It's a funny thing. All companies doing business today use technology. And virtually all companies doing business tomorrow will in one way or another use the Internet. Yet the way we talk about "technology companies" and "Internet companies" makes them seem more exceptional than they may actually be. Categories are useful, though. They help organize ideas and make it easier to talk about things in general ways.
The Rule Breaker portfolio is known for investing in technology companies, and for good reason. Even without using an all-inclusive definition, six of the port's seven holdings easily qualify as "techs," leaving only Starbuck's (Nasdaq: SBUX) brewing on the sidelines. Of the remaining six, four of them -- Amazon.com (Nasdaq: AMZN), America Online (NYSE: AOL), Excite@Home (Nasdaq: ATHM), and eBay (Nasdaq: EBAY) -- not only belong to but help define the infamous, modern "Internet company."
General categories only get us so far, though, and it's sometimes good to break things down some. I was recently reminded of this while reading through Paul Larson's report on the Wireless Web in the current issue of The Motley Fool Internet Report. With wireless already a subcategory of Internet, Paul further divided the companies playing in that space into five areas. Talk about specific! Even pulling back from that level of detail, there was still a general division of the companies that I found interesting.
On one side are the firms building the wireless infrastructure and providing mobile connections to the Net. On the other side are companies developing and offering consumers (that means us) the wireless applications we'll use once we get connected. Somewhere in the middle are the device makers whose cool gadgets actually put the Web in our palms and pockets and give us our "entry" point to the wireless Net, similar to how the PC has been our vehicle in the wired world.
These descriptions don't do justice to the many differences among these companies and the industry position each has staked out. (Nor do they do justice to Paul's Wireless Web report, I might add.) But that division is found throughout online space. It's found everywhere really. It's the difference between a technology and its application; between basic infrastructure technologies, and the consumer services and applications that ride on top of them. The underlying technologies are what make the medium possible, but the specific applications are what make the medium personally relevant.
Without the applications that bring it alive, the Internet is just a collection of interconnected hardware and software technologies, a cool engineering feat, but not much more. Applications are the common denominator that transforms "the Internet" into the "online medium." And that's what makes all this matter.
Rule Breaker Applications
The line being drawn here is hardly a sharp one and companies can operate anywhere on either side. But the distinction itself is real. And if we look closely enough at what a company does and how that relates to its industry, it's possible to place it somewhere on either side of the Technology-Application line -- subject to change, of course. The Rule Breaker's "Internet companies" are an interesting bunch in this connection.
AOL, Amazon, eBay, and Excite@Home each has its variation of the de rigueur "anywhere, everywhere, every device" strategy. Whether it's content, commerce, or both, all offer services that show up on our screens -- from the largest desktop monitors to the smallest squint-and-click handhelds. This clearly places them on the applications side of things, where branding and differentiation are relatively easy, or where they at least have a toehold. After all, we see and directly interact with their services. We know, for example, what Amazon's tabs and the @Home 2000 portal look like and what they'll do when we click this or that button. That gives us something to hang our experiences on. We get to know these services, like the view through our living room window.
Excite@Home also operates on the basic infrastructure side of things, where the technology itself is a bigger part of the story. Indeed, Excite@Home's broadband infrastructure was the company's main story when it entered the RB in late 1998, shortly before the Excite acquisition. Interestingly, Excite@Home's very name captures the division between user applications and basic technology, which are represented on either side of its at-sign.
On another level, that division was also a factor in the issues that have surrounded Excite@Home over the last year. More accurately, the issues have been whether the company would be able to operate across the division between basic technologies and end applications, to span its at-sign, and realize the promised synergies between its high-speed network and its consumer portal. And what's a portal other than a mega-application that hosts other applications?
America Online also operates on the infrastructure side. But unlike Excite@Home and its other peers and competitors, AOL's roots go back to a time when the background technology and the foreground service were integrated as one, and that was simply that. For the most part, AOL's main service continues to work that way, which on the one hand makes it a backwards relic, and on the other hand accounts in good part for its success.
Quite a study in contrasts, similarities, and self-contradiction, this motley crew of Rule Breakers. Together they offer a cross section of what's happening today on as far as the Internet "applies."
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