The Internet Didn't Fail. Wall Street Failed the Internet

Everything I read about the web these days is so funereal. Dot-bombs. Elegies for the good old days. F*ckedcompany.com. It's as though the web was some terrific science experiment that didn't pan out. People love to say the Internet is dead. And then of course there's all the schadenfreude oozing out of the old media types just aching to say, "I told you so."

But I have some of news for you: The Internet did not fail; Wall Street failed the Internet.

Put away that black bunting

The Internet is thriving. It's transforming how we live in ways too numerous to count. Yes, some people are moaning — or rejoicing — that the web is hitting a wall. But that's a version of Washington-speak, where a tiny decrease in the rate of increase is termed a draconian cut.

The popular misconception that the Internet is hurting is all wrong. Mary Meeker is hurting; venture capitalists are hurting; Morgan Stanley is hurting — the Internet is not hurting.

Dot.com closings get a lot of attention, but they don't affect the way people use the web. A recent Pew survey showed that only 8% of web users say a favorite site of theirs has bit the dust. And a report by Forester research says that despite the Nasdaq swan dive and the VC drought, people spent $45 billion online last year, and they predict that figure will reach $75 billion this year. By my calculation, that's $75 billion more than was spent on the Internet, oh, ten years ago.

A (web)TV in every home?

In fact, the growth of the Internet parallels another transformative mass medium: Television. Consider this: The web is ten years old and sixty-three percent of American homes have computers with Internet access. According to the Consumer Electronics association, television took eight years, from 1947 until 1955, to reach 63% of households. But then it took 30 or more years to reach 98% penetration.

Some analysts are wielding this latter fact like a bludgeon, saying the web has reached a "saturation point." Excuse me, is someone telling me that in 1960 or 1970 or 1980, TV was a slow growth industry that had hit the wall, that it wasn't at the very center of American life? C'mon.

And just to expand the comparison with television, let's remember that some 40 million Americans have access to the web at work. The tool they work with is also the engine of their entertainment and education. Last time I looked, most American workers don't have a TV to watch during the day. (Yes, we journalists do, of course, because it's part of my job to watch "Talk Back Live" every day.)

Granted, thus far, journalism on the web has not been stellar. Form follows function, and eventually, Internet journalism will shape itself to the nature of the Internet. Someday, every online journalist will use the syntax of html and flash right alongside her colorful lede.

I don't know anyone who is not on the web some time every day. I don't know anyone for whom e-mail is not a primary mode of daily communication. I don't know anyone who hasn't bought something on-line. (And, yes, I'm probably not the average American in this regard; I'm the editor of TIME.com, an Internet publication, owned by a little company called AOL Time Warner.)

Separating the cash from the concept

So what accounts for all the gloom surrounding the web? Bad business — not bad ideas. Analysts and venture capitalists and investment bankers all collaborated in a massive ponzi scheme — which left regular investors holding the bag. Don't blame the cocky web entrepreneur for squandering your money; blame your investment banker.

Condemning Internet entrepreneurs for launching too many businesses too quickly is like criticizing a thirsty guy for drinking too much water. It was promiscuous VCs, after all, who were throwing money at anything with a dot-com in its name. When I last checked, it was the business types who were supposed to make sure the companies they invested in had sound business plans. And it was the analysts who were supposed to figure out what could make money and what couldn't.

The debate about whether or not the Internet is the "fastest growing mass medium in history" is absurd. Personally, I'd settle for being the second fastest growing mass medium in history. No one argues that web penetration has been faster than another little gadget known as the telephone. The telephone took five decades to reach 90% penetration. Mass mediums don't go away. That's why they're called mass mediums.