============================================================================= Seidman's Online Insider ============================================================================= Weekly Summary of Major Online Services and Internet Events ----------------------------------------------------------------------------- Vol. 3 No. 1 January 7, 1995 =============================================================================  Copyright (C) 1995 Robert Seidman (robert@clark.net). All rights reserved. May be reproduced in any medium for non-commercial purposes.   IN THIS ISSUE ============= -Notes from the Editor -CompuServe Caves Under Pressure -AT&T Business Network/Interchange Head for the Web -Web Advertising: Still a Drop in the Bucket -Disclaimer -Subscription Information   Notes from the Editor ===================== The following story is true. I wish I could change the name to protect the idiot. I share it with you in the hopes that passing it along to 10,000+ will be a cathartic experience.  Right before the first of the year I received a new IBM ThinkPad. A 755CS with a 10.4" screen, DX4-100 CPU, and 24 Megs of RAM. I popped the hard drive out of my old ThinkPad, and several hours later, had things reconfigured correctly on the new system. I was in heaven -- to the point where I actually moved over to using the ThinkPad as my desktop PC, not only at the office, but at home as well. Life was good. Until today.  Something happened, I couldn't say what, but when I ran my diagnostics it said there was a problem with the DSP. Things still worked, I just lost my Mwave sounds and I couldn't get the video to display in the right resolution. Though, the ThinkPad worked fine, other than the DSP when not "docked". So, I undocked the ThinkPad and set it on the ledge of the loft with plans to tinker later. Then I headed downstairs and made a tunafish sandwich. After lunch, I went out into the hall of my building to check the availability of laundry machines in the laundry room. Then I came back inside. That's where my nightmare started.  I knew immediately something wasn't right. The ThinkPad was lying on the carpet when it should have been up in the loft. My front door is spring loaded, and it is pretty powerful. I lost my wall clock when it fell from the wall after the door shut. I can't say why the 8 Diet Pepsi cans remained on the ledge of the loft while the ThinkPad fell approximately 11 feet to its apparent demise. Most of my computer life is on the hard drive in the ThinkPad. I'm holding out some hope that if I plug it into another machine, it will work. But, I am not optimistic based on the loud whirring noise the hard drive made before the ThinkPad gave me error #174 and wouldn't allow me to continue.  Go ahead, laugh. I would probably laugh if it happened to someone else. Except it happened to me, so I'm thinking it's not all that funny. My brother, who joined the list this week will probably find this hysterical. My father, who also joined this week, will probably have more compassion for my plight, but I expect even he will get a pretty good snicker at my expense. And after I'm reprimanded for damaging a $5,000 piece of equipment, I think I'll bear the burden of flying ThinkPad jokes at the office.  Right now, I'm still not amused. I had all but completed this week's newsletter. I'd wait until tomorrow and try the drive in another machine at the office, but with the blizzard we're experiencing, I'm not sure there will be anyone there to assist me with getting a machine to test it on.  My apologies in advance to AT&T New Media Service president Michael Kolowich and to David Shnaider, Vice President at Ziff-Davis Interactive and GM of ZD Net since my notes and quotes are no longer available to me. I can relay the original spirit of their words from memory.  My stock quotes were also on the ThinkPad, so Stock Watch takes a week off. Nothing extremely notable except for FTP Software and NetManage. On news that 4th quarter earnings would be lower than last year, FTP Software's stock lost half its value, falling to $11.875 on Wednesday. NetManage, who produces software similar to FTP Software lost about 30% of its stock value over fears that their results may be similar to FTP Software's.  Since I like to live dangerously (a.k.a. I'M AN IDIOT), I don't have a very recent backup. Since all my e-mail was on the ThinkPad, if you've written within the last week or so with something important, please resend it.  I know some of you will write me wondering why I bothered to put this week's issue out at all, being that the newsletter is free. I can't say exactly when, or exactly why, but at some point, at some level, I became a publisher. Once that happened, I took publishing the newsletter very seriously. This wasn't a scheduled week off and the show must go on. Besides, if your computer is going to crash, it might as well crash from 11 feet. And while most of my data lived on the ThinkPad, I have another computer or three...   CompuServe Caves Under Pressure =============================== CompuServe recently announced that they were blocking over 200 newsgroups based on a request from German officials who reported the newsgroups as a part of an ongoing investigation into child pornography and other illegal pornographic material on the Internet. CompuServe lacking a technological solution to block the newsgroups only to subscribers accessing from Germany decided to block them everywhere. Two things happened. First, there was a loud protest from most of the Internet community regarding the censorship issue. Second, and somewhat surprisingly, the Germans denied they ordered CompuServe to block the groups.  Well, I'm not going to waste excessive bandwidth on this issue because in the end, it is mostly irrelevant. Before you jump to your e-mail client to fire me off a missive, please let me get to why I think its irrelevant. But first, let's not be too hard on CompuServe. Oh sure, they screwed up. I mean, they've now announced that they're going to put the groups back up this week and work towards a technological solution that would allow blocking by country as soon as possible. They have assured they will not censor newsgroups in the United States. This is what they should have offered to do to begin with. I'm pretty sure they've learned their lesson.  While CompuServe is the number two online service in subscribers world wide and in the United States, the fact remains that America Online is kicking the crap out of them in the U.S. I estimate that AOL's reported 4.5 million subscribers in the US and Canada is approximately one to one and a half million more subscribers than CompuServe has in the same region. CompuServe reports over 4 million subscribers worldwide, but is the strongest of the US providers in the European and Asian markets. They have a foothold there and they want to keep it. Germany is naturally one of the bigger European markets and with the AOL/Bertelsmann service recently launched in Germany, and about to begin beta testing in the UK and in France, CompuServe probably was motivated to comply to the fullest with the German authorities.  Okay, so maybe the Germans didn't order CompuServe to block the newsgroups outright, and maybe CompuServe acted a little quickly. But ordered or not, if someone says, "we find these newsgroups illegal, please investigate", whether they were ordered to comply or not seems moot. They want to compete in that market and didn't want to risk it.  Earlier I said the whole issue is irrelevant. I think it is. You can't censor the Internet. Some will say, "but if CompuServe will buckle to this, then any authority, whether it be from Germany or a small town in the bible belt can pull the same stunt." They can try. They will fail. You can't censor the Internet.  TCP/IP. The Internet. By its very nature what was developed was something that allows any computer on the network to talk to any other computer on the network. That's what it was supposed to do, and that's what it does. The theory was get all computers and allow them to communicate with each other. That was sort of the point of the whole thing. Vint Cerf, who some have deemed the "father of the Internet" worked hard championing the Internet Protocol (IP). Dr. Cerf reportedly was known to wear a T-shirt saying "IP Everywhere". You have to love scientific humor.  It's a great thing too, this inter-connectivity. It's what allowed me to remain "robert@clark.net" long after I moved from Virginia to New York. ClarkNet is a local provider in the Baltimore/Washington area. My e-mail address was something of my net identity so I didn't want to give it up. With TCP/IP I didn't have to give it up. Sure, I had to find a local provider to make my TCP/IP connection via SLIP or PPP or incur long distance charges. But I can connect through any local provider whether it be Cloud9, or a national provider like the IBM Global Network, GNN, or even the Microsoft Network. I connect, I bring up my mail client and I pull my mail from ClarkNet.  So you may be thinking, "What does any of that have to do with the CompuServe/Germany thing?" Okay, let's look into the future. Let's say you're accessing the Net from Germany. You use CompuServe as your provider. CompuServe, like other local German providers no longer provides access to about 200 newsgroups. You want access to them. It becomes a question of "how bad do you want it", because if you want it bad enough there will be LOTS of options available. You can telnet to any one of hundreds, if not thousands, of providers outside Germany and start-up a shell account that will give you access to those newsgroups.  The Internet, like it or not, is designed for the free flow of information. You can't play half way. You either open up to the whole thing, or you block the whole thing. It is a broadcast medium like no other. It's not radio, it's not TV, and it's not print. The censorship models that apply to those mediums can't work in this one. Can't work. It seems way too late to change that.  So to the Germans and those wishing to block particular traffic: You're better off giving up or deciding to block the whole thing, because there really is no middle ground here. Fortunately, one bad apple doesn't spoil the whole bunch.  If it's an all or nothing proposition, I think everyone will wind up taking it all. The benefits far outweigh the risks. New technical solutions for the risks (i.e. software that allows parents/teachers, etc. to block specific newsgroups) are coming all the time.    AT&T Business Network/Interchange Head for the Web ================================================== On Thursday, AT&T announced that its next version of the AT&T Business Network would be created for the World Wide Web and that over the next year, the Interchange platform would be phased out.  When I read the news on Tuesday about AT&T's write off of $6 billion along with layoffs which will impact 40,000 of its workers, I thought it might be a fine time to sweep a couple hundred million dollars worth of mistakes on online ventures like ImagiNation, Interchange and PersonalLink.  With regard to Interchange, AT&T New Media Services president Michael Kolowich said that the announcement had nothing to do with restructuring. Kolowich advised that they'd pretty much began focusing on the Web as early as last summer. He said that the move that was inevitable, but said the reality was that creating a service as rich as AT&T's Business Network wasn't possible yet on the Web and that if it had been someone would've already built one.  Especially with regard to bulletin boards, I'd agree with Kolowich. As most of you long time readers know, I was never very bullish on Interchange. The vision of the client software was a good vision, but too late. But it hadn't quite lived up to its promise. In its release version, it still crashes on me regularly. Every time it does the databases need to be re-indexed. It's quite annoying. And even on a DX4-100, it was pretty slow. Still, I liked the look and feel a lot. It was user friendly and I especially liked the customization features. Although, learning the customized features took some time, and I suspect most wouldn't be willing to take that time.  It was more the business model that I didn't like. With Interchange, you signed up for specific content, i.e., the Washington Post's Digital Ink and you also received the basic services offered by Interchange Central. Had the service launched years ago, maybe that model would've worked. But AOL, CompuServe and Prodigy offer a lot of content at one low price. No specific subscriber numbers have been given, but Kolowich has said the base is in the "tens of thousands range". Interchange launched last summer. Microsoft Network launched at the end of last summer and is probably nearing 750,000 as I type this.  Kolowich states the move to the Web was inevitable, but I imagine he fought for the Interchange platform pretty hard. While the Interchange model was off the mark, it seemed like a great platform for the AT&T Business Network. But the software still needs some work and lacks chat. They might have figured the development dollars were better served re-focusing on the Web. Kolowich though, said that they're still working on the Interchange platform and that a new version of the software will be released shortly.  Most of the problem probably was coming from existing and potential content partners. It can be a lot of work to produce content for a proprietary client, why not just publish on the Web and do it once? With America Online, CompuServe, and to a lesser degree, Prodigy, in some cases it may be worth reinventing content for these proprietary platforms in order to have the opportunity to get in front of millions of subscribers. With "tens of thousands", this isn't really the case with Interchange.  Kolowich is hopeful that the richness of the service can be recreated on the Web but he said that AT&T was very committed to growing the base of AT&T Business Network subscribers on the Interchange platform. He cited a recent media blitz of television commercials run during recent college bowl games and other prime time events. He says that so far, the campaign has yielded over 100,000 requests for trial kits.  Kolowich said he was proud of Interchange, and feels it gave AT&T a great time to market advantage as a platform for the Business Network. He also said that a lot of what they've developed is transportable to the Web and that the experience gained alone was worth a lot. From the standpoint of the AT&T Business Network, I'd have to agree with him. With regard to the original consumer based Interchange, it was a matter of bad timing.  As for AT&T Business Network, it remains to be seen how well the service can be converted to the Web. AT&T did not announce how the service would be charged on the Web. Currently, it's $24.95 a month for 10 hours of service.  It should be noted that none of the employees of the New Media Services group are among the 40,000 that will be laid off.  In other, perhaps related news, Don Brazeal who headed up the Washington Post's Digital Ink effort on Interchange left his post to "go on sabbatical" the day before AT&T announced it would phase out Interchange. He'll be replaced by Post technology VP Ralph Terkowitz. According to Terkowitz, Brazeal's departure wasn't related to the announcements from AT&T. Terkowitz told the Cowles/SIMBA Media Daily that the "door was open" for Brazeal after the sabbatical, but that "nothing definite was in place".  Many of you may remember Brazeal from last September's Jupiter Online Developers conference in San Francisco. It was there, during one of the conference panels, that Brazeal claimed that the heads of the major online services were "five wolves in sheep's clothing." He questioned whether there was such a thing as a good deal with an online service provider and said the cost of producing the content was higher than any revenue stream the content would yield. Back then, I questioned whether Brazeal wasn't perhaps upset that he'd aligned with the wrong wolf.    Web Advertising: Still a Drop in the Bucket =========================================== Next week, Ziff Davis Interactive plans to announce new advertising rates for its ZD Net Web site. Unfortunately, the new rates are resting peacefully on the ThinkPad hard drive and I can't access them. If you're super interested, keep an eye on the Cowles/SIMBA Media Daily as they'll probably cover it.  I spoke with David Shnaider of Ziff Davis Interactive. It is in some ways ironic that Interchange was born in this unit before ultimately being sold off to AT&T. It is ironic because with regard to the ZD Net brand, these guys are everywhere. Literally! In one fashion or another they're on CompuServe, Interchange, Prodigy, MSN, and the Web . Within the next 60 days, they'll be on AOL too. If you're going to experiment, that is a pretty good approach.  It is an approach that ZDI can take that some others can't afford to. The reason is simple. Everyone on an online or Internet service has a computer. If what you write about is the various aspects of computing, you've got a very good target audience since everyone in the audience, at some level, has an interest in computing. I believe this is an important distinction. If you publish a magazine about aviation, there may be many people in the overall online audience who are interested in what you're publishing, but certainly not most people. Therefore, you have difficult decisions about how and where to publish. If you're a Ziff-Davis, you can afford to try many different approaches.  In the second half of 1995, the ZD Net web site generated $1.2 million in revenue, most of it came in the fourth quarter. Shnaider predicts the Web site will grow to $5 million in advertising revenue in 1996. ZD Net is one of the biggest Web sites on the Web. In the end only the bigger sites will generate much in the way of advertising revenue. We can estimate for purposes of discussion that total advertising revenue from the Web will be roughly $100 million in '96, give or take $50 million. Compared to overall advertising revenue, this represents only a fraction.  The Web is still growing though, and more reasonable recent predictions (from companies like Forrester research who predict 13.8 million Web users by the end of 1996) show promise for the future.  ZD Net's biggest success story is on CompuServe where it has about 285,000 subscribers. The CompuServe ZD Net subscribers pay $3.50/mo. on top of the CompuServe monthly charges. Some of the CompuServe ZD Net content doesn't incur per minute charges, but much of it does. ZD Net was available on CompuServe for several years in some form at no additional charge. They built up to about 250,000 registered users under the free model before going to a pay model in the spring of 1992. Shnaider told me that they went from 250,000 to 0, and that they were "flamed" extensively. With time, the service built back up and surpassed where it once was, even with the subscription fee (when it launched in '92, the fee was $2.50/mo.)  Shnaider said that there are value added services on the subscription service that aren't available elsewhere. Shnaider spoke of ZD University, an online education service offered by ZD Net. When they offered a course on HTML via the CompuServe service, they filled up the same day it was announced. Shnaider said some CompuServe members who didn't make it into the class were offering to buy slots from those who did. Imagine that, scalping an HTML course! Shnaider said that many of the ZD Net subscribers on CompuServe had their accounts underwritten by their companies.  The Web may be the next big ticket, but for now, the subscription service on CompuServe will generate almost 2.5 times the revenue that advertising will generate on the Web. Shnaider hopes to begin offering a subscription version of the ZD Net service on the Web sometime this year, but was quick to point out that most of the magazine content currently available for free on the Web would remain free a la the ESPN SportsZone model. Shnaider said he believed that there will someday be enough Web subscribers where, like with magazines, they could charge subscription fees and sell advertising.  Look for ZD Net to appear on AOL within the next 60 days. Don't be surprised to see ads there. Shnaider said that he didn't think a publisher could make a lot of money from revenue sharing on time charges alone.   Other Items of Interest ======================= MSN recruited away Dan Fisher, the head of the LA Times electronic venture, TimesLink. TimesLink had only 21,000 subscribers after about a year of service on Prodigy and announced plans to migrate to the Web. The Web site plans to beta soon. According to the Cowles/SIMBA Media Daily, Fisher signed a non disclosure, but quoted a source at the Times as saying the position was, "something to do with information products separate from the news operations at the Microsoft Network."  According to the Media Daily, Fisher, who is in his early 50s will report to Melinda French, who heads up Microsoft's consumer division and is married to Bill Gates. --- FORMER NETGUIDE Publisher Don Tydeman plans to join Digital Delivery, a company that develops agents for delivering electronic content. One example can be found at CMP's TechWeb is an agent that pulls content from the Tech Web site. The benefits are the profiling capability and that the information can be pulled off the Web, and then be read much quicker on or offline. There are a couple of similar services available, and I expect to see many more in the coming months. Other products from digital delivery allow the electronic distribution of high quality graphic publications. Digital Delivery can be found on the Web at: . CMP's TechWeb is at . -- PRODIGY took a page from the E! Entertainment Network and launched "Chat Soup", which will cover celebrity chats that happen online. Prodigy will not only cover the chats that happen on its own service, but will also cover its major competitors and the Internet. Will the next Greg Kinnear be born online? -- NEW JERSEY ONLINE plans to launch officially on January 8th, but by the time you read this, it probably will be January 8. Besides, it's already there and looking pretty good at:   See you next week. Say a prayer for my hard drive and please go easy on my typos this week! :-) My latest c|net column is available on c|net under the personalities department at http://www.cnet.com/ .   Disclaimer ========== I began writing this newsletter in September 1994, at the time I was working for a technology company that is now owned by MCI. In March, I began working for International Business Machines Corporation. As of July, my management has agreed to allow me to do some work on the newsletter during business hours (probably about 6-8 hours a week). I speak for myself and not for IBM.   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