries
• Rise of Electronic Department Store
• Rise of the Cyberbank
• Supermarket as Network
• Do Consumers Know What They Want?
• High Prices for Web Services
• Who’s On the ‘Net?
• Advertising on the Internet
• Focus on Your Customers' Value-Creating Processes
• Rise of Video-on-Demand
• Rise of Price Competition
• Demise of the Traveling Salesman
• Rise of Meta-Information
• Rise of Online Marketing Services
• Rise of the Virtual Tradeshow
• Rise of Internet Time
• Rise of the Internet Auction
• Rise of Webonomics
• Rise of the Global Shopper
• Demise of VP of Marketing
• Rise of the Universe-of-the-Moment
• Rise of Web Selling
• Rise of Service Mobility

Rise of the Gift Economy

• "The sense I get of who wins and who loses is that the companies that are basically generous win where generous leads, prosperity tends to follow on the net. ... Generosity means on the net the nature of how it's grown over 25 years is, is basically a gift economy. It hasn't been an economy economy with money changing hands up til now. But it's a thriving world of 30 million people. What are they doing, they're giving each other information so that's the nature of transaction on the net now. For a company or business to get into the net, they need to join that way of doing things and so typically it means giving away software as the people that are now in netscape did by originally giving away mosaic. It means often giving away content. Many authors now reporting full chapters or even all of their book on the web and this is treated as advertising so then what actually do you get paid for? You get paid for other things that emerge later. Personal relationships, authentication, follow up support, some kind of thing that happens outside of the net that is a transaction. So if I put part of a portrait I'm writing on the net and people are intrigued by that, they may go to a book store and buy the actual finished book."
  Source: Stewart Brand, Interview on June 15, 1995 for PBS Frontline

• "What you're really trying to do is harness the collective brainpower of the Net in the service of your product. The old idea was that the only people who could help you invent new things were people inside your company. On the Net, you can invoke the talents of people worldwide, 24 hours a day, who are doing it out of love--doing it just to do it. You don't have to know their names; they're on the Net. You don't have to pay them; they're on the Net. They work all the time; they're on the Net all the time. The Net doesn't let you do away with your vice president of engineering, but it does change the job. The VP of engineering becomes a conductor and an explorer who looks for advanced work around the world and how to incorporate it into your product. The Net becomes the foundation for a vast acceleration in product development. It's the goal of the new fast company: instant communication with people you've never met, to create something of value that becomes the heart of a business."
  Source: John Gage (Chief Scientists at Sun Microsystems), "The Network is the Company," Fast Company, April/May, 1996

Rise of Interactive Marketing

• "The Internet, especially that portion known as the World Wide Web, has the potential to change radically the way businesses interact with their customers. The Web frees customers from their traditionally passive role as receivers of marketing communications, gives them much greater control over the information search and acquisition process, and allows them to become active participants in the marketing process. However, significant adoption barriers to commercialization preclude predictable and smooth development of commercial opportunities in this emerging medium. Commercial development of the Web must follow the demand ("demand pull"), instead of being driven by "gold fever." Firms will reap the benefits of innovation in interactivity by being closer to the customer than ever before."
  Source: Donna Hoffman, Thomas Novak, and Patrali Chattergee, "Commercial Scenarios for the Web: Opportunities and Challenges," Journal of Computer Mediated Communications, Vol. 3, No. 1, December 1995

• "'The potential of the Internet for customer interaction and direct commerce is enormous, if not limitless,' said Kodak's Chief Marketing Officer and Senior Vice President Carl Gustin. 'To date, more than 19,000 guestbook interactions have taken place with customers, and more than 4500 other web sites are now linked to Kodak. As the world's leader in imaging, we intend to make images as easy to use in communicating as word processing. Indeed, we envision high- resolution images incorporated with the touch of a few buttons into a student's school report, a letter to a distant friend, and through e-mail. The Internet will help drive that challenge.'"
  Source: "Kodak's Home Page Enters Second Year," Business Wire article, February 8, 1996

• "Virtual grocery shopping is about to become a reality for Baltimore-area consumers, who will soon experience the only on-line grocery service featuring full-motion video. Metro Foods, a 12-store supermarket chain, this Nov. 1st will launch the innovative on-line grocery shopping system, SHOP4groceries -- the first to integrate CD-ROM with on-line technologies. The system was developed by Market Street Telemedia (West Chester, Pa.) and represents a departure from traditional text-based on-line shopping services. 'Metro Foods is re-defining the grocery shopping experience, offering consumers a totally new point-of-purchase -- the personal computer,' says Robb Buller, co-founder with Will Aherne of Market Street Telemedia. 'Working in alliance with brand manufacturers and progressive supermarket chains like Metro, Market Street has a rare opportunity to present shoppers with a tangible and proprietary point of difference.' Aherne says shoppers will be able to view videos of brand commercials as they 'shop,' interact with special displays and promotional offers, as well as experience the store's overall shopping environment from the comfort of their own homes."
  Source: "Virtual Grocery Shopping Set for Baltimore Debut," Business Wire article, March 12, 1996

Rise of Particle Marketing

• "In the post-information age, we often have an audience of size of one. Everything is made to order, and information is extremely personalized. A widely held assumption is that individualization is the extrapolation of narrowcasting -- you go from a large to a small to a smaller group, ultimately to the individual By the time you have my address, my marital status, my age, my income, my car brand, my purchases, my drinking habits, and my taxes, you have me -- a demographic unit of one. This line of reasoning completely misses the fundamental difference between narrowcasting and being digital. In being digital I am me, not a statistical subset. Me includes information and events that have no demographic or statistical meaning. Where my mother-in-law lives, whom I had dinner with last night, and what time my flight departs from Richmond this afternoon have absolutely no correlation or statistical basis from which to derive suitable narrowcasting services. But that unique information about me determines news services I might want to receive about a small obscure town, a not so famous person, and (for today) the anticipated weather conditions in Virginia. Classic demographics do not scale down to the individual. ... True personalization is now upon us. The post-information age is about acquaintance over time: machines’ understanding individuals with the same degree of subtlety (or more so) we can expect from other human beings." Source: Nicholas Negroponte, Being Digital, Alfred Knopf, 1995, p. 164

• "As microchips continue to shrink, the commercial implication should not be overlooked: Products -- and the companies that make them -- now have the ability to remember the tastes and preferences of individual customers. As a result, product marketing will soon be supplanted by relationship marketing. The ability to remember a customer, from one event to the next, is the primary requirement for sustaining an ongoing relationship, and will soon become the main reason why a customer will remain loyal to one product, rather than start over with a competitor’s. ... To profit from the incredible shrinking microchip, begin now to use information technology to incorporate memories of your customers into every conceivable aspect of your operation. Never make a customer tell you the same thing twice. ... Use microchips to learn and remember your individual customers’ needs, and you may just be able to create impregnable relationships."
  Source: Don Peppers and Martha Rogers, "As Products Get Smarter Companies Will Have to Focus on Relationships," Forbes ASAP, February 26, 1996, p. 69

• "Internet guru and veteran, Tim O'Reilly, of O'Reilly & Associates, spoke about Internet hype: 'I think at this time, we, the people who work in and on the Internet community, should realize several macro-trends. First, and most important of those trends, is that the Internet is not a mass medium. It is a peer-to-peer medium. People who see the Internet as a mass medium are in trouble. Once we realize that is it not a mass medium, we should begin to see the necessity of focusing on the right content for the right audience. This may mean content or discussion groups for only five or ten select people. The Internet cannot be everything for everybody. It is much like the world of publication. There are more than 50,000 books published each year and there are some 35,000 magazines available. Each one of these publications is targeted towards a specific audience and most of those audiences are very small. Success on the Internet is based on the same principle."
  Source: Patrick McKenna, " Internet Hype & Reality," Newsbytes News Network article, February 22, 1996.

Rise of Electronic Commerce

• "GTE officials say that the company's new CyberTrust electronic commerce program will allow companies for the first time to handle most of the CA (Certification Authority) function by themselves, by means of secure Web servers. ... The four new services from GTE are aimed at financial institutions, online merchants, and government agencies, as well as at the corporate and consumer markets, said Charles S. Walton, Jr., CyberTrust's program director, speaking at the Comnet press event. One component of CyberTrust, called the Electronic Commerce Service, will provide an "infrastructure" for credit card companies using new secure payment standards for online transactions, Walton added."
  Source: "GTE's CyberTrust For Web Electronic Commerce," Newsbytes News Network article, November 6, 1996

• "General Electric's GE Information Services division said it is launching a new set of hardware and software products that will protect business transactions over the Internet. One of the features of the new system, called "GE InterBusiness," involves using one-time use encryption codes for each online session. The new offering combines the one-time, or dynamic, encrypted session key, mutual authentication, and advanced firewall technology, officials said. By using standard Internet protocols, a user can conduct electronic data interchange, electronic messaging, and electronic file transfers via a secure "pipeline." Those three elements are key in both electronic commerce and GE Information Services' Business Productivity solutions."
  Source: "*GE Info Services Launches New Transaction Technology," Newsbytes News Network article, November 6, 1996

• " International Business Machines and Chase are developing a system to process car loans through the Internet, the New York Times reported Thursday. Auto industry officials predict that such a system will change how Americans borrow cash to buy cars and trucks, the paper reported. The system has been tested at a dealership in Hempstead, N.Y., and the companies hope to install the system at 100 dealerships by April and 200 by the end of the year, Jim Brew, president of Chase's auto finance unit, told the paper."
  Source: "IBM, Chase to Devise Internet Car Loans." Reuters article, February 7, 1996

• "The global computer network of the Internet is beginning to make radical changes in the way consumers conduct their economic, social, leisure and professional lives. Internet-based businesses are being launched for many consumer activities --from purchasing homes, cars and college educations to planning vacations and finding jobs. These "electronic communities" will redefine whole industries, channels of distribution and even the practice of marketing."
  Source: James Champy, Nitin Nohria and Robert Buday, "The Rise of the Electronic Community"

• "There is tumult in the personal computer industry, and it is due largely to one man: Michael Dell. By sticking with a direct-order selling model -- in which people buy goods directly from a manufacturer by phone, fax or, increasingly, the Internet -- Dell Computer has become the cause celebre of computer-dom. ... Dell, which racked up $7.8 billion in revenue in its last fiscal year, is shifting the battle in a significant way: It's made the Web a profitable and efficient way to sell products to home users and small businesses. It now sells nearly $2 million of products daily via its Web site. How much revenue does it want to flow over the Web? 'We'd like to see it all on line,' says Dell, 32, who famously founded the company in his college dorm room. 'Why not? It is the most effective transaction medium we can think of except mental telepathy.'"
  Source: James Kim, "Rivals Rush to Imitate Direct Sell," USA Today, June 30, 1997, p. B1

Rise of the Locationless Marketing Function

• "Networks alter the nature of work by disconnecting intellectual activity from physical location and enabling people of different skills, interests, and authority to cross barriers of geography, language, organizational loyalty, and specialization. This takes place in much the same way that the automobile disconnected shopping and work from residential neighborhoods.

  Take the name of any business function and add the adjective 'locationless.'

  • Locationless selling: selling that requires no actual store
    
  • Locationless inventory: inventories that need no warehouse
    
  • Locationless training: training without a classroom
    
  • Locationless management: management without headquarters
    
  Clearly the computer revolution has just begun."
  Source: Earnest von Simson, "Customers Will Be Innovators" Fortune Information Technology Special Report, Autumn 1993 pp. 105-6

• "The phenomenon of 'outside intranetting' -- giving third parties such as trading partners and customers access to the corporate World Wide Web site -- is picking up steam as companies explore more creative uses for their intranets. At their most powerful, intranets can be harnessed in this manner to create new types of organizations--virtual groups that convene for a specific purpose and time period and later disband once a project is complete. Case in point: the DMRC (Direct Marketing Resource Collaborative), a collaborative of marketing professionals and clients that is a division of WA Wilde Inc., a large, privately held direct-mail company based in Holliston, Mass. DMRC leveraged Web technology to invent a new way of doing direct-marketing business. Using only a skeleton crew of sales and administration professionals in Holliston, DMRC's work is primarily conducted online with more than 50 free-lance marketing associates interacting with potential clients over the intranet, bidding on jobs and collaborating on projects.
  Source: Lauren Gibbons Paul, "The Outside Intranet," PC Week, July 8, 1996

Demise of Old Media

• “Why do we need new media? After all, what’s wrong with the old media? Plenty. The vain and manipulative star-making machine is wrong. The shameless blending of news and entertainment is wrong. The mad scramble for ratings is wrong. The smug insider/elite-control-over-editorial-decisions stance is wrong. The basic premise of one to many, us-versus-them broadcasting of propaganda is wrong. Old media is wrong media. But be careful. Old media shouldn’t be confused with any specific technology. It’s an attitude, a cultural phenomenon. It’s a business model. It’s a cluster of industries. It’s a collection of assumptions about who we are, what we want, what we’ll pay for, and who should be in control. It’s top down. It’s big, rich, and well-connected. And -- it’s wrong.”
  Source: Mark Stahlman, “Why We Need New Media,” Information Week, July 17, 1995, p. 96.

Rise of Mass Customization

• "The old marketing concept was centered on a concept of mass production for mass markets. The new marketing concept calls for mass customization of products and processes to deliver value to customers as individuals, not as part of a mass market."
  Source: Fred E. Webster, Jr., Market Driven Management, Wiley, 1994

• "Mass production is giving way to mass customization. The new tools allow us to customize for large masses of people. Production for the masses isn't dead. It has just been changed dramatically to encompass tailoring at blinding speeds."
  Source: Tom Peters, Liberation Management, Alfred A. Knopf, 1992

• "The corner store can become a global store, multiplying itself electronically. And retail giants can become corner stores. ... Micro-marketing on a macro-scale."
  Source: JoAnn Stone, "Buyers in the Driver's Seat," Perspective, Spring 1994

• "Marketing will be shifting, in large measure, from being a mass vehicle to becoming more of a one-to-one interactive paradigm. Advertising will increasingly become requested from the consumer as opposed to being directed by the marketer."
  Source: Peter Sealy, quoted in Advertising Age, March 13, 1995, p. S-28.

• "Today we are passing through a technological discontinuity of epic proportions, and most of us are not even remotely prepared. The old paradigm, a system of mass production, mass media, and mass marketing, is being replaced by a totally new paradigm, a one-to-one economic system. The 1:1 future will be characterized by customized production, individually addressable media, and 1:1 marketing, totally changing the rules of business competition and growth. Instead of market share, the goal of most business competition will be share of customer -- one customer at a time."
  Source: Don Peppers and Martha Rogers, The One to One Future: Building Relationships One Customer at a Time, Doubleday, 1993, p. 5

• "Everything you do with chips should serve this larger goal: creating customer value. This is what chips enable; inexorably, this will be the next competitive battlefield. Companies that learn to produce in volume while using chips to adapt each product to the needs of single customers will have a nearly insurmountable advantage. ... Don't assume that mass customization works only for complex products. You really can mass-customize dog food and potato chips. ... According to Frances X. Buckman, formerly senior vice-president of the George Group, ... 'thanks to new chip-based manufacturing and control technologies, you no longer need to make, say, a 5,000-gallon drum of detergent. Now you can make a small jar of the stuff just as cost-effectively.' Microproduction takes advantage of this latter trend through what Buckman calls 'mass deployment': moving production out to local sites, even to the retailer. Translation: It isnow possible to make fresh potato chips or dog food in small machines right at the supermarket or pet food store, with the exact ingredients, product size and volume the customer desires. Want half the usual caffeine in your Coke? Prefer your Doritos in an 8.5 ounce bag? Does your Pekingese eat only small-sized kibble? Soon, stores will be able to fill your customer orders."
  Source: Michael S. Malone, "Chips Triumphant," Forbes ASAP, February 26, 1996, p. 55

Demise of the Middleman

• "Today some 70 percent of the costs of a film go to distribution and advertising. In every industry -- from retailing to insurance -- the key impact of the computer-networking revolution is to collapse the cost of distribution and remove the middleman. The movie business is now mostly middlemen. In an information industry such as the movie business, distribution costs will predictably plummet. Anyone with access to the information highway will be able to distribute a film at a tiny fraction of the current costs. ... Personal computers will not only pulverize the costs of distribution; they will also drastically diminish the costs of actual film production. ... Just as digital desktop publishing equipment unleashed thousands of new text publishing companies, so the new digital desktop video publishing systems will unleash thousands of new filmmakers."
  Source: George Gilder, Life After Television, Revised Edition, W. W. Norton and Company, 1994, p. 203.
  Interesting site: Reel Access

• “A company’s move into the digital future will be at a speed proportionate to the conversion of its atoms to bits. (Note: the author is using the word atoms to denote physical objects and the word bits to denote their digital representation.) Videocassette rental is an example since these atoms could be become bits very easily. ... When information is embodied in atoms, there is a need for all sorts of industrial-age means and huge corporations for delivery. But suddenly, when the focus shifts to bits, the traditional big guys are no longer needed. Do-it-yourself publishing on the Internet makes sense. It does not for paper copy."
  Source: Nicholas Negroponte, “Bits and Atoms,” Wired, January 1995, p. 176.

• "What need is there for a film-distribution company when Al Pacino can rent space on a satellite network to beam his new movie to 3,000 theaters?"
  Source: G. Christian Hill, "Look! No Wires! The Cord Has Been Cut, and Communication May Never Be The Same," Wall Street Journal, Feb. 11, 1994, Sec. R, p. 1

• "Advances in communications and information technology are cutting out the traditional middleman in a growing number of transactions. ... Consumers are increasingly seeking out new sources of goods and services; that is no longer news. What is news is that they are bypassing traditional delivery channels -- corner drugstores, doctors' offices, the mass media -- in their search for quality, savings, convenience, and personal fit in all products and services."
  Source: Edith Weiner and Arnold Brown, "The New Marketplace," The Futurist, May/June 1995, pp. 12-16.

• "Clarion makes stereo equipment for cars of course, but also color LCD display and camera and so forth for RV rear view systems. They have a lovely web site, where you can order nothing. They try to refer you to one of their ‘dealers’ near you. This is clueless beyond the hen. I’m on their web site, with Master Card akimbo, and they want me to go away. The reason is a large network of middlemen that they went to some trouble to get to carry their products. But as the Web matures, they’re extra baggage. I want to go to Clarion and order the parts. Some other vendor will figure this out, and steal a lunch on this company in rather short order. But it collapses the distribution systems of the world, and eliminates millions of middlemen from the process. Whenever I describe this, I get some variation of the necessity of the ‘shopping experience.’ Balderdash. It would have to be a very different shopping experience than I’ve been getting here in the Denver area. And it will work for almost everything from pizza to large diesel rigs. A local car dealership put up a web site with the intent of luring people into their show rooms. They’re doing 50 cars a month now directly over the web – many of them are people BUYING a car on a CREDIT CARD. As it turns out, a LOT of us don’t really have any fascination with the ‘buying experience’ of spending three hours talking to a moron about what his ‘manager will go for’ on an asphalt prairie full of cars.”
  Source: Jack Rickard, Publisher/Editor, Boardwatch Magazine, May 1997, p. 11

Rise of Disintermediation

• “Look at manufacturing, undergoing a vast disintermediation as globalization, advances in logistics, computer-aided design, and warp-speed communication permit companies to outsource factory work--the very work that defined them in decades past. U.S. automakers today make fewer than half their parts; Chrysler outsources two-thirds. It's an exaggeration, but not an outrageous one, to say that the Big Three are chiefly design studios and marketers. The increasing value of information--source of at least three-fourths of value-added in manufacturing, by the estimate of James Brian Quinn of the Tuck School at Dartmouth--has changed the nature of manufacturing. Shoemaker Nike makes no shoes; its work is research and development, design, marketing, and distribution--all services. Order a pair of custom Levi's: Is this tailoring or manufactured duds?”
  Source: Thomas Stewart “A New 500 for the Economy,” Fortune, May 15, 1995,

• “Interactive technologies threaten massive value destruction, especially for large, well-established companies. As multimedia technologies provoke technological, market, and competitive discontinuities, they will inevitably alter the set of skills needed to compete successfully. ... The threat of value destruction is not limited to the providers of traditional media products and services. It will rapidly spread to ‘user’ industries as well. Media-reliant industries like consumer financial services and retailing should not ignore the long-term effects of multimedia technologies on their business. ... As more information becomes available to customers, these technologies threaten widespread disintermediation. Any business now serving as an intermediary between a product or service supplier and a final customer could be at risk. ... Equally important, the availability of higher quality information at lower cost will also tend to boost commodity-like competition in many product categories, thus squeezing profitability and generating more consumer surplus.”
  Source: John Hagel III and Thomas R. Eisenmann, “Navigating the Multimedia Landscape,” The McKinsey Quarterly, No. 3, 1994

• “Systems like THOMAS, which give direct access to government information, takes the media out of the middleman interpreting the public process. I think it gives the public the right to choose where they get their information. If you study the history of print media, its role has been to interpret events and offer opinion. The word ‘news’ is being redefined by the technology. With on-line services, people can personalize their definition of news. You can be more topic-specific about what you choose to consume in the way of content. The technology empowers viewers to determine what they want to know, rather than have that packaged by someone else. I that is powerful and a very important and fundamental shift in how news and information is distributed.”
  Source: Don Jones (telecommunications advisor and the person most responsible for THOMAS, the Congressional Web site), quoted in Jeff Ubois, “Newt’s Net,” Internet World, August 1995, p. 48.

• “The information superhighway holds dramatic implications for businesses that rely on salespeople. Cyberpunks turned cyberyuppies will figure out that their superior knowledge of intricate electronic networks enables them to create businesses with few fixed costs and little or no real estate or bureaucracy. Through the process known as disintermediation (a fancy term for cutting out the middleperson) cyberyuppies will rock entire industries with their technical know-how by offering new sales and distribution mechanisms through online services. Cyberyuppies, by bypassing sales agents, will be able to significantly lower the sales and general administrative costs of conducting business. Those executives who resist embracing interactive marketing because of their attachment to their salespeople will undoubtedly endanger their market position to cyberyuppies -- the new entrepreneurial elite.”
  Source: Michael Spalter, “Here Come the Cyberyuppies,” Futurist, May/June 1995, p. 20.

• “Once upon a time companies in need of capital would turn automatically to the banks. No longer. Many more companies nowadays take their borrowing needs direct to the capital markets by issuing short-term promissory notes, known as commercial paper. ... What lies behind this sharp reduction in bank lending? Banks once monopolised knowledge about borrowers, and therefore about the risk that extending a loan to them would entail. Computers have made much of this knowledge cheaply available to all investors, diminishing their need to work through a bank. At the same time, changes in information technology have brought about changes in financial technology. The one that has particularly damaged the position of banks is the process know as securitisation. This consists of converting individual liabilities and assets into financial instruments that can then be bundled together and traded in a marketplace. ... securitisation is ... an alternative system to banking, and an intrinsically more efficient one. ... Hence those long faces in banking’s boozeless boardrooms. The process of financial ‘disintermediation’ (cutting out the middleman, in plain English) continues to accelerate.”
  Source: Peter David, “Exit the Middleman,” Economist, April 30, 1994, p. ss6.

• “Disintermediation is a major way for individuals to maintain a standard of living in a contracting economy. It consists of any direct transaction or exchange of goods or services that bypasses someone typically involved in such a transaction. There are many signs that the US is moving from a more intermediary to a more disintermediary economy. ... Individuals and corporations are changing their strategies to cope; in the end, it will be the individual who rises.”
  Source: Paul Hawken, “Disintermediation: Cutting Out the Middleman,” Modern Office Technology, August 1985, p. 16

• “In the US, there are 2 overlapping economies -- the economy of mass production and consumption of material goods and the new informative economy that reduces the amount of material consumed by raising the intelligence and information contained in goods and services. The informative economy will not replace the mass economy, but it will absorb and include the mass economy as it evolves. During the course of the evolution, there will be disorder because the activity of economic components must change behavior, movement, and pattern. One aspect of the informative economy is disintermediation, which is any direct transaction that bypasses a middleman, professional, or specialist. Disintermediation can mean a change in which the production of goods or service is more closely integrated with consumption.”
  Source: Paul Hawken, “Post-Industrial America -- The New Di-Economy,” Marketing Communications, March 1987, p. 43.

• "What does IBM chief Lou Gerstner think about the future? ... The IBM chief proposes doing away with existing product distribution models altogether, as you’ll be able to upgrade software effortlessly over the network. As networks -- including the Internet -- are used more to reach customers directly, the companies between suppliers and buyers ‘will be on very dangerous ground,’ he warned." Source: Sebastian Rupley and Carol Levin, “The Next ‘Next Big Thing,’” PC Magazine, January 23, 1996, p. 31

• "Online Interactive Inc. said it has signed an agreement with Microsoft Corp. to electronically sell and deliver selected Microsoft software via the Internet."
  Source: "Download Microsoft Products From the Internet," News Byte article, January 16, 1996

• "A planned community being built by Walt Disney Co. in the sawgrass of central Florida will be the site of a novel experiment in on-line medicine. In Disney's Town of Celebration, up to 20,000 residents will be connected through home computers to the physicians, hospitals and other healthcare providers who look after them. If it works, the venture may take the idea of managed healthcare to a new level, while also raising some difficult questions about patient privacy and psychology. ``It's pushing the envelope of health empowerment,'' said Des Cummings, chief executive of Celebration Health, a venture joining Disney's Celebration Co. with Florida Hospital, a not-for-profit hospital in Orlando, Fla., and two subsidiaries of drugmaking giant Eli Lilly & Co. ``We are allowing the patient to access the overall information system to manage their own health,'' Cummings said."
  Source: Kevin Drawbaugh, "Disney town to test on-line medicine," Reuters article, February 11, 1996

• "The power now possessed by the media consumer is a heady change from what was once the most passive partner of the Old Media, in which marketer, medium, and audience knew their roles and stuck with them. ... It was a cozy threesome, with marketers on one side and compliant audiences on the other, and the medium in between, mediating the relationship between the two. By fulfilling that crucial role, each medium (especially broadcast TV) matured into a powerful, corporate form. But a funny thing happens to this happy arrangement when the media universe fractures. Media ceases to mediate. ... In cyberspace, content is a conversation in which the audience gets first byline. And merely by negotiating a Web site, a computer user becomes an editor, creating a completely personalized ‘publication’ for his individual entertainment."
  Source: Debra Goldman, “The Shape of Things to Come,” Adweek, MQ/September 18, 1995, pp. 5-42

• "IF BUYING a new car gives you about as much pleasure as scheduling a root canal, take heart. Computer technology, modern merchandising, and old-fashioned entrepreneurial spirit are about to put traditional car dealers--among the most hated business people in America--on the endangered species list. Already about one in ten buyers has discovered how to bypass the dealer. They get their cars through warehouse clubs, credit unions, affinity buying groups, and other third parties who do the dirty work for them. Or they go to auto superstores that sell at a fixed price, offer money-back guarantees, and don't pressure customers. Still others shop for a car--and actually make a purchase--with a computer (see box). The information superhighway, it turns out, goes right past a car dealership. A long-overdue revolution in auto retailing has arrived. Years after Wal-Mart upended general merchandise retailing and Home Depot annihilated the local hardware store, the auto industry is joining the modern age. Says J.D. Power III, founder of the consulting company that bears his name: "Car dealers may go the way of other local retailers in groceries, home appliances, travel, and a host of other businesses." Nearly everyone will benefit. New distribution channels mean that manufacturers will become more efficient and more adept at pleasing their customers. Customers will get the cars they want faster, with less hassle. Surviving dealers will be able to do business like normal merchants rather than like sharks fighting over the same piece of flesh."
  Source: Alex Taylor III, "How to Buy a Car on the Internet," Fortune, March 4, 1996

• "Shell calls the stations 'satellite' facilities; detractors call them 'ghost stations.' Shell Oil is testing gasoline stations with no attendants. ... At the Shell Express stations, motorists put their money, debit card or credit card in the pump before gassing up. Video cameras monitor activity. An intercom lets motorists talk to a person at a nearby Shell station if help is needed."
  Source: Earle Eldridge, "Video Camera Only Attendant in Shell Test," USA Today, April 29, 1996, p. A1

• "Discount airfares you won’t find anywhere else are popping up on the Internet. ... Starting Wednesday, American will sell fares on 20 routes that are as much as 70% below the lowest fares you would be quoted if you called a travel agent or American’s 800 number. ‘Every major airline is looking at this,’ say Julius Maldutis, Salomon Bros. analyst. ... Besides filling empty seats, Maldutis says airlines want to cut distributioin costs by selling directly on the Internet instead of through travel agents. Distribution costs -- which include travel-agent commissions and computer reservation system fees -- account for nearly 20% of airline operating expenses."
  Source: Donna Rosato, "Airlines Turn Internet into Discount Haven," USA Today, May 7, 1996, p.B1

• "Over the past twenty-something years, apart from medical revolution and the microprocessor revolution, the most significant thing to happen to the world has been the ability to take mass out of production. ... The inventory-to-sales ratio of the whole industrial world has dropped like a stone during the last two decades. ... The Internet is going to make it very difficult for anybody in a middleman position to stay in business. I cannot imagine how you can sustain any kind of a price premium when you'll be able to send an intelligent agent out to go price shopping from Bombay to Boston. The same type of effect that Wal-Mart had in the retailing sector - that's what the Internet is going to do to every business."
  Source: Fred Smith, CEO of Federal Express, quoted by Todd Lappin, "The Airline of the Internet," Wired, December 1996

• "Check cashers, who have cruised for decades on the berm of the financial system, are in danger of being driven off the road by electronic banking. Come January 1999, the U.S. Treasury will have to make all of its payments, except tax refunds, electronically. Private businesses are expected to join the switch, amking automatic payroll deposits into bank accounts. That leaves check cashers, who main source of income is inprocessing paper checks, at risk of losing their flagship business."
  Source: Patricia Lamiell, "Reality Check: Check Cashers Face Electronic Competition," Durham Herald Sun, September 28, 1997, p. F1

Rise of Cybermediaries

• "Call them the cybermediaries: the intermediaries of tomorrow. They are the Internet participants who leverage today's Net technologies to streamline transactions between producer and consumer, collecting a fee in the process without taking ownership of the product. Forrester Research calls them Internet Transaction Brokers (ITBs) and, in its opinion, the Internet cries for their participation. In fact, large-scale commerce will not happen without ITBs. ... Large-scale Internet commerce will depend on the mediating influence of the salesperson to draw producer and consumer together and execute the transaction. The middleman function isn't going to disappear because it's a necessary condition, in the view of Forrester, of being defined as an ITB. It just won't be in the form of the traditional salesperson."
  Source: John Berry, "Death of a Middel Man," Internet World, March 1997

• "The existence of cybermediaries is consistent with traditional marketing theory, which views intermediaries as organizations that support exchanges between producers and consumers, increasing the efficiency of the exchange process by aggregating transactions to create economies of scale and scope."
  Source: Mitra Barun Sarkar, Brian Butler, and Charles Steinfield, "Intermediaries and Cybermediaries: A Continuing Role for Mediating Players in the Electronic Marketplace," Journal of Computer-Mediated Communication, December 1995

Rise of Electronic Department Store

• "AmeriShop Corp., utilizing its unique merchandise distribution system of over 250,000 brand name products, is on the threshold of an evolving new era in merchandising, which will revolutionize the way merchandise is marketed and distributed to consumers. ... AmeriShop is developing 'online'access to its merchandise data base electronically linking the consumer to the manufacturer via the Interenet's World Wide Web. ... For an annual or monthly fee, customers will have the ability to comparison shop, browse, or purchase products from AmeriShop's 'Electronic Department Store.' Most importantly, not only will the consumer have instant access to product information, product features, specifications and prices, but the consumer will be able to buy brand name products at true discounts of up to 50 percent below manufacturer's suggested retail price. Extended warranties are also offered at over 50 precent below typical retail product warranty prices."
  Source: "AmeriShop Announces Plans to Launch its Internet Discount Shopping Service in the Fall of 1996," Business Wire article, March 28, 1996

Rise of the Cyberbank

• "First Union's vision of the future lies in our commitment to the delivery of Cyberbanking(sm) to our customers and strategic partners. First Union is currently offering several products that are setting the stage for our eventual delivery of full service banking through the Internet."
  Source: FirstAccess Cyberbanking

Supermarket as Network

• "In future supermarkets, consumers will shop without having to pay cash or sign credit-card receipts. An infrared or microwave "interrogator" could register each consumer as soon as he or she enters a store and be ready with account information when the time comes to pay. Supermarket futurist Gary Lind, a partner at Arnold Ward Studios/Lind Design in Hempstead, New York, envisions "intelligent carts" that will use optical lasers to scan bar codes automatically as items are moved in or out of a shopping cart, thus enabling customers to keep a running tab. These carts might even be programmed to organize the customer's shopping expedition through the store, by scanning a handwritten list and sorting out the fastest route through the aisles."
  Source: Barrett Seaman, "The Future is Already Here," Time, Special Issue Spring 1995, Vol. 145, No. 12
  

Do Consumers Know What They Want?

• "Past experience shows that consumers often don't know what they want until it's set before them. Silent movie fans in the 1920s, for instance, weren't clamoring for talking pictures. It was only after motion-picture studios, convinced of pent-up demand, pushed the technology that talkies made silent films obsolete."
  Source: Tara Parker-Pope, "Interactive Offerings Have Less Appeal in Europe Than in the U.S., Survey Says," Wall Street Journal, June 20, 1995, p. B7b.

High Prices for Web Services

• “A Web site cost $30,000 to $250,000 to create, says Mark Kvamme, CEO of CKS Group. For weekly upkeep, CKS charges an extra $100,000 to $300,000 per year. The average cost to make a 30 second television ad is about $250,000 dollars in 1993. Direct marketing campaigns to reach 25,000 people cost $125,000."
  Source: Michelle Quinn, “Internet Spawns Cottage Industry/ Upstart Advertising Agencies Surf Madison Avenue,” San Francisco Chronicle, June 12, 1995, p. B1

• "Deciding what to charge for Web site construction isn't easy. 'It's a couple hundred thousand dollars to do a good site, and rarely are they retainer-based,' one Internet veteran cautions. A site like Levi Strauss & Co.'s ... can cost well over $1 million. ... Hosting a site ranges from $5,000 to $10,000 per month; advanced services such as call center handling, measurement analysis, and e-mail responsibility add $25,000 to $50,000 or more per month."
  Source: Alice Z. Cuneo, Advertising Age, April 15, 1996, p. 36

Who’s On the ‘Net?

• Most experts agree the Internet crowd is changing to include more mainstream consumers. A recent report by Forrester Research Inc. ... predicted that the Web, currently used by about 2 million of the estimated 20 million people tapping into the Internet, will soar to 22 million users by the year 2000. ... ‘The audience is getting more and more representative of our audience all the time,’ said Steve Yastrow, vice president of resort marketing at Hyatt Hotels Corp. ‘People who say it’s just a bunch of computer nerds and college students are not in touch.’ The Hyatt Web site ... averages 4,000 to 5,000 visits a day. ... ‘There’s a steep learning curve, so we think by the time everyone else gets started, we’ll be ahead of the competition.’”
  Source: Cyndee Miller, “Marketers Find It’s Hip to Be on the Internet,” Marketing News, February 27, 1995, p. 2.
  
• "Some 24 million people in the U.S. and Canada alone are already on the Internet - fully 11% of the North America population over age 16, according to the new survey by Dun & Brandstreet Corp.'s Nielsen Media Research unit. An impressive 17.6 million people use the World Wide Web. ... The study also found that women comprise about one-third of all Internet users. And Internet users spend an average of five hours on-line each week -- more time than TV viewers spend with their VCRs. ... Roughly 2.5 million people have purchased products or services over the Web, and users tend to be upscale, educated professionals with a household income of more than $80,000."
  Source: Jared Sandberg, "On-Line Population Reaches 24 Million in North America," Wall Street Journal, October 30, 1995, p. B3.
• "The myth: Internet junkies are 18 to 35 year-old college students, computer jockeys or slackers with nothing better to do than chase down pictures of Pamela Anderson. The reality: Henry D. Reiss, age 66, semi-retired, and an America Online subscriber who logs an average of six hours a night in seniors-only chat rooms. Though not your stereotypical Netheads, those over 55 such as Reiss are well represented on the Internet and commercial online services, and according to some recent surveys, could teach their sons and daughters a thing or two about E-mail, chat rooms and cruising the Web. One third of U.S. adults over age 55 own a computer, and of that number, 28 percent use the Internet or online services regularly, according to a recent poll conducted by Frederick/Schneiders for SeniorNet, the San Francisco-based online education and training organization for senior adults."
  Source: Michelle V. Rafter, " Retirees, older adults are venturing online," Reuters article, March 13, 1996

Advertising on the Internet

• “On Jan. 1, Vibe Online hit the i-way, a virtual version of the magazine ... Vibe is charging advertising ... $20,000 to $40,000 for a six-month gig. The DeKuyper room is a virtual bar, complete with a cyberbouncer who won’t let visitors in until they find the ‘hot spot.’ ... It’s a totally different approach from running a print ad. ... It’s a combination of straight advertising, product placement and direct response.'"
  Source: Cyndee Miller, “Marketers Find It’s Hip to Be on the Internet,” Marketing News, February 27, 1995, p. 2.

• "Web publishers brought in $55 million in advertising last year, and media-consulting firm Jupiter Communications projects that by the year 2000 that figure will reach $4.6 billion -- more than will be spent on radio advertising."
  Source: Rob French, "Where is Publishing Heading," Adobe Magazine, June 1995, p. 37

• "A majority of executives from advertising agencies, marketing concerns, publishers, and manufacturing companies estimated that money spent in advertising on the World Wide Web will go from between $400 and $699 million in 1997 to between $1 and $3.99 billion in the year 2000. Those and other opinions about the Web and other new media were explored during a closed door meeting called the AdTech Summit Leadership Conference. The "adspend" result, along with other opinions, were released during a news conference last night prior to the AdTech Conference and Exposition"
  Source: Bob Woods, "Private Summit Uncovers Web Ad Thoughts," Newsbytes News Network article, 03/25/97

Focus on Your Customers' Value-Creating Processes

• "It is the interaction between the company's employees and its customers that business in developed and value is created. ... Companies are in the business of their customers' value-creating processes. The source of business is the customer's own generation of value. This is the resource that must be understood, processed, and developed. ... This is a fundamentally new paradigm."
  Source: Solveig Wikstrom and Richard Norman, Knowledge and Value: A New Perspective on Corporate Transformation, Routledge, 1994, p. 3 and 29

Rise of Video-on-Demand

• "At Procter & Gamble Co., deregulation may lead to a number of new ways to reach consumers such as video-on-demand. "There's potential for a company like ours to have efficient, effective ways for our advertisements to meet consumers," says Frank Caccamo, VP of management systems at the $30 billion consumer products giant."
  Source: Mary E. Thyfault and Jill Gambon, "The Telecom Bill: Why It Matters," InformationWeek, July 17, 1995, p. 16.

Rise of Price Competition

• "The sales force starting work in October at 24 California General Motors dealers will be interactive video screens. And the electronic sellers won't just tell consumers about some GM vehicles. The also will give shoppers price comparisons against competing models from Ford Motor, Chrysler and imports."
  Source: MIchael Clements, "New GM Sales Force a Bit Touchy," USA Today, August 25, 1995, p. B1.

Demise of the Traveling Salesman

• "The explosion in telephone marketing, home shopping and other forms of electronic distribution are making an anarchronism of the traveling salesman."
  Source: Thomas Petzinger, Jr., "Four Lessons Our Airlines Need to Learn," Wall Street Journal, November 6, 1995, p. B1.

Rise of Meta-Information

• "Yahoo is also an indicator that the information that matters the most in electronic environments is not information, it's meta information, it's information about information. Yahoo has no information of its own. What it is is pointers to interesting sources of information on the net and that's a fundamental change. When information was scarce in the battle of days of analogue media, you could charge money for that information itself. But when information is hyper abundant, the information itself is free. The thing you pay for is the index and the table of contents and the pointers to the things you need. You charge a premium for the meta information and the information comes free."
  Source: Paul Saffo interview by Frontline on June 12, 1995

• "Vitt Online (http://www.vitt.com), the first online interactive media planning and buying system, was launched today by Vitt Media International. ... Vitt Online's easy-to-use service provides Vitt's clients with all the information they need to access every step of their advertising campaign, from planning and placing media buys to reviewing their account. In addition, Vitt's research library, one of the most extensive in the industry, is available to clients through the online service. Advertisers have immediate access to everything they need for pre- and post-buy analysis including data from Arbitron, Nielsen, Simmons, MRI, Scarborough and the Audit Bureau of Circulation. The site also features color demographic maps, which were previously sent to Vitt's clients via overnight delivery. ... Steve Berger, vice president, media director of C&M Advertising, Woodbridge, N.J., a Vitt client that has tested the system, says, 'With Vitt Online, our agency gains immediate access to all of our account and buy information, 24 hours a day. Anything that can help us communicate better, quicker and provide more accurate dialogue not only will benefit us, but also our clients. 'We're always under pressure to get things done more quickly; with Vitt Online it's as though we work on the same floor as Vitt, instead of miles away.'"
  Source: "Advertising Industry's First online Media Planning and Buying System Launched by Vitt Media," Business Wire article, February 6, 1996

Rise of the Virtual Tradeshow

• "Cyber Merchants Exchange founder and president Fran Yuan has created a product-driven Web site -- a 'virtual tradeshow' -- specializing in the wholesale-to-retail trade where buyers and manufacturers can interact directly. In the less than three months since C-ME's Web site went on-line, 1,200 manufacturers have already signed on. ... Using a unique sort-match-retrieve algorithm, buyers can specify their product requirements, identify vendors, and review detailed sourcing information. They can then print out competitive offerings, compare price, quality and terms, negotiate their order and place it -- all without leaving their offices or computer screens. ... According to Yuan, 'Cyberspace remains open nights and weekends and therer are not holidays on the net -- a useful consideration when doing business internationally.'"
  Source: "Electronic Shopping Goes Wholesale," Business Wire article, Feb. 14, 1997

Rise of Internet Time

• "For a variety of reasons, the Internet has severely compressed the business cycle for the chip makers, computer developers and software designers of Silicon Valley. Chief among them is the high-speed product development that results from exchanging ideas and research over the network. ... 'We are now living on Internet time,' said Andrew Grove, chief executive of the Intel Corporation. His company, which rose to power in an earlier, more measured high-technology era, is now scrambling to adapt to life at warp speed. 'It's a new territory,' Mr. Grove said, 'and the cyber equivalent of the Oklahoma land rush is on.' ... Computer hardware and peripheral companies now design business plans so that most of the profit is wrung from a product within its first three months on the market. ... At Sun Microsystems, a Silicon Valley old-liner that has found a new career in Internet products, progress is now measured in 'Web weeks,' said Eric Schmidt, Sun's chief technology officer. The company now estimates that 20 percent of its in-house technical knowledge becomes obsolete each year. ... 'Market-share capture is now the leading measure of whether you're successful or not,' he said. 'This is different from classical markets in economics because of the nature of the medium of the Internet. You can make a million pieces of software for the same cost as one copy. It is that difference that distinguishes what we do from traditional manufacturing industries. They can't play this game.'"
  Source: John Markoff, "A Quicker Pace Means No Peace in the Valley," New York Times, June 3, 1996, p. C1

Rise of the Internet Auction

• "Wine lovers from around the world will be able to participate in one of the world's most prestigious wine auctions thanks to Sun Microsystems, Inc., Virtual Vineyards, and the Internet. The sixteenth annual Napa Valley Wine Auction: A Symphony for the Senses, will take place on Saturday, June 8, at Meadowood Resort in St. Helena, California. Internet users who cannot make it to this lovely Napa Valley resort will be able to review the wines being sold, participate in the bidding, and even experience the sights and sounds of the auction, all via the Napa Valley Wine Auction Web site (www.nvwa.org)."
  Source: "Experience the Napa Valley Wine Auction Without Ever Leaving Home," Business Wire artilce, June 4, 1996

• "... online ticket auctions are the newest way for airlines to offer exclusive deals to Internet users."
  Source: Lloyd Chrein, "A New Deal for Web-savy Air Traverlers: Online Ticket Auctions," Money Magazine Daily, June 5, 1996

Rise of Webonomics

• "New sites on the World Wide Web are cropping up at the rate of one per minute. As it expands at this astounding rate, the Web's colorful entanglement of words, pictures, sound, and motion is briskly becoming more than just a new medium. It's more like a parallel universe that mirrors the real world in some ways but exhibits unique properties in others. And if you hang out there long enough, you will slowly discover that nothing less than an entirely new publishing and advertising economy is taking shape in this man-made, information-based terrain. Call it Webonomics."
  Source: Evan I. Schwartz, "Advertising Webonomics 101," Wired 4.02

Rise of the Global Shopper

• “When she thinks of herself as ‘labor’ the average American citizen may not like this at all. But as a consumer she’s collaborating enthusiastically. She buys Nike and Nintendos made in Asian factories. She demands profit from her mutual fund and pension plan, not patriotic loss. Before long, she’ll shop for life insurance in London and health insurance in Geneva, and the offshore actuaries will discriminate fiercely in favor of the healthy. In the 1980s the chief executive of Chrysler might have decided to buy a few million car engines in Korea. Today millions of individual Americans are gaining the power to shop anywhere they please. No longer can consumers, any more than investors or corporate managers, be economically quarantined.”
  Source: Peter Huber, “Cyberpower,” Forbes, December 2, 1996, p. 146

Demise of VP of Marketing

• "For one thing--and this is only a slight overstatement--you can fire your vice president of marketing. The Internet style is to put something up and let other people examine it--no hype, no hoopla, no advertising unless it's substantive. That style is the basis of Java's success. We didn't make a big announcement. There were no tents, no spotlights, no celebrity endorsements. We put up the Web page (http://java.sun.com) and invited people to visit. They could read about Java, download code, and make up their own minds. And lots of people do. Our Java page gets 1.5 million hits per day. It's no-obligation marketing. And it creates a different kind of customer, a much more committed customer."
  Source: John Gage (Chief Scientists at Sun Microsystems), "The Network is the Company," Fast Company, April/May, 1996

Rise of the Universe-of-the-Moment

• "One way to view the World Wide Web is as the world's largest container of millions of vertical niches, with literally thousands of potential pieces of information to address most any topic. But is much more than a repository of information and data. It is a connective fiber linking millions of people, each of whom, at any given moment, is a consumer. Because it links individuals not only to information but also to other individuals, this digital environment also serves as host to temporary and long-term communities. The Net has no masses, only many millions of individuals, each preselecting what I consider the 'universe-of-the-moment.' Viewing the Net as a network of very, very small parts -- thinking small -- can help companies do bigger things."
  Source: Chuck Martin, The Digital Estate, McGraw-Hill, 1997, p. 23

Rise of Web Selling

• "The Internet has so far offered just a hint of the new kinds of communication that data networks will make possible. For instance, a shopper surfing on a company's Web page will be able to click on a link for a customer service representative and speak to one over the same data line. The rep will see what the customer has on his screen, and push more Web pages his way depending on what he might want to buy."
  Source: Andrew Kupfer, "Transforming Telecom: The Big Switch," Fortune, October 13, 1997, pp. 105-116.

Rise of Service Mobility

• "Data networks can also do something the telephone network never could: give travelers the services they subscribe to at home no matter where in the world they happen to be. Data networks can 'cache' information about customers and make it accessible anywhere, letting people tap into their voice mail and call forwarding by clicking on a Website. As Sun Microsystems Internet chief Dennis Tsu says, 'Data networks will make service mobility possible.'"
  Source: Andrew Kupfer, "Transforming Telecom: The Big Switch," Fortune, October 13, 1997, pp. 105-116.

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