When: 1969
Where: USA
Why: The internet has transformed global communication, making the world ‘smaller’ and interaction faster
How: The Pentagon’s need to communicate between computers at different bases inspired the ARPANET, which transmitted the first message across a network in 1969
Who: US Department of Defense
Fact: The record for the most expensive domain name is held by Insure.com, which was bought for a reported $16m by QuinStreet in 2009
Having given rise to everything from online shopping to social networking, there’s no doubt that the internet has changed our lives for the better. With hand-held devices giving us round-the-clock online access wherever we are, the internet is now so well integrated into our daily lives that it’s hard to imagine life without it. However, in reality, it’s only been a relatively short time since most people even gained access to the internet.
Although it was originally conceived during the 1970s, in the early stages the internet was the preserve of computer scientists and hobbyists. But that all changed in the mid-1990s, when a raft of new internet service providers made it available to a wider market. As a result, the way we communicate was radically transformed.
The age of the internet is a matter for debate. Indeed, the very meaning of the word ‘internet’ is debatable. Some might even argue that the network of telegraph cables laid in the late 19th century constituted an early form of internet. Thankfully, if we only consider the internet as we know and use it today – a means of communication between computers – age and history are easier to pin down.
Back in 1969, the Pentagon’s Defense Advanced Research Projects Agency (DARPA) was faced with a problem: it wanted to allow three of its computer terminals, at Cheyenne Mountain, the Pentagon and Strategic Air Command HQ, to communicate. The result was ARPANET, which was somewhat mythically rumoured to be able to withstand nuclear war. However, the technology it used was indeed very robust. The first two ‘hosts’, at the University of California and Stanford University, were connected on 29 October 1969. The first message transmitted across the network was supposed to be the word ‘LOGIN’ – but that was easier said than done. The first two letters went smoothly, but the system crashed at the letter ‘G’ – the kind of network failure that isn’t entirely unheard of today.
While ARPANET continued to grow (the UK was connected to it in 1973), rival networks were springing up all over the world. In Europe, the Janet network became the preferred choice of academics, while the French developed their own version, Cyclades.
Up [until 1974], the general public were almost entirely unexposed to the internet’s existence.
With dozens of new networks emerging, it was natural that someone would come up with a way to connect them all together. That person turned out to be DARPA programme manager Vint Cerf, who in 1974 proposed an ‘inter-network’, with no central control, that would run via a set of rules called transmission control protocol (known these days as TCP/IP) and would allow different types of machines to communicate with one another. While those rules eventually became standardised across ARPANET, it wasn’t until the 1980s that the networks eventually became homogenised.
Up to this point, aside from a few articles in the press, the general public were almost entirely unexposed to the internet’s existence. The problem wasn’t that they weren’t interested; it was more that it was still relatively complex and required a certain amount of technical knowledge. But that changed with three developments, which came in rapid succession.
First, in 1985, domain names were created. For many, that was game-changing. Although hosts were still linked to difficult-to-remember numerical IP addresses (168.192.1.1, for example), people could now reach them by typing in a word, followed by one of the approved suffixes. The first suffixes were .com, .edu, .gov, .mil, .net, .org and (naturally) .arpa. The first-ever company to register a .com address was US computer manufacturer Symbolics.com, on 15 March 1985. Some of the larger computer companies lagged behind – Apple.com wasn’t registered until 1987, while Microsoft.com didn’t come along until 1991. The record for the most expensive domain name is held by Insure.com, which was bought by QuinStreet for $16m in 2009. Sex.com, first registered by Match.com founder Gary Kremen in 1994, was purchased by Clover Holdings for a reported $13m in February 2011.
In 1985, domain names were created. For many, that was game-changing.
The second of the three developments – and what proved to be a game-changing moment in the history of the internet – was instigated by (now Sir) Tim Berners-Lee, a scientist with the European Organization for Nuclear Research, CERN. In 1989 Berners-Lee came up with the idea for ‘hypertext mark-up language’ (HTML), a programming language that allows users to ‘link’ between documents on a network. The project was called ‘WorldWideWeb’ or ‘WWW’, and would allow people to look at read-only information through a program called a ‘browser’.
Berners-Lee decided to couple his idea with the newly developing internet, which meant that people around the globe would be able to access it. By the time the WWW was invented, there were something like 159,000 hosts connected to ARPANET, and the ability to put information on there in a series of ‘pages’ was revolutionary. The first web page was at info.cern.ch and simply explained what it was: ‘a wide-area hypermedia information retrieval initiative’.
The final breakthrough was the creation of the first easy-to-use internet browser, Mosaic, in 1993, making the internet easily accessible to non-programmers for the first time. The browser was developed at the University of Illinois, but didn’t hold the top spot for long: Netscape Navigator, which eventually evolved into a key internet security tool, came into existence the following year. By then, there were almost four million computers connected to the internet – the World Wide Web was taking steps towards becoming the service we know today.
The internet’s early years saw a variety of attempts to make money out of it, and the first sanctioned ads began to appear in late 1994. Examples included online magazine HotWired, which launched with ads from the likes of AT&T, Sprint, MCI and Volvo. Pathfinder, an AOL-like portal into the internet launched by Time-Warner in October 1994, also contained advertisements.
As the popularity of internet advertising grew, content publishers such as newspapers began to realise that they could monetise their online offerings by serving up ads. Soon, website ads were commonplace, with advertisers using pop-ups, pop-unders, neon-coloured slogans and even musical ditties to promote their brands. Fuelled by demand from advertisers, internet advertising became the most popular way to monetise a website. In the second quarter of 1999, online spending reached nearly $1bn.
The beginning of the dotcom bubble is generally considered to be 9 August 1995, when web company Netscape made its initial public offering, after gaining a market share of more than 90% by the mid-1990s. Having originally intended to price its stock at $14 per share, the company made a last-minute decision to up the price to $28 per share. At one stage, prices reached $75.
Hundreds of internet companies began to follow suit. In many cases, the initial public offerings were driven by entrepreneurs who were looking for rapid growth through advertising revenue, and required substantial investment from venture capitalists (VCs) to realise this strategy. One of Silicon Valley’s catchphrases at the time was ‘Get large, or get lost’. Indeed, it was not unknown for a business to double or even triple in size every three months.
Various experts expressed concern that entrepreneurs were ignoring the long-term prospects of their businesses. Analysts talked about the difference between the ‘new’ and the ‘old’ economies – in the new economy, profit wasn’t even talked about. It was widely believed that, as long as the websites in question had the users – or the ‘eyeballs’, as they were referred to at the time – profit would eventually come later on in the business’s life. Until then, entrepreneurs had thousands of dollars’ worth of investors’ money, which often went on extravagances such as flash offices. Yet the investors didn’t mind, and many bought into this strategy. A common tactic was to invest in as many prospects as possible, and let the market decide which would win out.
By 2000, the NASDAQ Composite was trading at 5,048.62 – more than five times higher than anything it had traded at five years previously. No one is entirely sure what triggered the massive fall – or the ‘bursting’ of the dotcom ‘bubble’; but on the weekend of 10 March 2000 several multi-million-dollar sell orders for major tech stocks were processed at the same time. When the NASDAQ opened on Monday morning, it had dropped by 4%, from 5,038 to 4,879 – its largest sell-off for the entire year.
Over the next year or so, thousands of companies went bankrupt as investors increasingly lost confidence in the unsustainable business models that characterised the boom – and they refused to plough in any more cash. Meanwhile, entrepreneurs struggled to rein in their costs. Online fashion retailer Boo.com famously spent $188m in just six months before going bankrupt in May 2000, while internet service provider freeinternet.com (even its name doesn’t sound promising to investors) lost $19m on revenues of less than $1m in 1999, finally filing for bankruptcy in October 2000.
No one is entirely sure what triggered the massive fall – or the ‘bursting’ of the dotcom ‘bubble’; but on the weekend of 10 March 2000 several multi-million-dollar sell orders for major tech stocks were processed at the same time. When the NASDAQ opened on Monday morning, it had dropped by 4% …
More recently there has been renewed talk of a second dotcom bubble, with the valuations of relatively young companies with limited financial track records, such as Twitter, Facebook and Groupon, commanding huge valuations based on market-defying profit and revenue multiples. Nevertheless, the total value of sales made on the internet continues to rise, with the US Department of Commerce predicting that US e-commerce sales will exceed $188bn in 2011, whereas in the UK £58.8bn was spent online in 2010, with IMRG Capgemini predicting £69bn worth of sales for 2011.
Sites such as eBay, which generated annual revenue of $9bn in 2010, and Amazon, which turned over $34bn in 2010, account for a significant proportion of those figures. Equally, payment service provider PayPal now claims to have 100 million account holders and is forecast to reach $3.4bn in revenue in 2011.
Elsewhere, the internet has made the growth of other industries possible. Video conferencing and real-time video communication wouldn’t be possible without the introduction of Voice-over Internet Protocol (VoIP). Skype, for example, reported revenue of $860m in 2010 and 145 million users a month. Media-sharing sites such as YouTube are another example. The video-sharing site streams more than a billion videos per day and is approaching $1bn in annual revenues. Online dating, where Match.com is the largest player with $343m in annual revenue, and online banking, which is said to have more than 22 million users in the UK alone, completely disrupted traditional industries. And cloud computing, which delivers online business services, is forecasted to be an $82bn market by 2016, according to research house Visiongain.
The internet has made the growth of other industries possible. Video conferencing and real-time video communication wouldn’t be possible without the introduction of Voice-over Internet Protocol (VoIP).
The internet has destroyed vast numbers of traditional retailers and wiped out or heavily diluted the power of dominant players in many major consumer industries, such as music and travel – an outcome few would have believed possible just 20 years ago.
Today, there are estimated to be 346 million websites globally and 2.1 billion internet users around the world. Broadband made the internet a considerably more efficient experience and the demand for ever greater bandwidth remains unquenched. Furthermore, the advance of mobile devices that connect to the internet, such as BlackBerrys and iPhones, represents a massive emerging opportunity.
Online is now the primary forum for the marketing arsenal of many firms.
In 2011, in the USA alone, retailers are set to spend $220.9m on mobile devices and mobile sales volumes are predicted to reach $9bn. Furthermore, in 2010 the world’s population was responsible for the sending of 6.1 trillion text messages, with automated company and public sector text messages forming a growing part of that. Such activity and the existence of relatively under-developed mobile markets prompted ABI Research to predict that by 2015 the value of goods and services purchased globally via mobile devices will hit £120bn.
ABI will doubtless have looked to emerging markets for signs of much of the anticipated growth. China, for example, reportedly has 800 million mobile web users. India is expected to have 260 million mobile internet users by the end of 2011. While in Africa, a continent where mobile phones account for 90% of all telephones in use and an estimated 500 million people have a mobile phone, smartphone penetration has much further to go.
And then there is the power of social media. The likes of Facebook, Twitter and LinkedIn have changed the way businesses communicate with their customers. These days, businesses need to be aware of how their brands are portrayed not only in the media, but also on websites such as Twitter and Facebook, where their customers are having conversations about them. Social media has become an essential PR and marketing tool for millions of firms; according to a report from analysts BIA/Kelsey, social media advertising revenues will reach $8.3bn by 2015.
Indeed, for businesses, the internet is now significantly more measurable than in its early days. Companies can now build a much clearer picture of their customers’ needs and habits, making their marketing strategies a more scientific process – and in turn making advertising more targeted and relevant. Perhaps unsurprisingly, online is now the primary forum for the marketing arsenal of many firms and, far from having a competitor in its midst, the internet is growing, developing and advancing every day.