A Clue...to Internet Commerce
by Dana Blankenhorn
Volume II, No. VII
For the Week of February 16, 1998
Matt Drudge fancies himself as Walter Lippman. Lippman comes to us today as a set of disjointed quotes, taken out of context. My favorite is "There can be no liberty for a community which lacks the means by which to detect lies." So Drudge has made each of us our own Walter Lippmann, and it's our failure to do that job which has caused the hand wringing by Lippman's heirs.
If the hand wringers had read history, they'd know we had the same news situation in the 19th century, and the Republic survived it quite well. (They'd also remember that Tom Paine himself was a pamphleteer, an imported agent provocateur.) The "penny press" of the 19th century called Lincoln an ape, made the sex charge against Jefferson and made it stick against Cleveland, who won anyway. Grover later married a young woman near Monica Lewinsky's age in the White House, and everyone cheered.
Let's go to where this started. The Drudge Report is mainly a links page for political junkies to headlines and columns. It's the work product of the old media, in other words. Links to "New York Times" columns or editorials are through Yahoo. Links to Washington Post columnists go through the paper's search engine. There's value here, just as there's value in "aggregators" like Newslinx and Andover.Net . Instead of buying a stack of papers, you can look up the stories of interest to you on one Web site. It's Drudge's own column - his PR and marketing program - that's drawn the fire. He sells ads based on page views - again an old media pattern. In terms of what's covered here, his business plan is also Clueless.
Nevertheless we have old media types like Michael Kinsley claiming Drudge' sludge is a big media event. The usually clued-in Jesse Berst even compared it to the creation of CNN. This is bunk. The Lewinsky story is the product of two decades' political irrelevance, "wedge issues" like abortion and affirmative action used to raise increasing amounts of money from the upper middle class. Politics today is based on hatred, distrust, and maligning the intentions of the other side. It's a game the players (all of them) win and you lose. Had Drudge not gone with the story the Washington Times would have, and the result would be the same. We can end the money chase any time we want, by voting for those without money, regardless of their views on other issues.
Back to Drudge. There's a risk to journalism called libel. You can say anything, but you can also be held responsible for malicious falsehood. The Times vs. Sullivan case doesn't mean you can lie about the President - it means the bar for his proving you libeled him is higher. But the bar is still there, and celebrities do clear it. That's why Newsweek spiked its first Tailgate story, why The Dallas Morning News and Wall Street Journal pulled stories from their Web sites. The law is slow, but it's certain. The real Drudge news is the lawsuit Sidney Blumenthal filed last year after Drudge repeated false rumors about him. When Drudge loses, he'll learn "the rest of the story."
Let's review our Clues, shall we?
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...
AltaVista, the search engine developed by Digital Equipment Corp., is on the block with Digital's acquisition by Compaq, Advertising Age reports. In a story by Rick Bruner, the magazine speculates this might have a big impact on DoubleClick, the Web ad network for which AltaVista represents nearly half its revenue. As window dressing for the sale, AltaVista said last week it will offer free email accounts, like rivals Excite and Yahoo.
Bruner's most interesting point, however, remains how top-heavy Web banner advertising remains. DoubleClick is a large, well-run network yet it's vulnerable to the moves of one search engine client. If Yahoo's smart, it can pick up both AltaVista and DoubleClick for a song, and double its fun.
The Price Club
America Online's 10% price hike may have been the most mis-reported story since the Web was spun.
AOL's excuse for the hike is its investment in access. But (have we forgotten) the company decided last year to get out of that business. In the future, Worldcom will handle AOL access using MCI's network, AOL's old ANS+Core unit, and the old CompuServe network. Bernard Ebbers, not Steve Case, will set the price for reaching AOL. It's true some major ISPs are trying to eliminate $19.95/month AYCE pricing, because they can't turn a profit on it. But many can turn a dollar at that price, and that fact hasn't been covered. (It's so much harder to cover the 4,000 than the 10 most reporters don't bother.)
Over the last months, as its subscriber growth has slowed, AOL has redoubled its efforts to spam users (while self-righteously preventing others from doing so), and signed big-money "exclusives" with major Web vendors so the 11 million will only see the Web as AOL wants them to see it. It's worked - AOL's stock price rose sharply on AOL's price-hike, and the company took advantage of it with a stock-split. But the future of that stock price depends on the Clueless proposition that customers will put up with being treated like mushrooms indefinitely. People learn slowly, but they do learn. Expect to read press releases later this year about how fast AOL is growing overseas, as its U.S. subscriber base peaks and begins to fall back.
Speaking of AOL, it makes its money through paid affiliation agreements. Big merchants pay it millions of dollars for access to accounts AOL controls. Like AOL's other "innovations" (or dodges, if you prefer) this affiliation idea is spreading, to greater or lesser effect.
Let's look at the lesser first. AudioNet has a deal with RealNetworks, to produce streaming programming using RealSystem software for play on AudioNet's servers. For now, this gives AudioNet access to live sports from WFAA in Dallas. The problem is WFAA may not be able to give away this content. If there's value in broadcasting a game online, the leagues will exploit it, not individual stations. AudioNet should be saving its money for rights payments, and lining-up lower-tiered (or rated) events, if it wants to stay alive.
For a better idea, the Interactive Newspaper conference in Seattle was the site where Times Mirror announced a network of nine publishers and newspapers backing its Auction Universe auction site. Each affiliate will have its own auctions linked to the central service, which they will then publicize.
Auctions provide an adrenaline rush and immediate gratification. They work for the same reason slot machines work, only without the legal hassles. Lots of folks have proven the model, and Times Mirror is a follower of the trend. By lining up content providers to funnel traffic to it, however, it gives itself a chance against stiff competition. It's not a proven winner, but it does show someone over there has a Clue about marketing.
Going For Broker
Speaking of gambling, Robert Hertzberg's Internet World made its first big mistakes in a recent feature on my broker, Charles Schwab & Co.
The mistake was focusing on trading rather than account management. I excuse it based on the magazine's focus on the Internet rather than the brokerage business. Schwab recently cut its brokerage fees slightly (to $29.95 per stock trade), and offered "free" online accounts to everyone doing business with it. (Trading by phone will still cost $49.95.) The new price is twice what major rivals like Dean Witter Discover charge, and three times what low-end rivals like Datek take. While online costs remain modest, all Schwab's rivals have been spending on marketing, especially on financial channel CNBC, the network for shut-in executives.
Account management, however, is where the money is. If you have $100,000 at Schwab, half in "cash," you're really in the money market and they're taking management fees for that. Schwab account-holders are also big buyers of Schwab's own mutual funds, and its "One Source" plan - no-commission purchases of hundreds of others' funds - also brings in cash. Despite inroads made for decades by "discounters" like Schwab, full-service firms like Merrill Lynch still make much more money. One trick is the "wrap" account, combining all a customer's assets on a single statement. This gives you maximum return on your capital, while giving the broker maximum access to your cash.
There's one more very important point. The U.S. hasn't had a bear market since before the Web was spun. It will take capital to survive that event. Schwab has more capital than any discount rival and less exposure to potential losses than any full-service broker. Your Clue here is that sometimes Internet excitement can obscure the real story.
Clued-in is Vinton Cerf, who is now campaigning for router and Internet Service provider acceptance of Internet Protocol Version 6. He points out that millions of new addresses are needed for hand-held and set-top boxes. (No, well-capitalized outfits don't have an advantage in this upgrade...look how slow they are to upgrade their modem pools, then multiply that cost by 10...)
Clueless is Solid Oak, a censorware company, which issued only a half-hearted denial when charged by Wired with mail-bombing a critic. Even Clinton knew enough to deny it, fellas. If this isn't the incentive reporters need to go-after censorware with some hard-hitting, comparative reviews (moves by Congress to force use of such software in schools and libraries hasn't done it), maybe we'll have to go after them next.
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.