4th Wave of the Web:

Giants, Hybrids, and the Very Nimble

We all want to know what's going to happen next on the Net, not so much from mere curiousity, or even fascination, but, for many businesses, because our survival itself depends upon the Net's rapid twists and turns, crashes, flameouts, brilliant-rocketing-value-creating successes and constant metamorphosis into the Next, New Thing.

The Next New Thing

And what will that thing be? Take a look:

First To Hit the Beach

In about 1995, after the bureaucrats, researchers and engineers, when Netscape and the graphic browser transformed the Net, making it more user friendly, the Net began to take off, and the amateurs, pioneers and technocrats were the first wave to hit the beach. Some started small and no one knew how fast they'd grow or how high they'd climb. This list included Net upstarts like Amazon.com and advertising firm Doubleclick.net , with it's wholly new advertising technology and business concept. This was the height of the era of optimism so everyone hoped for the best, but no one really had a clue which, if any, part of these business plans were going to work.

2nd Wave - The Big Boys Get It.....Kind Of....

The 2nd wave was when the big boys of business, primarily media companies like Time-Warner, CNN and Hearst decided the Net was the place to be. These were swiftly followed by a host of companies, spawned on the Net, many of whom were made possible by the software revolution which was harnessing the power of the Net to change we way we all do business. Amazon.com was already huge and Doubleclick spanned the globe. Growth was hypercharged on the Net and for a trendy dot com, began to seem almost inevitable.

3rd Wave - When College Kids Became Zillionaires and Secretaries Could Buy Their Favorite Yacht

It was around this point, as new media AOL swallowed old media Time Warner, that we all sat back and looked at the possibilities and these New Economy Dot Coms and technology companies were able to IPO almost overnight, with sky rocketing share prices, making everyone involved an instant zillionarie, and many of the secretaires, multi-millionaires.

A company named the Wheel Group, consisting of pals who's been in the military together, in the course of 8 or 9 months, created some software, scrapped to get appointments with venture capitalists, who told them they were in the wrong location ( San Antonio, Texas, not Silicon Valley or even Austin) and didn't cough up a nickle. Shortly thereafter they sold the company to Cisco for $125 million in stock which today is worth $650 million. If their secretary is not a venture capitalist by now, it's not because she couldn't afford to be.

The guys......and gals.... who started these companies were smart, they were dedicated, and in a 24/7 business, live in every time zone, you will be winnowed out with whiplash speed if you're not an incredibly hard worker. These companie's more experienced backers and venture capitalists instructed them to spend what it took to get market share. Ignore the "burn rate".

At the time, the common wisdom was that the dot com wunderkids were into speed, brilliance, flash and instant fortunes. The old economy companies were lumbering dinosaurs, with neither the speed or wit to capture and leverage the advantages of the Net. And, to be fair, many of them had performed exceptionally poorly on the Net. Many started cranking up their websites as an in-house division and, in fact, they didn't "get it". When their sites weren't as awesome and competitive as expected, many dot coms breathed a sigh of relief and went back to counting their ( usuallly future) fortunes.

Funny, how reality has a way of teaching you a thing or two. When it comes to perceptions, and also reality, the pendulum always swings. It seems there are limits to success, even on the Net, and although it may not be possible to be too successful, it is definitely possible to gather so much success so swiftly selling a product, that your back end is not fully developed to fulfill your orders as flawlessly as you wish. All of the non-software efficiencies, systems and proven human talent are not in place to the extent they are at a, say, Wal-Mart. In short, you can sell but you have to keep building the back-end infrastructure, which is, in effect a start up within your own company, so, almost inevitably, inefficient. It is also not your core competency. Suddenly, as you grow, you are moving from a "smart as a whip- new economy- lightening speed" company to a hybrid, half Net/half bricks-and-mortar company, competing with the Giants on their own turf.

Giants didn't get to be giants by failing to protect their own turf. As soon as you cross the divide, trouble will appear if you are a small web business. You'd better learn to be nimble

The 4th Wave

So here we have one of the first of the 4th wave. As Cathy Benko, points out in Business 2.0 "Dumb Companies Get Smart":" As the Internet matures, it will be more common for new ebusiness ventures to launch with a complete infrastructure. They will hit the ground with a sound business plan, hundreds of employees, $50 million in run rates, an installed customer base, and global reach."

So What's Left for the Rest of Us

After the giants have launched their hybrids, bricks-and-mortar practicality with established brands and distribution, after some of them have feasted on the failing or failed dot coms, buying up their customer information, technology platforms and the brainiest of the management, what is left for the rest of us?

Good question. A first rate web site is expensive to set up and operate; it's costly to drive traffic to a website and difficult to connect buyers and sellers. Transaction fees are constantly squeezed and giants in an industry, like the automakers have set up their own sites. More giants will jump in and continue to pound the competition. The Net marketplace is extremely efficient, so players can become obsolete or squeezed out entirely in increasingly short cycles.

New Software and Technology

So, again, what's left? There are several areas which remain viable. New software which, essentially transforms the way business is done, will continue to drive innovation, new business models and profitability on the Net. As more and more traditional advertisers come on the Net, companies, like Google, Yahoo and Doubleclick.net ( now gobbled up by Google), which offer ad technology, as well as those companies producing websites, web technology and web advertising, as well as other support services, will continue to grow.

Niche Markets

Niche markets can be very strong and profitable, as long as they stay beneath the threshold size of the giants. As one guru advises: "Don't moon the giant." And, as Cathy Benko points out in her article, "The end game increasingly is not to go public,but to be acquired, and the most likely dance partners will be the big, enlightened firms that comprise the Global 2000." In other words, the giants. In the end, you may be glad they're on the Net, to give you a market for your niche website.

Content

And content, in all its many forms will become increasingly valuable as new software and technology enable it to be both monetized and dispersed across the Net, providing the requisite "stickiness" to the universe of sites, which, like in the early days of TV, all need something to fill that "blank screen" or, more likely, to wrap around all those products being sold. Content, ultimately, can have a broader reach and longer shelf life than all those products it helps sell. "I Love Lucy" is still shown in almost every country in the world, almost every day.

So, yes, the 4th wave is washing over us at this very moment. But hey, the water feels fine. Come on in. The party's not over. In fact, it's just beginning.