prompt a word to the wise
May 15, 2002
BY MICHAEL KRAUSS
are funny things.
I remember words, and where I was when I heard them, but can't
recall who said them. "Disintermediation" is one of
When I first
heard the word "disintermediation," it sounded odd to
me. Like the low guttural noise a worn-out car engine would make.
sitting in the audience of an Andersen Consulting (now Accenture)
CIO conference listening to a speaker describe the coming Internet
phenomenon. It was in 1993 or 1994.
vividly how the speaker described the risks of being a stockbroker,
a travel agent or a car salesman in the future networked world.
It sounded like everything would soon be disintermediated. The
rise of the Internet would connect buyers and sellers in a frictionless
way, the speaker warned. If you made your money playing in the
middle, find new work. You would soon be toast. The term was new
to me so I was somewhat skeptical at first.
spring, when the major airlines joined Delta in eliminating commissions
for travel agents, it brought me back to that funny-sounding word.
The likes of Travelocity, Expedia, Orbitz and Priceline have made
the life of the independent travel agent a lot less comfortable
and a lot less profitable.
But, now that
we've made the paradigm shift to the networked economy that was
envisioned in the early '90s, what are the new words on the horizon
of which we should take note?
One word that
may have as much impact on the operators of big consumer sites
as disintermediation had on their predecessors is . . . bias.
Let me explain.
large-scale technology-driven Web sites that sell apparel, books,
CDs, airline tickets and hotel reservations. How do we know these
marvelous sites are providing us fair access to goods at reasonable
prices? How do we know whether there is behind-the-scenes dealing
with suppliers that bias our selection and availability of goods
and services as well as the price?
same time as the airlines withdrew their commissions from the
travel agents, the Washington Post reported an example of site
bias toward a supplier. The Post explained, "Expedia briefly
refused to display United Airlines fares after the carrier said
it would stop paying commissions to Expedia on the tickets sold
on the site." The story added, "When consumers searched
for lowest fares on Expedia, United's flights were displayed but
the fares were hidden."
Well, I suppose
if I were a shopkeeper, I'd stop displaying the goods of a supplier
who wasn't paying me to sell its wares. But it made me wonder.
don't think about bias toward any one supplier, they think about
getting low prices. If you go to Wal-Mart, and P&G products
are low-cost, so much the better. But, what if P&G and Philip
Morris, along with a few other companies, owned Wal-Mart and decide
to exclude Kimberly-Clark or Clorox products from the shelves?
How should we feel then? Should we be concerned about bias?
of the online travel industry know, American, Continental, Delta,
Northwest and United banded together in 2001 to form Orbitz, ostensibly
to compete with Travelocity. Now the Justice Department is looking
into complaints that Orbitz gets cheaper fares through marketing
agreements with its owners that are not available to competitors.
Travelocity has agreements with American, Continental, Northwest,
Delta and British Airways, while Expedia has agreements with Delta,
Continental and USAir, according to the Post.
Web supposed to democratize the buying process? I guess not. All
this feels a little like oligarchy. That's supposed to be the
rule of the best, but it more often becomes the rule of the pushy
and the few.
say that Internet technology allowed disintermediation. This led
to consolidation and the rule of the oligarchs. Now online customers
have no real way to determine if the oligarchs are fair or biased.
I suppose that's the job of the regulators.
this led me to remember another old-fashioned word: reputation.
If I were
running one of the oligarchic, online travel services and was
busy signing complicated marketing agreements with my suppliers,
I'd remember that all my investments in information technology
could become worthless overnight if customers or the government
thought I was biased.
leading online sites should take note. There can be worse fates
is a partner with DiamondCluster International in Chicago. He
can be reached at email@example.com