The Digital Depression: Perception vs. Reality

New research on Internet traffic by Dr. Lawrence Roberts raises fascinating questions about the state of the Internet and the demand for Web-related services.

The findings of Roberts' study, which he says is based upon actual traffic data supplied by major carriers, stand the conventional wisdom on its head. Rather than slumping, use of the Internet is growing faster than ever, according to Roberts' data, with traffic doubling every six months.

The data - and Roberts' credibility as one of the 'fathers of the Internet' - raises profound questions about the current Digital Depression. Is the complete shutdown in financing and business activity based upon flawed perceptions of the market? Is the downturn in our heads, rather than the 'Net itself?

Nah! Couldn't be. Or could it?

History makes us pause and wonder. Conventional wisdom has been badly wrong in this sector before. Consider the irrational exuberance of 1998-9, when analysts and industry executives repeated the mantra of Internet traffic doubling every three or four months.

With 20/20 hindsight, critics now claim to have known it was too good to be true. If so, why were so many really smart people taken in? Because perception and hype are powerful forces. In the absence of hard data - which the National Science Foundation stopped providing in 1996 - perception and anecdotal evidence have held enormous sway in analyzing Internet activity.

Is the same thing happening now at the bottom of the market? Is this an irrational overreaction to the downside? Are the business decisions of today based on flawed assumptions, just like in 1999?

Time will tell whether Roberts' data is reality-based or just another case of optimistic filtering of numbers. Rollercoaster rides can be alternately giddy and nauseating. But once you've bought the ticket and climbed aboard, you've really no choice but to take the ride. Keep your seatbelts fastened.