The mpact or the nternet on rinancial marke tisements and prices to these individuals. In principle, individ- interfaces ualized prices can be used to extract more surplus as the par. Conclusion: expect the unexpected ticular individual reveals through past behavior his/her will- This short article discusses some important consequences ingness to pay for a good. In this way, individualized prices can of the emergence of the Internet as a global communications eliminate the benefits of mass markets to consumers. Similar- network. The Internet facilitation of information flows ly, individualized advertisements(or individualized sequences smoothes competitive frictions, intensifies competition, and f ads on the web) can, in principle, be targeted to have the promotes a winner-takes- most world. biggest impact based on past behavior. There is not enough evidence yet to show that either individualized pricing or indi- The Internet threatens firms, markets, processes, systems, dualized ads have been successful on the Internet, but they exchanges, and supply and distribution mechanisms that have may become successful in the future. this far been protected from global and intense competition behind national borders, regulatory rules, or geographic loca- Even if the business case for collecting vast amounts of tion. The Internet brings financial markets even more force- information on behavior on the Internet is not yet proven, it lIly into a regime of intense competition and very significant has raised significant privacy concerns. Information on activi- inequality a winner-takes- most world with a very intense race ties that most individuals consider private(such as reading a for the winner and with significant benefits for market partic. particular page of a newspaper on the Internet or monitoring trading activity of a particular stock) may also be the proper ty of various vendors(for example owners of web servers) The Internet has been full of surprises. These include that facilitate this activity. In the United States, people are o its very rapid commercialization and expansion, used to the high legal protection of privacy of telephone con- o the emergence of the Internet browser as a must-have versations. Such a high standard of privacy has not been killer"application in 1994-5, established for electronic mail and other activities on the o the world-wide fast expansion in the use of electronic rnet. The conflict over privacy is looming large in cyber ce law o the huge success of live text- based multi-party chat, and o the emergence of Napster as 6% of all Internet traffic in Overflow of information the fourth quarter of 2000, among others The Internet has been extremely successful in facilitating information flows. Both consumers and managers are over The nature of the internet is such that it holds a tremen- whelmed by the abundance of information. Both groups are dous promise of new processes, goods, and services. Thus unable to take full advantage of the information that flows to despite the careful analysis above, i would venture to say that them every minute. the Internet application and use that would become the most prominent in the next ten years is likely not yet conceived and The need for information filtering is critical. The most need- its impact is unanticipated. On the Internet, expect the unex- ed tools in the upcoming puberty of the Internet will be infor- ected, and you will likely be pleasantly surprised! mation filtering tools and interfaces, such as search engines and hierarchical classification systems. In the absence of such efficient tools, both consumers and managers will fall back to brand names and rules of thumb to select useful information If in the present Internet expansion phase content is king, its next phase will likely be ruled by information filtering andThe Impact of the Internet on financial markets 12 tisements and prices to these individuals. In principle, individ￾ualized prices can be used to extract more surplus as the par￾ticular individual reveals through past behavior his/her will￾ingness to pay for a good. In this way, individualized prices can eliminate the benefits of mass markets to consumers. Similar￾ly, individualized advertisements (or individualized sequences of ads on the web) can, in principle, be targeted to have the biggest impact based on past behavior. There is not enough evidence yet to show that either individualized pricing or indi￾vidualized ads have been successful on the Internet, but they may become successful in the future. Even if the business case for collecting vast amounts of information on behavior on the Internet is not yet proven, it has raised significant privacy concerns. Information on activi￾ties that most individuals consider private (such as reading a particular page of a newspaper on the Internet or monitoring trading activity of a particular stock) may also be the proper￾ty of various vendors (for example owners of web servers) that facilitate this activity. In the United States, people are used to the high legal protection of privacy of telephone con￾versations. Such a high standard of privacy has not been established for electronic mail and other activities on the Internet. The conflict over privacy is looming large in cyber￾space law. Overflow of information The Internet has been extremely successful in facilitating information flows. Both consumers and managers are over￾whelmed by the abundance of information. Both groups are unable to take full advantage of the information that flows to them every minute. The need for information filtering is critical. The most need￾ed tools in the upcoming puberty of the Internet will be infor￾mation filtering tools and interfaces, such as search engines and hierarchical classification systems. In the absence of such efficient tools, both consumers and managers will fall back to brand names and rules of thumb to select useful information. If in the present Internet expansion phase content is king, its next phase will likely be ruled by information filtering and interfaces. Conclusion: expect the unexpected This short article discusses some important consequences of the emergence of the Internet as a global communications network. The Internet facilitation of information flows smoothes competitive frictions, intensifies competition, and promotes a winner-takes-most world. The Internet threatens firms, markets, processes, systems, exchanges, and supply and distribution mechanisms that have this far been protected from global and intense competition behind national borders, regulatory rules, or geographic loca￾tion. The Internet brings financial markets even more force￾fully into a regime of intense competition and very significant inequality: a winner-takes-most world with a very intense race for the winner and with significant benefits for market partic￾ipants. The Internet has been full of surprises. These include •its very rapid commercialization and expansion, •the emergence of the Internet browser as a must-have “killer” application in 1994-5, •the world-wide fast expansion in the use of electronic mail, •the huge success of live text-based multi-party chat, and •the emergence of Napster as 6% of all Internet traffic in the fourth quarter of 2000, among others. The nature of the Internet is such that it holds a tremen￾dous promise of new processes, goods, and services. Thus, despite the careful analysis above, I would venture to say that the Internet application and use that would become the most prominent in the next ten years is likely not yet conceived and its impact is unanticipated. On the Internet, expect the unex￾pected, and you will likely be pleasantly surprised!