Going Native

Back before the Net yanked the middle links out of value chains, the coolest business virtue was to "add value." Companies didn't sell products or services. No, they were in the "value-add" business. But when Internet company stock prices began blasting to the sky, venture capitalist John Doerr observed that "over 100 billion dollars in new value" had been "created" in the preceding year. Suddenly golden verb was "create," rather than "add." Now we were artists and gods, not just guys ladling gravy on goods that chugged down the conveyor belt.

The amazing thing was, all hundred billion dollars of this "new value" was created out of nothing more than opinion. And it hasn't stopped growing. That $100 billion in 1996 is easily worth a trillion or more today. In opinion. Think about that. When somebody says "that's just an opinion," point them toward the stock market. Internet and Linux stocks may be "inflated," or "just paper money," but you can sell them for hard cash. So when we "create value," we're creating cash.

But what we're talking about here is the market for companies, not for the goods and services those companies sell. The difference isn't just large; it's absolute. And it is extremely important not to confuse the two, even though we do it all the time. When I ask star-up executives about how business is going, most of the time they say something like, "Great! We just closed another ten million dollar round." They're talking here about the market for their companies, not for what their real business is.

Too often they don't know. They say "we're an applications service solutions provider," or some other noun compound from the BuzzPhraser <www.buzzphraser.com> lexicon. They — we — have to do better than that. We have to be as inventive about what we sell as we are about what gives us such hot stock market buzz.

What's behind this boundless buoyancy? Is it the genius of guys like Jeff Bezos and Steve Case? Is it the low friction efficiencies of e-commerce? Is it the intoxicating sense that the Net plainly changes everything? No, it's the people who gave us the Net, Linux and every other technology that is good because it's free.

AOL didn't invent the Net. Hackers did. And they didn't invent it as yet another way to pump out "content" and suck back credit card purchases. They invented it so nobody could own it, anybody could use it, and nothing could threaten it. And no mating of whales on the supply side of any market — including the markets the Net transforms — will do anything change that fact.

"All the significant trends start with technologists," Marc Andreessen told us back in 1998, when we interviewed him about the open sourcing of Netscape's Mozilla code (Betting on Darwin, Linux Journal #52). In the same interview, he added, "Technologists are driving progress, and it's easier to drive with Linux than with anything else."

So let's savor this irony: while Netscape now belongs to AOL, and Mozilla (still funded by what's left of Netscape) famously lags behind Microsoft's Internet Explorer in the consumer market, Intel is quietly building its new home Internet appliances — TV set top boxes and thin network clients — with Mozilla code running on Linux. If these babies catch on, they'll bypass AOL and every other mass market megalith that continues to regard the Net as yet another one-way shipping system between a few suppliers and a zillion consumers. These appliances will prove yet again that the connections that matter most are the ones between human beings. And that includes the human beings who do e-business with each other.

From the day the first packet moved across a TCP/IP network, economic power has been shifting steadily from supply to demand. Wars and marriages between giant suppliers still make great stories, but those stories have little or nothing to do with what's really going on. Hackers — the programmers, inventors, developers and architects who are building out this new world — have been trying to make sure that the stuff that matters most is what works for everybody because it belongs to nobody. They do it by making markets what they were for thousands of years before industry turned "market" into a verb: places where people gather, talk about what matters to them and do business together.

Demand will win because it is equipped to win. Mouse-to-mouse, link-to-link, page-to-page, email-to-email, voice-to-voice, customers are going to come out on top, along with the companies who make it easy to do business with them. Those companies will know that the best way to relate to customers is as human beings; not as abstract populations to attack, control, capture and herd like dumb beasts.

The real war is between markets and marketing. For decades, marketing has been the military wing of business, working "strategically" to "attack," "capture" and "deliver impact" to populations it calls "eyeballs," "seats," "end users," "demographics" and "consumers" (which Jerry Michalski calls "gullets that live only to gulp products and crap cash"). The problem with marketing is that there is no demand — no market — for its insults. That's why markets will win.

Is the AOL/Time Warner deal a bet on markets, or on marketing? Credit where due: AOL has done a terrific job of equipping demand to deliver clues (as well as money) to supply. But the "consumers" AOL wants to "aggregate" and "deliver content" to will only become better equipped to screen out unwanted content, and, more significantly, to converse with its sources.

What happens when the mute bottons on remote controls send "we hate this" messages directly back to the advertisers who pay for the media? What happens when consumers turn into real customers with real names who express no desire for "messages" mostly intended for somebody else? The business model for mass media advertising falls like a bad tent, that's what.

There's an old advertising adage that says "I know half my money is wasted. I just don't know which half." In the advertising tradition, even that's a lie. Direct mail, one of the most efficient forms of advertising, counts a 3% response rate a success. The dirty truth about most advertising is that it has always been woefully inefficient, especially in mass markets. But a lot of it has been successful, which is why it's still around.

That success, of course, came in the absence of alternatives. Worse, it came in the absence of demand from consumers. But consumers were never advertising's real market. They paid nothing for advertising's goods, and exerted no direct influence over it. As a result, countless marketers and "creatives" in advertising agencies (including the hip new "interactive" agencies) still labor over screens and keyboards to come up with "messages" to "deliver" to people who have little or no interest in it.

The notable exceptions, of course, are classifieds, yellow pages and trade publications like Linux Journal, which are not only sources of useful editorial content , but of relevant additional information paid for by companies that are interesting to readers.

So here's a clue for mass marketers who think AOL's customers are going to sit still for the kind of heavy abuse that television has been delivering to its addict for decades: there is no demand for messages. There never was. When that clue finally arrives, it will be like a fist through the screen.

The fight is far from over. The good guys will win the OS war and the browser war. But there are other enabling technologies that still belong to suppliers with controlling intentions. Streaming media is one. Instant messaging is another. Both could be far more useful than the bait-for-advertising vehicles we see today. Look at the differences between AOL's Instant Messenger and what's starting to come from the Jabber people. Better yet, join the movement.

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Value: What's it Worth, Anyway?