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The Internet and American Business 0 10111 0 1 0 011010 history of technology/business Ceruzzi Aspray and editors American Business The Internet and William Aspray is Rudy Professor of Informatics at Indiana Contributors Of related interest The Internet and University in Bloomington. He is the editor (with J. McGrath Atsushi Akera From Airline Reservations to Sonic the Hedgehog The Internet and American Business Cohoon) of Women and Information Technology: Research William Aspray A History of the Software Industry American Business on Underrepresentation (MIT Press, 2006). Paul E. Ceruzzi is Randal A. Beam Martin Campbell-Kelly edited by Curator of the National Air and Space Museum, Smithson- Martin Campbell-Kelly edited by ian Institution, Washington, D.C. He is the author of A History Paul E. Ceruzzi From its first glimmerings in the 1950s, the software industry William Aspray and Paul E. Ceruzzi of Modern Computing (second edition, MIT Press, 2003) and James W. Cortada has evolved to become the fourth largest industrial sector of Internet Alley: High Technology in Tysons Corner, 1945–2005 Wolfgang Coy the U.S. economy. Starting with a handful of software contrac- William Aspray and (MIT Press, 2008). Blaise Cronin tors who produced specialized programs for the few existing Paul E. Ceruzzi Nathan Ensmenger machines, the industry grew to include producers of corporate When we think of the Internet, we generally think of Amazon, Daniel D. Garcia-Swartz software packages and then makers of mass-market products Google, Hotmail, Napster, MySpace, and other sites for buying Brent Goldfarb and recreational software. This book tells the story of each products, searching for information, downloading entertain- Shane Greenstein of these types of firms, focusing on the products they devel- ment, chatting with friends, or posting photographs. In the Thomas Haigh oped, the business models they followed, and the markets academic literature about the Internet, however, these uses History of Computing series Ward Hanson they served. are rarely covered. The Internet and American Business fills David A. Kirsch this gap, picking up where most scholarly histories of the Christine Ogan Internet leave off—with the commercialization of the Internet Jeffrey R. Yost established and its effect on traditional business a fact of life. The chapters in this book, describing challenges successfully met by some companies and failures to adapt by others, are a first attempt to understand a dynamic and exciting period of American business history. Tracing the impact of the commercialized Internet since 1995 on American business and society, the book describes new busi- ness models, new companies and adjustments by established 0 0110101 companies, the rise of e-commerce, and community building; it considers dot-com busts and difficulties encountered by tra- 0010111 ditional industries; and it discusses such newly created prob- THE MIT PRESS MASSACHUSETTS INSTITUTE OF TECHNOLOGY CAMBRIDGE, MASSACHUSETTS 02142 HTTP://MITPRESS.MIT.EDU lems as copyright violations associated with music file-sharing and the proliferation of Internet pornography. 0 0110101 0010111 978-0-262-01240-9 The Internet and American Business History of Computing I. Bernard Cohen and William Aspray, editors John Agar, The Government Machine: A Revolutionary History of the Computer William Aspray and Paul E. Ceruzzi, The Internet and American Business William Aspray, John von Neumann and the Origins of Modern Computing Charles J. Bashe, Lyle R. Johnson, John H. Palmer, and Emerson W. Pugh, IBM’s Early Computers Martin Campbell-Kelly, From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry Paul E. Ceruzzi, A History of Modern Computing I. Bernard Cohen, Howard Aiken: Portrait of a Computer Pioneer I. Bernard Cohen and Gregory W. Welch, editors, Makin’ Numbers: Howard Aiken and the Computer John Hendry, Innovating for Failure: Government Policy and the Early British Computer Industry Michael Lindgren, Glory and Failure: The Difference Engines of Johann Mu¨ller, Charles Babbage, and Georg and Edvard Scheutz David E. Lundstrom, A Few Good Men from Univac Rene´ Moreau, The Computer Comes of Age: The People, the Hardware, and the Software Arthur L. Norberg, Computers and Commerce: A Study of Technology and Management at Eckert- Mauchly Computer Company, Engineering Research Associates, and Remington Rand, 1946–1957 Emerson W. Pugh, Building IBM: Shaping an Industry and Its Technology Emerson W. Pugh, Memories That Shaped an Industry Emerson W. Pugh, Lyle R. Johnson, and John H. Palmer, IBM’s 360 and Early 370 Systems Kent C. Redmond and Thomas M. Smith, From Whirlwind to MITRE: The R&D Story of the SAGE Air Defense Computer Alex Roland with Philip Shiman, Strategic Computing: DARPA and the Quest for Machine Intelligence, 1983–1993 Rau´l Rojas and Ulf Hashagen, editors, The First Computers—History and Architectures Dorothy Stein, Ada: A Life and a Legacy John Vardalas, The Computer Revolution in Canada: Building National Technological Competence, 1945–1980 Maurice V. Wilkes, Memoirs of a Computer Pioneer The Internet and American Business edited by William Aspray and Paul E. Ceruzzi The MIT Press Cambridge, Massachusetts London, England ( 2008 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. For information about special quantity discounts, please e-mail [email protected] This book was set in Stone Serif and Stone Sans on 3B2 by Asco Typesetters, Hong Kong. Printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data The Internet and American business / edited by William Aspray, Paul E. Ceruzzi. p. cm. — (History of computing) Includes bibliographical references and index. ISBN 978-0-262-01240-9 (hardcover : alk. paper) 1. Internet—United States—Economic aspects. 2. Electronic commerce—United States. 3. Internet industry—United States. 4. Internet—United States—Social aspects. 5. Information technology—United States—Economic aspects. I. Aspray, William. II. Ceruzzi, Paul E. HE7583.U6I57 2008 384.3 030973—dc22 2007005460 10987654321 Contents Preface vii Acknowledgments ix I Introduction 1 1 Introduction 3 William Aspray and Paul E. Ceruzzi 2 The Internet before Commercialization 9 Paul E. Ceruzzi II Internet Technologies Seeking a Business Model 45 3 Innovation and the Evolution of Market Structure for Internet Access in the United States 47 Shane Greenstein 4 Protocols for Profit: Web and E-mail Technologies as Product and Infrastructure 105 Thomas Haigh 5 The Web’s Missing Links: Search Engines and Portals 159 Thomas Haigh 6 The Rise, Fall, and Resurrection of Software as a Service: Historical Perspectives on the Computer Utility and Software for Lease on a Network 201 Martin Campbell-Kelly and Daniel D. Garcia-Swartz III Commerce in the Internet World 231 7 Discovering a Role Online: Brick-and-Mortar Retailers and the Internet 233 Ward Hanson vi Contents 8 Small Ideas, Big Ideas, Bad Ideas, Good Ideas: ‘‘Get Big Fast’’ and Dot-Com Venture Creation 259 David A. Kirsch and Brent Goldfarb IV Industry Transformation and Selective Adoption 277 9 Internet Challenges for Media Businesses 279 Christine Ogan and Randal A. Beam 10 Internet Challenges for Nonmedia Industries, Firms, and Workers: Travel Agencies, Realtors, Mortgage Brokers, Personal Computer Manufacturers, and Information Technology Services Professionals 315 Jeffrey R. Yost 11 Resistance Is Futile? Reluctant and Selective Users of the Internet 351 Nathan Ensmenger V New Technology—Old and New Business Uses 389 12 New Wine in Old and New Bottles: Patterns and Effects of the Internet on Companies 391 James W. Cortada 13 Communities and Specialized Information Businesses 423 Atsushi Akera VI Newly Created or Amplified Problems 449 14 File Sharing and the Music Industry 451 William Aspray 15 Eros Unbound: Pornography and the Internet 491 Blaise Cronin VII Lessons Learned, Future Opportunities 539 16 Market and Agora: Community Building by Internet 541 Wolfgang Coy 17 Conclusions 557 William Aspray and Paul E. Ceruzzi List of Contributors 565 Index 569 Preface This book is a historical study of the effect of the Internet, a recent advance in commu- nications and computing technology, on traditional business practices in the United States. We begin with a brief look at the technological evolution of the Internet. We then quickly move to uncharted territory, in which we treat the existence of a robust and powerful computer network as a given, and examine what has happened as a re- sult of the Internet’s creation. More than ten years have passed since the Silicon Valley company Netscape had its initial public offering, an event that many argue triggered the gold rush of Internet commercialization. It has now been about five years since the ‘‘Internet bubble’’ burst, leaving behind a well-told story of bankruptcies, lawsuits, and plunging stock valua- tions. A look at U.S. business history reveals that this is not the first time such bubbles have occurred. The overbuilding of railroads in the nineteenth century and electric power networks in the early twentieth century followed a similar pattern. Huge for- tunes were amassed, scoundrels went to jail, newspapers ran daily stories of malfea- sance, and investors lost personal savings. But after all that happened, the nation was left
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