Imagine if you had 1 million people walk through the lobby of your
restaurant, take
a free dinner mint, toothpick, ask for a glass of water, and then leave.
During that brief interlude your business model is to hold up as many ad
flyers in front of their faces as they chew the mint, ponder the flavor,
ignore the menu and flyers (and any other gesture you come up with), leave
after the freebie is over.
Your marketing guru pats you on the back with
expressions like “great job, we have them now.”
| Internet.com’s | August | Oct 7 | Oct 14 | Oct 7 | Oct 14 | Percent |
WEBDEX | Users | Market cap or PMV* | Market cap or PMV* | User | User | change |
(millions) | (millions) | (millions) | Value | Value | ||
Yahoo | 26.1 | $10,715 | $10,481 | $410 | $401 | -2.2% |
AOL.com* | 21.8 | $3,000 | $2,850 | $138 | $131 | -5.0% |
Microsoft.com* | 19.6 | $2,500 | $2,600 | $127 | $133 | 4.0% |
Lycos | 17.6 | $1,005 | $1,059 | $57 | $60 | 5.4% |
Excite | 16.6 | $1,727 | $1,762 | $104 | $106 | 2.0% |
Netscape.com* | 16.3 | $1,400 | $1,500 | $86 | $92 | 7.1% |
MSN.com/Hotmail* | 15.6 | $875 | $1,000 | $56 | $64 | 14.3% |
GeoCities | 15.5 | $506 | $560 | $33 | $36 | 10.6% |
Infoseek | 11.0 | $645 | $647 | $59 | $59 | 0.3% |
Disney.com* | 10.4 | $900 | $1,000 | $86 | $96 | 11.1% |
TOTAL | 170.5 | $23,273 | $23,458 | $1,156 | $1,178 | 1.9% |
AVERAGE | 17.1 | $2,327 | $2,346 | $116 | $118 | 1.9% |
| ) 1998 Internet.com *PMV=Steve Harmon’s estimated private market value for Web site only | ||||||
Your ad guru touts that you frantically got before their eyeballs a record
10 flyers, including the new “eat at joes” flip-it animated one–that’s
surely gonna get their attention.
I’m going to call this the “raccoon”
business model. For anyone who’s ever seen the lifestyle pattern of a
raccoon knows they’re very habitual in their daily routine and they are
fond especially of free food. Flash as many flyers in front of a raccoon
while it’s eating the free-for-all and the best you’ll get is an amused
raccoon.
Said another way, on the Internet, the business model of
advertising is but 1/20th of the true value extraction of the user
relationship, if that.
While we are confident that advertising alone on
the Internet may be a $10 billion arena within a few short years (in a $200
billion ad universe across all mediums), what the Web offers that no other
medium in the history of media can do is monetize the user with the
universe of offers.
This is not “personalization” in the hackneyed
lexicon of Flycast or match and marry marketing. It is the development of a
“relationship” with the Internet experience.
No more than the
relationship we have with the movie experience. None of us goes to the
movie house with the express intent of buying popcorn for $7 dollars a
bucket, a soda for $3 and a dose of sugar candy with a thick coating of red
dye #2 spewed into it for $2.50 a box.
But economically we’ve spent $8
for the movie ticket and $12.50 on the associated “experience.” So is
United Artists in the movie or popcorn business? And it’s no accident that
when you walk into the movie house you must pass the snack bar, the
“relationship” has begun, the commerce opportunity is immediate and almost
invisible we’re so “used” to it. There are no banners or posters on the
walls of the movie house that say “check out the snacks” across the
street, go now.”
Since most of the top sites shown in Internet.com’s
WEBDEX (web site value index) depend a majority or entirely on advertising
let’s focus on the experience.
On the Internet we would posit that that’s
just what banner ads do, take the commerce AWAY from the site and not INTO
the site. The experience is not seamless or blended as the popcorn/movie
example. So we’ll look at Web site valuations today, movie houses with
nothing but posters pointing to other people’s commerce opportunities and
say what if the commerce opportunity was as user-friendly as the ransom we
pay for popcorn because the commerce opportunity is convenient, now, and
part of the “relationship” we accept from the movie house.
We suspect
that integrated commerce on the Internet, and it doesn’t exist on the Web
today truly since the services, software, user-interface are not there yet,
has the ability to increase the potential value of a user as seen in the
WEBDEX, 10x or more. Today’s $10 billion top-end valuation for a Yahoo
(NASDAQ:YHOO), or $560 million for a GeoCities (NASDAQ:GCTY) pales in
comparison.
These aren’t “media” companies as in ABC TV or CNN. These are
media companies with the potential to place real commerce at every click.
The future value of all of the above Web sites relies on the ability for
them to “walletize” users. Showing soon on a Web site near you?
