This article originally appeared in
6 February, 2006
The new digital boom

Commentary by Eric J. Lyman in Rome
for ISN Security Watch (06/02/06)

The explosive growth of the world’s
digital economy over the last several
years is leaving many experts
wondering how it will change the
way the world operates over the
next generation. And unlike similar
predictions in the 1990s, this time,
the experts say it is for real.

Around 400 representatives of the
digital economy - including government
officials, private sector representatives, scientists, and engineers - were on hand for
the 30-31 January conference on the future of the digital economy at the
headquarters of Italy’s Culture Ministry and hosted by the Paris-based Organization for
Economic Cooperation and Development (OECD). The forward-looking meetings were
the most interesting and passionate, with some experts speculating on what the digital
world may look like in the future.

“We have already seen so many big changes, but the biggest changes are yet to
come,” said Lucio Stanca, Italian Innovation and Technology Minister and the former
head of IBM’s operations in Europe, Africa, and the Middle East. “At one point the
focus was on the best hardware. Then it switched to a focus on software. Now the
focus is on content, which means it can include anything. This is the last and most
important stage of the digital economy’s development.”

Other delegates at the talks discussed ways in which the digital economy was
changing every day things: efforts to catalogue all the books in the world by internet
giants Yahoo! and Google; the rapid growth of downloadable music, movies, and
television programs; the use of digital media for medical collaboration; the increase in
the percentage of financial transactions that take place electronically; the storage of
personal information in electronic databases; and the mainstream acceptance of
electronic publishing.

"We are getting to a point when many of the cultural icons of the past, things as simple
as a book or a record album, or even something as simple as cash in a wallet are
starting to become obsolete,” Santiago Rizzoli, a Madrid-based author and technical
consultant, told ISN Security Watch. “Book and music stores, libraries, banks,
databases, hospitals, cinemas - all these kinds of businesses and organizations will
over the next decade or so see their models completely turned around.”

Before the internet bubble burst in 2001, that kind of talk was commonplace. But since
then, bold predictions about how the internet will change the way companies and
individuals operate have become mush less frequent.

Experts on hand in Rome told ISN Security watch that the failure of many internet
companies in the early part of the decade taught a lesson.

“The difference now is that predictions aren't that everyone is going to become a
billionaire as a result of these new technologies, just that the new technologies will
change the way business is done,” Rizzoli said. “There's no way to know which
companies will come out ahead and where the money will be once the process is
complete. All we do know is that the world’s economy will look much different.”

Two companies aggressively trying to stay on the cutting edges of the changes are
Google and Yahoo! Both US-based giants are undergoing a major initiative to try to
archive the world’s knowledge base in books, both in print and out of print, in a single
searchable database. The companies have different philosophies on how that should
be done. Google wants to archive everything but make only certain parts available to
the public as a way of protecting copyrights, while Yahoo! is undergoing a slower opt-
in process that publishers can choose to be part of. Both agree that the process
would probably not be profitable if it were a stand-alone business, but say it is part of
the 21st-century internet business model.

“This is a very costly project that doesn't yield too many revenue streams,” Jens
Redmer, the European director for Google Book Search, told ISN Security Watch on
the sidelines of the conference. “This is more about building consumer loyalty to the
Google brand name.”

Other experts at the conference predicted the advent of an increasingly cashless
society that would make fraud harder by making it easier to trace money. That could
make it easier to hinder organized crime by making money laundering much more
difficult. But it also raises concerns about personal privacy.

Others spoke about a rise in the specialization of medicine, because a more
specialized medical doctor would be able to diagnose and even treat patients outside
his or her geographical area.

Experts say there will also be an dramatic increase in the number and variety of online
security companies. They predict that existing software companies will come out with
ever more sophisticated programs to protect data and computers, and that specialized
firms will arise focusing on how to best keep companies secure from hackers and

“As the online world grows in importance, the risks associated with keeping it safe
and secure rise exponentially,” Carlo Bunti, a self-employed security consultant
working predominantly with UN agencies, told ISN Security Watch. “This is only going
to become more important.”

But like the unprofitable book projects from Yahoo! and Google, many areas do not
make it clear where revenue will come from.

According to David Sifry, the president of Technorati, a company that monitors traffic
for internet blog sites, the number of online blogs - personal online journals that are
often focused on a specific theme - is growing at a mind-boggling rate. Sifry said that
75,000 new blogs were started somewhere around the world each day and that more
than half of them were still operating three months later. There are 50,000 blog posts
every hour somewhere in the world, and growth is so fast in Asia that over just the
last year Japanese had surpassed English as the most common language for blogs
and Chinese is catching up quickly.

And the image of a blogger as a lone wolf ranting about some obscure issue is no
longer accurate: four of the world's top 30 media sites and 20 of the top 100 are
blogs, including two - Boing Boing and Engadget - that get more visitors that the web
sites operated by the Wall Street Journal, the New York Times, or Time Magazine.

“The speed of the changes is just stunning,” Sifry told ISN Security Watch. “It’s literally
a case of if you blink you’ll miss something.”

But where does that leave traditional media? The advertising model will obviously
change, with a slow shift toward online ads already starting. Television will suffer a
similar problem as more people start to download their favorite programs without the
advertisements. That fact causes many to predict that product placements in films,
television programs, and even blogs will become more and more common.

“I think we’ll definitely see a day when the three-second television ad spot will seem
like a quaint reminder of the past,” Sifry said.

Eric J. Lyman is ISN Security Watch's senior correspondent in Rome.

The views and opinions expressed herein are those of the author only, not the
International Relations and Security Network (ISN).
Image: ISN