A-Clue.Com
by Dana Blankenhorn
Volume V, No. LII
For the Week of December 31, 2001

This Week's Clue: What We'll See In 2002

This Week's Clue: What We'll See In 2002

SSP (Shameless Self Promotion)

SP (Shameless Promotion)

They Didn't Want The Web

Wasting Billions

The Truth About Holiday Results

Clued-in, Clueless

The problem with predicting the future is that predictions are usually based on the past. 

The "Naisbitt Method," used in the "Megatrends" books, was to collect newspaper stories from the last few years and extrapolate those trends forward . It works, after a fashion. But it doesn't really work at all.

The Naisbitt method doesn't account for economic cycles, which produce constant change for all businesses. It doesn't account for sudden shocks like September 11. It doesn't account for sudden technology changes, like the World Wide Web. It doesn't account for sudden changes in government policy, or changes in the national mood.

Given all that, anyone who looks ahead must do so with caveats and a bit of trepidation. It also helps to be humble and look at your own record.

Last year I predicted, "Fasten your seat belts. It's going to be a bumpy night." (Got that right.) A year earlier I predicted that IP Version 6 would become a key political issue. . (Got that wrong.) Then there was December 1997, when I predicted that many Internet start-ups would soon discover new chapters to their stories - 11 and 7. . (Right, but frankly too early to be useful.)

Now that you've seen my record as a seer, let's move ahead:

The top trend of 2002 will be 802.11, or "Wi-Fi." Venture capitalists are starting to back companies that deliver commercial-grade wireless broadband . The industry has begun developing its own press sources . It has even gotten its own backlash .

The economics of Wi-Fi are compelling. You don't need a frequency allocation, the equipment is cheap, and the result is to extend every corporate network and broadband connection using it. If you can cellularize and sectorize this connectivity, you have a broadband overlay that can completely bypass the ILECs -- Verizon, Qwest, SBC and BellSouth. (Connections can be made directly to long distance POPs or fiber runs.)

The countervailing trend will be a full-on attempt to re-regulate telecommunications, led again by the ILECs. Their latest argument is based on September 11. Only giant competitors should be allowed to go against the Bells, Verizon insists, claiming no collection of small companies could have brought back service to Lower Manhattan. That's completely unproven, and three months after the disaster, 10,000 phone lines there still don't work.

Arguments here are irrelevant anyway - instead analysts should follow the money. The Tauzin-Dingell subsidized monopoly bill will come up again in March . If it passes every small business in America should re-evaluate its support for anyone who voted "aye."

The biggest unsolved problem Webmasters face entering 2002 is finding a way to pay for content. Most content remains on the Web, but advertisers are looking elsewhere - to e-mail, to "wraps", and to sponsoring software -- for their branding.

When they advertise in this way their brand message gets across, unfiltered, while consumers aren't angered. When consumers get angry, brands get hurt. And consumers have been angered by such things as "mouse-over" ads that cover content, or pop-ups, pop-unders, and pop-overs that made them play "whack-a-mole" in 2001 or get anti-ad software .

I expect you'll see a lot more sponsorships, with whole pages or sections surrounded by a single advertiser's message, in the next few months. I think you'll see more Web publishers buying pre-and-post impression studies, and auditing their circulations (at the risk of losing much of it). But the Web ad recovery (as opposed to the Internet ad recovery, which has already begun) will be slow.

Security and law enforcement are obvious trends for 2002. In the wake of September 11 governments worldwide demanded, and received, all the legal authority they need to learn what you read, write and do on this medium, in the name of preventing another disaster. Governments have also greatly expanded their budgets for Internet "law enforcement," not just aiming at terrorists but at violations of copyright as well. How well they implement these powers, and how they move to expand their control to, say, music copyright and all material relating to sex and violence, will be worth watching.

Law enforcement is not just a tax on those who disobey the law. It also has a "chilling effect" on borderline economic activity. Some now fear the Net because of what criminals may do to them. Others could well fear the Net because of what government might do to them -- that will cut growth. Real criminals will continue their arms race, looking to new types of encryption and steganography to keep their dirty deeds from prying eyes. If music lovers are encrypting to protect their Britney Spears collections, it's easy to see another Osama Bin Laden keeping well-hidden in that haystack.

The best answer, the logical answer, is to rationalize the law. The best answer is to make criminal only those acts that are truly dangerous, and to leave the rest of us feeling secure, happy to cooperate with the police. That won't happen in 2002, but before the end of the year millions more will ask why not.

Not everything is terrorism, Mr. Ashcroft. If you think that last statement makes me an enemy of the state, the Administration will have a very hard year indeed. 


SSP (Shameless Self-Promotion)

It's here! Finally, the Print on Demand version of "Living on the Internet" is available for purchase at BookSurge.Com , for $29.99. And you can get the PDF version for just $7.99 (such a deal). The December update to the book will be coming out soon, and it's easy to get on the list via e-mail.

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 , BtoB, and Boardwatch. I'm also on the mast-head at Bottom Line Personal , a great print newsletter. Remember that it's journalism that keeps the Clues coming...


Shameless Promotion

E-mail marketing works, but only if it's based on a relationship and a database.

Permission is just the first step. An audit of your database to eliminate extraneous names is the second step. Building interactive relationships with every name in that database should be your Job One, the main creator of value in your company.

You can take the first step on this journey with help from my friends at Whitehat Interactive - click here to begin.


Takes on the News

They Didn't Want The Web

There's a great Clue hidden in the $10.7 billion purchase of the USA Cable assets from Barry Diller, which will also put him in charge of Vivendi's whole entertainment empire .

The Clue was - no one wanted the Web. Diller owns a bunch of Web assets - HSN, Ticketmaster, CitySearch. Some of them even make money. But Vivendi's bid doesn't include them. Diller keeps them, but his own attention will be riveted elsewhere, on his first love -- movies and TV. He's spinning that part of the deal like a win , but it is in fact a loss.

While it's likely Diller will try to associate his Web sites with the Vivendi assets, it's not clear Vivendi will be happy about it, since there's nothing in it for them. If he doesn't do that, the assets are left hanging by themselves. And, as I said, these are valuable assets.

It's a sure sign of a market bottom. When an industry's assets are dismissed just a few years after being overvalued, it's certain the truth is somewhere in the middle.

Wasting Billions

The bidding war AT&T is trying to create for its cable assets will likely drag down the buyer, not the seller.

I'm an AT&T Broadband customer, and I shouldn't be. The service is terrible, it's overpriced, it's filled with house ads against cable box theft (who would want to), and the company even refused to buy the rights to local college basketball, meaning its subscribers wind up with less service than if they didn't have cable. If my house weren't surrounded by big trees I'd get a dish in a heartbeat, and I still may do it when I get back from vacation.

We haven't even talked about the potential competition of Wi-Fi, or AT&T's horrible performance in the wake of the @Home collapse.

Cable is, quite simply, a non-competitive industry. It has the worst customer service reputation of any American industry, even worse than the phone companies. AOL and Microsoft are competing to "own" this business and its customers, but why spend billions on bad will, then force these people to take your crappy software on top of it?

Gimme a Dish.

The Truth About Holiday Results

Online sales for all of 2001 rose 11% from 2000, to $11.9 billion. To some that's leveling off , even a bit disappointing.

It shouldn't be. The law of numbers states that the bigger they get, the harder they are to nudge up by the same percentage. The influence of online retailing shouldn't just be measured by direct sales, but by the offline sales generated through online browsing. Those stores that don't have sites, in other words, probably lost business to those which did. Those stores with poor sites probably lost business to stores with better ones.

Recessions are also very hard on retailers generally. New York City said this Christmas sales were 30% below a year ago. Redbook said sales for the first two weeks of December were down 4.6% from a year before . The drop was especially bad for high-end luxury goods. In order to get an 11% jump in sales, in other words, the Web not only had to buck a downward trend, but had to generate a much larger jump in actual deliveries.

Analysts were very upset that November retail sales figures were down 3.7% from a year before , but all retailers put goods on sale during the month, that's what buyers went for, so it's likely merchants actually moved more merchandise, despite the fact that the goods sold for less than before.

All in all this was just a good year to be a customer. The Web's success as a buying medium needs to be seen in the long term, not the short. And the long term outlook is very bright indeed.

Clued-in, Clueless

Clued-in is Google, for their catalog search engine . The company has managed to completely avoid the mis-steps that killed older search engines (like Excite), while creating new ways for it to profit, and it keeps getting better by keeping customers' needs first.

Clueless is Google, for ignoring reports on how hackers are abusing it . I sent their PR department a question with a link to this story, and a week later got a blanket denial that seemed to indicate they hadn't read the thing. (Denial ain't just a river in Egypt.)


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