Net benefit: how the internet is transforming our world

Think back just 13 years. The year is 1993. John Major is Prime Minister. The Tories are in government. Tony Blair still looks like Bambi. Bill Clinton has just become President of the United States. Nobody has heard of Monica Lewinsky. Germany is a prosperous country. Mercedes are the most reliable cars around. Only grown-ups have mobile phones. Nobody outside of academic and research labs has an email address. And a URL – now that is something really exotic! Amazon is a river in South America. A googol is the technical term for an enormous number. eBay and iPod are typos.

Why did I pick that year? Because 1993 was the year that the World Wide Web took off. It had actually been invented three years earlier by Tim Berners-Lee, but the spring of 1993 was when the first graphical browser was launched and the Web became something that ordinary human beings could understand and use.

The rest, as they say, is history. Today, nobody knows how big the web is. When it stopped publishing the number, Google was claiming to index 8 billion pages, but everyone knows that was just the tip of the iceberg. Some sensible people are claiming that the web is 400 times bigger than the number of pages indexed by Google. So a publication medium which contains over 3,000 billion pages has come into being in little over a decade, and it's growing by maybe 25,000 pages an hour. This is a revolutionary transformation of our environment by any standards.

Now think back to the year 1455 when a man living in Mainz, Germany, by the name of Johannes Gutenberg, published the Bible he had created using a fancy invention called moveable type. It was the world's first printed book. Printing was a revolutionary transformation of mankind's communications environment. Up to then, books were strictly a minority sport – the preserve of a tiny, rich and powerful elite, centred on the Church and the aristocracy. But in time, printing created the modern world. It undermined the authority of the Catholic church, enabled the Reformation and the Enlightenment, powered the rise of nationalism and of modern science, created new social classes and stimulated the creation of the educational system we still rely on today.

All of this flowed from Gutenberg's invention in 1455. But neither he nor his contemporaries could have had any idea what it would lead to. All of which leads me to formulate Naughton's First Law which says that we invariably over-estimate the short-term implications of new communications technologies, and we under-estimate their long-term impacts. The great Internet Bubble of 1995– 2000 was a good example of this – a product of crazy over-estimates of short-term impacts leading to what one economist memorably christened 'irrational exuberance'.

Now is the time to turn to longer-term implications.

MEDIA ECOLOGY – MEDIA AS ENVIRONMENT

The conventional way of thinking about this is what John Seely Brown calls 'endism' – the perspective that sees new technologies as replacing, or even wiping out, older ones. Thus, at the moment we see a great deal of angst in the newspaper business about whether online news sites will wipe out newspapers. Maybe they will, but that has more to do with classified advertising than with news. The truth is that the interactions between old and new communications technologies are actually very complex.

For example, when the CD-ROM arrived, people predicted the demise of the printed book. It didn't happen. In fact, books are doing quite nicely. When TV arrived, people predicted the end of radio and indeed of movies. It didn't happen. Radio and movies are doing quite nicely, thank you. TV news was going to wipe out newspapers. It didn't happen.

But at the same time something did happen. Although the CD-ROM didn't wipe out the printed book, it did change forever the prospects for expensive reference works. Remember Encyclopedia Brittannica? And as for videotapes and DVD, the movie studios now make more revenue from them than they do from cinemas. And so on.

So where do we find an intellectual framework which captures the complexity of these interactions? The answer was suggested many years ago by the late Neil Postman, a Professor at New York University who was the most perceptive critic of media and communications technology since Marshall McLuhan. In a series of witty and thought-provoking books, Postman described how our societies are shaped by their prevailing modes of communication and fretted about the consequences. In seeking a language in which to talk about change, I've borrowed an idea from Postman – the notion of media ecology: the study of media as environment.

The term comes from the sciences, where an ecosystem is defined as a dynamic system in which living organisms interact with one another and with their environment. These interactions can be very complex and take many forms. Organisms prey on one another; compete for food and other nutrients; have parasitic or symbiotic relationships; wax and wane; prosper and decline. An ecosystem is never static. The system may be in equilibrium at any given moment but the balance is precarious. The slightest perturbation may disturb it, resulting in a new set of interactions and movement to another – temporary – point of equilibrium.

This seems to me to be a more insightful way of viewing our communications environment than the conventional 'market' metaphor commonly used in public discussion because it comes closer to capturing the complexity of what actually goes on in real life.

The 'organisms' in our media ecosystem include broadcast and narrowcast television, movies, radio, print and the internet (which itself encompasses the Web, email and peer-to-peer networking of various kinds). For most of our lives, the dominant organism in this system – the one that grabbed most of the resources, revenue and attention – was broadcast TV: a relatively small number of broadcasters, transmitting content to billions of essentially passive viewers and listeners.

TV VS NEWSPAPERS: A GOOD ILLUSTRATION OF ECOLOGICAL ADAPTATION

There came a point – sometime in the late 1950s – when more people in Britain got their news from television than from newspapers. This created a crisis for the papers. How should they respond to the threat? Well, basically they reacted in two different ways. The popular papers essentially became parasitic feeders on television and the cult of celebrity that it spawned. (They're now also parasitic feeders on Premiership football.) The broadsheets, for their part, decided that if they could no longer be the first with the news, then they would instead become providers of comment, analysis and, later, of features. In other words, television news did not wipe out British newspapers. However, it forced them to adapt and move to a different place in the ecosystem.

BROADCAST GIVES WAY TO NARROWCAST

Broadcast TV is in inexorable decline. Its audiences are fragmenting. Twenty years ago, a show like The Two Ronnies could attract audiences of up to 20 million in the UK. Now an audience of five million is considered a stupendous success by any television channel. In ten years' time, 200,000 viewers will be considered a miracle.

Broadcast TV is being eaten from within. The worm in the bud in this case is narrowcast digital television – in which specialist content is aimed at specialised, subscription-based audiences and distributed via digital channels. But waiting in the wings is something even more devastating – Internet Protocol TV (IPtv) – which is technospeak for television on demand, delivered to consumers via the internet. And it's coming fairly soon to a computer monitor near you.

The trouble for broadcast TV is that its business model is based on its ability to attract and hold mass audiences. Once audiences become fragmented, the commercial logic changes. Furthermore, new technologies like Personal Video Recorders (PVRs) – essentially recorders which use hard drives rather than tape and are much easier to programme – are enabling viewers to determine their own viewing schedules and – more significantly – to avoid advertisements. Think of Sky Plus. Think of TiVO. As the CEO of Yahoo said recently, the era of 'appointmentto-view' TV is coming to an end.

Note that when I say that broadcast TV is declining, I am not saying that it will disappear. That's what John Seely Brown calls 'endism' and it's not the way ecologists think. Broadcast will continue to exist, for the very good reason that some things are best covered using a few-to-many technology. Only a broadcast model can deal with something like a World Cup final or a major terrorist attack, for example – when the attention of the world is focused on a single event or a single place. But broadcast will lose its dominant position in the ecosystem, and that is the change I think will have really profound consequences for us all.

THE INTERNET AS THE DOMINANT ORGANISM IN OUR MEDIA ECOSYSTEM

The biggest mistake people in the media business make is to think that the Net and the Web are synonymous. They're not. Of course the Web is enormous, but it's just one kind of traffic that runs on the internet's tracks and signalling. Already the Web is being dwarfed by other kinds of traffic. According to data gathered by the Cambridge firm Cachelogic, peer-to-peer networking traffic now exceeds Web traffic by a factor of between two and ten, depending on the time of day. I've no doubt that in ten years' time, P2P traffic will be outrun by some other ingenious networking application, as yet undiscovered.

Signs of the Net's approaching centrality are everywhere. We see it, for example, in:

• the astonishing penetration of broadband access in developed countries
• the explosive growth of e-commerce
• the streaming of audio – and, increasingly, video across the Net
• the sudden interest of Rupert Murdoch and other broadcasters in acquiring broadband companies
• declining newspaper sales and the growth of online news and in the stupendous growth of internet telephony – spurred by the realisation that, sooner rather than later, all voice telephony will be done over the Net
• the advent of Radio Frequency Identity (RFID) technology, together with WiFi and mesh networking
• the fact that you can now buy episodes of popular US TV series on the Apple iTunes store, download them onto your computer – and watch them on your sparkling new Video iPod
• the BBC Radio's 'listen again' facility, whereby if you miss a programme you can always click on a link and have it streamed to your computer at a time that suits you.

'PUSH' MEDIA GIVES WAY TO 'PULL' MEDIA

In 1999, Andy Grove, who was then the CEO of Intel, made a famous prediction. In five years' time, he said, all companies will be Internet companies or they won't be companies at all. At the time, people laughed. Did he mean that every hamburger joint and hardware store would have to be online by 2004? What a ridiculous idea!

In fact it was an exceedingly insightful prediction. What Grove meant was that the internet would move from being something rather exotic to being a kind of utility, like electricity or the telephone. None of us could envisage being in business today without making use of both.

The point of all this is that while we grew up and came to maturity in a media ecosystem dominated by broadcast TV, our children and grandchildren will live in an environment dominated by the Net.

What Does This Mean?

In thinking about the future, the two most useful words are 'push' and 'pull' because they capture the essence of where we've been and where we're headed.

Broadcast TV is a push medium. A relatively select band of producers (broadcasters) decide what content is to be created, create it and then push it down analogue or digital channels at audiences that are assumed to consist of essentially passive recipients.

The couch potato was, par excellence, a creature of this world. He did, of course, have some freedom of action. He could choose to switch the TV off. But if he decided to leave it on, then essentially his freedom of action was confined to choosing from a menu of options decided for him by others: in other words a human surrogate for one of BF Skinner's pigeons – free to peck at whatever coloured lever took his fancy, but not free at all in comparison with his fellow pigeon perched outside on the roof.

The other essential feature of the world of push media was its fundamental asymmetry. All the creative energy was assumed to be located at one end (the producer/broadcaster). The viewer or listener was assumed to be incapable of, or uninterested in, creating content. Even if it turned out that he was capable of creative activity, there was no way in which anything he produced could have been published.

Looking back, the most astonishing thing about the broadcast dominated world was how successful it was for so long in keeping billions of people in thrall. Networks could pull in audiences in the tens of millions for successful and popular broadcasts – and pitch their advertising rates accordingly. Small wonder that the owner of a UK ITV franchise once described commercial television (in public) as 'a licence to print money'.

In fact, the dominance of the push model was an artefact of the state of technology. Analogue transmission technology severely limited the number of channels that could be broadcast through the ether, so consumer choice was restricted by the laws of analogue electronics. The advent of (analogue) cable and satellite transmission and, later, digital technology changed all that and began to hollow-out the push model from within.

CAN YOUR COMPANY KEEP A SECRET?

If one of your products has flaws, or if a service you provide is sub-standard, then the chances are that the news will appear somewhere on a Blog or a posting to a newsgroup or email list. For example, in the last few months, the giant Sony corporation has been crucified because of the discovery that it had been covertly installing software on customers' PCs that could compromise their security. It's not clear exactly when Sony had become aware of the problem but when the story finally broke - on a techie's blog - the company's successive inept attempts at denial and damagelimitation were relentlessly exposed and discredited by enraged consumers hunting in virtual packs. (See Figure 1)

The internet – and particularly the Web – is the exact opposite of this. The Web is a pull medium. Nothing comes to you unless you choose it and click on it to 'pull' it down onto your computer.

A RADICAL INCREASE IN CONSUMER SOVEREIGNTY

We saw this early on in e-commerce, because it became easy to compare online prices and locate the most competitive suppliers from the comfort of your own armchair. Just one illustration: over 80% of prospective customers nowadays turn up at Ford dealerships in the US armed not only with information about particular models, but also with detailed data on the prices that dealers elsewhere in the country are charging for those models.

We're now seeing this in other areas too – for example in the way prospective students click their way through the websites of competing universities while deciding which ones to apply to. But the internet doesn't just enable people to become more fickle and choosy consumers. It also makes them much better informed – or at least provides them with formidable resources with which to become more knowledgeable.

Search technology is the key to this. In an interesting recent book, The Search, John Battelle describes the dramatic effects that search engines like Google are having on the advertising and marketing industries.

'In the past few years', he writes, 'search has become a universally understood method of navigating our information universe: much as the Windows interface defined our interactions with the personal computer, 'search' defines our interactions with the internet. Put a search box in front of just about anybody, and he'll know what to do with it. And the aggregate of all those searches, it turns out, is knowable: it constitutes the database of our intentions'.

My conjecture therefore is that nobody who offers a public service will be immune from this aspect of a ubiquitous Net. And with every day that passes we see other examples. Take for instance the maddening hypocrisy of companies whose call centres give you a recorded message saying that they really value your call and then drag you through a Kafkaesque maze for 20 minutes before you even get a chance to talk to a human being. There's now a useful website on which users post the key codes needed to bypass the maze. For Citibank in the US, for example, the sequence you need is 0#0#0#0#0#0#! And the name of this site? Why, gethuman.com.

AN EXPLOSION OF CREATIVITY

Another implication is that the asymmetry of the old, push media world may be replaced by something much more balanced.

Remember that the underlying assumption of the old broadcast model was that audiences are passive and uncreative.

What we're now discovering is that this passivity and apparent lack of creativity may have been more due to the absence of tools and publication opportunities than to intrinsic defects in human nature.

Take blogging – the practice of keeping an online diary. There are millions and millions of the things. When I last checked (May 29), Technorati – a blog-tracking service – was claiming to be monitoring over 41.7 million, and the number of them is doubling every five and a half months. The current creation rate is 75,000 a day – that's about one a second. Many of them are, as you might expect, mere dross – vanity publishing with no discernible literary or intellectual merit. But something like 13 million blogs are still being updated three months after their initial creation, and many of them contain writing and thinking of a very high order.

In my own areas of professional interest, for example, blogs are always my most trusted online sources, because I know many of the people who write them and some of them are world experts in their fields. What is significant about the blogging phenomenon is its demonstration that the traffic in ideas and cultural products isn't a one-way street as it was in the old push-media ecology.

People have always been thoughtful and articulate and well informed, but up to now relatively few of them ever made it past the gatekeepers who controlled access to publication media. Blogging software and the internet gave them the platform they needed.

NO INDUSTRY CAN AFFORD TO IGNORE WHAT'S HAPPENING

If you want a case study of this, consider what happened to the music industry. In the early 1980s, recorded music went digital with the arrival of the compact disc. Recording studios pumped out music as streams of ones and zeroes; and at the consumer end, CD players translated those ones and zeroes back into sounds. The problem was: how to get those ones and zeroes – those digital bitstreams – from studio to player. The solution was to burn the bits onto plastic discs and distribute those to consumers.

That meant making the discs, burning the music onto them, printing labels, packing them into boxes (which always seemed to break), packing the boxes into bigger boxes, putting those on pallets, loading the pallets onto trucks, delivering them to warehouses, who then delivered them to retailers, who took the disks out of the boxes and put the boxes on display etc, etc. You see what a wasteful, inefficient, brain-dead way that was for distributing a product.

Nevertheless, the record industry built a very cosy business out of this. There was one small problem: the economics of producing and shipping discs meant that there was little commercial mileage in selling single tracks, so the industry focused on selling albums and increasingly ignored the consumer demand for tracks. And it might have continued doing this forever, but for one thing: the internet.

HOLIDAY SNAPS: FROM PRIVATE TO PUBLIC

The other remarkable explosion of creativity comes from digital photography. In the last few years an enormous number of digital cameras have been sold – and of course many mobile phones now come with an onboard camera. The trend is so pronounced that even the biggest names in photography – Kodak, Nikon, Konica Minolta -- are getting out of film.

So every day, millions of digital photographs are taken. Until the advent of a site called Flickr.com, an understandable response to this statement would have been “so what?” But Flickr allows people to upload their pictures and display them on the Web, each neatly resized and allocated its own unique URL. And it has grown like crazy – to the point where it was acquired by Yahoo in March 2005 for an undisclosed pile of serious money.

The number of photographs Flickr holds is already many millions. The most interesting aspect of it is that users are encouraged to attach tags to their pictures, and these tags can be used as the basis for searches of the entire database. The other day I searched for photographs tagged with 'Ireland' and came up with 122,000 images! (A month earlier, the same search had come up with 85,000.) They were mostly holiday and casual snapshots, but here and there were some truly beautiful pictures. What struck me most, though, was what they represented.

Ten years ago, those snapshots would have wound up in a shoebox and would certainly never have been seen in a public forum. But now they can be – and are being – published, shared with others, made available to the world. What I'm really saying is that the world has changed out of all recognition already.

In 1999, a disaffected music lover named Shawn Fanning sat down and wrote some software which enabled people to easily locate and share music tracks over the Net. He called it Napster. Within 18 months, Napster had 80 million subscribers, swapping millions of tracks every hour of every day. The music industry eventually got Napster shut down, but by then the genie was out of the bottle. And even today, millions of music tracks are being illicitly shared across the Net (remember that Cachelogic survey of Internet traffic), and the only hope for the music industry is to fall in with the legal downloading services offered by companies like Apple with its iTunes Store.

Since it opened the store, Apple has sold a million tracks a day, and recently celebrated the sale of its billionth song.

One of the defensive arguments used by the record companies to justify their existence – not to mention their stock options – was that only they could find and nurture talent. Without them, so they implied, the Rolling Stones and U2 would still be playing in pubs, clubs and student raves. The Arctic Monkeys have suddenly become the biggest band in Britain. And they did it by releasing their music – free – on their website and letting fans spread it by word of mouth. Eventually, a record label came begging to be allowed to take them on. It is bands like Arctic Monkeys, not record companies, that are the future of the music business. Nobody is indispensable any more.

The moral of the story is that you ignore changes in the communications ecology at your peril. Remember what Andy Grove said all those years ago. Companies that are not internet companies won't be companies at all.

This article featured in Market Leader, Summer 2006.

NOTES & EXHIBITS

FIGURE 1