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Monday, 4 December, 2000, 11:25 GMT
The revolution will be postponed
Damaged Lenin statue AP
Might the internet end up as a historical curiosity?
Everyone had huge expectations of the internet. But now, writes BBC News Online internet reporter Mark Ward, people are starting to question it.

The internet was supposed to change everything.

It was supposed to re-write the rules of business and free us from the drudgery of our daily existence. It was supposed to usher in a brave new world centred around freedom, knowledge and community.

Except that it hasn't. And even if it does, more people seem to be saying, it might not be for a long time yet.

It is certain that heralds of the information revolution have been hard to find lately.

A rough ride: Despite's high profile flop, it was reborn
Dot.coms are going bust in large numbers, tech stocks are tanking, no-one is using Wap phones and Stephen King has abandoned his attempt to re-write the rules of publishing.

But look closer, and the news gets even grimmer.

In the last week of November the tech heavy Nasdaq dived below 2600, half of the value it hit at its peak on March 10th. Some say it has a lot further to fall.

The UK Techmark 100 index has suffered a similar fate. It hit a high of 5735 in early March, now it is hovering around the 2470 mark.

The effects of the internet are profoundly overblown

Steve Woolgar, Virtual Society
Across US markets more than 200 net stocks are worth only 20% of the value they hit at their peak.

The sky-high valuations of many dot.coms stocks reflected the belief that internet companies could change everything and sweep away old, tired ways of doing business. Smart technology was all it took. Build a website and the consumers will come.

Sadly they haven't yet. The latest figures from the US reveal that web sales account for less than 1% of all retail sales.

"People have been told that the internet changes everything. Clearly, it doesn't," wrote analysts from Andersen Consulting in a report released this week.

Reality bites

The falling stock prices reflect the realisation that the net is not a passport to success. Dot.coms do not have a secret sauce that lets them manufacture money. Instead they are just like any business and need customers and cashflow to stay afloat.

If they are going to be treated just like any other business they may have a lot further to fall.

Further to fall?
Most traditional companies on the Dow Jones industrial average trade at a value of about 20 times year end earnings. Despite the fall, many dot.coms are still trading at 50-60 times year end earnings
The initiative is now swinging back to the traditional companies, the not.coms, who are only now starting to establish a web presence. Online retail sales are up 15.3% over last year but it is the old economy companies that are getting the custom.

They are doing well because people have already heard of them, they don't have to spend millions getting their name in front of potential customers. Some dot.coms have gone bust because they have spent so much on marketing - spent four times its sales on advertising.

These more established companies are likely to benefit most from the development of internet technology.

Bet your business

"The idea 8-9 months ago was that there were going to be a lot of new business models around," said Jon Hughes, UK managing director of web consultancy Zefer. "Now it's obvious that is not going to happen."

Mr Hughes said initially many companies were starting to use the net as simply another way to reach customers.

Not net congestion: We may be online, but most lives go on the same
Few companies were even now starting to take advantage of web-based technology to cut cost, he said. But this was where the net would make big changes, rather than in the lives of consumers.

Web-based technology lets businesses plot the likes and dislikes of their customers and sell more to them as a result. It also gives companies a chance to remake relationships with suppliers and tie them together into more responsive networks.

The reason older firms are doing so well is because of the brutal fact that people do not change as fast as technology. No matter how much dot.coms want people to use the web, most people aren't. The Andersen Consulting study has found that only 10% of the US population are responsible for 70% of all net purchases.

As a result, it is going to be a long time before society is altered as significantly as businesses are.

Social success

"The effects of the internet are profoundly overblown," said Steve Woolgar, head of the Virtual Society project which is studying how the net is changing people's lives.

"It will change our lives but not half as significantly as we thought," he said. "It is not going to substantially change the lives of the great mass of the population."

It will change our lives but not half as significantly as we thought

Steve Woolgar
The results of the early work done by researchers on the Virtual Society project has found that the internet seems to help people do more of what they already do. "The net does not substitute for the old ways of doing things," said Mr Woolgar. "The new virtual activity only stimulates the real activity."

He said the idea of the paperless office was the best example of this lesson at work. Despite the improvements in office technology that are supposed to do away with our dependence on documents, more paper than ever is being used.

As a result the changes that the internet is bringing about are going to take a long time to be felt. "There is a decade or two of analogue people out there that will take time to be replaced by completely digital people," said John Mole, an analyst at PriceWaterhouseCoopers studying how net and phone technologies will change people.

Mr Mole said the plethora of ways we can get at information is starting to change things. "The technology allows people to define the world in their terms, an extension of the 'me' idea, my services my shopping, my interests and projects," he said, "it is starting to be oriented around people in a meaningful sense."

But this implies something even more profound. The net is not changing us. We are changing the internet.

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See also:

17 Nov 00 | Business
There goes another
24 Nov 00 | Business
Investors turn cold on UK dot.coms
10 Jul 00 | UK
Just the (online) job
08 Oct 00 | Business
Investors watch clearout
11 Oct 00 | Business
Dot.coms 'are fading'
09 Oct 00 | Features
Dot-com collapse
12 Oct 00 | UK
A dot of trouble
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