While the dot-com crash had an extremely detrimental affect on the Internet, with investors avoiding dot-com companies like the proverbial plague, sentiment towards e-business appears to moving into extremely positive territory as the Internet starts to deliver on what many started to think were hyped-up promises.
This is according in Douglas Reed, MD of premier Internet service provider (ISP) and network integrator DataPro.
"It is perhaps true that all the promises were more than a bit delayed, but it is becoming more apparent that the Internet is starting to effectively connect more people and businesses - and that Internet initiatives such as business-to-business and business-to-consumer, are starting to pay dividends. Companies that are utilising the Internet for internal communications, for instance - and for communicating with their clients and their suppliers - are starting to see overheads drop significantly. As a communications medium, the Internet is proving to be compelling."
Reed also said the Internet is increasing the pace of innovation and improving productivity. "In fact, everything we used to hear about the Internet is now starting to happen, albeit a bit late."
If one looks at the latest statistics, Forrester Research reports that networked business-to-business transactions now stand at $2.4 trillion (2003). Forrester originally predicted in 1999 that US consumer e-commerce would reach $108 billion by 2003. "Despite the dot-com crash of 1999 and despite ongoing war and terrorism, this prediction is not going to fall far from its mark. There is definitely less hype surrounding the Internet. People are getting excited again, but they are now more focused on real numbers - and on real, concrete returns.
"It must also be noted that the Internet has actually survived a very serious downturn in the US economy - and what can only be regarded as a subdued world economy. Even the much-maligned Internet companies themselves - which have been at the centre of attention - are starting to turn the corner. Up until recently there were dark clouds hanging over Amazon.com, with some pundits starting to predict that the Internet behemoth would not be able to survive under its mountain of debts. But it is now interesting to note that of the publicly trading companies that survived the dot-com crash, about 40% were profitable by the fourth quarter of 2002. This makes interesting reading," said Reed.
He said many people, until recently, started to regard online advertising as some fast-fading fad. But a closer look reveals that even online advertising is finally making a comeback, bringing a much welcomed reprieve to all Internet-driven players - especially those relying on online advertising, such as Yahoo and Google, a newcomer that is taking the market by storm.
"The danger here," he said, "is that investors and people might start thinking there is going to be another big Internet wave. If we return to a state of hype - and if .net stocks are again unrealistically pumped up - we run the risk of causing a second disaster. Although it is unlikely to be as severe as the 1999 bubble burst was, it will not do market sentiment any good. Hopefully common sense will prevail and, while people start viewing .net stocks with more favour and fervour, they will not lose sight of the fact that the money also needs to talk - it needs to turn a profit.
"There shouldn`t be such a big wave that we witnessed in the late 1990s. That kind of growth and hype is not sustainable. It must merely be noted that the Internet is here, it is here to stay, and it is going to boost productivity and growth if leveraged wisely."
Companies have realised, he added, that e-business is not like one big button that you push and, hey presto!, you have a new business model and money starts pouring it. "Companies are getting wiser. Many got burnt. Now they realise that maybe only parts of their business should go the e-business route. Companies are coming to the market with a mixture of traditional brick-and-mortar business models and e-business models. The two methods cross-pollinate one another. So, while embracing, and entering, new markets - and perhaps luring new customers, these bold e-business ventures are backed up with solid business principles and, where needed, someone sitting behind a desk physically taking calls, rather than some automatic cyber voice that, in some instances, only serves to irk some customers."
But it is clear that the Internet has grown in stature - and physical power. Broadband has improved in leaps and bounds - and in the past year broadband usage in the US has grown to a staggering 19 million households. This is double the 2001 figures - and, according to Forrester, will reach 40 million by the end of 2004. "Every one wants to get onto the Net and this is a compelling reason for businesses to reach these potential clients - by ingeniously harnessing the Web. In addition, if you think that the US is taking to the Web like a duck to water, then consider the higher take-ons in countries such as Canada and Japan. According to Forrester, broadband subscribers spend 58% more time online - and spend 37% more on e-commerce. Without a doubt, this usage is signalling that the Internet is gaining ground. If this can be regarded as its early days, imagine when it matures?"
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