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                         Seidman's Online Insider
=============================================================================
      Weekly Summary of  Major Online Services and Internet Events
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Vol. 3 Number 20                                        May 19, 1996
=============================================================================

Copyright (C) 1996 Robert Seidman ([e-mail]).  All rights
reserved.   May be reproduced in any medium for non-commercial purposes,
so long as attribution is given.


IN THIS ISSUE
=============
Sign o'The Times?
Amnesty
Let the Consolidations Begin!
Newsworthy Notes
Stock Watch
Disclaimer
Subscription Information


Sign o' the Times?
==================

There are several ways to get involved with content production on the Net.
They range from big web sites like Pathfinder, ZD Net, c|net, etc., to
home brewed productions like this newsletter.  There is a middle ground
though -- companies  offering professional quality material without
the deep pockets and resources of a HotWired, ZD Net or c|net.  Companies
like Songline Studios fall into that middle ground.

With dignity and a sense of humor, Songline's Web Review
< http://www.gnn.com/wr/ > informed its readers that the May 17th issue
would be its last.  The first words on the page?  404 Not Found.   The
reason for the end of Web Review?  Money -- not enough of it.  According
to a letter from Dale Dougherty, the publisher of Web Review and president
of Songline Studios, the advertising supported model wasn't covering the
costs.

Web Review has between 25,000 and 50,000 weekly readers, but with the
staff dedicated to producing the site, the advertising dollars just
weren't covering the amount of resources they were throwing at the site.

"In the end, however, we cannot keep giving it away," said the letter to
readers from Dougherty.

Web Review isn't exactly giving up though.  It's polling readers to find
out if there is any interest in a subscription based service.  If 5,000
readers (about 10% of the readership, according to the letter) express
interest in a $19.95 subscription price for 6 months of Web Review,
they'll come back next month with a prototype of the new service.

It seems odd to me that with all the fervor over the Web, a publication
about the Web itself can't succeed on the Internet.  I can't help but
wonder if they perhaps haven't pulled the plug a little too early.  I
mean, I really didn't expect anyone, except perhaps the search engine
services, to make any real money in advertising this year.  Next year
perhaps, but I think we may even need to get into 1998 before the concept
of an advertising supported site works very well for most, especially
those in the middle ground.  These are the experimental years.

I asked Dougherty if he pulled the plug a little early.

"Perhaps," said Dougherty during a telephone interview, "We can't keep
going on the way we're going. The rules have to change a little bit or we
have to change the game."

While Dougherty is still optimistic for the future of Web content
services, he said that it was also important for Songline, as a medium
sized company, to find out how to generate revenue now.

"Last year when we started, I thought that advertisers would develop a
better sense of the market sooner," said Dougherty.   "I think they are
still caught up on developing their own web sites rather than working in
cooperation with content developers," he added.

"I think it will happen, but not as soon as I originally anticipated,"
Dougherty said of advertisers working in conjunction with content
producers in ways that benefit both parties.

Songline also did an online serial/soap opera called Ferndale
< http://www.ferndale.com >.  Dougherty expressed that they faced similar
revenue problems with Ferndale.  "Ferndale was a pilot," said Dougherty.
"It was too expensive to imagine as an ongoing thing (without a steady
source of revenue.)"

Songline also has the Movie Critic site at < http://www.moviecritic.com >.
Much like Firefly < http://www.firefly.com/ >, Movie Critic allows members
to rate movies and receive recommendations based on those with similar
opinions.  Dougherty doesn't believe this is necessarily the demise of Web
Review, either.  According to Dougherty, it was simply a matter of not
letting it "...go on the way it was."

"We can't continue to pump money into it and not see a return," said
Dougherty.  I asked Dougherty whether even 5,000 subscribers would be
enough to drive the necessary revenue, and while I got the feeling that it
wouldn't be, Dougherty said that at least "it would be a nucleus."

Dougherty believes, like many (including myself), that in a couple of
years, you'll begin to see services generating revenue based on a mix of
subscription fees and advertising revenue.  But Dougherty thinks that
now is the time to begin experimenting with subscription fees.

"I think we do need to make a move to collect user revenue, we need to
figure that out," he said.


*Personal Viewpoint*

As an "Internet Publisher", the news of Web Review might have saddened me.
While I am sad for Web Review and its staff, because I really liked the
publication, I am not especially surprised.  I certainly don't view it as
the kiss of death for my own publishing efforts.  I've worked pretty
diligently over the last few months to come up with a deal that would
allow me to say, "I can keep giving away my newsletter for free!"  I plan
to do just that.  Expect a major announcement soon...

But the differences between me and a publication like Web Review are
significant.  I'm a one man band.  There are no publication or technical
issues to resolve.  No artwork to worry about.   I don't need 20 people.
Those are all valid differences, but they're not the most important
difference.  E-mail is my primary delivery vehicle.  For me, the Web is an
afterthought, something that is done simply because it can and should be
done.  With e-mail, things come directly to you.  When it comes to e-mail
versus the Web, especially for things like delivering news, the difference
is as great as receiving the newspaper directly on your doorstep versus
having to run down to the corner to pick up a copy of the paper.

I thought Web Review was a quality publication.  Still, I didn't read it
very often because reading it was something that required a conscious
effort on my part.  I can assure you though, if Web Review was available
by e-mail, I would've subscribed, and read it.  At least the free version.
And here's the rub: advertisers just don't get jazzed about e-mail.
Advertisers love multimedia -- pictures, sound, things moving around.  All
things which currently can't be done in e-mail -- at least not in the
mainstream.  I know that things like Netscape's e-mail client bring new
possibilities, but until this sort of e-mail client spreads, and it will
sooner or later, we're living in an ASCII world.

But there is hope to bridge the gap between push and pull (e-mail vs. the
Web.)  As new products like Pointcast < http://www.pointcast.com > and
Freeloader < http://www.freeloader.net > proliferate,  publishers,
advertisers and readers alike have the opportunity for the best of both
worlds --  multimedia content delivered directly to the desktop.

This model isn't perfect because the sites themselves don't necessarily
want to split the advertising revenues with the Freeloaders and Pointcasts
of the world.  Also, you can use such services to read Web pages offline.
In the offline mode, clicking on an ad banner would require the software
to dial up and go get the page.  This isn't awful, but it isn't perfect
either.  Over time, I think we're moving towards a world where many of us
spend more time in a connected state (whether we're actually in front of
our computers, televisions, or whatever the appliance is.)  Advertisers
won't be thrilled if everyone chooses to use the offline mode because it
puts a barrier to accessing the more in-depth advertising.

Online or offline viewing aside, what can happen as such products
proliferate is that publications like Web Review can significantly
increase their readership and advertising revenues because the information
can be delivered directly to the reader.  Subscription based services are
also more attractive in this model because it takes the responsibility off
the subscriber to go pull the Web page(s).

I expect the Freeloader and Pointcast type products will proliferate, but
it will take some time.  When the time comes though, there will be new
opportunities for publications like Web Review that don't exist today.


Amnesty
=======

Could it be that the patent office, in their infinite wisdom, granted a
broad patent over 10 years ago where  if the patent holder were patient
they would someday have the opportunity to make a big score?   We're still
not too sure, but it seems like that is the case.

E-data claims ownership of the E-dataSystem electronic distribution
patent.  According to E-data, it is the "key to the Internet, online
services and CD-ROM," with regard to electronic commerce.  The essence of
the patent, according to e-data, is a "system whereby a product in the
form of digital data is sold from a host computer through a point of sale
terminal."  Well, that pretty much covers the electronic commerce space!

And while E-data has taken some companies to court for infringement of
their patent, they announced an amnesty program earlier this month which
forgives any past infringement by companies provided they take licenses
from E-data within the next 90 days.

E-data is claiming that the licensing revenue alone will result in a
profit this year.  The patent, which was approved in 1985, covers most any
use of pay-per-view transactions via the Internet or CD-ROM, according to
the company.

The implications of this are large, and it was interesting in reviewing
the chronology of events.  The patent, known as the Freeny Patent, was
approved in 1985.  At some point a company named Avedas bought the patent,
and then in January of 1995, Avedas sold the patent to Interactive Gift
Express (which later became E-data) in exchange for common shares and
deferred cash payments.

As early as March 1995, management of E-data (then Interactive Gift
Express) was planning on capitalizing on infringement of the patent.

"Management intends to fully exploit its patent rights and aggressively
pursue the licensing of all infringers," Arnold L. Freilich, president of
the company stated in March 95.

Indeed, the company went on the rampage, warning 30 companies of
infringement in May of 1995, though the company didn't disclose the names
of the companies.  By August of 1995, they had warned over 100 companies
and publicly disclosed that they were suing Dun & Bradstreet, and Meca
Software, Inc. (who were bought by BankAmerica and NationsBank Corp),
Adobe, Apogee, Broderbund, CompuServe, Cybersource Corporation, First
Virtual, Intuit, McGraw-Hill and a slew of others.

In September 1995, the company announced that IBM had licensed the patent.
In March, VocalTec licensed the patent.

"Our goal remains to license rather than to litigate," said E-data
president Arnold L. Freilich. "We are delighted that such a highly
successful industry leader as VocalTec has chosen to join IBM on our
roster of licensees," Freilich said in March.

Last week, E-data announced that Adobe and CD-Max had agreed to take
licenses of the E-dataSystem  system and method patent.   According to
E-data, a hearing has been set on June 7 in New York for E-data's case
against CompuServe and 14 other defendants.

You can find out more about E-data at:
< http://www.3wnet.com:80/corp/edata/ >


Let the Consolidations Begin!
=============================

One of the most interesting press releases I've read to date was issued by
PSINet on May 15th.  The thrust of the release was that while PSINet
believes it can stay on track with their current business plan and be
profitable for the 90s and beyond, they threw in one whopper of a "BUT".
Because even though PSINet "believes that substantial shareholder value
will be created through continued execution of its business plan," they
have retained Merrill Lynch & Co. to pursue "strategic alternatives."
These alternatives include, "domestic and international joint operating
agreements; strategic alliances; and sales of minority or controlling
interests in the company," according to the press release.

Hey, you just can't sneak that "sale of controlling interest" of the
company in there and not expect a reaction!  Though a "poison-pill"
strategy was put in place to ward off any unwanted takeovers, Wall Street
reacted favorably, driving the price of the stock up over 14% compared to
the previous week.  Netcom also went up over 17%.

With the recent planned acquisition of UUNET by MFS Communications, we can
expect to see a lot of the smaller players get gobbled up.  PSINet was
already positioning to stay competitive in the brave new world where AT&T,
MCI, and the local phone companies are either providing or plan to provide
Internet access.  PSINet announced on May 10 that it was reorganizing the
companies product line and reducing staff by 15% in order to accelerate
plans to be cash-flow positive.

In February 1995, PSINet bought Pipeline, a company with a well
established set of proprietary tools that made accessing the Internet
easy, for 2.8 million shares of PSINet stock.  Though it seems like only
yesterday, PSINet announced that it would be getting rid of its Pipeline
service and offering Pipeline subscribers the opportunity to subscribe to
a new service which will be unveiled in the third quarter of this year.
PSI will be keeping its $29 and $19 services, and concentrating more on
sales to businesses, which account for most of its revenue.  The $9/month
Pipeline service probably didn't make much sense in light of competitive
offerings from bigger players.

The Wall Street Journal reported that Bell Atlantic is one of the
companies that may be interested in acquiring PSINet.  Bell Atlantic won't
confirm or deny the rumor.

While PSINet has somewhat played down the potential sale, the fact remains
that they, and other companies like them, may have more to gain
financially by selling now.  While many of these companies are predicting
profits for the next five years, they may not make as much in those five
years as they'd make if they sell now.

There are a lot of fish in the Internet access sea.   There are big fish,
medium sized fish, and little fish.  Some of the medium sized and little
fish may survive on their own by providing niche services, but most of the
little and medium sized fish will need to figure out how to get bigger.
It's get bigger or die outright.  If they're going to get gobbled up
anyway, getting paid for the privilege must seem a tasty alternative.



Newsworthy Notes
================
America Online announced its intent to license key technologies for
its security and electronic commerce strategy.  The relationships with
CyberCash, IBM infoMarket, RSA Data Security, Terisa Systems, and
VeriSign, are part of AOL's plans for secure electronic commerce.  We
can't help wonder if E-data isn't out there rubbing its patent holding
hands together and grinning...
--
IT MUST HAVE BEEN a bad week for American Family Association's (AFA)
director of government affairs, Patrick Trueman.  Trueman didn't come
through with a whiny press release this week.  Meanwhile there has been
some confusion on whether the FBI has investigated AFA's complaint against
CompuServe's MacGlamour area (which the AFA isn't happy about because of
some nude pictures.)  The AFA asked for CompuServe to be prosecuted under
the communications decency legislation recently passed as a part of
telecom reform.  The new law itself is on trial in Philadelphia, and it
was agreed that there would be no investigations under the new law until
the case in Philadelphia was resolved.  But the Justice Dept. decided to
pass the case on to the FBI, and whatever the FBI did, it really miffed
Federal Judge Stewart Dalzell.  Dazell ordered the FBI to cease its review
of CompuServe until he and the other judges involved in the case have
ruled on whether the Communications Decency Act is constitutional.  Dazell
also ordered the Justice Department to stop sending any CDA cases to the
FBI, unless child pornography was suspected.  Speaking of the FBI...
--
AMERICA'S MOST WANTED? Escaped bank robber Leslie Rogge, one of the FBI's
ten "most wanted" fugitives, was arrested in Guatemala after being
recognized by someone on the FBI's Web page.  You never know, check it out
at: < http://www.fbi.gov/ >.
--
YET ANOTHER NETSCAPE JAVA FLAW:  The New York Times reported on Saturday
that Princeton researchers Friday disclosed they'd found "...a new and
potentially serious flaw" in the Netscape Navigator.  According to the
story, the flaw "could allow people to write destructive or malicious
programs and potentially destroy or steal data or otherwise tamper with a
computer that was connected to the Internet and used the Navigator
program."  Yikes.  Netscape reportedly has a fix in the works that will
protect against such attacks, according to the Times' story.
--
AND IN THE "MAN AM I GETTING OLD DEPARTMENT... Prodigy finally launched
"STIM", an advertising supported (maybe?) Web site.  Billed by Prodigy as
a "...webzine and virtual community dedicated to deviant pop culture,
broadly defined; this includes literature, reportage, commentary, fashion,
video games, freaks, trends, and more."  I guess I am not deviant enough
to relate, but still, this site has excellent design, takes advantage of
the medium very well, and it was pretty fast to boot.  Whether you're a
hip 20 something or not, the site is worth a look at
< http://www.stim.com >.
--
AMERICA ONLINE STOCK continued its slide on Friday when Merrill Lynch
analyst Lou Kerner lowered his earnings estimate for AMER from $1.15 to
$1.00 for the year ending June 1997.  According to reports, Kerner lowered
his estimate based on impact of the recently announced $20/20 hour plan
which will be available effective July 1.  Kerner said that he estimated
the impact of the new pricing plan to be about a 9%-10% reduction in AOL's
average revenue per subscriber.
--
THE NETWORK PC JUST WON'T DIE.  It doesn't matter whether me and most of
the  analytical community have slammed the Network PC, Internet Appliance,
or whatever you choose to call it, (though this rose, by any other name,
still has a lot of thorns) several companies are committed to making such
devices.  While I believe what consumers need is a VERY inexpensive
computer that does have memory and storage, there is a case to be made for
the Network PC, at least in businesses.  Right now, businesses are where
the money is and "Intranet" is grabbing a lot of focus.  On Monday IBM
plans to "show" its Internet PC (though the report from Reuters didn't say
whether they'd actually let anyone USE it.)  IBM is joining Oracle, Sun
Microsystems, Apple and Netscape in endorsing standards for software and
hardware developers to use in making the scaled down computers.   IBM,
Oracle, Sun, Apple and Netscape...strange bedfellows perhaps, but strange
bedfellows with a common enemy -- Microsoft.
--
NETSCAPE AND HP IN ALLIANCE.  Hewlett-Packard and Netscape announced a
strategic alliance to deliver software for corporate Intranets (on UNIX
and Windows NT.)  The deal will make HP an authorized worldwide support
provider for Netscape products.  Additionally, the two companies will work
together to develop Intranet management tools.
--
ANOTHER PERSONALIZED NEWS SERVICE.  This one is from infoSeek. They use a
slightly different, albeit interesting, model than some of the other
services.  Check it out for yourself at:
< http://personal.infoseek.com/ >.




Stock Watch for the Week Ending May 17, 1996
============================================


                                This     %      52      52
                                Week's  Change  Week    Week
Company Name            Ticker  Close   1 Week  High    Low
============            =====   ======  =====   ======  ====

@Net Index              IIX     $275.09  4.5%   $263.12 $185.76
America Online          AMER    $53.63  -7.7%   $71.00  $16.75
Apple Computer          AAPL    $27.63   1.4%   $50.94  $23.00
AT&T                    T       $61.25   0.2%   $68.88  $49.13
BBN Corporation         BBN     $28.50   5.6%   $48.75  $16.50
CMG Information Svcs.   CMGI    $30.25  -5.5%   $50.25  $5.50
CompuServe              CSRV    $27.63   8.4%   $35.50  $25.00
CyberCash Inc.          CYCH    $49.00  24.8%   $64.50  $24.50
Excite Inc              XCIT    $18.88   9.8%   $21.25  $13.13
FTP Software            FTPS    $9.63    4.1%   $40.63  $8.13
H&R Block               HRB     $35.13   0.0%   $48.88  $31.50
IBM                     IBM     $110.88  4.2%   $128.88 $83.13
Lycos Inc.              LCOS    $18.75   7.1%   $29.25  $14.00
MCI                     MCIC    $29.13   0.0%   $31.13  $19.09
Mecklermedia Corp.      MECK    $15.75  -1.6%   $24.38  $8.50
Microsoft               MSFT    $117.00  1.8%   $120.00 $79.88
Netcom                  NETC    $41.75  17.2%   $91.50  $19.22
NetManage               NETM    $14.69   2.2%   $34.00  $9.38
Netscape Comm. Corp     NSCP    $70.75  17.4%   $87.00  $22.88
News Corp.              NWS     $22.13  -0.5%   $25.13  $18.50
Oracle Corp.            ORCL    $35.13   3.7%   $36.66  $22.00
PSINet Inc.             PSIX    $18.50  14.3%   $29.00  $6.75
Sears                   S       $50.25  -1.7%   $53.25  $26.81
Spyglass Inc.           SPYG    $29.75  -0.8%   $61.00  $13.25
Sun Microsystems        SUNW    $58.25   2.2%   $60.25  $19.75
UUNET Technologies      UUNT    $63.94   3.7%   $98.75  $21.75
VocalTec LTD            VOCLF   $10.38  -7.7%   $20.75  $8.50
Yahoo                   YHOO    $30.00  -4.0%   $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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