The Wild Wild West
By Jon Lebkowsky
MARCH 8, 1999:
"Nobody knows what's going on. The technology people don't know. The content people don't know. The money people don't know. Whatever we agree on today will be disputed tomorrow. Whoever is leading today, I can say with absolute certainty, will be adrift or transformed some number of months from now. Whosoever screws with you will get screwed with, too. It's a kind of anarchy. A strangely level playing field. The Wild Wild West."
These days, the Internet is starting to have shape and substance and is becoming a Big Deal. Wolff's book hit just as the rest of us began to hear the People Who Should Know describe the Internet as an industry; Wolff created even more of a buzz with his concise descriptions of players and meetings. Although these are the kinds of topics which can be pretty boring, the combination of Wolff's dry wit and his eye for significant detail makes for a good read. Even people who hate the book seem to love reading it.
Many speculate that Wolff couldn't possibly retain the detailed memories of all those business meetings he describes in Burn Rate; but regardless, he presents a pretty accurate picture of the scramble to make a viable industry from a technology that nobody has quite figured out. Now Wolff is doing the pundit thing, trying to make informed guesses about the future of media old and new, and he will be one of the keynote speakers at this year's South by Southwest Interactive Festival.
If you care about the Internet as an industry, I imagine it's either because you want to join the gold rush and try to make a million bucks, or because you deplore the commercialization of the communal bit bucket. Either way, you should pay attention to Wolff.
Michael Wolff: Gratified is more like it. It's nice to hit the target.
MW: Everything in the book is accurate. That's the way it looked from where I stood.
MW: Well, it does seem to keep going on and on.
MW: It merely confirms my view of the Internet world as being a) without logic, and b) the playing field of speculators and financial engineers.
MW: I think they will be erased.
MW: Really no mystery, just one magazine not wanting to trumpet another. I'm not writing a weekly column for New York Magazine about the media writ large (i.e., old media as well as new media).
MW: Yikes! What a question. It's so large that every answer is right. It is both the state of things and not. Obviously that is one of the trends that we're witnessing, but the question presupposes that corporate string pullers know what they're doing. So: Yes these things are happening; no, they won't work the way they're supposed to work. In fact, I think you can argue that it is chaos rather than control that is increasing.
MW: I was just a commuter.
MW: It's kind of like how the little league compares to the major leagues. There really is no comparison. Silicon Valley is a place with a level of capital that is almost incomparable, and I think any comparisons to it are highly problematic. Nothing is now like Silicon Valley. Could it be replicated? Well, the interesting thing about technology is how fast the shifts occur. But the concentration of capital there, in a capital-intensive industry (because the industry doesn't make money, so you have to have access to capital markets) is what has made Silicon Valley Silicon Valley. Unless there is some other geographic region that is suddenly capable of turning the faucet and releasing just a torrent of capital, it's pretty hard to compete.
MW: I guess it's partly just the luck of the draw. There were a number of companies that got started there that were successful, there are universities in that area that started to attract talent, there were investment companies that began to make bets in that area, and those investments paid off. So it's a whole kind of cascade of cause and effect.
MW: Yeah. New York City is not a place that has a lot of venture capital firms. It has other kinds of money, other kinds of investment, but not the kind of investment that technology usually demands. Also New York City, remember, has big companies. We have real companies. It's very hard to suddenly say, "Hey, let's stop concentrating on our real economy, and let's go focus on an economy which may never return real profits." Plus, New York City hasn't had the kind of technology talent resources that other places with technically minded universities have. So in some ways, from a technology standpoint, everyone's always said New York is kind of a "dumb" town. And I think that's still largely the case. Now, the thinking was always that, as this became "new media," with the emphasis on the media, that content would come out of New York as it traditionally has. But I think the problem with that is that new media has not really turned into media. It's turned into something we-don't-know-what-it-is. But the demand for content has not been all that great.
MW: I have no idea what that means.
MW: Well, that may mean that it's not media at all; that it's just distribution. If that's the case, and I think that it's certainly partly the case, then there is never going to be a business of Internet content per se. The Internet just becomes something to move a lot of other traditional kinds of content.
MW: Yeah, that may or may not be true, but it's certainly, I think, a cogent way to look at it.
MW: Of course. I don't think anybody except the most chamber-of-commerce-centric people imagine that there won't be a bust.
MW: Well, we certainly know that there is not a business model that's robust enough to survive any kind of downturn. As soon as the "endless" source of capital dries up, the business is in trouble.
MW: I don't know of an e-commerce company that makes money. The e-commerce business model is now: "I will spend more money selling you something than you pay me to buy it."
MW: I guess in some cases. In some cases, I think fulfillment is pretty good. Nevertheless, I do think we're still in a situation where things have to be highly discounted, and effectively, you lose money on everything you sell.
MW: I do see a convergence. I think the question is what form that convergence takes. I wrote a column recently in which I hypothesized that a good deal for AOL would be to buy CBS. The convergence I imagined there was a convergence in advertising packages. The whole movement in the advertising business is packaging media. It's impossible to reach a 1965 network-size audience anymore, so in order to do it, you have to do it across lots of different platforms. If you only have one platform, that's going to be fairly limiting. If you're a media company with multiple platforms, you're ahead of the game. So I conjecture that, if AOL truly wants to be a media company rather than just an Internet access company, then they would have to require other forms of media.
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