by Dana Blankenhorn
Volume V, No. XVIII
For the Week of May 14, 2001

This Week's Clue: The Index Free Zone

This Week's Clue: The Index Free Zone

SSP (Shameless Self Promotion)

SP (Shameless Promotion)

Truth: Internet Still Growing

The Linux Desktop

More Room for You (More Room for Me)

Clued-in, Clueless

Most Internet services rely on indexes and search engines to be useful. The 1995 excitement over Yahoo stemmed from this realization. 

Moves were made quickly to create other types of indexes to make other Internet services more useful. While Deja.com failed in the marketplace, it provided a valuable service - which Google recognized in buying it this year. E-mail directories like Switchboard, now part owned by CBS, were done-in by the spam flood, which caused most people to prefer that their e-mail addresses remain anonymous. (E-mail forwarding services now fill this need.) 

One of the first roles for Topica was to index and make searchable e-mail newsletters (like the one you're reading) and digest lists (like I-Strategy), but I found out recently (for ClickZ) that they've given up on this function. 

As a result the best e-mail newsletter products are at a severe disadvantage. Users can find newsletters that evolved from print easily. They can't find online only publications. There are 44 different e-mail listing services out there, everything from Asphyxia.Com to Zineconnection, but the sign-up process on all these directories is manual. The sites have no capital, no way to gather a user base, the resulting sites are kludgy and (most important) they're incomplete - they can't provide the service people need.

Two companies - Google.Com and Moreover.Com - have the reach and technology to solve this problem and deliver new revenue streams to newsletter and digest list owners. Google has over 3.1 million listings involving the word "newsletter" . Moreover's use of Rich Site Summary , a lightweight XML format for sharing headlines and other Web content, is also important here for revolutionizing how sites deliver industry-specific news to their readers.

An entrepreneur who combined these two resources (or who got the two companies to cooperate and put together their own tools) would have ample markets and minimal risk. What's needed is an application that creates accurate RSS tags on every newsletter or digest story, so they could be offered through a service like Moreover.

As with many other business plans in the post-bust Web, this is one that requires cooperation among existing players to work. That means you need a different skill set than the one that broke early niches. You need someone who can sell in a boardroom, who can craft win-win agreements among people who are jealously guarding their turf, and who can then market these agreements to a host of suspicious individualists who have been burned once and are thus twice-shy. 

The software, in other words, is the easy part. But there's a lot of functionality, and thus a lot of profit, to be had here for lots of people. And that's the direction entrepreneurs need to go in. 

SSP (Shameless Self-Promotion)

Boardwatch  has launched its newsletter under my byline called ISP Executive. Check it out. I'm also doing a series of features this month for Advertising Age on new media technologies, for publication in June. If you want to be interviewed for it give me a call.

Join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Adventive. 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...

Shameless Promotion

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So don't delay. Your investment is minimal and the potential benefits enormous. Click the link.

Takes on the News

Truth: Internet Still Growing

Nearly everyone in this business makes mistakes, including me. We look at the headlines, not the reality. Or we look at the leading edge and fail to see the mass market.

So it is with the dial-up Internet. It's still growing. And it's having a dramatic impact on regular phone service, according to a "USA Today" story that I hope hasn't been taken-down by the time you read this.

Assuming it has been taken down let me explain. The problem is, simply, that telephone networks are engineered so that 8% of us will be on the phone at once. Many modem users stay on for hours at a time, making it harder to get dial tones in many areas, the newspaper reports. Verizon alone had to pay Vermont consumers $30,000 last year for failing to add enough dial tones to serve the phone market. It blamed modem users, and said it would market DSL heavily to them. (This marketing provides a great opportunity to ISPs - they can demand open access as a cure to dial tone shortages.)

The Linux Desktop

A single blow is needed to break Microsoft's monopoly over operating systems (and by extension the Internet). That blow is a successful Linux desktop.

Right now Microsoft cows the major hardware makers (although Dell has released Linux servers) and existing Linux players are either broke or concentrating hard on the server end of the business.

But the opportunity is massive for a device pre-loaded with applications (that can write to Microsoft formats), based on a flat panel screen, rented (not sold) by ISPs along with broadband service for a total of, say, $75-100/month.

Linus Torvalds himself makes an appealing spokesman, so he could be a key element in the marketing. (You could even call the device the Linus.) His response to Microsoft's current challenge to open source, "I'd rather listen to Newton than to Mundie" , given to Dan Gillmor of the San Jose Mercury-News early this month, is really priceless. Linus was referencing Newton's own acknowledgement of his achievements, "If I have been able to see further, it was only because I stood on the shoulders of giants." (Do you start to see this campaign coming together?)

The companies in the best position to exploit this opportunity are Red Hat and VA Linux, which combine the software expertise, ISP street credibility and manufacturing capabilities necessary to push this solution. Of the two Red Hat looks to be the Microsoft, VA the Intel, but the former (frankly) looks like the better long-term bet (although I still own stock in the latter).

More Room for You (More Room for Me)

The Industry Standard (which is trying hard these days to remake itself as a technology industry "Business Week") took a quick look at Webmergers' statistics recently. They came up with 55 dot-coms going under in April following 44 closings in March and 58 more in February . The value of industry merger activity has also plummeted from $5 billion in March to $2.6 billion in April.

Many people will call this harvest of shame bad news, proof that the Internet is bad for business. In fact the opposite is true. The Internet, like every other medium, is bad for bad businesses.

The rash of failures also means there are a host of great niches that have either cleared for good companies or cleared-out for new start-ups. These new start-ups won't get venture funding. They will have to be profitable from day one. Their initial success will also draw a host of larger companies into their niches, all anxious to steal away the new market. That's the point where the ambitious start-up should look for outside funding, not before. It's also the point where they should consider what they are, whether they want to stay small or sell out.

There's nothing wrong with any of this. Welcome to the real world of business. These are the choices faced by retailers, by law firms, by restaurants, and by every other business that discovers and exploits a new niche.

Clued-in, Clueless

Clued-in is Larry Fullerton , who has spent nearly 25 years perfecting a new technology that allows data broadcasts across wide frequencies, done in bursts so they don't interfere with licensed traffic. This is his Clue, as described to Discover Magazine. "I've made it my job to find out what the edges of knowledge are, the fringes, and to extend them. It's the edges that are important and interesting." Learn more at his Web site

Clueless is the Internet advertising business, for letting itself get roped into "click-throughs" as the main measurement of ad success . They're one measure of an ad's direct response, but that's all they are.

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