Survival of the Fastest

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For my part, I think we have already witnessed something like a Cambrian explosion of life. Since Netscape went public, in 1995, we've seen a big bang of new economic species burst forth, producing thousands of enterprises that couldn't have existed previously. All the necessary elements came together rather suddenly. Software for creating and browsing Web sites flooded the market, making the digital landscape hospitable. And the venture capital started flowing like a river, so there was enough food.

But I think we are inevitably going to enter an era of mass extinction in which most of the dot-com enterprises that now exist will be gone or swallowed up. The great Darwinian sorting of winners and losers has already started happening.

McLemore: I agree. In many consumer-goods sectors, there are already more companies than the ecosystem can support. Only large, broad-market players and niche ones will survive. Many middle players will starve to death or be devoured by larger ones. As the Internet evolves, there will be some extinction, but there will also be more growth.

Owen: Michael Dell's philosophy on Internet business models is that, like most embryonic businesses, the initial winners on the Net are often not the real winners. Maybe one or two of the current pack can adapt and win big, but many players may simply not be around in a five-year time frame. First-mover advantage is great if you pick the right model, but the model can change so much that maybe the second mover makes the real money.

Inc.: So what age will we give way to?

Hoffman: The next Internet age will be the era of business-to-business commerce, which represents a huge opportunity. Forrester Research estimates revenues for business-to-business E-commerce of more than a trillion dollars by 2003. Today most of that business is happening on a regional basis: North American buyers buy from North American suppliers, and the same with Europe, Asia, and so on. The next big phase will occur as regional trading communities begin to do business with each other.

Inc.: How are dot-com-company founders today different from those of a couple of years ago?

Owen: Too much capital is chasing too few good ideas. Many dot-com founders are poor businesspeople who are attracted by the potential to get rich rather than to create something that is -- in the words of authors James Collins and Jerry Porras -- "built to last." The mix of quality has changed in the past year as the providers of capital have become less discriminating.

McLemore: I disagree. I've noticed that investors want a lot more management experience in founders because competition has increased. Repeat Internet entrepreneurs such as myself and savvy founders from outside the Internet with extensive management experience are becoming much more common.

Briggs: And more dot-commers now come from traditional retailing backgrounds. They really understand their customers and the value of superior customer service. That is very different from early Web-centric companies, which simply offered a big selection at low prices.

Current (and Future) E-vents
Inc.: Right now, many big dot-com companies are experiencing considerable success. Look at Amazon, with its ever-expanding tentacles. Will small dot-coms get squeezed out?

Schwartz: People misunderstand why Amazon is growing so fast. It's not just the low prices and wide selection; it's the attention to detail in customer service and the wide range of services, like one-click payment, personal recommendations, and a powerful affiliate program. But Amazon won't be like Wal-Mart coming to a small town, wiping out everything else. There will be thousands of other winners in niche categories, especially in business-to-business markets.

McLemore: There is plenty of room and opportunity for well-funded world-class brands as well as small, shallow-pocketed players. Small players just need to focus on a niche where their expertise can provide a value-added experience for the consumer. I just ordered a book on vintage soda machines from a collectors' site because of the expert editorials I saw there.

Owen: You could view this as an argument between big department stores and specialty stores. A lot of people still shop at department stores, and they are not going away, but America has chosen specialty stores. Amazon-style companies will have to compete against the specialty players, who may dominate their own spaces. And price will increasingly disappear as a method of differentiation and will be replaced by content, community, and customer experience.

Inc.: The crossroad at which the dot-com companies intersect with land-based business represents both an opportunity and a challenge to new, shallow-pocketed entrepreneurs. What model offers more likely success -- the pure-play dot-com or the hybrid?

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