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============================================================================= Seidman's Online Insider ============================================================================= Weekly Summary of Major Online Services and Internet Events ----------------------------------------------------------------------------- Vol. 3 Number 13 March 31, 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 ============= -The Grammar Police -MSN Hits the Million Mark -AOL Enterprises: Own Your Own Online Service -Phone Wars Continued: MCI vs. AT&T -NewsWorthy Notes -Stock Watch -Disclaimer -Subscription Info The Grammar Police ================== Whoa Nellie! You know the saying, "what goes around comes around"? Well, I believe it's true. Last week, my newsletter went around and the e-mail from the grammar police came around. To be honest, I have plenty of excuses (like the lame, but true, "I sent out the unedited version of my newsletter.") I don't have any defense to offer though. I did a baaaaad thing. On a serious note, poor grammar tends to undermine one's credibility. One never wants to lose credibility, especially not this one. I'll make a sincere effort to do a better job with my editing. MSN Hits the Million Mark ========================= Microsoft announced earlier this week that the Microsoft Network had reached one million subscribers. I hear a lot of folks claim that having an icon on the desktop doesn't mean squat. I have a question for those folks: What drugs are you on and can you send me some. That way, when I read the comments those folks make, I can read them with a glazed eyed smile instead of thinking, "SHEESH!" Being on the desktop is important. Microsoft hit one million users in 7 months. Seven. One, two, three, four, five, six, seven. A most impressive feat really. Some of my antagonists would say, "Seidman, YOU are an idiot! I mean, AOL is growing faster than 1 million in 7 months, so why is MSN hitting 1 million in 7 months any big deal at all. Idiot." I actually got a piece of mail like that this week. It amazes me how some people think. What can you do? AOL would be in great despair if they weren't outpacing MSN's growth. AOL is available to EVERY win 3.x and above PC, plus the Macintosh world (plus, if it matters, the DOS only world). MSN is only available to PCs with Windows 95. Period. Microsoft claims 20 million copies of Windows 95 have been sold. Analysts claim that there are over 115 million Windows 3.1 PCs. Throw in another 20 million or so for the Mac environment, and you see that AOL is playing in a much bigger space. Truth is, some of Win 95's 20 million are still sitting on the shelves or pre-installed on PCs that have NOT been sold yet. Some copies went to businesses, where it isn't likely that there is a modem hooked up to the PC. We could probably knock it down to 10-15 million copies where there was even an opportunity to sign up for MSN. But, we'll play with the 20 million figure. That means a 5% conversion rate. Nothing to write home about really, but it's 5% conversion with VERY LITTLE expense involved in customer acquisition. I suspect that once Microsoft has sold 40 million copies of Windows 95, they'll start doing heavy duty direct mail to registered owners of Win 95. "Hello there Robert! Did you know that on your PC there is already a gateway to the entire WORLD!? It's called the Microsoft Network and we think you'll like what you see. We're offering you a free month of unlimited usage to check it out. If you already have a modem installed in your PC, you don't have to do anything special. Just click on the MSN icon on your desktop. That's all there is to it!" This would take no more than a postcard. They could send one to you every day for a month, and it would probably be cheaper than sending you a DISK. And such an approach might knock their conversion rate up to 10%-15%. Don't knock MSN for only hitting a million subscribers in 7 months. No other online service reached their first million that fast. If you want to knock something, knock Microsoft in general for not convincing the public that they needed Windows 95. Don't worry about that though, by this summer I think we'll be getting THAT message loud and clear. Think of it this way: if Win 95 were on as many desktops as Win 3.1, and MSN maintained the same conversion rate, then they'd have at least 5 million accounts. That would put them at 5,750,000 and make them the biggest of online services. Okay, so they wouldn't be THAT much bigger than AOL (and we expect AOL to announce new subscriber figures sometime soon). That's true, but to date, it appears Microsoft has spent very little in the way of customer acquisition. America Online, Prodigy, CompuServe, etc., pay big customer acquisition costs. Advertising costs them. Direct mail costs them. Bundling disks with magazines costs them. Bundling the software with new PCs costs them. It can get pretty expensive. America Online is said to pay $45 for every customer acquired and we have reason to believe that their net $/customer acquired is even higher. I figure that America Online is at least at 5.5 million subscribers now. If you do the math, they've spent almost $250 million to acquire those customers and perhaps they have spent much more. If Microsoft decides to shell out a quarter billion dollars to promote MSN, I think it is reasonable to expect they'd have a lot higher conversion rate than 5%. Of course, Microsoft probably isn't going to spend that money on MSN. At least not yet. More likely they'll spend it on Win 95 in general. MSN has one thing going for it besides the fact that it's on the desktop. It has a $4.95 price plan. While you don't get much with that plan, I'd imagine that the biggest percentage of the one million subscribers is on the $4.95 plan (unfortunately Microsoft won't release such statistics.) AOL got its wish a spot on the desktop in forthcoming versions of the Windows 9x OS, but you can bet the others (CompuServe, WOW!, etc.) will wind up there as well, though not in as prime a spot as MSN. Last week, AOL Services President Ted Leonsis eluded to me that AOL would have to compete on price and it seemed to me that AOL is definitely considering a $4.95 price plan at some point. While it is true that some people considered that MSN would have more of an overall impact on the industry than it has had, don't minimize what MSN accomplished by getting to a million users in 7 months. There seemed to be a "mood" in all the hysteria over Windows 95 that there would be a lot more Win 95 desktops than there are by now. But, if the percentages were to hold, and Microsoft actually would've dumped 60 million copies of Win 95, there would be 3 million MSN subscribers in 7 months, and we'd all be talking about how they're charging fast. All things considered, they're charging pretty fast anyway. Congratulations, MSN. AOL Enterprises: You Too Can Own Your Own Online Service ======================================================== When it comes to making money on the online services or the Net, I often rue the day when I decided to write about Online Service and the Net. The way I look at it, my life would've been a lot different if I had chosen another subject to launch a newsletter on. I mean, if I would have started a newsletter on PCI and Cellular services or telecommunications deregulation, I'd have gone all out to get my own forum on AOL, because I believe there are $$ to be made there. Let's say that you're running the National Association of Widgets, an organization that is made up of 75,000 people in the Widget industry. You charge them say, $200 a year in dues, and in return you provide them with information to assist them in building better Widgets. Additionally, you spread the gospel of Widgets and probably, once a year you host a big Widget convention that you charge even more money for. But your association members are clamoring for "online access" to information and they want to communicate with their Widget brethren. Your problem isn't an easy one to solve because you have a diverse membership which is spread all over the country. Since the members aren't all from the same company an "intranet" solution is impossible. You could set up a Web site and provide all your members with a password, but you fear, given the current state of the Net, you wouldn't be able to support all the inquiries from the members on how to hook up to the Net. Enter AOL Enterprise, a recently announced offering from America Online. For relatively small start-up costs (probably about $50,000), they'll set you up with your own private area on America Online. Your members will gain access to the private area and have access to information, message boards, chat areas, etc. It's up to you whether you want them to have access to the rest of AOL or not. They'll get some amount of time "free" based on their Widget association dues. You can either have it set up so that when their time runs out, they either can't access for the rest of the month, or they can charge it to their own credit card, or even back to you. A nice, solid, easy to use, one disk solution, that provides message boards and chat. If you want them to have access to the rest of AOL, they can have access to that, too. That's exactly what Century 21 has done for its very disparate work force. The Harvard Business School Alumni association has had a similar scheme in place for their alumni. I think the opportunities here are very big for AOL. There is nice potential for an additional revenue stream and more customers. I think AOL Enterprises will strike several major deals in the coming year. The potential for companies who want to market online services is big. Basically a private labled AOL. Everyone will know it's AOL, but it can be set up to default to YOUR welcome screen instead of AOL's welcome screen. As for me, I envision a world where I'd started In, Around and Wireless which later became Seidman's Wireless Insider. I'd start out abstracting the news and injecting just the smallest bit of opinion. After gaining some credibility, I'd be a pitbull and be after the muckity-mucks at MCI, AT&T, Bell Atlantic, Southwestern Bell, Cellular One, etc. for information and quotes. I'd transform myself from a pundit wannabe to a pundit. I'd grow the list high enough until I got to the point where I could sock it to 1,000 of them and charge them $600 a year for the newsletter. You laugh, but it could work! But there's more. Not only would the elite 1,000 or so who were willing to fork over $600/year get the newsletter. NO! That's not enough of a differentiation between the other newsletters in that model. The elite 1,000 would also get FREE (I learned this trick from AOL) access to the online service of the newsletter. Bell Atlantic could rag on AT&T Wireless in the message forums. Online debates with the presidents from all the companies could be held in the conference rooms. The best part would be that much of the content of the newsletter would actually get driven from the forums and conferences held online. And I would use AOL Enterprises to set this up. You're probably thinking, "Big deal! $600,000 a year in revenue, so what!" So what? Most of it would go to me! I could even set up to take the subscriptions via AOL. Oh sure, they'd want a cut. So what, I wouldn't have to handle billing and collections. I don't write the Wireless Insider, I write the Online Insider. It's free and I'm damn proud of it. Still, if anyone wants to come forward with the $50K AOL Enterprises would want, I think I could become pretty knowledgeable about the wireless industry in a few short months... Phone Wars Continued: MCI vs. AT&T ================================== Last week I said something like, "Make no mistake about it, MCI is chasing AT&T" with regard to their respective Internet services. Ah, the power of AT&T marketing. Hell, even I bought into it. This week, I had the opportunity to speak with Brian Brewer, a Sr. VP at MCI. He did an admirable job convincing me MCI is ahead of AT&T. Brewer suggested that MCI was "a long stretch from following AT&T," when it comes to the Internet. "We have been focused in the business market," said Brewer, pointing out that there is "nobody close to us in the business market." Indeed, when it comes to connections to the Internet and Internet backbone, MCI is indeed in the lead. AT&T does not yet have their own Network, though Brewer felt that was only a matter of time. Brewer suggested I could run "traceroute" on an AT&T site, and that if I did, I shouldn't be surprised to see a lot of the packets traversing the MCI backbone to get there. According to Brewer, the demand for circuits to connect to the Internet has been so overwhelming that they've actually stopped adding any additional lines from customer sites to the Net until they expand network capacity. Brewer said they know the delays were causing some grief, but they didn't want to degrade network performance. They'll start adding connections again on April 15, according to Brewer. Brewer said that while MCI plans to compete in the consumer side with dial-up access, business was their focus. "I'll guarantee there's no money to made if you look at where AT&T is focused," Brewer said, speaking of AT&T's plan to provide 5 free hours of access for a year. Brewer conceded that AT&T may be making such an offer with the thought of reducing churn, but outside of that possibility, he didn't see it as a business. I asked Brewer about the $19.95 unlimited access price model and he said that he felt such services could be marginally profitable. But, he added that he wouldn't start-up a business with a $19.95 all-you-can-eat Internet access service as the primary product. I also asked Brewer about "Internet Phone services". "We don't see it is an immediate threat," said Brewer, but he indicated they are very interested in Internet Telephony and are following the technology developments closely. Brewer seemed to feel that the software issues could be overcome to make telephone by Internet almost as ubiquitous as the regular telephone. However, Brewer pointed out that MCI has one of the largest Internet backbones and that it was "infinitesimal" compared to their switched network for voice. In order for there ever to be widespread use of Internet Telephony Brewer said that, "Internet networks will have to be orders of magnitude bigger and it won't be free." Indeed, somebody has to pay for the network. NewsWorthy Notes ================ THE COMPUSERVE IPO shares are scheduled to be available the week of 4/15, according to the Wall Street Journal. The initial offering consists of 16 million shares, which represents a 17.7% stake in CompuServe. The shares expected to be priced between $27 and $30, giving CompuServe a market value at about $2.5 billion or about half of the market capitalization of America Online. For all the praise I bestow on AOL, CompuServe was a cash machine until recently and something isn't right if the value of CompuServe is half that of America Online. CIS will surge past the 30s, or AOL has to come down. Of course, as we know from our Netscape experience the market value at the actual time of the IPO can be MUCH, MUCH lower than the market value at the end of the first day of trading. And it's legal to boot! Sheesh. -- BAD COFFEE. Princeton Researchers found yet another security bug in Netscape's implementation of Sun's Java language. Sun & Netscape plan a fix soon. -- IT'S ALL RIGHT AS LONG AS YOU DON'T KNOW. German justice minister Edzard Schmidt-Jortzig said that a new law being planned regarding indecency on the Internet will make it clear that Net access companies aren't expected to police the Net. According to a story by Reuters, Schmidt-Jortzig said that the companies would not be prosecuted unless they KNEW illegal material was available via their services and did nothing about it. You have to love this. It brings new meaning to Sgt. Schultz of Hogan's Heroes favorite catch phrase: "I KNOW NOTHING!". "Someone who opens a door cannot know what the people who walk through it are going to be carrying," he said. "And if there were body searches for everyone going through your door, people would simply choose to go through another," said Schmidt-Jortzing. "The provider could only be punished if he had the ability to take action but did not do so," he said. -- POINTCAST IS HOT. Some love it, and some don't really care, but everyone seems to agree PointCast's "custom" news and screen saver software is slick. Now the Canadians want in on the action. The Toronto Globe and Mail Company want Pointcast to develop a Canadian version of the software that will have Canadian content. PointCast Network Canada is expected to be available in the summer. In the meanwhile, you can check out the US Beta at < http://www.pointcast.com >. -- UMI & MAID LAUNCH Business Services on the Web. In an effort to take advantage of the business desktops with Web access, UMI and Maid have launched versions of their business information services on the Web. UMI is offering its ProQuest Direct service at < http://www.umi.com > and the UK based MAID is offering a Web based version of its Profound service at < http://www.profound.com > -- NETCOM HAS DONE AN OEM DEAL with Individual Inc. to provide Individual's Personal Newspage Direct at no cost to Netcom subscribers. It's a smart move by Netcom, who is trying to differentiate itself as more than just another Internet access company. It is especially critical for them to establish such differentiation in light of the consumer Internet war being played out by MCI and AT&T. -- NETSCAPE CLOSED UP $3 on Friday to end the week only slightly down over the previous week. Allegedly the jump on Friday was attributed to deals with 5 of the Web search sites. Reportedly Yahoo!, InfoSeek, Lycos, Excite, and the McKinley Magellan directory are in deals with Netscape to have their services showcased on Netscape's home page. According to recent SEC filings by those who are about to IPO (Lycos, Yahoo!) they may pay Netscape as much as $5 million a year for the right to be showcased on Netscape's home page. Of course if you'd read "Ned Brainard's" FLUX column on Hotwired a couple of weeks ago, you'd have known this on March 18th. Ned's posion pen thoughts on the subject can be read at < http://www.hotwired.com/flux/96/12/index1a.html >. Netscape expects a newly designed home page with all the services to launch in the second quarter, according to the Cowles/SIMBA media daily. -- @HOME AWAY FROM HOME? According to the Cowles/SIMBA media Daily, the @home high speed Internet access service, a venture of Tele-Communications Inc.-Kleiner Perkins Caufield & Byers, will be delaying the launch of their service until "later this year". The service originally was to be launched in Sunnyvale, Ca. in February, but was pushed back to later this month. Now they're delaying until sometime later this year. The reasons, according to the Media Daily, are technical problems, higher demand than anticipated and a shortage of cable modems. -- THE WORLD ACCORDING TO BILL. The Wall Street Journal and New York Times reported that Microsoft will unveil plans for a new consumer appliance on Monday. The appliance, dubbed Simply Interactive Personal Computer, or SIPC will be more than just a computer, and more than just an Internet access device, but include a TV, Stereo and VCR. We're pretty sure it won't be $500, but it makes more sense to me in the consumer space (though not with businesses) than the much hyped, but yet to be delivered $500 network PC for accessing the Internet. The question is will it be the Swiss Army Knife of home appliances or the Ginsu Knife? Whatever kind of knife it is, it appears to be pointed at Larry Ellison. -- NEWSCORP'S 20th Century Fox and IGUIDE have teamed to bring you the FOX.COM web site which provides a consolidated web home for all that is FOX. Koombaya indeed. Check it out at < http://www.fox.com > See you next week. Stock Watch =========== New this week: VocalTec This % 52 52 Week's Change Week Week Company Name Ticker Close 1 Week High Low @Net Index IIX $220.60 -0.5% $259.85 $185.76 America Online AMER $56.00 3.6% $60.00 $16.75 Apple AAPL $24.56 -3.2% $50.94 $23.00 AT&T T $61.13 -0.2% $68.88 $47.88 BBN Corporation BBN $25.38 -10.6% $48.75 $16.50 CMG Information Svcs. CMGI $39.50 5.3% $50.25 $5.50 CyberCash Inc. CYCH $34.00 -2.2% $64.50 $24.50 FTP Software FTPS $12.25 -3.0% $40.63 $10.38 H&R Block HRB $36.13 -4.0% $48.88 $31.50 IBM IBM $111.25 -2.6% $128.88 $81.38 MCI MCIC $30.25 -0.4% $31.00 $19.09 Mecklermedia Corp. MECK $12.00 21.5% $24.38 $4.94 Microsoft MSFT $103.13 2.0% $109.25 $68.75 Netcom NETC $24.00 2.1% $91.50 $19.00 NetManage NETM $10.88 -2.2% $34.00 $9.38 Netscape Comm. Corp NSCP $41.50 -2.9% $87.00 $22.88 News Corp. NWS $23.00 -3.2% $25.13 $18.13 Oracle Corp. ORCL $47.13 -3.6% $55.00 $28.00 PSINet Inc. PSIX $9.69 -6.6% $29.00 $8.75 Sears S $48.75 -4.4% $51.88 $25.25 Spyglass Inc. SPYG $21.63 -13.1% $61.00 $13.25 Sun Microsystems SUNW $43.75 -2.5% $57.13 $16.94 UUNET Technologies UUNT $25.50 -1.0% $98.75 $21.75 VocalTec LTD VOCLF $12.00 -9.4% $17.00 $11.75 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. Subscription Information ======================== To subscribe to this newsletter by e-mail: Send an e-mail message to: LISTSERV@PEACH.EASE.LSOFT.COM In the BODY of the message type: SUBSCRIBE ONLINE-L FIRSTNAME LASTNAME Example: Subscribe Online-L Robert Seidman If you wish to remove yourself from this mailing list, send a message to: LISTSERV@PEACH.EASE.LSOFT.COM and in the body of the message type: SIGNOFF ONLINE-L . A Web version of the newsletter is available at: <http://www.clark.net/pub/robert>.