Some of the Web's earliest assumptions did turn out to be true.
One such assumption was that, in some cases, there is just one winner. But the idea of getting there "firstest with the mostest" turned out to be wrong. Getting there with the mostest - the most technology, the most service, the most value - turned out to be a lot more important than getting there firstest.
An example of this principle can be found in what folks in the last century called "the portal wars."
The portal wars are now over, and the winner has been crowned. It's instructive to look at who won and why. Yahoo, Excite, Lycos, Microsoft and all the TV networks created "me-too" indexes or search engines, then loaded up on features and claimed to be full-fledged Web destinations. None of them won the day.
Instead the winner was Google, a site that didn't even exist when the "wars" were over. Google recognized from the first the war wasn't about being a "portal" - it was about being a search engine. Google built the best search engine, the best hardware platform (shared servers) for delivering it, and built an organization that could run without much intrusive advertising.
Now, of course, they have to "monetize" it. They have to bring in profits, and they have to make those profits increase. Their first step was to extend their niche into Usenet, and my guess is they will go into e-mail newsletters next. (I can't wait.) (They quietly went into individual site searches a while back and just as quietly, cleaned up.)
There are ways in which Google can get a higher CP/M for its placements without bothering users too much. One way is I-Lor. This "beyond the banner" technology holds promise, even on text-based ads. Turning ad links into real service makes them more useful. The I-Lor people must have a Clue because they have just such a link in operation now on their own site.
Here's another "war" that was won quietly, but not by whom you'd expect. This was the war to become the default news aggregator. There were a bunch of contestants, including Newsedge, Individual Inc. and Internet.Com's Newslinx. The winner (if you haven't guessed by now) was Moreover.Com.
The answer, as in Google's case, was superior software. Moreover created a great way to index news stories, a great way to search that index on a granular level, and a simple system for posting the results on any Web site. Not only did this make Moreover the winner - starting on small sites and then working up - it made its technology (RSS) a winner as well.
RSS is simply a set of XML tags showing how to index each story, by title, link and description. It becomes the basis of an extremely powerful (and simple) search procedure. The only (mildly) objectionable thing Moreover ever did was open every link in a new browser window, making things a little harder to follow for researchers - but only a little.
If you deliver the best possible software to service a need, in other words, you can win the market. Monetizing that effectively is a separate struggle, where you need to be careful and understand that your users made you (and that your users can break you).
AOL's software holds a third important market. It has the best Web application suite. That's really what AOL is - an application suite backed by a "walled garden" of services using that software. ISPs (and even me) didn't realize this was the game until the game was nearly over. (The only ISP to really understand the game, it seems, was Microsoft - and in fact both AOL and MSN are really just resellers of Worldcom's local Internet service.)
But now AOL is under increasing pressure to "monetize" its asset, and it's hosing users in the process. It's getting away with this because the users don't feel they have anywhere else to go.
That may no longer be true. A company called Portalvision is hoping to arm ISPs with their own suites, and to arm affinity groups of all types with such suites as well. The suites include all the functions of the AOL suite - including chat, "Buddy Lists" and Instant Messaging. These can all be branded and fully customized - the manager can control what users do online more thoroughly than AOL by incorporating their own censorware in the suite (or on their server).
The company is now calling on ISPs and affinity groups, hoping to train everyone from your local preacher to the roadies of your favorite band how to create fully functioning online communities. Unlike AOL's communities, there's a business model here that can give the affinity group a hefty profit. (On a local level it can also help small local ISPs compete.) AOL has given this company an opening by raising its prices. We'll see if they have the financial strength to go through it.
Just remember the key Clue this week. The best software wins.
I'll be doing a teleconference this week for the folks at Wz.Com on Internet strategy and business models. It's part of their "The 45-second Mentor Program." Hope to hear you there.
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.
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Takes on the News
Wanna Buy a Portal?
Has anyone noticed that attempts to sell portals Altavista , Excite , and (even) Yahoo have been met by giant yawns?
There is an important Clue here, but it's not what you think. The Clue is not that the advertising-supported Web is dead, or that there's no business model in portals.
The Clue is that every publisher must know his or her audience.
TV and radio stations know their audiences through rating services - they know how many people watch or listen to each show, and how much of each market segment they're drawing. Newspapers know their audiences through subscription lists. You can easily find just how small a percentage of readers in each market take the newspaper. Magazines don't just have subscription lists - they also have audits. Ad buyers can know exactly how much of a market segment they're reaching with each buy.
Portals evaluated themselves solely on clickthroughs - the demographic sales were made through technology platforms that guessed the characteristics of individuals. They could only tell you how much of the total Internet audience they were drawing - they still know nothing about the characteristics of that audience.
When everyone was fat and happy, the portals did nothing to meet Madison Avenue's expectations on audience measurement. Now they're starving and have no money with which to meet them. But you can now get these portals for pennies on the dollar. If you follow up with detailed demographic studies, with audits, and with data ad buyers can bank on, you can turn any of these outfits around.
The Bigger Ad Problem
The biggest problem for the Internet advertising community is that the total advertising pie is shrinking.
At the recent AAAA meetings executives admitted they would be happy to break even in 2001 . Total advertising budgets are liable to be lower overall.
This means every medium is pulling out all the stops to maintain their market share. Internet executives, who figured advertising sold itself, had no inkling they would actually have to compete for business and so are left with the dregs .
Numbers are one ingredient for a comeback. But you also have to invest in people. Sites (and networks) must find salesmen who can schmooze the right contacts and get advertisers to "sign on the line that is dotted." Sites that are cutting staffs, rather than rewarding their best closers, are the sites that are still to close.
Amazon Will Survive
This is not investment advice. I can't even say that Jeff Bezos will still be in charge 5 years from now. But it is becoming increasingly clear that Amazon.com, the poster child of e-commerce, will survive (and probably thrive) in the years to come.
Amazon knows the task ahead. It must increase the capacity utilization of its mammoth infrastructure to turn losses into profits. It is doing this in a variety of ways, and it's closing those warehouses it can't sustain.
Amazon has decisively (and quietly) broken out of its home niche, selling consumer electronics fairly effectively and by taking over the online operations of Toys R Us. It can probably negotiate other such deals, and even if it can't it can simply close more warehouses.
Amazon has quietly raised prices, taken control of its databases, and reduced its affiliate marketing costs substantially. There have been complaints, but they have been muted. It is continuing to sell merchandise in massive quantities through the downturn - all it really must do is match sales to costs.
The survival of Amazon, moreover, offers hope to everyone else engaged in e-commerce. Its lessons are our lessons, and taking-in both its problems and its solutions will help all of us find the way out of the present recession.
Clued-in is Earthlink for not knuckling-under to demands of record companies that it kick-off users the RIAA claims run Gnutella. Supporting your customers is always good business.
Clueless is the whole idea of Terra Lycos buying Earthlink . Terra brings nothing to the party but money, the executive suite of Earthlink would likely skedaddle like Lycos', and losses would inevitably follow. Fools and their money are soon parted, even when there's $2 billion available.
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