A-Clue.Com
(formerly "A Clue...to Internet Commerce")
by Dana Blankenhorn
Volume II, No. XX
For the Week of May 18, 1998
 

This Week's Clue: Liquidators 

SSP (Shameless Self-Promotion)  

Numbers Behind The Hype 

Microsoft's New Object 

Notes on Spam 

Notes On Scam 

QVC Bids For Portal Status 

Clued-in, Clueless

This Week's Clue: Liquidators   

One of my earliest friends in this business was Alex Randall. He founded the Boston Computer Exchange  as a way to get good used machines into the hands of those without the means to buy new. He once offered me a laptop owned by Walter Cronkite, which to my regret I passed on. 

I bring this up for two reasons. First, BoCoEx solved a problem that still bedevils auction sites like eBay, namely the credibility of market participants. The solution was for buyers to send BoCoEx their checks, which were held in escrow until the buyers approved the quality of merchandise received from sellers. BoCoEx then took its 15% off the top - money moved to it before anything else moved anywhere, and this controlled everyone's ethics. That's a free Clue for folks that want to put buyers and sellers together without holding inventory themselves. 

The second reason I bring this up is what happened to BoCoEx. Alex sold-out when it evolved into a simple liquidation business, moving slow-selling inventory off retailers' shelves, into consumers' hands. For a time he worked on donations of used equipment to less developed countries, and now he's happy in the Virgin Islands. The business, of course, continued, which brings us back to Internet Commerce. 

Last year I wrote about Andy's Garage Sale, a unit of Fingerhut. Their job is to take goods that can no longer go into catalogs (because quantities are small), mark them down, and move them over the Web. The alternative would be to call an outfit like Pic 'n Save, which specializes in moving failed and small-run goods from its store shelves at super-low prices. Well, the site became so successful it's gotten its own buyers, who now scour other suppliers, looking for bargains to offer online. The Clue here is that, since transaction and publishing costs are minimal online, this can be a very good business if you've got the necessary back-end systems, warehouses, and shipping wherewithal. 

Recently I took a call from eMarketLive, which is trying to take this one step further. They sign consignment deals on computers and related equipment then put it online in live auctions. Users place their bids, and when they're accepted they win a bargain. The company's biggest problem is finding the goods, I was told. A recent visit found a nearly blank page, with a promise to email me when something came in. 

The Clues here are how the Internet makes markets more efficient, and what it takes to get in on the action. Products that don't move are getting bid-up in price, and moving through distribution quickly, as large businesses increasingly take to the Internet to move the merchandise in innovative ways. You can get into this business, if you understand that the requirements aren't just online, but offline. You'll need cash to bring in the product at a good price, you'll need some way to warehouse and deliver it, and you'll need extensive back-end systems to deliver your profit. (Oh, you'll also need a big marketing budget.) 



SSP (Shameless Self-Promotion)  

How are we doing? A-Clue.Com is now sent from a Revnet Groupmaster email server, operated by Audette Media. If you save the message to your hard drive and view it in a browser, it should pop-up in all its glory. (If not, let me know.) There's a link at the top of each message, pointing to its posting on the Web. And you can now subscribe (or cancel your subscription) automatically by emailing us at a-clue@list.mmgco.com . If you don't get service, of course, feel free to drop me a note at dana.blankenhorn@att.net. And we want your feedback  as well, always. In time you'll also see an ad in this space (or very near it) to defray our higher costs. (You won't mind, will you?) 

As usual, I'm also talking to lots of new publishers, including the Chicago Tribune  and you can be one of them. 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 email). If you're looking for excellent work, as found in Atlanta Computer Currents, at PlugIn Datamation or in Net Marketing magazine, among other locations, don't wait for the email -- give me a call at 404-373-7634. 

And now back to our show... 


Numbers Behind The Hype  

I spent some time in the last week collecting some of the numbers fueling the Internet stock bubble. To the three lies of lies, damned lies and statistics, let's add market research. Then let's dig in. 

Start with big numbers. IDC  claims $333 billion in sales will move online by the year 2002, still just one percent of the total global economy. That's up from $8 billion in sales last year, said IDC senior vice president Frank Gens. The number of Web users, 80 million in 1997, will reach 1 billion in 2002, IDC added. That's why sites like Yahoo trade at 30 times trailing revenues. 

ActivMedia  expects Web managers to put $23.6 billion into site upgrades over the next four years, spending an average of $35,000 per business-to-business site in 1998 alone on e-commerce automation. That's money spent integrating things like inventory and registration, and adding cash registers. But look inside the numbers. The "high budget" sites are defined as spending $10,000/year with outside firms, and only 8% of all sites have budgets over $50,000. There are plenty of minnows in the sea. 

RelevantKnowledge  put some meat on the bones of debates concerning Microsoft vs. the Web. It seems females and folks over 50 are at the heart of the Web growth curve today. They like automated services like PointCast, and travel sites like PreviewTravel. In general, Microsoft-branded sites did less-well with these folks than in the market as a whole. Combine Microsoft's MSN/Hotmail sites with its Microsoft.Com site, and overall Big Green has pulled even with Yahoo and its Four11 affiliate. (That's not true with older folks.) These over-50s are clued-in, and that's the demo we're all heading toward. 

At its @ad:Tech meeting in Chicago, the Association of National Advertisers  surveyed 124 large companies to see where the big online money's coming from. Two-thirds of respondents advertised online, spending an average of $714,000 and nearly half were selling online. Senior vice president Robin Webster noted, however, that most are buying their Web ads directly from sites, rather than through agencies. She seemed to find something wrong in that. 

Finally, CyberDialogue  released a study showing that, even when we don't buy online, more and more of us use online sources in researching our decisions. Of the $7.5 billion in goods and services affected by online research last year, the study concluded, $4.2 billion was actually spent offline. And the online purchases went through results from search engines, the study added, not banners. 

Taken together, we can sift out some big Clues. Folks are smarter than anyone thinks, on both sides of the screen. Old-timers still don't trust that kid Gates (and who can blame them)? The "portal" sites are actually used as "yellow pages," not a direct marketing medium, and the legitimacy of those sites' results will become a key to their success down the road. Finally, I still maintain that, if you stick to your knitting, even a small share of the growing pie will look mighty tasty five years from now. Keeping track of your Clues, in other words, remains invaluable. 

Microsoft's New Object   

Stripped to its essence, Microsoft's Web object is to make the creation of interchangeable software objects proprietary. Objects are pieces of code that can be used to build larger systems more simply. They're the keys to a future in which they'll be no time to hand-code anything. 

That hidden aim, I believe, is behind Big Green's constant renaming of its object model. Remember OLE, ActiveX, DCOM [Distributed Common Object Model] and COM? It's now called Com+. Whatever you call it, you combine these things on servers to make big things, like Transaction Server  components that work with your back-end, and it's nifty. The problem is, Netscape's failures have removed the last honest broker on the side of the competing CORBA  offering, which can now be seen for what it is, a Sun-IBM joint. (And will they get along as well as Microsoft gets along with itself? Don't bet on it.) 

In all of this, Microsoft's key ally is Compaq, which is turning Digital Equipment Corp. into an NT shop as it previously transformed Tandem. Compaq is a $25 billion hardware maker and NT system integrator, relying on a single OS, NT, to overtake IBM and its multiple OS strategy. Want to watch the battle up-close? Here's a Clue you can use over the next year. Check the Netcraft Web server survey  and local lists like Chicago Internet Service Providers List. If Microsoft's MCIS suite  is gaining big market share, you'll see it reflected in these surveys. If that happens, ignore all the news from the Justice Department. Bill Gates' master plan will be working, and resistance will be futile - you will be assimilated. 

Notes on Spam   

Despite recent news reports claiming top spammers are abandoning the field, and that firms like Hotmail are becoming more aggressive against them, I don't believe it. I personally get more and more of it, increasingly homegrown crap from businesses you might usually think of as legitimate. Just in the last week I've been spammed by a temporary help outfit, a life insurance agency, and a dealer in Mexican rugs. 

The economics are simply irresistible, writes our Webmaster, Tommy Bass. Even if you get 100 favorable responses to 1 million outgoing messages, you're making money. So you're all invited to enlist in the war. Tommy suggests that, when you have time, you cut-and-paste the domain from which your spam originates, and plug it into http://www.whois.net. That should give you the administrator of the offending domain. Forward the whole message to that address so they can continue the research, and take legal action if their address is being used falsely. At the very least, "The Administrator can go to their Provider, who can drop the offending Service from the Internet," he writes. 

Notes On Scam   

Speaking of rip-offs, Robert Langdon of RetailerNews  has alerted the I-Sales list to a new scam you should be aware of. 

The technology is related to that used by the "spamdexers"  we discussed in V2I16 of A-Clue.Com. Such firms tweak special pages that attract search engines, then redirect hits from those pages to clients. It's just this side of shady, and some engines  have been fighting back. Now, "It seems a company called 'IncBase Digital'  is pirating web pages that rank high on the search engines and putting them on their site (or clients' sites) to steal traffic," Langdon writes. "They're selling this service to other website owners under the name 'Traffic Magic.'  The result is that searches for retailing news, for instance, are going to an ad for online gambling. 

The bad news is you might be getting ripped-off without your knowledge, since your content isn't being seen when the hits are stolen. The good news is this rip-off may finally force the other search engines  to go after the whole "spamdex" business, with both their programmers and their lawyers. 

QVC Bids For Portal Status  

For a long time I (and the rest of the media) failed to see what QVC was up to last week, when they announced other e-tailers in their "Square at QVC" online mall. But a new study from Zona Research  Clued-me in, and I pass the Clue to you. 

Zona recently introduced a term called "portalnomics," essentially the economic model of portal sites like AOL and, increasingly, search engines. Portals get paid for directing traffic to commerce sites, which pay for the traffic. Well, it seems QVC is aiming to become a portal. QVC likes to say it's the largest general retailer on the Web. The key to the deal is in the headline of the QVC press release, where sites like BarnesandNoble.Com, Music Boulevard, and NetGrocer are termed "best of the Web niche merchants." Accent on the word niche. A Clue to QVC's tenants. There's nothing more limited than a limited partner. 

Clued-in, Clueless  

Clued-in this week is BellSouth.Net , the ISP unit of the southeastern Bell company, which signed Yoyodyne  to run a contest for it . A Clue ain't a win, but by going with a reputable contest organizer to build its client base, it's clear someone in Atlanta's doing some thinking. 

Clueless is Borders . They pre-announced a site long before it was ready, and will soon be engaged in a three-front war involving books, CDs  and videos , armed only with a big marketing budget aimed at second-tier portal sites



A.Clue.Com (formerly A Clue...to Internet Commerce) is a free weekly email publication. Subscribers can receive either a .txt file or .htm file. The .htm version features links that become active from inside a browser. To take your name off the list, simply write REMOVE as the subject, or content, of a message replying to any issue. To request your free copy, write us at mailto:Dana.Blankenhorn@ att.net. To subscribe you can also write to a-clue@list.mmgco.com with the word "subscribe" in the subject. (Address your notes on the .txt version to a-clue_textonly@list.mmgco.com. You can unsubscribe with a note to the same addresses and the word "unsubscribe" in the subject.. We're on the Web at http://www.a-clue.com and http://www.ppn.org/clue.