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The Net Return On Investment


by Glen Emerson Morris

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Return on investment is not any easy calculation with the Internet. The Internet exists in a kind of statistical limbo; it has no sales figures to speak of, and no ratings service provides numbers on a regular basis. This is why Wall Street is having such a hard time deciding where to invest money on the Net. Why is Netscape so popular?

It's valuation is primarily based on the market share of it's Internet browser software, a product the company gives away. The Netscape browser may be free, but at least Wall Street knows approximately how many of them have been given away.

For the next year or two, Internet advertisers will face the same statistical limbo engulfing Wall Street. This shouldn't discourage advertisers from going on the Net now. In most cases it will pay to be on the Net, though proving it will be another matter. In most industries, it's easy to spot the winners by their sales figures or ratings. The Internet can't provide sales figures, because without a cash secure encryption system, the Net isn't secure enough for sales. Yet. Ratings services are just beginning to take a look at the Internet, so it may be a year or two before reliable ratings are available on a regular basis.

The Net is at a point similar to television in 1950, when television was still behind radio in ratings and rating services attention. Like early TV, the Internet is attracting talent and money far out of proportion to its provable impact. That kind of investment usually pays off, even if the returns can be hard to estimate. Like early TV, the Internet will succeed now, in large part because so much talent and money have been spent on a basically good idea.

The Internet is proving to be more than just a good idea. There is a quality of the Internet that is beginning to reoccur in different stages of it's life, concerning the way the Net influences return on investment. When the Internet became widely available to the academic community, it facilitated the free sharing of information. Colleges and Universities were willing to make research information available free on line for mutual access. This accelerated research and brought us our high tech world sooner than it could have been otherwise.

The Internet will affect business as profoundly as it affected academia. It has already taken the concept of free exchange a step further. Academics just shared ideas, businesses are using the Internet to give away products, and not just Netscape. One of the exhibits at the Apple Developer's section of the 1996 San Francisco MacWorld, included an ad-on to the Apple Open Doc system that would search the Internet automatically to find and acquire any component you might need to view a document. This is a very essential compliment to the Apple Open Doc standard, which uses the approach of giving away the software parts needed to view documents, and charging only for the software needed to create the documents.

Open Doc is another technology which promises to do a lot for advertising, by making it cheaper and easier for consumers to view multimedia ads, by giving away the viewer software. It also follows the trend of giving things to consumers, in hopes of getting far more back later, somehow, as a delayed return on investment. We have entered a unique period in history, one when the worth of a company can be judged by what it can afford to give away. This new ability may become a necessity in the future.

Businesses want customers, but they don't want employees. If the current automation trend continues, 5% of the world's population could support 100% of the population within another 20 years. The question, "How will the 95% of the population that doesn't work be able to afford to buy the necessities of life from the 5% of the population that does work", is worth considering long before we reach that point. Somehow, the necessities of life have to be made so inexpensive that they can be given away free, and people only have to work to buy the luxuries.

Recently, the famed scientist and writer Arthur C. Clarke predicted that a source of free energy would be discovered within a few years, possibly before the end of the decade. If Clarke is correct, it may be possible for businesses to give away the necessities of life, so consumers will be able afford the luxuries. The Internet is proving this kind of economic system just might work. It's a statistical long shot, but investing in consumers may provide the best net return on investment.

Copyright 1994 - 2010 by Glen Emerson Morris All Rights Reserved

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