Shifting Internet Geo-Centers: Will you lose your balance?

The geo-centers of the Internet are shifting in two directions. First is west to east. Every media company except Disney is on the N, R, 4, 5 or 6 subway lines, and that's where the Internet will play out. The other shift is to internationalization.

You can't talk about globalization without talking wireless and broadband. We're basically disconnected nomads, and the implications of a wireless world are absolutely huge. If you're Yahoo! and negotiate a deal with a wireless provider to become the front page of the wireless experience, you've won the game. It's not worth my time to figure out how to put a URL into a little device with my pudgy hands. I'll go to the front page they serve up, scroll down and hit whatever Yahoo! tells me to.

With globalization, think wireless, and if you get that right, you've got 90 percent of the game. Wireless is relevant wherever there's instant gratification, and the world is going to instant gratification big time. Auctions are instant gratification; so are first-come-first-serve IPOs. My daughter was on the Net, designed her Barbie, hit enter and walked downstairs expecting to open the door for Federal Express. I'm a big investor in same-day delivery companies.

Internationalization was ignored by most Internet companies, even to the extent of not registering their international URLs, but it's turned relevant now that they're not growing at 100 percent a month. And although B2C is down in the U.S., it's not so down in the rest of the world. I don't have operations in Western Europe; they're six months behind us and will make all the mistakes. I have operations in Russia, Turkey and China. In these countries, three skill sets matter in developing Internet companies. First, you'd better capitalize these things well. One of my frustrations with Russia is I can't find money. Second is having the technology. With no Web developers in these countries, the first thing I do is to develop that team. And the third is getting people. Boy, is that important. The local U.S. company doesn't have a chance of getting it right in those markets -- they may have the technology and the capital, but they don't have the people and they certainly don't know the local culture.

The dialogue I have with a U.S. company is, "Look, we can bring you to China. If you give us the code and we save X months, you'll own 20 to 30 percent of the globalized company. You don't get cash, but you will get equity valuation." You won't get away doing those deals where there's a strong economy, like Western Europe, but you will in Russia.

With globalization, you live by the same algebra, with different variables. Customer acquisition costs are much lower, but so is lifetime value of the customer. I develop Web sites for about a fifth of the cost and time as here, but there aren't a lot of credit cards in those countries and there's no advertising business. You have to be willing to burn money longer, but you're burning less.