For the Week of July 29, 2002
The year 2002 is all about war.
We know about the War on Terrorism, and there will be more on that later in this issue. We've also talked here about the Copyright Wars, which are becoming increasingly vicious.
But there's a third, equally important war going on this year. I call it the Commercial War.
It has a lot in common with the Copyright Wars. There are a few big media companies desperate to make a profit, stretching the advertising format in ways previously associated only with porn. There are pop-ups, pop-unders, full-page ad splashes, ads that cover copy when you mouse over them and ads that jump in size to cover lead paragraphs even when you don't.
Unlike the Copyright Wars, there are both good guys and bad guys on the business team. Spammers have grown more sophisticated. There are spams that force-open browser windows, spams that try and force the download of foreign character sets, spams that avoid filters by spoofing the recipient's e-mail address in the "from" line. More important, there are a lot more spams.
I've been spending most of my time at home these days (thanks to the recession) but I know that the next time I leave home with my laptop I'd better bring my passwords and use Web interfaces, avoiding my POP3 mailer, Outlook Express. I've gotten 544 spams in the last 6 days. If I have to wait for them to download automatically I'll be online for an hour before doing anything, and in a hotel room the charges add up.
But using my Web interface is difficult. Earthlink, like other large ISPs, has been forced to close Port 25 access and eliminate all access to e-mail from outside its network. This makes it less likely to become a victim of spammers whose automated systems seek out open IP addresses and flood mailboxes from them. Reading your e-mail from a trade show terminal may no longer be possible. Trying to access your regular account from a cell phone, PDA, or any non-broadband connection is a waste of time. E-mail is being destroyed as both an effective advertising and editorial medium.
On the Web and in e-mail, users (and their allies) are fighting back.
Programs like Pop-Up Killer and PopUp Stopper have been around for a year now, but the big news here is the new version of ZoneAlarm Pro. All God's chillun need firewalls, but in addition to its other capabilities the new version of Pro includes ad-blocking. (part of its "privacy settings") as well as cookie blocking. It's not perfect, but it will get better, and with firewalls becoming standard even on dial-up accounts, the percentage of users whose software blocks pop-ups and pop-unders is bound to increase. It's a major escalation in the Commercial Wars.
Web sites have responded with a quiet boil. They claim that "ads are the price you pay for free service," threatening to close off access if ad blocking becomes popular. (They're also escalating with technology, and are likely to follow the copyright industry's lead in trying to stop their opponents from responding in kind.)
Advertisers must be skittish of buying ads that users won't see, and I don't think servers can really tell a block from a quick click on the "x" box. The result is that despite increasing "avails" the Web ad pie isn't growing, Web ad effectiveness is declining and, indeed, Web content is threatened. (Will the last person to leave ClickZ please turn out the lights?)
The Inbox battle is even fiercer. Many e-mail newsletters just like this one are being blacklisted, as angry (and forgetful) users report them to blackhole lists that don't double-check entries. Some ISPs now prevent users from sending e-mail to more than 25 people at once. Despite the passage of criminal anti-spam laws in Louisiana(and their upholding in California) the flood increases. So does user anger.
When a program like Spam Assassin or ChoiceMail puts you or your IP block on its blacklist, you may have no legal recourse, and not even your individual notes will get through to users who choose these tools. Worse, any victim who wins a case against blacklisting risks seeing spammers rush through the same loopholes, and spammers' lawyers are very active (since spammers do make a profit). They have already shut two major blackhole lists.
What does this add up to? Both the Web and e-mail are being ruined by greed, in an economic world that's currently ruled by fear. It's not a pretty picture, but even if the economic clouds lift soon, this problem will remain.
What's the solution? If you're into e-mail, I suggest you only go with a reputable double opt-in outfit like Whitehat. It will cost you more, in money, time and hassle, but it will make sure the mail goes through.
For content sites, the answer (paradoxically) is e-mail, along with the time value of information. Don't post your best stuff immediately. Send it first as a paid e-mail, then (some hours later) as a free e-mail backed by advertising. Your list must become your key asset.
The Commercial War won't end until some customers are blacklisted from the Internet, not just their spam, and until content sites can make a profit without porn-like ad formats. Your best choice right now is to opt-out of those wars in any way you can.
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Takes on the News
Where The Bear Goes From Here
I can't say I'm unhappy about the bear market. I've got nearly $50,000 in cash sitting in an IRA account, waiting for bargains.
Those bargains will be found in real companies showing real earnings at price multiples which are realistic on historical levels. (In the past, market tops came at a P/E ratio of 15, and there are still a ton of big outfits selling at 25.) Given the length and breadth of the bear run so far, I'd even wait for real bargains - good companies with sustainable, even growing earnings priced at P/Es of 10.
The problem with waiting for such an event is that the bear market becomes self-reinforcing. Consumers without assets will stop buying, eventually, driving earnings down. Thus, reasonable multiples will be found at ever-lower prices. Once the housing market cracks (and it will - it's in the process of cracking) the recession really gets started, and down we go again.
Trying to talk-up the market, as folks in politics, the marketplace, and the media have been doing lately, only delays the inevitable. Markets respond to action, not talk. Orange jumpsuits on people like Ken Lay, Jack Grubman, and (yes, maybe even) Dick Cheney would help. Even better would be hard time, life-time, for the crooks who cooked the books, transferred their assets off-shore, and sold at the top. No "Club Fed" vacations, I'm talking about deep, deep holes with new "friends" who think they got pretty mouths. If it's good enough for a crack dealer, it's good enough for them - they're worse.
Beyond that values will find their level. Prices will fall to slightly below that level, bargain-hunting will then commence, prices will stabilize at reasonable asset values, and only then can we buy with confidence. Clear the money-changers from the temple, put in regulation which guarantees future crooks get hard time, and wait for things to clear.
Once that happens, it's a wonderful world. A realistic e-book technology - a flat screen that can be rolled-up like paper, is finally coming out of the lab. Amazing stuff is always coming in the areas of chips, semiconductor materials and equipment. Moore's Law isn't dead - it's just getting started. That's the key difference between now and the 1930s. Progress today is picking up speed. Nothing can stop it - not monopoly, not government, not management, no matter how Clueless. Once the bottom is found, really found, buy tech.
Just as we anticipated Bob Pittman is out at AOL and AOL is on its way toward becoming "just another division" of Time Warner While the New York Times doesn't know it, the next move by Steve Case will not be to take the lead, but to walk the plank.
With Richard Parsons and his bureaucrats firmly in charge, all their mistakes can now be blamed on others (especially Case) while the complex balance sheet can be simplified. (The solution to the intractable Time Warner Entertainment price problem, for instance, is to simply let the market decide. what the thing's worth.)
The main problem with otherwise clued-in analysis is that, as usual, it's got 20-20 hindsight and no idea of what's coming. What's coming is a re-monopolization of the wired telecom infrastructure followed by its replacement, this time by wireless infrastructure.
In that environment AOL's cable assets, not its online service, is the albatross. The online service draws $10/month from 30 million people for its content and software. That's success you can build on. The cable properties, meanwhile, face destruction at the hands of satellite and the next generation of Wi-Fi. If they can be gotten-rid of at an attractive price (or even an unattractive one) then the stock becomes a buy. Until then don't touch it.
The biggest surprise in the whole deal to me is how little the company's media assets were really folded into the AOL service. Were Time, CNN, and Warner exclusives to AOL, you'd have a reason why nearly everyone would want to buy the service (as opposed to access), just as HBO's success is based on its original, exclusive shows. Dumping the cable assets and making Time Warner content exclusive to AOL is the best play, and it's the one most unlikely to be made.
Why We (Should) Fight
(Apologies for this if you're from Europe, Australia or elsewhere where a-clue.com goes. But I need to talk to my fellow Yanks for a moment.)
Call out the secret police
on me if you want, but I have a problem with the "War on Terrorism."
I object to the name and to the cause. The burning of the Gaspee in 1772 was terrorism. Sherman's 1864 march to the sea was terrorism (on a massive scale). General Doolittle's 1942 raid on Tokyo was terrorism (and we bless him for that). Taking any war to civilians with the aim of creating fear is terrorism. Terrorism, in other words, is a tactic, not an opponent.
America has also never gone to war solely against someone or some thing. We're always for something, usually something important. The war that began after the Gaspee incident was for "life, liberty and the pursuit of happiness." The war of Sherman's march was for "a new birth of freedom." The war of Doolittle's raid was on behalf of the "United Nations."While the Cold War was defined, especially during the McCarthy era, as being "anti-communist," that was a mistake. It was won because we were doing something affirmative, we were liberating people. In Ronald Reagan's words "tear down this wall."
Worse is that when you get the basics wrong, you wind up making stupid mistakes in terms of strategy and tactics. You play too much defense, for one thing, protecting everything everywhere from everybody. You define too many enemies. You might even accidentally, in the name of a good cause, create a Secret Police force.
The worst thing, of course, is that when you get the basics wrong, then make mistakes in strategy and tactics, you may lose. Define every Muslim as an enemy and winning gets harder. Define everyone who disagrees as an enemy and winning becomes impossible.
It's not like we don't have plenty to fight for. This medium, for one thing. The Internet was born of free men, built by free men, and those who use it - those who are free to read what they wish and write what they wish - they're all free men (and women). Coming to this medium is, in a way, coming to America. That's why Chinese people are willing to risk death to use an uncensored Internet Café. This medium is the enemy of every tyranny over the mind of man.
The danger is that, in the name of defense, and in the name of being against little causes and little men, we might lose all this. Saving everyone's e-mail is not only useless (our problem is in analysis, not data collection) it's against our principles. Invading peoples' homes without specific authority is against our principles. Secret police agencies and ethic internment camps are against our principles. When you violate your principles often enough, they become empty words. If we do that routinely we have lost, regardless of the war's outcome.
So why should we fight and what is our cause? We should fight for the liberty of everyone, everywhere, including those in Saudi Arabia whose Internet access is censored, and those in Sudan who are being enslaved by monsters on behalf of religious tyranny. Even if free governments of free people disagree strongly with us, we are not their enemies. Iran's democratic leaders deserve respect, and if the oligarchs of Egypt, or the Arabian peninsula, imprison the minds and spirits of their people (as Al-Qaeda alleges) they are not our friends. The world's house is divided, half-slave and half-free. I don't know the outcome of the struggle, but I do know the world will cease to be divided. It will become all one thing or all the other.
Democracy, freedom and liberty aren't just words. They're not just American. They are the universal inheritance of all humanity.
"Whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.".
"We here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth.".
With apologies to Dr. King's great work, then, some paraphrasing. Let freedom ring from every server on the Internet! But not only that; let freedom ring from Mecca and Medina. Let freedom ring from Baghdad and Teheran! Let freedom ring from Khartoum and Islamabad! Let freedom ring from every hill and every molehill of Egypt and Arabia. From every mountainside, and from every heart let freedom ring.
And all those who would deny freedom, whether in the name of religion, or of political self-interest, or of security, they have made themselves our enemies. Whether they're in the caves of Afghanistan, or in a seat of churchly power, or even in the government of America itself. They must be rooted out, they must be exposed, and they must be destroyed.
This should not be the War on Terrorism. If it is we'll lose. It should be a War for Human Liberation, especially the liberation of the Muslim world from tyrannies of military madmen, absolute monarchs and religious fanatics. Let's make this a cause worth dying for.
Clued-in is is Gordon Gook for his cogent criticisms of emerging U.S. telecomm policy. "Are we not now about to adopt a national policy of rewarding;
1. use of inefficient technology; 2. fear of innovation; 3. acquisition of debt in pursuit of diseconomies of scale; 4. fraud, and 5. if you are small and want to innovate forget it because investors like market power and even though the industry is bankrupt we do what investors like." Go get 'em, Gordo.
Clueless is Eli Noam, arguing that the answer to telecomm's problems would be a return to monopolies. Think a Qwest bankruptcy filing would change your mind?
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