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Week's Clue: Why We Hate Washington (and the Media)
Some work I did for NetMarketing last week offered important Clues as to why Internet businesses (and users) distrust both Washington and the media. (My apologies to international readers for what follows...)
The subject was spam, specifically S. 1618, a bill passed by the Senate making things like falsifying email addresses to get around mail filters illegal. In theory, no one could be against it, but CAUCE is. Why? Because the "findings" at the front of the bill include a paragraph approving the use of email as a marketing tool. CAUCE argues this would legitimize spam. Anyone with a motorcycle gathering dust would send 100,000 spams to get rid of it, instead of taking out a classified ad, CAUCE co-founder John Mozena told me. Pretty soon the whole system would break down.
Chet Dalzell of the Direct Marketing Association , on the other hand, defended spam vigorously. He said outfits like Ziff-Davis and IDG use "targeted" spam regularly, with fine results. Take away spam, he argued, and you'd might as well rip-up the First Amendment. Stuck in the middle was the Center for Democracy and Technology . Staff counsel Deirdre Mulligan supports S. 1618 as a "first step," but recognized the danger CAUCE cited, saying if the warnings of critics prove right Congress can try again.
So far all this sounds fairly civil. But the more we talked the hotter the rhetoric got. The first thing to go was the basic assumption that the people on the other side of the argument are human beings whose motives are decent. Then came what CAUCE board member Everett Church called the "parade of horribles," predictions of disaster if "those people" get their way. Many reporters play devil's advocate with this, collecting the worst jabs together into a story claiming that either "you're about to be flooded with spam" or "your free speech rights are being threatened by radicals." Regular users of the Internet recognize this is pouring gasoline on a flame war.
The irony is that, when I questioned these folks closely, I found the germ of an agreement. Ideas like charging postage fees to junk emailers, establishing a universal don't-spam list and enforcing use of it (pay for it with the postage), and correctly identifying spam so filters work against it drew strong response from all sides. But most of us will never know this, because that story isn't sexy enough, and solutions don't draw contributions to a cause.
I didn't know our Founding Fathers, and won't pretend to interpret most of their work. But I do know they put all that gobbledegook and folderol about courtesy into Congress' rules for a reason. There were bitter divides between Americans in 1789. By following strict rules of procedure and calling each other "honorable," members were reminded of a basic responsibility necessary for self-government.
The problem with the media and Washington today is that editors and politicians just won't follow the Netiquette embodied in the rules of Congress. Spamming, at its heart, represents a basic refusal to follow Netiquette. This failure infects every issue that comes to Washington today. Bill Gates claims he's not a monopolist, then a month later claims the economy will collapse unless he can ship Windows '98 on time. As a result, millions of people who've never met the man turn him into a hero or a villain. In fact, he is neither - he's just a businessman trying to maintain the rules that favor his business.
Some in Washington are already sickened by this lack of civility. Political columnist David Broder recently devoted a day bemoaning the lack of civility between President Clinton and Speaker Gingrich, asking, in effect, what's wrong with them? The answer is nothing's wrong with them, Mr. Broder, but something is wrong with us. For over 30 years now, we've had a political world divided between absolutes. A generation that grew up on Vietnam and Watergate assumes the other side has murder in its heart. Many of us have now grown up to realize that's not true, but the past can't be undone, and the habits of a lifetime are hard to break. It's even harder when newspapers and syndicates stop hiring journalists like Broder to write their columns, giving them instead to political hacks from the left or the right. The result is we never see behind the rhetoric anymore - all we see is the latest spin. And we're sick of it. The result is we're sick of Washington, we're sick of the media, and we're also very reluctant to look in the mirror and find, as Al Capp's "Pogo" said, "we have met the enemy and he is us."
On the Internet, however, the vast majority of us follow basic rules of Netiquette. As a result, increasing numbers of us prefer the "lawless" Internet, where norms are controlled through technology and social ostracism, to the regulated society we actually live in, where laws are made through political means. That's a Clue that can help your marketing campaign, your political campaign, even your life in general. What people most crave today are what they find online - a basic honesty, a willingness to accept people at face value, and the ability (when we choose) to turn it all off. Tap into that and you tap into gold.
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And now back to our show...
All this (thankfully diminishing) hooha about "portal sites" - really search engines using stock to enter other businesses - has obscured key Clues concerning how Web advertising is divided today.
It's true a very small number of companies - most of which started as search engines - stand at the top of today's Web pyramid. They have their own ad staffs looking to multi-million dollar "sponsorships" rather than banner sales for their profits. America Online is their "mother ship," and they copy its strategies slavishly. I've written many times that AOL engages in short-term thinking, but inertia is powerful - bodies at rest tend to remain at rest. For users who prefer being treated like mushrooms (kept in the dark with shit shoveled on 'em) the "mass market" assumptions work well. As long as there's a continual stream of newbies, these companies will continue to prosper.
The next tier is made up of what I call "major media" sites, like CNN , Disney's ESPN and Microsoft-NBC. You can add the major computer publishers to this list as well. These sites offer content of real value, they have their own ad staffs, they're looking for sponsorship deals, but they're still operating on the mass market assumptions of the portals. They collect eyeballs and rent them. On the whole they're looking for "click-throughs." The most Clued-in thing they're doing is following the portals into exclusive arrangements with sales sites from which they earn commissions rather than impressions. The most clued-in among them, I'd say, is Barry Diller's QVC , which uses its media power to actually sell something.
Next come the Web ad networks - DoubleClick, 24/7 (formerly Petry, Katz, and Commonwealth) and - for hundreds of thousands of small sites, LinkExchange. The networks offer solid measurement tools, but they're limited in what they can do by their nature. As "ad networks," they're still renting eyeballs. And within this group there's a class distinction. Sites on Doubleclick get dollars for their banner spaces, while those on LinkExchange merely get free impressions on other members' sites. Unless you can turn a high proportion of your LinkExchange impressions into sales of something (or can turn the percentage you do get into sales of something expensive) you're not really an Internet professional. That describes the vast majority of LinkExchange members.
At the bottom, paying the freight, are commerce sites. You know the big names - books, travel, CDs . Such sites gain real dollars from their Internet presence, in the form of real sales. They pay the bills on all the other tiers - they keep everything afloat. As new online niches develop the whole boat floats higher in the water. But here's a key Clue - there's a learning curve for sellers as there is for buyers. Users who decide they hate Microsoft know how to get Navigator, while those who dislike Barnes & Noble know how to click over to Amazon. Sellers of goods learn in the same way, only faster. The strategy of this year's selling "newbies" will be more sophisticated than that which came before and those with ad space to sell had better realize it.
Now here's the key Clue. It's those at the bottom of the pyramid that control the board. It's those who have the gold (sales) that make the rules. If your site actually has something to sell, in other words, don't buy anything the upper tiers tell you at face value. Don't just make your best deal, be ready to change your deal at any time. At the end of the day, you're the only one who counts.
My old friend John Evan Frook, now with "Internet Week," gave his readers a key Clue recently with a feature beginning "inventory management can be the trickiest part of running an electronic commerce site."
I learned this first-hand recently when I visited a new online video store, BigStar , and ordered "Allegro Non Troppo," an Italian-made rip-off of Disney's "Fantasia" from the 1970s. The order went through OK, but days later I got an email informing me the item was out-of-stock, and would ship when they could get it. Think I'm going to buy from them again?
This is where Barnes & Noble could, if it chose, grab Amazon.Com by the short hairs. Delivery of what you sell online takes a lot of computing power, integrated computing power. (It also takes big bucks to line-up the inventory.) Toby Lenk, CEO of eToys , told John it's "the true barrier to entry" because "exceptions will kill you." The problem isn't extreme yet, but as a greater portion of total sales move online it will become extreme. If you're making money online, this is where to put your profits.
Working with Media Synergy of Toronto, the National Geographic Society has decided to go head-to-head with Hotmail , offering free e-mail services. The kick here is they're offering to let you send multimedia postcards from their site, but the aim is the same, as Christine Thomas wrote on behalf of the site. "National Geographic Interactive's goal is to expand its marketing database."
There's an important Clue here for anyone with an active site, namely a growing number of technology outfits aiming to provide your users with "free" services. Any site can now offer its own search engine, direct access to a bookstore, and multimedia emails. Read the fine print carefully, and don't add services your users don't need, but if you find something valuable add it. And let me know how it works.
Two stories this week reveal again how complex the battle for fast Internet access is becoming, and why more users aren't going for it.
BellSouth and SBC's PacBell both said they'll offer Asymmetrical Digital Subscriber Line (ADSL) services in major markets. At $200 for equipment, $100 for installation, and $50-60 per month for service, BellSouth's deal sounds interesting. (PacBell's pricing is tiered based on speed.) But if the Bells don't offer the "dry copper" necessary for rival ISPs to offer the access service (as US West is already trying to do), the market won't grow, the bureaucrats will rush in, and we'll all still be using modems 10 years from now.
In a (to me) related story, groups representing phone users are laying siege to the FCC to halt its plan to subsidize Internet access to schools and libraries, complaining they're being gouged. They charge companies like AT&T are using the program as an excuse to raise rates, and they're right. The FCC argues the program - at $1/line per month - is not a hardship and doesn't justify higher charges. But charges are a state, not a federal question, the Bells know how to play the states like a violin, and if access is that cheap and valuable you have to wonder why the local governments that fund schools and libraries don't just pony-up on their own.
Your Clue is this. People don't like buying in non-competitive markets. If monopolies recognize this, they can relent and make a ton of money. If they don't, the future will have to wait.
Clued-in is The Gartner Group, which in its May 22 "Gartner Flash," sent to clients, correctly identified the big problem with U.S. sanctions against India over it's A-bomb tests. It's the Year 2000 problem , which tens of thousands of Indian engineers are trying to help U.S. firms solve. There are other software "factories" in places like the Philippines, Ireland and Barbados, but we're now 19 months away from this E-bomb's explosion. Next to the possible damage from that, India's dropping an A-bomb we knew they had on themselves doesn't look so bad.
Clueless is Tony Comparelli of Mind the Store, Toronto, Canada, who launched a mall called HotFlyers, based on content looted from sales sites. By launching his mall with an "opt-out" scheme - grabbing content first, then waiting to be told to take it down - Mr. Comparelli killed his credibility at a stroke. The only way he'll make money now is off-line.