Ten years ago, they had just come out of the garage. They were New Age entrepreneurs opening the gates on what a leading venture capitalist termed “the largest legal creation of wealth in the history of the planet.”
The founders of Amazon.com Inc., Yahoo Inc., eBay Inc. and Netscape Communications Corp. each had a vision of what could be done with the Internet, but none knew in those early days the true size of the revolution they had sparked.
David Filo and Jerry Yang, for example, two PhD candidates in electrical engineering at Stanford University, started a guide to their favourite links on the Internet in a campus trailer. A few months later, when 100,000 people visited the guide in a single day, they knew they had a business opportunity they couldn't ignore. They abandoned their electrical engineering studies for a round of venture capital funding. Today, Yahoo serves more than 345 million individuals around the world every month.
Some of these young companies are now household names and part of the foundations of the 21st century economy. On-line sales in Canada hit $28.3-billion last year. In the United States, they reached $141-billion (U.S.), or 6.5 per cent of all retail sales. By 2010, the on-line channel will account for 13 per cent of total U.S. retail sales, or $331-billion, according to Forrester Research.
Many of the decade's Internet startups, however, never progressed beyond a website and expensive marketing campaign. After burning through billions of dollars of startup capital, their fates were brutish and short. One notorious example was Pixelon.com, which raised $35-million by promising TV over the Internet, then promptly spent $11-million on a launch party in Las Vegas in October, 1999.
In the five years between Netscape's public offering and the peak of the Nasdaq Stock Market in March, 2000, more than 800 startups went public, most with connections to the Internet, raising almost $50-billion.
The differentiating factors between success and failure in the first decade of e-commerce are still not entirely clear, even as the Internet economy moves into its next phase of rapid change and development. But survivors of the early generation point to some common winning traits, including using the new technology to improve the way they interact with customers, manage costs and respond to changes in the marketplace.
One of the ideas that fascinated eBay founder Pierre Omidyar was creating trust between users thousands of miles apart, who would never meet face to face. An early creation at eBay that helped distinguish it from other on-line trading companies was an electronic feedback forum where buyers and sellers could establish reputations. The concept has become one of the cornerstones of the eBay trading community, which today numbers 157 million people around the world.
Similar communication channels play a key role in formulating the company's strategy. EBay established a system of message boards to which users send their ideas for improving the trading community. Employees pore over thousands of messages each day and use customer resource management software to help sort the ideas into categories that eventually form the basis of the company's product planning sessions each quarter.
“In some respect, we are a communications company,” says Jordan Banks, managing director of eBay Canada, a five-year-old subsidiary of San Jose, Calif.-based eBay Inc. “Since day one, the customer has been the guiding voice. We gave them the avenue and forums to communicate. It means that we don't have to hope what we introduce will be well adopted.”
Some of eBay's most recent initiatives include the $620-million purchase of Shopping.com, a comparison shopping service, and the introduction of Prostores, a program under which eBay runs customized e-commerce storefronts for merchants so they can sell their products outside the eBay marketplace.
“There really was no way to predict where the successful strands would come in the e-world,” says John Challenger, of Challenger Gray & Christmas, Inc., an outplacement consultancy based in Chicago that works with executives in the industry. “If you take a company like Yahoo, they got there early, with a lot of money, and were able to go out and hire the very best people.”
