A-Clue.Com
by Dana Blankenhorn
Volume III, No. XXXIV
For the Week of August 23, 1999

This Week's Clue: Domains And Our Masters

This Week's Clue: Domains And Our Masters

Shameless Promotion 

SSP (Shameless Self-Promotion)

The Local News Battle (and its Major Profit Center)

Why We Run From Shopping Carts

Great Idea From Joke A Day

VNU Buys Nielsen

The Social Question

Clued-in, Clueless

Two of the biggest topics on the e-mail lists I subscribe to are taxes and the domain name mess. Let me propose something wildly controversial that might solve both problems.

The tax issue popped up when Sen. Ernest Hollings, an iconoclast whose beach house later washed away in a storm (Divine intervention? Don't you wish.) proposed a 5% tax on all transactions performed on U.S. commerce servers, which the Feds would dole out to teachers. The idea was, at a stroke, to solve the problem of Internet commerce's tax-free nature, while dealing with the industry's contention that handling different tax rates for each state, city, and county would be a burden. Hollings' proposal was a non-starter, but the Gilmore Commission continues its tax-raising work, spurred on by (of all people) Utah's Republican governor . (Having a conservative push for taxes is supposed to take the sting out of it.) 

The domain name mess, meanwhile, just gets worse and worse. The main culprits are no longer cyber-squatters, but corporations (and political campaigns) who are grabbing bunches of names as protection against the future , as defense against critics, or just to piss-off rivals. The best case to bring to the bar is that of Texas Governor George W. (dumber than Quayle) Bush. He not only tried to keep critics offline (or hidden) by registering every derogatory name he could think of (didn't work), he also registered names for potential VP candidates, thereby tipping-off opponents to his overconfidence, his long-term strategy, and his campaign's basic Cluelessness. 

The WB ain't the only fool playing this game. Corporations are doing it in spades Not only are 93% of common English terms taken in the dot-com domain, but most are wasted - neglected, not updated, not found, or for sale. Many legitimate Web sites are also buying multiple names - askjeeves.com, aj.com, and ask.com all point to AskJeeves, for instance. (I myself recently bought DanaBlankenhorn.Com, which I'll point here when I get a chance.)

Domain names have become a major gray-market industry but the biggest gains are going to people who legitimately registered domains for their businesses, and now find they want to go in a different direction and cash out. Speculators, meanwhile, are forking over big bucks to Network Solutions (and others), playing the lottery at $70/ticket.

The problem is going to get worse. There are now 5 registrars in the .com domain, another 7 are on the way and a price war is breaking out . (It's also going to become harder to find out who owns domains, since some will no longer file the whois information online.) 

The wild popularity of the dot com domain has many people (especially politicians) using it inappropriately. Networks should be .net, not .com, and organizations (like political campaigns) should be using .org. (Educators want to keep speculators out and want to grab control of their TLD before it's too late. Meanwhile, corporations that want to offer good stuff online are frustrated because their proper names are no longer available.

ICANN is proposing a complex dispute resolution policy , but there's another way to handle this, which gets us back to Sen. Hollings and Gov. Leavitt. I propose a "dot com" tax, payable annually on every dot com address, of, let's say $250. The money could go to into that Universal Net fund, or to buying Hershey bars for kids in Beverly Hills for all I care. I'd also like to propose that every Web site have no more than one address. These actions alone would likely free up half the domain names now being hoarded (if it doesn't, we raise the tax until it does) and give the politicians a pot of money to play with. (Once they have their pot of money they're supposed to go away - play with it outside and let the rest of us do bidness.)

After all, a .com is a business, so call this an Internet Business License. If you're a foreign company and don't want to pay, fine - just go to your national register and get a co.uk (or co.de or co.ch) name, on whatever terms your national government prescribes. If you're a network or political organization (or a non-profit) you can escape the fee by going to the appropriate TLD and leaving the rest of us alone.

Before you start howling, let me conclude with one point. The alternative to regulation by government is regulation by the market, and what I'm offering here is a market mechanism. Low prices move merchandise, and high prices ration scarce resources. Prices here are too low.


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SSP (Shameless Self-Promotion)

I'll be in New York August 17-19, covering the Jupiter Conference on Online Advertising for ClickZ. Hope to see you there.

ClickZ, has me putting a "clued-in" spin on the day's news. I'm also a semi-regular on TechEdge Radio and I'm continuing monthly columns for  NetMarketing, Boardwatch, and  Intellectual Capital. I'll also begin work soon with the IC folk on a book project concerning politics and the Internet, which will appear first on the Web. A-Clue.Com is also the Monday e-commerce column of Andover.News. Buy my book now. Subscription instructions are at the bottom of each issue.

Remember that it's still journalism -- checking the news, calling people, listening carefully and writing on deadline -- which keeps the Clues coming. If you're looking for excellent work, give me a call at 404-373-7634. Now back to the show...


Takes on The News

It's what we've been doing anyway, but I decided to formalize this section of the letter, naming it after a quote from sports talk host Jim Rome, who demands that callers "have a take and don't suck."

The Local News Battle (and its Major Profit Center)

The nation's newspaper chains seem to have ceded the battle for their future markets to new players. Web sites with national reach have taken away the classifieds, and the news niche is shaping up as a battle between Ticketmaster-CitySearch and America Online's Digital City, although it may be a third contender is trying to emerge.

I say this with some confidence because what your local fishwrap hasn't seen online (and likely won't see any time soon) is a profit, and ticket buying is wildly profitable. Ticketmaster has become the master of jerking around buyers and maximizing this profit, which gives them a big lead. AOL finally got this Clue and spent $388 for Moviefone, at least gaining some place at the table. Now Cox Enterprises has gotten religion and is joining Excite@Home in an $85 million investment in Tickets.Com, the ticket broker Ticketmaster is suing. (The investment guarantees Tickets.Com the muscle it needs to fight Ticketmaster in court, so we may finally get a decision on whether "deep links" can be enjoined - unless the fools wimp-out and settle.)

MSNBC's story had the players and part of the competitive landscape right , but it missed the point of local news profit. Then again MSNBC parent Microsoft sold its Sidewalk sites to CitySearch earlier this year, so they never did figure out the game.

As a final piece of evidence proving the point, AOL signed a "strategic content agreement" whereby Knight-Ridder, which thought it was the leading newspaper chain online, agreed to provide its local news to Digital City sites in its marketplaces. When you start begging a rival for space (because it's got the distribution sewed up) the game is over.

Why We Run From Shopping Carts

It's a fact - 70% of online purchases are abandoned just before checkout. I know, because I personally abandon at least two-thirds of the purchases I start making at Web sites.

Qpass Powerwallet  thinks it can solve the problem by filling out most of the form for you, John Einhorn of Capshack wrote recently. Instabuy from CyberCash does much the same thing, and they have a major investment from Commission Junction, which manages affiliate networks.

"Just a small jump in conversion rates translates into increased sales," John writes, and it's good that he's keeping his goals modest. The main reason people don't complete transactions really has little to do with the forms, and everything to do with the basic interface. Look at people in line at a real world store. They're touching what they're buying, double-checking the prices, and reassuring themselves. Until we find an online analog (links back to page where the goods were found and sound, faster return and remorse policies) I don't think we'll make much of a dent in the problem. At least, not around my house.

Great Idea From Joke A Day

Ray Owens of Jokeaday.com told I-Sales a great trick for selling ads on online newsletters like this one, an idea so insanely obvious I'm amazed I hadn't thought of it.

Give the ads away. We're used to giving merchandise away but not ads. Owens suggests offering advertising prospects a week or two (maybe a month for a weekly letter) of free ads, which can then be tracked for their value. Owens' lists have 100,000 and 200,000 names each, respectively, so he's fairly certain his freebies will pay off for clients. His second point, which may be his best, is that list owners just work harder on circulation until they reach critical mass. Critical mass will vary depending on the width of your focus, he adds - a general interest publication may not be worth advertising in until it reaches 50,000 subscribers, while Iconocast is a raving success at a fraction of that base.

"What sponsor can turn down FREE as a price?" he writes. Besides, "Having a full ad book creates a sense of contentment in your mind and relieves the 'pressure' to get the ads in the door." It also creates scarcity. Just in case you wondered if there were any pros in the online newsletter field, you just met one.

VNU Buys Nielsen

I'm no big fan of VNU, the Dutch publisher that said last week it will pay $2.5 billion cash for Nielsen Media Research (and its piece of Nielsen NetRatings . Let me just say this is a good example of how savvy moneymen (who may be Clueless about management) can get their hands on sound Net assets. VNU has mucked about with many magazines (especially in the computer press) squeezing costs until good people leave, so it's at its best in unassailable market positions. That's what it is building in entertainment numbers (as opposed to entertainment and advertising publishing where, as I say, their skinflint ways muck up the works). VNU gets less than 1/10th of its revenue in the U.S., and this will goose that up to about 15%.

The Social Question

Most Americans don't even think about where Internet entrepreneurship and freelancing may be taking our society. Fortunately, other people do. The Department of Trade and Industry in the United Kingdom suggests we're heading back to a world where unions and professional associations maintain our social fabric.

After you stop laughing, hear them out . How else can freelancers gain benefits (not to mention socialize) than through associations? Yes, our press clubs are weak, and such things as professional training is a business here, not a non-profit bailiwick, but many groups in the U.S. are growing into the niches mentioned by the report, including churches, the AARP, and buying clubs (Costco health insurance, anyone?). Before you start screaming, click on the link and recognize they're looking 15 years ahead. In Internet years, that would make us all dead.

Clued-in, Clueless

Clued-in is the Southern Poverty Law Center and its database of hate groups The best way to fight hate remains shining a bright light on it.

Clueless is Tupperware, which went to direct online sales on its own site, , destroying its direct sales force for short-term gain. (They should have started by running connections to that sales force through a b2b Web site years ago. Now they'll lose the sales force and, eventually, the market.)


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