AFTER THE FALL, the Internet:

• will continue to be the lowest cost communications
• will continue to provide customized communications
• will be highly competitive, rivals only one click away
• will not be a physical distribution medium
• will be advertiser-subsidized, relying on an advertising model for revenues
• will rely on broadband - which will be almost 100% accepted within 7 years - the majority of the population will rely on broadband access

INTERNET WINNERS

• all types of financial sectors (banking, bill-paying, loans, insurance)
• music distribution (on-line)
• e-books
• video distribution

INTERNET HYBRIDS

• television and Internet via set-top boxes (will provide consumer reactions to advertising)
• order goods that are subsequently delivered by consumer-goods distribution systems
• telephones (wired and wireless)
• financial packages

INTERNET LOSERS

• most consumer and retail goods
• shipment of books, goods, other physical packages

WHY WAL-MART WILL BEAT THE INTERNET

• stores are self-delivery systems
• Internet retail shopping is not cost-competitive
• delivery costs high and getting higher
• taxes are coming to Internet commerce
• Wal-Mart has an effective integrated supply process from the factory

INTERNET VICTIMS

• first-class mail
• facsimile (legal documents over the Internet will kill faxes)
• old media advertising, Internet ads will gain share over old media advertising

REASONS FOR CONSUMER INTERNET STOCK FAILURES

• retail e-commerce failures
• Internet access prices are falling (competition will erode the financial subsidy of access to the Internet)
• Internet advertising has limited special advantages
• Internet may have one million broadcasters (in 5 years), but who will listen to them?

IMPLICATIONS FOR SILICON VALLEY

• mid-1990's: sold products; paid staff in cash
• today: sell stock, not products; pay in options, not in cash
• IPO madness will implode
• the Valley will be stronger in the long run, with less VC investments in 2000-2001 than in 1999.