Manager's Journal
Is there a Santa Claus on the World Wide Web? "This may be the first e-Christmas," a recent article in this newspaper speculated. The current cover of Fortune depicts the Internet as a rainbow -- with, one must assume, a pot of gold at the end.</br></br>Here's a reality check. This summer an Internet trade magazine asked some technically savvy employees to create an Internet store selling baseball books. The result? In two months they had five orders, totaling $76.75. In all, excluding labor but including advertising, the sites cost them $485. "E-commerce isn't fast and it isn't easy," reported the chastened publication. And these techies did everything right. They knew to register (and reregister) with the right search engines; they knew how to wrestle with service bugs; they knew to link to other sites and how to design banner advertisements; they knew to sell baseball books during baseball season. Still they flopped.</br></br>If people who know what they're doing can't make money on the Web, who can? So far the answer is almost no one. A Morgan Stanley e-commerce study from last year found that the top 10 Internet sites got 50% of the advertising revenue. The top 100 sites got almost 95% of the revenue.</br></br>So who is making money? As in past gold rushes, it is the people who were there first, like Amazon.com, whose stock split 3-to-1 last week. Also doing well are sharpies selling maps and pickaxes. The Internet map makers have various guises, including search engines like Yahoo! and AltaVista, as well as market researchers like Jupiter Communications and Forrester Research.</br></br>Many a fanciful business plan has been launched using numbers from Internet market researchers, yet they know little more than anyone else. But without maps, online businesses are nowhere -- thus many map-makers are profitable. "The Internet is a little bit recession proof," opined David C. Peterschmidt recently from his vantage as CEO of Inktomi Corporation, a search company. And he cheerfully added, "Every time somebody hits the search button, our cash register rings."