Copyright © 2004 John Zipperer unless indicated otherwise.
(10/22/03) Of all the industries that had heart-sinking feelings of doom when the Internet became widely commercialized in the early 1990s, perhaps none was more fearful than real estate. After all, what were realtors but subscribers to a proprietary intranet? Real estate did adapt, but now it may be about to meet a more-targeted and therefore more-dangerous threat: e-commerce wiz Barry Diller.
The real estate market was ripe for an earthquake in the early 1990s. Single-family real estate agents joined the National Association of Realtors (NAR) for the privilege of using its multiple listing service (MLS), a private intranet that home buyers needed to use to see a wide number of available homes. When the Web came along and let anyone post notices of homes for sale (and buyers could see the houses at no cost and no obligation), a fair number of realtors lost their reason for being, at least professionally. Commercial real estate agents those who bought, sold, and developed apartments, offices, warehouses, and retail properties were in some cases better prepared; because of their business customers, many of them were already in positions of selling not access to properties but analysis and financial forecasting services.
NAR and its commercial affiliates did eventually jump on the Web bandwagon, and it has worked hard to promote its membership as a resource about properties and neighborhoods. They have become higher-value access providers, in a sense. All the more power to them, right?
Also in the 1990s, convulsions in another industry were pushing a hungry businessman into a new direction, one that would eventually make him eye the real estate market. As BusinessWeek explained in a recent cover story (requires free registration), Barry Diller found himself frustrated in his attempts to capitalize on the merger mania and empire building going on in his native entertainment industry, so he decided to pack up his billions of dollars and head into e-commerce. And he did. With a vengeance. His online properties now include Expedia, Hotels.com, Ticketmaster, Hotwire.com, and CitySearch/EPI; Diller also has a huge war chest to use for further acquisitions. (He's particularly interested in overseas acquisitions.)
But BusinessWeek notes that Diller's plan was to go to "highly fragmented industries, such as travel, personal finance, and local entertainment." His companies then act as the middleman, bringing together buyers with sellers. What market does that remind you of? If you said "real estate," you're correct. And Diller does not disappoint unless you're a realtor or a real estate lender, perhaps. With LendingTree, Diller is bringing together buyers with lending banks, and he's bringing together those same buyers with real estate agents, collecting a fee with each hook-up.
It's not exactly a threat to their very existence, because Diller needs them to exist so he has someone with whom he can hook up the buyers. But real estate people would be wise to listen to the major hotel chains and airlines, who complain that Diller's companies squeeze them of profits and take away their power to price their own services.
It was not unheard of a decade ago to find commercial real estate pros who had been NASA engineers until the decline in space funding in the early 1970s. Some of them may want to keep their eyes out on the job market once again.
(09/17/03) While other sectors may have taken a breather on their R&D and innovation efforts, the search technology industry hasn't. The upheaval this year in the search market has led some to believe that the end is near for dramatic progress in this field. But the truth is quite the opposite, and the consolidation actually heralds a heated-up competition that should benefit Internet business companies of all sizes. If they use it correctly.
Why are we so optimistic? Partly because search, which would appear to the layman to be one of the simpler Internet tools, is a part of the industry that is still thriving on innovation. As CNet recently pointed out, the heated rivalry between the main search technology companies is causing them to announce increases in the sizes of search indexes and to improve their algorythms. When you have a newly reinvigorated rival biting at your heels, you can't relax, and that's good for search customers.
A white paper earlier this year from the Yankee Group looked at the recent wave of consolidations in the search-engine market, such as Overture's acquisitions of AltaVista and FAST, and Inktomi's remains being picked apart by Yahoo and Verity. The report focuses on Web searches, though it notes the intertwining of Web and enterprise search. Its sound recommendation to companies looking for search technology for their Web sites is that they should make use of what competition remains in the market in an effort to keep costs down. As much as Google seems to be the reigning uber-search technology today, it faces a reinvigorated threat from Yahoo in the Web search market and a variety of embedded competitors in the enterprise market, such as Kaidara, MuseGlobal, Verity, or iPhrase.
A market in which the key players are dramatically reducing in numbers might seem to be a negative for customers. After all, doesn't a maturing market mean that options and innovation are becoming a thing of the past? But that's clearly not the case with search technology, which is continuing to develop across the board. We get excited by each new tool and technique added to the Google site, and we also get excited by the natural-language search developments at companies such as Kaidara.
And personalization is the key in every part of search. "All customers have different expectations," says Kaidara Software founder and chairman Michel Manago. "Some are experts, some are novices, and they want to interact with the system in a personalized way." They do, and increasingly they are.
The Yankee report's second recommendation deserves to be underscored: "Do not underestimate the importance of effective site search." It's not just something for retail sites to worry about; go to any company's site even small companies and pay attention to how easy or difficult it is to find something one or two layers beneath the surface.
Your needs in that area, as both a site user and a site owner, will be what keeps the fires lit beneath the feet of the search technology providers.
(09/03/03) Just when it begins to look like e-commerce is establishing itself as a trusted, robust, and accepted part of the economy, along comes an idea that is likely to undercut its legitimacy. The topic is an old Internet business antagonist: consumer data privacy. The proposal is that consumers stop worrying about companies selling their personal data and that they instead get a cut of the proceeds. It's an idea that should be staked in the heart like Dracula before it creates another wave of popular revulsion against e-businesses.
Harvard Business School professor John Deighton has made the proposal in a white paper called "Market Solutions to Privacy Problems?" He argues that regulation doesn't work and that online data privacy is a problem for the market to solve. He says that regulation "solves the problem of intrusion on consumers caused by the inefficiencies of marketing methods, but at the cost of completely denying the customers the value of their identity."
Ugh. Deighton misses the point that the outrage of selling private information is not that most people want to profit from their own information, but that they don't want it sold at any price.
Companies have long collected and sold information to some degree. For example, many magazines make significant amounts of money renting their subscriber lists to companies that want to market to readers with specific interests. But Internet commerce has given online businesses the ability to collect much more information on people than their name, address, and whether they subscribe to Astronomy or Heavy Metal magazines.
Deighton's approach is likely to be embraced by many companies, because in effect he's telling them what they want to hear: Privacy is an economic transaction, not an ethical and moral issue. It's an example of market-think run amok, and it brings to mind political humorist P.J. O'Rourke's answer to a question of why he continued to identify himself as a conservative instead of as a libertarian, despite his many free-market ideals. He responded that he agrees about many things with libertarians, but they go too far and sooner or later they're talking about privatizing the sewers.
The answer to consumer fears about private information being collated and sold is not to give them a piece of the action. Rather, it's to continue to do what respectable companies have been doing for years: Be upfront and disclose what you will do with customer information; write the disclosure in plain English and don't hide it in dense legalese; don't have a business plan that banks on trading customer data; and go one step further than you have to by thinking of new ways to protect the data and reassure your customers that you are responsible.
Now is not the time to throw away the business integrity e-commerce has worked so hard to establish.