gian@gandalf.it

It's unsafe to attempt any forecast in this context. But I have decided to run that risk.

My "calculated guess" is: what will actually happen will not be like any of the scenarios now most broadly discussed.

I must admit that it's easy to say something like that. Even in situations that are less new, more mature, and less open to unexpected change, all the best analysts agree on the complexity of systems, the importance of low-probability scenarios, on the basic need for flexible strategies, structures and behavior. One of the mysteries of our time is why these theories are hardly ever practiced: neither in large companies, nor in political and administrative structures. Systems remain rigid and hierarchic. We are faced every day with the resulting inefficiency.

At first glance, this may appear to lead to no practical solutions. I think it's quite the opposite.

There are two considerations that, I think, are quite practical.

• The net, more that any other tool, makes it possible to test continually. It's the ideal ground for flexible strategies, to check and explore while operating. The direct marketer's dream come true. The absence of rigidity, or limited and limiting projections, can be used as a resource instead of being suffered as a problem. Those who will learn, better that others, to operate in this manner, will gain a competitive edge - and could learn lessons that can be applied also outside of the net.
• It is perfectly possible, as shown by an example that I shall quote, to build one's own territory in the net. If the "general" world of the net is unpredictable, an area in which a company has experience is much easier to understand; and there is a fair chance that it can be controlled and adapted to that company's strategies. Dialogue, interaction and service are the keys to build an "island in the net" that is not subject to the whims of technology, or to the general trends of culture and economy, but can use them according to its own original and distinctive project. Experience shows that this is a winning strategy: and I think we shall see many more examples.

And... as I have stepped into the treacherous ground of prophecies, let me risk one more forecast.

All developments in the net have had so far, and will have in coming years, an uneven pattern.

We know that social and economic trends (like all biological phenomena) don't grow in a straight line (nor do they follow an "exponential" curve... as we hear too often) but in what some call a wave, or sinusoid, and I tend to call a "Gauss curve". It looks more or less like the one in this picture. But I believe that in our case there will not be any evolution that can be reduced to such a simple curve. There are two reasons.

In new trends, there is discontinuity. As John Naisbitt put it brilliantly, fifteen years ago, in Megatrends: «The gee-whiz futurists are always wrong because they believe technological innovation travels in a straight line. It doesn't. It weaves and bobs and lurches and sputters.»

The net is not a single event, or trend. If we look at the market for a home appliance, or a packaged consumer product, we see a slow start, and acceleration, then a leveling off when the market reaches saturation or maturity: curves are coherent and largely predictable. In each case we are dealing with a single, specific type of human behavior. The net is the sum of a variety of very different behaviors, that cross and overlap. If we could isolate any of these, we might find a precise "Gauss curve". But they mix - and the resulting intricacy is most unlikely to lead to any coherent pattern. The only thing that we can reasonably expect is further growth; with frequent changes, sometimes accelerating, sometimes slowing down; quite unpredictably.

Nicholas Negroponte, the best known hype prophet (though his comments often make more sense that those of his "disciples") in a recent article felt the need to reassure his followers: «have faith, don't listen to the skeptics, the fabulous future is really on its way».

Earlier this year the Wall Street Journal, in an article headlined Reality Hits the Internet reiterated the doubt: "can you make money on the Net?". Variations on the same theme were published by many other newspapers, discussing investments with no return and the flop of seemingly popular sites such as an online soap opera called The Spot. A Time Warner executive was quoted calling their Pathfinder super-site a "black hole". The New York Times summed it up as The Great Web Shakedown.

On April 14 Steven Levy in Newsweek looked into the subject, in an article headlined What Shakeout? said that this is not a catastrophe, or an earthquake, but just a shakeout - serious damage for the victims, but only an adjustment for the market as a whole.

Levy points out that publishers, who have made large investments, are not pulling back from "black holes" but are investing more money. He explains that «many businesses on the Web aren't planning for immediate profit.» but some «are making money even without selling pictures of naked people.» For instance CNN Interactive, a costly site, is reporting a profit in recent months. The Wall Street Journal says that 70.000 people subscribe to its interactive edition; some of its space is sold for weeks in advance.

Why, then, are there important sites that go bust, and so many are discouraged? Because, the article explains, they were expecting too much, too soon. The "gold rush" mentality led too many people to think that they could get rich just by showing up on the Net. Several were backed by hasty and impatient venture capital.

Few have understood that it takes consistent investment, patience - and a raison d'être. Another problem, says Newsweek, is that too many are competing for not enough money: about 300 million dollars that corporations have budgeted for Web ads in 1996. This may appear as a large figure, when seen from Italy; but it's only 0.3 percent of advertising investments in the United States.

The article quotes well known success stories, such as the Amazon library (browsed often also by Italian net habitués) and Federal Express that lets customers track their packages on its website (and so do its main competitors). By doing so, not only FedEx provides good service, but also «saves a few bucks» on each shipment. How much? The International Customer Service Association calculates a million dollars a month.

But, as in any pioneer rush, while some find gold mines many other are disappointed. An unavoidable shakeout, says Newsweek; where the victims are those who don't understand the real values of interactivity and are unable to change their modus operandi to adjust to the needs of the Net and exploit its opportunities.

On this side of the Ocean... is the lesson different? I don't think so. The picture is the same, though on a much smaller scale. With those difficulties that come from the immaturity of the Net in Italy, but the interesting opportunities, especially for export, that come from the very nature and vitality of many Italian companies.

I must confess that, for the moment, I don't have enough information to be able to analyze these data. Not much can be learnt from a shallow press release; nor can one gain much depth by reading the summary that was distributed at the press conference.

The same goes for the data issued recently by Nielsen on internet users in the united States and Canada, claiming a very high penetration: 23 percent of the total population (Web users 17 percent). According to this source, most users connect only occasionally: people who used the internet in the last three months are reported as 10 percent of the population (4 out of 10 net users). Fifteen percent of internet users made at least one purchase on the net; purchase of what, we are not told, except for the obvious fact that it's mostly software.

For the time being, I can only say that I share the doubts expressed by readers of this newsletter, as well as by every person I know that has experience of the Net. And I continue to think that there are very few Italians buying any goods on the Net (it's relevant, I think, that no data are published on this) and those few buy mostly from American sites.

There are to ways to check these data and get to more realistic estimates.

The first is an in-depth analysis of research. In decades of experience I have never considered any market research of any practical value unless I had a full and detailed report, with a chance to look into the methodology and the structure of questions and answers. Even when (as, I think, in these cases) the statistical sampling is acceptable, the meaning of the data remains to be understood. We know that there is a significant difference between what people "say" and what they "do". We know that (especially in Italy, where there is a big gap between "noise" about the internet and reality) there are people who "think" or "say" that they are on the net and don't own a modem. I have read and heard pompous lectures by people who don't know the difference between an internet connection and a cd-rom. What I don't know, and so far I can't measure, is how much these facts influence the figures that we are reading.

The second is comparison with other data. Should other indexes (such as number of modems sold, or of contracts with providers) confirm the same trend in the same period, we could believe that a dramatic change has indeed occurred. So far there is no indication that such confirmation exists.

We do have one precise figure: the RIPE European hostcount. We could discuss forever on the meaning of these figures, but - as I said in the first issue of this newsletter - I don't think they are irrelevant. From September 1996 to March 1997 the number of Italian hosts increased from 131.328 to 218.407 - 66 percent. Remarkable growth, and faster than the European average: but well below the "fantastic" growth figures we are hearing from other sources.

So far, I can only say that data are not sufficient. If I wanted to risk a "guesstimate", I would say that, using a broad definition of "user", we may have reached now the half-million figure that AIIP announced (and the press reported) at the end of 1995. In a stricter definition (provider contracts) we may have reached, or exceeded, the 100 thousand level.

The problem in this "numbers game", I think, is that it creates "artificial disappointments" . Had we always looked at the growth of the net with a clear mind, we would see that it is, indeed, quite fast. It seems slow, or disappointing, only because it was overestimated. What worries me about exaggerated estimates or forecasts is that they are self-defeating. If I drive a new car and compare it to the same class of car a few years ago, I am likely to find its performance quite exciting. But if someone sells it to me as a Ferrari...

We should break the hype-disappointment vicious circle, to concentrate on real opportunities.

I don't know if a year from now these concepts will still work or will need to be changed. For the time being, I hope they are useful. I wrote them for a book, where they came at the end, after each concept had been explained. Here, we are still at the beginning; I have covered some of the points, others will be discussed in following issues of this newsletter.

1. Respect the intelligence of the people you meet on the Net. The easiest way to make enemies of them is to treat them like fools.
2. If you don't have a clear idea of how the Net fits your needs, don't venture on the Net with generic offerings. Observe and learn.
3. Never think of the Net as a system of machines, technologies and protocols. Always think only about people.
4. Georges Clemenceau used to say: «War is too serious to let it be handled by generals.» Today he would probably say: «The Net is too interesting to let it be handled only by the EDP people.»
5. Never spam. Any result you may obtain in that manner will backfire.
6. Learn net culture and netiquette. May be the traditional culture of the Net was a bit elitist: but it's better to learn it before we try to change it.
7. Before you think of the most obvious thing, a website, study carefully all the other opportunities that the Net offers.
8. Don't put a page on the Web unless you have a clear idea of who should read it and what is interesting for that person.
9. Don't fill your pages with glitz, pretty pictures, decorations, adjectives and empty games of words. People who are coming to read it want clear and precise information.
10. If you really must (or want) to have your own website, keep it alive. If you can't update it and enrich it all the time, don't open it.

Above all... be patient and consistent. Marketing in the Net is not a matter of just selling, but of building relationships. The greatest value is the customer's trust. We must know how to earn it, paying a lot of attention to him; and maintain it, never coming short of his expectations.