IDC Predicts Free Internet Access, Internet Stock Correction – Again – and Death of the “.Com”

FRAMINGHAM, Mass., December 29, 1999 — Expect Internet stock corrections – again – death of the ".com," and an explosion of free Internet access in the online industry in 2000, International Data Corporation (IDC) predicted today. These Internet market developments are among IDC's Fifth Annual Predictions of key trends, strategies, and events that will change the Internet playing field in the next century.

The key themes for IDC Predictions 2000 by Frank Gens, IDC's senior vice president, Internet Research are:

— Financial reality meets Internet: a broadening Internet stock correction, consolidation in key ecommerce segments, and a shift to profitability as a virtue for .coms. Internet players expect to be profitable by 2001. Whether they will be or not, we shall see. But there’s a growing sense that they need to be.

— Free Internet access services, devices, and software: Kmart’s eyebrow-raising deal with Yahoo, offering free Internet access to those who register at Bluelight.com, will look very, very common by the end of Q1.

— Death of .com as a sole strategy: Customers are on the Internet — and everywhere else! In the coming year pure-play Internet players will develop presence in the real world. Think pure-play Internet banks and brokers and regional banks. Think Amazon and WebVan.

— Channels, channels, channels: This year smart companies will actually put the network effect to work in their business model (duh…), radically expanding their echannels, and becoming channels for others. Indirect channels will make a huge comeback: shopbots and the new virtual malls, digital marketplace, and affiliate marketing. Even Michael Dell, poster child for direct marketing on the Net, will embrace the new breed of echannels.

According to Gens, "The company that possesses the ability to anticipate and adapt to this new Internet will create a whole new pack of Internet players in 2000."

Technologies for the Next Generation

— Broadband in more than 1 in 10 online households by yearend 2000 — about 2.5 times the number in 1999

— Home LANS in 38% of U.S. households with two or more PCs

— eWallets for wired consumers will reach critical mass just in time for the 2000 holiday season

Predictions Grab-Bag: Microsoft, Politicians, Celebrity CEOs, and Fired VPs

— Microsoft break-up: IDC predicted this last year. Either Microsoft will break itself up or the Department of Justice will. Yes, we were a little bit early. Yes, it’s still going to happen.

— Still more presidential candidates seek Internet paternity: Last year IDC predicted that one or more presidential candidates would seek to grab credit for the Internet and ecommerce — thank you, Mr. Vice President. Amazingly, the flack Al Gore took will not deter others from seeking Internet credit in 2000. The scary part is that they will do so by proposing new legislation and regulation.

— Celebrity CEOs will jump to ".coms": What do you do when you’re an upper middle-aged executive who’s done it all, are tremendously wealthy, and are bored out of your mind? Time to jump to an Internet startup! Our picks to follow Lou Dobbs and George Shaheen are Scott McNealy of Sun and Larry Ellison of Oracle.

— Many Fortune 1000 businesses will still bungle ".com": Despite the many very visible examples about how not to run an Internet business, many Fortune 1000 companies will still struggle getting their online initiatives to work. Expect a lot of Internet unit vice presidents and presidents to be fired.

IDC Predictions That Came True

Gens’ predictions have been more than 70% accurate over the past four years. "This is not just throwing darts; it is driven by our worldwide market research network that enables us to detect the first tremors of Internet change," Gens said.

In 1999, the following predictions came true:

— Compaq would sell off AltaVista — they did to CMGI.

— Excite would be acquired — they were by @Home.

— ZDNet would be spun out of Ziff Davis — it was, as a tracking stock.

— Live phone support would break out on the Web — started in '99; most visible example – Lands' End Live.

On the lighter side:

— One or more presidential candidates would grab credit for the Internet, eCommerce — thank you, Al Gore.

— Worldwide Internet commerce volume would finally exceed Bill Gates' net worth — it just did last month.

— Women would shift from online minority to majority — we were close; the percentage was 47% last December; latest data shows they now account for 50%.

The full text of Gens' Predictions will be on the IDC Web site at http://www.idc.com. For additional information about IDC's Internet research program, contact Jon Guloyan at 508-935-4296 or at jguloyan@idc.com.

About IDC

IDC delivers dependable, relevant, and high-impact data and insight on information technology to help organizations make sound business and technology decisions. IDC forecasts worldwide IT markets and technology trends and analyzes IT products and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC is committed to providing global research with local content through more than 500 analysts in 42 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of International Data Group, the world's leading IT media, research, and exposition company.

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