Internet Challenges for Non-media Industries

Aside of the media industries, for whom the Internet is a direct competitor and a direct threat to their core line of business, the Internet has had a significant impact on many industries.

This chapter will examine several non-media industries, and the impact that the Internet has had upon them.

Travel Agencies

Travel agencies have been among the most adversely affected by the Internet. Traditionally, the travel agent was an intermediary, offering advice and booking reservations on computerized reservation systems, and combining the services of multiple vendors (airline, hotel, rental cars, etc.) into a single package for their clients.

One could argue that the role of the travel agent was critical to the individual traveler before the advent of computers - where booking travel arrangements required knowledge of the various providers and a great deal of clerical work to call each to obtain its part of the package.

Computer systems such as SAGE and SABRE automated much of this work, giving travel agents access to a database of flight information to facilitate the booking process and eventually ancillary services such as hotels, cruises, rental cars, and other travel-related products.

In 1985, American Airlines launched easySABRE, which was not widely used as a dial-in system, but enjoyed greater utilization when it was connected to online services such as AOL and CompuServe. Even then, it was nota user-friendly process, and required a great deal of effort for an individual, who had to conform to the needs of the systems (understand the gibberish of airport codes, industry jargon, and other such things).

Later, when the internet came along, airlines opened their booking systems to the Internet, and third-party firms (Travelocity, Expedia, and the like) took steps to make the process more user-friendly (as a method of gaining competitive advantage).

This also led to price competitions among providers, making it such that a traditional travel agent, with the overhead of staff and physical office, could not cut their margins to compete on price. In recent years, the emergence of discount providers and travel "auction" sites has further fueled price competition, such that the average mark-up on a travel package can be as little as $5 - and while an online agency that does a bulk of business using automated systems can turn a profit at that level, a traditional travel agent cannot.

The events precipitating from 9/11/01 were also detrimental to traditional travel agencies: many airlines reduced or eliminated commissions paid to travel agents (such that they would have to charge a mark-up to the consumer); meanwhile customers stranded by the event soon recognized the value of having immediate information and the ability to manage their own travel itineraries with the delay of a professional intermediary.

The emergence of e-tickets, which were issued by 90% of commercial carriers by 2003, also reduced the need for travel agents, and the ability of automated systems to provide phone, e-mail, and instant-messaging updates to customers and more reliably than a human intermediary also left agents in a disadvantaged position.

Online travel agents replaced many of the functions of travel agents, providing recommendations, special offers, package deals, and convenient one-stop shopping for complete travel packages.

Finally, there is the breadth of information that is available online, through travel-oriented Web sites and the social networks, as well as access to service providers that were not listed in the previous databases.

As a result, booking travel through an agent gave a person fewer options, higher prices, and less convenience. The industry has been decimated, and the few full-service agencies that remain largely serve individuals who are uncomfortable with the technology or have had miserable experiences booking travel online.

By 2002, the travel industry became the leader in revenue generation. Roughly two-thirds of all Americans regularly book their travel online, and most of the other third had used the Internet as a method of research and price comparison before booking travel by other means.

Some travel agents have survived by adapting and providing ancillary services. For some, this means brokering exclusive relationships with small providers, or creating tour packages that go beyond merely booking arrangements, but providing live guides to accompany groups of travelers.

However, it has been suggested that the online media are beginning to encroach even on these spaces. For example, Travelocity has begun a program whereby it sends representatives on cruises with their customers to assist them and act as in-person travel guides for ports of call, encroaching on the shrinking segment to which traditional travel agents have been relegated.

Realtors and Mortgage Brokers

Real estate and mortgage brokers are different enterprises, but they have been traditionally very closely entwined: a realtor assists a buyer in finding a property, whereas the mortgage broker helps them obtain a loan to purchase it. Both have faced significant changes and challenges as the Internet has moved into the industry.

In a similar role to the travel agent, the real estate agent previously served customers by providing information about the marker and assistance locating properties for sale by the use of proprietary databases. However, a plethora of information is now available online, and the MLS database is available through multiple Web sites, largely eliminating the need for a skilled professional to provide these services.

Likewise, the mortgage broker once served as an intermediary, and the value of his participation in the mortgage process was his knowledge of various lenders and loan types, information which is currently available online. Individuals can search for a mortgage (or use a comparison site to conveniently compare the rates of many lenders) and even apply for the loan online.

However, the legal processes involved in the sale of real estates have left a niche for realtors that online intermediaries have yet to fill. Also, realtors still provide some degree of value to property sellers, in getting their property entered into the MLS database and preparing additional material to market the properties they represent. Hence, direct sales from property owner to property buyer have increased, but still remain a minority of all real estate transactions.

It is speculated that both of these obstacles may be addressed in the future - changes in the way the government and legal system process real estate transactions, leveraging information technology, could enable a third-party provider to develop a user-friendly method for managing the ownership of real estate,. And the opening of the MLS database, or the emergence of a similar product, to enable sellers to create and manage their own listings could eliminate the remaining need for real estate agencies.

The author makes much noise about the ready availability of low-interest mortgage loans as a boon to realtors and brokers alike, but this predates the current (2008) consumer credit crisis. I expect this has had a very adverse affect on the industry, which has been more poignant for traditional; firms, with fewer customers and greater overhead, than for online ones.

Personal Computers

Traditionally, computers were purchased from local retailers, much as any other appliance: from general merchandise retailers (department stores), electronics suppliers, and specialized computer stores, many of which provided support and service in addition to the sale of the physical appliance.

In the earliest days of the Internet, computer sales went online very quickly - which is a natural fit, as the majority of people accessing the Internet were doing so from personal computers (hence, the market was already there).

Most firms (IBM,. Compaq, etc.) began to use the Internet as a direct-marketing medium, providing product information and a toll-free number, even before e-commerce capabilities were available. At that point, companies such as Gateway and Dell rushed in, offering low-cost computers to the masses, and eliminating the need to purchase computer hardware and peripherals at local retailers.

An excruciating level of detail is provided as to the rise of computer sales online, though the discussion seems largely focused on hardware (rather than software or support) - but the bottom line is that direct-sales from manufacturers online made the brick-and-mortar realties largely obsolete.

In the present day, few computer stores exist, and computers are still sold at big-box electronics retailers, but it's a small sliver of the industry, and generally caters to those who feel the need for a higher level of support than a remote source can provide.

Business Process Outsourcing

While "offshoring" has been going on for years in the manufacturing sectors, the emergence of the Internet has facilitated the off shoring of knowledge workers: call centers, business process, and research can now be done at overseas firms at a fraction of the cost of hiring Americans.

The author makes a lot of ominous noise and cites statistics from the call-center industry, but really does not make a case for the degree to which such tasks are being moved overseas, or why the Internet is to blame for the trend. This is really weak compared to the previous sections.

Film and Film Development, Florists, and Bike Messengers

The author speaks of the emergence of digital photography as devastating to the companies that made a majority of their revenues from manufacturing and developing film. The connection to the internet is tenuous (people share photos via e-mail rather than postal mail).

Small businesses such as florists have been affected by the Internet, in that local florists who are connected to networks such as FTD and Teleflora now receive a majority of their orders from online sources and those who are not linked into these networks are dying. Again, this is largely speculative, and no good evidence or statistics are provided.

Likewise, bicycle delivery services in large cities have largely been eliminated because documents can be sent via e-mail. There are some documents that must still be delivered physically, as well as physical goods, but the suggestion (again, without evidence or statistical proof) is that these firms are suffering considerable losses.


In spite of the real and significant threats to some businesses and industry segments, there are many other areas in which Internet companies were unable to make significant inroads: grocers, per supply stores, and pharmacies were all, at one time, under assault by online factors that failed.

The advice seems to be that industries of all kinds should be on the lookout for competition from online, but the author does not have any specific advice for determining whether the threat is real, or suggesting how one might react to it.