levy, leve, levera, leverage, leverage, SCALE
Economies of scale apply extremely well to the internet. Once you have set up the basic routines, additional clicks are at zero cost. However the basic routines are not that simple and you need millions of dollars of infrastructure and the best team of engineers in the world to keep it in the air.
So competition in the internet means capturing the largest marketshare, allowing you to generate the dollars to maintain and develop the infrastructure and pay the engineers.
Running a shopping engine is highly complex and it is not feasible that small portals develop it on their own. (compare to the info-feeds of infospace) Webmarket in the past had their own team but three months ago they linked to the shopping engine of Inktomi. All search powerhouses are developing shopping engines, in the future search and commerce will be closely linked. Now you have altavista (shopping.com) and inktomi as the most powerful shopping engines. The main question at this moment is of AOL and Yahoo will use the inktomi shopping engine. They already use the inktomi search engine. If they start using the inktomi shopping engine, than part of the economic power shifts to inktomi itself.
MARKETSHARE. To define this, the first step is to define the market. Well the internet is global. Yes there are different languages and cultures. But for the underlying technology, it is one global market. Inktomi has started operations in UK, France, Germany, Japan, Australia and China. It serves the major search engines in Latin America as well (terra.com and starmedia.com). Inktomi is number one in the global market. New .com's that are deciding between make or buy, will almost always choose inktomi as the low cost alternative.
Back to GNET. Their core business is technology driven websites. The problem, they are in many businesses and in all of them they are not number one and in none of them they are global. SI is a star product. But there are 100 stock exchanges in the world and you should cover all of them. They have to define the world as their market. (another question for the shareholders meeting). Another option is to define not SI, but the underlying 'community-technology' as the business. Then they should include other fields of application like travel. There are hundreds of travelogue sites where the SI technology could easily form the basis of 'the premier travel site on the web'. Travelers want to exchange info on destinations, hotels and airlines want to put banners with packages.
So i think GNET has to define their business areas and become the global leader in each of them. Follow amazon, inktomi, cisco, yahoo and egroup. Define the niches where you want to be the leader. (SI-technology, business hosting, playsite)
You may divide the internet in three layers, each has it own dynamics of scale.
1. infrastructure - iron
2. web technology - brain
3. web presence - brand
The web presence is ruled by eyeballs and brandnames. One site - one brand. To get scale, the brand has to become global. There are millions of sites, but only some make money. And they make big money.
The infrastructure is ruled by global presence and low cost. Thousands of different websites will share the same infrastructure, plug and play (mci-worldcom, exodus, cisco, island). There are thousands of companies, but less than hundred are the real leaders.
Web technology or 'back office' is ruled similar to complicated software. It can be used by many sites, but still you need a fair amount of development. Can be compared to large databases of ERP packages. For each application their are less than hundred companies active and only some make real money (Oracle, SAP, ITWO).
GNET is active at three levels, brand, infrastructure and web technology. It was interesting to hear last month that gnet divides its businesses into business services, consumer services and enabling technology. I hope that next shareholders meeting sheds some more light on their strategic direction. I would say profit is important, but much more important is business definition and global dominance. SI got big with free sign up. They should do the same on all stock exchanges, in 20 languages. Enter in the travel world. Get Hypermart in 20 languages. Have 100hot for all countries. Create a web technology powerhouse. The shares will fly again.
Inktomi shopping engine, underlying web technology:
209.185.142.203
209.185.142.203
209.185.142.203
209.185.142.203
209.185.142.203
shop.go.com
cnnfn.com
shopmerrill.com
iwon.com
Even levy did set up his private label site:
209.185.142.203
i'm not saying inktomi is a clear winner, some other companies try to get the shopping dominance...
i'm not an expert, but like all of you i try to find out a model to understand the net to know where to invest.
regards,
Pareto |
