============================================================================= Seidman's Online Insider ============================================================================= Weekly Summary of Major Online Services and Internet Events ----------------------------------------------------------------------------- Vol. 3 Number 18 May 5, 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 ============= -Dow Jones Breaks New Ground -"Web-ward Ho!" For Microsoft -More On "Click Here for $$$" -Newsworthy Notes -Stock Watch -Disclaimer -Subscription Information. Dow Jones Breaks New Ground =========================== Many scoff at the notion that there's money to made via advertising on the Web, but I don't buy that. I believe some sites will succeed when it comes to generating advertising revenues. When it comes to subscription services, i.e., people actually plunking down their (or their companies') hard earned money, there are even more skeptics. Most of the bigger content sites on the Web think the true business model is one that marries subscription fees with advertising revenues a la the newspaper model. Dow Jones is testing this theory in a big way with the grand daddy of business publications, The Wall Street Journal. This week the Wall Street Journal Money & Investing Update page switched to "The Wall Street Journal Interactive Edition" (WSJIE), and added the full content of the Wall Street Journal. Other features, such as the "Personal Journal", a service which previously required proprietary software are included. But after more than a year of sticking their toe in the water with the Money & Investing Update page, Dow Jones has decided to immerse themselves in the sea of the Web. Dow Jones will soon charge $49/year for the service, and $29/year for those who subscribe to any version of the print publication. The rest of the Web world looks on with great anticipation. Sites like Pathfinder, The New York Times, etc., are wishing Dow Jones well in their effort. If the Wall Street Journal can make money on the Web, there's a shot for them. I don't believe this is necessarily true, because I think consumer services will have a harder sell. But if the WSJIE can't succeed, it paints a gloomy picture for everyone else. If they can't succeed, who can? They have a great shot at success. Their success will not be solely on the basis of providing good information with a good brand name at a fair price. If they succeed, it will be because they have put together an excellent service. I went looking to find something bad about the Interactive Edition, but the only thing I could find was that demand was so high on the site that the servers were bogged down. Not a bad problem to have, and certainly one they can fix. Short of that, the folks at the Interactive Edition did an outstanding job. I spoke with Neil Budde, editor of the Interactive Edition and one of the visionaries behind the service. "We set out to say we're going to exploit the medium in ways we couldn't in print. The Wall Street Journal Interactive Edition is not a supplement, it stands on its own," said Budde by phone. They accomplished what they set out to do in spades. It is a service with unique material, stories that didn't make the print versions and updated business news throughout the day. Also included are Sports (from AP) and Weather (Accuweather). They've done an outstanding job of packaging the material. They have editors on site 24 hours a day, and usually the pages are updated at least once an hour. As for unique content, there is an Online Column, and each Saturday, a feature called Mossberg's Mailbox, from Personal Technology columnist Walter Mossberg. Mossberg's Mailbox was priceless in its debut. Mossberg is the master of taking a complex subject and translating it into a language that most everyone can understand. This week, in addition to finding out about things like SeniorNet and whether to skip Win 95 and go directly to Windows NT, you can also find the answer to this question a reader queried Mossberg with: "Is it true you are the oldest person alive on AOL?" But wait, there's more! There's also the Personal Journal which allows you to set up a simple profile based on keywords and company names or ticker symbols. Each time you check out the Personal Journal, you'll get a list of recent stories matching your profile. The useful "Briefing Books" for company background information that have long been a part of the Money & Investing Update page for some time are there as well. While certain sites like SportsZone < http://espnet.sportszone.com > have been toying with a subscription model, the bulk of their service is still free. For those registering for the WSJIE between now and the end of May, usage will be free and unlimited through the end of July. After that, it's time to fork over the credit card. For just a little over $4/month -- and less if you're already a Journal subscriber, over time, this site should do very well. "A percentage of people will say, 'That's it, I'm out of here'," said Budde regarding the soon to be subscription-only service. But Budde believes many will stay and that the base of subscribers will build back up over time. Based on research they've done, Budde is confident that the number of subscriptions to make money will be there. Budde said that they don't need "huge numbers" to have a viable business. But what about the revenue model? What will be the mix between subscription and advertising revenue? Budde told a tale that is not so surprising in retrospect. Only a few years ago, when they were first tinkering with this vision, advertising was not a part of the original business model. Now, according to Budde, they are looking at somewhere between a 60%-40% and %70-%30 split, with advertising being the heavier component. I asked Budde how it felt to be the trend setter and have all the eyes in the Web publishing world upon the Interactive Edition. "It's exciting - we don't mind being there," said Budde, "But our focus is on delivering the information and not on setting trends in a lot of ways," Budde added, pointing out that many other sites are the real trend setters leveraging the multimedia to the fullest with things like Java and Shockwave. You won't find any of that on The Wall Street Journal Interactive Edition. You will find valuable, nicely packaged information, that is easy to navigate. At $4.08/mo., it's a great deal. Register this month and get it free until the end of July. If you've already registered for the Money & Investing Update page, there's no need to re-register. See for yourself at: < http://interactive.wsj.com >. Provided that they can quickly add additional capacity (servers and bandwidth) as needed, this service will be a real winner. "Web-ward Ho!" For Microsoft ============================ Microsoft announced that their "MSN News" is now freely available on the Web at . This news, basically a somewhat packaged version of Reuters news is not a big deal. In a day and age where Reuters is already all over the Web, where CNN, USA TODAY and indeed the Wall Street Journal, have established very rich news sites, Microsoft's site can not be viewed as a threat in the news space. Still, they did a nice job of implementing and packaging this service. Over the coming months Microsoft will shift entirely away from the proprietary MSN service and move the remaining content over to the Web. Whatever. This has been coming for months. But, Microsoft announced a while back that if you were coming in via another Internet access provider, you could access the MSN content on an unlimited basis for your monthly fee. Microsoft has now lowered the price. If you're coming in from another provider, you can get all-you-can-eat MSN for $6.95 a month, and through August, a special yearly rate of $39.95 is being offered. $3.33 a month for unlimited access! Sure, you need an access provider, but there is much available in the $15-$20 a month range. Potentially, you can get the best of all worlds for under $20/mo. It's just that in its present state, MSN doesn't offer as much as some of the other services. Still, if I am America Online and CompuServe, I'm starting to get just a little antsy about Microsoft. MSN originally was billed as they great online service killer. Then it was viewed as a flop, at least by many. But MSN had the unfortunate experience of getting caught up in Microsoft's shift to the Internet. In the end, that experience may not be prove unfortunate after all. While it doesn't look like MSN will be the online-service killer it was billed as it can still wreak havoc on the industry. A year ago, I would've sung a different tune because messaging and conferencing on the Web were not done as elegantly as they were on the proprietary online services. That's already changing, and with Java and Active-X, Microsoft should be able to build pretty good bulletin boards and chat on the Web. *Will this impact other services?* So why am I worried if I am AOL? Most of their subscribers are on the $9.95 plan and not using more than 5 hours a month. $9.95 is better than $20 or so, so what's the big deal? I'm going into reruns, but here is the big deal: It is pretty much accepted that about two-thirds of AOL subscribers don't go over 5 hours a month. The most recent reports are that the average AOL subscriber pays $18/mo. If two-thirds of the subscriber base are not going over the $9.95, that means, that if the base is near 6 million, those two-thirds are responsible for about $39.4 million in monthly revenue. Now, if the average is $18.00/mo, but two-thirds are in the $9.95 category, that means that 1/3 of their base is averaging $34.10 a month, or $67.5 million in revenue a month. One-third of AOL's subscriber base is responsible for almost two-thirds of the revenue. Sooner or later we'll see AOL do some price maneuvering with regard to a flat-fee service. I think they'll be competitive, but the reality must have sunk in by now in Vienna, Va. that it's going to smart a little. There's really no way for them to come out ahead because whatever they do will have a adverse short term impact on their revenue. Microsoft's aggressive pricing might succeed in driving the online world into the flat-fee cable model. Will we have have a flat-fee ISP and flat-fee "online" services (whether they be Web based or proprietary services you can get to via the Net) for around $20/mo? It may take a bit to get there, but I think in the case of AOL/GNN and CompuServe/SpryNet, that's where the world is moving. Those two aren't off the hook on their $9.95 pricing either, which over time will probably be cut in half. CompuServe and AOL will have to hope they can make it up in volume. But it's not so simple according to America Online CEO and chairman, Steve Case. "We've done a lot of price testing -- of lower and higher monthly fees, with varying amounts of free time -- and there's a reason why we're still at $9.95 for 5 hours. If we thought we could attract more customers with a different price point, we'd do it," said Case via e-mail. I'm pretty sure that if the service was $1 a month for unlimited usage, they could attract more users, but that probably wouldn't be a wise business decision. Case believes that consumer-based a la carte subscription content sites on the Web will be a difficult sale, but thinks such sites will demonstrate the true value of AOL. "As we've grown, we've dramatically expanded our array of offerings, while keeping the price the same. As more Web sites move to ala carte pricing -- such as Wall Street Journal and soon Pathfinder -- the value provided by AOL will become even clearer," said Case. "But this is not just about price," Case added. "It's about creating an engaging interactive experience that is easy and fun to use and can excite the imaginations of tens of millions of people. With the proliferation of content, the battlefront will shift increasingly towards context, community and commerce -- all AOL strengths, in my view," he said. I agree with Case for the most part. I don't believe that consumers, in the mainstream, will want to pay $5 here and $3.95 there for Web content. And I do believe that context and community are important. I just don't believe AOL has a patent on context and community. I caught Case online and suggested that the technical problems of community and context would ultimately be resolved on the Web. Case shot back with " context/community is NOT a technology problem -- context is enabled by technology but the real value is editorial (i.e. people.)" Case said that while community is also enabled by technology, the real value is "in the people themselves, the social aspect, that sense of community." And you know what? Surprise -- I agree with Case here, too. Except for one thing -- when Microsoft and others resolve the technical challenges to enable easy community and context (and this is happening all over), what's to stop Microsoft from developing context and communinty? Can they hire people to serve in editorial roles? Sure! And Case is right, "community" needs people. The only trouble MSN may have is attracting the wealth of content that is available on AOL. Many content providers are already disgusted with MSN (not that they love AOL either!), but at flat-fee pricing, it might be tough to line up a lot of content to put into context. "The key will of course be, as it always has been and always will be, what consumers want and how they want it," said Case. "The new models emerging from MSN and others are interesting to watch but the rubber will meet the road when consumers make their choices," he added. He's right, but sooner or later it comes down to money. Consumers certainly care about price and if Microsoft can build a quality product on par with AOL and decides to drive it via price, it isn't safe to assume they will fail. I'm not forecasting the second coming of MSN (when exactly was the first coming?), but it could get very interesting. More On "Click Here for $$$" ============================ Last week's newsletter included a piece on Web advertising which discussed Proctor & Gamble's recent deal with Yahoo where P&G would only pay based on people clicking the ads (click-through) and not on impressions (simple display of the ad banner.) I received the following response from Scott Kurnit, the former Prodigy #2 and former #1 at MCI/Newscorp's aborted online venture. Kurnit's comments summarize well the bulk of the e-mail received on the subject. "It's the responsibility of the advertiser (not the media outlet) to get the order. If P&G runs an ineffective ad on CBS that doesn't sell the goods they don't go back to CBS looking for a credit. It's up to the advertiser to buy the media space they believe will properly target their customers and then "get the order." In the case of a Web site the advertiser knows what they're buying, then they have to make a compelling banner, cross promotion, webfomercial etc. that entices the almighty click. As with anything related to the Internet there will be clever variations, but this is the starting point," said Kurnit. NewsWorthy Notes ================ UUNET AND MFS AGREE TO MERGE. Omaha, Ne. based telecommunications company MFS and Reston, Va. based Internet company, UUNET Technologies have agreed to a $2 billion stock conversion merger. Generally speaking the analysts loved this deal and the synergies the two companies have. UUNET recently reported net income for the first quarter of $233,000 on $43 million in revenues compared to a loss of $263,000 on $15 million in revenues one year ago. The MFS deal values UUNET shares at about $61.67/share. UUNET closed up %40.8 versus last weeks close, ending the week at $63. Last week the stock closed at $44.75. Meanwhile, The Washington Post reports that the National Association of Securities Dealers and the Chicago Board Options Exchange are investigating unusual stock trading related to activity prior to announcement of the deal. -- PLEASE MAKE IT STOP...I deliberately have avoided the story where the American Family Association (AFA) sent letters to Janet Reno asking that CompuServe be prosecuted under the Communications Decency Act for distributing "pornography and other sexually oriented materials." The CDA itself is the subject of a lawsuit challenging whether it is constitutional. Until that suit is settled, the Justice Department has agreed not to investigate, indict or prosecute based on the CDA. However, according to the Cowles/SIMBA Media Daily < http://www.simbanet.com >, the matter has been referred to the FBI. CompuServe claims that they haven't been contacted by the FBI, but that they would cooperate fully. the MacGlamour area on CompuServe, which does have nude pictures and quick-time movies available. Recently, Go-Graphics of Orlando, Fl. Was asked to manage the forum by CompuServe. Asked whether the management transfer was precipitated by the AFA's complaint, a CompuServe spokesperson replied, "possibly." The area clearly warns of adult material AND that the service can be blocked from view of children. And on that note... -- MILLION GEEK MARCH. Billed as the Electronic Freedom March, a group of cyber-activists are planning a protest march in Washington, D.C. in late September (and I really should be back in school) to defend free speech on the Internet. While the thought of a million geeks in one place (especially one as small as D.C.) scares the heck out of me, it seems like a worthy cause. Find out more at: < http://march.tico.com/ >. -- COMPUSERVE LAWSUIT DEUX? German news magazine Der Spiegel reports that CompuServe is considering suing the German state-owned phone company, Deutsche Telekom. CompuServe has asked German and European Union cartels to look into whether Deutsche Telekom is abusing its monopoly position and favoring its own online service, T-Online. According to the report, CompuServe members in Munich are complaining that they regularly experience difficulties trying to access CompuServe. -- PAC BELL ANNOUNCES INTERNET Service. During a keynote speech at Internet World, Rick Hronicek, President of Pacific Bell Internet Services said that consumer dial-up Internet access would be available on May 28. No additional details were given, but the scuttlebutt is that the pricing will be $14.95/mo. for 20 hours, with additional hours at $.50/hr. up to a maximum monthly price of $19.95. A $9.95/mo. for 10 hours plan, with $1.00/hr. over the 10 is also planned. The hope is that the service will lead to additional sales of ISDN, second lines, etc. Also announced for June is an interactive yellow pages for California dubbed "Pacific Bell At Hand", from Pacific Bell Interactive Media. A preview of the site is available at: < http://www.athand.com >. -- DELPHI FOUNDERS BUY SERVICE BACK. About 3 months from the MCI pull-out of the Newscorp/MCI online venture was all it took for Rupert Murdoch's News Corp. to sell off the text-based Delphi service to a group which includes former Delphi president and CEO, Dan Bruns. It is estimated that Murdoch paid about $12 million for the service when it was purchased in 1993. No financial details were disclosed. Delphi and sister service BIX were included in the sale, but the iGuide site < http://www.iguide.com > developed by the MCI/Newscorp venture was not included. Delphi has an estimated 50,000 subscribers, and according to Bruns is profitable. -- JAMBA-LAYA: Aimtech Corporation, introduced Jamba, a visual authoring tool for creating Java applets and applications. Jamba is built on an industry standard object model and enables Internet developers, creative professionals and webmasters to create Java applets without programming or scripting. In a related announcement, IBM and Aimtech disclosed plans to strengthen their existing relationship, which will include collaboration and joint marketing. -- NETSCAPE ATLAS BECOMES Netscape 3.0 Beta! Check it out at: < http://home.netscape.com > "Cooltalk" Internet phone application can only help cement Netscape's market share in the browser wars. -- WILL I WAFFLE my view on the "Internet Terminal"? A New c|net "connected" column, which should be available Monday night at < http://www.cnet.com/Content/Voices/Seidman/ > will give you the scoop. Stock Watch for the Week Ending May 3, 1996 =========================================== This % 52 52 Week's Change Week Week Company Name Ticker Close 1 Week High Low @Net Index IIX $253.52 0.5% $259.85 $185.76 America Online AMER $62.63 -5.3% $68.13 $16.75 Apple Computer AAPL $23.88 -3.5% $50.94 $23.00 AT&T T $59.38 -3.3% $68.88 $49.13 BBN Corporation BBN $27.63 -1.8% $48.75 $16.50 CMG Information Svcs. CMGI $29.72 -2.6% $50.25 $5.50 CompuServe CSRV $26.50 -11.7% $35.50 $26.00 CyberCash Inc. CYCH $35.25 2.9% $64.50 $24.50 Excite Inc XCIT $19.25 14.0% $21.25 $13.13 FTP Software FTPS $9.94 -1.9% $40.63 $8.13 H&R Block HRB $35.13 -3.4% $48.88 $31.50 IBM IBM $108.13 0.4% $128.88 $83.13 Lycos Inc. LCOS $16.75 -6.9% $29.25 $14.00 MCI MCIC $29.00 0.4% $31.13 $19.09 Mecklermedia Corp. MECK $15.50 -8.8% $24.38 $7.75 Microsoft MSFT $110.88 -2.3% $115.25 $78.88 Netcom NETC $38.00 15.2% $91.50 $19.22 NetManage NETM $14.19 10.2% $34.00 $9.38 Netscape Comm. Corp NSCP $56.50 -8.5% $87.00 $22.88 News Corp. NWS $23.13 -2.1% $25.13 $18.50 Oracle Corp. ORCL $33.31 -2.4% $36.66 $20.31 PSINet Inc. PSIX $17.00 46.2% $29.00 $6.75 Sears S $50.25 -0.5% $53.25 $25.88 Spyglass Inc. SPYG $31.50 16.1% $61.00 $13.25 Sun Microsystems SUNW $57.38 6.3% $59.13 $19.75 UUNET Technologies UUNT $63.00 40.8% $98.75 $21.75 VocalTec LTD VOCLF $11.25 1.1% $20.75 $8.50 Yahoo YHOO $32.00 0.8% $43.00 $24.50 Disclaimer ========== I began writing this newsletter in September 1994, at the time I was working for a technology company now owned by MCI. In March 1995, I began working for International Business Machines Corporation. I speak for myself and not for IBM. 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