the e.biz 25
Masters of the Web Universe
The inaugural business week e.biz 25 celebrates the Internet innovators who are doing the most to spark a transformation of society that is as profound as the Industrial Revolution. From such bona fide captains of industry as Yahoo!'s Timothy Koogle to relative unknowns such as Glen Meakem, founder of FreeMarkets Inc., they represent a wholesale redistribution of tech leadership

Editor's Memo
They're Rockin' the World

Home Page
Sealed Air's niche is all wrapped up; divorce, Internet-style; extreme commerce; Silicon Valley's mobile dentist; hot wheels for hot venture capitalists

Perspective
Who's Afraid of Net Banking?
Consumers, that's who. But online banking is improving, and it will be a viable alternative to traditional banks

Data Mine
I Want My MP3!
It's mostly a fringe movement -- for now -- but downloadable music is the key to e-success for the record biz

Commentary
The Great Equalizer? Not Yet
The Net was supposed to herald a new era of diversity. But so far, the e-world looks awfully white and male

Strategies
A "Neanderthal" Logs On
Fed up with order snafus, the electrical-parts industry has built itself a snazzy new network

One Nifty Net Game
Office Depot is a case study of how a brick-and-mortar merchant can build a Web strategy that plays to its strengths

The Virtual Catwalk
The Net makes fashion as accessible in Peoria as in Paris

Upstarts
A Gold Mine in the Making
Chances are, you haven't heard of Inktomi, but this dynamo could wind up as the toll collector of the Net

"Just Another Medium"
QVC's Internet arm takes a low-tech approach -- and boasts some of the happiest customers around

The Early Bid
QXL has the lead in Europe's lucrative auctions market, but powerful rivals are moving in

Net Worth
Finding the Perfect Shareholder
Through data mining and the Net, IPO issuers hope to match people to stocks they'll hold for the long term

What Price Eyeballs?
Startups can get access to a powerful portal's customers -- in exchange for equity stakes

Clicks & Misses
The Trouble With IPO Sites
You'd think the Net would be a great place to get the lowdown on the latest offerings. Think again

Cleaning Up the Clutter
Like many sites, sports powerhouse cnnsi.com got too crowded. Here's a preview of its new design

Digital Dispatch
How to Talk the Talk
Ever heard of a value proposition? How about the dirt world? Here's a lesson in Geekspeek

Cutting Edge
Is That E-biz Roadkill Ahead?
It's inevitable: All those Internet retailers are likely to face a major shakeout after the holidays

COVER STORY -- E.BIZ -- THE E.BIZ 25

The e.biz 25: Masters of the Web Universe
The Internet pioneers of the inaugural BUSINESS WEEK e.biz 25 are changing the competitive landscape of almost every industry in the world

[empire builders] Jeffrey P. Bezos AMAZON.COM INC. Stephen M. Case AMERICA ONLINE INC. Timothy A. Koogle YAHOO! INC. [the innovators] Louis H. Borders WEBVAN GROUP INC. Jay S. Walker PRICELINE.COM Margaret C. Whitman EBAY INC. Glen Meakem FREE MARKETS ONLINE INC. James H. Clark MYCFO INC. Christos M. Cotsakos E*TRADE GROUP INC. [bankrollers] Masayoshi Son SOFTBANK CORP., JAPAN Robert C. Kagle BENCHMARK CAPITAL Lawton W. Fitt GOLDMAN SACHS & CO. L. John Doerr KLEINER PERKINS CAUFIELD & BYERS   Bernard Arnault LVMH MOET HENNESSY LOUIS VUITTON   [the visionaries] Mary G. Meeker MORGAN STANLEY DEAN WITTER John Hagel III MCKINSEY & CO. William Joy SUN MICROSYSTEMS [the architects] Louis V. Gerstner Jr. IBM CORP. Pehong Chen BROADVISION INC. David C. Peterschmidt INKTOMI INC. Kevin J. O'Connor DOUBLECLICK Ellen M. Hancock EXODUS COMMUNICATIONS [the pace setters] David S. Pottruck CHARLES SCHWAB CORP. John T. Chambers CISCO SYSTEMS Michael S. Dell DELL COMPUTER

Since the advent of navel gazing, wise men have debated whether economic progress should be credited more to the introduction of new technologies or to the people who put them to exceptional use. It's typically a fruitless exercise--like trying to figure out how many angels can dance on the head of a pin. But in the case of the Internet, there's something in the yin and yang of man and machine that's well worth contemplating. It's clear that while technology laid the foundations for the Web's first wave, it is sharp thinking by individuals that's powering the second wave--the e-business revolution.

Thus, we offer up BUSINESS WEEK's inaugural e.biz 25. It's our celebration of the innovators and influencers who are doing the most to spark a transformation of society that is every bit as profound as the Industrial Revolution. This is the PC biz times 1,000. That's because these 25 larger-than-life characters, and thousands more who are aspiring to be just like them, are determined to overthrow the old world order. Forget paper, fax, phones, and all those rabid sales people. The Internet way calls for direct contact between buyer and seller, collapsing space and time while cutting costs. ''The Internet is not only creating a new industry in itself but changing the competitive landscape of every industry in the world,'' says Benjamin M. Rosen, the chairman of Compaq Computer Corp.

So who made BUSINESS WEEK's e.biz elite? Some of our picks are already bona fide captains of industry--like Yahoo! Chief Executive Timothy Koogle, financier Masayoshi Son of Softbank Corp., and e-commerce king Jeffrey P. Bezos of Amazon.com Inc. Others are as-yet unproven Netrepreneurs who made the list because of the radical trails that they're blazing--like Webvan Group Inc.'s Louis H. Borders, of Borders bookstore fame, who is turning his mathematical prowess on a huge Web conundrum: How to deliver perishable foods to cybershoppers everywhere.

DAREDEVILS. And then there are the best-kept secrets: Goldman Sachs & Co. tech IPO quarterback Lawton W. Fitt, for example, who laid the groundwork for the launch of 22 highfliers this year. Ever heard of Glen T. Meakem? You will. The founder of FreeMarkets Inc. is challenging fixed pricing by making it possible for all manner of businesses--even coal mines--to use the Web for their auctions of products and services.

It was no cinch to pick the 25 ultimate Netheads. We brainstormed and amassed a master list of more than 100 names. Then, over the course of three weeks and with much, er, spirited debate, the best of those rose to the top as the standouts we believe are most profoundly influencing the Internet today. They're the empire builders, the innovators, the bankrollers, the architects, the visionaries, and the pacesetters--daredevils who gladly risk all and leap the chasm between what they know and what they believe.

Here's a sign of how much things have changed. The daredevil of the PC generation is not on our list: William H. Gates III. It wasn't so long ago that the honcho of Microsoft Corp. seemed to have the computer industry in a brainlock. But now we're seeing the wholesale redistribution of leadership in the technology industry. Like the Web itself, the Internet industry has no center of gravity. It's creative chaos incarnate. Now, someone at Noname.com is just as likely to create the next great business as is someone at Microsoft. ''The beauty of the Web is that it's open to everybody,'' says Scott G. McNealy, CEO of Sun Microsystems Inc. Everybody gets to stand on the shoulders of everybody else's work. That's why everything's accelerating.''

Eventually, things will slow down. Power will coalesce, too. But don't expect the Internet to mimic the PC industry, with only a duo of dominant players. That's because the Net's technology underpinnings are not owned by one company--the way Microsoft owns Windows on PCs. Ron Chernow, author of Titan: The Life of John D. Rockefeller, Sr., doubts that anybody will be able to control the Internet the way Rockefeller controlled oil. ''It's a very greasy pole,'' he says. ''It's very difficult to maintain a dominant hold because of the speed of change and the competition that can emerge from unexpected areas.''

The members of our e.biz 25 don't take their successes for granted. Even Bezos doesn't rule out the possibility that his seemingly unbeatable company might end up being just a ''footnote'' in e-commerce history. Or not. The fact that he's so watchful could assure that he will make our list for years to come.

By Steve Hamm

Commentary: The Great Equalizer? Not by a Long Shot
It'll take conscious effort to make the Net more minority-friendly

The Internet was supposed to herald the dawning of a new era of fairness. As the great leveler, the Web would put obscure entrepreneurs, smart 15-year-olds, and outsiders of every stripe on the same footing as multinationals and the rest of the Establishment.

But as BUSINESS WEEK identifies e.biz's top 25 movers and shakers, the executive elite of this new industry looks a lot like the traditional corporate world. Nineteen are white men, four are white women, one is Asian American, and one a Japanese citizen. None is African American or Hispanic. In Corporate America as a whole, white males account for about 56% of managers; white women 32%; African Americans 6%; Hispanics 3.2%; Asian Americans 2.5%; and Native Americans less than 1%, according to the U.S. Equal Employment Opportunity Commission.

Not that we didn't try hard to avoid overlooking anyone. We racked the brains of our editorial staff and queried Net gurus to identify the captains of this new industry. But here's the sad truth: Few minorities have emerged as leaders of top-tier e-businesses.

What happened on the way to the e-revolution? For all the hype about a new order in cyberspace, the old order, for the most part, still rules. While the high-tech crowd likes to view itself as a meritocracy where nothing matters but brains and moxie, this credo masks an important truth: Relationships and crony networks count heavily, even in e-business. Who you know still helps determine whether you'll get a crack at leading one of the companies at the cutting edge of this new industry.

Cozy relationships are hardly the only factor, though. African Americans and Hispanics often don't have the backgrounds and experience considered by many to be necessary for the Internet. Just 7.2% of engineering and computer science degrees went to African Americans and 5.9% to Hispanics in 1996, according to the National Science Foundation. And only 23% of African-American households are online, compared with 34% for white Americans, 36% for Hispanics, and 64% for Asian Americans, according to Forrester Research Inc.

But rationalizing a largely white male leadership doesn't make it good or right. Remember, the promise of the Net was something more revolutionary than making twentysomethings into multimillionaires: It was about transforming the daily lives of all people. The masters of this new universe must recognize its lack of diversity as a shortcoming if they are to lead the Web to its full potential. Without more managers of color who can tap into the hopes and dreams of the people who use the Net, the Web could end up reinforcing the divisions within society instead of erasing them. ''Ultimately, if this is going to be a mass medium, it's critical that it be reflective of society,'' says America Online CEO Stephen M. Case.

Fortunately, there is a kernel of truth to the idea that the Net can be a democratizing force. In 1998, immigrants of Indian and Chinese descent ran 25% of Silicon Valley high-tech startups, according to a study by University of California at Berkeley Professor AnnaLee Saxenian. There are examples of success elsewhere, too. Consider Benjamin Sun, the 26-year-old CEO of New York's Community Connect Inc. At first he was unable to get funding for Asianavenue.com, a portal for Asian Americans, because the concept of an online gathering place for an ethnic community didn't resonate with venture capitalists. ''The idea was foreign to them, because the people we approached were not people of color,'' says Sun, a former Merrill Lynch & Co. investment banker. But after he scraped together 100,000 members in his first year, he was able to attract $4.5 million in financing.

And the number of women tech executives is on the rise. Carly Fiorina became the first female CEO of a Dow 30 company when she was named to head Hewlett-Packard Co. in July. eBay CEO Meg Whitman and Exodus Communications CEO Ellen Hancock have become industry stars. And they're working hard to encourage women's success in the future. For example, Hancock has mentored 15 female entrepreneurs.

But these are exceptions to the lack of diversity. You can count on one hand the blacks and Hispanics who hold real power in the industry. There's E. David Ellington, CEO of Net Noir, a San Francisco-based portal targeting African Americans. Robert Knowling, CEO of Covad Communication in Santa Clara, Calif., rules a telecom company. Fernando Espuelas, CEO of Star Media Network Inc., has had his site dubbed the Yahoo! of Latin America. Raul Fernandez, the Cuban-American CEO of Proxicom in Reston, Va., sells e-commerce software. These leaders suggest talent is available, but they're a tiny group in the defining business phenomena of our time.

The problem in part stems from a sometimes-unconscious reliance on the old-boy network. When venture capitalists look for managers for the startups they fund, they often look first to friends and colleagues. ''These companies are founded by small groups of friends, funded by friends of friends, and grow into businesses that look like them,'' says Joseph Mouzon, the black CEO of Imhotech, a Redwood City (Calif.) company that designs music and entertainment Web sites and software.

As the world of business is changed by the Net, it's important to listen to new voices. Some black leaders feel free markets alone won't make diversity happen. Angel investors, VCs, and CEOs should be mindful of promising minority entrepreneurs. Ellington suggests that VCs earmark a certain percentage of their funds for minorities. Beyond money, they can offer advice, as Hanock is doing. As this generation of minority entrepreneurs grows from rags to riches, it can seed a new wave of minority-led companies.

With blacks and Hispanics coming online fast, it makes sense to diversify at the top. African Americans still have the lowest percentage of online usage today, but the number will soar to 40% next year, according to Forrester. Hispanic households online will surge to 43% in 2000, from 36% this year. As Net users diversify, there will be increased demand for sites tailored to ethnic tastes.

If the minority presence in leadership roles doesn't soon reflect the general population or the online population, it will be time for Net boosters to ask themselves why what was supposed be a democratizing influence didn't work out that way. The answer may be in the nearest mirror.

For interviews with Net Noir CEO David Ellington and other minority executives, see ebiz.businessweek.com.

By Catherine C. Yang

Who's Lagging in the Net Age


Although they are the largest minority groups in the country, blacks and Hispanics have lagged in Net access and tech management. That has hurt their ability to break into the top tier of e-business.

COVER STORY -- E.BIZ -- EDITOR'S MEMO

They're Rockin' the World


I figured that assembling a dozen busy executives from around the world for a joint photo would mean plenty of headaches. The last thing I expected was a dance party. But that's just what happened--as you can see from the cover of this, the inaugural version of our list of the most influential people in electronic business.

When the 12 Netheads--from Seattle, Silicon Valley, New York, Pittsburgh, and even Japan--arrived in San Francisco, the rock music was cranked to the rafters. For our group, this wasn't just background music. They broke loose and gave us a look at the energy powering the e-business revolution. Amazon.com CEO Jeff Bezos was irrepressible--so much so that we asked him to move off the top of a tiered platform onto the bottom step for fear he might tumble over the side with his high kicks. Investors would not have been happy. Yahoo!'s Tim Koogle went Saturday Night Fever with not one, but two fingers aloft. And where else would you see eBay's Meg Whitman doing the frug?

It was a hoot. Even putting it together wasn't such a teeth-gnashing task. Getting the planets aligned took a little more than one week. By contrast, coordinating a photo shoot two years ago with 12 of Silicon Valley's finest--including Andy Grove, Steve Jobs, and Scott McNealy--took one month. Ah, finally, we see the upside of Internet time. Our thanks to the rockin' Netheads and to photographer Alan Levenson, who captured the spark behind the Net phenomenon.

By Kathy Rebello, Managing Editor, [email protected]

Who's Afraid of Online Banking?
Consumers, that's who. But it's becoming a viable alternative to banks

For the past three years, I've been a PC-banking junkie. It takes me 10 minutes a month to pay bills. I can track every transaction online and transfer funds between accounts with a mouse click--or have it done automatically. And I, for one, am surprised--no, shocked--that someone with a PC would not want to bank online. But according to a recent survey, Net-only banks and traditional banks operating on the Net are doing a lousy job. So bad, in fact, they're sending customers fleeing for the cyberexits.

Here's a statistic bound to wrinkle the pinstripes at WingspanBank.com and other banks on the Web: In the year ended July 31, 3.2 million consumers signed up for Net banking--while 3.1 million closed their accounts. That means the net increase in Internet banking customers was a skimpy 100,000, or 2%, for a total of 6.3 million customers. This is according to Cyber Dialogue Inc., a New York research firm that surveyed 2,000 Net users and non-Internet users. These numbers contradict other studies that show Net banking growing 50%-plus a year. Cyber Dialogue claims that many accounts counted in those studies are probably not active.

BELLS AND WHISTLES. So are the prospects for Net-only banks and traditional banks on the Web bleak? Not at all. Bet on many of the frustrated consumers eventually being wooed back to the Net. That's because as competition increases, banks online are exploiting their sharply lower operating costs to pay higher interest rates on deposits and reduce fees. What's more, competition is forcing cyberbanks to make speedy improvements in service and Web site design. There now are nearly 1,000 banks online, and more are coming: Numerous Net-only banks will be launched within a year, while traditional players like Citibank are building branches in cyberspace. Even brokers such as Schwab are planning forays.

WingspanBank.com is the latest online-only bank to raise the industry bar. Launched in June, the Bank One Corp. spin-off charges virtually no fees, absorbs ATM surcharges of up to $5 a month, and pays interest on checking of 3.1% for balances between $1,000 and $10,000. (Traditional banks often pay less than 1% on such balances.) Its Web site has a host of bells and whistles, including access to mutual funds and brokerage services through a private-label deal with DLJdirect. But it does not yet have certain services that are available elsewhere on the Net, such as online bill receiving.

Still, Wingspan is a compelling alternative to old-line banks. Many brick-and-mortar banks now make more than 50% of their profits from nickel-and-diming customers with fees. Industry consolidation has reduced competition, and banks are raising the minimum balances required to avoid monthly fees, adding surcharges for certain ATM transactions, and paying paltry interest rates on deposits. Consider Wingspan's parent, Bank One Corp. The bank charges some customers $2 if they go to a teller for certain transactions that could be made at an ATM, including making a deposit.

That's not to say online banking doesn't have its problems. Some 57% of those surveyed by Cyber Dialogue said banking on the Net was either too complicated or that customer service was poor. A basic problem is that Net banks don't have branches where customers can withdraw money or talk to a teller. And Web banking can be slow because of heavy security measures.

Even the best of the banks operating online have customer service issues. Market researcher Gomez.com ranks Security First Network Bank and Wells Fargo as the top two banks on the Net. But customers commenting on Gomez' message boards have a different opinion: They awarded the banks two out of a possible five stars.

Banks online still haven't found their sea legs. But once you get up and running with an account, their advantages are clear. Net banking eventually will save consumers billions of dollars in fees. And you may never have to write checks and lick those godawful stamps again.

By GEOFFREY SMITH