WHAT IS AN INTERNET BUSINESS?
There are many changes that have taken place in business in the past two-hundred years, but none have so profoundly changed our concept of what a business is as the Internet and the World Wide Web.
Until the advent of this electronic forum that reaches into almost every home in America and many throughout the world a ‘business’ was primarily thought of as a building with employees, resources and facilities, and people who bought and dealt with such businesses could easily identify their worth by the materials and net worth of the resources and personnel those facilities contained.
This all changed starting in October of 1969 with the introduction of a military construct called “ARPANET” created by DARPA to allow a rich communications network that should stay up even in the advent of major breakdowns in our telecommunications networks.
At first this fledgling Internet was used mainly to communicate text streams and message boards.
Starting in 1990 it was renamed the “NSFNet and began to be loosely managed by the National Science Foundation which oversaw the extension of the Internet into the CSNET throughout universities across the USA and Europe.
When usage began to expand due in no small part to the TCP/IP protocol developed by Bob Kahn and Vinton Cerf (which is still in use and the standard today) the government opened the net up to privatization in about 1995, and the first online business sites began to appear.
Back then online sites were pretty clunky and used primarily for advertising and showing contact information – but as HTML and other formats became widely accepted allowing use of graphics and dynamic web pages to accomplish more and more in this new medium the sites became more sophisticated, and eventually became ‘storefronts’ in their own right.
Much has been written about how the World Wide Web (WWW) ‘changed the nature of business’ but in reality shake-ups in business are nothing new, and this new medium, while exciting and certainly unprecedented is not that different from the industrialization or the creation of communication devices like the teletype and fax machine.
Business has always gone with what works fastest so long as it is efficient and affordable – and this new medium was both of those!
Many of the companies who started such as Chemdex once a Wall Street darling have since faded into obscurity or failed because they didn’t recognize that not all of the rules for business had changed just because there was a new format available to market to the public.
Just as with traditional business models the basic rules of supply and demand and profitability still held true: there is no such thing as a free lunch!
There is a tendency for people to get ‘caught up’ in things that are exciting and new, and when the hype and excitement exceed the marketability a ‘bubble’ can occur just as that which came about when the dot com boom of the mid 90’s gave rise to any company which went public and had an exciting description or business plan becoming an overnight success story. The problem with bubbles is that they are prone to breaking.
At first the exciting concepts for using the new Internet medium in fields such as advertising, mail-order and online sales proved irresistible to venture capitalists, and the increasing number of easy access to online trading sites which allowed the ‘common man’ to become an investor drove waves of investors to IPO’s that otherwise might not have had a chance of being successful based solely on the plans the company had and not any true business model or market share factors.
The bubble reached a peak in late 2000 and early 2001 before fundamental flaws in many companies models forced a succession of failures and then the bubble burst.
