In the case of the dotcom companies, factors like quality and convenience can be used as competitive weapons. I like to buy books from Amazon.com, for example, because (a) I have the convenience of being able to order from home at any time of day or night, and (b) I know that I can search for a book by author or title, whereas the clerk at the neighborhood brick-and-mortar store probably won’t be able to give me accurate information about the book I’m trying to find. But competitive advantages in this area are likely to be hygiene factors: I don’t pay much attention to them when they’re present and notice them only when they’re absent. And if the neighborhood brick-and-mortar store had any sense, it would retaliate by hiring better clerks and staying open 24 hours a day to service the people who want to wander in to buy a book at 3 a.m.

Ultimately, the success of a dotcom company is going to lie in other areas—such as the ability to make better use of its data and the ability to create a sense of community on its website. Amazon.com continues to amaze me with the sophistication of its personalized data-mining capabilities. Whenever I visit the site, it effectively says, "Hi, Ed, good to see you back again. Here are three books we think you’d like, based on your recent purchasing patterns." In theory, the neighborhood brick-and-mortar store could do the same thing, and perhaps there are some legitimate examples of that level of service in a few small towns, but this doesn’t work so well in a big city like New York. Some brick-and-mortar bookstores do create a sense of community by opening a coffee shop in the midst of its book racks or by inviting poets and musicians to drop in to read their work and play their songs. But I think there are far greater opportunities to create virtual communities consisting of affinity groups based on products or other consumer preferences.

The interesting thing is that a company like Amazon.com is arguably doing a good, innovative job at several of these tasks—and yet it’s still being subjected to intense pressure by the financial community.

If it’s tough for Amazon.com, how much tougher must it be for all of the other dotcom companies that don’t have the experience and sophistication that Amazon.com demonstrates over and over again? Well, Charles Darwin told us a long time ago what happens when there is a great deal of competition in an environment with limited resources: It’s called survival of the fittest. And what we’ve begun seeing in the dotcom marketplace is that fittest no longer means offering the biggest discounts. It will be interesting to see what it really does mean as the dotcom industry evolves toward maturity.