============================================================================= Seidman's Online Insider ============================================================================= Weekly Summary of Major Online Services and Internet Events ----------------------------------------------------------------------------- Vol. 3 Number 12 March 24, 1996 ============================================================================= Copyright (C) 1996 Robert Seidman (robert@clark.net). All rights reserved. May be reproduced in any medium for non-commercial purposes, so long as attribution is given. IN THIS ISSUE ============= -WOW! -Ah, the Familiar Wars: MCI vs. AT&T -Prodigy: Dead or Alive? -The Future of AOL -NewsWorthy Notes -Disclaimer -Subscription Info WOW! ==== It wasn't easy, but finally, I saw WOW! It was worth the wait. (Note: Walter Mossberg wrote a mostly positive view of WOW! in his recent column which you can see, at least until Thursday (March 28) at: < http://ptech.wsj.com >. I recommend that all of you who haven't seen the column check it out, because it gives some very interesting view points that are somewhat in contrast to what I've been saying. ) I haven't used WOW! much yet, but I've used it enough to know one thing: It's easy. In the end, being easy was probably the most important thing they were trying to accomplish. They succeeded in a big way. Remember though, WOW! is a service aimed at new users. I believe new users will find it EXTREMELY easy. It is, in all probability, the more experienced user who'll have a hard time with it. There are certain things about WOW! that I found annoying (i.e., I can't maximize the Web browser all forms stay the same size, etc.) but these things were done for a reason, they wanted the user to always be able to navigate the system. "The navigational buttons are always in view so that the user never can get lost," said Alexander "Lex" Crosett, VP, Technology and Development for CompuServe when asked about why I couldn't resize windows. There's certainly logic in the design, and I wondered as I navigated through WOW! whether I found certain things annoying only because I'd gotten so used to doing things the "wrong" way, that I am not comfortable when I'm forced to do it the right way. New users will find WOW! a breeze to navigate though experienced users will have trouble with features that are lost in the effort to always present a map to users. For a time, I had difficulty understanding why CompuServe would spin off WOW! as a separate service. I felt, if WOW! was a better interface, why not just throw everything on CompuServe over to WOW! I understand now. When they said they were targeting new inexperienced users, or people who just don't care about tinkering they weren't kidding. You have to have a separate brand for the people who like to tinker, because they probably won't like WOW! According to Crosett, experienced folks will want to hang on for the 3.0 version of the CIM software for CompuServe which is currently in alpha test, and will soon be in Beta. I originally thought that CompuServe was holding back on me, that ultimately they'd roll everything over to WOW! I can see now that's not the case, and as such, the dual brand makes a lot more sense. Let's face it, most people don't want to tinker they want to use my service. It's not uncommon really. I recently bought a new TV and it has lot's of bells and whistles. Dual tuner picture in picture, closed captioning, closed captioning in Spanish, hook it up to the stereo and it is amazing. Mostly though, when I watch TV, well, I just watch TV. No picture in picture, no closed captioning in Spanish, no blasting the surround sound through my stereo system. Watch TV. WOW! tries to make going online that simple, and to the extent that is even possible, I think they succeed. WOW! still has their work cut out for them if they hope to make a run at AOL, and it will take some time, but the premise may be right. They're still limited to Win 95, and considering that an integrated .dll style version of Microsoft's Internet Explorer is the browser for WOW, it isn't hard to understand why (since the 3.1 version of Internet Explorer is still in beta). I'm sure there are other reasons why Win 95 has been used from a design perspective. It's also not hard to understand why you need a CD-ROM. The full install of WOW! is 49 Megabytes, and that's bigger than some operating systems by itself. But WOW! is the "Certs" of online services. You see, it's "two-two" two online services in one. It's an adult online service as well as an online service for kids. While I understand the reasons for Win 95 and CD-ROM, I think these qualifiers will hold WOW! back until the number of Win 95 desktops overtakes the number of Win 3.1 desktops (There are currently 20 million copies of Win 95 out there according to Microsoft, and about 115 million Win 3.1 desktops according to PC Software analyst, Mary Meeker of Morgan Stanley.) The basic premise of WOW! is in both the kid and adult versions, but the look is entirely different, and the content, and what may be accessed on the Net is entirely different. I think I liked the kid's WOW! better! That's because with adult WOW! though I knew it wasn't aimed at me, the more experienced user, I felt sort of cheated that it wasn't aimed at me. With the kids version, I didn't feel that animosity. Plus, I really liked the cartoonish look a lot. Last week, I said that I thought the all-you-can-eat pricing of $17.95 wouldn't appeal to new users the way you might expect. In defense, Rich Baker, director of communications for WOW! told me that one thing they found was that people wanted predictable pricing. "WOW! offers predictable pricing. You can have up to six family members on the account, and our pricing encourages all of them to use the service as much as they want." I understand the sentiment, but still expect first-timers will balk at the $17.95. I agree people want predictable pricing. Unfortunately for companies trying to make money, they want that predictable pricing to be free! If it isn't free, $17.95 doesn't sound as good as $4.95, or $9.95, even if it is all you can eat. WOW! still has some bugs to work out, lacks a lot in content (but makes up for some of that with unlimited access to the Web at one low price), as well as some features that I think even "inexperienced" users would want. I suspect they'll get the bugs and content issues worked out, and hope they'll do the same with the features, but I'm not as confident there. I'll go into more detail about WOW! beginning next week, when the service officially launches. Ah, the Familiar Wars: MCI vs. AT&T =================================== This is a war we're all familiar with and a war that's entertained us in our living rooms for years. And while MCI one the battle to break up "the phone company", AT&T is winning the war for the long distance market. Fortunately, in this kind of war, MCI is not a loser. It's a battlefield where coming in second place can be pretty darn lucrative. This week, MCI reacted to AT&T's announcement by launching their own flat-fee service for $19.95/mo. Also, for MCI customers, there will be a "5 hour free" plan like AT&T's, but unlike AT&T's, it will only run until May 31. AT&T is offering five free hours to AT&T subscribers for a year. In the MCI plan, after May 31, it will be, $9.95/mo. for 5 hours, and $2.50 an hour after that. To be honest, I think their $9.95 pricing won't hunt very well vs. AOL, CompuServe and Prodigy. If it were $4.95-$7.95, maybe. I believe, that the flat-fee services offered by MCI, AT&T, SpryNet and now Netcom, will gain a lot of customers currently spending more for their access, however, those folks don't represent the biggest part of the market. Like AT&T, MCI's flat-fee plan will be $5/mo. more for those who don't use MCI's long distance service. "AT&T seems to be building its Internet service out of newspaper headlines, MCI's service is built on a foundation of fiber," MCI's Vint Cerf told the New York Times. MCI will increase it's network capacity to 155 megabits per second from the 45 megabits per second system in place today. They say doing so will help with some of the net congestion. Indeed, this will potentially help a lot for portions of the Net carried by MCI, but outside of that, congestion will still be a problem unless other carriers increase their capacity, too. Cerf may be right about AT&T, but I think the same thing could be said for MCI as well. MCI missed a tremendous opportunity to gain mindshare over the last year because their Internet MCI offering was relatively high priced. Had they begun offering inexpensive pricing a year ago, it might have made a big difference. Hindsight is 20-20, but in November 1994, when MCI first announced their Internet offerings, I said that the pricing concerned me, but I was optimistic to see a company like MCI got in the game with all their marketing might. Thing is, for all their marketing might, they didn't really do anything. I expect there's a simple reason for that. What MCI understands and excels at is selling long distance phone service. Getting their sales reps to get fired up about selling Internet access wasn't in the cards. MCI, who was the first long distance company to announce access, but having done relatively nothing with it over the last year, they've been reduced to reacting to AT&T's announcement. AT&T may be fighting it's battle in the headlines, but it's a formidable foe. They've got bigger marketing muscle than MCI, and a lot more customers to market their goods to. MCI may have played a bigger role in the Internet. They may have Vint Cerf, one of the founding fathers of the Internet. And they were be the first of the long distance companies to announce access, but make no mistake, they're chasing AT&T now. Prodigy: Dead or Alive? ======================= A few weeks ago, Todd Copilevitz, who writes a technology column for the Dallas Morning News, called to discuss Prodigy for a piece he was doing. He asked me whether I thought Prodigy was dead, and I told him "No", but that I thought they were dying. In Copilevitz piece last week, Prodigy COO said that anyone that thinks Prodigy is dying hasn't been looking at them lately. They had been dying, according to Lansing, but he seems to think the resurrection is in progress. He attributes this resurrection, in part, to the work Prodigy has done in developing content. Developing content to compete should the day come when content and access are separated is important. Unfortunately, for Prodigy, America Online is doing the same thing. There can only be so much content that can make money. That might be quite a bit of content, mind you, but that is not the original premise of the Prodigy service. Oh they're hiring content gurus a-plenty, but without a lot of customers, that won't save them. America Online is being extremely aggressive with the creation of content. There's the Greenhouse program, and there's also Digital City, which sooner or later will come to a city near you, as well as other new content that falls outside either of those programs. America Online has over 5 million subscribers, and while Prodigy doesn't release statistics, it's pretty widely accepted that Prodigy is in the 1.2 million or so subscriber range. If and when the online model does finally tip over content will be important. Seemingly though, the more eyeballs who were aware of your content PRIOR to the end of the model, the better off you are. AOL can potentially expose their content to over 5 million people, about 5 times as many people as Prodigy. Oh, I know, but if we put our content on the Web, everyone can see it including AOL members! But this isn't like cable, where if you are blessed to have a channel, you'll get eyeballs. There are so many channels, there's no way to keep up with it all. The bigger you are the better your opportunities to showcase content at the "front door". Developing brands is a great thing to do, but you need eyeballs. Prodigy needs money. Money to finish the service, money to acquire customers and money to promote it's content. Money to get eyeballs. AOL and CompuServe both have a lot more eyeballs than Prodigy. Content alone isn't going to save them. The Future of AOL ================= I held an impromptu Q&A session with Ted Leonsis, president of AOL Services Co. Specifically, I was looking to see the view AOL had on separating access from content, and what the AOL vantage point was on offering a flat-fee price. Leonsis jumped directly into Marketing 101 with an explanation of the four grid service matrix. No or low price/low value, low price/high value, high price/low value, and high price/high value. I've worked for a couple of really strong marketing types in my day, and I've seen the matrix many times in many ways. I've even had it drawn for me on a bar napkin before. Leonsis considers the AT&T five hour offering in the first grid. Low price/low value. He felt that the consumers get access and the tools, and were pretty much left on their own to figure it out. Quite naturally, he sees AOL in the low price/high value grid. He points to the Netcom style unlimited access pricing (I assumed for their shell account service) as an example of high price/low value. While I agree that style service is not for everyone, and certainly not for the average consumer, I think there are individuals who get great value out of such services, but in the mainstream, I'd agree with Leonsis. In the fourth grid, he cited an AT&T/AOL combo as an example of high price/high value. He alluded that we'd soon see some interesting pricing plans for access via TCP/IP to AOL. "But a WOW like intro IS NOT consumer friendly," said Leonsis. "The real consumer sweetspot is UNDER ten bucks. So, we will look at a lower price point, and use GNN as a flanker brand." Leonsis said he felt GNN was doing very well with over 150K subscribers. "(GNN) will pass Netcom in less than 3 months to become the biggest ISP," said Leonsis. I find that prediction a little surprising considering Netcom has more than twice as many subscribers and it has taken AOL five months to get to half Netcom's size. I asked Leonsis about whether he saw separating content from access as an issue in the near term. "We don't necessarily see that happening, but we are ready. That's why we have been investing in the brand, in content and community," said Leonsis. Leonsis sees continued strong growth in the near term. "My bet is that we will get to 10 million members in 12 to 18 months, and then have another 1 million come from other sources a la AT&T," said Leonsis. "Remember today, only 1.5 percent of all AOL traffic comes over TCP/IP," he added. Leonsis also believes that for all the numbers game of the Net, that there are less than a million consumers paying for direct dial Internet access services (like Netcom, GNN, and the local ISPs). "The net is a day time network. (The) Netscape home page peaks at 4:00 p.m.," Leonsis said. "We just get started at 6:30 p.m. and we peak at 10:30 p.m." As for the AT&T deal, Leonsis said they would do "interesting pricing" for their members and will probably come up with a pricing plan for anyone wishing to access AOL from the Net. When asked if he envisioned any offering from AOL in the near term that didn't have connect charges, Leonsis replied, "Yes, I do." I believe you'll see some sort of $20/mo. or so unlimited access plan made available via the Net, and I wonder if that won't take a chunk out of AOL's revenue stream as high spenders defect to a flat-fee net account and a flat fee AOL account. They might wind up paying $40/mo. for the privilege, but for members currently paying $40 or more on AOL, it will be a good deal for the members. If that happens, on those customers, AOL stands to lose at least $20/mo. Newsworthy Notes ================ UUNET WITHDREW their registration statement to offer 6.62 million shares of its common stock to the public. UUNET said they withdrew the offer due to a drop in the stock price over the last several weeks. "We believe that the market for Internet-related stocks has been affected by several recent industry announcements, especially AT&T's consumer Internet offering. We have not been able to communicate our message to the market effectively since we were in the quiet period associated with the registration process," said UUNET president John Sidgmore in a statement from the company. "AT&T and MCI have both been competing in the business sector for quite some time with mixed results, and are now making a major thrust into the consumer sector where we do not compete. We believe UUNET is the leader in the business marketplace, and we want to communicate that message clearly and effectively," said Sidgmore. -- SOFTBANK CORP. OF JAPAN is looking at investments in more than 30 Internet-related companies and recently announced deals with Microsoft and Interactive Marketing Inc. as well as considering increasing its investment in Yahoo! Softbank plan to become an infrastructure provider for the Internet and is not trying to compete with technology companies, according to a story by Reuters. -- AN INTERESTING MODEL. AT&T Business Network announced the "beta" of it's "Lead Story" service on the Web at: < http://www.leadstory.com >. It is interesting because basically the site takes a hot topic and points to in-depth coverage on other Web sites. I find it an interesting approach to adding "editorial" value, and if AT&T New Media Services president Michael Kolowich can convince the consumer side to showcase Lead Story on their home page, it could be a very interesting advertising model, and some have commented to me that AT&T could potentially sell the links to the in-depth coverage (i.e., CNN pays for the link.) Ethics be damned. -- PRODIGY NAMED their recently announced $1/hour Internet access service, officially unveiling it as "ACCESS NET DIRECT". The service, which is currently in a market trial in New York City, is currently only available for Win 95 and Win 3.1, but a Macintosh version is planned when the service nationally launches later this year. You can find out more at: < http://www.and.net >. -- INDECENCY ON TRIAL? The court case on whether the "indecent" provisions of the recently passed telecommunications reform are legal under the Constitution began this week in Philadelphia with the three judge panel getting an Internet primer. So far, it's looking pretty good for those of us opposed to the provision. U.S. District Judge Stewart Dalzell, one of the three member panel said, according to a story by UPI: "The very exponential growth and utility of the Internet occurred precisely because governments kept their hands out of this and didn't set standards that everybody had to follow." Exactly. -- DRAW 'EM IN PART I. As a way to increase traffic to your Web site, Newsbytes < http://www.newsbytes.com > is offering business a chance to post Newsbytes' "Top Stories" on Web sites at no cost. I can tell you from my own, not that many hits Web page, that putting up new content regularly really does make a difference. Find out more at: < http://www.newsbytes.com/subinfo.html >, or contact Newsbytes editor, Wendy Woods by e-mail at wendy@newsbytes.com . -- DRAW 'EM IN PART II. Check out "The PostMaster", an automated URL announcement service from NetCreations. It lets Internet marketers fill out one form, click on one button, and, within minutes, publicize their clients' Web sites to more than 350 Web directories, search engines, media outlets, and what's new and what's cool lists. I'd try it myself, but I confess, I don't really care about drawing traffic to my site as much as you probably do! Find out more at: < http://www.netcreations.com/postmaster/ >, or contact Ryan Scott at rscott@netcreations.com . -- See you next week. 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. I speak for myself and not for IBM. 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