gian@gandalf.it

I shall try to follow three criteria.

• Observe situations and their evolution in a realistic manner: with no unnecessary fear and no exaggerated enthusiasm.
• Look at things from a European and specifically Italian viewpoint. There is a lot to be learned from international experience; but rather than imitate what others do I think we should try to understand problems and opportunities from our perspective.
• Concentrate on human values: behavior, attitudes, methods, problems and solutions. I dont think we should be driven by technologies. They are wonderful tools, but the real value is in the way we use them.

My intention is not negative or pessimistic. I am not suggesting that we should freeze in the Arctic. We just need a shower to clear our minds and freshen our ideas.

A year ago, people in the United States were talking about a hangover. Now here, as well, there is some perplexity. Why are the prophecies not coming true? Where are the exponential growth, the radical change, the digitalization of the entire commercial and information system? There is a simple explanation. Those gee-whiz projections were poorly based, far removed from what could really happen. Media echoed the most fantastic hypotheses as though they were going to come true next morning. Inexperienced operators made promises they could not keep. The disappointment was unavoidable.

This is quite normal every time there is something new, that most people dont understand. The difference is that mass media can, as they did in this case, blow up fantasies and scares out of all proportion.

A cold shower, some cool thinking, is not a way of weakening the newborn trend. Quite to the contrary, it can cut through the delusion-disappointment cycle and help us to step forward on more solid ground, on a road that can lead to practical results.

A sober attitude was proposed also by the Harvard Business Review (November-December 1996) in a discussion about The Future of Interactive Marketing: "Does interactivity represent the greatest marketing opportunity of all time or 101 ways to lose money?"

We are not in the middle of a violent and destructive revolution. Traditional marketing and communication tools will continue to work in the predictable future. For some, the new opportunities can bear fruit immediately; for others, it will take longer. I think its better this way. It would be rather worrying if things were changing so quickly as to throw us all into an unknown reality before we have had the time to understand it.

It would be dangerous, of course, to make the opposite mistake: to imagine that there is no change. Its there, and it isnt slow. Those who will learn sooner how to use the opportunities offered by the new technologies may gain a strong competitive edge. For those who dont develop an understanding of the new territories, surprises a few years from now could be quite bitter.

We shall have several opportunities to come back to this subject in the following issues of this newsletter. But in the meantime I would like to define four criteria that, I think, are basic.

1. The most effective solution is not to apply new technologies, in bits and pieces, in different parts of a companys structure. One should look deeper, develop a culture of the new means of communication, spread as widely as possible throughout the organization.
2. All this is too recent for any organization to have developed a solid culture; and its changing all the time. No one person or department can have all of the necessary knowledge. Only by grouping different disciplines and experiences, that cross hierarchies and function barriers, one can gain the necessary perspective and identify clearly the opportunities.
3. There are no magic formulas or good-for-all solutions. Each enterprise needs to identify it own model to use the available resources; its unique and distinctive way of gaining a competitive edge.
4. Not all is selling. The competitive advantage can be generated by the application of technologies in different parts of the companys communication system internal and external. It is likely that the winning strategies will come from an original combination of innovative solutions in several parts of the companys structure and relations.

But I believe it could be useful to spend a little time looking a little more carefully ate the numbers we read and hear. We are often told that the nets growth is exponential. It is not. Growth has been, and is, fast; but there is no hyperbolic curve, and there are ups-and-downs. There are times when growth accelerates, and times when it slows down; the pattern is, and will be, quite unpredictable.

It was widely stated two years ago (and we still hear it repeated) that there were 25 million internet users in 1994 and they were growing 15 percent a month. Nobody seems to have stopped to think. Had that been true, we would be 700 million now, over a billion in mid 1997; the figure would be larger, in 1998, than the entire human population of our planet.

The fact is that nobody knows how many we are. There are only guesses and estimates, none very reliable. In the United States, where the internet has been studied much more deeply than here, estimates in 1996 ranged from 6 to 60 million.

A few days ago, Italian newspapers published the news that internet user in our country are 600 thousand, with a 175 percent growth since last year. A year ago, the same newspapers said they were 500 thousand. As usual, the arithmetic is questionable.

From a series of deductions (which I dont claim are accurate) I believe that using a narrow definition (people and companies that have a contract with an ISP) the number worldwide is not far from 10 million; approximately 80,000 in Italy (quite reliable sources estimate 200,000 in the UK, 90,000 in France, etc.)

Using a wider definition (which includes people accessing from intranets or universities, occasional users, etc.) one can estimate 50 million users worldwide. Possibly between 300 and 400 thousand in Italy. The number is growing, but we tend to forget that not all new users stay connected. According to some sources, one new user in three drops out in the first three months.

One thing seems clear: so far its unbalanced, concentrated in a few countries. Over 60 percent of the internet (in whichever way its measured) is in the United States. 90 percent is in seven countries (USA, UK, Germany, Japan, Canada, Australia and Finland) that account for ten percent of the globes population.

People who buy online are possibly 1.5 million in the United States, maybe two million worldwide. Not more than 24 thousand in Italy (and most of them buy only a few types of goods, such as software or books, from foreign suppliers mostly from the US). There is no market worth talking about, if we define it as selling online from Italy to Italians. But there are many opportunities of marketing in the net, which we shall discuss in the following issues of this newsletter.

Now... if we look at the number of hosts... one could discuss forever what a hostcount really means (as all net terminology, but I am convinced that it is a relevant measure of the presence of a country in the net. And it can lead to interesting observations.

For instance, we can see that growth is fast (as is quite normal for something new) but not at all exponential - and its not constant. According to the hostcount published by RIPE (Réseaux IP Européens) percentage growth in Europe in the last five years was:

Internet Hosts in 15 Countries

Network Wizards - 1996

Per-capita density in Italy is not higher than the global average, which includes many underdeveloped countries.

A recent European hostcount (RIPE) shows different figures, but the picture doesnt change: Italy is one of the least developed countries, with per-capita density well below the European average.

Internet Hosts in 15 European countries

RIPE hostcount - January 31, 1997

Number of hosts (thousands)

Hosts per 1000 inhabitants

A further interesting analysis can be based on another fast-growing market: cellular phones. This service has been expanding rapidly for several years; a little less, in percentage growth, than the net but the numbers are much larger.

(In Italy, for instance, there are ten people using a portable phone for each, even occasional, net user).

Cellular telephones in Europe (thousands) 1996

Some of these figures, though small, are relevant. Over two million Italians use voice mail, but only 80,000 (of 400,000 in Europe) are data-on-cellular users. In Sweden the density of DCU, in relation to the countrys population, is 60 times larger; in the UK 9, in Germany 6. An other indicator of how far behind we are (though France isnt doing much better and Spain appears to be far behind).

Another interesting observation is that, while in all of Europe the old fax technology remains generally dominant, in the case of wireless usage data transmission prevails 5 to 1.

Even when it will be larger, its unlikely that it will become mass. The system tends, by its own nature, to split up in countless islands many different segments, each with it own identity. If the lack of large numbers can be seen as a limit, on the other hand high selectivity is one of the most attractive opportunities of this newborn world (and market). This is something that I think deserves further discussion.

The Net in Italy is not only under-used, as we have seen; but it is also poorly understood. Few people use it, and several of those often do it badly: especially in commercial ventures, or when all they do is open a website that is little more than an act of presence with no strategy or clear objective.

However... the Net offers us great opportunities. Even when we appear confused, we can be surprisingly efficient. When we understand its potential, the Net is likely to be an environment for which we are well adapted. Some of us are already there.

Many Italians have imagination. They know how to be flexible, to be at ease in unstructured and changing environments. This makes us genetically adapted for survival in a shapeless, changing, newborn system like the Net.

Italy is rich in small businesses with a proven ability to export, to compete worldwide. Often they have the winning combination: innovation, imagination, technology. The Net is offering growing opportunities for this type of business; and also for large companies if they can learn to be flexible.

When compared to the huge mass markets, the internet is small. But its size is already quite interesting for exporters in not-so-vast, and specialized, markets. And its growing.

There are great opportunities, I think, for many Italian companies in the global environment of the Net, on five conditions:

1. that they think of service, not just image;
2. that they work in depth, and with patience, to build an internal net culture;
3. that they do not consider only direct selling, or final consumers, but also how to communicate more effectively with dealers and other partners of their business system;
4. that they never follow any fixed stereotype, but identify the specific factors relating to their enterprise and their market;
5. that they be flexible, innovative and daring; and be able to lead and use, not just follow, the jumps and leaps and loops and wobbles of an infant system that is complex, changing, unstable, whimsical and unpredictable.

Some have done it. There's room for many more.