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| Here I am, driving down Highway 101 in a rented Ford from San Francisco Airport, enjoying the unaccustomed scent of eucalyptus while on my way to a new job in Silicon Valley. After a long career with the Wall Street Journal, I've been recruited to join a high-tech start-up as vice president, product management. I'm on a mission. My new employer operates one of the more popular "search engines," which let people find the teeniest of a gazillion bits of information hiding in the furthest reaches of the Internet. In the pecking order of the digital universe, search engines rank near the top. And we are aiming at the summit. Our ever-bullish chief executive has set us no less a mission than to connect the world's six billion people to the world's exploding store of knowledge. When I reach the office, I find 80 people piled on top of each other in a small space in a building indistinguishable from the stubby, two-story structures that have sprouted like mushrooms just off 101. My own office is dinky. I may be entering the Grand Central Terminal of cyberspace, but our offices feel more like those of an insurance-claims adjuster. Some things fit the legend. The "code head" engineers munch stale Fritos and guzzle countless Diet Cokes. One collects dead cockroaches from amid the computer cables, puts them atop his workstation, and calls them his pets. Most work all night to make the Internet do what we want-which is to find even the most obscure needle in the bizarre haystack of the Internet. And I quickly find "bizarre" is the right word. While many of the biggest media companies have developed sophisticated Web sites that actually break news and draw important audiences, for each of these there are literally dozens of low-rent sites that put out "content" of dubious value. Particularly surprising is the amount of traffic based on sex. On some days, many of the most popular queries to our search engine could best be described as pornographic. When I mention this to the company's chairman, a multimillionaire veteran of several successful Silicon Valley start-ups (there is a Web site that tracks his current net worth) he tells me this is just good business, giving the customer "what he wants." Having now returned to the world of journalism and established a little distance between myself and my initial jolt, I think I can put the experience in some perspective. While some of the media-related content sites are reaching takeoff velocity, too much of the rest of the Internet is still in an adolescent stage, focused on the equivalent of dirty magazines and heavy breathing. But VCRs, pay-per-view TV, 900-numbers, and other technologies have all matured over time. The Internet will grow up, too. I still wonder: How quickly? When will most companies be able to make a real business out of selling something other than porn on the Internet? It may be a while. Interestingly, some of the fastest growth on the Web right now is in the consumer market for such business information. There is, in fact, already a market for "must-have" information, such as competitive business intelligence and real-time stock prices. And sites leading in these areas should get bigger. We know that news reports can move markets, creating or destroying fortunes, so those reports are clearly worth something. Another promising area is electronic commerce. There are signs that consumers and some businesses are beginning to move important amounts of orders- and revenue-to the Web. We also know that some writers are better than others. As Michael Kinsley, editor of the on-line magazine Slate, said: "If I go to a great restaurant, I want my meal cooked by the chef, not the guy at the next table." So why are the chef and the guy at the next table treated equally on the Internet? In this early stage in the Internet's development as an information and entertainment medium, it's so easy to put information on the Internet, and there is so much out there. This creates the perception that few people are willing to pay when so much is available for free. This view, especially popular among technologists in Silicon Valley, traces its roots to the birth of the Internet in the 1960s as a military and academic communications network. Unless there is a change in this notion that information has to be free, profits will need to come from treating the Internet as a broadcast medium, rather than a publish-and-subscribe print medium. But the broadcast approach requires building a mass audience and a brand, and that takes time and some patience. Let's look at a few numbers. The average cost per thousand views for advertising on a Web site today is roughly $20. That means that traffic needs to be running at better than one million page views daily to generate revenues of $20,000, or roughly $7.3 million annually. Of the tens of thousands of Web sites, there are fewer than 100 that get this much daily traffic. Then, understand that these sites need to average 10 million page views daily before they become $100 million annual businesses- or 10 times more viewership than they get today. With current volumes on the Internet, they will stay small for quite a while. Now, consider some costs, such as 15% right off the top for advertising commissions. Then, deduct headcount costs (advertising sales, marketing, and administration). And consider that few sites sell all of their advertising inventory. Then, include other overhead, such as the cost of a link to the Internet, and such key infrastructure as servers and database software, and it's no wonder that only the biggest sites are turning a profit. So it may take a while for the Internet to turn into a real business for information providers. The good news is that the number of users on the Internet keeps growing at an exponential rate. People are so driven to be on-line these days that a growing cause of car accidents in the Valley is executives reading (and returning!!) their e-mail from laptops while driving.
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