This Week's Clue: Scaling For Real Bidness 

Reno vs. Gates 

Principle? Or Self-Interest? 

Justice In This World 

Death of Newspapers Is A Suicide 

Clued-in, Clueless

Over the last several months, some Clued-in entrepreneurs have been scaling and combining Web design and marketing shops, adding system integration and network management, to create the kinds of enterprises necessary to bring the Fortune 500 into the 21st Century. 

The opportunity emerged because system integrators like Cambridge Technology Partners  lacked the marketing focus to create (and maintain) successful, scaled Web stores, while big ad agencies like Young & Rubicam, which had the marketing savvy, didn't buy (and can't afford) the technical ways and means. 

I first picked up this Clue from Curtis Uehlein, heading IBM's operation in this field from impressive offices in Marietta, near Atlanta, Georgia. Unfortunately, it seems IBM has leaned too-heavily on technology and entertainment. It does a lot of business in dubbing DVD movies, even dabbles in video production, but it really needs more Big League account reps, closers, and creative spitballers. The jury also remains out on EDS' c2o shop - to make it work, a successful company must reach the size of EDS proper, and I doubt if a bunch of Dallas crewcuts will let some long-haired marketers get that far with their money. 

The result is the ball's been picked up by USWeb, which started as a franchise but has since gone to a more centralized model, and iXL, launched by former broadcasting executive Bert Ellis. The boundaries between engineering and marketing are lost on these folks, and thank goodness. US Web, for instance, just spent over $80 million on Gray Peak Technologies, a New York-based network integration outfit. 

This is an expensive business. Since iXL is privately-held, we don't know how much they're paying to grow, but US Web is publicly-traded and says it has bought 27 outfits in 30 months and lost $16.4 million, 56 cents a share, in its most recent quarter. The stock went up on that because the loss was smaller than expected - a common sight on the Internet where you often have to invest ahead of revenues. 

What's needed here aren't some 20-something geeks or marketing whizzes but some 30-something and 40-something account reps, people who look good in a suit, whose word can be trusted and who can get a multi-billion dollar outfit to do not only what's necessary, but what works. That takes more than a Clue, of course, it takes an MBA with the instincts of a psychiatrist. These will be the big marketing stars of the early 21st century, and your last Clue is most won't be working for ad agencies. 

We got game. The Revnet Groupmaster email server operated by Audette Media  tells me circulation to A-Clue.Com is up over 20% in the two weeks since we began automated deliveries - not too shabby. 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... 

Reno vs. Gates  

I've seldom seen more Cluelessness, from every quarter, than in the week since the U.S. Justice Department filed its antitrust case against Microsoft. This is not the end of the world, or the beginnings of government regulation against Internet content. (Although it is a case that will launch a thousand quips. For instance, have you noticed how much Gates looks like Reno? Think about it.) 

This is just one milestone in an ongoing process that began in 1995. It will either bind Microsoft with lawyers and political hacks or cause it to be split into two businesses, one holding an expensive (for us) monopoly on operating systems, the other holding a powerful (but not dominant) position in applications. Right now my betting's on the former, but there's no third choice, class. Bill Gates ain't going to take over the world. 

I date all this from the first Microsoft consent decree, and take as my text previous cases against IBM and AT&T. As discussed here before, IBM fought the law and, after 25 years, won its case. But in so doing it left itself with bureaucratic leaders like John Akers, vulnerable to the first kid with a Clue who could sense that if you control the bottom of the pyramid, you own the whole shebang. AT&T drew heavy fire from other businesses for acceding to its 1984 break-up, but if you'd bought both IBM and AT&T shares in 1982, which would you rather hold now? If Bill Gates wants to make a small fortune by squandering his huge fortune, that's his business. But it doesn't mean anything for my business. 

The economic theories and political arguments over this case go back a century, and were settled then. You can have a monopoly, you can lock in your profits and become a Morgan or a Rockefeller. But in exchange you accept government oversight on your business practices. This is how our nation's electrical grid, phone network, and natural gas systems were created. If you put your standard in the public domain (so anyone can exploit it) you avoid this problem. If you hold it proprietary, you accept the consequences. 

The confusion over this point is a hangover from the 1980s' attitude that all government action concerning the economy is bad. That, friends, was always rhetoric, and never reality. Reaganism didn't dismantle the military, the police, or the highway department. Where the rhetoric matched the reality, we had the savings and loan debacle. So grow up, kids. Unless we, the people, have some check on monopoly business power, the result is fascism. It's what we fought all the struggles of the 20th century against and no one - not on the left and not on the right - is going to re-fight those battles for Mr. Bill's benefit. 

What's all this mean for Internet Commerce? Your Clue is this - about as much as Monica Lewinsky means for the 1998 elections. It's a sideshow, an expensive entertainment. All the functions of Windows '98 have shipped. If Microsoft lets itself get distracted, we have plenty of alternatives. Now can we move on to something meaningful? 

Principle? Or Self-Interest?  

All the brouhaha against taxing goods sold online obscures some important facts. First, sales taxes are like it or not (and I don't) a key method for paying the costs of state and local government. Second, it is possible (it isn't even that hard) to impose sales taxes on goods purchased online. (iQVC did it to me last week when I bought a breadmaker.) 

That's why e-mails like a recent screed from Larry Smith, CEO of US Interactive,  bite so hard. He's got his undies in a bunch over the idea the FCC  might impose access fees on Internet telephony. These are the same fees imposed (fairly or not) on long distance carriers for accessing local loops. It's not a tax (it goes to the Bells, not the Bills), but Smith rants that it's "bad policy and bad business," as well as a reversal of the Administration's "laissez-faire policy" concerning the Internet. Back up, hoss. If your competitors have costs you don't, and those costs are imposed by government, how is it "unfair" to even things up? 

Smith's evidence is that the Gross National Product has risen during the Reagan and Clinton administrations, "when taxes and regulations were lowered." Whoa, pardner. Taxes went up under Clinton - I think Smith is referring here to John F. Kennedy. But GNP growth has been sharp during the last five years, so he's undermined his own argument. "Change happens, and that change is best promulgated by the market," he adds. Really? In that case, the Internet and the mall should be tax-neutral - the move to electronic commerce shouldn't be driven by tax advantages. (Oh, and who do you think created the Internet, and paid for the research needed to create the silicon chip? I'll wait...) 

Admittedly Smith's PR counsel, Steven Blinn  sent this out, and it may have been over Blinn's objection. I'd hate to think an advisor suggested this guy spam "I'm an idiot" to every reporter he could find. 

There is an open question of how to tax a local transaction in an international medium. Those who want lower taxes over time might seek taxation where the sale is made, so sites might all run to the lowest-tax jurisdiction possible and drive taxes down across the board. Failing that, this is just another case where we in the Internet, who want to run the real world, need to deal with the real world on its own terms, not just those of our own rhetoric. 

Justice In This World  

The sale of Boardwatch  Magazine, and its ISPCon  shows, to Mecklermedia  for $29.5 million in cash and stock guarantees that someone with a Clue is going to continue to be heard in this business, which is good news for everyone. Publisher Jack Rickard said he sold to the #4 computer publisher, instead of its rivals, precisely so he'd retain his editorial independence. The ISPCon show itself, meanwhile, can now expand internationally, and the world will get to understand my own tag-line for this wonderful, geek-heavy collection of columns (especially Jack's) - smell the testosterone. 

Speaking of Justice, the decision of the San Jose Mercury News  to stop charging for access should silence, once and for all, that chorus that cried you have to pay for general Web content, even general high-quality Web content. Specialty information is worth paying for, but news isn't specialty information. The Merc will try to hide its internal budget cuts by adding partnership content and a bit of commerce. Hopefully, they'll now catch the key Clue that content follows commerce, and not the other way around. 

Death of Newspapers Is A Suicide  

Old friend (and fellow Northwestern alum) Dan Janal  recently predicted the death of newspapers based on their continuing Cluelessless, and the fact that they now finish third - behind the Web and broadcast - in even getting out local news. In his message Dan recalled an editor for the St. Petersburg Times letting sites like Third Age  steal her core elderly audience without so much as a fight. Dan's point was that local papers need to figure out what their national audience is and serve that niche. 

Dan might be right, but not just for the reasons he states. Newspapers have the Web completely back-asswards, as my mom would say. They're starting with content, looking for advertising, and waving at commerce way over there. The Web competitors who destroy them will start with commerce, build databases as a first step toward content, then license the rest and hire editors to ride herd on the cross-traffic, adding reporters as they go. 

I've watched this Cluelessness close-up in the form of Cox Enterprises. Their chairman, James Cox Kennedy, insisted he would succeed by "repurposing" existing content. He divided the pages of his local news monopoly into three sites - for entertainment, sports  and everything else . When he's lucky he gets a few dozen people into a chat with one of his "stars." He's been losing a ton everywhere, but doesn't seem to notice - perhaps because profits from his cable monopolies mask it all. Now he's finally launched yet-another losing site -- www.ajc.com specifically for his lead newspaper. What's saddest is no one has even begun to take him on. If you're in Atlanta and want to put this boy out of his misery, give me a call. 

Clued-in, Clueless 

Clued-in are Electrohouse Inc. and Altervue Systems Inc., which have begun demonstrating and selling VR Charts, a 3-D visualization product for data mining, on the Web. The product turns VRML browsers like COSMO Player into real business tools under Windows NT, working with typical business database systems like Oracle. It's a tough sale, but with a low-cost demonstration and sales channel there's a chance to close it. That's the essence of being clued-in. 

Clueless is Frank Catalano, for his ClickZ  column on "responsible spamming," which he says was removed from his "Marketing Online for Dummies" by publisher IDG. Frank, they cut the chapter for a reason. Spam represents a hole in the Internet's economic model, and until the model is changed, no one who is responsible and has a Clue should touch it. It's not just "an electronic marketing message," simply because (unlike every other type of marketing message) it doesn't pay its way. Until it does, it's just Information Highway robbery.