The Internet as an Industry: Four Phases

The first phase is hyping the concept,

or hyping valuation. This mainly applies to the period before the dot-com bubble burst in 2000. At that stage, people were still figuring out what practical applications would look like—for example, Mr. Ma launched a yellow pages business back in 1995. But looking at the industry as a whole, it was still firmly in the concept-hype phase.

The key characteristic was extremely high valuations for tech-related sectors in US stocks. Many people were experimenting with various business models, but few were making money; most were burning cash.

The second phase was all about bandwidth.

Readers who got online before 2000 will remember how painfully slow the internet was back then.

Opening a portal site and waiting half a minute or more for a single image to load. Customer needs dictate direction: because speeds were slow, some wanted things faster, and others were willing to pay for speed. That was the market demand. Whoever could build out bandwidth and ramp up internet speeds became the dominant player of the future.

This was when many telecom operators rose to prominence, as well as the equipment vendors serving them.

The third phase was all about terminals.

Once infrastructure services and communication bandwidth were in place, whose domain would it be? Naturally, the terminal device makers. With foundational services ready, you could evolve from Nokia's brick phones to smartphones. Just like you need to build roads before you can prosper—without roads, no matter how impressive your car is, how is it supposed to drive?

The fourth phase is all about applications.

Once device platforms were established, what kind of companies emerged as giants?

They were all application companies—the so-called traffic entry points. You know the ones: every app you can't live without these days, this one and that one.