Were early projections for electronic commerce revenues overstated and unattainable? As hyperbole fades and the challenges of making all transactions digital come to light, the electronic commerce boom seems far away.

Anyone who overestimated how quickly electronic commerce would grow should be comforted by the fact that no one got it right. In last year's issue on digital commerce, The Herring questioned the International Data Corporation and Forrester Research about their widely disparate projections for online commerce revenues by the year 2000 (see "Give or Take $100 Billion"). According to the IDC projections that we printed, e-commerce revenues should have been just under $50 billion in 1997; by Forrester's calculations that figure should have been around $3 billion.

One year later IDC has had to revise its numbers dramatically; the firm now estimates e-commerce revenues of $10.6 billion for 1997. But are IDC's latest projections any more realistic? Not really. They simply follow the premise that cyberconsumers will spend more per person over the next few years, and as a result worldwide Internet commerce revenues will nearly triple this year and then double every year through 2001--significantly outpacing IDC's prediction for the growth rate of consumers buying goods on the World Wide Web.

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Such numbers fail to reflect certain uncomfortable facts: that much of the necessary software and financial transaction standards are still being developed, that the banking industry is still struggling to adjust to the Internet, and that early e-commerce businesses have failed to serve as role models. In short, we are still building the foundation for electronic commerce.

One reason that market projections have varied so widely is that the term electronic commerce is misleading. It combines business-to-business and retail sales, security products, and the digitization of the financial industry into one undifferentiated category. Electronic commerce encompasses so many pieces of so many divergent industries that its impact--both in direct financial advantage and more intangible gains in market reach and efficiency--defies simple measurement.

In this month's Industry Briefing, The Red Herring decided it would be useful to look at progress in several arenas--security software, transaction standards, financial services, and online retail--in order to examine the current state of electronic commerce.

One year ago practically everyone we interviewed maintained that the Secure Electronic Transaction (SET) protocol would be the keystone that would allow merchants and consumers to engage securely in electronic commerce. But after a year of development, SET remains riddled with technical problems, and most of the industry is not interested in what it will offer (see "Promises, Promises").

Although business-to-business selling is acknowledged as the best near-term e-commerce opportunity, an examination of the standards struggle reveals that even corporate buyers are nowhere near large-scale adoption (see "Ecologies of Scale"). Without basic protocols in place, convincing businesses to turn over critical functions to technology is a daunting task.

As the business-to-business market waits for standard technology protocols to emerge, the window of opportunity for native Internet retail operations is slowly closing. "There is a limited set of goods that are great for Net sales," says Bill Burnham, an electronic commerce analyst with Piper Jaffray, "and all of the low-hanging business-to-consumer fruit has been taken"(see "Opportunity Walks").

But our assessment of electronic commerce is not without its bright spots. Anonymous online exchanges are making money selling everything from electronic parts to mortgages (see "Home, Home on the Exchange"). Traditional retailers have advanced from marketing-only Web sites to targeted shopping venues (see "It Takes Tools"). And the U.S. Department of Commerce is advocating regulatory forbearance for the Internet and electronic commerce (see "Digital Sherpa").

To that end, the technology industry continues to labor at the problem of how to transform transactions into pure bits.