Great article on the Internet and BtoB from INTERNET STOCK NEWS (TM)
internetstocknews.com
4. WITH THE INTERNET, BANK ON CHANGE
By Mike Ogburn
The more you learn about the Internet, the more you realize how little you know. And, the more you recognize current trends, the more you discover what's on the edge of obsolescence.
The point: the Internet is in its infancy, and it is destined for more radical changes in a shorter period of time than any industry in history. If you're an investor, getting a handle on the Internet's next move and determining who's poised to benefit (or who will crash and burn) can be a lethal combination.
A few months ago, when broadband made the scene, investors flocked to
companies involved in high-speed access -– Aware, Covad and @Home – and helped double or quadruple their market caps. Today, with some broadband service actually in place, investors saw the need for faster, wider infrastructure and loaded up on “next generation” networking companies such as Brocade, Juniper, F5 and GadZoox.
The evolution to broadband access is still the most obvious trend on the Net. The AT&T vs. America Online battle for cable access is coming to a city near you. Wireless companies are jumping in the broadband technology battle along with cable, DSL and satellite forces. A host of companies – including streaming media providers such as RealNetworks and Broadcast.com, plus software downloading firms like Digital River and Beyond – wish broadband would grow past the less than 5% of Internet users currently wired for speed.
But broadband isn't the only evolving element of the Internet.
One of the first “awakenings” proving the Internet was real came in the form of blowout revenues in the e-commerce industry. The several billion dollars spent online buying Christmas gifts seemed to grab the attention of retailers and the general public. The market, too, took notice, as demonstrated by the lofty values of companies such as Amazon.com, eBay, Priceline and eToys.
E-tailing is here to stay and growing, but it, too, is becoming yesterday's news.
It's a different kind of e-commerce – business-to-business – that's now changing the face of the Internet. Forrester Research estimates that this “B2B” e-commerce will reach $1.3 trillion in 2003, up from $43 billion in 1998. In fact, B2B is expected to exceed business-to-consumer commerce by a factor of 9-to-1!
Now you see what IBM has been up to, where Oracle is positioning itself and why Ariba caught a rocketship on its public debut. It also shows why Application Service Provisioning (ASP) – the renting/leasing of software via the Net – is being touted as the next “killer app.”
If Forrester's research is anywhere close to being accurate, investors are going to continue backing companies with software or hardware or expertise that facilitates business-to-business commerce. This trend should be your friend.
Another Net evolution bordering on revolution is occurring in the Internet Service Provider market. AOL once captured market leadership by sending out floppy disks (and later CDs) offering free hours on Internet time as an entree to sign you up. Recently, several companies began offering a free computer to new subscribers. And this week, an UK company – Totalise PLC – announced an offer of free shares of Totalise stock for individuals signing up for Internet service.
A quick read of the tealeaves says free Internet access (which already exists through companies such as NetZero) will soon be mainstream. And that, in turn, will cause more than a ripple.
For starters, ISPs will have to rely more on advertising and licensing agreements in lieu of subscription revenues. Also, the “free” movement may kick into full throttle just as widespread broadband access becomes more readily available.
An interesting battle for subscribers looms between free, traditional
dial-up service and $50 per month high-speed cable or DSL service.
Internet communications is also in a state of metamorphosis. Tools such as e-mail, chat rooms and message boards have spawned some compelling mutations. The most common is the instant messenger, popularized by AOL's ICQ service and now also proliferated by Yahoo and MSN.
An even newer wave of “inline” products allow Internet users to post “web notes” on any web site. Upstarts such as Third Voice, NovaWhiz, uTok and Zadu offer downloadable software that allows users to post and read posts placed on popular sites – notes that remain unseen to non-users. These companies hope to make money through advertising and a percent of transactions resulting from referrals.
Another offshoot, clickthebutton.com, offers free service that allows you to click on an item priced at say Amazon.com and immediately get current prices of that same product at buy.com, booksamillion.com, barnesandnoble.com and so on.
What trend do these tools portend? Just note that new tools are coming along everyday, and for every 10 failures, one of them is going to catch on like Hotmail.
One final cyber-surprise. Intimate Brands, parent company of Victoria's Secret, this week announced that it would begin selling its stock directly through its intimatebrands.com web site. No broker needed, just log on, set up an account and buy shares.
Other companies will follow suit. While it's too early to figure how
investors can play this trend, in the case of Intimate Brands/Victoria's Secret, it should give plenty of husbands a decent excuse when the misses catches them visiting the sites.
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