A-Clue.Com
by Dana Blankenhorn
Volume III, No. XLV
For the Week of November 8, 1999

This Week's Clue: The Aim of the Exercise

This Week's Clue: The Aim of the Exercise

SSP (Shameless Self-Promotion)

Calling all Cars

Hey, You, Get off of Marc's Cloud

International Politics

Clued-in, Clueless

Last week's AdTech conference in New York reminded me of the old joke about fighting alligators - the aim was to drain the swamp. The aim of advertising - of all marketing - is to expand sales and grow the business. 

Too many people are looking inside the alligators' mouths these days and forgetting the purpose of the e-commerce exercise. When Wall Street rewards traffic growth ahead of revenue and profit, that becomes understandable. The aim becomes to get people to click somewhere, anywhere - not to click the buy button. 

Another piece of John Audette's wisdom  is instructive here. The only way to justify a steep Web marketing budget is to base it on the lifetime value of a customer, not transaction volume. Or (if I might paraphrase with a Kennedy accent) ask not how many customers you've screwed, but what you can do for your customers. 

Is it any wonder that old media is crowing these days, as Time Magazine did last week in noting how many dot com outfits are buying TV, magazine, and even billboard ads. To old media, this stands as proof that we need them more than the other way around. To me, this is just proof of the bubble. 

The ads themselves have one of two purposes. They either encourage a click and a trial, or they brand the site as a destination for a specific service. The idea is that once the boom ends those left standing will have brands (and budgets) that can fight off newcomers.

All this assumes, of course, that everything's been invented, or at least it's being invented now. Once the leaders in a niche have been established - Yahoo in search, Schwab for stocks, etc. - rivals are left to use their ads to batter against the established leader, which can absorb little ideas from rivals and let branding do the rest. The trick on the Internet, however, is to create a new niche. Let Art.Com establish the art niche, then represent the artist. To win the battle against a large rival you don't go against the wide front, you concentrate your attack on a single point.

Then there's the question of what you do with a customer when you get them. Don't hammer them with spam, as CDNow has tried to do. Use the traffic and knowledge they've given you to provide them better service, as Amazon.Com has done. Once you have customers, in other words, the purpose of marketing is to build their loyalty, to expand the relationship, to turn customers into your salespeople. (Have you heard the good news about Amway?. Don't just use greed.) Advertising does play a role in that, reminding your target market of what you've done for them so they'll think before going somewhere else for it.

What we're seeing, instead, is an exercise of "you liked this, you'll like this, too." Making that work requires a connection between the two niches, as Amazon is trying to make with its single database. But that's difficult to make work, as I found out when I tried to sell my science fiction work or political stuff . What is true for a writer is also true for a site - when you change niches you start at the bottom. The key for a site's expansion is to find a common theme between the two niches, and not a connection that works for you but one that works for your customer.

When all this dot com money goes to money heaven, those left standing (without rotted foundations) will be those who've won the loyalty of customers, not those with the best-known brands in their niches. That is the aim of the exercise.



SSP (Shameless Self-Promotion)

I have begun my adventure at Voxcap.Com, discussing how next year's elections might impact the future of the Internet. I write daily for ClickZ, and appear on TechEdge Radio. I write monthly columns for  NetMarketing, Boardwatch, and  Intellectual Capital. Once every other month I'm in CLEC Magazine. The lead item here is also the Monday e-commerce column of Andover.News. You can still buy my book . Subscription instructions are at the bottom of each issue.

Remember that it's still journalism that keeps the Clues coming. Give me a call at 404-373-7634. (Yes, I do some commercial writing.) Now back to the show...


Takes on The News

Calling all Cars

Ethics are fine, but ethics don't stop crooks. The line between a crime and a mere ethical violation can also be difficult to discern, especially for someone who thinks they have been victimized, and especially at Christmas.

So here's a prediction. This industry has set itself up for media horror stories and action by ambitious district attorneys because of its weak actions on the privacy front. ZDNet has offered a code of conduct with no teeth (you get an icon for following it), and even though Giga Information  has already begun audits based on the code it's still toothless. The American Bar Association has launched an effort aimed at making consumers wary, complete with an all-too-obvious set of tips which, of course, have no legal standing.

The anti-eshopping backlash has also begun in the media. Consumer Reports studied 25 paper catalogs and found most haven't integrated their Web and phone systems yet, which Newsweek called a scandal . The story should serve as a warning that retail brand names and pretty pictures are no guarantee someone knows what they're doing. But the more important result of all this wailing will be to move shoppers toward brand names (even Web portals) and away from small online merchants that are, in fact, probably doing a great job.

Hey, You, Get off of Marc's Cloud

There was an awesome amount of flak thrown at Marc Andreessen last week over his new venture, Loudcloud . Let's clear it up.

Loudcloud is aiming at two online sweetspots with plenty of growth and profits. These are application service provision and commerce service provision. The former area has a host of hosting outfits (Intel and Oracle are just the latest) that are usually wed to their own solutions. In this area Loudcloud sounds a bit like EDS or Perot Systems, providing custom solutions to big clueless clients. The latter area is provisioning for commerce service providers, where outfits like iXL, ModemMedia and Agency.Com play. These outfits are turning away business almost as fast as it comes in.

What's unique about Loudcloud, Andreessen hopes, is that clients who sign up now get the attention of top-level people, that solutions will be agnostic on technology and internal corporate relationships, and that it plays both inside and outside - big corporate computing problems usually play that way. Given the screaming shortage of talent, this is a no-lose deal for Andreessen and his partners. If they stay true to their vision, they can do something special.

International Politics

What we do here is on a collision course with nationalism, all around the world. Pat Buchanan doesn't know this, but you're his worst nightmare.

When I look at the a-clue.com subscriber list I see people in Russia, Germany, Denmark, Australia, Japan, Singapore, South Africa and India, to name just a few. I enjoy corresponding with and advising these international readers, and I learn a lot from them. Mainly, we learn together how alike we really are, however religion or politics may divide us.

For any nationalist, whether in the U.S., Russia, India, or Austria, this is dangerous stuff, and for Internet users rabid nationalism also holds dangers. For one thing, it's tremendously appealing, especially to the off-line majority. For another thing, the Internet still lacks organization, and its "citizens" lack the political will to create such an organization. To a nationalist, it looks like order is being threatened by anarchy. (In fact, it's being threatened by technology.)

The first steps in the direction of Internet political order, however, are now being taken. ICANN's new board has just one American face (Vint Cerf of Worldcom), which is why folks like Rep. Thomas Bliley might be angered by it. Vint, meanwhile, is pushing Ipv6 , which supports identification technologies some see as a threat to privacy. (Holy New World Order!)

My point today is every nation has a Buchanan, most of them are more powerful than Pat, and every one of them will have to be faced with courage if the Internet is to realize its potential.

Clued-in, Clueless

Clued-in is Intel for canceling its regular analyst meeting and putting it online through a "Webcast." (Making the Webcast available to all, not just to analysts, would have been even more clued-in.) It's a risk (if the server crashes) but with the company moving heavily into the hosting business it's a worthwhile risk, and very clever branding that costs very little money.

Clueless is the non-binding resolution against Internet taxes that Congress passed and sent to its "enemies" at the World Trade Organization. If they meant it they'd call off the Gilmore Commission , which is developing an Internet sales tax regime. Your Clue is, they didn't mean it.


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