A Clue..to Internet Commerce

by Dana Blankenhorn

For the Week of March 24, 1997

Volume 1, No. 4

This Week's Clue: Personalization

Where are the open jobs for crackerjack Internet programmers? Personalization services.

These are software systems for Web sites using a technique called "collaborative filtering," matching your preferences with those of others to identify things you might like to try. The technology's already been displayed at Firefly and MovieCritic, and it's also being offered for sale by Likeminds, WiseWire (formerly Empirical Media), Gustos, and NetPerceptions.

What these programs do is easy to visualize. Mentally graph your tastes in music -- do you like Mozart or Beethoven, Clint Black or Wynonna, R.E.M or Nine-Inch Nails, Dr. Dre or Lionel Ritchie? Collect a bunch of these preference lists, add basic demographic data like your sex and age, run through an Oracle database and presto! Recommendations that are at least worth a look.

Needless to say, retailers like this very much. Barnes & Noble wants to make Firefly's technology the heart of its new online store. Its target is Amazon.com, which already uses NetPerceptions' GroupLens for recommendations. Firefly is closing its Web site and "service-izing" its offering through companies like Yahoo, Ziff-Davis, and Reuters New Media. The idea is to use a single Firefly Passport file of preferences across a number of sites, based on the idea that the more sites which share a format the easier it is to collect data, and the more data you have in your Passport the better the recommendations you can get.

Firefly's spent the last year nailing-down its allies, and pushing a privacy standard, both on its own and with a consortium called eTrust. The idea's sound -- if you're going to let some big stores share data on you, you want to have some control over the process.

What's wrong with this picture? For starters, costs. Your Web site can't use most of this stuff -- we're talking tens of thousands of dollars for the database server, software, and customization. Despite all the hoopla, most vendors are offering one-off solutions. An exception may be LikeMinds, which comes from Songline Studios and, through Songline, the folks at O'Reilly & Associates. Of course, AOL holds a big stake in Songline, and they're not anxious to offer this at popular prices.

The best-deal for small Web businesses is undoubtedly Gustos, which offers its Java-based technology free to consumers, and can build a revenue-sharing relationships with Web sites. WiseWire is also looking to do some ad-driven deals.

How about a clue to these questions of morality? Forget eTrust for a moment. The bad news is privacy standards will be set by the market. The good news is that the market's far more moral than most participants in it believe. For personalization to work, you must trust, absolutely trust, the Web site offering the service. It's something you use to add to an existing relationship, not something on which to base a relationship. Big, clueless companies see personalization as a short-cut to market dominance. There are no short-cuts.

Novell Buys A Clue

Novell has, in the course of just a few years, turned a near-monopoly in local networking software into a near-hopeless position. But by hiring Sun's chief scientist, Eric Schmidt, as its new CEO, the company's finally bought a clue.

Will it be enough? Schmidt, who pushed Java to its present prominence, has no bureaucratic experience, no demonstrated management expertise. He's a visionary and communicator. Only total control of operations, and strong hands committed to his vision, will give Schmidt a puncher's chance. Still, we're all stakeholders in this -- if local networks are truly clued-in, under Internet standards, it will be good for everyone. So wish him luck.

Dangers in WebMail

This newsletter is a form of "WebMail," offered as an .htm file which provides live hot-links to readers.

We've been offered sponsorships, and might consider them down the road. But here's one we won't consider. First Virtual Holdings' VirtualTAG -- banners with forms that can handle transactions. Yes, they can be included in e-mails, but beware. They take 20-40 Kb to store, far above the 10 Kb limits set by the Internet Advertising Bureau . Narrative Communications says its version, Enliven, turns banners into "webfomercials." DimensionX, best-known for its 3-D browser, is also in this market.

A clue. In considering advertising, remember that your credibility's on the line, not just that of your advertiser. Anger a reader, with technology or spams, and you can burn yourself quickly.

Why Mass Merchants Fail Online

Greg Stuart has worked for many mass merchants, helping them understand online technology. He says they're frustrated. None has yet stepped into direct e-mail solicitations, and not just for the obvious reason. The problem is the lists are too small, he says. Lists which are big enough to offer a return are all "opt-out," and no one wants to put their good name on the line or be accused of spamming by a TV network.

Their problems with the Web are similar. Even busy Web sites lack the large number of users needed to move market share numbers for big companies. AOL has 8 million members? The Internet has 40 million users? America alone has 260 million consumers. While the online world's interesting, very-much worth study, in other words, it's not yet ready for prime-time.

Your clue. You still have time to build. The big challenges are still in scaling small Web businesses up as they grow. The threat of mass merchants dominating the online world is vastly overrated.

Is Wired Getting Tired?

Wired's deal to turn Feed into its East Coast bureau comes with a price -- the separate vision of Steve Johnson.

In a recent column dubbed "Paradigm Shtick," Johnson bites down hard on the hand that's feeding him. Wired's recent cover story, claiming push-technologies like Backweb, Marimba and PointCast will replace browsers is pushing Johnson's buttons. As well they should.

Push is great, if you like what's being pushed to you. Johnson notes that default pages and bookmarks are just as easy to use as PointCast, but that's not the real point here. The real point is that, once a few sources of data are defined in a push format, users can stop thinking about where their news and views come from.

In the end push technology is yet-another attempt by Big Media to make the Internet wheel stop with their numbers holding the ball. It's based on the assumption that people are stupid, or lazy, and that monopolies can be created in a technology where the cost-of-entry is near zero. Clueless? Definitely. Tired? You betcha.

Clued-In, Clueless

Clued-in this week, if you haven't guessed by now, is Steve Johnson of Feed Magazine. Steve long-ago figured out the key to success online -- make outgo match income. In a truly new medium, understanding is far more important than capital, and while money does sing a siren song, being true to yourself, your visions and views, means more than all the money in the world.

Clueless is Chris Matthews of "Hardball," and every other mainstream news-talker who hosted "debates" over the Communications Decency Act before it went before the Supreme Court last week. The issue isn't child molesters, or dirty pictures being seen by teenagers. The issue is whether the First Amendment can be defined-away simply because the "press" in question uses magnetic ink. Here's a clue, Chris -- even the CDA's ardent defenders, on your program, were denying the plain language of their law. It was a hint you were too-busy hyperventilating to take.

Special Clueless Couple award this week to Time and CompuServe. The two are now in court over $3.5 million Time claims it's lost because CompuServe cancelled a deal for Time to anchor its online news coverage. Time had left AOL, amid great fanfare, in 1995, figuring CompuServe could bring it more money, along with a bunch of push technology. Greed meets stupidity, the whole affair's in the papers -- Ted Turner needs to get online and clean house. (Turner previously was rumored to be angling for his CNN group to run Time's online operations. This might be the time to revisit that.)

A Clue...to Internet Commerce is a weekly publication of @Have Modem, Will Travel. It's sent free to a qualified e-mail list. It carries a list price of $49 per year. Subscribers can receive either a .txt file or an .htm file. The .htm version features links which become active when online with 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, of a message replying to this post. To request your free copy, write us at Dana Blankenhorn@worldnet.att.net. We're on the Web at www.tbass.com/clue and www.ppn.org/clue .

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