by Dana Blankenhorn
Volume VI, No. II
For the Week of January 14, 2001

This Week's Clue: Internet Time as Money

This Week's Clue: Internet Time as Money 

SSP (Shameless Self Promotion)

SP (Shameless Promotion)

Why Enron Fell

Standards Can't Be Patented

Creeping Takeover of Yahoo

Clued-in, Clueless

The really important news of the last two weeks was the launch of the euro. Memories of war and snow will fade, but economic policy can go on forever.

Over a dozen countries have shelved their domestic currencies for the euro, which is now legal tender from the Baltic to the Mediterranean, and from Dresden to Lisbon. Merchants can no longer hide their customers' favorite products in high prices, consumers can easily compare salary offers across the continent, and governments have completely lost control of their monetary policies.

The Euro will be great for e-commerce as well. It simplifies operations, makes thousands of sites more directly competitive, and eliminates that ubiquitous industry known as the "Bureau du Change." It will drive costs out of business and make all of Europe more competitive. The euro may even act as a reserve currency, like the U.S. dollar, constraining American policymakers. (Competition is a good thing, especially when it comes to power.) 

Launching a new currency, and assuring its use, is a mammoth undertaking. That's the important lesson here for the Internet. 

For years we've had start-ups trying to manage new currencies, with disastrous results. Beanz, Flooz, and others went belly-up, leaving consumers with worthless ducats. Too much was given out, there was no fixed exchange rate, and the currency was too easy to abandon. 

One thing I write often here is that time is money, but money is also time. Time, not an arbitrary basket of goods, should be the basis of a true Internet currency. 

All "premium" Internet content requires a business model, and time is the best one we have. Its efficacy was proven a decade ago, when CompuServe and GEnie were the heart of the online world. Time had economic value then, which could be parsed among various departments (including editorial). Hours appeared on the pay stub, but they were actually toted-up in minutes and seconds.

Time (at a price) is the perfect currency for Internet music, Internet video, for premium content of all sorts. With the proper conversion ratios, Time could also be applied to cell phone contracts, and a hundred other fun activities.

An Internet currency of hours, minutes and seconds would be taken from consumers in the form of dollars, yen or euros, but it could also be granted back to them in various ways. New bands might pay people in Time to spend time listening to their stuff. Research companies could pay people in Time for completing surveys. 

Instead of measuring the cost of, say, this newsletter, as a quarter, we could measure it in terms of Internet Time, say five minutes. If you had a regular account for Time, in which you placed money, and a standard for measuring Time (so you knew how much you had and what you were spending for it) you could then value A-Clue against all the other premium online activities you might engage in. In this way more content that's now free would become premium, and people would pay more for common online activities. But you could link into firewalls (I could link to "The Wall Street Journal" if it were priced in Time) and many other problems now bedeviling the Net would disappear.

The creation of a currency called Internet Time is not a job solely for an entrepreneur. The necessary technology, after all, is trivial to create and exchange. The entrepreneur's job here is to convince the biggest sellers of time (like AOL and Microsoft) to use Internet Time, by convincing a major brand of value (like Visa or MasterCard) to set the value of Internet Time (the ratio of Time to money) and stand behind it. 

The biggest problem with that is everyone wants to control Time (thus money), and no one wants a Third Party (let alone an entrepreneur) to get a sniff. Windows XP is all about making Microsoft the banker of this Internet currency, giving Bill Gates a cut of every transaction. As a practical matter that won't work. Bankers can't be players, just as bookies can't gamble (as the case of Enron proved). 

Who would I call on to get Internet Time going? I'd start with Bank One. It's big in Visa and MasterCard, it's got a huge payment processing facility, and its Paymentech unit is the leader in processing Internet transactions. Get them behind Time, get them geared up to offer it and convert Time into money at a fixed rate, and you've got thousands of merchants (as well as hundreds of thousands of customers) ready to go. Then have Bank One ready to let go of Time (or at least most of it) so every large bank has an incentive to support the currency. It could then be integrated into payment networks (in the form of money for Time) and we can get this Internet economy moving again. 

Yes, the problem and solution here are the same. It's about Time. 

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.

This month I opened a new market for my articles with Ray Fix of Wildwood Marketing. The first one appeared here . More exciting deals are on the way.

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

Why Enron Fell

The collapse of Enron can be tied directly to its attempt to make a market in bandwidth . This is a market it knew nothing about. The reason for its collapse has never been a secret, even in China , although you wouldn't know that to read American consumer reporting on the bankruptcy.

The problem was that Enron owned 18,000 miles of fiber, and it valued the use of this asset at an unsustainable level, given the difficulty of connecting consumers to it via DSL or cable. As I've said before , the problem lay in claiming to make a market in a commodity it also claimed to control. If you're going to treat bandwidth (or real-time oil supplies) like pork bellies, then you must regulate the market like you do the one in pork bellies. In other words, you must make it transparent to all the market's players, and you must separate the operation of the market from participation in it.

Yet in the wake of the disaster none of the reporting I've seen has yet made this obvious point. Instead, the bandwidth glut itself is being blamed - there's no market when there's unlimited supply and tightly-limited demand. (Ever try to sell kittens?)

While the presence of a bandwidth glut is interesting (and why it's noted only after-the-fact is beyond me) that's irrelevant to the underlying problem. This kind of thing will happen again-and-again until b2b markets offer transparency. Transparency can't happen until there's a demand for it. Until then, we're going back to a pre-Internet market in many, many commodities, based on personal contact, phone calls, and plane rides. That means lower productivity, negative growth, and continued recession.

The press can start the economic ball rolling upward again by demanding transparency in real-time b2b markets, so that consumers (and voters) understand the issue and demand that regulators respond.

Standards Can't Be Patented

The growth of the Web is proof that industry standards shouldn't be patented. This is an obvious truth that some shysters working for the W3C ignored last year before they were put down by the community .

But we need to go further. The stupid "British Telecom" patent on linking was a great giggle but now it's happened again. This time the offender is Unified Data Technologies of Vancouver, Canada, which claims this patent covers the Resource Description Framework, used for (among other things) the RSS technology driving the A-Clue.Com newsfeed. UDT is now sending lawyer letters like they were spam-mail.

The possibility that people might try to extort Web users for using Web standards is serious and real . The only possible solution must be as serious as a heart attack. It's quite simple really. Not only must the W3C's patent policy clearly prohibit the use of patented technology in its standards , but it should find a way to go further. Legal mechanisms need to be put in place guaranteeing that once something becomes a Web standard it enters the public domain. Patent holders can look at proposed standards and any claimed technology will simply be taken out of the standard. But once it goes in, it's free.

Creeping Takeover of Yahoo

SBC knows everyone hates it, and with good reason. The ILEC is arrogant, ignorant, and bureaucratic. It's a regulated entity that wants both unregulated profits and monopoly power.

Its takeover of Prodigy puts a separate brand in front of its efforts to drive independent ISPs out of business. (It thinks we won't figure it out once Prodigy starts acting like a phone company.) Now SBC wants to do the same thing with Internet content, a business it knows nothing about and has no business being involved in. But it figures that if Prodigy forces an SBC-owned home page on users, and throws that site into users' faces continuously the way Microsoft does, then it can't lose. (SBC can't stand propositions where it can lose - that's why it should stay in the monopoly business.)

Anyway, watch this space . SBC has taken 3% of Yahoo from Softbank, which will next sell the remainder of its stake to the phone company, giving it nearly 20%. A few purchases in the open market and Yahoo's results will have to appear inside SBC's books, and SBC people will go on Yahoo's board. Yahoo Essentials then goes onto Prodigy's DSL disks, and voila (or so they think).

There's one problem. They don't know the territory , and this ain't Broadway, so there will be no happy endings.

Clued-in, Clueless

Clued-in is Larry Lessig's new book, "The Future of Ideas." It's important to discuss issues like copyright vs. the First Amendment, and it's vital that we have people discussing them who write in Clear English.

Clueless are most business reporters, for failing to understand one simple truth. When things go on sale, not as much money comes in for them. Price reductions mean recession, and their announcement must be seen in that light. This business of acting surprised later when results fail to meet forecasts due to sales is silly and ignorant.

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