by Dana Blankenhorn
Volume V, No. XXXIII
For the Week of August 20, 2001

This Week's Clue: Give Peace a Chance

This Week's Clue: Give Peace a Chance

SSP (Shameless Self Promotion)

SP (Shameless Promotion)

The Trouble with Linux

Sons of TotalNews

Turning Hackers into Heroes

Clued-in, Clueless

An old "Warner Brothers" cartoon from the 1930s featured two mountain families fighting one another. Every once in a while they would stop while a character would come through with a sign, saying "Let Us Have Peace." It became a running gag. At the end, I think, the guy with the sign was selling something.

The point is that war is only good for arms merchants, and best only for those arms merchants who are well away from the fighting. Yet these days everyone seems to be slouching toward war, both online and off.

The reason is simple. It takes two to make a marriage, but just one to make a divorce. That is, unless both sides in a dispute are committed to peace extremists will force them into war. 

Since this column is about the Internet, let's just review some of the online wars. Microsoft is fighting AOL, the Justice Department, and Linux. Copyright owners are fighting the "sons of Napster," and Linux users (who want open source DVD players) are among those caught in the crossfire. Meanwhile the Bells are treating the remaining competitive DSL providers the way Milosevic is alleged to have treated the Bosnian Muslims. Is it any wonder then that total U.S. Web traffic fell last month?

Both sides are losing in the struggle between AOL and Microsoft . Microsoft is down 3% for the last year, AOL is down 20%. Looking to Washington for answers is a losing strategy for big businesses - the resulting carnage among smaller businesses merely obscures that sad fact. Who cares if AOL now has a Senator and whether that is causing Gates tsuris. Lawyers and lobbyists don't make profits - they spend profits. They're the only winners when business goes to war in courtrooms and cloakrooms. 

What makes this so frustrating is the fact that in order for true peace to take hold the strong must bend. The result of total victory is merely oppression or monopoly - in a business sense it means inefficiency setting the stage for another war. 

The one constant in all the current struggles is the demand for total victory. Microsoft demands total autonomy in its Windows XP efforts despite the fact it's a proven monopolist. Music companies demand that fair use be ended because it might lead to piracy . The Bells think that if they can just kill DSL competition they will be able to go toe-to-toe with cable operators (who haven't been forced into competition as the Bells were). 

When all the "adults" in the world are acting like children it's very hard to see the general economy coming back. True growth comes from win-win agreements, not win-lose battles. The strategy for the rest of us should be to demand peace, to organize and make our voices heard on behalf of online peace. It may seem silly, even naïve, but if you raise your voice for peace, and act in a peaceful manner, you're actually telling the market something positive. All those who commit to peace, who agree to organize for peace, are telling their customers that they are ready for prosperity. 

SSP (Shameless Self-Promotion)

The draft is done. "Living on the Internet: How to Make Money, Live Right, and Fight For the 21st Century" is now in the hands of the folks at eBookAgent , which is arranging for electronic distribution. I'm hoping to add a monthly newsletter as an up-sell, available free to all buyers of the book. Your testimonials would be appreciated. Drop me a note if you need a sample chapter first .

You can join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Adventive.Com. You can also read me at ClickZ , B2B, at Boardwatch, ISP Executive, Sitepoint  and the new (paid) version of WorkZ. More deals are being sought. Remember that it's journalism that keeps the Clues coming...

Shameless Promotion

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Takes on the News

The Trouble with Linux

Linux continues to intrigue and repel the mainstream. Dan Gillmor (no friend of Microsoft) recently tried (and failed) to make an installation of Red Hat Linux work . VA Linux' decision to get out of hardware, followed by Dell's decision to drop support for Linux in its hardware, has cast a pall on the space.

But Linux' advantages over Windows are too obvious for its "fall" to be forever. Linux allows an unlimited number of simultaneous connections in a free system. Linux is very stable. Linux (as opposed to GNU-Linux) allows a plethora of economic models, making it open to entrepreneurial experiments.

The problem is that the recession has knocked the pins out of everyone who might experiment. ISPs and CLECs are on their backs. Investment comes in huge chunks that denies creative thinking. It takes small bets to win big advances.

Linux will come into the home on little cat feet. It will come in through home networking, as a server, pre-installed and configured by your broadband Internet supplier. (The Intel AnyPoint router runs under Linux.) It will come pre-installed with applications. (Someone has already produced a palmtop with Linux and Compaq has experimented with supporting such a system. ) It will come when people start thinking outside the designs Microsoft and Apple have stuck onto the market.

A computer doesn't have to be a box with a fan, a TV and a typewriter. It is, at heart, a capability, not a specific piece of hardware. Turn that Clue over in your mind, and come back to the market with the product of your imagination. You'll do well, and re-invigorate the market.

Sons of TotalNews

A lot of complaints have been lodged recently against software that "steals" content by inserting other ads on top of it. This is not new. It has been around ever since the "TotalNews" case, settled in 1997.

In the case of "Gator," the "wallet" that has come under fire for putting offers from competitors in front of browsers about to buy, the complaints are very late because Gator's business model has been obvious and well-publicized for years. (My problem with the system is it's obnoxious, sneaking into my "start-up" each time I use it to fill out a form, so that it re-loads without my bidding the next time I turn on the machine. It's constantly popping into a corner of my screen like a hyperactive child - I finally turned the thing off.)

The problem with Kazaa is altogether different. This program is not just a descendent of TotalNews, but of Napster as well. Under the DMCA, it's illegal. So if you're already illegal why not frame or "steal" others' content by linking words on one screen to content on another?

Kazaa forgot one thing - its successful business model means there's now someone to sue and, through a suit, a way to put the whole effort out of business. Next time, base yourself in Antigua and stay there.

All these companies also offer a second, very important lesson. There's nothing new online to excite people, so efforts are growing to "steal" users. The Clue is that of the zero-sum game. If you can create something exciting, you'll get both publicity and traffic more easily than if you try to fool folks.

Turning Hackers into Heroes

The Kazaa story should remind everyone how the recording industry's policy of turning hackers into heroes is hurting a lot of innocent people. That war is continuing unabated.

Pressplay and MusicNet are being investigated on antitrust grounds, but the fact is you can't have a monopoly, or a duopoly, until you have an opoly. You can't monopolize a business that doesn't exist. The conditions the recording industry has placed on its creations - that users be forbidden from exercising fair use on downloads - guarantees these efforts will fail. In a year we'll be left right back where we are now.

Here's another industry brainstorm - CDs that only play in audio CD machines, that won't work in PCs at all .

There is demand for music that's portable. There is a price people are willing to pay for that music. Rather than try and find that price, the industry is intent on using technology to destroy the rights buyers previously thought they had. Then they think their industry is going to grow? Instead of continuing to transform the underground from a group of hobbyists into an economic force (as the government did with marijuana) wouldn't it be better to create an economic model people will accept for downloading and exchanging music?

We're willing to lose billions of dollars and thousands of lives each year in the drug wars. We've made that decision as a society. Music companies need to ask themselves whether we're willing to do the same for them. I suspect the answer to that question is no.

Clued-in, Clueless

Clued-in is eBay, for their targeted acquisition strategy . This call is way overdue. First-mover advantage only counts if you execute to the market's specifications and pursue an acquisition strategy that makes sense - eBay has done both for several years.

Clueless is FCC chairman Michael Powell, ignoring the old 35% rule and creating a built-in conflict-of-interest with his own family media holdings. When power in Congress turns over (as it always does) Powell's public actions will become the Bush Administration's "Teapot Dome." (Is he too old for a spanking, General?)

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