ECW8
Office Futures
ECW8
Issue 8, February 2, 2000
+++ TIME for AOL
+++ New Reading (1)
+++ New Reading (2)
+++ More Notes From A Small (Fantasy) Island
+++ About eComWatch
+++TIME for AOL
The seismic waves from the TIME-Warner AOL merger rumble on. New Media met Old Media, and highly-valued New Media paper sufficed to buy some old fashioned assets of the kind accountants understand.
The merger also sent a frisson of delicious horror through the Web establishment of "Old Hackers". During the early years of the Internet, AOL stood for everything the purists feared would happen to the Web once it became available to Everyman. AOL wasn't a real Internet provider. AOL was full of brash newbies who broke all the rules. AOL members were spammers full of scams and get-rich-quick schemes. AOL was the brawling Spanish Steps of the Internet.
++Putting American on line
In an odd sort of way, AOL's name says it all. That name was also a mission statement. Courtesy of just about every mailing list I am found on, and every modem I have ever bought, I have enough AOL CDs to shingle tile a fair sized garden shed. Steve Case has taken America online.
Without Steve Case, we wouldn't have 43% of American homes connected to the Internet. Nor would getting on for 100% of American businesses have at least basic connectivity. Case drove many of these online and he was also the prod which drove the other mass providers.
Steve Case probably joins Bill Gates in the rogues' gallery of those the Web purists most love to hate. Each has succeeded in imposing his own vision on technologies developed by others.
It is probably fair to say that Case and Gates share an inherent understanding of the future Network Economy, an understanding which still seems to elude most telcos and governments, as well as many old friends like Novell. Case and Gates seem to appreciate that the real value of the network comes from the number of nodes on it. They will spend huge sums of money on marketing -- in AOL's case -- and on giving away enabling software, in Gates'. Their objective is to increase the number of nodes on the network -- nodes coming in 'through' them.
Contrast this with the telcos, who have still to learn the lesson the fax taught two decades ago. Or think of Novell, who are still cheerfully suggesting that it would be really neat if they and the telcos owned and provided the Web's directory structure. It's the mentality of owning the railroad or toll highways versus the idea of an open road system and owning the motels and service stations. Which generates more traffic?
Sadly, many of the old hackers still yearn for the days when the Internet was like America before the railroads. If you could tweak your modem initiation string and hand tune your TCP/IP stack, you could get around just fine, just as a skilled frontiersman could journey around the wilderness.
++A new business model?
The acquisition positions Case at an interesting crossroads and again possibly brings his vision into conflict with that of the old Web hands.
Since the earliest days, the mantras have run "content is king" and "information wants to be free". The Internet, theoretically, offers the empowerment of the creator of content and the confusion of the greed-crazed suits who consistently fail to recognize genius and cause people like us to sell the output of our pens for a mere 10% of gross. Or so the prophets have proclaimed.
The sad reality, of course, is that wit, genius, talent and real artistry are out there all right but buried in a morass of millions and millions of pages of dross, worthy irrelevancy and the ravings of the mad, the bad and the sad.
Cutting across that are the antics of the buccaneers or pirates (depending on your perspective) who give reality to the proposition that copyright information wants to be free too. With DVD cracks, MP3s and Warez, they make it possible for you to enjoy anything from the latest drum 'n bass tune to Windows 2000, free of charge if not free of risk.
One of the most interesting challenges facing e-commerce cuts directly across all this. Think, for example, of publishing. Were this a commercial newsletter being sold for GBP500 a year, the GBP500 income of a single sub might break down thus:
Authors: GBP 75
Production: GBP125
Fulfillment: GBP 60
Marketing: GBP125
Management: GBP 75
Profit: GBP 40
It is easy to see that the simple expedient of transferring to a Web base would radically alter those numbers. The authors, of course, can be persuaded to write directly to HTML, or we could use a conversion routine. If we adopt an e-mail marketing platform or begin by owning a high traffic site where we could promote the newsletter, marketing costs might be significantly reduced. By reducing production and marketing, we also reduce the middle management charges.
The revised figures might look like this:
Authors: GBP 75
Production: GBP 10
Fulfillment: GBP 10
Marketing: GBP 25
Management: GBP 15
Which leads to the interesting question: what do you do with the GBP365 that is now 'surplus'?
The banks gave a clear answer with the fruits of their automation: senior management and shareholders share the pot. And this will work until one breaks ranks and begins to compete on price.
Obviously, this is a very simplistic model, but it illustrates a point that transcends the mundane world of newsletter publishing. The new distribution medium makes possible radically new business models across virtually every field of content provision from rock 'n roll to publishing encyclopedias.
The key issue facing anyone starting from scratch is how can you actually get your shiny new business model in front of enough eyes or ears to make money by selling 12 songs for GBP1.00 instead of GBP15.00?
++ Razors versus blades
Well, so the reasoning goes, if you are AOL, you already have the eyeballs. And if you happen to own TIME-Warner, you have the content. But it isn't shiny new-model content. It is old-model content, where men in expensive suits make the big bucks by being right about The Next Big Thing often enough to keep the shareholders happy.
Is an explosive new Renaissance of low-cost high-quality output from empowered artists the outcome you are expecting by this time next year? If so, you are likely to be disappointed. The model successfully pioneered by the banks beckons, and there are an awful lot of shareholders who believe that the cost benefits of any new business model should reach them long before it does the consumer.
Perhaps we are being unnecessarily contrary, but we'd sooner look to Bill Gates. He's learned a few hard lessons about this. Turning Slate around and producing it as free, quality content must be stirring other thoughts. The attention being lavished on the free Media Player and NetMeeting and building Internet radio into Internet Explorer all suggest a deep and long term interest in content.
Skipping back a couple of analogies, Gates is someone who is interested in owning the motels and filling stations on the motorway system. If Microsoft were paying us to do the thinking, we'd be focusing on creating and owning the microbilling system that is the essential precursor to really powerful new media new business models. Then, if we owned the media players most people used, the mechanism they used to pay for content and the tools they used to search for content & goodness, let Case have the old content producers. It'll probably do him about as much good as the purchase of Netscape.
+++New Reading (1)
Electronic Business Revolution. Opportunities and Challenges in the 21st Century, by Peter Cunningham and Friedrich Fröschl. Springer-Verlag, 1999. ISBN 3540662111., GBP 27.00, $48.00 or DM 79.00. 234 pages, hardback.
This introduction to electronic commerce was written by two influential people. Peter Cunningham is President of INPUT, a well-known American market research firm. Doctor Friedrich Fröschl is President and CEO of Siemens Business Services, one of Europe's largest computer services organizations.
The latter appears to be the senior partner. There is little mention of INPUT in the book (and, conversely, it is not mentioned on the firm's Web site). By contrast, the text contains frequent references to Fröschl's employer, and there is also an appendix describing SBS's activities. This, I think, gives a clue to this book's role -- it is a piece of marketing collateral for Siemens.
Nevertheless, given their respective experience and positions, one could reasonably expect the authors to have produced something authoritative. Sadly, this is not the case. Although much of what they have to say is good, interesting and informative -- and it is all clearly written -- it skims the surface of almost all the topics covered.
The tone throughout is upbeat, the authors seemingly being concerned to present good news. Even when there are problems mentioned, they write about them as though they were readily soluble, often through technical advances. Subjects like channel conflict, the effects on the organization, the potential pitfalls of globalization, and the size and sources of internal funding are skated over at best. The use of MP3 files in music distribution, for example, merits just two paragraphs, with no mention of the contentiousness of the issues this has brought to the fore.
This is disappointing. I know the book is meant just as an introduction to the subject of e-commerce, but the reader has a right to expect greater realism about actual and potential problems. That does not take extra words, just different ones.
Also, finding out all that the authors have to say on a topic is difficult. There is a lack of cross-references and the contents are, to my mind, somewhat confusingly organized. This made worse by there being no index, which is slipshod for a scientific publisher. Most statistics are given without details of their source and might just as well be folklore. There is, though, a handy glossary.
According to the publisher's Web site, the book is intended for "executives in business and government, and people who run a business, primarily in Europe". Those executives are likely have access to more balanced information than this book provides and for nothing, either on the Web or by traditional means.
Government employees, for instance, would look in vain here for material on how the public sector is using electronic commerce (or "Electronic Business", as it is constantly described). This will surprise some British readers, since SBS is a major supplier to the British government.
Overall, then, I rate this book as an 'almost'. There is potentially an excellent work somewhere between its covers but this isn't it. What is there needs to be put together better and more purposefully edited. It is a shame that better use has not been made of the two authors' knowledge and insight. The price is high, too (especially from Amazon.com UK, which is asking a remarkable ,34.50 for it).
Doctor Johnson reportedly said of the Giant's Causeway that, although it was worth seeing, it was not worth going to see. Much the same could be said of this work: it's worth reading but scarcely worth paying to read (even at the standard price). That probably won't affect sales much, since I expect SBS will be giving it away to current and potential customers.
+++New Reading (2)
E-Commerce: A Guide to the Law of Electronic Business, edited by Stephen York and Ken Chia. Butterworths, 1999. ISBN: 0406982635. £95.00 321 pages, softbound A4.
I mentioned this work in the reading list published in ECW7 but it deserves fuller coverage. It is written by fifteen practising solicitors, led by the editors, who all work at the British firm of Hammond Suddards. As you would expect, therefore, it deals mainly with British law but it also gives good coverage of international matters and cases.
Its contents embrace pretty well all the topics likely to concern any organization running a Web site and especially one engaging in e-commerce. There are sections on domain names, copyright, advertising, online contracts, electronic payment, liabilities various, defamation, data protection, privacy, obscenity, intellectual property rights (copyright, patents, trademarks and so on), litigation, the law on selling financial products, taxation and duty and, finally, some speculation on future legal issues and remedies. So far as I could tell, though, there is nothing on gambling and on auctions. Coverage is up-to-date enough to mention, for instance, day-trading of shares and the influence of message boards on this.
The back-cover blurb describes the book as being suitable for "every legal advisor, project director and business adviser". It largely lives up to that claim, although the "every' might be hard to substantiate. The lay reader would need some familiarity with legal terminology to get the most out of the book, but it is easily readable as well as comprehensive. The text is well organized and clearly laid out. I detected only one 'typo' ("relied upon" for "denied", on page 43) and one incorrect page number in the index ("radar" is on page 203, not 204) but there are few obvious errors.
As one would expect in a law book, there are lists of the statutes, European legislation and cases referred to in the text. There are also numerous footnotes and a lengthy index but no glossary, either of ecommerce terms for lawyers or of legal terms for e-traders.
The book also lacks URLs, which robs it of a dimension of usefulness. In fact, one would not even know from the book that the authors' firm has a Web site (it's at http://www.hammondsuddards.co.uk). I feel that companies who sponsor or produce a book are missing an opportunity if they do not link to it from or update it on the Web. (This does, though, mean keeping those pages current, an investment that not all want to make.)
Not only is the Hammond Suddards Web site not listed, the book gives no contact details for the firm. Although this reticence is commendable, especially in contrast with SBS's incessant self-promotion (see New Reading 1), a little more information about the authors would not have gone amiss. British solicitors have been able to advertise for some years now.
Although pricey at £95, this book would be a good investment, especially for people or organizations without access to a suitably-experienced in-house lawyer. It is the best one-volume guide to electronic commerce law in Britain that I have so far seen.
+++More Notes From A Small (Fantasy) Island
Pity the poor bureaucrats trying to guess the impact of electronic commerce over the next couple of years.
Here, in one of the world's smaller almost-sovereign jurisdictions (the province of Prince Edward Island, population 137,000), provincial bureaucrats from the Technology Department have been sitting with our rather peculiar IT trade association, attempting to put numbers to IT's contribution to GDP and job creation over the next couple of years.
The exercise is conducted in a sort of Alice-in-Wonderland atmosphere. The official line is that we are already recognized as a world leader in technology. Also, it seems, the two companies which dominate the trade association (an Oracle developer primarily doing local public sector business, and the telco) are "world-class players".
The macroeconomics were strange to say the least. Their headline figures suggested that IT currently contributes about $140 million to GDP and that $280 million would be a realistic figure for two years hence.
Under questioning, it became clear that they would have included the eel catch as current IT revenue if only they were the electric variety. As it was, they did include the revenues of the telcos, the cable TV company, the activities of call centres and provincial and federal government expenditure on IT, internal and external. Those figures taken out, there was a nut of $25 million that the private IT sector might (or might not) be turning over.
As 75% of the estimated 80-odd IT firms refused to participate in their survey, they couldn't really be sure. In any event, most of those firms are computer retailers, call centres or small static Website developers. There are perhaps a dozen or so businesses actually doing work of the sort that can trigger explosive growth.
As for the figure anticipated two years hence, clearly public sector expenditure will be flat, telco revenues are unlikely to skyrocket, and it is doubtful that call centres or the cable company will experience exponential growth. Some quick jottings on the back of an envelope suggested they were about to bet government policy on the proposition that a handful of firms currently generating a maximum of $25 million (including the sale of computers in the retail market) will somehow put on an extra $140 million in revenue over the next 24 months.
Interestingly, the close-knit group that controls the trade association does not include any of the likely breakthrough companies, and all opinion outside this magic circle of bureaucrats and their principal suppliers was rigorously excluded. (Come back National Economic Development Council, all is forgiven. 1970's UK corporatism flourishes in our island paradise.) Nor is much of the $30 million they are seeking to make this all happen likely to trickle down beyond that circle.
When all of this was finally revealed to the full membership of the trade association, there was much hilarity. The joy of nations was increased when the chap who had done the macroeconomic work solemnly assured us they had consulted both "the important firms and small businesses" (and he probably meant "both the important firms, and the small businesses"). When it came time for this chap (who was also session facilitator) to summarise the comments of the meeting, he couldn't. It seems no one from the trade association could be bothered to take notes.
Although it hasn't been confirmed, we understand this nonsense was presented to Cabinet a few days later as "the industry's" policy.
No matter how idiotic public policy on e-commerce may seem in the UK, take heart: in Canada's self-proclaimed "Smart Province" Technology Department, the process is worthy of Monty Python.
-oOo-
About eComWatch
eComWatch is edited and published by Roger Whitehead and Christopher Ogg. Copyright Roger Whitehead and Christopher Ogg, 2002. eComWatch may be circulated freely in its original format with copyright notice intact. For permission to reproduce any article,