timone NetMarketing
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Marketing in the internet – as seen from Italy

No. 57 – May 19, 2001



loghino.gif (1071 byte) 1. Editorial: Money isn’t value

This issue of Netmarketing is about money. The reason is that many people, at this time, are puzzled about “money and the internet”. Net-based businesses, as well as other companies using the net, are asking: «where is the money?» It isn’t where they expected it to be – and now they are very confused. They don’t want to admit the simple truth (their strategies were wrong) and so they are claiming that “the free internet is dead” and that all services online will need to have a price. That is, again, a mistake – and it’s likely to lead to more blunders and more failures.

Before I get into this specific subject, let me attempt a general comment about “money”. I am not trying to discuss general economic theory. The “dismal science”, as Thomas Carlyle called it, has many problems explaining or understanding human behavior and business. I leave those complexities to academics and business analysts. All I need to do here is to look at a simple fact: money and value aren’t the same thing. What is happening with the internet is not an “exception” but a specific (and, in its way, unique) case of a broader principle. There are, and there have always been, transactions in which value is exchanged but no money is paid.

There is no “real value” in money. It is valuable only when it can be exchanged for goods or services. There are valuable things that money can’t buy. And there are valuable exchanges that don’t involve money. That’s more frequent, even in our daily experience, than we bother to notice. Even in a culture dominated by the false notion that “money is everything” we wouldn’t be able to survive with a minimum of comfort and piece of mind without a variety of human transactions based on behavior, interchange, relationships – that are very meaningful but don’t involve money. A lot of that is happening on the internet. Without it the net would lose most of its value. And that wouldn’t do any good to anyone, including business.

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loghino.gif (1071 byte) 2. The meaning of “free internet”

The frantic discussions about “free internet” forget a basic fact. The structure of the net is not based on money. That doesn’t mean that we are getting “something for nothing”. Any “knot” on the net must provide service to all others (there are over 100 million “hosts”) in order to be able to access the system. They don’t pay money to each other but they exchange services. And for each of them, obviously, that has a cost. Equipment, people, time, effort – and money. It’s quite surprising that this simple (and basic) fact is never mentioned in all f the confusing discussions about “the end of the free internet”. Which really means something else: «how can we make money in this strange environment?» The more this discussion is led by people who don’t know what they are talking about, the fewer chances there are of finding a solution.

Of course money can be made on the internet. But not by charging for services that are, quite rightly, expected to be “free”.

In order to make money it is necessary, first of all, to feed the “free” internet (in which a great deal of value is exchanged, but no money). The people who want to “kill the free internet” are very unlikely to succeed. If they did, they would simply kill the internet. And dead geese don’t lay any golden eggs.

Is it as simple as that? Not quite. Each single case is different and finding the specific solutions to offer something that someone is willing to pay for can be quite complex. It requires patience, dedication, experiment and learning. But when the basic concept is understood there are fewer dead alleys, fewer disappointments, and much greater opportunities.


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loghino.gif (1071 byte) 3. Where is the money?

The reason why so many people (companies, organizations etc.) failed to make money with the internet isn’t that it’s impossible. Or even difficult. It’s simply because their plans were poorly conceived and their objectives were unrealistic.

In many cases they expected too much, too soon. Some people made a lot of money, not by providing value, but by escalating speculative investments and getting out of the act before their phony plans fell apart. That’s good for the few that profit, but very bad for everyone else. As is clear from the débacle of the so-called “new economy”. Of course such ventures have little to do with any sound economy, old or new. It’s more like selling the Brooklyn bridge. Unfortunately that trickery isn’ìt finished. In spite of so many failures, there are still several organizations finding buyers (or supporting capital) for worthless enterprises.

Discussions on “money and the internet” are so confused and warped that they miss some simple facts. The internet, as such, is money-free. That doesn’t mean that people are unwilling to pay for specific goods or services. If they believe they are worth the money. It’s not even difficult to find out who is prepared to pay for what – and how much. The internet is a wonderful testing ground for almost anything – if we understand how it works. The dismal fact in all the discussions about money and the internet is that they appear to be led by people who lack a basic understanding of what the net is and how it works.

In the last two years I wrote two books about the internet. I apologize to my international readers for the fact that they are in Italian (and it’s very unlikely that they will ever be translated into English). But I was surprised by something that maybe can have a broader meaning. The first book, La coltivazione dell’internet, is doing reasonably well; it was reprinted and a second edition is due at the end of this year. A leading business association asked me to sumarize the basic concepts in a smaller book, Le imprese e l’internet, that was distributed to all its members. Both seem to be appreciated by most readers (though I don’t see many signs of its concepts being practiced.)

The surprise came with the second book, L’umanità dell’internet, published this year. It’s meant for people, not business. I didn’t expect the business community to be interested. What’s happening is that several business people are reading it, using it in training sessions, giving copies to their partners and customers. They say it’s even more useful that the other. Why? There is only one possible answer. Managers and entrepreneurs have been cluttered with so much nonsense about e-commerce and online business that they find it refreshing (and useful) to “get to the basics”.

There are great opportunities in the internet. If so many business managers and consultants have such a poor knowledge of what the net is and how it works – in spite of the clutter the “free” internet is a place where money can be made by forgetting the noise and the nonsense – and concentrating on what can really motivate people to buy. Current discussions about “should the internet be free or not” are a waste of time. And they are standing in the way of real business.



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loghino.gif (1071 byte) 3. The problem of “content”

Of course there are still very confused ideas about “content”. Many people still think they can get away with appearances, useless decorations, etcetera. But even if we boil it down to real, meaningful content the issue remains blurred.

The role of a company or an organization, unless it’s in the publishing business, is not to be a “content provider”. It’s only to provide clear, well-organized content that relates to what it’s doing. That’s so obvious that it should be unnecessary to repeat it – but it’s surprising to find how many companies still think that they can’t be online unless they provide entertainment or other content unrelated to their identity and mission.

For all companies that are not in the business of producing information the issue of “free” internet versus charging for service doesn’t exist. They provide information as they feel appropriate to promote and explain what they do. They charge money for whatever they are selling. The more good “free internet” exists, the better the environment for them to perform their role.

If we limit the issue to those organizations that want to make money by selling information, we get to the real heart of the problem. There is enormous amount of “free” information on the net end it will continue to be there. A lot of it is trash, but some is very good. As in the case of universities putting all of their knowledge online.

So the situation is quite difficult for anyone trying to sell information as such on the net. Except, of course, for highly specialized professional services which are already charging for their content.

I can’t thing of any magic formula for the solution of this problem. But there are two possibilities.

One is that so-called information services, that went online with the sole purpose of providing “no matter what” information and make some easy money, simply give up and shut down. Leaving the field open for those who can provide real quality.

The net needs great variety and diversity. So I am not suggesting that it would be a good idea for thousands of good services to disappear and only a few major concentrations to survive. Quite to the contrary, we want as much diversity as we can get. Many “small and dedicated” organizations will continue to provide better quality, and more interesting content, that any of the big “generic” systems. Many of those can survive without charging for information – as they have done so far (their “reward” is not money but the exchange of knowledge). Others can, and probably will, find some financial support by people and organizations that are specifically interested in what they are doing.

The second possibility is that information providers set more realistic objectives. If they don’t expect too much, too soon they will find ways of making their operations viable.

Is advertising one of the solutions? It can be. But it wont’ work until the environment becomes less confused. It takes time to build a clear identity, with “loyal” readership and believability. Warping content to please “sponsors” (as too many are doing, in their hasty attempt to achieve impossible financial targets) leads to a loss of quality that soon becomes visible and disappoints readers. For instance several search engines have been dramatically deteriorating by “grading” materials on the basis of who pays for higher ranking.

What we need is more clarity, more honesty, greater attention to genuine service to readers. And (also in this case) a much better understanding of how the net works. The real problem is that many things need to be “undone” before good quality can be properly recognized – and rewarded.



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