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One step ahead of the law
As the gory killsport game Kingpin hits the street, the gaming industry toys with self-regulation to avoid government action.
By Mark Boal
[07/19/99]

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[07/17/99]

21st Challenge
21st Challenge No. 24
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Did "The Blair Witch Project" fake its online fan base?
Glowing reviews and fan sites raise suspicions that Hollywood is planting ready-made buzz on the Net.
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[07/16/99]

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"The Pearly Gates of Cyberspace" examines the spiritual realm of non-physical space -- and finds that Giotto painted VR frescoes.
By Gavin McNett
[07/15/99]

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Schwartz posits his book as a warning against stock market overexuberance, writing that "rational businesses are the ones that are valued based on their earnings and the growth of their earnings. Irrational businesses are the ones valued, or vastly overvalued, based on nothing so tangible as revenue or profits but rather on their sheer potential, the story that they tell. Often, this potential is greatly misunderstood, exaggerated, or subject to extreme wishful thinking."

He's right, of course. But he himself falls into the same trap. Schwartz's book might be more interesting if he spent more time explaining the irrationality of some business models -- poking holes in the advertising-based community model of the GeoCities and theglobe.coms of the Net, for instance -- instead of trying to predict which models will be winners in the online survival game. And while Schwartz does point out some interesting companies with intriguing ideas -- such as a company that uses the Web to sell made-to-order bicycles, or REI's use of in-store Web kiosks to order merchandise that isn't in stock -- there's no guarantee that his examples of "fit" business models are those that will endure.

Take Priceline, the online travel booking service that lets users state the price they are willing to pay for airline tickets and hotel rooms. Schwartz awards the firm plaudits for "treading an unconventional, even forbidden path" with its "buyer-driven commerce" concept -- a concept that Priceline has patented. What Schwartz doesn't mention is that Priceline had $112 million in losses in 1998, compared to $35 million in revenue, and that the company completes only 7 percent of all the bids it receives. Then, there's the fact that Priceline is selling many of these tickets at a loss; the company is also paying a hefty $38.9 million in warrants to airlines just for the rights to be able to sell their tickets. Despite Priceline's performance in the stock market, it is hemorrhaging cash and its business model has been harshly criticized.

Schwartz also has a weakness for futuristic technologies, and flogs the same concepts that he did in "Webonomics" -- many of which didn't work in 1997 and still aren't working in 1999. He encourages entrepreneurs to put their money into smart card systems (which, thus far, have been thoroughly unsuccessful in the United States) and wireless computing (such as Motorola's Piano system, which requires that computers be so close to the Web server -- like 10 feet -- as to be impractical). Recommending that fledgling online entrepreneurs adopt these fallible and expensive technologies might well lead to their demise, not their survival. It is far too early to predict which models will win in the long run, let alone endorse them as business solutions for Web entrepreneurs.

Even as all these Web business ideas play themselves out, we are experiencing a supersaturation of business-technology media; there are rackfuls of magazines, pages of Web-based news services and newspapers across the country that are increasingly offering Web industry case studies on a daily basis. Because of this, many of the profiles that Schwartz provides here feel stale: How many times can one person read an explanation of eBay's customer feedback program? How often must we hear about the Junglee shopping bot? How much praise can the Amazon.com affiliate program really justify?

Schwartz must know that a print book about Web business is going to be hopelessly out-of-date by the time it hits the shelves; this must be why he tries to provide a value-added "theme" that might offer more insight into the meaning of online success. But even if his premise is practical on a meta level, theories are very hard to apply to a medium that is morphing on a daily basis. This is something he alludes to in the final pages of his book, basically adding a caveat to all the ideas he just finished advocating. "The principle of survival of the fittest doesn't mean that anything that survives is necessarily fit. One can prosper for a time even as extinction lies just ahead."
salon.com | July 20, 1999

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