After several months of euphoria and rising stock prices, things seem to have gone back to order in a more perennial way at the end of 2001. It now seems possible to make a first objective analysis of the results and trends, which are shaping up with the broad availability of electronic networks and Internet. The myth of the so-called "new economy" is indeed just a memory and everyone will agree today, that, for innovations to happen, they will have to be created in a certain way within established standards. Play-time is over.

The Big Disillusion

We thought that we were dealing with an independent market place where we were going to invent everything, and which would be capable of striving independently, having no link with the past economic traditions: this explains most of the disappointment facing e-business today. It is remarkable that the net-companies now turn towards the traditional business to find inspiration in the way in which they work, and in their business model. Adding to this, "brick and mortar" companies are seamlessly integrating Internet into their processes without creating a dedicated function in their organization charts. As a communication medium, a production tool, or a distribution channel Internet has not created any real business; rather, it has fostered an overall renewal of the whole economy, which is just as extraordinary. Speaking of a "new economy" was naively simplistic, but is would be just as absurd to deny prematurely the real economic changes caused by the new information technologies.

There was originally confusion between the productivity gains that could be expected from the merge of computer technologies and communication networks and, on the other side, a strong speculation by investors that made financing easily available. But capital has a cost and, at a certain point, businesses must show tangible results; if this does not happen, the speculative bubble blows up. This is the reason why Internet stocks experienced such drastic corrections that have not been recovered today. However, even if the focus has been on a genuine krach, this very aspect is not the only critical factor and it must be put in perspective. Indeed, even though it may seem contradictory, a net-company may see its stock price drop while its revenue increases. Also, variations can be very different depending on the core activity. On this subject, two categories can be distinguished:

  • The sites -which represent a small number- have truly innovated compared with old systems of distribution. Their stock prices have eventually reached levels that are deemed normal for the technology sector: Yahoo, AOL, e-Bay or even Monster are examples (�)
  • The companies with a business model which merely mimics the good old mail order model are the most threatened because consumers generally will not change their buying behaviors. Because they tend to trust brands which they are already familiar with, they are not likely to easily switch to the pure players, the 100% Internet companies; competitive prices are not sufficient to offset the consumer concern created by the virtual nature of those companies.
It is the end of a dream which assumed that start-ups could simultaneously be revolutionary while having sustainable business models. Today, there are so many "start-downs", not even including those which have already gone.

However, some have survived; they even continue to double their revenues and to broaden their offerings. They are the evidence that the poor performances of Nasdaq must not make us forget that Internet remains a source of new attitudes, and so, of new models to experiment and to build, a changing as well as stimulating environment, where nothing is taken for granted. This is why we continue to believe in the capacity of the network to produce employment, benefits and to foster innovative and powerful ideas.

The backlash has, for example, the effect of making investors in Internet venture much more demanding (�) The stock crisis has revealed the weakness of several projects and it is better this way. If financing is today not as easily available, the net economy remains very relevant. It adapts itself to, for instance, the arrival of seasoned managers at the head of venture-capital companies, saving precious time: accounting, cash-flow management and people management are no mystery for them. This phenomenon usually happens when a strong-growth business enters a consolidation stage: it proves that the net economy exists and will stay, even though its showing does not really match what had been imagined in the first place.

After an era of pioneers and opportunists, Internet is getting more professional and mature; at the same time, the market has rationalized, which is good. It is now becoming clear that e-business will develop along three key areas of activity:

  • traffic generators: Internet access providers, portals and search engines,
  • e-dealers: mail order, auctions and group purchases,
  • facilitators: they provide the Internet infrastructure and the e-commerce components such as software, logistics,�Their business modems are traditional and therefore viable, but they must manage to get the right production tools to intelligently link together the real and the Internet businesses.
Translated by Val�rie Didier, B.A. Cambridge University, UK