Leslie Walker's .com Live
Discussion with DEMOletter's Chris Shipley.
Thursday, Jan. 11, 2001; Noon EST
Join us Thursday at Noon EST for a live chat with Chris Shipley, editor and publisher of the DEMOletter. Shipley will be online to discuss trends among Internet companies that are surviving the great Internet shake out.
(Gary Wagner Photography)
In her capacity as executive producer of the annual DEMO Technology Conference, Shipley has met personally with between 500 and 1,000 companies seeking to present at next month's DEMO 2001 in Phoenix. She'll share her insight into what the firms will be presenting at the conference and more.
Transcript is as follows.
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Hello. And welcome to all. We're glad Chris Shipley could be with us today.
There's gloom and doom in dot.com land these days. What differences are you seeing among companies vying for a spot at DEMO vs. past years?
Chris Shipley: While the technology markets are rather gloomy, I'm rather optimisitic about the technology industry overall. As we interviewed more than 500 companies in planning for DEMO 2001, I was impressed with the quality and abundance of real innovation. We're seeing now products that are addressing real and fundamental business problems. It's a stark contrast to companies a year ago that were making land grabs for various consumer Internet market segments.
Is the .com bust affecting a particular kind of technology firm, or is it across the board? It's my impression that it's e-commerce and news/content sites that are falling apart more than b2bs, software makers, tech infrastructure firms etc.
Chris Shipley: To be sure, all technology startups, regardless of market segment, are having difficulty raising investment capital. Yet I think this is working as an effective filter very early in a company's life -- the good, useful and revenue-producing concepts ARE getting funded, almost regardless of market segment. (Although I wouldn't want to be starting a .com business today!)
Sound management and cash conservation are critical for any technology company today. And to be successful, companies must be looking to short- and mid-term revenues.
Has there been a big pickup in the number of wireless startups knocking on your door? Or was that last year, before the big crash?
Chris Shipley: We say many wireless ventures in early and mid-2000. It was, in some ways, a repeat of the .com land rush. However, those companies have also been affected by the down turn and the flow of venture money to wireles startups was not as big, and did not last as long, as the money rushed into .coms in 98 and 99.
Hello. I was wondering whether you are seeing a drop in registration for your technology conference. Other conferences have been cancelled because of the economic downturn. What's the impact been on DEMO?
Chris Shipley: We believe that DEMO is a valuable proposition when the market is good, and perhaps even more so when the market is bad. Technologists and investors need to be much more cautious about where they spend their time and money. DEMO has a long history of presenting the best of emerging technology and products, and of providing an outstanding context for business networking. We're on track to sell out the conference again this year.
You say you're seeing more products that address real business problems, rather than just land grabs. Can you elaborate?
What kind of companies are you seeing less of (niche retailers?) and what kind more of (B2b software?)
Chris Shipley: We saw very few companies offering direct-to-consumer Web businesses. Instead, the majority of companies focused on business problems (knowledge management, work flow, collaboration, data management) and fundamental infrastructure technology (bandwidth, data mining, data delivery, peer/distrubited computing).
What trends are you seeing in Internet software? Do the new companies you're seeing seem to be writing a lot of applications in Java?
Also, how do you rate prospects for Microsoft's .net software platform?
Chris Shipley: The overwhelming trend in "Internet software" is not so much Internet or Web-based applications, but solutions that use the use IP to deliver data to the point of need. The Internet is a delivery technology and it's being used as such in a variety of business and consumer applications. In time, Web sites will be less destinations and more launch points for a variety of applications and services. For example, you may register and set preferences on a Web site, but you'll not visit that site in order to benefit from the services that are being delivered to you.
Hi! Could you tell us anything about Washington-area companies. Do you see lots of innovation from this area? Is it on the rise, or are we even on your radar?
Chris Shipley: Not surprisingly, the majority of the companies we see come from Silicon Valley, Boston, the South East. However, we are hearing more from ventures in the Washington area, particularly as entrepreneurs come out the major computing/technology companies in your area to start new businesses. I suspect that in the years ahead, we'll see a lot more activity from the mid-Atlantic region.
So, given the changes in the market and the many failed dot-coms, what sorts of companies does DEMO believe will make an impact on the industry during 2001 and beyond? On what sorts of companies will DEMO focus in Phoenix?
Chris Shipley: It's a return to fundamentals: companies focusing on solving real business pain, whether that's an application or an infrastruture.
One of the challenges of the .com companies was that they addressed consumers on a "nice to have" proposition. For example, it would be "nice" not to go to the pet store and have dog food delivered to your home. Nice, but not critical or essential.
The companies that will emerge in the next 24 months and continue to grow are those that focus on what business -- and even consumers -- "need to have." Enterprises need more effective mechanisms to exchange data and collaborate with their business partners and customers. They need faster and more reliable access. They need to leverage the investments they've already made in technology. Companies that can meet these, and other, needs will have a ready market.
What impact, if any, do you think the impending AOL-Time Warner merger approval will have on the dot.com economy overall?
I'll leave it to Chris to gauge the potential impact, but I see this deal as emblematic of where the Net is heading: integration with the old economy. About.com is merging with Primedia; Lycos got snapped up by Terra; the B2B marketplaces were reclaimed by industrial giants; Amazon & ToysRUs hooked up. The list goes on and on. . .
Chris Shipley: I'd certainly agree with Leslie. I contend that this is not an "old" economy and a "new" economy -- just the economy. The Internet and related technologies are a way of extending traditional businesses as they reach out to provide better value to existing customers.
That said, I think the AOL-Time Warner merger will create a lot of opportunity for startups: it will be a huge acquisition machine for many startups that have built some fundamental technologies and gained the expertise in key areas that AOL-Time Warner -- and other large companies -- will need to extend and grow their businesses.
In reality, that's how the startup business has always worked. In many instances, startups are R&D projects to be acquired by established organizations.
Some companies are getting funding and then announcing layoffs. Do you think layoffs have become a good way to entice VCs to provide more financing to troubled dot-coms?
Chris Shipley: I'd be hard pressed to use the words "good" and "layoffs" in the same sentence. Layoffs are a signal that companies have not been able to reach or maintain their growth objectives. They are about cash conservation. And, in startup ventures, they are often a signal that the company is ready to go on the auction block. None of those factors would be attractive to an investor.
A lot of people think wireless data applications are overhyped.
Yes, yes, yes, I do!
Not that mobile data isn't a real trend. I just think people will adopt mobile technologies more slowly and for far fewer things thatn technology vendors believe.
Chris Shipley: I think a lot of lame wireless ideas are overhyped, but wireless itself is not. Let me explain: Many of the initial ideas and applications for wireless computer were, to my way of thinking, "because we can" applications. You know, let's put a browser on a 1x2 inch cell phone screen because technically we can do it, even if broswing Web pages has very little value to a cell phone user.
But delivering information wirelessly IS very useful. Wireless will be about notification and transactions and I do think we will see many very compelling applications in this space. In fact, a number of companies at DEMO will introduce extremely interesting and useful applications and devices that take advantage of wireless technology.
The thing to remember here, as in other market segments, is that wireless itself isn't an application, it's a technology. It's how that technology gets used that matters. Our industry tends to hype technologies as if they are applications (Internet, Java, wireless, etc.) and so it's no wonder that there is disappointment. It's like hyping a motor: it's not that interesting until you do something interesting with it.
Are you seeing a lot of last-mile companies--new twists on ways to deliver broadband to homes and companies? What trends if any are you seeing in broadband access. Thanks!
Chris Shipley: We will present one very interesting last mile company at DEMO 2001. The company has a unique approach to bringing Internet connectivity to many homes, working through municiple utilities.
Perhaps more interestingly, though, will be the series of companies that are working to accelerate content and applciation deliver through a variety of means: peering, data and site distribution, caching, hardware appliances, etc. There is still a great deal of performance to be eeked out of existing pipes.
Silver Spring, MD:
Recently employees of media sites, such as nytimes.com and cnn.com, have been added to the list of layoffs. Do you expect to see more layoffs from media companies?
Sadly, yes. We are in an economic slowdown. Advertising volumes are dropping. Yahoo gave the Net economy a shock yesterday by slashing reducing earning projections for the year. If profitable Yahoo is hurting, how about all those unprofitable news Web sites? Lots more pain is to come. Media portals like iVillage and women.com have already had cutbacks, too, and are fighting to stay alive.
I hope many media sites retrench through attrition, rather than layoffs. But you can bet there will be more cutbacks at media Web sites this year.
Chris, I bet you hardly see ANY media sites angling to present at DEMO, right?
Chris Shipley: We're seeing the ugly side of a natural cycle: business booms as new industries emerge. Media companies (as well as others) staff up to capitalize on the opportunity. They build bigger bandwaggons to capture greater ad revenues and page volumes. When the hype subsides, and their advertisers scale back or fail all together, media companies that have staffed for the peak are forced to scale back -- unless they can redeploy resources to capitalize on "the next big thing."
I bet you see a lot of silly new ideas. Any common themes among the biggest mistakes you see in startups?
Chris Shipley: Biggest mistake: assuming everyone is as in love with your idea as you are. Too often, technologists design products for technologist, and there just aren't that many technologists to create a big enough market.
New York, NY:
Are there any hot new audio entertainment companies to keep an eye on this year? A few months ago I heard about a company called Full Audio, is it a good alternative to napster?
Chris Shipley: While we don't disclose the names of companies coming to DEMO until the week before (keep an eye on our Web site, www.demo.com) because they are still working in secret on their products, I can tell you that we will have one very hot audio company at DEMO 2001. We selected them because they have the right combination of technology, music industry, consumer and business know-how to be successful.
Please tell us some of the biggest hits and biggest duds of DEMOs past.
Chris Shipley: The biggest hit: The PalmPilot
The biggest dud: What duds?
Okay, I might have a selective memory, but I do want to make a point. We're not venture capitalists at DEMO, although we do have a strong track record of selecting and introducing companies that go on to be very successful. Instead, we're about identifying ideas, technologies and trends, and even when a company is not successful, the core of the idea most often proves to be very important.
Case in point: HotOffice came to DEMO 97. At the time, the audience was skeptical that anyone would use a Web-based application. Today, the ASP model is proven.
Case in point: MagicMaker, a company that was working on concepts in interactive story telling and entertainment. We'll see a product launch at DEMO 2001 that I predict will be the "Survior" phenom of the year -- and it's all about interactive entertainment.
What impact has the proliferation of the internet really had on the WAY people work, rather than what they do at work? Has it led to a more collaborative work environmment, and where do you see this going in the future? Just how "hot" is collaboration right now?
Chris Shipley: I'm inclined to think that the Internet has impacted the AMOUNT of work we do more than the means by which we do it. Work is accessible to us, and we to it, any time, any where.
Collaboration is a tough nut to crack because it implies significant behavior change. It's hard for technology to do that. Yet we'll see some extremely interesting new collaborative applications next month that leverage technology to support known and comfortable work and learning modes.
Could you give your your view on how peer-to-peer technologies will evolve? Are you seeing lots of companies try to create ebay-ish peer-to-peer markets, for example, where they take a commission and let millions of people auction/swap/sell to one another?
Chris Shipley: Peer to peer/distributed computing is an important technology. It is how the Internet will scale and it will rewrite the principle of Metcalfe's Law (that the value of the network is the square of the number of nodes).
But remember, it is a technology, not an application. We'll see many important and different types of applications build on this technology -- from market places, as you suggest, to resource sharing and bandwidth stretching applications.
New York, NY:
There has been a lot of talk about MP3 players and product like these that allow listeners to down load music and take it with them (swiftly becoming wireless), is this a passing phase or will these devices take the place of our home stereo systems?
Chris Shipley: Initially MP3 players will be integrated along side consumer entertainment systems, and eventually become an integral part of the consumer stereo experience. The technology carries additional costs, however, that will drive the cost of home entertainment systems that use MP3. Those systems require large hard disk or silicon storage systems, connectivity, etc., and that will make the cost of the equipment greater than today's audio systems.
We will wrap up soon, folks. Thanks for your great questions!
Could you both give us your nominees for the most-likely-to-survive Internet companies and Web sites?
1) AOL, hands down.
2) Ebay, still underrated.
3) Everything else, up for grabs!
No kidding, it's that unsettled. I personally rate Yahoo and Amazon as survivors, but even they are debatable. Net technology and business strategies evolve so rapidly that until a company has a large base of regular PAYING customers, like AOL and eBay do, I really think they're all vulnerable.
Chris Shipley: I agree with Leslie: AOL, eBay, for sure. I'd also add eTrade, Amazon as independent companies. c|net will survive, but may do so as part of an even larger media company.
They key here, though, is that these aren't "Internet" companies. They are media companies, auction services, financial services, retailers.
I'd also add that the perception that the Internet and Internet-based businesses are dead is DEAD WRONG. The Internet remains a healthy and active platform and continues to present the opportunity for smart businesses. The problem we're facing is the back lash of a land grab. 24 months ago, any entrepreneur who could fog a mirror and had a .com business plan was able to get at least seed funding. There was little filtering of ideas (why is a bad business idea on Main Street a good business idea on the Internet?) and there was no accountability for revenue growth. Those companies SHOULD HAVE DIED.
The next generation being funded today are forced to focus on revenue and have real and attainable plans to reach profitability.
New Orleans, LA:
What kind of company will be most prevelant at this year's DEMO conference?
Chris Shipley: Smart companies. Always smart companies with great ideas.
But I suspect you want more specifics than that. Best idea: come to DEMO 2001 to see for yourself that the technology industry is alive and very well indeed.
That's it for today, folks. Good insights from the DEMO producer. I'll be reporting from DEMO in Arizona next month, so check the .com column to see what surprises Chris Shipley has up her sleeve.
Thanks to Chris for joining us today. Hope to see you again in two weeks for more talk about the Internet economy.
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