Debunking 10 Internet Myths

In all, McCarthy used his session at Dimension Data's Accelerate 2001 roadshow to debunk ten Internet myths.

1. The idea that buying online was a fad does not hold up in the face of statistics showing 27 percent of US consumers had purchased online in the last three months, up from 23 percent in the previous year, and the NRF/Forrester online retail index shows Web sales are holding steady compared with last year. Although online retail figures have fallen since September 11, the drop is much smaller than experienced by traditional retailers, he said.

2. The idea that the demise of many dot-coms means companies can put their Web projects on ice and still hold their competitive ground was also rejected by McCarthy. The threat is still there, but it comes from traditional competitors who are taking advantage of what the Web can offer to cut costs and meet customer demands.

3. Spending on IT may have dropped, but there isn't a budget meltdown -- all that's happened is that spending has retreated to "pre-bubble levels," he said. Much of the drop in spending can be accounted for by the demise of startups that had been spending heavily to establish their infrastructure.

4. There may be a perception that the Internet failed to produce viable new business models, but while there were too many copycat and half-baked ideas, the reality is that it has enabled new forms of many-to-many connections. eBay sold consumer goods worth $US5.6 billion in 2000 (in Australia alone, it sells 100 pieces of jewellery a day, 9 computer items and hour, and a CD, book or toy every four minutes), while Enron provides a $US336 billion online energy market.

5. Some people would have you believe that online transactions are the goal of a Web site, but "the Net continues to be a major force in driving offline sales," said McCarthy. For example, only 2 percent of US online consumers surveyed had purchased a car online, 30 percent said the Internet was a key part of their pre-purchase research. More generally, 46 percent had made an offline purchase during the last three months after doing their research online.

6. Another suggestion is that technical innovation has stalled. McCarthy's view is that "there is a huge surge of innovation in a couple of particular areas," notably Internet-based inter-company collaboration. In particular, companies believe design collaboration is becoming increasingly important, and that the Internet is playing an increasingly central role in that process.

7. As for the idea that current Web sites are adequate, McCarthy was blunt: "Most sites flat-out stink," he said. Issues include text that's too small for the screen resolution of current PCs, poor search facilities (a trial of 36 retail sites found two-thirds of test shoppers failed to find what they wanted even though they were motivated with 'free' spending money), and "incredibly frustrating" sites that look like they should provide product details and perhaps online shopping, but don't. In a review of 140 sites, only one reached Forrester's 'passing grade' and in general B2B sites were slightly worse than their B2C brethren.

8. Pundits have been proclaiming the death of the banner ad, yet banners are at least as effective as magazine, radio and newspaper advertisements for driving traffic to a Web site. The most effective mechanism is sending email to customers, McCarthy suggested. A mix of email, affiliate programs and banners gives better results than offline advertising.

9. The supposed 'bandwidth glut' is another furphy, according to McCarthy. Although there is capacity on some segments of the Internet backbone, bottlenecks between different carriers makes the excess capacity unusable, keeping costs high and hindering companies' ability to deploy online applications. On the consumer side, broadband access is still a rarity, but Telstra is looking to increase its broadband customer base from the present 76,000 to one million by 2005.

10. The final myth McCarthy debunked is that the Internet is now late in its lifecycle. While the easy wins (eg, brochures and price lists on the Web) have been achieved, "we're still very early on," he said. The price and efficiency gains of eMarketplaces and real supply chain integration have barely begun, collaboration via the Internet is just starting to come into play, the deployment of broadband drives more consumer activity, and we are only just beginning to combine data from offline physical-world sources via wireless.

Examples of that last point include vending machines that 'phone home' when they need replenishment, and trucks equipped with sensors and wireless links that allow rerouting at the first signs of spoilage of perishable cargos. Although Forrester sees a current flattening in the growth of investment in Internet-related projects and a focus on cost control and ROI, it predicts another surge in investment from 2004 thanks to growth in inter-company collaboration projects.

"It ain't over until it's over, and it ain't over," said McCarthy, paraphrasing legendary baseballer Yogi Berra.