A Clue...to Internet Commerce

by Dana Blankenhorn

Volume II, No. II

For the Week of January 12, 1998

This Week's Clue: The Market Share Trap

SSP (Shameless Self-Promotion)

VRML And Other Disasters

Data Broadcasting: Threat Or Menace?

Zig When They Think Zag

Clued-in, Clueless

This Week's Clue: The Market Share Trap

Back in 1995, when I was at the old Interactive Age Daily, we were thrilled to get 50,000 page accesses a week. Such numbers are laughable now because there are 50 million regular Internet users, not 5 million, and it seems at least 1 million of those users are trying to make their living online.

It's in following the 50 million that many analysts, and reporters, fall into the "market share trap." The trap is laid by the "success" of America Online , which claims its 10 million members (most at $19.95/month) represent half the Internet's bandwidth demand. It's true that the larger the pool, the slower the learning. But AOL continues to suffer high churn so learning continues - it's a throne made of molasses. For some reason, Microsoft wants to be AOL and thinks it can buy its way there. So Big Green "bought eyeballs" through its acquisition of HotMail . Then Hotmail's service went down for a time. The Clue should be obvious - big profits don't always follow big numbers.

What matters isn't how big a portion of the mass market you have, but what you do with that portion of the market you do have. To stay with stuff Microsoft owns for a moment, Slate is failing either because its content doesn't win the loyalty of its target audience (emphasis on the word target), or it's failing to capitalize on that interest. If Slate were printed, the solution would be "controlled circulation," making sure its content hit the brain pans of the right Washington shakers-and-bakers, verifying that attention, then using it to get paid subscribers and advertisers. With a Web site, you can also sell the products of your target market - political software, consulting and the like. (Even given all that, the financial clout of the political market is very, very small - see the New Republic and National Review.) The site's failure is that it didn't turn interest into a marketplace.

Word up to MSNBC general manager Jim Kinsella and the rest of the Clueless . Even if you give something away, you're still expecting people to pay for it with something vital - their time. Even paid print circulation pays only the distribution costs (on the Web that translates to marketing costs). That's no way out of a loss.

A demand that users pay for your stupidity through subscriptions is Chapter 10 for Clueless Web sites - you know what chapter comes next. Great content alone doesn't do the job, either. And charging for services like back issues isn't the same as charging for subscriptions. Maybe you'll understand this if I speak ve-ry slow-ly. You need to target your audience, verify its existence in detail, create a marketplace modeling the economic activities of the target market, and then take what you've earned. The technology for doing all this exists right now.

What's lacking is the imagination to turn the attention paid to content into a market sites can capitalize upon. What's lacking is the willingness of content owners to treat the Web as the Web.

SSP (Shameless Self-Promotion)

Here's the deal. John Audette will soon host the e-mail editions of A Clue, and we hope you'll join the discussion and help us build a digest of Clues we can share. (The Web version stays with Sean Cafferky and Tommy Bass.) Our present estimate for the hand-over is February 1. To pay for all this, we'll add a weekly, tracked ad (http://www.adniche.com). I figure on calling it shameless promotion, running along this SSP we've always done. The theory is you first provide service - real newspapers don't put ads above the fold.

Still, 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, as found in Atlanta Computer Currents , on Access Atlanta or Net Marketing magazine and Internet & Electronic Commerce Strategies don't wait for the e-mail -- give me a call at 404-373-7634.

And now back to our show...

VRML And Other Disasters

The failure of the Virtual Reality Modeling Language (VRML) to take-off continues to be a source of continuing wonder to me. It's a great technology, it's becoming compatible - what's missing?

The VRML Consortium thinks the answer to that question is content, and is sponsoring a contest with 3D Design Magazine (http://www.3ddesign.com/vrmlcontest.html) to find it and publicize it. Prizes in the form of hardware and software donated by vendors will be awarded for art, innovation, architecture, visualization, and business applications.

It's the last entry that will draw my interest. VRML's problem is that no one has yet made a compelling business marketplace using it. Such a market would draw serious businesses to get the software, it would spawn imitators, it would move standards forward, and it would probably get some developers out of their moms' basements and into Armani suits, where they belong.

So how about it, I ask you. What marketplaces could be created using VRML, the kinds that would put meat on the developers' bones? We'll repeat the best ideas we get here in a future issue.

Data Broadcasting: Threat Or Menace?

Data broadcasting has been around for years, but new wireless, cable and satellite bandwidth may finally bring it into its own as an adjunct to the Internet. Where will it fit in?

William Gurley of Hummer Winblad thinks data broadcasting will create an Internet-like revolution in the next year or so. I say, don't hold your breath. There are some valuable applications - stock quotes, sports scores, some news reports. But they're well taken care of with today's limited bandwidth.

Gurley thinks applications that now rely on streaming will move to data broadcasting, and there are a few sites where that makes physical sense if not economic sense. Where people now "rush to the rail," as with the Mars Pathfinder probe or the Heaven's Gate mess of 1997, instant mirroring on hundreds or thousands of hard drives can take the load. (Sort of an above Above Net ). Things that were on the Mbone in 1995, like the Rolling Stones, could also go to data broadcast. In theory.

There are two big problems here. First, if something's big enough (like Mick) there are easy technology alternatives, like pay per view. If it's not, where's the money to come from that pays for the technology? (Software updates aren't large-enough files - they can be handled well through existing push alternatives, unless you have a new version of Netscape or Explorer.) The guess here is those questions will take time to answer. By the time we're ready for "bunny ears" on our PCs, most of us will have either ADSL, DirecTv or cable modems.

Zig When They Think Zag

It's an axiom of sports that when you can't beat someone their way, you find another way. Facing a run-and-gun basketball squad, you walk the ball up. If a slick-passing hockey team is on the schedule, prepare to bang 'em into the boards. Don't do what they do, make 'em respect what you do.

That might be why Angela Gunn has so mis-read the "battle" between Hollywood studios and their fans, writing recently the "corporate takeover of the Web" was the big story of 1997. Copyright owners, both Clueless and Clued-in, have always been able to control copyright. So over the last year these rights-holders' lawyers have been going after "fan sites" devoted to their stuff. Last year they killed "Star Trek," this year they're reportedly going after "The X-Files." Of course, Gunn's own column then shows how stupid these lawyers are (which is why I'll never call her Clueless). Warner Brothers' "Babylon 5" show is getting a new season on TNT (despite poor ratings) because it nurtures its fan sites. The real story is how, in the name of protecting copyright, many lawyers are trying to shutter criticism of their products or services. Now that is a story worth following-up on. Your Clue here, of course, is that the easy story isn't always the right one...

Speaking of zigging when you should zag, check out Netscape's coming dance with the authors of Opera, a Norwegian-made mini-browser that loads in just 1.9 Megabytes and runs on 386-based PCs. It would not take much scratch for Netscape to brand Opera and post it, grabbing-back the whole low-end of the market from its rival to the north. Your Clue, fans, is if they're lined up to stop the run, throw the ball...

Clued-in, Clueless

Clued-in this week are I/Pro , which announced a version of its I/Audit software to verify e-mail circulation, and Pinnacle Publishing , which launched a service called LinkInfo to track external links for Web sites. The packages may or may not work, may or may not provide value, but they fill real desires in the real world - a good Clue for all.

Clueless this week is Oron Strauss , author of the political spam package CapWeb. He thinks selling spam software to politicians will make his fortune until he builds a database that lets the Christian Coalition spam abortion proponents. This same poor soul used donations at the Dartmouth Review to spout his support for free markets - didn't want to dirty his hands in the search for ads, I suppose. A Clue to the Right - your friends are those who play capitalism well, not those who'll just sooth your egos.

A Clue...to Internet Commerce is a weekly publication of @Have Modem, Will Travel. It's sent free to a qualified e-mail list. 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 mailto:Dana.Blankenhorn@ att.net. We're on the Web at http://www.tbass.com/clue and http://www.ppn.org/clue.