A Clue...to Internet Commerce

by Dana Blankenhorn

Volume II, No. XI

For the Week of March 16, 1998

This Week's Clue: Charging for Content

SSP (Shameless Self-Promotion)

All God's Chillun Want A Search Engine

VANs

Minnows Win

Clued-in, Clueless

This Week's Clue: Charging for Content


Clueless mainstream journalists love the idea of Web sites charging for access. "It's the death of the free Web!" they shout. "It's the only way to make money," they add.

Wrong, and wrong. Low value content will remain free, high-value content will always have a price tag. Nothing has changed. Charging for journalism is also no way to make a profit from it. Let's take some Clues from the reality of publishing and the Web:

  • Subscription revenue doesn't pay the freight - The price I pay on the street for "The Wall Street Journal" doesn't cover the cost of producing the paper. It pays for getting it to me, its distribution cost. So it is with every other newspaper and magazine I buy. That's the way it will be on the Web.
  • Marketing is Distribution - The cost of getting a magazine to me may include the cost of the publisher finding me. (The list, not the mailing.) In the virtual world you can't spam, but you must publicize, and you must do targeted advertising, if you're to build a successful online brand.
  • You're charging for what? - A Web site can charge for enhanced services (like its morgue database, discussion groups, or special features) while keeping most of the site free and open. Many of the sites planning to charge are doing just this, a point ignored by Clueless journalists in search of a headline.
  • It's the list, stupid. Many European sites have long required registrations for entrance, without really knowing why. The reason is found in the U.S. trade publication . The key database is a controlled circulation list. The value will be proven when Clued-in publishers start kicking-out readers who don't measure up, just as they do in print.
  • Charge for news and you're off the Web. Here's something Slate will soon learn to its horror. Even if they get 20,000 buyers, that's all the readers they have. You can no longer link into content once it's behind a firewall. If 11 million are paying for you or you have another business (the Journal again) to assure you'll be heard, fine. But unless you get the right readers, meeting your subscription goals is a Pyrrhic victory.
  • The Web isn't that different. Look at where the money comes from, and where it goes when you're printing on paper. Seen this way, the main thing the Web provides is depth. You can directly provide your Web market with the products and services readers decide they need after interacting with your content. If you don't offer all the depth the Web provides, your competitor will, and you'll soon be out of business. That's a great incentive for maximizing circulation and keeping as much content as possible free.
Your job as a publisher remains the same as it was before the Web was spun. Identify a market, find and serve those people, then get your profits from the folks who sell to that market. When you charge for access, or even require registration, you place a hurdle between your target market and that service. Manage that problem, use the money you bring in wisely, and you'll do well.

SSP (Shameless Self-Promotion)


Look for my column in PlugIn Datamation very soon. We're still waiting on automated deliveries of this letter through Audette Media - we'll let you know on that. And we're working on our own URL - www.a-clue.com. (Classy, eh?)

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

And now back to our show...

All God's Chillun Want A Search Engine


At Internet World, show sponsor Mecklermedia trumpeted its new search engine, NetSearcher . Lycos is developing the engine, which will focus only on the Internet industries. Vertical marketing is very in among search engine developers.

Meanwhile, CNN is reportedly looking to build, or buy, a search engine, and Microsoft has been working on a search engine for months. Then there are the search engines of search engines that let you search multiple engines at once and compare the results.

What's it all about? The mass market, and advertising revenue. "Ratings" show search engines get the most traffic online, hence the bulk of Web ad dollars. Big media companies still find themselves 20th among online channels, following Web newbies. So they figure they'll play BarnesandNoble to Excite's Amazon . They'll spend the big bucks to create their own search engine, win affiliation agreements with other sites to lock-out Web-bies, then laugh all the way to the bank.

Here's a Clue. You know what the most popular search engine is, don't you? Well, it's not a search engine. It's an index, run by human beings, which is why a lot of Web designers are complaining these days - humans are slower than machines, and make mistakes. Yahoo's Great Clue is to not just be a search engine - they're after bigger game with a host of new services, even local services. Its outrageous stock price even protects it from takeovers. Inertia, and a hefty mass-market ad campaign (I even heard a Yahoo ad on an LA talk radio station last week) give them a bigger head-start than Amazon ever dreamt of.

VANs


Forget bandwidth, at least according to AT&T. When looking for a Web host, you need a Value Added Network.

At Internet World Gary Hickox, vice president of AT&T Global Marketing, explained what this means. Obviously you need a commerce-enabled site with a cash register, targeted content and integration with your real business. Hickox says you also need integration with other types of telecommunications. Here's his pitch, and his advantage. "Some 87% of large businesses today have call centers, while 72% have Web sites. Only 11% have the two integrated." That's one value AT&T means to provide, at sites like this Another key value is security. AT&T has branded its own security under the name SecureBuy, and Hickox said one gourmet site doubled its online sales in the quarter after they took the branding.

There's a lot worth offering, which is why Web-based competitors have big advantages over, say, regional phone companies . Besides security (a book in itself), transaction processing and call centers, customers need performance guarantees, back-office integration, even references to top designers and support for a wide variety of e-commerce software. I've seen a lot more ISPs specializing in, say, hosting services, corporate services or consumer services, and in any of these niches they'll run rings around the RBOCs, or Microsoft for that matter.

To its credit, AT&T is building separate organizations to go after all these niches. They'll lose some games as well as win some, but it's the willingness to risk and lose that makes them a better buy right now than any monopoly.

Minnows Win


Speaking of losing, here's a fact that's becoming increasingly clear. The big fish have lost the game over consumer ISP access.

Forget MCI's so-called $14.95/month rate. You have to buy their higher-profit long distance services to get it. Generally, the minnows have won. AT&T is just the latest to give it up, cutting-off some users after four hours. Previously, IBM set a 100 hour/month "maximum" on its "unlimited" rate plan, and AOL raised prices.

Why can Earthlink, Mindspring, and hundreds of others do what AT&T, IBM, and AOL can't, provide a basic service at a reasonable price and make a profit? Start with the fact it's easier to replace a few hundred modems than a few hundred thousand modems. It's also easier to track a few thousand users than 10 million - easier billing, easier customer service, easier everything.

Sure, they'll be a new move by the majors to cut-off small fry from the backbone, but now there are three dozen backbones. Multi-homing, even through PNAPs rather than the MAE switches, gets easier-and-easier.

There's a big Clue here for everyone, no matter who you're competing with. Minnows die when concrete hardens. As long as things stay liquid, it's happy days.

Clued-in, Clueless


Clued-in is The Barbeque Source, an excellent online store demonstrating how a little money can become a big profit. Andy Parker of Mercantec brought them to my attention during Internet World, and they follow some key Clues. They set real expectations, focused on a niche, marketed in the real world, and leveraged partnerships as they came along. They spent $6,000 to get the store going, and while the owners haven't made a fortune they've got a good little business. The man was looking, Andy says, for some retirement income. This beats mowing lawns.

Clueless (again) is the Fox TV Network . They'll launch a network of sites for owned-and-operated TV stations, despite the lack of a business model, and despite the increasingly obvious failures of Digital City, Sidewalk, and others. They did something similar in 1995, failing to deliver iGuide after months of heavy spending. (Memo to Rupert Murdoch - Scott Kurnit says hi. If they're smart, they'll stop there in this case, too. Unless (gasp), they've learned about databases and commerce. Nyahh!

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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.