And E-Commerce for All?

Every computer maker great and small seems to have contemplated the same holy grail: To make an inexpensive machine that will connect users to the Internet and allow them to send and receive e-mail. That’s it. No complex, breakdown-prone hard drives, no bundled software to choose. Just a machine for getting connected.

The possibilities seem endless. Some people believe that these so-called Internet machines will be the bridge that finally spans the digital divide. Others point out that even financially strapped schools will be able to give every child access to the Web.

And still others envision a wave of new users crashing through the wall of technophobia that continues to keep millions of potential e-commerce customers away from the Internet.

Ellison’s Gamble

The latest high profile figure to bet on the concept is Oracle Chairman Larry Ellison, who announced the formation of The New Internet Computer Company this week. The firm will sell $199 (US$) machines — sans monitor — that run on the Linux operating system and do little more than surf the Web and process e-mail.

Ellison’s gambit has been tried before, with limited success. So is there any reason to believe that his venture will be any different?

Those involved think so. Gina Smith, a former journalist who is now CEO of Ellison’s company, admitted to a press conference that the profit margin for each machine will be small. However, she added, “We’re going to sell a gazillion of them.”

Taking Aim

Starting out by targeting the educational market is a smart strategy, because the schools that are attracted to the possibility of setting up 10 computers for the price of one or two loaded machines will probably seize upon the opportunity. But margins are generally lower in the educational market as well, as volume discounts and goodwill donations are the norm.

My guess is that by comparison, the consumer market is going to be a much tougher nut for Ellison and his fellow travelers in the Internet machine marketplace to crack. The barrier keeping those reluctant users away will take longer to fall.

Why the reluctance? Psychological ties to the PC play a part. Although Netpliance’s I-opener, for instance, has a sleek, modern appearance and no hard drive, the machine still looks and acts like a computer, complete with a keyboard.

Mixed Signals

Another factor might be the wait-and-see approach. It is relatively easy to understand why some consumers might be confused enough to keep their cash in their pockets, given the rash of conflicting messages they get about the direction the Internet is taking.

Will consumers be using their TV sets to surf the Web in one year? Five? Ten? Or will we all be connected over the air, without any wires at all? Should we simply wait until the prices of mobile handsets come down, or wait for broadband to whisk them away?

Any of those outcomes could render any machine, however modestly priced, obsolete.

Ultimately, attracting everyone and anyone to e-commerce is not going to happen so long as the marketplace continues to change every week. Of course, the upside is that we will know whether Ellison’s move is a boon or bust in short order — and consumers can get back to waiting for the next big thing.