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After the Gold Rush

Looking for fresh ideas? The enormous Internet World show in Los Angeles has a few sparkling moments — but mostly a churchlike stillness and a lot of worn-out hopes.

Want to gauge the mood of an entire industry? There’s no better way than to visit a giant trade show.

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When times are booming, there are noisy crowds everywhere. Swarms of people flock to even the tiniest booths, wanting to win a T-shirt, test a new product, or just swap business cards. And at the big exhibitors, standing-room-only crowds jam into mini-auditoriums, listening avidly to every word that host-company executives share — convinced that the next phrase could be the key to the future.

A year or two ago, Internet World was that sort of conference. This year, it’s an entirely different story.

Overall, barely 500 companies are exhibiting at the giant Los Angeles conference, down from nearly 900 last year. Showcase companies such as Cisco and DoubleClick haven’t set up booths at all this year. Conference organizers say that advance registrations were off just 3% from last year’s pace, when turnout totaled 50,000. But floor traffic looks more like a conference half that size, and some keynote speakers are portraying the Internet economy as a blighted area.

“It’s pretty ugly out there, and it’s going to get worse,” says Thomas Siebel, founder and chief executive officer of Siebel Systems Inc. His San Mateo, California company is the leading producer of customer-relationship software, and he counts about 80 smaller competitors. “Fifty of them will not survive this year,” he says. “Unless you have a positive cash-flow business, the capital markets don’t want to do business with you. You’re going to be consolidated out of business, and the world will probably be a better place for it.”

Not everyone shares that sense of gloom. AT&T and Sprint are two of the largest exhibitors at the conference, and both have big growth plans for various Internet-related offerings. AT&T is talking up voice-over-Internet phone service — an idea that may finally provide sufficient reliability and call quality to appeal to corporate customers. One AT&T plan would charge users about $160 a month with essentially unlimited long-distance usage. Some pilot customers are trying the service in southern California, and more are expected to follow.

Sprint officials are eager to show off a $299 wireless modem that would allow laptop users to access the Internet from anywhere within Sprint’s nationwide network. The current version operates at a fairly slow transmission rate, but faster alternatives could emerge within the year, Sprint managers say.

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Other big exhibitors, though, are having a hard time generating excitement about their newest offerings. America Online officials are eager to demonstrate their version of Web TV, but they are chary of disclosing sales figures and say that the rollout has been “gradual” so far.

AOL is also demonstrating a $499 screen-and-keyboard combination made in partnership with Gateway. This technology is meant to provide quick Internet access for families in their kitchens and other second-computer locations in the home. But visitors are grumbling about the small screen size of this latest incarnation of the “network appliance” — a long-talked-about alternative to full-fledged home computers.

For smaller exhibitors in past years, Internet World has been a chance to catch the public’s eye — and perhaps dazzle thousands of potential customers — with something utterly new. This year, though, many of the offerings in areas like secure email, content-management and customer-relationship software, and data mining represent mostly modest incremental improvements over what was available a year ago — without revolutionary breakthroughs.

A Macromedia presentation on new editing tools for Web sites drew one of the bigger crowdsat Internet World earlier this week. But even there, the company spoke mostly of refining earlier software versions, instead of trying something radically different.

Almost gone from the conference is any trace of e-commerce companies. In past years, they had been some of the most ebullient exhibitors. But many of them have gone out of business in the past year, and those that remain may have decided that the expense of mounting a trade-show presentation wasn’t worth it.

In an eerie side note, the most high-profile display of Internet-based greeting cards has been mounted by the U.S. Postal Service. A year or two ago, predictions were that the greeting card business would be transformed by all-email alternatives, such as Blue Mountain Arts, which used its Web site to send millions of online “cards” to recipients. As popular as those sites have been, they now are widely regarded as problematic businesses, because it’s almost impossible to build up reliable revenue streams to go with all that traffic.

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So the Postal Service isn’t completing the delivery of its e-cards online. Instead — in a throwback to the time-honored way of doing things — it prints out the cards, stuffs them into envelopes, and delivers them to recipients as part of regular mail. “We think a lot of people prefer that,” says L. Gaye Hirz, a Postal Service marketing specialist for e-commerce.

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