by Dana Blankenhorn
Volume 1, No. V
He writes about his Easydiet.com site, which sells a weight-loss pill called chitosan. Big deal. Except that chitosan, like many products, is sold via multi-level marketing. Salesmen live on commissions from other salesmen they recruit. When his supplier cut him off, Dvorak switched to another for his "Web vending machine" and writes "controlling the channels of distribution are over forever thanks to the Web."
Disintermediation -- the process of getting rid of the middle-man -- is happening in all markets. It's behind last week's turmoil at NetGuide, my old stomping-grounds, where a new editor will cut the editorial budget. All computer magazine publishers are threatened by advertisers moving to the Web, where they haven't a clue how to make money. Companies whose loyal readers are in "the channel" -- like CMP's -- are most directly-threatened. But everyone's hurting: the betting here's Softbank will be broken-up this year and the most-profitable pieces picked up by Time-Warner, News Corp., and some others.
What's this mean for you? Opportunity. Sell direct, pass on the savings, and you can deliver huge value, even to a small number of customers, at low cost, then grow from there. Remember, you can model the entire marketing process -- draw an audience, advertise, offer credible and biased information, take the money, provide customer service -- on the Web. That's more than a clue...it's a business plan.
E*Trade has taken the big risk of a major network buy, part of CBS' coverage of the NCAA mens' basketball tournament . The brand-awareness campaign focuses on the benefits of Web-based trading, with an E*Trade logo offered in scoring summaries. The idea is to stake a leadership claim early-on, then grow with the market.
The profits from Web-based stock trading are huge -- orders are far less-expensive to execute by PC than by phone. This is the next stage beyond a $29 per trade price war --on a large block that's under a penny per share. It works because the broker gets use of your money, profiting from payments with floor brokers for placing the order, and building a relationship through which other investments can be offered.
Schwab has taken a more-conventional approach, concentrating its fire on national cable stations CNBC and CNNfn , buttressed by ads on the PointCast screen-saver and mentions of the site in other collateral. What's news is how the TV ads take-off after E*Trade, with Schwab himself claiming anyone can put an "e" in front of their name, but what counts is size and experience. Other Web-based sites making cable buys this quarter include J.B. Oxford and Quick & Reilly. One leader in the field, Ameritrade, which has four different Web trading sites (like Ceres and Aufhauser ), has actually made one of the smaller TV buys.
Your clue? You can get in as much trouble striking early as late. The costs of nework advertising are a big threat to E*Trade. Combine it with the negative turn the market's taking on Internet stocks and the danger becomes obvious. Unless E*Trade's advertising itself for-sale, the game's Schwab's to lose. And they're not clueless.
But people also have a right to resist. New versions of Z-Mail Pro, Eudora and Netscape's Communicator all support filtering -- sorting e-mail based on rules users create. (The first rule, of course, is don't send me junk.) Some Internet service providers have begun doing this at the server level, so junk doesn't get through to their users. A clue for spammers -- the market's more moral than you think.
Over the next few weeks you'll see a sponsorship banner on this newsletter from NetCreations. In exchange for this consideration, we'll be doing an e-mail to one of their targeted lists, offering A Clue at $49/year, with a 30-day money-back guarantee. We'll calculate the results and report them back to you. Of course, results vary with the offer, and the list it's sent to. But the only way to prove a point is to test it, and better I get flamed than you do, right?
Clueless this week is CMP Media , my beloved former employer. Besides their channel problems, they suffer from a history of over-promising on the Web, selling ads on their Techweb site which didn't draw promised traffic, running the NetGuide Live site from 3,000 miles away, badly, and generally trying to model the Web on the business they know -- publishing. CMP, you're a wonderful company with marvelous people, so we'll give you a clue. David Strom. Best of all, he's already working for you . Give this guy some power, then go and sin no more.
A Clue...to Internet Commerce is a weekly publication of @Have Modem, Will Travel. It's sent free to a qualified e-mail list. Like Netscape Navigator, it carries a list price -- $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