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February 9  1999

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How do you make a buck?

AN EASY way to make money on the Internet at the moment is to publish pictures of  Anna Kournikova bending over and then charge surfers $2 a week to see them. But shrines to celebrity skin have little to do with the current Net share boom. It is big business -- Wired News reported last week that Net-related stocks had gained 50 per cent in value during January alone.

And the traders trying to cash in on the century's last gold rush base their gambles on the belief that there is a lot of money to be made on the medium. Exactly how business can make the Net pay is the perplexing question. It is a curious fact of life that most of the companies attracting attention do not make money as yet. If it is a gold rush, there is precious little precious metal to be seen.

Amazon.com is often touted as the model of commerce in the new millennium. The online bookseller has just raised $U2 billion in the biggest US convertible bond offering ever. But it has also told America's Securities & Exchange Commission that it expects to report "substantial operating losses for the foreseeable future"‘. Amazon now has nearly $3.3 billion in the bank and can afford to make losses for another 60 years.

What makes people invest in companies like Amazon or Yahoo or AOL is the hope they are betting on the next Microsoft or Intel. These companies made their money providing the software and hardware to fuel the growth in computer ownership during the 1990s.

Where Amazon etc will make their money -- and keep investors happy -- is selling on the Web. Companies that are geared up to trade on the Web, it is argued, are the ones worth watching. And companies, like Australia's OzEmail for example, that will sign up the shoppers are also worth a look. As are companies that can provide infrastructure or expertise.

But will it necessarily be that way in five to 10 years? Will we all shop and bank with our computers? A recent article in the Economist magazine tried to put things in perspective. It quoted Forrester Research as saying that online retail sales last year to Americans were worth $13 billion, more than three times the $4 billion of 1997.

Forrester predicts that by 2003, Internet retail sales will hit $180 billion as 40 million American households make online purchases. The big but is that a firm in the real world, Wal-Mart, took more than $200 billion in sales last year. And the total value of American retail sales in 1998 was around $28 trillion.

According to the Economist: "Even if Forrester's forecasts prove correct, the Internet will five years from now account for no more than 5 per cent of total retail sales."

However, the Economist does not deal with the impact of digital TV. Its advent in Australia makes the future of Web commerce a little clearer. Digital TV will bring the Web into many more households, a ready-made population of consumers. And the Federal Government has declared that the usual suspects -- Channels Seven, Nine and Ten -- will run digital TV. Therefore they will control the Web too, and the interaction of consumers.

Although it is early days, Seven's tie-up with the AFL on the Net, and Nine's with both the Australian Cricket Board and CricInfo, show how they can capture big Net audiences by extending their TV interests.

The message has to be: Making money on the Net is easy . . . if you are already big enough and rich enough.

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