Thursday, February 07, 2002

Late Adapters

Yesterday, Adam Cohen wrote a good "Editorial Observer" piece (registration required) in the NYT about the PayPal IPO. [Update: The PayPal IPO has been delayed.] PayPal is basically E-Z Pass for purchase payment on the Internet and if you're not a subscriber, you probably should be. It makes on-line purchasing a lot easier.

PayPal itself is one of those companies that survived the crash and lived to fight another day. Despite all the gloomy coverage of the last 21 months, the sector has rebounded smartly. McKinsey published a useful report on the revival last year. I wrote a column about it in the November issue of Fast Company.

The reason that companies like PayPal are now thought to be solid business propositions is fairly simple. A majority of Americans, according to a Commerce Department survey released this week, are up on the Net. The growth of Internet usage by Americans continues to astonish. and not companies that make the experience faster, better, cheaper, more statisfying are adding real value and thus are likely to succeed as businesses.

What amazes many people, including me, is the continuing Internet-phobia of American business executives. I recently met with a small (10-person) New York-based outfit called Allcast. Allcast provides peer-to-peer (P2P) video streaming technology that works just fine. Today, if you want to stream video/audio clips to 1000 people, you have to buy 1000 streams. Allcast technology enables you to "peer" one stream to a 1000 person network (in roughly the same way that Napster "peers" music files from one person to the next). Instead of buying 1000 streams, which can get pricey, companies that use Allcast's peer technology can buy an Allcast lisence, stream one stream and then by "peering" that stream, cut their costs by as much as 85 percent.

There are hundreds, perhaps thousands of companies that buy video streams every day. They include financial service corporations, professional sports teams, media companies,....the list goes on and on. So far, not one (that I know of) has availed itself of Allcast's technology.

Why not? There are any number of reasons. One is that Allcast is largely unknown and has no sales force. Another is that because Allcast has no big customers, it can't land a big customer. Another reason is that many American companies have simply stopped making new technology capital expenditures. It's like they're waiting to see what happens.

What's happening is that the web is winning. Peer-to-peer is coming and it's a powerful force. The crash is over. The killer comapnies are on the march. Even the New York Times, which has been notably reactionary regarding all things Internet, feels the change in the weather. One hopes corporate America will snap out of it and get back in the game.