Three Lessons That We've Learned About the Net

Spreading the Gospel... I love mixing with the real world. So it was lots of fun last week to speak at IDRC in Orlando and at BOMA in Kansas City. In these talks, I try to present a framework for thoughtful decision making about Internet strategies. What's appropriate for my firm? What's not? It's hard to believe, but I've been making these presentations for almost five years. In that time, we've definitely moved beyond fear / hostility. But I'm afraid that we’ve moved to confusion / uncertainty. Oops. So what have we learned? Here are three lessons, which I've patterned after Fortune's excellent article, Dot-coms: What Have We Learned? (Oct 30, 2000).

One: The Internet is not as disruptive as we thought. ... Yep, everybody's using e-mail these days and zapping files back and forth electronically. But the Internet itself really hasn't fundamentally changed the use of property or the delivery of real estate services. We still see the demand for property generally related to employment growth. And we still see the traditional players involved in the transaction process. No new break-the-mold business models -- yet. Ever? Search me.

Two: If it doesn't make cents, it doesn't make sense. ... Real estate dot-com business models will need to make money -- cash flow money. Many venture-funded services have yet to demonstrate this. As a venture capitalist says in the Fortune article: "When there's a ton of water, a lot of things float and look like boats. When there's a ton of money, a lot of things float and look like companies." Will new real estate services translate operational efficiencies into revenue streams? What incremental fees can be carved out of the transaction and management processes?

Three: Time favors incumbents. ... Traditional owners of real estate and service providers don't have to worry about Lesson Two because they're existing businesses with existing revenues. But, at least in the B-to-C world (business-to-consumer), life has become pretty dangerous. As one analyst predicts, "In six to nine months, there will be no major retail pure plays left." So the intriguing dynamic will be to watch strong players like, say, Equity Office, Insignia Financial and Marcus & Millichap as they seek to strengthen their brands by embedding Internet ventures into their brick-and-mortar operations. ... Note: Please don't bang on my e-mail box too much. YES. The Internet is a BIG deal, and it WILL impact the real estate process. It's just going to take a lot LONGER than we would have imagined five years ago. That's my two cents.

PikeNet Forum 2000 ... Mark your calendars for the PikeNet Forum,
May 2-4, 2001, San Francisco, CA. I'm still refining the theme. But it will be something like "Clickstream to Mainstream: Weaving the Web into the Fabric of Commercial Real Estate." The focus will be on the cultural barriers to Internet adoption. I've got a great program under development. Details available soon.

--Peter Pike