When Jerry Kaplan began auctioning goods on the Internet three years ago, some of his friends worried about him. He had recently left Go, a pen computing start-up he founded that turned into one of the highest-profile flops in Silicon Valley history. He was going through a separation that led to divorce. And now, through his On-Sale auction site, he seemed to be settling for a nice, little idea rather than the grand plans that had made him a big-name player in the high-tech world.

Last year, On-Sale (www.onsale.com) had $89 million in sales, and some analysts suggest it could reach $1 billion by 2001. The company has gone public, and Mr. Kaplan's 28% stake is valued at more than $150 million as Context goes to press. That doesn't count the $12 million he received from a sale of stock last fall.

How did a nice, little idea turn out to be such a big deal?

Partly, this is the standard tale of the Internet. Mr. Kaplan, 45 years old, staked out a position for himself early on, then rode the Internet wave as usage exploded. But he also did something very smart. He recognized that companies that were selling goods over the Internet were essentially just posting brochures and weren't taking advantage of the new medium's full, interactive capabilities. Mr. Kaplan likened the situation to the early days of television, when networks simply produced televised versions of long-standing radio shows.

He decided that auctions were the answer. He figured that the prospect of bargains and the suspense of the bidding might draw people to his site. He was right.

Mr. Kaplan had plenty of learning to do along the way-but he was early enough in setting up on-line auctions that he had time to recover from his mistakes.

A visit to On-Sale two years ago found that Mr. Kaplan, having recently moved the business out of his spare bedroom, had spread out over a few cubicles he was borrowing from a friend's software business. On the floor were items that hadn't sold, including a mismatched case of wine. With the evidence there at his feet, Mr. Kaplan realized that he shouldn't be auctioning items that were widely available at a known price. He needed goods without a clear value. Otherwise, what was the point of an auction?

So he gave up on jewelry, arts and crafts, and refrigerators. Given that his customers were computer users, he decided to specialize in reconditioned electronics, such as personal computers and VCRs. They should work as well as new machines but couldn't be sold through normal channels at full price.

Customers found On-Sale quickly because they could sometimes get very good deals. For instance, On-Sale recently sold 138 reconditioned Hewlett-Packard personal computers at prices ranging from $859 to $1,089. The same machine sold in stores at the time for $1,800.

Customers did, in fact, get into the spirit of the auction. Some tried to talk down the price by denigrating the product. "Terrible PC. Buying to use as doorstop," one wrote, in the kind of comment that people are encouraged to post next to their bids. Others tried to encourage collaboration to keep prices low. Some simply begged to not be outbid. "Come on, guys. Give me a break," one wrote.

Now that he's ended up with what he considers to be a new type of distribution channel, Mr. Kaplan figures he can sell all kinds of goods and services that don't have a fixed value. He's adding more-expensive electronics-On-Sale recently sold a reconditioned network server for $18,000. He's moving into sports memorabilia, such as baseball cards. He's planning to get into travel, where he might auction off vacation packages that are still unsold a few days before they begin. Last fall, Mr. Kaplan added the On-Sale Exchange, which lets individuals list items that they'd like to sell.

On-Sale is also doing more to try to build follow-on sales. If someone buys a PC, for instance, he may be prompted later with information about an auction of memory cards.

Mr. Kaplan has plenty of hurdles still to clear. The big issue is that, to be sure On-Sale has staying power, it needs to expand quickly and build its brand. Plenty of competition is now headed its way, including a subsidiary of the Home Shopping Network. While On-Sale had been modestly profitable in 1996, Mr. Kaplan has decided to plow all profits-and a lot of other money, besides-into expansion.

The odds seem to be with him, if only because auctions fit the Internet's personality so well. As Mr. Kaplan says, "People enjoy buying this way. There's so much more of an emotional content."

MOORE IS LESS

Gordon Moore made his famous prediction about computers 30 years ago, saying that the power of a chip would double every 18 months at no in- crease in cost-or, conversely, that the cost of computing power would fall 50%. Sure enough, ever since, electronics-based industries have been riding the Moore wave, offering ever cheaper and more powerful products-ones that generally wouldn't have seemed possible just a few years before. Here's a sampling of recent gadgets that benefited from Moore's Law. Some of them are pretty cool.

IT TAKES A LICKING BUT KEEPS ON TALKING: Skiers, skaters, bobsledders, and other cold-weather athletes weren't the only ones testing their limits at the Nagano Winter Olympics in February. Nippon Telegraph & Telephone was trying out a prototype cellular telephone so small that until now it was just the stuff of Dick Tracy cartoons.

The prototype-which NTT calls the Pretty Handy Phone System-is as small as a watch and is worn on the wrist. NTT gets around the limitations inherent in such a small device by using speech recognition software. Whose fingers would be small enough to use it if it had all the buttons on most cellular phones?

A user can place a call by saying the phone number. He can also program numbers in ahead of time and just say the name of the person to be called. The phone contains four buttons that can be used to dial if the surroundings are noisy.

NTT says the small size of the phone and some features designed to cut power consumption will allow for extended battery life. The company adds that the antenna is hidden inside the phone.

While the results of the trial among Olympics officials weren't available at press time, NTT does appear to have moved the technology for such tiny phones out of the lab and close to commercial reality. NTT says the prototype will be turned into a commercial product in a year and will be priced competitively with other mobile phones. The company adds that-by riding the wave of Moore's Law-it will continue to push the concept of "wearable communications tools."

For more information: www.ntt.co.jp

A LEAN, MEAN MACHINE

Every few months there seems to be a new champion in the laptop world. Something comes along that is smaller and lighter, yet far more powerful, than the previous champ. And, even though the new machine is completely in line with the changes predicted by Moore's Law, it still seems awfully impressive.

The latest king of the hill is the Pedion from Mitsubishi. It weighs 3.1 pounds and is just over half an inch thick. Yet the machine contains a very fast, 233 megahertz Pentium II processor, a one-gigabyte hard drive, and 64 megabytes of memory.

The machine ain't cheap. It costs between $5,500 and $6,000. But give it another 18 months-another Moore's Law generation-and it'll be a lot more affordable.

For more information: www.mitsubishi-mobile.com

THE FACE IS FAMILIAR, BUT...

Pretty soon, your personal computer could greet you by singing, "I've grown accustomed to your face."

A new security system developed by Visionics Corp. uses software and a tiny video camera to make sure that the face staring at the PC monitor exactly matches the face that is programmed into its memory. Only then will the security system allow the PC to be used.

In other words, your face is your password.

Spy movies and high-security facilities have long used such technology, along with retinal scans, fingerprint matching, and so on. But the declining costs that come from Moore's Law have now made Visionics' FaceIt system available on a mass scale. The software costs $149.95, and the camera sells for another $199.00 to $399.00.

Computer processing power is so cheap these days that Visionics has been able to add all kinds of goodies to the system, too. FaceIt can be set to monitor who is around your computer while you're gone, snapping pictures of anyone who gets too close. FaceIt, which won the Best of Show award at the Fall Comdex technology conference, also allows the PC to be used as a visual answering machine.

Anyone passing by looking for you can turn on the camera and leave a message.

FaceIt, or similar technology, is sure to proliferate now that prices have fallen so much. The security systems will show up at ATMs, in office buildings, and so on. Before you know it, your teenager will set up a security system in his room to make sure his sister keeps her distance.

For more information: www.faceit.com

PAGING YOUR CAR

With cars turning into computers, Motorola has developed a way to let drivers communicate with them remotely, essentially by paging the cars. An executive who returns bleary-eyed from a long business trip and can't find his car would be able to dial an 800-number, punch in a code to identify his car, and have the car start honking its horn and flashing its lights.

The system, called CreataLink, would also let a driver unlock the doors by telephone if he left his keys inside or turn off the lights without leaving a baseball game. (Of course, these days, another chip in the car might already have detected the lapse and killed the lights.)

The CreataLink system-which costs about $160 for the equipment and installation, with a $25 annual service fee on top of that-will appeal to car-rental companies, Motorola hopes. It figures these companies could save money by not having to send employees out to unlock cars whose renters have left the keys inside.

A more controversial user would be car-finance companies. They could warn delinquent owners by flashing the car's lights and honking the horn. They could also make sure the engine stayed off until the owner caught up on the payments.

For more information: http://www.mot.com

THE WIDENING WEB

With the Internet having developed such cachet over the past couple of years, it has benefited from a snowball effect. As the Internet becomes more widely used, it becomes a more valuable place to conduct commerce, exchange information, do research, etc. So more people use the Internet. That makes it more valuable. And so on. Companies do their part, too, to make the Internet ever more popular. They find ways to shore up the Internet's sometimes flimsy structure and to use it in interesting new ways that further increase its value.

JUST THE FAX, MA'AM

The Internet lends itself to fax traffic. Faxes aren't as sensitive as voice traffic-while having a voice conversation occasionally disrupted for a couple of seconds at a time would be unacceptable, a fax transmission could tolerate even longer delays and still come through fine. Of course, Internet fax traffic, like voice traffic, doesn't cost anything beyond the monthly charge of $20 or so that's paid to the Internet Service Provider.

With so many customers beckoning, fax makers are happy to oblige. Panasonic recently introduced a good example of an Internet fax machine, the Panafax UF 770i. It faxes documents over the Internet to any e-mail address. It also has all the standard functions of an advanced fax machine, including a three-second Quick Scan and 50-page automatic document feeder.

As if the long-distance carriers didn't have enough to worry about, without all these folks trying to take away their fax traffic. . . .

For more information: www.panasonic.com/internetfax

DOLLARS AND SENSE

With cellular modems for personal computers becoming available, Bell Atlantic Mobile is offering unlimited, wireless access to the Internet for a flat $54.95 a month. The idea is to encourage cellular traffic by mimicking the flat rates that Internet Service Providers charge for access over land lines (albeit with cellular access costing almost three times as much).

A Bell Atlantic official says most companies that offer cellular access to the Internet charge a monthly fee plus something for each kilobyte of data transmitted or received.

The service is available from Boston to Columbia, S.C.

For more information: www.bam.com

OF BANKERS, BEER, AND BIG BETS

Wit Capital is making as bold a play as any firm on the Internet these days. Its goal is nothing less than to wreak havoc on investment banking and restructure securities markets-while taking a little piece of each transaction for itself.

The Wit idea began with beer. Andy Klein decided he'd rather brew Wit beer than practice securities law at Cravath Swaine & Moore. But he needed money. After some to-ing and fro-ing with the Securities and Exchange Commission, he raised $1.6 million for his Spring Street Brewing in an IPO over the Internet.

Now, Mr. Klein reasons, why not do more Internet IPOs and make a business out of it? Wit Capital has arranged with some brokerage firms to distribute stock in IPOs to the general public over the Internet. It has also arranged to let individuals invest in certain venture-capital funds. In addition, Wit is trying to set up an electronic exchange that would handle big volumes of securities trading.

Wit may well not succeed. It faces formidable competitors. It also has the classic chicken-and-egg problem that shows up so often in technology-related ventures. It must attract lots of customers if it's going to draw much interest from brokers wanting to distribute IPO stock, from venture-capital funds, and from companies looking for venues for trading their securities. But Wit must have broad access to stock and venture-capital funds if it's to attract lots of customers.

Still, there is a certain appeal to the idea. Investment banks and others in the financial world make gobs of money because of their access to customers. So, if some company can provide broad access electronically at a lower price, it'll attract all kinds of business.

For more information: www.witcapital.com