The Wiring of America By Chris Gulker Technological progress rarely follows the paths even our best pundits foresee. Alexander Graham Bell thought the major use of the telephone would be to broadcast symphonies. Marconi thought that radio would only be used to replace the telephone in remote locations and ships at sea - he didn't see broadcasting as a viable use for the medium. These great visionaries were no match for the market which saw better uses for their technologies. So it goes in publishing technology. Remember when the computer was going to be the keystone of the "paperless office"? Paper business forms were surely doomed, according to the seers. Newspapers and magazines would soon follow, no match for ultra-timely online services. But, as with telephony and radio before, events and people have a way of finding their own path. The computer spawned not the paperless office, but rather a blizzard of new, computer-generated reports, printouts and forms. Paper not only survived, it increased. Even with the arrival of the Internet, CD-ROM, digital video and other advances, paper continues to be the medium of choice. Paper is platform independent, doesn't require user skills beyond the ability to read, and is immediately accessible wherever the user happens to be. Newspapers and magazines grew in aggregate circulation in 1994 and continue to serve vastly greater numbers of readers than online services. But now paper seems to be having a reverse influence. Paper, or more specifically, the cost of paper, is driving publishers to plunge into electronic media with a new seriousness. The rise of a global network has the potential to radically alter the business model for publishing. Currently, many commercial publishers in effect pay customers to take their products, in the hopes of realizing sufficient advertising revenue to offset costs and make a profit. For example, it may cost a newspaper $1.50 to produce and deliver a paper for which the customer pays 25 cents. Giving away content free on the Internet actually looks pretty attractive compared to the current print-and-deliver scenario: the publisher loses 25 cents in revenue, but gains by eliminating $1.50 in costs per customer. If the publication can continue to sell advertising (a big if in these early days of the Internet), this business model is very attractive. In the last 14 months, the number of newspapers on the Internet has gone from 4 to nearly 300. Equal numbers publish via online service and many produce CD-ROMs stuffed with their content for consumption by libraries, corporations and researchers. America's 8 biggest publishing companies have announce the New Century Network, an effort to cross-link hundreds of the largest newspapers and their readers via the World Wide Web. The pace of these initiatives has picked up sharply, in no small part fueled by rising paper costs. How successful are these ventures? The San Francisco Examiner's World Wide Web site went from start to an audience equal to the paper's daily circulation in less than 6 months. The paper's conventional circulation did not fall, silencing those who feared Internet distribution would cannibalize street sales. Electronic ad revenues lag readership as advertisers eye the new medium with some suspicion, but dozens of newspapers have begun to realize revenue in 1995 from the Internet and online services, including the San Jose Mercury News and HotWired. Electronic media offer the promise of targeting readers with pinpoint precision, a service that is much prized by advertisers. CMP, a high-tech trade magazine publisher, has successfully sold such context-sensitive advertising using Internet technology from Wais, Inc. Prodigy was able to sell advertising in special interest forums, for example BMW ads in the auto enthusiasts forum, at a rate that was a multiple of comparable print rates because the response rate was much higher from targeted groups. Publishers who are not advertising-based also see merit in the Internet, albeit mainly as a marketing tool. Book publishers, for example, might publish an excerpt of their wares, and offer easy mail-order fulfillment of book orders via the convenience of the user's desktop computer. Walter Bender, head of the News in the Future program at MIT's Media Lab, thinks the next generation of inexpensive high-quality printers will quietly open up new opportunities for publishers. Bender believes that fast, high-quality color printers selling for $100 may mean customers will be willing to download content in electronic form, and print it for themselves, in whole or in part. In this example, the publisher can offer content at a substantial reduction due to production cost savings, while preserving or increasing margins. The publisher's costs are largely fixed: she buys the content and pays to turn it into an electronic book or multimedia file which is placed on a publicly accessible server offering a payment mechanism. Unlike paper-based publishing, each new purchase does not result in an increment in costs to the publisher. There is no need to do a second printing or an extra run in order to generate new revenues. The paperless office idea is not going away either: companies like Apple, Sun and Intel do increasing amounts of their business electronically. Use of the Internet is a requirement for Sun's suppliers, and a major reason that Sun was able to sharply reduce its costs recently even as revenue went up. The invoices, purchase orders, catalogs and reports that were once lugged around in manila folders are now electronic files sitting on servers that are globally accessible. Intel recently turned the technical documentation for its chips into electronic Adobe Acrobat files. Acrobat files allow the users of almost any kind of computer to share documents that include rich text and graphics without regard to platform, software, installed fonts etc. Intel previously paid huge sums to continually update and ship out these technical manuals which went out of date as soon as they were printed.Now Intel maintains the up-to-the minute version of each document on a password-protected server that their partners can access form any computer. The result has been more timely documentation and sharply reduced costs. Earlier this month at Apple, I contracted with a business consultant to visit and advise a business venture partner back East. Our initial contact was by e-mail, as was the contractor's proposal, final report and invoice. Apple travel handled the airline tickets and hotel reservations electronically, while I submitted the purchase order for the contractor's services by email. I made an electronic presentation of the findings, together with photos and graphs to present to my colleagues in person and via eWorld and the Internet. The only paper that moved was the check that was eventually mailed out for payment. Some Apple offices, for example those in Northern Europe, prefer to do direct electronic funds transfer, eliminating even the paper check. The world is not yet sufficiently wired to make these practices universally applicable. Most enterprises still rely on mountains of paper in order to transact business. However, some technologically-advantaged companies have managed to do a better job at much lower cost by eliminating paper. I don't think it will be long before other firms, under competitive pressure to do a better job at ever-lower cost will begin to follow this lead. I'd like to leave you with a personal appraisal of business on the Internet today, in the hopes it may offer insight into the future of paper publishing. The Internet today has remarkable parallels to the era surrounding the invention of paper and printing. Early printers were often enthusiasts (or in the employ of enthusiasts like philosophers and religious reformers) who wanted others to read what they had to offer. Similarly, any of today's Internet users are enthusiasts who use the Net to find like-minded folk with whom to trade ideas. Today's Internet is still financially nebulous: early printers had their share of money woes. In fact Gutenberg's first press was repossessed by the venture capitalist who had backed him (it's true; I looked it up on my CD-ROM encyclopedia). Indeed, centuries would pass before the invention of printing resulted in the rise of a viable commercial publishing industry. The invention of the Internet, in the ever-increasing pace of our world, will probably not require centuries before it gives rise to a large commercial industry. Some would argue that this is already taking place as companies like Netscape go from startup to $800 million in financing to initial public offering in a space of 16 months. And it's likely that more than a few digital Gutenbergs will stumble financially before all is said and done. Venture capitalists have not repossessed their last computer or replaced their last CEO in Internet-related ventures. Lastly, it is likely that paper, that universally-accessible medium, will have a long life, provided users can afford it. Technology still has only scratched the surface of American society: even in the most wired place in the world, Silicon Valley, only 13% of households have computers with modems. The rest of the world, including, surprisingly, Japan is far behind in being able to access electronic media. In this sense, paper will control its own destiny: abundant paper and efficient production mechanisms will serve to make it a viable medium. Shortages and expensive production will drive the world to seek other means like the Internet, which will only enhance the business proposition offered by new media. A feedback loop could evolve in which ever-cheaper technology would supplant ever-more-expensive paper. But I pray this will happen slowly: I would surely miss my morning newspaper .