Who Commoditized the Internet?

You offer more to the customer than a connection to the internet.

by Brock Henderson Principal, Henderson & Associates [June 19, 2007]

Ever read something about one subject and have a flash of insight about another subject? That happened to me recently. I was reading about a marketing problem in the advertising industry and suddenly a realization popped in my head about the ISP industry.

At past ISPCONs as well as on the ISP-Marketing discussion group there is periodic discussion about the commoditization of the internet; but who commoditized the internet in the first place?

Many ISPs seem to feel that the individual consumer turned the internet into a commodity because they perceived one provider to be just the same as another provider. But that isn't right. Just look at AOL. AOL charged more than other ISPs and yet continued to grow. If the consumer was to blame for the commoditization of the internet, AOL would never have become what it is.

So who turned internet access into a commodity? The ISPs did because they failed to differentiate themselves, and as a result one ISP looked pretty much the same as the next—except for AOL who constantly hammered at the "community" theme and created a place that looked and felt like a friendly community.

If you're a local ISP, you can offer community to an extent that a national ISP never will. You need to address your customers.

But most ISPs did not properly address the needs of their consumers. Rather than challenge themselves to offer something unique, most ISPs competed on price alone, and that created the impression in the consumers' minds that internet access is a commodity.

The Cadillac, the Big Mac, and you
Price is not the sole criteria people have for choosing an internet provider or a car or a hamburger. When people buy a car they can get a Kia or a Cadillac. Both provide basic transportation, and one is vastly less expensive than the other, but people buy a Cadillac for more than basic transportation. They buy it for prestige, or durability, or comfort, or safety, or some other reason.

Do you purchase equipment for your ISP based solely upon price, or what the equipment can do for you? Probably for what it can do for you and your business, with price being a secondary consideration. So what makes you think your customers are strictly dollar conscious?

Consider the hamburger. McDonald's, Wendy's, and Burger King all make hamburgers, but each chain has created a different image/persona/uniqueness about their hamburger. It's still just a hamburger, but yet each chain has its loyal followers. ISPs need to do the exact same thing, create a unique identity.

If people are saying, "I can get service at X company for two dollars less", then you haven't persuaded the public that you are worth two dollars more. On the other hand, if you don't feel you are worth more than the competition then you are the reason the internet has been commoditized.

What's the difference between McDonald's and Burger King? Not much really. Burger King fries their hamburger over an open flame and then refrigerates it until needed, then pops it into a microwave. McDonalds grills it fresh now, but they used to grill them and store them under a heat lamp. It's still a hamburger.

The only real difference between the burger joints is the image. Take a long hard look at your company. Look at who you are and what you can do. How can you take exactly what you are doing and package it differently to make yourself unique?

I'm looking forward to hearing your thoughts on this, so tell me what you think. Visit me at my website (linked above) or use the Feedback link below.

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