gian@gandalf.it

While the "glitz" and exaggerated forecasts are losing their shine, the internet seems to be really penetrating in almost every household and office in the United States (and in a few other countries). The American experience is point of reference for all; but it needs to be examined and understood carefully.

It's important to learn from advanced countries. But it could be ineffective to "copy" or try to duplicate their experience literally. For several reasons.

•   First of all, size. Non just the number of people, companies and organizations in the net is much smaller in other countries, but so is the amount of money involved.
•   There are differences in market structure and people's habits that are much older than the net. In the United States mail-order has been an established practice for many years; "electronic commerce" quite often is just a new and more practical way of doing the same thing. Not so in other countries, such as Italy and a large part of Europe.
•   "Plastic" is a very common form of money in the US. Not so in many parts of the world. Even in America some people are concerned (more than they really should) about sending credit card numbers on the internet. That is a much more serious problem in countries, such as Italy, where the habit of using credit cards is much less established.
•   The use of computers, and generally information technology, is much more widespread in the US (and in a few other countries, such as the UK) than in the rest of the world. There are 37 computers per 100 inhabitants in the United States, 15 in the European Union.
•   Most American children go to college away from home. That is one of the driving forces behind the growth of e-mail. In Italy (as in many other places) most young people stay with their families until they get married. In most of Europe (except Scandinavia, where net penetration is much higher) population density is high and distances are small. These are just two of many reasons why the development of e-mail and other internet activities is faster in the United States (and places such as Canada and Australia) than in most of Europe.
•   And also... laws, regulations and administrative systems are different. "Red tape" is a problem everywhere, but in countries such as Italy it can make things especially complicated.

This are only a few of many reasons why environments in different countries are not the same. The basic principles don't change, but the pace an manner of development can be quite different.

I believe that there are many opportunities for companies with drive and imagination, even in less developed markets. There are three ways in which they can gain a competitive edge:

1.   They should understand the opportunities for export of goods or services to advanced markets, such as the US. They are fiercely competitive, but offer great opportunities. Of course the key factor is to find a "niche", or a relevant point of difference. Many Italian (or more generally European) companies have been able to do so without the internet. They can do it even better with this new tool.
2.   They should understand which opportunities there are in their home market. They are fewer than in America, and probably quite different. But they exist. There is a need for fresh and new ideas, to find (or make) paths where there are no busy highways.
3.   They should understand which opportunities can be offered by the differences in other individual markets, ranging from those that are almost as advanced as the US to those that are behind us, where we can have the role of "pioneers".

It's often said that problems can be turned into opportunities. Even people and organizations from backward countries, such as Italy, can become leaders. But that can't be done by following any repetitive formula. It takes imagination, flexibility and patience; a dedication to exploring and learning along the way.

Internet hosts in 18 countries in the Europe-Mediterranean area
Numbers in thousands. 18 countries with over 50.000 hosts - of 54 countries covered by RIPE (Réseaux IP Européens)

The green slice of the bars is growth in the second half of 1997. Differences are increasing rather than decreasing; the stronger countries are getting even stronger. No visible effects, yet, of the commitment by the French government to encourage a shift from the minitel  to the internet.

Let's look, as usual, to per-capita density

Internet hosts per 1000 inhabitants
21 countries with over 10.000 hosts and density over 4 - of 54 in the RIPE area (Europe and Mediterranean)

Finland holds its world leadership; Scandinavia as a whole is well ahead of the rest of Europe. Density in Germany is increasing, but the UK remains ahead. The only country in the Mediterranean area above European average is Israel. Southern Europe remains weak; Greece is the only country in the European Union with density below 3.

Almost everyone in the market is expecting Italy to have a fast increase, to "catch up" with at least the European average. So far, it isn't happening.

At first glance, looking at "absolute" data, we see a relatively strong growth also in Italy, especially in 1995-96 and in the first half of 1997.

Internet hosts in Italy 1991-1997

The growth rate is decreasing. In the second half of 1997 the average monthly increase in Italy was 1 percent, while for Europe as a whole it was almost 4 percent.

This is even more obvious if we look at the variation of growth percentages over time.

Internet hosts in Italy: quarterly growth percentages 1991-1997

Of course percentages were less relevant in the earlier years, when figures were very small. There was sustained growth in 1995, probably because of wider availability of internet services and the development of the World Wide Web  - but that impulse has lost momentum. Since the beginning of 1996 (except for an isolated "leap" in January, 1997) percentages are constantly declining.

Let's look at the Italian hostcount as a percentage of the European total

Internet hosts in Italy as a percentage of RIPE area (Europe and Mediterranean)

Italy's share increased gradually, from 2 percent in 1990-92 to 3 in 1993-95 and 5 in 1997, but now it's decreasing. Even at 5 percent it's very low. For instance the UK, with comparable population and economy, has 18 percent of the European hostcount.

There is an improvement compared to four or five years ago, but that's not enough. Italy has 12 percent of Europe's GNP, 10 percent of telephones, 14 percent of cars, but only 4 percent of the net.

These are very small figures. Not enough money to satisfy hundreds of contenders for "ad" income. One tenth of one per thousand of total advertising expenditure in Italy.

The same "rumors" indicate that in 1998 the amount will grow to five or ten million dollars. Still a tiny figure compared to advertising in traditional media. But is such a leap possible? Maybe. However... the way in which it could happen is quite peculiar.

We can easily assume that large newspapers, looking for income to support their online editions, have asked their advertising brokers to collect some money. That's not a bad idea, because publishers deserve some support in their effort to develop online newspapers. But let's try to imagine the consequences.

The salesman of a big broker visits one of his customers. A large advertiser, an ad agency or one of the big media buying systems. They discuss large contracts; several hundred thousand dollars apiece, if not millions. At the end he says "well, there is also the internet...". His sales folder projects unrealistic "user" figures (in one lump, as though they were a "mass" audience) with some quality statistics: active people with high income, high education, etc.

Both people in the room are trained to think about broadcast media. Neither of them has the time or the desire to look into the peculiarities of interactive communication. The amount involved is very small, compared to the contract being discussed. The salesman may be willing to give away a few banners, as a little incentive to close the contract (this is not an assumption, I know it's happening). So "something" (roughly one thousandth of the total amount) is invested in banners or some other form of "advertising" on the net.

A few days later, someone (probably a product manager in a marketing company and an account executive in an ad agency) is landed with a few crumbs invested in this new unknown medium. The task gets handed around carelessly, winds up on the desk of some junior assistant.

Eventually a deluge of poorly planned and poorly executed banners descends on the net.

The glitz crowd will acclaim: tenfold growth! Hardly anyone will bother to look into what is really happening. We shall be, once again, in the delusion-disappointment vicious circle.

I've said many times that I don't believe in forecasts. I am not attempting any "prophecy". We shall see what will really happen. But unfortunately this is a high-probability scenario.

What I found useful about the Internet in 1997 was the same that I found useful about the Internet in 1996, 1995 and 1994. Communicating through email. Finding and providing valuable information.

Simple things. The only difference in 1997 was that I was able to communicate with more people and find more information.

No, I didn't watch amazing animations. I quickly got tired of Push. I didn't use video conferencing. I didn't have interactive meetings on the Internet. (This is a very interesting idea; if only I could get the software to work.) I didn't talk on Internet phone. I wasn't using Java or ActiveX. I kept it simple in 1997. I intend to keep it simple in 1998.

The Image Makers are screaming at my door, peddling, pushing, telling me that if I've got time to wait, they'll show me all sorts of things. They're trying to make me bored with email. After all, we are supposed to be the Bored Generation, always wanting something new because what we have we'd had for fifteen minutes.

The Image Makers have it wrong. They don't 'get' the Internet. They don't understand that it's not an image thing. That it's an information and communication thing.

The Internet maintained its incredible pace of growth in 1997 because it's still doing simple things well. Email works (most of the time). Websites, if anything, have trimmed down on graphics, and have invested instead in better information organisation structures. Databases and search facilities are now the engines of good websites.

Interactivity between the company and customer is being encouraged. Ecommerce is happening. Business-to-business transactions are growing rapidly.

There are dozens of magazines abut computers and about the net. Only a few are worth reading. But this one is the first of its kind. And it's about internet marketing , not just "electronic commerce". Time (and content) will tell. But their basic philosophy is right: look for real interactivity, don't follow the traditional logic of one-way media. I think they deserve to be successful.

There doesn't seem to be any problem for our PCs, or any of the standard software we are using. But if a few big systems, in large public or private organizations, get into trouble, that could harm people who have never touched a computer but depend on some form of electronic service. That's practically everybody.

The origin of the problem was in the Sixties. Data storage was scarce and expensive; some programmers found it convenient to save space by reducing dates to two digits. That such an obvious problem has remained unsolved for over thirty years is just another example of the staggering power of human stupidity.

It's not easy to understand which systems may be hit. But the problem is already here. Thousands of credit cards with expiration dates beyond '99 were refused by "millennium bugged" checking systems.

This bizarre situation can also have legal implications. An article by Daniel R. Mummery and Thomas A. Unger in the National Law Journal  of November 3 points to the liabilities that may be caused by a computing malfunction. And warns that the "debugging" devices offered may not be as effective or safe as they claim. That's too complex a matter to be explained here (and by someone, like me, with no legal expertise) but an example of the problems that the "bug" could cause. I don't think there are reasons for major alarm, but many companies and organizations should check the systems they are using to avoid consequences that could be quite unpredictable.