A Clue...to Internet Commerce

by Dana Blankenhorn

For the Week of August 18, 1997

Volume I, No. XXV


This Week's Clue: Shovel This!

What's wrong with publishers' Web sites, from a business standpoint, can be summed up in one word -- shovelware. Shovelware means taking content you created for one medium and shoveling it onto the Web. I want to expand the definition a bit, to content (even Web-only content) shoveled to users without provision of a good feedback loop which will keep people online, make them loyal to the site, and build relationships which lead to purchases. (If you're not charging a per-hour fee to users, you have to get your money out through the buying responses of those users.)

A few years ago Cox Enterprises Inc. chairman James Cox Kennedy addressed an Atlanta Press Club reception and said the key to the Web was "re-purposing" content from newspapers, TV and radio. Dumber words were never spoken. It's his money, but it's going down the tubes at sites like Fastball.com, Yall.com and Access Atlanta .

Why? Lack of a comfortable feedback loop. Employees spending too much time shoveling newspaper stories online, not enough time massaging users and building messaging traffic. The arrogance of a staff which thinks that, because they work for a local media monopoly, they can act like the bureaucrats their news staffs decry. There seems to be no price to be paid, they figure, because no other local news organization is doing any better.

Wrong! The fight is not for clicks, for reading time, or local market share. It's for writing time, for user loyalty, for global mindshare. The same rules developed in the online world of the 1980s still apply. Get people talking to one another, build their comfort level, then solve their problems and reap the benefits in the form of sales made through you, and commissions on those sales.

This idiocy is not unique to Mr. Kennedy. Wired suffers greatly from it. Although not as badly as does Pathfinder , which recently had another wiseguy rap a tongue-in-cheek "101 Ways to Save Wired." Large media companies tend to hide the true costs of their Web efforts. They're not paying for the garbage they shovel, they ignore the losses as immaterial to their total bottom line, or they excuse the losses with lines like "it's a new medium" and "we have to be here."

Who are the winners? Vertical market sites of all kinds, catering to the lifestyle needs of users rather than their location. Merchants who transfer orders to lower-cost Web sites and use conventional marketing techniques -- like branding -- to draw customers into those sites. Sales moved from stores or phone lines to Web sites save merchants money, which spells profit.

In the long run, however, journalism is the loser. Media companies are going to wise-up and throw in their hands, or have their hands taken off the cash spigot by their bankers. (Denise Caruso has already sounded the retreat.) There's an enormous learning curve yet to cross in turning this new medium into profitable new media-owned businesses. So here's a clue for moguls like Mr. Kennedy. Look at your numbers. Your costs, your revenues. Demand results -- bottom line results. Stop listening to excuses. The sooner you do that, the sooner this business will begin proceeding on a sound basis.


SSP (Shameless Self-Promotion)

We got game. In May it was USA Today , calling us a "hot site." Now it's Jayde , which gave our PPN site, run by Sean Cafferky of Houston, its coveted "Jayde Gold Diamond" award. Right alongside such smarties as Searchenginewatch , which we've already called clued-in. Thanks so much.

Want to know what you can do to help? Remember that it's Journalism -- checking the news, calling people, listening carefully, writing on deadline -- which keeps the clues coming, 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.


Making Coupons Work

On August 6 LinkShare Corp. of New York announced a technology which implements one of my favorite concepts, online coupons.

The software, LinkShare Synergy, is based on a patented technology called Referral Tracking and Payment (RTP), which creates and manages commission-based agreements between merchants and other sites. LinkShare president Heidi Messer talked with A Clue about our ideas for couponing and her implementation of it. "You're about 500 years ahead of most people on the Internet," she said. "This is like a railroad," passing value from editorial sites to sales sites.

"We use site owners as expert marketers. They understand their markets better than any agency. They're creative, they've been doing it for free, they have loyal audiences, and they reach markets that are incredibly expensive to reach offline. Why not enlist them?" The system's currently in a public beta test, but Messer has been talking to some major publishers -- she just can't name them yet.

PowerValue or SuperSPAM?

PowerAgent is launching a public beta of its "infomediary" system. Basically, you give them your preferences and tastes, they send you offers (with discounts) on products and services which meet your preferences. The messages "pop-up" while you're waiting for slow Web pages to download. (PowerMail, an "offer inbox" is the first option, although they're also planning to launch PowerFrames, which take a piece of your Web page window, and PowerPages, which take the whole window.)

We discussed all this with network president David Scott Carlick. "In exchange for profile information, we match and deliver offers that fit the user's lifestyle, while absolutely protecting privacy, at a price that is better than free." All this runs on EDS servers in Plano (they're his largest investor) "It takes about five minutes to sign up, and then we will deliver, automatically, more values in a few minutes a month than you could get from hours of surfing the web or reading 'personalized' content pages," he says. Advertisers pay $5-30 per thousand messages delivered, which you can compare to the $20-200 per thousand cost of targeted media or Web advertising, he says.

So here's the pitch..." I'm not going to charge you for anything I don't deliver...you're protected. I'm going to offer you more qualified people at a lower cost than in any other medium, so there's no financial argument. Third, for those advertisers who choose to make an early commitment we'll offer rate protection for the next year, as our database grows." Carlick's also setting his bar for success with consumers high. "We project sending 10 messages a day...you're not going to continue unless I send two a week that are really interesting. If you don't have a 4% response rate you won't be happy and I'll have problems." That's double the normal direct mail response rate, he notes, and four times the average "click-through" rate on Web ads.

Now, are you going to sign-up to have ads sent to you, even for stuff you like to buy? That's what PowerAgent offers. Personally, I'm more likely to look for a coupon once I've come to trust a source for stuff. If LinkShare can make their business work, in other words, it's a better model.

What? Another Ad Marketplace? (WHAM)

Narrowline has launched Brought To You By, which it calls the first "comprehensive transaction system for both buyers and sellers of Internet media."

Subscribers include such ad agencies as Ogilvy & Mather, Young & Rubicam, DMB&B, Anderson Lembke and Western International. Among the sellers of ad space are McGraw-Hill, Match.com, Tribune Interactive (uh-oh) and WhoWhere? (what? why?) Narrowline says its technology lets buyers launch campaigns quickly, while sellers get a true auction for their banner ad space.

How's it work? Ad agencies and Web site ad managers get in via passwords as either buyers or sellers, then have the ability to perform high-volume, real-time transaction processing and ad delivery, with Coopers & Lybrand putting its name on the line for the outfit's business practices. Perhaps the most interesting part of the play is its new ad definition, the Salable Net Unit, or SNU, which it calls a "common currency" for Internet advertising buyers and sellers. (I don't know -- what's SNU with you?)

While Narrowline says it doesn't use cookies, it is building a big database on user behavior, and it says it's a founding member of TRUSTe. Time will tell whether they can make it work, but competitors like DoubleClick already offer more automation to ad buyers, and it's buyers who make markets.

OUPS

There's been a lot of loose talk that the strike against United Parcel Service represents a "crisis" for electronic commerce, since UPS delivers so much of what we order online.

Well, it's a problem for all commerce. I recently got the last patch kit at my local bike shop because he depends on UPS for deliveries and has orders sitting in warehouses. UPS handles 80 percent of the U.S. package delivery market (close to Microsoft's share in office suites) so everyone's hurting. And that hurt is likely to increase because the issues are so clear. If the Teamsters win, wage inflation will rattle the bond and stock markets, while higher wages spell opportunity for those serving the middle class. If UPS wins, American unionism is dead -- if you can break America's strongest union with unemployment under 5 percent, no union card is worth holding.

There are two important points for electronic commerce. First, consider substitution effects. Companies of all kinds are learning just how much work they can take to the Web. Second, diversification is good. This is a huge opportunity for the U.S. Postal Service, Federal Express, Airborne and others. A truly free package delivery market, with many strong players, is in everyone's long-term interest.

Your clue. Deal with the effects of the strike and learn what lessons you can. Don't sweat the result, whatever it is.

Clued-in, Clueless

Clued-in this week is Jon Katz of Wired. I've been a fan of Jon's for some time, but it's his "Invitation to a Beheading" series which brings this award. It's a long discourse on why journalists shouldn't be pundits, or rub shoulders with newsmakers. It's Journalism 101, but it's amazing how many people who call themselves journalists forget we work for readers, not for sources, and that even the free shrimp at a press conference comes with a price tag attached. Thanks.

Clueless is the Internet Content Coalition (ICC) -- and all their members. They're trying to define "news" so they can create a rating which gets past filters from the Recreational Software Advisory Council to "protect" children (and anyone who doesn't want to listen) from free speech. This is what Tom Paine called "Sunshine Patriotism." If an "N" comes out I'm using it, and so are others the ICC may not like. Let 'em sue to stop me -- the Constitutional argument that the ICC defining "news" represents "prior restraint" should be obvious enough for even Clarence Thomas to understand. What Communists do through state fiat, it seems, democracies want to do by private action -- kill Constitutional Rights by "privatizing" them, then saying "private" entities can do what they want. If a court buys that nonsense, it'll be resisted and we'll know who the real patriots are.


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