The Company Store

By Douglas Rushkoff. Published in The New York Times Syndicate/Guardian of London on 9 May 2008

It’s easy to understand why advertising on the Web doesn’t work. People are loathe to click on an ad, and resentful of commercials that cost them time. Unlike TV viewers, who have surrendered their experience to the programmer, users of the Web like to navigate their own experience. We want to remain active. We don’t want to look at an ad when we log onto America Online, much less be forced to watch a streaming video “intermercial.”

But advertising is not the only form of marketing out there. While the Web may not offer advertising agencies new ways to distribute their messages, it does provide marketers new ways of positioning their products. As utopian as our original vision of an Internet community is the marketer’s vision of the Internet as company store.

One of the biggest problems facing manufacturers today is inventory. It is difficult to estimate how many of a product to make, because it’s so hard to determine how many are going to be bought. The outrageous success of computer manufacturers like Dell and Gateway can be attributed to their clever exploitation of the Internet and telephone. They don’t build a computer until it is ordered. The number of units manufactured can almost exactly match the number of units sold.

Imagine if milk producers adopted the same strategy. Instead of ordering books through, you’d order milk through, say, amazon.milk. You’d subscribe to the service and order a certain number of gallons per week, delivered fresh to your door. What? You don’t have a computer? Well, you can still go buy a single quart at the corner store, but it’ll cost you a few dollars extra. You should probably just get online.

In New York City it is already practically impossible to attend a first-run motion picture without ordering your tickets in advance through one of the telephone ticket services. Of course they tack on a $1.50 service charge, but that’s the price of security. Meanwhile, the movie theater owners get an accurate headcount ahead of time, and can shift films from theater to theater within their complex to accommodate larger or smaller audiences. No wasted seats.

This practice is quickly migrating online.

If is any indication, Microsoft’s plans to transform the Internet into a direct marketing paradise. Lists of restaurants, for example, will be accompanied by buttons to secure reservations. Restaurants can dispense with reservations phone lines and the human beings paid to answer them, and simply pay Microsoft to administer their online clientele. Meanwhile, Microsoft can charge a service charge to the reservation maker - and a steep penalty for no-shows. You can’t just use a fake name; they’ve got your number.

In this scenario, advertising online will be replaced by positioning. What restaurants and other merchants will pay for is their placement on the list of available services. Businesses already pay fees to search engine companies for the privilege of appearing first on the list of sites retrieved based on certain keywords.

Why is all this so terrible? First, because people who are not online will lose their ability to get the goods and services offered to subscribers. If you don’t have a telephone and a credit card today, it’s mighty hard to get concert tickets. People without cable television can’t even watch their home team’s basketball games anymore.

While going online can be a terrific thing, it should not become a mandatory one. We are at a juncture where the Internet could be turned into something like an old-time “company town” where coal miners would move out to a remote region to get work, then be forced to rent company housing. Worse, they would be paid in currency only good at the company’s own store.

The modern, voluntary version of such an arrangement would be Disney’s new town, Celebration. The corporation manages the town’s facilities and owns all of the commercial real estate. In exchange for the security and convenience of living in a Disney town, you agree to live in an absolutely commodified sphere. The increase in television news reporting about violent crime, in spite of a decrease in the actual occurrences, is powerful incentive to opt for just such a corporate-sponsored closed community.

The vision is not much different. The physical sidewalk itself - the place where we browse for goods downtown - is replaced by a closed set of lists and buttons. Businesses won’t even need to maintain storefronts if they can make more money selling their services online. Their new profit margin is high enough to compensate for the lost walk-in business.

And if you think this is nightmare scenario, just wait until digital cash. If the huge population of workers required to perform data entry are willing to accept some form of Microsoft dollars (good at all “participating” stores) instead of the real stuff, look out.

Supply and demand are powerful forces - especially when we have technologies in place that can allow businesses to answer to nothing else. I’m no luddite, but neither am I enthusiastic enough about the convenience of online services that I’m willing to roll up the sidewalks and move out onto the Web.