Is the Internet Boom Over?
An op/ed piece
The Internet boom made money for large companies as well as individuals during the 1990s, but in the wake of the Internet bubble bursting, is the boom over? Clearly, the answer for companies like Googlewith a stock price around $380 per shareseems to be a resounding no, but it is the "boom for everyone" Internet that I explore here. Can the average Joe Programmer like you or I still make money on the Internet?
Because my crystal ball is on the fritz, I employ loose historical parallels to show that elements of history repeat and follow cycles of innovation and consolidation during a given age. (Thank you, Dr. Baughman at Jefferson Community College. That history you taught is really coming in handy.) I believe that some of this ebb and flow has placed us in a time when the best is yet to come. Thus, read this article, check my facts, consider current affairs, and then decide if youusing tools like ASP.NET and VB.NET, or good old-fashioned know-howcan find a niche and prosper in this current era of the digital age.
Where We've Been
I am not a historical expert, but I play one on the Web.
Recent US history has seen three notable economic eras between which a fundamental shift in the wealth of the economy switched from one form to another: from the agrarian (farming) age to the industrial (manufacturing) age and on to the current digital or information age. The span of time from the inception of an age to its end seems to be shortening. Farming seemed to last a very long time, manufacturing less so, and the digital age possibly will be even shorter. Our present age is approximately 60 years old this year if you start with the creation of the ENIAC computer but only about 35 years old if you think in terms of major economic impact.
Early players in the digital age included Xerox PARC, Apple, Intel, and Microsoft. These small innovators turned opportunity and ingenuity into monumental success. Then, Tim Berners-Lee and some others pioneered a paradigm shift: the Internet. Massive exuberance and speculation ensued, with everyone opening a dotcom business. This phase did not signify a change in era, but it did signify a paradigm shift within it.
I imagine that, from a thousand-foot view, the rise and fall of Internet companies looked like the irrational stock speculation before the 1929 stock market crash. We even had our own stock market crash, which destroyed most dotcoms. Many may say that the stock market crash that preceded the great depression in the U.S. was unlike the Internet crash because the durations were notably different. (The great depression lasted from 1929 until about 1939. The dotcom bubble popped and slowed the economy for two years.) However, consider the events that preceded both crasheswild speculation and significant shifts in capital valuationsand the similarities are much closer.
If you concur that the circumstances have similarities, then we may be on the cusp of unheralded prosperity, much like the era that followed the Second World War. More wealth was created between 1945 and 1983 than in any other point in history, based on the third and probably best phase of the US industrial age. My historical comparison may be faulty in areas, but I believe we are in the third phase of the digital age, with phases one and two overlapping to some extent with the third phase of manufacturing.
The first phase of the digital age began with innovators starting empires in their garages (think Jobs and Wozniak, and Gates and Allen). The second was the creation of massive wealth and employment, followed by a collapse caused by irrational exuberance, which presaged the current phase, in which the strongest players and many of the newest and best innovators are the most viable members.
Note: From 1945 to 1975, the Dow Jones Industrial Average (DJIA) doubled to about 1,000. From 1975 to 1983, it doubled from 1,000 to 2,000. From 1983about the time consumers began purchasing PCsto 1999, the DIJA increased five-fold.
This phase could last between 35 and 50 years. (A very rough guess, of course.) During this time, companies with real business models, well-identified markets, consolidation strategies, and real innovation will profit. Small innovators will profit by introducing intra-phase paradigm shifts, investing in the capital markets, and by selling or participating in the prosperity of the industry leaders. Programmers can make excellent livings by writing code for companies such as Google and Microsoft and investing in their stocks. Clever programmers can make money by introducing new or derivative products like NUnit (a .NET testing tool) or PubSub.com (a prospective search engine). Clever programmer/entrepreneurs like those at Sparx Systems can erode existing market positions by competing on price with larger companies like IBM/Rational (more on that in the next section).
So, the answer to whether or not it is still possible to make money on the Internet is a resounding yes. The opportunity should be as good as it gets for the next generation or two because of the following factors:
- Individuals can compete on price or innovate for the cost of a compiler like VB.NET.
- Anyone can easily buy and sell stocks onlineparticipating in solid capital markets.
- Larger companies face challenges from innovators, as demonstrated by Netscape in the 1990s, possibly PubSub in the near future, and Sparx Systems now.
Where We Are
In the Innovator's Dilemma, Clayton Christensen explains a plausible cycle for innovation. Christensen tells us that new products follow distinctive cycles. When something brand new is created, it doesn't have a market, and the low sales volume makes the product too expensive to produce. Then, a paradigm shift happens and something in the market changes. The next cycle in Christensen's theory is ubiquity. Everybody is making the product and competition is based on price followed by service. Then, the cycle is repeated when an innovator develops a new product like Google.
Read Christensen's book for more details on how to capitalize on this new knowledge. Based on price, David can win David-vs.-Goliath battles such as the one between Sparx Systems' Enterprise Architect and IBM's Rational Rose. With price points of several thousand for Rose and a couple of hundred for EA, Sparx Systems has a real chance of chipping away at IBM/Rational's market share in the visual modeling tool space. Other contenders include Microsoft's inexpensive Visio and Gentleware's Poseidon for UML. This is just one possible epic battle where innovation, competition, price, or service may represent opportunities for Joe Programmer to find lucrative employment or compounded capital.
According to Christensen, anyone who invents a product or change in the way business is conducted can cause a paradigm shift. These people can make money; a good example is Enterprise Architect, and a burgeoning challenger to Google may be PubSub.com (a prospective, or looking forward, search engine). If you are a person toiling away on the next killer application, you may be that innovator. If you aren't working on the next killer application or Web site, you can still benefit hugely by catching the next wave on the Internet and cashing in on it.
Unfortunately, I can't be sure who will get consolidated and what will cause a paradigm shift. If I did, I wouldn't work for a living. I do know that there is clear evidence that the wealth of our economy is based on information, we are entering a mature period in the present era, and history suggests the mature phase is the most prosperous. I also believe that the Internet has leveled the playing field considerably because access to that information means average Joes can act on it. For example, you can read Web sites like this one or invest in the stock market inexpensively. Twenty years ago, this seemingly trivial act required considerably more wealth and generally privileged access.
Other Interesting Web Sites
The following are some interesting sites to show you that Internet innovation is alive, exciting, dynamic, and bursting with potential. You will have to check them out to see what they do, but the trip is worth it:
- Alexa.com (check out the Wayback machine)
If you only have time for one site, start with StumbleUpon.com. It adds a Stumble toolbar button and takes you to one of billions of interesting Web sites at random. Viewers rate the coolness factor of the stumbled-upon Web sites so you can stumble on the cooler sites first.
The Next Big Thing
History repeats itself because generations have to re-learn some things over and over. As I see it, the digital economy is in its third wave as investment shifts from industrial- to digital-based corporations. This era will create more prosperity than any other period in historyincluding manufacturing's fifty-year run.
Plenty of opportunity still exists for individuals to inspire or engineer the next new thing. This new thing, while we are in the digital age, may occur on the Internet, a ubiquitous connected system second only to the telephone.
What's your take on the current opportunities for programmers to make money on the Internet? Post your opinion in the CodeGuru Forums.
About the AuthorPaul Kimmel has written several books on object-oriented programming and .NET. Check out his new book UML Demystified from McGraw-Hill/Osborne. Paul is also the founder and chief architect for Software Conceptions, Inc., founded 1990. He is available to help design and build software worldwide. You may contact him for consulting opportunities or technology questions at email@example.com. If you are interested in joining, sponsoring a meeting, or posting a job then checkout www.glugnet.org, the Web page of the Greater Lansing area Users Group for .NET.
Copyright © 2005 by Paul T. Kimmel. All Rights Reserved.