A Clue..to Internet Commerce

by Dana Blankenhorn

For the Week of March 10, 1997

Volume 1, No. 2

  • Surviving the Internet Recession

  • Clues for Sharks: AT&T

  • Price me a Link

  • The Next Wave is International

  • Clued-In, Clueless

  • Surviving the Internet Recession

    It's already begun. "Cash burn," as NETCOM chairman David Garrison so charmingly puts it, is catching up with the Internet industry. MSN is laying-off 200, maybe more. Cybercash, Excite, and other market leaders which have run through their capital, may not survive. A recession is overdue -- it's the only way to get rid of the clueless.

    But how do you survive? Here are some clues:

    * Remember Business 101 -- Income and outgo must balance. Examine all your funding sources for stability, and work to reduce expenses to match.

    * Concentrate on Credibility -- Journalists always do this. You can too. Make your word your bond, and you won't lose friends you need when times get tough.

    * Give Value -- This newsletter is an example. Offer what you know, free, and your value will be rewarded as it should be, over time. Remember that what's in shortest supply, always, is time and talent, and if you give unto others, they'll give unto you.

    * Network -- Lists like I-Sales are invaluable for building contacts which will get you through to the other side.

    * Shoemaker, Stick to your Last -- Figure out what you do best, and concentrate on doing that. If you're best at writing software, don't get bogged down in marketing, and vice versa.

    * Don't Panic -- Concentrate on what's important, on what you want to do and what you need to keep. Let the rest go, and you'll be prepared to prosper in better times.

    The economist Joseph Schumpeter called recessions "creative destruction." Like forest fires, they burn off excess and leave room for new species to emerge. Plant your seeds now to ensure your survival.

    Clues for Sharks: AT&T

    If you don't know how to do something, here's a clue -- don't do it.

    AT&T may finally be figuring this out. Under chairman Robert Allen, the company's had more failures and false-starts than the New York Jets. From the "AT&T Business Network" and "Imagination Network" to the new "EasyCommerce Services," the company tried to buy-in early to businesses with no clear model for success, provided no special value and, as a result, failed.

    Maybe new president John "Big Kahuna" Walter, like new Jets' coach Bill "Big Tune" Parcell, can turn things around. Walter's first moves make sense. He hasn't just cut 1,700 jobs, but brought the Web inside the rest of the business. John Petrillo, who heads the company's Internet strategy, now reports to Walter. Walter's background at direct-mailer R.R. Donnelley indicates he may actually have A Clue.

    Why care, and what should he do now? At the end of the day we want big U.S. companies to be able to run the best of what we build. Big companies will bring your pot of gold, and they'll bring survivors the discipline needed to keep their edge.

    So Walter should take care to buy only winning companies which can benefit from what AT&T does best, which is run networks. An outfit like US Web, which designs and manages Web sites, could get bulk discounts on AT&T's Web and still offer a good price. And it should be run without interference, under its own name, for as long as possible.

    AT&T's only Internet success to date, WorldNet, also holds lessons. AT&T has the network and back-office systems to sell Internet access to millions. Taking it worldwide makes sense. So does its new deal with Blockbuster, distributing access disks in stores. It costs much less to do this than mail them, as AOL does, and cutting the costs of acquiring customers is the key to success, at $20/month or any other reasonable price. But buying start-ups, or hiring consultants to advise committees, is clueless. After all, you can get A Clue just by asking for it...

    Price me a Link

    Forget click-throughs, stop counting visits, and stop renting eyeballs. Here's a clue for making big money with a Web site that serves a small number of people.

    Imagine the last few paragraphs have been a review of a computer printer. Now, imagine this is a graphic at the top of the page and click here. Not worth much, is it? Now, click here. This may be considered ambush marketing. OK, now offer a link to the news:comp.periphs.printers discussion group. See the value you've added? Finally, what if you offered a link to the page on the Internet Shopping Network where that printer is sold? .

    Want to guarantee you can track that last link? Give your buyer an online coupon, a small file he can pass to the store worth $5 off the printer's purchase price. Now you're modeling the entire process of buying a printer -- unbiased information, a wide range of information, biased information, customer service, and the transaction itself. You have fully marketed that printer, and any good salesperson can find ways to extract that value from the printer's manufacturer.

    You can do the same thing for any good or service. To make money on the Web, don't worry just about subscriptions and ad revenues. To make the big money, first provide deep value.

    The Next Wave is International

    If I had a stringer in Tel Aviv right now, an honest, reliable reporter I could pay for each story I ran, my computer news site would be well ahead of the game. Same if I could find someone in Bangalore, or Singapore, Canton, or even Johannesburg.

    With one set of standards to meet, it is just a matter of time (and not much) before the Internet ceases to be an American lake. Vocaltec was just the tip of the iceberg, and if you have someone on the ground you can get those stories first, with little effort, and maximum impact.

    Why do smart companies like C/Net , Hotwired , Ziff-Davis and CMP only chase each other in San Francisco or Boston, ignoring the rest of the world? It's where the easy money is. But with no easy money left, it may be time to look elsewhere.

    Clued-In, Clueless

    This is our regular feature where we identify who's clued-in, and who lacks a clue, in Internet Commerce. Those who have a clue use the Web as it is, rather than modeling another medium on it, and know where their profit's coming from.

    Clued-in are the folks at Yoyodyne. They run contests for other sites, collecting demographics on users in the process. With all the talk of cookies, caches, push-technology and "spam" this business model actually works. It's the "Publisher's Clearinghouse" business model. It works, if you provide real value (even a lottery ticket) and don't mis-use what you get.

    Clueless this week is the Wall Street Journal. There's a reason Dow Jones faces a revolt by family shareholders -- short-sightedness. The Journal's for-pay Web site should be Exhibit A for the prosecution. By demanding money for access up-front they greatly limit their profit potential this year, even if they make a small profit this year. They also lose all links to the outside.

    A Clue...to Internet Commerce is a weekly publication of @Have Modem, Will Travel. It's sent free to a qualified e-mail list, and carries a list price of $49 per year. Subscribers can receive either a .txt file or an .htm file, the latter enables links on the page to be active when seen inside a browser, or an e-mail package like Netscape 3.0. (Let us know which you prefer.) To take your name off the list, simply write REMOVE as the subject, or content, or a message replying to this post. To request your free copy, write us at clue@tbass.com, or Dana.Blankenhorn@worldnet.att.net. We're on the Web at www.tbass.com/clue.html.

    A Clue...to Internet Commerce -- Copyright @Have Modem, Will Travel and Dana Blankenhorn, 1997.