Error 402: E-Commerce Goes Mainstream, But Something Is Missing

Last week in our Error 402 series on the history of web monetization, we talked about the earliest secure monetary transactions on the web, soon after the National Science Foundation opened up the early internet for commercialization. There were electronic transactions over networks that pre-dated this (such as on proprietary online services like CompuServe, but the World Wide Web commercialization only began in the early 1990s).

Soon after those early transactions, the web as a place for business exploded. In 1995, both Amazon and eBay were founded. Tons of other e-commerce rushed into the market as well. Indeed, a few months before eBay was founded, another online auction house, OnSale, came on the scene, and received tremendous press coverage. At the time, I remember talking to a venture capitalist who insisted that OnSale would easily win over the “latecomer,” eBay.

Amazon, of course, started out by selling books, but expanded over time to selling everything. But the e-commerce boom of the late 90s involved companies springing out of the woodwork on a near weekly basis, claiming to be the e-commerce site for every possible category under the sun. I even remember sitting in on meetings with people going through lists of the most popular categories of goods and looking for “gaps” in the e-commerce market that people could build a dot com around.

Soon there were e-commerce sites for music, for books, for non-perishable food, for DVDs, for software, for toys, and much much more. Most famously, of course, towards the end of the original dot com bubble, there were a slew of e-commerce companies all looking to sell pet food and pet supplies. Many people are aware of Pets.com as the quintessential example of dot com excess in the late 90s, but what many forget is that it was competing against a bunch of other pet-related dot coms, each trying to raise more venture capital money than the others, in order to acquire more customers.

There was PetStore.com, Petopia, PetPlanet, and Petsmart.com, which basically licensed the name from the brick-and-mortar retailer to set up its own e-commerce operation (sidenote: after Pets.com went bankrupt, PetSmart.com bought the domain name).

And while the e-commerce bubble popped a bit after the dotcom craze collapsed in the early 2000s, e-commerce was clearly here to stay.

However, one element was missing. All of these transactions were about buying physical products by ordering them online. There was still little to no market for spending money on actual content online, and it was debated if there ever would be. Indeed veteran news executive Alan Mutter famously argued that newspapers failing to charge for their content online is the “original sin” of news going on the web. However, that ignores some early attempts to do just that, which failed miserably in the face of a few fundamental challenges to the economics of monetizing online content.

Next week we’ll explore the early experiments in monetizing content and services online.