The Impact of the Internet on Business

Current Uses of the Internet

The Internet has a wide variety of uses. It provides an excellent means for disseminating information and communicating with other people in all regions of the world. While the greatest use of the Internet has been sharing information, other sources of use are rapidly developing. For instance, chat rooms, a space where people can go to discuss an assortment of issues, and Internet Commerce, which connects buyers and sellers online. The following are other examples of current Internet uses:

1. Technical Papers

Originally, the Internet was only used by the government and universities. Research scientists used the Internet to communicate with other scientists at different labs and to access powerful computer systems at distant computing facilities. Scientists also shared the results of their work in technical papers stored locally on their computer system in ftp sites. Researchers from other facilities used the Internet to access the ftp directory and obtain these technical papers. Examples of research sites are NASA and NASA AMES.

2. Share Company Information

Commercial companies are now using the Web for many purposes. One of the first ways that commercial companies used the Web was to share information with their employees. Sterling Software's Web page informs employees about such things as training schedules and C++ Guidelines. There is also some information which is company private and access is restricted to company employees only. Another company example is Sun Microsystems which similarily contains general information about the Sun Microsystems company.

3. Product Information

One of the ways businesses share information is to present their product information on a Web page. Some examples are: Cray Research, Sun Microsystems, Hewlet Packard, and GM's Pontiac Site. The Web provides an easy and efficient way for companies to distribute product information to their current and potential customers.

4. Advertising

Along these lines, companies are beginning to actually advertise online. Some examples of different ways to advertise online are Netscape's Ad Page. Netscape has a list of advertising companies. They also use a banner for advertisements on their Yahoo Web Page. Starware similarly uses banner advertisement. These advertisements are created in the established advertising model where the advertising is positioned between rather than within editorial items. Another type of advertising focuses on entertaining the customers and keeping them at the companies' site for a longer time period. Some of the more interesting of these are:

The advantages of each method of advertising will be discussed in more detail in the section on strategic risks and target markets.

5. Business & Commerce on the Net

Commercial use restrictions of the Internet were lifted in 1991. This has caused an explosion of commercial use. More information about business on the Internet can be found at the Commerce Net. This site has information such as the projected growth of advertising on the Internet and online services. Commercial Services on the Net has a list of various businesses on the Internet. They are many unusual businesses listed here such that you begin to wonder if they are legitimate businesses. This topic is discussed in more detail in the section on risks and consumer confidence. Business and Commerce provides consumer product information. The Federal Trade Commission is also quite concerned about legal business on the Internet.

WWW users are clearly upscale, professional, and well educated compared with the population as a whole. For example, from CommerceNet's Survey (CommerceNet is a not for-profit 501c(6) mutual benefit corporation which is conducting the first large-scale market trial of technologies and business processes to support electronic commerce via the Internet) as of 10/30/95 :

CommerceNet's study also found that there is a sizable base of Internet Users in the US and Canada. With 24 million Internet users (16 years of age or older) and 18 million WWW users (16 years of age or older), WWW users are a key target for business applications. Approximately 2.5 million people have made purchases using the WWW. The Internet is, however, heavily skewed to males in terms of both usage and users. Access through work is also an important factor for both the Internet and online services such as America Online and CompuServe. For an example of the size of the market, the total Internet usage exceeds online services and is approximately equivalent to playback of rented videotapes.

6. Magazines

Magazines are starting to realize that they can attract customers online. Examples of magazines now published online are Outside, Economist, and Business Week. These magazines are still published in hard copy, but they are now also available online. Many of these publications are available free sometimes because of the time delay (i.e. publications online are past issues) or usually to draw in subscribers for a free initial trial period. Some of these publications may remain free online if advertisers pay for the publications with their advertisement banners.

7. Newspapers

Some newspapers are beginning to publish online. The San Jose Mercury News is a full newspaper online, while the Seattle Times offers just classified ads and educational information. The Dow Jones Wall Street Journal publishes its front page online with highlighted links from the front page to complete stories. The Journal also provides links to briefing books, which provide financial information on the company, stock performance, and recent articles and press releases. For an example of a briefing book see, Netscape Briefing Book. This is all free by the Wall Street Journal during the trial period which should last until mid 1996.

8. Employment Ads

Companies are also beginning to list their employment ads online to attract talented people who they might not have been able to reach by the more tradition method of advertising in local papers. Sun Microsystems provides a list of job openings on the Internet. Interested parties can submit a resume or call to schedule an interview, which saves time for everyone involved. Universities can also help their students find jobs more easily by using job listings on the Internet. The University of Washington has a job listing site. Local papers can also make it easier for job searchers by creating a database search feature. The job searchers can select the type of jobs that they are interested in and the search will return a list of all the matching job openings. San Jose Mercury News is a good example of this approach.

9. Stock Quotes

There are several time delayed (15 minutes) ways to track stock performance, and they are all are free. The first to provide this service was PAWWS Financial Network, and now CNN also lets you track stocks. These are commercial companies which provide stock quotes for free but charge for other services. A non-commercial site, MIT's Stock & Mutual Fund Charts, updates information daily and provides a history file for a select number of stocks and mutual funds. Information in these history files can be graphically displayed so that it is easier to see a stock's performance over time.

10. Country Investment Information

Thinking about investing in a particular country? Information on countries can be found online. For example, check out the graphical information (GDP, inflation, direct foreign investment, etc.) on Indonesia.

11. Order Pizza

You can order a pizza online. This Web site is actually a joke, but you can easily imagine people working late at their offices and ordering out for food online.

12. Software Distribution

A very effective and efficient use of the Web is to order software online. This reduces the packaging and shipping costs. Also documentation can now be provided online. A good example is Netscape Navigator. Another example is Macromedia's Shockwave. What is Shockwave for Director? The description online is as following:
"Shockwave for Director is the product name for the Macromedia Director-on-the-Internet project. Shockwave for Director includes two distinct pieces of functionality:
(1) Shockwave Plug-In for Web browsers like Netscape Navigator 2.0 which allows movies to be played seamlessly within the same window as the browser page.
(2) Afterburner is a post-processor for Director movie source files. Multimedia developers use it to prepare content for Internet distribution. Afterburner compresses movies and makes them ready for uploading to an HTTP server, from which they'll be accessed by Internet users."

So by reading about the product online, you can decide if it sounds interesting. You can then immediately get the software by downloading it from Macromedia's computer to yours. Next, you install it on your system and you're all set. You didn't even have to leave your terminal, and there was no shipping cost to you or the company.

13. Traffic Information

Ever wonder what the rush hour traffic was like before you head home and get stuck in it? Many different cities are putting traffic information online. In Seattle, a graphical traffic report is available.

14. Tourism

Plan a trip to Australia or New Zealand with information gathered off the Internet. These and other countries are on the Internet. So you can plan your vacation from your computer.

15. Movie Previews

Who needs Siskel and Ebert, when you can be your own movie critic? Buena Vista Movie Clips provides movie clips from many of their new releases. For a sample movie clip preview "Unstrung Heroes".

16. Chat Rooms on AOL

Chat rooms are a more interactive technology. America Online provides areas where people can "log on" and converse with others with similar interests in real time. This is the first popular use of interactivity by the general public. The other uses up until recently have been more static, one-way distribution of information. Interactivity is the future of the Internet (See the next section).

Forecast of How the Internet & WWW Might Be Used in the Future

There are many ways that the Internet could be used in the next 3 to 5 years. The main aspect that they all have in common is the increased use of interactivity on the Internet. This means that the Internet will shift from being a one-way distribution of information to a two-way information stream. Scientists will continue to lead the way in this area by watching the results from scientific experiments and exchanging ideas through live audio and video feeds. Due to budget cuts, this collaboration should be expected to increase even more to stretch what budget they do have. (For more information on this, check out Business Week article on science and technology "Welcome To The World Wide Lab" 10/30/95.)

1. Interactive Computer Games

One of the first areas where interactivity will increase on the Internet are computer games. People will no longer have to take turns playing solitary or crowd around one machine. Instead they will join a computer network game and compete against players located at distant sites. An example of this is Starwave's Fantasy Sports Game. This game is still a more traditional approach of updating statistics on the computer and players looking at their status. A more active game is Marathon Man, which portrays players on the screen reacting to various situations. In the future, many of these games will also include virtual reality.

2. Real Estate

Buying a home online will become possible. While very few people would want to buy a home without seeing it in person, having house listings online will help reduce the time it takes to purchase a home. People can narrow down which houses that they are actually interested in viewing by seeing their description and picture online. An example is this list of house descriptions by region of the country. This will be improved when database search capabilities are added. People can select the features that they are interested in and then search the database. In response, they will receive a list of houses that meet their criteria. Also, having several different images of the House as well as a short video clip of a walk through of the house, will help buyers make their selection quicker. This area is growing quickly. For example, the following sites of interest to the West Coast were added online since the writing of this paper: Windermere Real Estate, Fractals, and Listinglink.

3. Process Mortgages online

After a house is chosen, potential buyers can apply for a mortgage online. No longer will buyers be restricted to local lending institutions, since many lenders will be able to compete online for business. Visit an example of an online mortgage computation. In the future, each lender will have a Web page which will process the mortgage application. One of the main reasons this has not been implemented is security, which is discussed further under the strategic risks and security section.

4. Buying stocks

Stocks will soon be able to be purchased over the Internet without the assistance of a broker. Charles Schwab has a prototype that is being tested currently in Florida. Once the security issues are ironed out, this application will also be active.

5. Ordering products.

Ordering products online is an important application. As mentioned above, the Pizza Page showed how easy it could be done. Other companies are setting up Web pages to actually do this. An example is TSI Soccer. Customers can actually order online if they choose to do so. They can even send their credit card number over the network. Since this is non-secure, most people probably still call the company to order any item.

6. Live Video

Viewing live video clips will become more common in the future. CNN has files of video clips of news stories at video vault which can be downloaded and viewed on a home computer. Seeing actual live video feed is dependent on network speed, and most home users do not have fast enough connections to make this a practical application yet. This is discussed in more detail under the section strategic risk and speed of network access. Once the speed of network connection increases, more people will be interested in live video clips.

7. "Chat" Internet Telephone

While AOL users are currently accessing "Chat Rooms" to communicate with other people on the Internet, they are restricted to text-based communication or possibly an icon as their identity online. CUCME from Carneige Mellon provides a means for people to actually see other people online. However, network speed is once again a limiting factor. If a user is not directly connected to the Internet (most connections are via modem), then the image is extremely slow. This application will become more popular with increased network connections.

8. Video Conferencing

On the other hand, businesses will begin using video to communicate with others. Andersen Consulting is setting up training online. There should also be some applications that businesses can choose to help set up video conferencing. IBM bought LOTUS Notes for this reason last summer. IBM needs to make it a more flexible solution by interacting LOTUS Notes with the Internet. They currently are in the process of doing this. Netscape also offers a solution based on the software company Collabora that they purchased last fall. These possible solutions should encourage businesses to use video conferencing and online training. Additional information on Video Conferencing is also available.

Strategic Risks Associated with Business Uses of the Internet

1. Targeting right market segments.

It is important for advertisers to spend their advertisement dollars wisely. They can achieve this by using appropriate methods of advertising and targeting the right market segments. Two different types of advertising are entertainment ads and traditional advertising. Entertainment ads focus on entertaining a customer whereas traditional advertising is more direct and usually positioned between rather than within editorial items. When the entertainment ads work well, they can be quite successful in drawing customers to their site; however, it is very easy for this type of ad to flop resulting in no one returning to visit the advertisement site after they see it once. Traditional advertising has better readership. It can also be used well in targeting the right market segments. For instance, the ESPN Sports page would be a good site to place ads by Gatorade and Nike. Sports minded people that might be interested in these products would be likely to access these pages. A good reference for researching this topic further is at Advertising Age.

2. Security

One of the main factors holding back businesses' progress on the Internet, is the issue of security. Customers do not feel confident sending their credit card numbers over the Internet. Computer hackers can grab this information off the Internet if it is not encrypted. Netscape and several other companies are working on encryption methods. Strong encryption algorithms and public education in the use of the Internet should increase the number of online transactions. After all, getting your credit card number stolen in every day transactions is easier. In addition, securing private company information and enforcing copyright issues still need to be resolved before the business community really takes advantage of Internet transactions. There are, however, currently some methods within Netscape for placing the information online yet restricting it to only certain people such as company employees.

3. Consumer confidence

Consumer confidence is essential for conducting business online. Although related to security, consumer confidence also deals with feeling confident about doing business online. For instance, can consumers believe that a company is legitimate if it is on the Internet, or could it be some kind of boiler room operation? Also, companies must be able to substantiate their advertising claims if they are published online. These are some of the issues that concern the Federal Trade Commission, as well as the future of Internet commerce. After all, if consumer confidence is low, businesses will not succeed.

4. Speed of network access

The speed of network access is a risk for businesses. If businesses spend a lot of money for fast network connections and design their sites with this in mind yet customers have lower speed connections, this may result in less consumers accessing their site. Less consumers accessing their site most likely results in lower profits which is in addition to the extra cost of the faster network connection. On the other hand, if the company designed for slower access yet customers have faster access, they could still lose out in profits. Currently, some of the options that home users have to choose from are traditional modems, ISDN, and Cable Modems. Traditional modems are cheaper but the current speed is a maximum of 28.8 Kbps. ISDN is faster at 56 Kbps, but more expensive. Cable modems are faster yet with a speed of 4 Mbps. However, two-way interaction with a cable modem needs some more testing to be sure that it works as well as ISDN.

5. Picking Wrong Industry Standards

Along these lines of picking industry standards, companies must also be sure that the Web Browser that they develop for is the standard. Otherwise, some of the features that they are using to highlight their site may not work. Currently the defacto standard is Netscape. There also needs to be a standard language that adds high quality features such as animation, so that software applications written for the Internet will run on all the different types of architectures customers may have. Major computer industry players have backed JAVA by Sun Microsystems. So while some areas are becoming standardized, companies must be alert to industry changes to avoid becoming obsolete in hardware, software, and data communications.

6. Internet Community & Philosophy

The Internet was originally developed with a philosophy for sharing information and assisting others in their research. The original intent emphasised concern for others, technological advances, and not for profit organizations.

With the lifting of commercial restrictions in 1991, businesses are now joining the Internet community. As with any small town that has a sudden increase in population, fast growth can cause problems. Old residents could create animosity if they feel that the new residents are taking over their community and causing congestion and prices to increase. Businesses need to be conscious of this phenomenon.

While businesses can expect help from Internet users, businesses will lose this help if they only use it to make a quick profit. As in a large city, people will start to feel less like helping others in need. Businesses will be more successful on the Internet if they can emphasize how they can help add value to the Internet rather than focusing on how to make a quick profit. For example, businesses can take advantage of the opportunity to provide additional Internet services (e.g., services discussed in the sections on current uses of the Internet and future uses) now that funding from the government is being reduced.

An example of a city that has grown rapidly, yet still considered very livable, is Seattle. One of the reasons attributed to Seattle's successful growth is, that despite it being a large city, there are numerous small communities within the city. These small communities retain such benefits as concern for others within the framework of services that a large city can provide. If businesses along with the Internet community follow this model, the Internet will have a chance to keep its successful small town atmosphere while adding increased services for more people.

Conclusion

The Internet is a dynamic environment. While there are many risks involved with change, there can be many benefits. This paper has given some ideas on possible benefits and possible risks. Now it is up to each business to decide if the potential benefits outweigh the potential risks. Hopefully, we'll see you on the Web!

Group 33's Home Pages:

To show another way of communication on the Web, we created our own home pages to market ourselves and display our expertise in Web technology.

John Attala
Richard Chun
Jamee Fields
Lisa VanderSluis Whitney
D.K. Yoon

Here's a short quicktime movie(406kbytes) of our group.

Note: All links from this page were checked when implemented. However, the Web is in a constant state of flux. Site adminstrators may be updating their Web pages. So if a link doesn't work today, try again later and it probably will.

Last update: March 5, 1996.
lwhitney@u.washington.edu