A Clue...to Internet Commerce

by Dana Blankenhorn

For the Week of June 30, 1997

Volume I, No. XVIII

This Week's Clue: Game Networks

While the crowd examined boxes at PC Expo, I walked around E3 for clues on how low value-add products might make money on the Web.

Game companies are solving all the mass-market, low-technology problems publishers prefer to bemoan. Microsoft, naturally, led the way, offering free access to a host of its titles for sell-through, and drawing 275,000 registered users.(The site also takes a stab at that crowds' browser preferences by not supporting Netscape Navigator 3.0.)

At this show SegaSoft , which is only part-owned by Sega of Japan, was taking the next step. Heat.Net, like the Zone, can be accessed free, but if you're willing to pay $6/month you get something important -- live opponents, rankings, tournaments, and "frequent-player points" you can redeem for merchandise. Note the explicit value-for-money proposition.

Sega's getting smart out of desperation -- their Saturn game-machine has been blown-away by the rival Sony Playstation, which in turn doesn't stand-up to the Nintendo 64. But the knowledge of an impending execution can concentrate the mind. SegaSoft's also heading full-steam into PC gaming software, and those clued-into the industry suspect Sega itself will in time become a software house.

After hearing Intel chairman Andy Grove's keynote, this did not sound stupid. Intel's next platform, the Pentium II, is terrific for game play, and should be down to $1,500 by Christmas, 1998. There's no compelling reason right now for offices to upgrade (they'd rather try to NC or NetPC), and servers won't save the fourth quarter, so Grove's dancing as fast as he can into the home market. DVD drives will let National Geographic put out its 100 years' output onto one disk, not 10. USB connectors will let new players plug-in their joysticks in the middle of a contest and join the fun. The AGP bus, which replaces PCI, means add-in cards will go as fast as the Pentium II chip, which needs to be in a large module to access twin multi-megabit memory caches. Yeah, the PC will always cost 10 times more than a game machine, but it does 10 times more, he said.

While the game industry's winners, like Nintendo of America president Howard Lincoln, were acting coy about offering 64-megabyte hard drives (!?) for Christmas, the losers were heeding Grove's call to go beyond the 12-20 testosterone set, which loves fast-twitch shoot-em-ups, and find new markets. All the new markets sought at E3 -- kids, girls, families -- were exclusively for the PC. And even most of Sony's developers were hedging bets and going on the PC alongside the PlayStation.

Thus, the move to the Internet. SegaSoft and Microsoft were just two leaders in this rush. 2AM was offering to build games which deal with latency problems. Concentric Network was offering its network as a low-latency alternative to game companies. Twelve exhi itors at this show were offering multi-player online games, and this doesn't include AOL's WorldPlay , formerly the Imagination Network, or such networks as mPath. I also found two magazines devoted exclusively to online gaming.

Let's see. Multiple revenue streams, technical solutions to real problems, a ready, growing market, and Nintendo's asleep at the wheel. Your clue is that when Henry Ford drives down the road, it's best to be the #3 buggy-whip maker.

SSP (Shameless Self-Promotion)

Business is picking up. Check out the next issue of DOSV, Softbank's Japanese computer magazine, or the next issue of Internet & Electronic Commerce Strategies, to cite two examples. And AccessAtlanta is finally running my "Internet Insider" column.

That's good for you.Because it's journalism -- checking the news, calling people, listening carefully, writing on deadline -- which keeps us hot, although I also handle consulting and commercial writing (ask about those rates via e-mail). If you're looking for excellent work -- like that found in my column at Atlanta Computer Currents or my regular work for Net Marketing magazine, don't wait for the e-mail -- give me a call at 404-373-7634.

Taking Stock

I spent much of this week looking at online stock brokers for a fine newsletter publisher , and while they'll print my best stuff, I did leave with some clues for y'all.

Since I last looked-in on this group late last year, the bar's been raised considerably. You need to trade more products, offer lower commissions, and give-away tons of data to make a dent in this market. Ameritrade does it with four offerings -- each has a different mix of price points and service features. Sweet, but I wonder how long that will be viable, since customers are pushing everyone down to the same level, low prices with tons of service.

Winners get traders who plunk like Las Vegas rollers and expect to be treated that way. Anger one and he'll tell the world on sites like Silicon Investor, and it doesn't seem to help (much) to have someone in-the-group to argue -- that's just an invitation to a flame war. There's also lots of free and low-cost data -- including comparisons of the sites themselves.

Here's a clue. It may well turn out that the "sweet spot" of this market is to follow the assets, not the trades. That's the key to Schwab's success -- getting and keeping discount accounts means holding all those IRAs. So my best clue may be to look at what the first online traders did before they entered the market -- wrap accounts , which combine all an investor's assets on one monthly statement. Getting those accounts will mean offering a host of other services -- including banking services. So look for partners who know where the assets are, and who understand Internet banking. Let me know how you do...

Define Clueless...

I don't have all the answers. I'm a reporter. You wouldn't want a sportswriter running your ball team, nor a movie critic running your studio. But I have been covering the online business for 12 years, enough time to see patterns. I don't know it all, but the patterns have given me insights, which I call clues, into what's coming around the bend.

So when I name someone as "clued-in" or "clueless," it's no guarantee of success or failure. Success depends on many factors. Timing. Organization. Financial muscle. Management skill. It's not enough to just have a clue, and some defined here as "clueless" will march from success to success despite it all. (I'm sure you know people like that.)

Take James Cannavino of Perot Systems, whom we dumped on last week. Seems his $9 million purchase of assets from Nets Inc. wasn't entirely stupid. For one thing, good people are hard to find, and his purchase brought in over 50 top technical minds to a firm with 2,000 unfilled job openings at last count. The "assets" he bought were what those folks were working on. It also turns out he already had an operation in Cambridge, where Nets Inc. was officed, so these folks can get right to work. And his strategy is to build the same MRO systems Nets Inc. was working on, while keeping Perot's name in the background. (H.Ross, by the way, still keeps an interest in the company through the family trust, but he has no say in the management -- an outgrowth of his political career.)

On the other hand, many of those we've called "clued-in" would love to have Mr. Cannavino's bank accounts or management savvy. (When Holly Hunter is told in "Broadcast News" it must be great being right all the time, she replies "No, it's terrible." She's right.) For more on that, read on...

Clued-in, Clueless

Clued-in this week is Danny Sullivan, a British engineer who, like me, gives away his expertise for goodwill to generate other work. His latest effort is the "Search Engine Watch", designed to keep search engine users and web developers informed about all issues related to search engines around the world. Danny does for search engines what Jack Rickard does for Internet Service Providers. He's actually been doing it since April, 1996 and already has thousands on his mailing list. Great stuff, well worth a look.

Clueless, I'm afraid, is going to have to be CMP Media, which closed the best Internet book ever, Interactive Age, closed NetGuide after claiming it was doing great, and now is renaming their most successful trade, CommunicationsWeek, InternetWeek so they'll have a "play" in the field. Let's play piss-off-the-phone-company-advertisers to cover up our other mistakes -- it'll hype the IPO. First thing these shareholders ought to do is revolt.

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