by Dana Blankenhorn
Volume V, No. XIII
For the Week of April 2, 2001

This Week's Clue: Liberty Indivisible

This Week's Clue: Liberty Indivisible

SSP (Shameless Self Promotion)

Bezos' Charm Offensive

Microsoft's FUD Offensive

Controlled Circulation

Clued-in, Clueless

The Internet Bubble caused many people to focus too much on the Internet as a business and ignore the true importance of the medium.

The Internet is the most important tool for human freedom since the printing press. 

Governments of all types now recognize this. All of them are doing what they can to stop it. Not just the tyrants of Afghanistan and China, but our government, on every level. 

You can get a good overview on U.S. anti-Web efforts from The Register of the U.K. . But it's most important to note that their screed against U.S. policy (especially criticisms of former Attorney General Reno) could also be written, from the U.S., about British laws regarding the Internet. 

The fact is that Internet policy today is being made by cops and spies and those who love freedom seem to have no lever to pull on its behalf. Even in the most democratic countries it's simple to demagogue, to sow fear of pedophiles and terrorists, and then have free access to Web resources cut off, often in the most crude possible way. You may seek recourse in the courts but courtrooms are a place for professionals, not amateurs. (If you want to do your bit, of course, you support those professionals despite their faults .)

In the absence of power paranoia may be the best defense, Phil Zimmerman says. Encrypt everything for the cause , and seek safe haven. The author of PGP says that the more people who use encryption routinely, both in their e-mail and in their Web surfing, the more difficult it will be for cops and spies to operate. Outlook Express's default tool for doing this is certificate-based encryption, but as Zimmerman has said for years that's not reliable .

The trouble with this is that anyone can use technology, including industry "vigilantes" out to break opposition to their business models by destroying opponents' access to the Net. Zimmerman may see no other choice, but his way leads only to a technology war, an arms race with no winners. 

For every effort underway to use the Net to improve human rights there are two countervailing attempts in this country to halt criticism or deny critics access to the data needed to prove their case

This has always been true, but the Internet has also caused a change in where the battle for freedom is being fought. 

In earlier centuries the fight took place in public. The battle moved from the meeting rooms of the 18th century to the streets of the 20th century, but always it took organization and public demands in order for change to occur. What most frightened China about Falun Gong was how a large public demonstration could be organized and carried out without the knowledge of authorities . The answer was, of course, the Internet. China's crackdown has combined both hamhanded online propaganda , attempts to monitor all Internet traffic, and old-fashioned rough stuff. 

What most Internet users fail to recognize are the connections between Falun Gong's struggle and that of, say, a pimply-faced kid trying to hear the latest Metallica single. In the absence of governments that exercise checks on police power, and balance the rights of all, liberty becomes indivisible. In the absence of checks and balances pedophilia becomes merely a question of definition. China equates all members of Falun Gong with pedophiles, and will use any online tools we create against pedophiles against Falun Gong. 

In the long run, we must find mechanisms that will separate the interests of Falun Gong members from those of pedophiles. In the absence of such mechanisms their interests (and our interests) are identical. 

The Internet War between liberty and control is a total war. It is being fought, and will be fought, on the keyboard of every Internet user, and in the hearts and minds behind those keyboards. 

SSP (Shameless Self-Promotion)

I'm pleased to note that I've gotten new orders for reporting from AdAge, B2B and Boardwatch, ending a personal freefall in orders due to the Internet recession. I hope your business is turning around as well.

Join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Audettemedia. You can also read me daily at ClickZ , monthly at B2B, and Boardwatch, and once every two weeks at Internet Content. (More deals are being negotiated as this is written, so call me at 404-373-7634 to get in on it.) Remember that it's journalism that keeps the Clues coming...

Takes on the News

Bezos' Charm Offensive

With half of all Americans owning some stock the struggle to sell stock becomes a political struggle.

Jeff Bezos seems to have realized this before most of us, and last week he demonstrated the benefits of this knowledge. After stiffing analysts seeking a closer look at his books he went on a charm offensive, gaining big space in "USA Today" and Business Week, then practically co-hosting on CNBC' "Squawk Box".

His theme was profitability. He talked lovingly of his "get the crap out" program, in which products that don't sell quickly will be dropped from Amazon warehouses in favor of having distributors or manufacturers fulfill those orders. Bezos wasn't promising real earnings per share (he has too much debt, inventory and fallow warehouse capacity for that) but gross margins , which would be added to alliances in various product categories to produce EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA proves that the business model works, he says, that with financial finagling earnings will follow. It's a key measure used by financial professionals.

Those considering taking a flyer on Amazon, however, should know it's a speculation by taking note of something else Bezos told CNBC. In answer to a question Monday, he acknowledged that the U.S. book and record business for Amazon is "mature," that growth has to come from new product areas and from international sales. Amazon has yet to prove itself outside its home market and home niche. Its growth story, not just its profitability story, is unproven.

Microsoft's FUD Offensive

There is a difference between a charm offensive and a FUD (Fear, Uncertainty, Doubt) offensive, one many young reporters and observers fail to recognize.

Charm is about placing a gloss on what you're doing. While it may mean hiding some bad news, it doesn't mean criticizing others. Microsoft, on the other hand, is always about criticizing others - that's what makes it the Elmer of FUD.

In the short run FUD works. It confuses your enemies and can even win you government protection. In the long run it always fails. Your enemies gang up on you and even the government becomes your enemy.

That's what happened over decades to IBM, and it's what is happening now to Microsoft. All the company's recent statements are pure FUD, with Steve Ballmer starring as the equivalent of IBM's John Akers . Ballmer's statements against IBM's Linux play are pure FUD. So too is Microsoft's offensive on behalf of P3P, its failed privacy standard . It may fool some who want to be fooled, but over the long run it's still FUD foolishness.

The danger here is that even when you're telling the God's honest truth, as in Ballmer's efforts to boost XML on wireless devices, critics will dismiss what you say as FUD. It's like the boy crying wolf - in time you get eaten.

Controlled Circulation

All the nonsense about the "death of the free Internet," based on business books like Variety charging for access misses a key Clue.

Business magazines are reverting to their old models, models that work, in restricting access only to "industry insiders." It's called "controlled circulation," and it has been common in the business press for decades. Readers are forced to submit forms proving their worth to advertisers before being given "free" industry magazines. ("Information Week" is playing a version of this game. It's sending out circulation forms widely, then pushing its e-mails on those who (like me) it decides don't measure up.)

When the Web was new many magazines figured that the Net meant "free circulation" and provided their content online. But the advertising returns have been skimpy, in part because this cirulation is non-qualified - advertisers don't know if they're reaching the industry or just a bunch of wannabees. (The business cost of dealing with non-players can be substantial.) There's also an opportunity cost to the publisher in taking non-qualified readers. It reduces the value of your "insider" content to insiders, since anyone can get it.

Salon, on the other hand, still doesn't understand this Clue. They think charging for ads-free content will make the books balance. They are wrong in this. If the audience is worthwhile, the ads are a big part of the content.

That's why Variety and the Hollywood Reporter have acted as they have. Non-qualified readers must pay to make up for the losses (dilution of the audience) not just in advertising, but in reduced attention from qualified readers who find their "insider" stuff to be common knowledge.

All business publications can learn from this, and they don't have to charge people to do it. The Clue is to qualify your readership, audit the quality of your readers, then give advertising buyers apples-to-apples comparisons between your reach and that of your off-line competitors. Only then do your lower costs become a factor in the competition. Only then do you have a chance of winning. And you'd best snap to it, before those off-line competitors figure out the Net.

Clued-in, Clueless

Clued-in is Philip Kaplan, who goes by the nom de keyboard "pud," for his suggestion that unsold Web ad inventory be donated to non-profit organizations.

Clueless is how AT&T took out Northpoint , buying the assets and hosing the customers. Broadband users won't forget it, nor will they forgive it.

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