A Clue...to Internet Commerce
by Dana Blankenhorn
Volume II, No. V
For the Week of February 2, 1998
The battle over links and ads didn't end with TotalNews' agreement last year to a "link license" with major content sites. It just got more complicated.
Newslinx is a news aggregator, like Andover.Net. Instead of searching dozens of news sites that might have stories on the Web today, I can go to Newslinx or Andover's Internet Watch and quickly find what C|Net, ZDNet and dozens of newspapers are writing on the Net in a few clicks. (A relatively ad-free aggregator, LinkExchange WebNews, was recently made members-only.) In both cases the aggregator's menu carries ads, and Newslinx has even experimented with pop-ups.
Now, news sites have some problems with this. Whether they do it manually, by computer, or with some mixture of both, the aggregators create news judgements, and substitute their tables of contents for the sites'. They also put rivals' stories head-to-head every day, letting readers draw quick conclusions as to who has game and who doesn't. (The San Francisco Examiner is becoming increasingly competitive with the San Jose Mercury News, for instance.)
I benefit from this as a user, while content providers lose. Many important sites (not just paid sites like the Wall Street Journal) are not available from the Andover menus. Instead, stories are taken from other sites through syndicates -- stories identified as coming from The New York Times, for instance, might link from their Detroit News versions, although the menu might give the Times credit. Some news sites don't get linked at all, no matter how good their stories are. My Clue here is these sites are getting tough on the aggregators, denying something they may not legally be able to control - the right to link.
If my link to you is pure, and I'm adding value through the aggregation, there should be no problem - I'm sending you money in the form of advertising opportunities. But I've learned that is not always the case. On a recent visit to Newslinx, for instance, I found a News.Com story by Tim Clark in a text-only mode - the News.Com ads had been stripped-out. (I saved both the linked version and the News.Com version of the story - they had different file names.) A nearby story (on the Newslinx menu) from Forbes was dated February 9 - almost two weeks in advance - and was displayed in just a portion of the screen. Forbes' Web-honcho David Churbuck told me that's no problem - issue dates in the magazine business generally refer to when a retailer should take the paper off their shelves. More troubling was the lack of his familiar "Digital Tool" menu frame (and its ads) - but a redirect command from the Forbes server automatically brought back the tool frame. Churbuck's got no problem with Newslinx, but the Clue I got remains - their hands may not be entirely clean.
What conclusions should we draw from all this? With the advance of technology, linking is becoming a Wild West proposition, and no one benefits from that. Sites like C|Net may still want to take TotalNews' "link license" as a precedent to prevent links to aggregators in the name of "protecting copyright." My guess is the attempt will be laughed out of court, but not until an aggregator has the capital to hire a lawyer who'll fight for the point - a process that may take years. On the other hand, links that strip-out the linkees' ads, or break an official release date, are (in my opinion) a form of theft, and should be actionable. Reaching this kind of common sense compromise, however, will make lawyers rich. In the meantime, the speed with which news moves around the Net will slow, and users will be the losers.
Just for fun, I've written a novel. E-mail me for a copy and you'll get a ZIP file that unzips to reveal 20 chapters in MS Word 6.0 of "The Time Mirror," which tells you what we can really do with the Pentium II. (Yes, I'm working on a sequel.) If you like, you might also pass some Clues about how to get some money out of this thing - it's not my day job.
Meanwhile, CoolTool is just the latest outlet to admit we work hard to give you the best coverage possible of Internet Commerce. 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. 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...
Speaking of Tim Clark's advertising story, it's based on a report from Cowles Simba claiming ad revenues were up 150% from the year before. But were they?
The report makes clear that search engines Yahoo and Excite lead the parade, snaring nearly 20% of total budgets between them. Infoseek and Lycos were third and fourth, respectively. Despite all the talk about targeting, Simba editorial director Karen Burka was dead-on in noting advertisers still care first about volume and traditional media paradigms. Simba didn't calculate how much of the volume is barter (as against real money), so while the Internet Advertising Bureau's totals are twice as large (IAB throws AOL and PointCast into the mix) there's some indication they're over-estimating the numbers, too.
What Clues can be drawn from all this? Where the big money flows, there's still an incredible amount of Cluelessness. Branding is valuable, but the secret of the Net lies in its ability to model the entire sales process, from branding to sales to customer service. There's still time, and room, for the Clued-in to eat the big boys' cheese.
Here's a Clue for understanding Compaq's purchase of Digital Equipment last week. It's all part of Bill Gates' "final solution" to the Year 2000 problem.
Compaq chairman Eckhard Pfeiffer, like his podner-rival Michael Dell, is a big supporter of Windows NT. Until recently, both Digital and Tandem, another recent Compaq acquisition, sold different operating systems. Both launched support for NT shortly before Compaq swallowed them, and both are aimed squarely at enterprise-wide NT now. (Digital still has thousands of Unix-heads - here's a Clue where Compaq's axe is likely to fall.)
What does this have to do with the Y2K problem? Because NT is brand new, it solves the problem. Re-orient your computer systems to NT, in other words, and you solve Y2K. So many companies - a surprising number, in fact - have been buying Compaq's argument of enterprise-wide NT lately. Unix is old and thus may have the problem, they don't trust NetWare, so why not just bite the bullet and trust "Big Green?" The costs of Y2K compliance are simply folded into the pot and make the numbers look better. Compaq (with Digital and Tandem) has the heft to go toe-to-toe with IBM on Wintel's behalf.
For Microsoft, the real key has been its relationship with SAP, which ported its high-end database accounting package to Big Green last year, and has formed an alliance with Gates. While even big companies (even Microsoft) can do their books on SAP (and often nothing else will do) the problem with NT remains the same. As a Network Operating System, it doesn't scale. It won't run large networks. It won't run Gigabit Ethernet. I'm no expert, but I've talked to lots of real experts in the last few months and their conclusion is unanimous...it just doesn't work. And that, not the clicking of the date counters, may prove to be the real Year 2000 problem.
Pfeiffer, Dell, and their troops assume Microsoft will fix NT and make it scale. They know they can simply pass the buck to the software if they're wrong. (That's the big advantage of being a hardware guy instead of a systems guy.) But if the troops in Redmond can't make NT work when these customers demand that it work, Bill Gates may find himself in the Bronco with Bill Clinton and O.J. Simpson. The ultimate road trip -- O.J. looking for the "real killers," Elvis hunting for the "real pervert," and ol' Gigadollar looking for someone else to pin the blame on. (Of course it'll never happen - the customers will just wait, won't they? Besides, Al Cowlings sold the Bronco...)
IBM chairman Lou Gerstner was hired from RJR Nabisco (he also did time at American Express) and won the sobriquet "cookie monster" before he turned Big Blue around. Momentum's now slowing in the face of the Microsoft juggernaut (see the story above for details) and he needs to make a move to regain it.
Meanwhile, Netscape has a big problem, as plain as the red ink flowing on its recent "earnings" report. It can't compete head-to-head with Microsoft, even with a free browser, because it can't afford the marketing expense, and it doesn't have the clout to win the loyalty of computer makers - who need more cover than Barksdale could ever provide to give this sucker an even break. The problem's reflected in the stock price, which has been falling faster than Clinton's approval ratings.
Gerstner's Clue here should be obvious. He buys Netscape. He gives them the software heft to compete on the server end, the marketing heft to compete in browsers. The price of Netscape may fall further, but the clock's ticking. The more Netscape's market share falls, the less valuable it becomes to IBM - price and value are now going down in lock step. The longer IBM remains without a "pure play" on the Internet, meanwhile, the more trouble it brings on its head. Sure, the danger here is that the DoJ lawsuit against Microsoft over browsers goes bye-bye when a previous defendant steps in, but that's not Gerstner's problem and I hear he's a Republican anyway. IBM's already proven it will give acquisitions the freedom and independence they need to compete and win. It's time to pull the trigger.
Recently AudetteMedia's HelpDesk list hosted a number of screeds condemning the Council of Better Business Bureaus and charging it with being just a prettified extortion racket.
The BBB has a long history and a valid premise. Local businessmen organize to police themselves and avoid consumer lawsuits. Their dues go toward setting rules and arbitrating disputes. In small town America, this often worked well. Consumers won redress they couldn't afford in the courts, while businesses cut costs, maintained goodwill, and won political cover against stronger consumer protection laws.
The function remains valid - more necessary than ever - in cyberspace. After initial resistance, the BBB went online last year. But it remains very, very Clueless. Its attempts to collect membership dues before putting its stamp of approval on a business and adjudicating consumer disputes does look like extortion, because the group hasn't scaled its operations to meet the challenge. Worse, its locally directed organization structure just won't work online.
The solution is simple to state, hard to put in practice. Large Web merchants need to fund an online version of the BBB, giving it the capital needed to research and arbitrate consumer-site disputes before smaller merchants are asked for a dime. Provide a valuable service, prove its value, and you'll convince any good businessperson who's gotten that service to support it financially. Seeking "memberships" based on unspecified "complaints" won't work.
Clued-in is the
Ft. Lauderdale Sun-Sentinel,
which combined its Web and print news staffs to break stories and
maintain credit for them. Instead of isolating the "Web-heads"
to a corner of the news room, the Web producers are an integral part
of the news process, building pages alongside the copy desk and
competing directly with local TV sources for readers' attention. I
don't care much for their screen design (it's an MSNBC wannabe, a page
that eats bandwidth like Matt
Drudge eats his own credibility), but next to the key point
that's a quibble.
Clueless is Bill Clinton. I don't want to talk about it, I don't want to think about it, and I don't want my kids to have it in their history books, either. Everyone is degraded by the spectacle, from the self-righteous hypocrites screaming for his scalp, to the Idiot-in-Chief who brought it on himself, to the poor reporters who have to cover it and the Americans who are governed by it. The whole thing's destructive to democracy, which as Asia is learning remains capitalism's best protector.
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