In Traditional distribution, goods and services are passed on from the manufacturer to a broker, to the wholesaler, and then on to the retailer. Every step of this process adds non-value added costs to the product. Non-value added costs are things such as equipment, warehousing, shipping, employee wages and benefits, etc. that do not add to the value of the product.

There is a growing trend to switch from traditional distribution to direct distribution. Direct distribution cuts out as much of the non-value-added costs as possible. Rather than going through a broker, wholesaler, and retailer, customers may purchase products directly from the manufacturer. Internet commerce, otherwise known as e-commerce allows this marketplace transformation to occur.

E-commerce is the tool that will change the face of business forever. Internet traffic is currently doubling every 100 days. In early 1999, approximately 30 million people were online. That amount is expected to be over 300 million people by the end of 2001. The Internet is growing at a rate of about 700% per year according to the US Department of Commerce. In 1998, about 10% of American households had access to the Internet. Already, that number is closer to 25% in 1999, and is anticipated to increase to over 90% by 2001. Obviously, the Internet is experiencing tremendous growth.

In January of 1999, America Online reported total sales of over $1.3 Billion (online) in December 1998. The upcoming holiday season will be an enormous opportunity for businesses offering e-commerce capabilities. Already, the general perception is that a company that does not have an Internet commerce compatible site, is technologically behind. According to Forrester Research, online sales will grow to over $3.2 TRILLION by 2003. Wow!!!

Why is the online marketplace growing so quickly? People can stay at home rather than fight traffic and crowds, and parking, etc. Rather than depending on stores to be open when they want to shop, people can shop anytime they want in "virtual malls". In short, a virtual mall is a shopping mall online, where you cannot physically touch the product, but a description and picture are usually given. Most e-commerce sites offer a 100% satisfaction guarantee.

These sites are convenient for shoppers, and make sense for sellers. A virtual mall may sell thousands of products without the overhead a traditional business must carry.

The Internet represents a technology that will change the marketplace forever. Every major market transformation typically takes place within a nine-year period. Welcome to year number two. There are roughly seven more years left in the Internet boom, before it reaches its threshold of 90% (of US households online, probably shopping online). Businesses with a keen sense for technological revolutions are currently expanding their Internet capabilities. As I type this document, my word processor keeps underlining the word "internet". Apparently it was not in its dictionary when the software was released. But what is the state of Internet in our lives? Almost everyone I know has access to the Internet. Universities are beginning to host classes online. Businesses are conferencing online. The Internet represents a powerful research tool, which allows us to sort through thousands more documents in less time. Is the Internet just a phase in history? I believe it will cause a shift in our lives, particularly in business.

Without going any further, consider some of the recent and developing technological advancements:

• WebTV by Microsoft
  
• Palm Pilot
  
• Internet Pc's
  
• Internet Cellular Phones (expected to grow by 74% each year until 2002)
  
• i-opener by Netpliance Inc.
  
• iPhone by InfoGear Technology Corp.
  
• MailStation by Cidco Inc.
  
• Sony's PlayStation2 with web access and DVD
  
• NetDisplay by Converging Technologies
  

Hold strong. Defer litigation as long as necessary. The two-year window will bring extensive technological change, as we head full forward into the Internet revolution. If Microsoft holds out, by the time this whole thing is resolved, there will be no such thing as a Microsoft monopoly. MSFT was the first to dominantly enter the marketplace. Under the circumstances, they made the BEST business decisions that could have been made from an economic point-of-view. Were they wrong? No. Do you remember the last time you were playing Monopoly, and were winning by a landslide? Did you let the pressure off? Did you loan the competition $10,000 just to compete with you? Or did you build more hotels and wait for your best friend to land on Boardwalk?

That's what I thought ! MSFT was looking after it's own best interest, and succeeded. But the technological market place is one that violently changes direction. One day you can be the Captain of the ship, and the next day, swabbing the galley- check out Sprint. There's a swashbuckler for 'ya (yet a powerful and well-thought out merge decision will insure the stability of the company, despite a phonological overhaul).

Typically technology markets allow a company a two-year advantage before the market shifts. Bravo to Mr. Bill for the wonderful show !! The MSFT strategic marketshare takeover was a textbook example of the American Dream. But beware, Steady the hull- you have left the lagoon and a storm 's 'a brewing- there be rough seas ahead matey.

Yes, steady the hull. Ride the two-year interim. Tech. will shift, and the litigation will become irrelevant. Microsoft will maintain a competitive marketshare, but will encounter stiff resistance. The key is to diversify... and don't think they haven't taken those steps already. Mr. Gates, when I am done with my degree, I am coming to work for you-- MSFT is a company with OPPORTUNITY.