Microsoft chief sees `low overhead capitalism' making for more efficient advertising
Bill Gates, the king of PCs, acknowledges no computer company that's ruled one era has gone on to lead the next. So what Microsoft Corp.'s chairman says about the next era--the "information highway"--may be irrelevant.
Why listen to a guy who a year ago underestimated the potential of the Internet, missing as badly as IBM did 15 years ago in failing to grasp the significance of the personal computer?
For a good reason: Mr. Gates often is wrong, but he has a knack for picking the right answer in the end. "I want to defy historical tradition," he writes in his new book, "The Road Ahead." "Somewhere ahead is the threshold dividing the PC era from the highway era. I want to be first to cross over when the moment comes."
The candidate for king of the road ahead leaves himself a lot of wiggle room about the future in his book (Viking, $29.95, including a companion CD-ROM). He paints an optimistic picture of how PCs and PC-based TVs, phones and other devices will put the consumer in charge.
The Internet, he says, will evolve into the information highway, a broad computer network connecting all consumers and all businesses.
Mr. Gates says parts of the new highway will take shape by the year 2000. "Within twenty years virtually everything ... in this book will be broadly available in developed countries and in businesses and schools in developing countries," he says.
Despite that grand prediction, Mr. Gates is short on specifics. And that is his genius: He started Microsoft 20 years ago with the vision "What if computing were nearly free?" He was convinced of the market for cheap PCs, running his low-priced operating systems, and he bet correctly that software applications--spreadsheets, word processors--would emerge to make the market a reality.
With the information highway, Mr. Gates again focuses on the macro rather than the micro, spending little time wondering what applications will evolve to move the masses onto the road. His new question: "What if communicating were almost free?"
The implications are broad: With information passing efficiently over the network, consumers will be able to shop easily for the best deals. Consumers will be able to tailor online newspapers and watch TV shows and customized newscasts at their convenience.
The highway will usher in a new era of "low-friction, low-overhead capitalism," making advertising and marketing far more efficient, Mr. Gates writes. As more commerce is done on the network, distance will shrink as an advantage for local business, he says. He forecasts gloom for retailers that don't have either the best price or service.
Advertising will evolve into a hybrid combining TV commercials, magazine ads and sales brochures, he writes. TV spots will include direct links for more information.
Mr. Gates takes this one more step with movie product placements: While watching "Top Gun" at home, consumers captivated by Tom Cruise's cool glasses could pause the film and click to order a pair.
Consumers will still enjoy shared televised experiences, such as the Super Bowl and "Seinfeld," Mr. Gates says. But consumers will have the option of watching "Seinfeld" at any time after its official prime-time debut, he suggests. Ford, meanwhile, may choose to advertise on a popular show, but it might promote different models--Escort, Taurus, Lincoln--in different households based on income or other attributes.
Mr. Gates offers a scheme for zap-proof commercials: Consumers could fast-forward through a show but would have to sit through the paid ads.
In Mr. Gates' future, consumers will be able to decide whom to give access to their phone or e-mail. Direct marketers may pay for access: Porsche might offer $1 to encourage a prospect to accept its e-mail ad.
"The advertiser decides how much money it is willing to bid for your time, and you decide what your time is worth," Mr. Gates writes.
Is this science fiction or reality? Stay tuned. Beneath his techy facade, Mr. Gates is a savvy chief executive with an innate knack for smart marketing, skills that made him Ad Age's 1994 Marketer of the Year. Marketers looking for ideas would do well to read at least two chapters, "Implications for Business" and "Friction-free Capitalism."
But other points in the book also are worth considering. Mr. Gates explains how Microsoft has deliberately hired a few managers from failing companies--talent, he says, that will help Microsoft cope with failures it is destined to encounter.
Mr. Gates, too, raises doubts about the merit of major media mergers--Walt Disney Co. and Cap Cities/ABC, Time Warner and Turner Broadcasting--being done in preparation for the road ahead.
"Beware!" he writes. "Mergers that are attempts to bring all aspects of highway expertise into one organization should be viewed skeptically." Alliances, he suggests, may be wiser than mergers.
Mr. Gates' 276-page book offers a map of where he intends to go, making it must reading for all competitors. The book, co-written by Microsoft futurist Nathan Myhrvold and veteran computer writer Peter Rinearson, also is an elegantly simple primer on the past and future of computers, offering a quick education to non-technical sorts who want to get with the program.
The book recasts Mr. Gates as an appealing, good-humored sort who cleverly spins his ideas about technology by playing off bits of pop culture--"Seinfeld," "The Little Mermaid" and O.J.'s car chase. The oddities of billionaire Bill do come out: He read World Book volumes cover to cover as a child. He plays bridge on the 'Net. He's building a trampoline room in his new manse. Still, the masses who read this book will see only good Bill, not the evil dictator that lesser competitors and trustbusting bureaucrats fear is plotting to take over the world.
Copyright December 1995 Crain Communications Inc.