Internet.ID v2.0: Happy New Year!!

By Hasan Yahya

JAKARTA (JP): In this day and age, it's amazing what can happen in a year. Early in the year, the local Internet scene was buzzing with energy and excitement. Launch parties and fancy campaigns, you can almost feel it in the air.

Things were happening, or at least were expected to happen, and it was a gold rush toward that land of opportunity called cyberspace. The excitement, of course, was only too welcome after the crisis that hit the nation hard during 1997 to 1999 period. There was a sense of awakening, at least among the younger generation.

People felt they could make an impact on the economy. Portal became a business buzzword, warnets mushroomed all over the country and corporations rushed in to find their domain name snapped up by college kids in Depok.

Just like in the U.S., there was a sense of hyperoptimism that the Internet would boldly take us where no one had gone before. It was fun and strange at the same time, when everyone suddenly felt that a NASDAQ IPO is within a business plan's grasp... felt that way, anyway.

I had a good share of partying during those days, I enjoyed it.

Then came the NASDAQ crash in March, the turning point that rudely awakened everyone to reality -- forgotten to some and oblivious to others that business is about profitability, sales, revenue and well, noticeably customers. In the strange mechanism in which a global market economy works, the crash in the NASDAQ immediately made an impact on our country, all the way across the Pacific and dampened the optimism we'd seen before. I'm not an economist, so don't ask me the mechanics of it but things have changed since then.

Suddenly everyone starts talking about advertising revenue or the lack thereof, and hurrying, one after another, to try to come up with the most innovative ways of making money. One buzzword after another - in an industry that has a seemingly unlimited supply of random combinations of three letters - were touted to be the ultimate moneymaking escape hatch.

We're lucky this is an industry that also seemingly has an inexhaustible supply of optimism. By end of the year 2000, the discussion on how to play it in the next year is the after-hours chosen subject of conversation. We've seen how it played out in the past several months, and many of us had mistakenly put our bets on the wrong buzzwords, it'd be nice to know what's going to happen in 2001.

Recently, I had several discussions with some friends, playing oracle, and trying to figure out where the industry will go in the New Year. We've seen the industry go through the phases of overhyped buzzwords just like it happened on the NASDAQ, albeit some minor variations.

Repeating the same cycle

The cycle goes like this, content was king, portal was the hot stuff, B2C was the revolution, B2B was the one after the previous, infrastructure is the underlying fundamentals and wireless is the heavenly dream - and that's when you start thinking about content to go on your nifty mobile screen.

Sporadically along the way on the cycle, Indonesia had seen companies, daring investors and gutsy entrepreneurs alike trying to conquer each of these individual markets.

To no one's great surprise...as we approach the New Year, it looks like we're about to repeat the same cycle all over again.

The overall experience on the news portal sector was devastating to some and less than good to most. Most players are likely to see new management taking over within the first quarter of 2001, and they need to learn from their past mistakes.

No more overextended newsroom operations. No more silly branding exercises, it's time to get to know the audience and prepare something relevant. Something more entertaining. Getting the page views means nothing if that can't be turned into cash. No more land grab in content alliances, this is the time to ally with advertisers.

The truth is, as the country gets better in the overall economy and Internet users start reaching critical mass, the top tier online news portals that actually survive will make good acquisition targets for international players looking for regional footholds. If they're lucky, the investors will get some spare change. The less fortunate ones will simply experience one hard lesson in new economics.

Since portals are going through transformation and more people are getting connected to the Net, expect a revived version of the B2C ideas. Hey, you can probably actually sell those hats online. After all, Lipposhop has managed to sell quite a few bottled Starbucks cappuccinos online. So it could probably work, and investors have probably forgotten the high profile NASDAQ flop in year 2000. It's worth a try.

And then, of course, comes infrastructure, which is probably the most interesting sector. During 1999, ISP was the name of the game for the industry. As the licensing procedures and bureaucratic hurdles were notoriously difficult, the barrier to entry into this market was significantly higher, with only a handful of companies ending up operating as full ISPs during those days. They later found out - many, again, the hard way - that running an ISP is not as simple as they thought, and certainly not as cheap.

These days, data centers seem to be unusually popular, laying cables and throwing satellites around the place seems to be everyone's idea of making big bucks. It probably wouldn't change all that much in 2001, as the market having grown spectacularly in the last year, almost everyone has found themselves short of bandwidth. But then again, many of these would find existing bureaucracies and regulatory hurdles stubbornly refusing to move away from those nice milestones set on the business plans, and some adjustments would need to be made.

Well, that's not even mentioning leaving customers stranded without support services and a pricing structure that would confuse even the most mathematically gifted bandwidth-hungry- money-spender, such as myself, excluding the gifted part.

To be frank, most of our infrastructure players lack that ultimate experience in dealing with real life customers and tend to treat them as hostile entities that creep into their network.

Ugly price war

Either way, I'm still hoping to get one of those nice satellite connections sometime in 2001. I personally think that this is a good bet, although it tends to get into ugly price wars and only those with significant savings are advised to get into it. If you happen to be following what's happening on the NASDAQ, you'd have also noticed that infrastructure is probably the closest thing to the now-happening event of telco and optical network equipment. Since Indonesia is unlikely to see the sudden rise in network equipment research lab and manufacturing, putting the things together is probably a good way to follow the trends.

And then, of course, is the whole brick-and-mortar stuff. The so-called incumbents, traditionalist, old economists, dinosaurs, something, whatever, those big guys who were there during the last economy. Enjoying their stable growth in the survival of the crisis and their legal mess, many of them would find themselves right in the middle of the Internet revolution.

Truth be told, these guys are the biggest suppliers, buyers, customers, producers; in short, the dynamo that would actually have any serious opportunities to survive and propel the Internet industry. After all, if they could survive whatever it was that hit them in 1997, there's a good chance that they wouldn't be obituaries to our adrenaline-driven entrepreneurs.

You notice that I didn't mention wireless. The truth is I don't really know what's going to happen with wireless. Much touted to be the "next thing", wireless communication and the numerous gadgets haven't yet gotten any further than that: the next technology.

The current technology available here is far from ideal to deliver anything useful short of SMS messaging and choppy voice communication. Technology is about usability. Enabling customer to do more, better and quicker. The fact is most customers don't really care about the capability of new technology, they care when they can use it. The year 2001 will see a slew of new gadgets arriving in the market, both overseas and here in Indonesia. Carriers are expected to start upgrading their infrastructure to enable bigger bandwidth and a range of new services would probably be made available. Exciting times, to see whether the customer will buy it.

The truth is, the Internet industry, the way it is right now, is a market in the making. The contribution to the overall economy is barely there. The value creation mechanism within the entire chain merely skims the surface of the market expectation.

It's a Darwinian process on adrenaline very early in the evolutionary process that will pick the surviving species. It's a cycle that goes around, just as it has happened in other markets, each time snowballing until it reaches that perfect critical mass that would launch it to the next phase in the economy.

At least we passed year 2000 with some sense of reality that those IPO dreams that most of us had, wouldn't come as easy... we probably should start learning that it definitely wouldn't come any easier in 2001. We still lack that one success story. It's a whole load of battles with no winners. It probably came as a surprise to some that generating sales is actually an important element in doing business, but to many who have gone through the old economy phase, it's just an official nod that we didn't waste our time trying to create value and that those things take time. We need a success story to prove that it can be done. There's a real business to be made on the Internet. Right here, in Indonesia.

I'm a big believer on this whole Internet thing. And I believe that someday, hopefully not too long from today, it will start having a real impact on our real life. A weird combination of factors have kept some of the best success stories from the outside world away from Indonesia, leaving us way behind in terms of technology competitiveness. As we repeat the cycle in our learning process, with more respect to generally accepted economic fundamentals, the year 2001 should be a critical year for the Industry. It's the final exam year on the third grade. Heck, it'd be nice to start the new year with the same optimism as we had early this year. After all, it's the real millennium. Welcome to Internet.id 2.0!

The author is CEO and lead consultant of SIP, an IT and human resources firm in Jakarta. (hyahya@sip.co.id)