The Myth of Internet Time

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Tim O'Reilly
Dec. 15, 2001 12:12 PM
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In a reply to an earlier posting on Dave Farber's IP list, which talked about the failure of Metricom at the same time as tiny wireless ISPs are prospering, Andrew Odlyzko sent in a cogent explanation:

"...an important factor that helps explain why giant new ventures like Metricom and Webvan failed is that Internet time is a myth. New technologies are generally being developed faster than before, but they generally do not spread through society any faster. That is a key reason that most dot-com business plans were doomed to failure....Being small allows for adjusting to the speed with which new products and services can diffuse, as opposed to having to depend on every conceivable consumer jumping on your bandwagon the moment you open for business."

This same principle is also key to the success (and importance) of open source. So many open source projects start small and grow over time. The recent funding boom and consequent failures may lead some people to believe that Linux and open source were over-hyped. They reinforce my belief in the opposite. Adding a lot of funding didn't do much to accelerate the model. The projects are still moving along at about the same rate, and having the same impact.

Odlyzko's line "Being small allows for adjusting to the speed with which new products and services can diffuse" feels like a nice complement to my oft-repeated assertion that one of the key things about open source is that it lowers the barrier to market entry by small players, and thus enhances innovation. These small players not only move more quickly, they often set their targets lower in terms of return on investment, and are thus able to prosper in the longer timeframe that it takes for a new technology to take deep hold. In another paper, Odlylzko quotes Licklider's maxim that "People tend to overestimate what can be done in one year and underestimate what can be done in five to ten years."

As I've often put it when talking about my own business, small companies should look for markets where time is an ally rather than an enemy. Fast growing markets aren't necessarily good for small players. As pioneering Silicon Valley venture capitalist William Davidow observed in his book Marketing High Technology, if "dominating a market" means having more than 50% market share, you can only dominate a market that's less than twice your achievable revenues, and that is growing more slowly than you are. This is one of the unavoidable rules that ends up turning over hypergrowth markets to big companies, or forcing small companies to turn to outside investors to get big quickly enough. Slower technology adoption curves, on the other hand, often allow small companies to grow organically "under the radar" before the large, entrenched players notice the new market.

Tim O'Reilly is the founder and CEO of O'Reilly Media, Inc., thought by many to be the best computer book publisher in the world. O'Reilly Media also hosts conferences on technology topics, including the Web 2.0 Summit, the Web 2.0 Expo, the O'Reilly Open Source Convention, and the O'Reilly Emerging Technology Conference. Tim's blog, the O'Reilly Radar, "watches the alpha geeks" to determine emerging technology trends, and serves as a platform for advocacy about issues of importance to the technical community. Tim is an activist for open source and open standards, and an opponent of software patents and other incursions of new intellectual property laws into the public domain. Tim's long-term vision for his company is to change the world by spreading the knowledge of innovators. For everything Tim, see tim.oreilly.com.

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