Is the Internet Eden or Armageddon? (1,887 words)
by Denny Hatch
In the place without place, anarchy reigns once worked for a cherubic-faced, hard-drinking publisher named Franklin Watts. "Good morning, Frank," I would say each day. "How are you?"
"Happy as a country without a history," he'd respond.
How long has it been since the Internet was without a history and considered the new Garden of Eden—a paradise of investor and intellectual euphoria unmatched in the entire spectrum of human endeavor? Less than eight months.
Remember the thinking of those heady times?
• For investors, here were infinite horizons of obscene profits that turned traditional business models on their ear.
"Those who cannot remember the past are condemned to repeat it," wrote philosopher George Santayana. Financial history buffs will recall the South Sea Bubble of the 1700s; Teapot Dome Scandal in the 1920s; Anthony "Tough Tino" De Angelis, perpetrator of the Great Salad Oil Swindle of the 1960s that sent the stock of American Express into a downward spiral. I see no difference between these great flimflams of the past and the 24-year-old wunderkinds of Boo.com burning through $135 million in six months and the avuncular old ex-Surgeon General who conned investors into spending as much as $45.75 for shares of Drkoop.com only to have it implode to $1, as well as the legion of other high-flying dot-coms on the NASDAQ ash heap.
• Direct marketers would no longer have to spend $500/M on mail and catalogs because reaching people on the Internet is basically free.
If true, please explain why a major list broker told me at the American List Counsel lunch in New York this past May that fully 10 percent of her business was from dot-com companies using the mail to promote Web site traffic. I just received my first curiously targeted print catalog from a Web site, PetFoodDirect.com.
• What's more, all who surfed the Internet could be individually tracked as to their interests and then hit with precisely targeted advertisements and offers.
In the words of Republican pollster Neil Newhouse, among consumers, the fear of privacy invasion "tests off the charts." Writing in The Wall Street Journal, Andrea Petersen described DoubleClick—the 'Net's premier Internet snoop—as "going from dot-com darling with an inside track on e-commerce to an Internet pariah." But perhaps Thomas L. Friedman, writing on the Op-Ed page of The New York Times, said it best: "I believe in the possibilities of the new technologies as much as anyone. But it seems that while we started by surfing the Web, the Web is now surfing us."
• These offers will be so precisely targeted that direct marketing response rates will go through the roof.
According to a study by the Poynter Institute and Stanford University, Web users look at only 45 percent of banner ads—the main source of revenues for as many as 7,000 Web sites. What's more, they spend an average of just one second on each banner ad, with click-through rates somewhere between two- and three-tenths of a percent. (Remember, click-through means eyeballs only, not revenues. In the words of Agora Publishing's Bill Bonner, "The only bank that takes eyeballs is the eye bank.")
• Students could use the Internet to do research right from their homes, thus avoiding hazardous night travel to and from the library.
I read a statistic recently that sounds right: Of the 24 million kids currently on the Internet, one in five has gotten or will receive an "indecent proposal" of some sort.
• The Internet is the great new repository of all the world's information and knowledge and available to all.
Yeah, and millions of people around the world have become sexually addicted to their computers. Example: When I was in Toronto in late April, the Toronto Globe and Mail revealed that the 10,000 employees of the Government Department of Fisheries were making 70,000 visits to porn sites every day.
• Books and magazines would be delivered electronically, saving billions in paper, printing, binding and delivery.
Two Internet-only magazines sprang up in the very late 1990s. Slate.com under the editorship of Michael Kinsley found it could not charge consumers, but was forced to rely solely on advertising. Salon.com has just fired a number of editors and is retrenching.
Why the Internet is Eden
Speaking personally, as someone who makes a living as a writer, the Internet is a godsend—an amazing research tool. Example: As a subscriber to The Wall Street Journal online edition, I have free access to its archives of millions of articles from hundreds of publications and a search engine that brings me what I need in seconds. Contrast this with the bad old days of schlepping to the library, parking the car, dealing with indices and microfiche machines.
What's more, the range of information available is fantastic—every Academy Award nomination and winner, Supreme Court decisions, sources for the peculiar halogen light bulbs that illuminate the paintings in my hallway. The uses of the Internet in terms of savings of time and money are limitless.
Why the Internet is Armageddon
The dictionary describes Armageddon as the ultimate battle between good and evil. That's the Internet! Consider the battles currently raging.
The Battle for the World's Soul
Computer cyberpunks are creating viruses such as Melissa, Worm and I Love You that destroy personal files around the world; many more are happily hacking into what should be absolutely secure computer systems in business and government, stealing and destroying files.
One international hacker stole 300,000 credit card account numbers from an American marketer of CDs and offered to return them for a ransom of $100,000. The marketer refused, whereupon the numbers appeared on a Web site for all the world to see (and steal). Alarmingly, in the words of Brajendra Pana, Associate Professor of Computer Science at the University of North Dakota, "Most computer break-ins go unnoticed; only about 10 to 15 percent are detected."
Go to Dogpile and enter "term AND papers"; you'll discover powerful online ads for tens of thousands of pre-written term papers—complete with footnotes and bibliographies—for as little as $19.95, thus turning our young people into a nation of cheaters.
Add to the mix myriad scams—such as the scandal of "shill bidding" on eBay where rings of conspirators work to artificially hype the value of objects up for sale and similar covens do likewise in the financial markets—and you have a nation of crooks.
In Paris, the French government sued the American company Yahoo! for featuring some 1,000 Nazi souvenirs with offensive emblems; the sale of such items is flatly against French law. Yahoo's lawyer's argument to the court: "But there is no France on the Internet."
The Battle for Copyright
The lethal combination of four kinds of technology—MP3, Napster, Gnutella and Freenet—means music and movies can be freely and anonymously stolen and traded around the world—with no royalties to the artists, the songwriters or the recording companies. Freenet's creator, Ian Clarke, calls it "near-perfect anarchy."
In the words of a New York City high school student who downloads music while he sleeps and thinks nothing of his thieving ways, "Napster is the best thing that's ever been created. I don't have to spend any money."
As Holman W. Jenkins Jr. wrote in The Wall Street Journal, "Napster leaves it up to users to worry about copyright laws, which is to say no one worries about copyright laws. We have disorganized crime on a massive scale. This is wrong, terribly wrong, and yet it's hard to think of anything to say but tough luck, buster. A quirk of technology giveth and a quirk of technology taketh away."
Harvard Law Professor Lawrence Lessig suggests that code—the underlying DNA of software—is weak and that high-tech companies will come up with better code to solve the theft problem. To which Freenet inventor Ian Clarke counters: "I have two words for those companies: give up. There is no way they are going to stop those technologies. They are trying to plug holes in a dam that is about to burst."
On July 27, a federal judge in San Francisco shut Napster down. [Napster was back in business a day later thanks to a stay.] Alas, the entire camel is in the tent. Look for Napster—or its derivative—to set up a server in Afghanistan or Crete (both a local phone call away) to serve the worldwide audience of music thieves.
While some of us will continue to buy CDs, performing artists are going to have to deal with the new paradigm: their recordings—traded freely over the Internet—will simply be promotional vehicles to create demand for their live concerts, driving ticket prices up, enabling them to make the lion's share of their money from performances, rather than via CDs.
The industry in real trouble is Hollywood, which has to deal with DivS software that will compress a two-hour film into a file so tiny it can be transferred over broadband in minutes.
The Battle for Patents
Target Marketing's 1998 Direct Marketer of the Year was Jay Walker, founder of Priceline.com and president of Walker Digital, which owns some 60 patents on "business systems" (including the blind bidding scheme on which Priceline.com is based) and 300 more pending. In October 1999, Walker filed suit against Microsoft for launching Hotel Price Matcher. That same year, Jeff Bezos forced Barnesandnoble.com to cease using a "1-Click Ordering" system because his Amazon.com held the patent. In the words of Lawrence Lessig, "The idea that 1-Click is so amazing that it deserves a government-granted monopoly is ridiculous."
It matters not one whit whether a rogue patent office is granting protection to every nutsy-fagan idea that comes down the pike.
Even if Walker and Bezos do spend the millions to defend their patents, like telemarketing boiler room scammers of old, copycats will simply close their doors and set up shop—not across the street, but in some other country where they are still just a local phone call away.
The Battle for Privacy
Personal privacy is dead. All kinds of groups worldwide are trying to regulate privacy on the Internet—by fiat or by legislation. The European Union, the Federal Trade Commission, Congress, the President and the Justice Department are all trying to come to terms with what is becoming a consumer hot button. Is it really a problem? "Ask 100 people if they care about privacy, and 85 will say yes," says Austin Hill, president of Zero-Knowledge Systems. "Ask those same 100 people if they'll give you a DNA sample just to get a free Big Mac, and 85 will say yes."
The Battle for Delivery
I recently received a call from a stranger at the U.S. Postal Service asking me for ideas on how to promote First Class Mail; it seems e-mail is destroying this once-lucrative profit center. Good luck, guys.
The Battle for Long Distance Phone Service
Check out www.net2phone.com and then think about selling your AT&T and MCI/Worldcom stock.
Denny Hatch, consultant and freelance copywriter, founder of Who's Mailing What! (now Inside Direct Mail) and former editor of Target Marketing, is the author of "Method Marketing" and "2,239 Tested Secrets for Direct Marketing Success." A consulting editor to Target Marketing, he can be reached at www.methodmarketing.com or firstname.lastname@example.org.