Saturday, September 03, 2005

OLD MODEL VERSUS NEW MODEL

In the old days: Businesses paid for advertising, including yellow page advertising.
In the new days: Businesses contract for leads at a specified price per lead.

In the old days: Businesses could easily waste much money on ineffective advertising.
In the new days: Businesses will only pay for effective ads.

In the old days: Businesses often did not know where they got their best leads.
In the new days: Businesses will know precisely where they get their best leads.

In the old days: Consumers searched the yellow pages to find vendors.
In the new days: Consumers find listings quickly and save the results for the next time.

In the old days: Finding an auto-mechanic did not necessarily show the location.
In the new days: A map is presented showing the locations of all auto-mechanics in the area.

In the old days: Once each year, consumers threw out the old yellow pages including their notes.
In the new days: A searchable record is maintained. Calls, comments, results are recorded.

In the old days: Businesses paid substantial monthly fees for web site hosting.
In the new days: Web site hosting will be free.

In the old days: customers paid a monthly fee just to have the communication line.
In the new days: customers will have free access to the web; businesses will pay for the service.


The savings per transaction are on average bigger than they look and there are trillions of transactions. The total savings are huge.

The above are part of the ramifications of "pay per click calling". The change will not occur over night. After all, a lot of people still pay AOL $21 per month for dial up internet service. Bell South advertises $24.95 per month high speed broadband that allows phone calls and internet service at the same time. Some folks are slow to adopt new technology. However, since the price difference between land line phone service and internet phone service is huge, the adoption rate should be very fast.

STOCK MARKET BOOM!

It is typical for the stock market to boom during periods when technological innovations are being adopted rapidly. It often takes years for 10% of the population to adopt an innovation. The rapid growth phase typically starts after the 10% level has been reached. Fifty-one million consumers have downloaded Skype. Vonage, AT&T, VZ,SBC, TWX and many other companies are rapidly signing up new VoIP customers. Google has just introduced Google Talk. At the current time, Google Talk is only an instant messaging service. However, Google plans to support SIP. This means that Google Talk users will be able to make calls from computer to land line phone. Because Google will use open source technology, Google Talk users will be able to talk to users of various instant message services. My wife and I will disconnect one of our phone lines next week. We have quickly moved over the half-way mark. Now more of our calls are made on cell phones or via Vonage or Google Talk than are made on land lines. We look forward to transferring our other lines to the internet soon.

Internet telephony is ready for prime time which helps explain many other things. For example, long term treasury bond rates have confused market mavens for the past couple of years. It is difficult to understand how the nominal rate on the 10 year is only 4% while the real GNP (GNP net of inflation) has been growing at almost 4%. The bond market has been forecasting a dramatic slowing of the economy or significant productivity improvements. Bears are almost worn out. They cannot keep saying the market is about to collapse as evidenced by the bond market or by the flat yeild curve. The GNP will probably slow as a result of Katrina but growth will still be present because of technological innovations.

Productivity must be ready to resume its incredible surge! Businesses around the world are about to reduce their operating costs, including advertising, telephone and communication costs, while getting more done. Whenever a business or a consumer cuts a 10 mile round trip down to a 5 mile round trip to pick up a good or service, the savings will be large relative to the phone call savings.

"BUY THE BULL! The oil crises are a temporary phenomena. Energy is a bottomless well. It is a matter of time before the price stabilizes or goes down when supply increases relative to demand. Productivity does not go away but gets compounded.

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