03.11.2001 - Keynote Address
John Heilemann & John Battelle
Sunday morning started off with a keynote address by John
Heilemann and John Battelle. They discussed the trends and issues shaping the direction of
the Internet economy and Internet industry, which they view as two distinct entities.
Some of you may remember that Heilemann was one of three
founding editors of Wired Magazine. He is now the CEO of
TheStandard.com, a website devoted to the business of the Internet.
Battelle has been writing about the Internet since the 90's
and was the National Affairs Editor for Wired and its online
sister HotWired.com. He recently authored the book, Pride Before the Fall -
The Trials of Bill Gates and the End of the Microsoft Era.
The point was made by both of these speakers that the
Internet economy is so integrated into the total economy that it is appropriate to
consider the Internet impact on the changes in the world economy.
They both differentiate between the Internet industry and
the Internet economy. The industry models have operated for years under an assumption that
somehow the Internet economy was separate from "the Economy." This is a
significant influence on the sudden collapse of the "dot-com's."
For years, when we talked about a 3 billion dollar company
we were addressing its revenue stream. With the explosion of the speculation of Internet
companies and their stock, a 3 billion dollar company was typically addressing their
market capitalization rate. Suddenly, "new business" value was based on the hype
of how much money they could raise - not on what they could earn.
As recent events have so ably demonstated the economic
models of old are not necessarily out of date. Capitalism still requires a profit to
survive.
A lot of discussion addressed the question of whether the
Internet after the shakeout of the dot-com's was going to end up as "a tool" or
"a new medium."
The general consensus is that it will ultimately be both.
Business will continue to view the Internet as a tool for servicing their clients and the
hard core Internet population will seek the Internet as their information and
entertainment medium.
Now the big question: Is there still venture money out
there? After the shake-out, many people assume that there was a lot of money lost and that
no one is investing anymore in the Internet. Wrong - the big venture capital players
cashed out just before the shake-out and are sitting on billions that will have to be
invested either for fidiciary or legal reasons fairly soon.
The next round of investment in the Internet is probably
going to the hardware and software sectors and any investment in E-commerce will be based
on business models that project a reasonable revenue stream and profitability model.
"If we build it they will come" thinking will no longer work to attract the real
money.
Ultimately this latest round of crisis is perceived as a
necessary growing pain of the Internet economy as it carves its place into the overall
economy.
Rick McCauley
