SO WHO'S REALLY GOING TO MAKE
THE BILLIONS ON THE INTERNET?

by A. Anthony Citrano, III

Recently, I shared a morning (but I didn't share the cinnamon rolls -- he's trying to cut back on sweets, despite the fact that he's far more "buff" than I) with Mike Zisman, the new CEO of Lotus Development. I tell you this to give credit where credit is due; something he said is the impetus for this column, so I felt it important to open with that.

Mike drew a parallel between the early days in television and the early days on the Web frontier. He said that he believed there was a major divergence going on and that it was evident by looking at the sites. He thinks it won't be long before (we may already be there) 90% of the traffic goes to 5-10% of the sites, just like comparing the big four TV networks with the hundreds that are available. Mike is one of the brightest guys in this business, and I think he's right. I'd never thought of it that way, but the more I consider it, the more appropriate it seems.

Now, I want to take it a bit further than Mike did. Let's consider, for a moment, Web advertising. Right now, no matter what you investors are being told, its not a moneymaker. It will be a big one, however, in the coming years. Currently, the money is being made in service delivery. However, as ultra-wide bandwidth (40MBPS++) modems become widely available, it will be possible to deliver virtual reality effectively over the internet. I've said it before, and I'll say it again -- Virtual Reality over the internet and the talented entertainment development companies that spring from it will make more billionaires than any other industry in history. As that begins to unfold, the real differences between Web sites become apparent.

To maintain a major Virtual Reality (or, over the internet, VRML) entertainment company (which is what the best Virtual Reality Web sites will become) you need development talent, creative talent, and serious financial resources. To help build those resources, consider an ad for a cruise line where you can actually walk through their flagship. A tourism ad that takes you on a fly-through of the area. How about an ad for a car where you can actually drive the car around Ocean Drive in Acadia? Will companies pay for advertising like this? Yes, in time, if the VRML publishers show them what it is and that it can be done.

Those are reasons why Zisman is right. As wonderful as local TV stations and public access channels are, they just don't have the pizzaz and appeal that a major network does. Thats why the big guys attract so much market share, and thats why they command millions for advertising. The same truth will apply to great Web sites. Build it, and build it well, and they will come. The 10% of sites that get 90% of the attention will have billions of dollars in advertising revenues. New advertising agencies will be born with VRML specialties. The VRML Web sites will not just be "web sites" in the 1995 sense of the term -- they will be universes created by artists and visited en masse by curious visitors and addicts from all around the world.

The entertainment gods will extend their reach onto the information dirt road as it slowly gains bandwidth and becomes the information highway. I don't use the term "gods" loosely, either. The VR revolution will give a lot of people the chance to create their own worlds and attract occupants (citizens?) to them. That is playing god. You can get your part of the billions that will be made by investing in the companies that can make this a reality. The most exciting part is that most of these companies have not been born yet or are tiny basement operations doing VRML publishing in their spare time. This is an incredible opportunity, and those who take advantage of it today will be key players in the entertainment business of tomorrow.

Anthony's Stock Picks:

-- Intel (INTC, Recent Price $60) I think $90 is reasonable for 96.
-- Number Nine Visual Technologies (NINE, Recent Price $9) Long term buy -- will profit greatly from VR advancements;
-- Novell (NOVL, Recent Price $14.50) Ripe for the IBM bite at $25+;
-- California Microwave (CMIC, Recent Price $19) Just bought a huge chunk of West Coast wireless bandwidth;
-- MetaTools Initial Public Offering, Asking Price $8, I expect it to open at $20. Buy at open, sell when your money doubles. (It'll probably take less than a week -- not that its worth it, but it has "internet" in the prospectus);
-- Sell Short Netcom (NETC, Recent $55) I think this stock will hit $20 or lower during 96;
-- Sell Short Netscape (NSCP, Recent $145) I think this stock will drop well below $100 during 96. A P/E of 336? Puhlease!;
-- Sell Short Spyglass (SPYG, Recent $105). Same story. Overhyped, overvalued.
Nothing is neat enough to justify a 200+ P/E.
About the author:

A. Anthony Citrano, III is the former owner of Advantage Consulting Group in Portland, Maine and founder and former President of 3D Millennium Publishing of Portland, Maine, one of the first companies in the world to publish an electronic magazine on the Internet's World Wide Web. Over the years, he has appeared in national and local media as an expert on computers, telecommunications, the internet, and computer network security.

Citrano has appeared on NBC's Today Show, CNN Headline News, and several regional television stories. He has been featured in print mediums such as Inc. Magazine, The Seattle Times, Media Daily, East Side Week, Newsday, and more. He is a Contributing Editor for SYNAPSE Magazine, and the New England business magazine, The Small Business Review. He also authors monthly columns for Cybertown's Cybernews.

If after reading all of that, you still don't think he's a geek, try this --- he absolutely loves what he does! He currently works as Information Services Manager for Maine Governor Angus King (the only Independent Governor in the nation) and loves getting e-mail from readers at: 72610.657@compuserve.com