The digital money was a failure

Interview by Jorge Nascimento Rodrigues (1998)

The book, with the strange name of "Webonomics", rapidly became a best seller in the booming literature about digital economy in the 90's. According to Amazon.com, the English edition (published by Broadway Books of Bantan Doubleday, in New York) reached the first place of the reader's preferences in those days.

Besides the nine principles of how to manage business through his presence in the WWW, Evan Schwartz breaks some myths, like the digital money, moderates the fever in relation to the push technology and says to the strategists and marketing men that the reality is now different.

What is the difference between your concept of web economy and digital economy launched some years ago by the canadian Don Tapscott, among others?

EVAN SCHWARTZ - My concept of web economy is about the business strategies that really work and about those that do not really work in the WWW, and why. My objective was writing a business book on purpose that would seriously deflate the talk that goes around, and that would attack the conventional thinking in these subjects. There are many ideas that are totally wrong and are prejudicial. That is why I preferred an approach dictated by the common sense, which is based on the concrete experiences of the companies and consumers of the Web. No doubt that the web is the best example of a working digital economy. However, Tapscott's pioneer book - "The Digital Economy" - does not focus in this specific area I refer.

With the web we are finally assisting to the dream of a totally free market, as the fathers of capitalism idealised it? Or is it just talk?

E.S. - In my opinion web is effectively very near of the idea of a pure free market, more than any other economic reality. Until now an economy of free market was only a theoretical possibility, with the web it is the first time a practical possibility, in my opinion. But there have been some efforts of regulating it, mainly in relation to the distribution without borders of some products. But the web has resisted well to these efforts. Globally speaking, the web continues to be a market economy, with sellers and buyers. But if the traditional economy is based on the idea that the offer is scarce, in the economy of the web, as we see, the offer of information and ideas is not scarce at all. In fact, everybody reclaims the flood of information.

What is scarce, to respect the idea that economy is the science of scarcity?

E.S. - The only scarce merchandise is the attention of the people that use the Web, always busy and super demanding. So, the rule was inverted - instead of scarcity of offer, we have scarcity of demand. The real battle in the web is the capacity of building and maintaining that attention by part of the users. As a consequence, the buyers and the sellers - the consumers and the producers - should form more a partnership relation that a conflict one.

But if the Web is not a mass media, but a market of niches and loyal users, where go the marketing strategies that have been refined since the 60s?

E.S. - In reality, we realise that the companies are spending loads of money and applying enormous effort in sites that hope to be of enormous transit flux. They are wrongly applying to this new media - the Web - the same strategy that they designed for television and (printed) press, trying to obtain the bigger number of hits. The strategy has to be different: the marketing men should not think that the web is the company site to expose itself, but it is the place to obtain results. The idea is transforming the attention you receive on the web in something that can be measured: bigger sales, lower costs, better service to the client, or a more intimate relation with their consumers or readers, for example.

What do you mean by recommending that you should mainly bet on a better navigation experience by the user's part, more than in the control of statistics and the number of visits to a given site?

E.S. - A better quality experience means this, in simple terms: people have to have a good reason to go back to a certain web site. People do not go back to their favourite sites to entertain themselves, although that visit experience should give entertainment. People go back to the site to do things that otherwise they couldn't do or that wouldn't be as easy and comfortable. That is why I insist that the companies offer added value services in the web, that is things that are only possible to do well and that gain faithfulness on part of the users. For example, see the case of Amazon.com that is able to offer his clients personalised recommendations, with base on the type of book acquisitions they made in the past.

When we read your book, we get the idea that in the case of products that are poor in content of information, there will be no space for them in the web. Are they condemned for eternity to stay out of digital market?

E.S. - In a certain sense, yes. The products and services that sell best in the web are the ones that are rich in information. Think about the cases of books, CDs, funds in the financial area, electronic products of consume, computers, software, cars, houses, and gifts in general. Why? Because the people - the web users - will pass time shopping for a kind of product that makes them search, compare on line before the acquisition. On the other hand, many poor products in information, typical of supermarkets or big commercial spaces, do not attract this attention.

Other statement of yours is that digital money is bullshit! So, in the web, what kind of monetary system is emerging?

E.S. - I wrote and I repeat - digital money is pure exaggeration, and it ended by failing. Cases like First Virtual, or Cybercash or Digicash, were total flops. People feel better buying in the web using their credit cards, now that they understood that is even more safe than using them in restaurants. I also tell you - I develop this in my book - that is being created a new type of money on line, that I called coin based on value, something that fundaments itself in a concept similar to the miles of frequent flyers in the airline companies for example. People like going through the extracts of these programs and using the points to shop on line. This kind of coin puts the companies in the role of governments, in the measure that they can regulate this monetary circulation.

You recommend the web as the ideal place for strategies of diversification of business. But don't you think that that dynamic of creation of new conglomerates doesn't bring the danger of deviating the companies of their core competencies and their main businesses? Are Hamel and Prahalad totally wrong?

E.S. - In my opinion, in the web, the brands are more important than ever. And the companies are using their brands to expand to new areas. Microsoft is selling cars, theatre tickets and for concerts, and giving investment services. Intuit, that launched the financial personal software Quicken, is selling insurance policies online. Yahoo, one of the more known search machines of the web, is entering new businesses. That makes sense, in my opinion, because the notion of core competencies migrated, in many cases, of specifically industrial criteria to wider attributes, like solutions of userbility, excellent applications of self service or convenience.

Push technology has provoked a real fever, but you advert for the danger that it may bring to the creators of contents. Will they loose direct contact with the end users? How do the producers of contents overcome this trap?

E.S. - The push technology was excessively "sold". But it won't transform the way that web functions, as it was expected one year ago. But it can be very useful if used in a simple manner, especially with resort to the old electronic mail. Look at the case of Wired magazine, if you go to its site (www.wired.com), put your e-mail and you will receive daily a newsletter with active links. It is a simple and intelligent example of a push strategy from a creator of contents.