Geek News

“Disintermediation” is one of those geeky terms that few people recognize, and fewer understand.

Having been immersed in the Internet for more than a decade – 14 years now, in fact – including a stint wrapped up in the dot-com boom lunacy. That’s a phrase I learned long ago, and one that I still consider now and then. That’s geek daydreams for you, I guess.

Disintermediation refers to the process of cutting out the middleman, in particular, in the dot-com context, the way in which the Internet helps cut out the middleman. Consider, for instance, eBay. I’m not sure eBay is used as an example of disintermediation very often, but it’s one of the most important players in this game. Let’s say you own an antique widget and need to get rid of it. It’s taking up too much room, and anyway, you’d like to sell it so you can take the money and buy a brand new whatchamacallit.

In the past – before eBay – you’d probably had to take the widget to an antique store, and sell it directly or perhaps leave it on consignment. eBay, however, let’s you contact thousands of potential buyers directly. eBay has “disintermediated” the antique store, removing the middleman and connecting buyer and seller directly.

In some cases disintermediation isn’t really disintermediation. The travel business is often used as an example – where have all the travel agents gone? The travel-agent middlemen have been disintermediated! Well, actually, they’ve been replaced by a different class of middleman – the giant online travel agents such as Travelocity and Expedia.

Sure, the airlines and hotel chains are selling far more tickets and nights directly to the consumer than they used to 10 years ago, but they are at a huge disadvantage. People don’t usually travel-shop by brand, they shop by location. They’re looking for the best value to get to and stay in a particular location and in most cases have little brand loyalty. It seems that for travel at least, we really need a middleman.

Still, disintermediation is well under way in many ways and ways that you might not have thought of. Another little-considered but powerful disintermediator? Craigslist, www.craigslist.com. This classified-ad site has subsites in 450 cities around the world, from Buenos Aires, Argentina, to Ho Chi Minh City, Vietnam (admittedly the Vietnamese Garage Sale category is a little sparse).

I’ve experimented with a little disintermediation recently via Craigslist. First, my car. You see, I had a problem with my Volvo. Now, I love this vehicle. Not because it’s a comfortable, or powerful, or classy vehicle – because it’s none of those things. It’s a 1986 station wagon, with almost 200,000 miles on it, and it rattles like, well, a vehicle with almost 200,000 miles on it. No, I love it because it just amazes me, it just seems to keep going and going and going. What an amazing machine. Still, it’s not perfect. Did I mention it has 200,000 miles on it?

So when the mechanic at my regular garage told me it would cost around $600 to fix some of the rattling up front, naturally I thought: “Disintermediate Them!” Let’s face it, love has its limits, and $600 is beyond my limit for a car with a couple of hundred thousand miles on it.

So, I went home and ordered the parts I needed online through a Volvo specialist; they cost $113, saving me a considerable sum right there by cutting out the middleman. Instead of going from the manufacturer, to a distributor, to the garage, to me, they went from the manufacturer to a distributor/retailer, to me. Next, I jumped onto Craigslist and into the Automotive Services section where I found a bunch of mechanics intent on disintermediating the garages they used to work for (or, in some cases, the garages they still work for).

Instead of a mechanic selling his services to a garage, which would then sell his services to you, you can buy the mechanic’s services directly and at a much lower cost. And in many cases the mechanic will come to you (depending on the type of work required). I haven’t yet had the work done, but I will, and I’m beginning to wonder why I haven’t been doing this for years. How many vacations could I have had on the money I saved?

My son has been using Craigslist recently, too. He’s been looking for summer work, looking in Craigslist’s Jobs section. Last weekend he found someone needing help with the yard work for a day, and he was well paid for his work, too. Was this disintermediation? I’m not sure, but it certainly made the connection between the person with a need and the person with the time available much easier. Perhaps there were no kids in his neighborhood to do the yard work. And that’s really what disintermediation is all about, removing the friction that slows commerce, and providing people with services to provide – like mechanics and my son -more ways to reach people who need those services.

Peter Kent is an e-commerce consultant in Denver. He can be reached at www.PeterKentConsulting.com/or GeekNews@PeterKentConsulting.com.