(formerly "A Clue...to Internet Commerce")
by Dana Blankenhorn
Volume II, No. XXVII
For the Week of July 6, 1998

This Week's Clue: The Truth Concerning Broadband 

SSP (Shameless Self-Promotion)  

Fulfillment - The Killer App 

Branding and The Web Ad Shakeout 


The Good News On Porn 

Clued-in, Clueless

This Week's Clue: The Truth Concerning Broadband  

Broadband is coming. It's not coming as fast as I'd like (or you'd like) but it's coming. It could come from your cable company, in the form of a cable modem. It could come from your phone company in the form of DSL. It could come (to your office or your kid's dorm room) in the form of a 10 Mbps Ethernet connection. But it's coming. Within three years, most experienced Web users will have 1 Mbps connections from home or office (although not from the road). 

The question before the house becomes, what does this mean for your Web business? Right now, it means the Clueless are trying to play monopoly and portal games. AT&T buys TCI and AOL objects. Cable companies think they'll be able to choose what you do on the Internet just as they choose which channels to carry. All large ISPs (even companies like Mindspring and Earthlink) are locking users' browser defaults to pages they select, then taking millions from the "lucky" content providers on behalf of "captive" audiences. 

Beyond that lies another assumption, namely that if you have a big pipe, you'll demand Big Wow all the time. Why read when you can watch TV? So sites like CNN add streaming video they assume will make them attractive in this Brave New World. (The revolution will not be televised -- it'll be streamed.) 

John Audette is convinced big pipes will kill small sites. "When the pipes explode, which I believe is imminent, delivery of rich content will be enabled -- and mandated," he wrote to his I-Sales list recently. "The Web sites of today will look like crayon scrawlings of pre-schoolers," creating a "tilting playing field" with "Big Dogs" holding all the hole cards. 

This is what happened to newspapers with the advent of automated Linotype machines and new, faster printing presses in the 1880s. The new equipment created barriers to entry which forced-out ethnic, then political papers, in favor of "professional" dailies that, in time, became newspaper monopolies. "Will Little Dogs be relegated to producing content similar to that broadcast on Community Cable?" Audette asked. 

I don't think so, and here's why. The Internet, unlike the penny press, is a transaction medium. (ActivMedia reported again recently that just 2% of this year's $21.8 billion in Web dollars are flowing to ads - 98% are flowing to product sales.) Every aspect of the relationship between a business and a customer - from prospecting, research and convincing you to purchase, through to transaction, delivery and customer service - can be done over this medium. News isn't the portal (we're told), databases are the portal. Entertainment or information are two possible outcomes of your Web experience, but they're just two - and they're the least-valuable two. 

What I see is a model more like that of today's real business world. Yes, we have the Fortune 500, but we also have millions of small businesses - including SOHO businesses - that can move faster, profit in smaller niches, and grow in ways big businesses can't. TV and cable networks (along with some Web-only experts) will gain the biggest shares of the market, but they'll never gain all of it. The cost of entry into the content (actually the Web store) business will always remain low enough for the Web equivalent of specialty shops and newsletters to thrive. 

What John fears most (and it's a valid fear) is an end to social mobility - the rich staying rich while the Clued-in poor are crushed. My prediction is that unless that happens in society generally, it won't happen online. But if it does happen in society generally, online will accelerate the change, as it accelerates all change. The political reaction to such an event would also be accelerated via the Web. 

As the big pipes come on-stream, the cost of producing for those big pipes continues to decline. (Creativity, not technology, remains the key to success.) That didn't happen in the "penny press" revolution, but we know it's happening here. So you'll be able to compete. Bureaucracy will continue to harden big business arteries, giving smart new players their chance, well into the 21st century. 

SSP (Shameless Self-Promotion) 

You are not alone. We now have over 650 readers on the A-Clue.Com list, and there may be as many as a thousand more visiting our Web sites each week (including Sean Cafferky's PPN and Tom King's CompuTalk . That's because we not only deliver news and insight, we deliver it in a fun, entertaining way. It's the thought that counts, and as always I very much appreciate yours. 

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As usual, I'm also talking to lots of new publishers, 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... 

Fulfillment - The Killer App  

Search engines are rapidly evolving into online malls, offering software and services ordinary merchants can use to create a sales presence online. Even LinkExchange, which unlike rivals actually has credibility with small sites, has joined the fray , hoping its banner and search-engine manipulation offerings can drive traffic and make its stores profitable. 

In theory, it makes sense. Unlike the old online malls, the new malls give merchants their own URLs, and their own look-and-feel. They provide hosting, design tools, publicity, and commerce functions, earning their rent. 

What's missing? As Julie King told the I-Sales list recently, the answer is fulfillment . How do you turn an order into a delivery and still have a profit at day's end? Just as this letter grew until I could no longer deliver it out of my laptop, so a growing online merchant will need help in moving the merchandise and handling the bookkeeping. This is the biggest threat faced by successful outfits like Amazon

Federal Express and UPS do part of this job, and some recent FedEx commercials imply they do it all. (They still need the middleware between merchants' ordering systems and their delivery networks, plus a real, affordable presence in small merchants' warehouses.) Their "instant inventory" systems are still basically b2b tools. Meanwhile, Hannah Kain, president of ALOM Technologies, offered I-Sales users some good advice. Start-ups with up to 20 shipments/day should do it themselves or take a loss. A good fulfillment house should be relied upon to negotiate rates and help in designing packages that cut costs and stand up to abuse. As you grow, put one person (and only one) in charge of this relationship. Finally, "Don't ask for anything you don't need. If your customers do not expect next day service, don't try to 'surprise them positively.'" 

Branding and The Web Ad Shakeout  

While branding is proving itself online , Web ad networks keep going through their shakeout. Why? 

Marketers will pay big for a branding opportunity only if they can freeze-out other brands. Otherwise, they want the lowest-possible price for masses of impressions. In other words, if anyone can play the game's not worth that much. An exclusive deal assumes a captive market, and gets a better price. That's why you only see one brand of soda in a fast-food joint. 

The Web has enormous branding power. But as "The Web" the market price of that power is limited. The inventory of ads is so big that Coke and Pepsi, Budweiser and Miller, and all their competitors can't fill it. Thus the per-impression value of the medium heads toward zero. 

Thus we have the rush for "exclusive" deals between content sites and major brands. The value to Barnes and Noble of freezing Amazon out of The New York Times exceeds the value of the sales generated by the arrangement. The branding power from the constant bombardment of impressions makes the deal pay. 

Despite all efforts to make banners more creative, and to target them more effectively, all the ad networks still charge per-impression, or offer an increasingly inefficient per-click or per-transaction model. That's why banners are dying - David Strom is correct in that. He asks, since branding works, but banners are dying, won't the money now flow to sponsoring better sites? Yes, it will. But define better, Dave. If you can create a business in defining "better," and sell that as a third-party (rather than relying on sites to do this themselves) you'll have a new business model that will make someone a fortune. This is where sharpies like Kevin O'Connor and John Audette should be putting their money. 


Clued-in users increasingly prefer meta-search sites over search engines because they get multiple bytes of the same apple. They can find what all major engines do with a search at a glance. For simple keyword searches, of course, an index remains the best choice. But it's frustrating - what if you really want to find out something instead of going somewhere? 

New search software will change that. Here's a candidate - WebSleuth 2.0 from Prompt Software . The key is a linguistic analysis of relevant documents, done on-the-fly, which builds an encyclopedia from your query that pinpoints what you're looking for, says spokesman Jose Rodriguez. They're selling it for $40 as a client software package. 

There's no warranty here that Prompt has found "the" answer. There will be many answers, and they'll keep coming for years. That's why search engines, as search engines, have such a limited shelf life. They will compete with AOL, re-make themselves every few months, or become obsolete. 

The Good News On Porn  

Rather than wringing their hands and proposing bans, conservatives should be rejoicing over the easy availability of pornography online, as Ron Martz of the Cox News Service accidentally made clear in a recent feature on the subject

All adults have fantasies, even if we pretend otherwise. Most are relatively harmless, and most of us easily separate fantasy from reality. Some fantasies aren't harmless, of course, and even innocuous games become evil when the other side doesn't want to play. You can't tell who among us is thinking what, which is what makes sexual fantasy so dangerous. The local cop, the city manager, even your Boy Scout leader might be a closet pervert seeking to prey on your children. 

That's where the Internet comes in. It not only makes all thought available, it makes all actions traceable - if the tracing is narrowly targeted. It's not entirely anonymous. It can be audited, and it can help make cases. Martz makes this abundantly clear in his story. The Internet has become a mousetrap to child pedophiles who may spend six hours a day seeking their prey, but who then wind up behind bars. 

Without the Internet, could the FBI have made a case against the former Camilla, Georgia city manager and his wife for molesting her two children? Could they have trapped the youth baseball coach in Alpharetta, Georgia who thought he was meeting a 13-year old in St. Louis, and wound up in the hands of a police officer instead? Could they have made the case against a former Boy Scout leader and his roommate in Lafayette, Louisiana, who allegedly had 1,800 examples of child pornography on their computer, without that technology? Custom officials "blame" the Internet for tripling annual arrests for child pornography. But isn't it also accurate to say the agency's "Innocent Images" sting operation - made possible by the Internet - should claim credit for flushing out dangerous perverts?

Police now admit there are a lot more dangerous pedophiles out there than they thought, and this should give pause to all those who seek to ban sexual images. As a range of crime is expanded, it makes more people criminals. Without priorities, enforcement becomes impossible. You can't ban religious or political speech for that reason. You can't ban tobacco until just 1% of us smoke. (You haven't had much luck with pot because roughly 10% of us smoke it.) And unless you keep the focus on violence - particularly non-consensual (by definition) violence against children - you can't protect the rest of us from the evil in our midst. 

Clued-in, Clueless 

Clued-in (for now, but you're only as good as your last column) is ZDNet's Jesse Berst , for his perception in seeing the hole in Yahoo's business model - building relationships with users. 

Clueless is Cox News . They let others exploit their work unmercifully, while their own site features pictures of their idiot editors and a long screed about their glorious history. The absurd link at the top of our "good news on porn" piece became necessary when a third-party archived the piece a day after running it - I could find no such archive from Cox. A sad story just gets sadder... 

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