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=============================================================================
Seidman's Online Insider
=============================================================================
Weekly Summary of Major Online Services and Internet Events
-----------------------------------------------------------------------------
Vol. 3 Number 14 April 7,1996
=============================================================================
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
=============
-Notes from the Editor
-More MSN on the Desktop
-AOL Enterprise? Whaddabout CompuServe?
-A Metamorphosis for Prodigy
-Steve Case's 15 Minutes of Fame
-NewsWorthy Notes
-Disclaimer
-Stock Watch
-Subscription Info
Notes from the Editor
=====================
Be sure to check out my c|net column which should run beginning sometime
Monday night EDT at < http://www.cnet.com/Content/Voices/Seidman/ >. The
topic is "Kicking and screaming into the information age".
Special thanks to Felix Kramer who has volunteered to edit my newsletter.
Though many have volunteered such services in the past (and I thank them
for their generous offers!) Kramer went a step further and actually edited
last week's edition to show how he would've edited it. He passed the
audition, and if all works out, I'll have to change the heading of this
section to "Notes from the Publisher".
More MSN on the Desktop
=======================
Several people wrote about last week's piece more or less asking why I had
taken such a pro-MSN stance when MSN is not a very good online service.
For my part, I agree that the proprietary MSN is nothing to stop the world
over.
I understand that they had some favorable pricing for charter members and
that we have no idea how many "trial" memberships are included. But hey,
if AOL can include trial memberships, why shouldn't MSN? Some of you
wanted to know why I was making a big deal out of MSN's march to one
million since they're allegedly moving all of their content to the
Web.
I got notes saying "I'm surprised you like MSN in any way at all!"
I'll confess, I do. MSN is great one button Internet access. I'm not
talking about the slow and slower proprietary service! When you install the
version of MSN from the Plus pack or download that version and install it,
an interesting thing happens. MSN writes a "Connect to the Microsoft
Network" script/icon into your "Dial-up Networking" folder. If you select
that instead of the MSN icon on the desktop, you make a straight PPP
connection to the Internet. You don't even ever have to see that you're
on MSN. No MSN welcome screen, no slow display of graphics. It's easy
one-button access to the Internet, and other than the occasional -- okay,
sometimes frequent-- busy signals, that seemingly are experienced many other
places in Net-land, it works very well.
Some of you also wrote into say, "Hey! Microsoft DID send me a piece of
diskless direct mail asking me to sign up for MSN with one month free.
You're amazing!" Well, predicting that wasn't exactly like predicting who
was going to be playing in the NCAA basketball tournament championship
game before the tournament started. After I sent my piece last week, I
considered maybe one of the reasons MSN has not marketed the service
heavily is lack of a solid network to support it. There are frequent busy
signals where I live during prime-time, and we all know that can be a
major turnoff. While it's a major turnoff for everyone, I suspect that in
some ways it's more frustrating for the new user trying to get online for
the first time.
Microsoft has already asked UUNET to pick up the pace for increasing
network capacity. Meanwhile, we're still wondering what role, if any, MCI
will play in offering dial-up and ISDN access to the Microsoft Network.
AOL Enterprise? Whaddabout CompuServe?
======================================
Many people wrote taking me to task for not pointing out that CompuServe
has had the equivalent to AOL's new Enterprise service I wrote about for
many years. It's true. In fairness AOL also had such a program for a
while, but until now, hasn't stoked up the PR machine and established
Enterprise as a separate offering.
What CompuServe lacks is the momentum of AOL. AOL has about
twice as many subscribers as CompuServe in the US and they have a much
better interface. That may change when CompuServe launches the 3.0
version of their CIM software, but for now the wind is blowing in AOL's
direction.
Still, I think we can expect to see both AOL and CompuServe aggressively
go after the business customer for enterprise type services. Why?
Because, as many people have pointed out to me recently, the consumer
space is a high volume, low margin business now. The real money is in the
commercial space.
A Metamorphosis for Prodigy
===========================
Last Monday, Ed Bennett, the current President of Prodigy made his way
into the pages of the New York Times business section. The basis for the
piece was that Bennett was considering buying Prodigy and turning it into
a content machine for the Internet. The ballpark figure for the
management buyout in the Times was in the $500-$700 million range.
My initial thoughts on the subject were: okay, if you strip away all the
baggage and reinvent yourself as a content production company for the Net,
you could have a profitable business. While not a billion dollar a year
revenue generator like AOL for the foreseeable future, it could definitely
make a profit. As one of my higher-ups at IBM put it, it would
sort of be like a c|net.
Later, I read reports that Prodigy had engaged investment banking firm
Wasserstein Perella Securities and preparing a buyout offer in the area
$250 million. Wire services reports also said sources at Prodigy
confirmed that layoffs were imminent in the next few weeks for about 100
of Prodigy's workforce of 650.
I'm definitely NOT speaking for IBM now. But if the reports were true
and I were speaking for IBM , I'd say "no thank you" to Mr. Bennett. Then
I'd fire him. Prodigy insiders have told me that officials at IBM and
Sears felt that the $500M-$700M asking price quoted in the Times was high.
Perhaps, but $250 million?! After IBM and Sears have reportedly
collectively poured over $1 billion into Prodigy. $125 million to IBM?
I'd let the company run into the ground and go ahead and lose the last
$125 million out of spite, before I'd let Ed Bennett and his band of merry
content producers pull that sort of fast one on me.
Buying the service for $250M may actually be a fair price -- in the real
world. But we don't live in the real world. We live in a world where the
market says that America Online and Netscape are worth billions and
billions. Of course, much of the value put on those two companies is in
terms of future growth. Sadly, nobody knows what that means for Prodigy
or whether it will be worth anything or not.
In some ways the Prodigy name all by itself may be worth $250 million. A
lot of the dollars poured into Prodigy were spent on establishing it as a
brand name. Some of you may say, "yeah, well a lot of good THAT did!" I
wouldn't argue with that notion, except for one thing: most of the people
out there have never USED an online service. Every now and then I get
e-mail from someone who has recently joined the online fold complaining
about a horrible experience logging onto Prodigy. "I logged on and I was
ready to go! But everywhere I turned, I had to spend 10 minutes
downloading something. Ten minutes may not sound like much, but when it's
ten minutes here and ten minutes there, it adds up!" Inevitably I ask,
"Why did you pick Prodigy?" Usually the reply is, "I was familiar with
the name." I believe Prodigy still has a great deal of mindshare among
the masses of people who have never used an online service.
Bennett's theory is to buy the company for around $250M and then turn it
into a high-tech multimedia content production company. Let's say Bennett
gets his way, then what happens? Well, we can take some guesses. You
have to imagine that they will SELL off all the crap that they don't need
to raise some money. Then they'll strip down to a lean, mean, fighting
machine, hire some programmers who can do wonders with Java and VRML,
Shockwave and whatever the state-of-the-art du jour is. They'll produce a
couple of sites that will leave the small audience actually equipped to
view the content in its intended form utterly amazed. Then they will ramp
up the PR machine. And then? Then they will do what every red-blooded,
hyped-up Internet related company does -- they'll announce an initial
public offering.
If I were IBM (and though I *am* an IBM employee, I am not IBM!), I'd find
out if Sears is game for the $125 million. If they are, I'd give it to
them. Then I'd call up Halsey Minor of c|net and I'd say, "Halsey, we'll
give you Prodigy in exchange for a stake in c|net!" Some of you may be
saying, "Aha! You're a sneaky one Seidman! You're a columnist for c|net."
Yes, that's true, and while I won't divulge my terms with c|net, I'll tell
you this much: IBM is paying me MUCH more. I'd do the deal with c|net
because they have proven, at least to me, that they know what they are
doing. Halsey Minor and Kevin Wendle "get it". You may think that sounds
strange, but I can tell you from my own experience, that most people, even
inside the industry, don't "get it".
Does Prodigy "get it"? There are some people there who do, I'm sure. If
Ed Bennett can pull off his $250 million dollar buyout plan, I'll be the
first in line for an "Ed gets it!" pin. But Prodigy has not done a
great job during the Bennett regime when it comes to the most basic online
skill: PUBLIC RELATIONS. Oh, on the human side, they're very good. Mike
Darcy and Barry Kluger set me up with a face-to-face interview with Ed
Bennett.
But all that really proved to me was that Ed, Barry and Mike are very nice
people. Bennett is very charming, and it was clear to me, even several
months ago when I met with him, that producing content was where his heart
was. You can't blame him, he comes from the world of television. And
let's face it, Prodigy had a malignancy by the time Bennett got there.
For all practical purposes they were dying and the insurance company (in
this case Sears and IBM) said, "We aren't giving you any more money for
treatment!"
Brian Ek gets appointed to a position on the congressional committee to
think-tank on the cyberporn issues and Prodigy does a press release.
Okay, that's cool, no problem. That's good PR. But, it isn't PR that can
get them much business. I'd like to tell you a little story about a couple
of women I know that "produce content" for Prodigy. I set "produce
content" off in quotes, because remember, Bennett's vision of a new
Prodigy is based on CONTENT.
Jaclyn Easton and Spike Gillespie both write columns for Prodigy. Easton
leverages her experience as an Internet shopping authority to offer
insights on effective online business marketing options. Gillespie, who
the USA TODAY called a " A mouthy 'macho chick' with a modem," writes for
Prodigy's Avenue-W (a Women's area) and offers a weekly column which
basically gives you a from-the-heart insight into her life, and a
profile/Interview of a female "net celebrity."
Had Easton and Gillespie not told me about their work themselves, I'd
never known about it. While the content written by Easton and Gillespie
is intended for the Prodigy audience, some of it is available to anyone on
the Internet via e-mail. It doesn't take a lot of money to promote this
content. I ought to know! If nothing else, the content serves as a pretty
good advertisement for Prodigy to those people on the Net who are not
Prodigy members. It would make a lot of sense -- and cost very little --
for Prodigy to promote this content a little more to the Net at large.
Peter Nemarich religiously sends out the Prodigy chat highlights on a
weekly basis. It isn't as though they're doing nothing, but in my mind it
is clear they're not doing all they could even on a $0 budget.
On the other hand, if someone so much as sneezes at AOL, CompuServe or
yes, even c|net, I usually get a press release. In fairness, as Prodigy
has dwindled they haven't done as many deals as the other services. Still,
they could do a better job. In the USA TODAY report last month, it said
Gillespie had almost a thousand people on her mailing list. Spike should
easily have 10 times the distribution I do (around 20K) because her
content has a much broader audience. While Prodigy has done a pretty good
job of leveraging traditional forms of PR (and they did throw Spike a
press party on Valentine's Day) they haven't done well using the Net
itself as a marketing tool.
Then there's the forthcoming Stim site which is aimed at the 20-something
audience. People who have seen the demo have found it impressive, but
analysts fear that Prodigy may alienate the remaining core customers in
the push to attract the 20-somethings. I think Prodigy is smart to
emphasize content that will draw in a younger audience, but they need to
find a balance. Prodigy did have an image of being the "family service"
and that's an image worth working to keep. If they could build up the
"hip" crowd while growing the "family service" they would be on to
something. One industry insider told me that the end result so far "has
been to cloud exactly what the Prodigy name means without growing the
brand." The same insider also said, "As a family vehicle they are minting
money. Its a big mistake to try to turn a brand into something you want
it to be and not what the market demands."
That said, Stim, which was originally scheduled to launch this month, is
now looking to launch somewhere between May 15 and June 15.
Can Bennett transform Prodigy into a content super-store? He just might
be able to pull it off. Still, I find it hard to trust an executive who
seemingly couldn't turn the company around when he comes a-calling with a
bargain basement offer to buy the company. Personally, I hope IBM will
just say no.
Steve Case's 15 Minutes of Fame
===============================
Several months ago I wrote a piece called Steve Case's 15 Seconds of
Shame. The piece was about AOL's practice of essentially adding 15 seconds
to the first minute of every sign on. I didn't like the practice then,
and I don't like it now. But mostly, when I write about AOL and Case, my
comments have been positive. Probably more positive than most critics.
But, I have thought for the most part that they "get it" in a huge way.
Steve Case more than gets it. He lives it. And the mass media are
starting to understand that Case and AOL have positioned themselves as
players.
First the Spencer Katt comic in PC-Week where Case has beefed up into a
muscle bound Net god. This week, Case made the cover of Business Week
mugging for the cameras as he was sprawled out on a mountain of AOL disks!
The piece was very good and points both to the things AOL has done well
and the problems it may run into in the future. It's worth a look.
*More on Case*
This weekend several people wrote in to joke about this month's letter
from Steve Case to AOL members. The letter quotes Case talking about how
he uses America Online. Some people wrote me basically saying "Like he
really has time to do THAT!"
I don't really know Steve Case. Most of what I learn, I learn from things
like the Business Week article. But at some level, I relate to Steve Case
very well. There's a saying I've heard which goes "he does what he loves
so he loves what he does." For myself, I probably didn't even know what
that meant until a few years ago, and it probably took this newsletter to
really drive the point home. While saying there are orders of magnitude
of difference between my little newsletter and America Online is an
understatement, at the root, it is the same for Steve Case.
Many executives talk the talk of the digital world. Steve Case lives the
life he preaches. He knows his service very well. If America Online
decides to create a breakfast cereal, Steve Case will eat it for
breakfast.
I'm sure Case sometimes thinks, "Sheesh! This guy just won't quit!," when
it comes to my sending him e-mail and instant messages. Sometimes he
doesn't answer, but sometimes he does. If he thinks it is important
enough to take the time to spend a minute answering my e-mail, you know he
thinks using his own service is important. Besides, I've seen Steve Case
online enough to have actually seen him in a chat row at a couple of AOL's
Center Stage events.
I don't believe everything I hear out of AOL, but I do believe Steve Case
practices what he preaches when it comes to using America Online.
*Sidebar*
The Business Week cover story, "The Online World of Steve Case", had an
interesting sidebar called "We Have to be Prime Time", which is just what
AOL Services Co. president Ted Leonsis said in the piece. When asked who
the competition is these days, Leonsis will tell anyone who'll listen that
it's Seinfeld. The piece said that on a good Thursday night, AOL gets
400,000 people logging on during prime time, while Seinfeld pulls in 20
million viewers.
"We are pathetic compared to that," Leonsis said. "But we have to get
there. We have to be prime time."
I received a piece of e-mail from AOL director of communications, Susyn
Conway. Conway talked about AOL's emphasis on customer service and how
she felt that would position AOL well against commodity access providers
and giants like AT&T and Microsoft. Being on the desktop with an icon is
not enough, according to Conway.
"There's a reason customer service is the biggest body count at America
Online -- with customers comes customer support. It's a heavy-duty
commitment," said Conway.
"Customer-friendly is part of the code we don't expect Microsoft to crack
for some time," Conway added.
AOL is still focused on making the service easier according to Conway.
"Today's online users ARE NOT click-and-browse types. Seinfeld is easy --
you just have to watch," she said.
Overall, AOL seemed very happy with the Business Week piece, but Conway to
an error in their coverage.
"...we're still pathetic compared to Seinfeld, but we get over a million
people on AOL in prime time, not 400,000. Over 300,000 people sign on per
hour in prime time, which is 8-11 (p.m.), M-F."
NewsWorthy Notes
================
COMPUSERVE STRIKES DEAL WITH AT&T. Like AOL before it, CompuServe
announced that the CompuServe online service would be made available as an
option to AT&T World Net subscribers. Also like AOL before it, no details
on pricing were disclosed.
--
PENTHOUSE IS #1 on the Web, according to a press release from Penthouse.
"Employees at IBM, Apple, AT&T, NASA and Hewlett-Packard are also
among the most frequent visitors to < http://www.penthousemag.com > on
the Internet, which registered a total of 2,085,520 "visits" and 54
million "hits" in one-month period, according to Nielsen-I/Pro," said the
press release.
--
SPEAKING OF PENTHOUSE: Once I saw the press release well, I had to, you
know, check the site out. I know, I know, it's a tough job! Not
surprisingly I found that Penthouse is using the "Communications Decency"
legislation to its advantage. Earlier in the week when I "looked", there
were no pictures in the "free" content area. Instead, I got a message
telling me that if I lived in a "free" society, I would get to see the
pictures, but because of the recent legislation: sorry! They've scaled
that back to now cropping the pictures in such a way as to not violate the
law. The "free" society bit kind of made me chuckle, especially since the
nude pictures are still available on the Internet in the "pay" society.
When you get right down to it, this is part of the reason I haven't given
this issue more coverage. I'm still trying to figure out the difference
between those who are really trying to figure things out and those who are
merely exploiting the situation to their advantage. The only thing I have
figured out is that I haven't figured it out yet.
--
APRIL FOOLS! Well Taco Bell and AOL have something in common. Maybe it's
because of Steve Case's time spent at Pepsi. Taco Bell ran ads in several
major papers stating that they were buying Philadelphia's Liberty Bell and
were going to re-christen it as the Taco Liberty Bell. That actually
amused me. AOL on the other hand, leveraged its Welcome screen to put up
a bogus "Top News" story announcing life had been discovered on Jupiter.
The Top News icon linked you to a full-blown area. In the "did you know
the word 'gullible' wasn't in the dictionary" department, I read numerous
wire stories about people who had fallen for the hoaxes. Sheesh, it was
after all, April Fools Day!
Stock Watch
===========
I'm not all that excited to add the search engine services, Excite and
Lycos to the fold.
This % 52 52
Week's Change Week Week
Company Name Ticker Close 1 Week High Low
@Net Index IIX $223.47 1.3% $259.85 $185.76
America Online AMER $54.75 -2.2% $60.00 $16.75
Apple AAPL $24.13 -1.8% $50.94 $23.00
AT&T T $62.88 2.9% $68.88 $47.88
BBN Corporation BBN $25.13 -1.0% $48.75 $16.50
CMG Information Svcs. CMGI $33.25 -15.8% $50.25 $5.50
CyberCash Inc. CYCH $32.50 -4.4% $64.50 $24.50
Excite Inc XCIT $20.00 -- $21.25 $19.25
FTP Software FTPS $9.50 -22.4% $40.63 $9.50
H&R Block HRB $37.75 4.5% $48.88 $31.50
IBM IBM $117.75 5.8% $128.88 $83.13
Lycos Inc. LCOS $18.00 -- $29.25 $16.50
MCI MCIC $29.88 -1.2% $31.13 $19.09
Mecklermedia Corp. MECK $12.75 6.3% $24.38 $6.56
Microsoft MSFT $104.38 1.2% $109.25 $69.38
Netcom NETC $24.63 2.6% $91.50 $19.00
NetManage NETM $10.00 -8.1% $34.00 $9.38
Netscape Comm. Corp NSCP $45.63 10.0% $87.00 $22.88
News Corp. NWS $22.63 -1.6% $25.13 $18.13
Oracle Corp. ORCL $45.50 -3.5% $55.00 $28.00
PSINet Inc. PSIX $9.38 -3.2% $29.00 $8.75
Sears S $48.38 -0.8% $51.88 $25.25
Spyglass Inc. SPYG $20.88 -3.5% $61.00 $13.25
Sun Microsystems SUNW $46.13 5.4% $57.13 $16.94
UUNET Technologies UUNT $29.00 13.7% $98.75 $21.75
VocalTec LTD VOCLF $9.00 -25.0% $20.75 $8.50
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
========================
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