Israel's Internet is on the verge of a new era, its third era in less than a decade. Web surfers have enjoyed eight years of expensively produced free content (even after the bubble burst). Now a new, louder era beckons: "Enough, it's over, there's no more money. If you want content, let's see the cash."
The first ISPs (Internet service providers) began operating in the early to mid-1990s. Between 1994 to 1998, Web site owners were fanatic believers in using the new technology as a platform for alternative expression. Few entrepreneurs saw the Internet as a source of income.
Israeli surfers didn't beat down the doors to get to the first Web sites - simple, poor designs with pages that were updated according to the whims of the owners.
Those who went online preferred American content - much more sophisticated and rich in production values. It's hard to blame Israelis - in a 1997 poll, Tnuva was listed as the third most popular site.
In early 1998, the second era began, and it also lasted about four years. The Israeli entrepreneurs took a look at what was happening overseas and were amazed. American Internet companies were raising millions - and sometimes hundreds of millions of dollars - on Nasdaq. Theglobe.com (closed, August 2001) set a new record in November 1998 with its IPO (initial public offering) when its shares soared 606 percent on the first day of trading. Yahoo went onto the market in April 1996 at $2.75, and by January 2000 had climbed to $100 a share.
The message was obvious. Money is cheap, can be raised easily, and you can get rich quickly. Dozens of people hired dozens of more talented people and they developed sophisticated, attractive sites. They talked about IPOs, talked instant company valuations, and managed to raise hundreds of thousands of dollars from excited investors. In the new era, the Internet surfer was center stage and the word "revenues" was replaced by "eyeballs."
Economic giants wanted in on the party. American sites like Thestreet.com and Insider.com, and Israeli sites like Globes.co.il, Analyst-online.co.il, and TheMarker.com (from the Schocken Group) became missionaries of the "new economy" to Israeli Web surfers. Some dared to declare the death of the old financial and business press.
But that passed too. In March 2000, the Internet stock bubble burst on Nasdaq. It took nearly a year for the implosive reverberation to reach Israel. Walla merged with IOL, Netking closed, Tapuz practically disappeared, Netvision's Nana looked set to evaporate. Hundreds if not thousands of people were thrown out of an industry that only a moment before was clamoring for them. By the end of the second era the message was clear, but it was the opposite of the first era - those who want money must earn it, not just talk about it.
In this third era of the Internet, money is center stage. It started with Yedioth Internet, the company that built the impressive Ynet site with the labors of nearly 200 people - half of them long since fired. Nearly the entire top layer of Ynet executives who had said "give us money" to the company's owners (Yedioth Ahronoth), was replaced a year ago by a management that talks about "how to make money."
Presumably, the day is not far off when Ynet will start asking surfers for a small contribution. And the business sites are also looking at new models. TheMarker.com is getting ready to start charging for content, and Globes will not be far behind.
But the new era will only really begin for Israelis in the near future when they come face to face with two new ISPs, the legitimate children of the two largest content sites in the country - Walla and MSN-Israel. The managers running those two sites understood that one way to bring in money is to take money from the surfer right from the start - when they want to log on. Those ready to pay Walla and MSN to be their ISPs will get content that won't be available to those who keep their cash in their wallets.
The new era will be ushered in by symbolic changes in the management of the large companies. Walla's CEO, Ofer Levy, left the company to run Blockbuster Video, and MSN's CEO, Doron Liebstein, is going back to the mother-ship Microsoft, which has always been in the money printing business.
The third era of the Internet in Israel will be less romantic and less simpatico. Everyone will be asked to pay, one way or another. But, as the party gets under way, a missing variable remains in the equation. Will the guests be ready to cooperate?
The site owners are convinced they will. A large proportion of the surfers say no way. In the coming four years of the third era, the answer will become clear. And one more time, it will shape the Internet experience.
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