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            Seidman's Online Insider - Vol. 7, Issue 1
               < http://www.onlineinsider.com >
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Copyright (C) 2000 Robert Seidman.  All rights reserved. May be
reproduced in any medium for noncommercial purposes as long as
attribution is given.

IN THIS ISSUE

- Author's Note
- Warning
- Where Does an 800 Pound AOL Sit?
  - AOL to Buy Time Warner
  - Thoughts from a former AOLer
  - AOL vs. MSN
- Free ISP Morphs to Free Broadband
- Subscription Info
- Disclaimer

Author's Note
=============

Yeah, I know I said in November that I'd put something out before
Christmas, but I didn't say WHICH Christmas.  Seriously though, I
apologize for the delays. I had some good reasons that I won't bore
you with.  I am confident, however, that I will be able to publish
a lot more this year than I did last year (where I was down to only
12 issues!).  To those who e-mailed worrying about me, thanks, I
appreciate it.  I'm actually feeling pretty good.

Speaking of e-mail, I have been a poor correspondent. I have e-mail
in my inbox dating back to September, but I'll clear it out by the
end of this month.

Also, I recently purchased the seidman.org domain.  I'm not sure
what I will do with it, but I will likely move the newsletter over
to that site and am strongly considering renaming from Online
Insider to Seidman.Org.  I always hated the Online Insider name
(sue me, but I actually liked the original "In, Around and Online"
much better).  But there was that branding issue to contend with.
I'll keep you posted.


Warning
=======

I've received much abuse over the last 5+ years for writing too
much about AOL.  So, if you absolutely hate reading about AOL, you
won't want to read this newsletter.

And to those of you who harassed me for focusing too much on AOL,
just remember these seven words: I was right and you were wrong!
I'm really just kidding about that.  If it will make you feel any
better, the president and co-ceo of the company I work for once
told me I write too much about AOL and as I respect his judgement
quite a bit, there is probably something to it.  I'll work on
diversity in the next issue.


Where Does an 800 Pound AOL Sit?
================================

You were expecting a punch line?  Ha!   I'm just jazzed at the
prospects of the new Wav (sound files) on AOL as a result of AOL's
pending merger -- okay acquisition -- of Time Warner.

Throw out "Welcome" and bring in James Earl Jones with "THIS is
AOL".  Goodbye "Goodbye", hello Porky Pig stammering "B-dee,b-dee,
b-dee, that's all folks!"  There's a long way I could go with this,
and yes, I know I could make Porky Pig my "goodbye" sound anyway,
but you know most people don't ever change the defaults.  And if
you don't know this, AOL is very aware of it.  You don't think
those annoying pop-up ads are defaulted to be turned on for
nothing.

*AOL to Buy Time Warner*

I remember thinking when WorldCom announced that it was buying MCI
that the world was changing.  How could a company with a,
relatively speaking, pittance of revenue buy a behemoth with lots
of revenue?!  Stock valuations, that's how!  I remember at the time
thinking, okay it's over then -- Disney or Time Warner won't be
buying AOL, AOL will be buying them.  We live in a bizarre world
where the market values AOL more than it values Time Warner.

Personally, I think this is crazy.  Oh, sure, I understand it in a
forward-thinking kind of way.  I mean, I could see a day in the
future where AOL was really worth more than Time Warner or Disney.
But when I try to look at things in terms of today's absolute
value, I simply don't see AOL being worth more than Time-Warner.
But you know what, the market says I am wrong and I don't at all
blame AOL for playing the hand it was dealt.

Besides, like The Moody Blues once sang "School taught one and one
is two, but by now that answer just ain't true..."

Ah, ah, ah, ah, ah, ah, ah, ah, ah, ah, ah, ah, ah...ah.

Indeed, we are living in a time where one and one no longer
necessarily make two.  The new math is in.  WorldCom did it and now
AOL has gotten the religion of the new math.  In truth, AOL
probably had the religion before, but it took a while to pick a
mate and then court it.

So what does it mean?  Well, looking backwards, it means Time
Warner could never figure out how to leverage all of its offline
properties in a way to drive a ton of traffic to its online site,
and it could never build enough distribution online for its online
site either.  We can call efforts like Pathfinder a failure (and
sure on many fronts it was a failure), but really, the problem was
distribution.

In the end, Time-Warner wasn't comfortable, for whatever reason,
spending the big marketing bucks necessary to gain the necessary
distribution for its online properties.  Sneer at Time Warner's
efforts as failures if you will, but with the exception of Disney,
no traditional media company has dumped the kind of money necessary
to gain any kind of real online presence.

If you look at Media Metrix' top 50 rankings for November, Disney
was the only traditional media company to crack the top five (the
top 4 being AOL, Yahoo, Microsoft and Lycos -- note: this is from a
unique visitors point of view, not page views or time spent on the
sites).

The only other traditional media company in the top 10 was Time
Warner, with 12.4 million unique visitors, or about 10 million less
than Disney's roughly 22 million with the Go Network.  But here's
the thing, I'm guessing (I can't exactly prove it, but I'm betting
my next paycheck nobody will write me to disprove it either) that
Disney spent significantly more than twice as much as Time Warner
to get less than twice as many unique visitors.  Besides, Disney
has better logical offline properties (like ABC and ESPN) to drive
traffic to its Web properties than Time Warner does.

Finally, from a retrospective point of view, it just kind of proves
that the emphasis AOL has put on subscriber growth (sometimes at
any cost, sometimes at reasonable costs) was the right way to go.
Around this time last year, I was writing that the AOL flagship
service had reached 15 million subscribers worldwide.  A year
later, it's at 20 million -- or 33% growth in a year.  Not too
shabby and with none, relatively speaking, of the access hassles
that plagued it a few years ago.

Going forward it means AOL has access to cable pipes via Time
Warner's RoadRunner service.  I can tell you, having visited
Northern Virginia several times in the last year, that the
promotion for the RoadRunner service right in AOL's own backyard
via Media General Cable (now Cox, I believe) must've had 'em crazy
at AOL.  The infomercial that runs continuously promoting the
service was pretty good.  Something about a granddaughter sending
her grandparents some pictures.  "Which one," grandpa asks.  "All
of them," beams the granddaughter (cuz it is sooooooo fast, don't
you know).

What this means for the deals AOL has forged with DSL providers, is
unclear. First of all, the deals are REALLLLY slow to get going.
For example, AOL did a deal with SBC (which includes PacBell).
Where I live DSL is available, and the AOL software for accessing
via DSL is ready and available, but I can't get the service.

Actually, I sort of got the service anyway over my TCP connection
and have to say I am pretty impressed where AOL is going with it.
AOL has nicely integrated (or working on nicely integrating)
broadband content based on where you go on AOL.  For example, if
you go to the "Sports" channel a little window (AOL calls it the
Media Tower) pops up with relevant sports videos.  At least in
theory they are relevant.  Prior to this weekend's NFL playoff
games there were video previews of each game available.

But as the games were played out over the weekend, the Media Tower
was not updated with videos of the specific games.  Still the
integration is nice, but clearly AOL has some operational issues to
work out.

At any rate, I think the DSL alliances may cause the first clash of
the egos with the Case and Pittman cramming it down Levin's throat
that it is in AOL Time Warner's best interest to get distribution
wherever it can get it, "even if we DO own a cable company!"

It will be interesting to see how this plays out, but I expect Case
and crew will be able to show Levin and company that "hey, the more
customers we have, WHEREVER they come from, the more we can promote
that new movie we're putting out."  It's all about distribution and
promotion.  That's what this deal boils down to, AOL promoting all
of Time Warner's properties ranging from books and magazines to TV
shows and movies heavily.  And all those properties will promote
AOL.  Ah the sweet synergy that scale brings.

A couple of things beyond promotion and distribution -- even
though, yeah, they are promotion and distribution related -- music
distribution and AOLTV.  My bet is that within six months of the
merger closing, if not sooner, AOL will be SELLING (yes selling)
digital versions (MP3) of songs by artists on the various Time
Warner labels.  This won't be exclusive to AOL, but will be
built-in to AOL.COM, WinAmp (also owned by AOL), ICQ and Netscape
and all of these sites/properties will promote books, movies and
magazine subscriptions.

As for AOLTV, it is apparently still mostly vaporware and pretty
worthless according to every review I read from the Consumer
Electronics Show held recently in Las Vegas.  But the Time-Warner
element makes it interesting.  Throw in the Tivo (personal
television recorder) capabilities with a fat pipe for cable
subscribers and AOL will likely be sending down actual content.
Movie trailers, for sure, but specialized content promoting other
Time Warner properties and perhaps the actual content.

>From a bandwidth perspective, it won't make much sense to send down
actual programming when it can be recorded off the airwaves, but I
am thinking more along the lines of "Sign up for AOLTV now and see
the season finale of Buffy the Vampire Slayer a week before
everyone else..."

*Thoughts from a Former AOLer*

These interesting points come to us from Bill Gorman, a former
long-time AOL employee.


1. It's interesting that AOL sold it's previous network, ANS, and
then said  it was happy to be out of the network business. Now
AOL's even happier to be back in the network business. The
difference being that this network business [cable]is a monopoly
and will presumably give AOL the leverage to pry open access out
of the other cable systems.

2. AOL's Bob Pittman loves brand building, and it strikes me how
similar the combined companies brand building strategies are [a
few big brands like AOL/Netscape and Time/CNN/Sports Illustrated;
with lots of little brands like Spinner.com and Cartoon Network]
and how very different they are from the other big Internet brand
success, Yahoo! [one brand].

3. Cross selling products between the now mutually owned customer
bases is supposed to be a big synergy benefit of the deal. If
that's a better way to maximize growth or profitability than AOL's
current type of e-commerce and advertising deals can we expect AOL
to acquire more of it's e-commerce advertisers [like Amazon.com]?

4. Lots has been written about all the great content that the new
AOL/TWX now  owns for distribution over the internet. Five years
ago the CEO of a failed media-centric online venture proclaimed
that online "Content is King". He was definitely wrong then. Was he
just ahead of his time?

5. I always thought that Bob Pittman figured he should be behind
Gerry Levin's [or Mike Eisner's] desk. That shouldn't take too long
now.

6. If I'm a TWX shareholder, I'm happy for the deal related stock
appreciation, but now that it's happened, do I want to effectively
be holding AOL stock if I wasn't already?

7. In the past, AOL has typically bought internet industry
companies thatcould add technical capabilities, traffic, or
customers to the AOL group.  Then it achieved efficiencies in a
variety of ways and continued as an  augmented version of the
previous AOL. Even AOL's biggest previous acquisitions, Netscape
and CompuServe, didn't really change AOL's business much. Not so
this deal.

8. I'm sorry to see Thomas Middelhoff, the CEO of Bertelsmann,
leave the AOL board because of a conflict of interest with TWX.
I always thought that he wanted to have Bertelsmann buy AOL.
Things certainly turned out differently.

Bill Gorman can be reached at [log in to unmask]


*AOL vs. MSN*

I had an interesting conversation with Yusuf Mehdi, Director of MSN
Marketing at Microsoft.

"[The deal between AOL/Time Warner] clarifies two distinct views of
what companies want to do for their viewers," Mehdi says.  "This
cements the direction AOL was heading in -- towards being a media
company."

For MSN, Mehdi says the focus is less about content.  "The real
value-add is what you can do with the content," Mehdi says.

Clarifying, Mehdi says MSN isn't abandoning content.  He feels MSN
can partner to get a lot of content and then add tools that make
the content more valuable. Mehdi points to the value of MSN's
MoneyCentral, for example, where the tools to manipulate your
portfolio greatly enhance the value.  Mehdi also points to services
like the MSN Communities, which allows people to fairly easily
create their own content communities.

Mehdi thinks that with this deal AOL will focus more and more on
content and less and less on software.  "All of the bias and a lot
of the focus is going to be on the media properties," Mehdi says.
"Does AOL/Time Warner become the place to go if you want to work in
technology," Mehdi ponders.

Mehdi views the deal as a net positive for MSN and thinks over time
that a lot of companies, including AOL Time Warner might want to
buy Microsoft products for Interactive TV as well as other services
(MSN Instant Messenger for example).  Mehdi is not sure that if the
results of the antitrust case against Microsoft were favorable for
AOL, that AOL would stop using IE.

Personally I am pretty sure that if AOL can integrate Netscape AND
remain bundled with the various Windows operating systems that AOL
will indeed bundle Netscape, but Mehdi argues that if the gap in
the software is such that AOL's customers will benefit more from
IE, AOL may well stick with it.   I think the gap would have to be
a lot bigger than it is right now.

On the MSN front, Mehdi seems prepared to battle AOL, noting that
December was the second best month ever in terms of sign-ups for
the subscription MSN service.  The December growth has MSN back to
around 2 million subscribers (bottom line, no real net growth in
the last few years).  I asked Mehdi if MSN was shooting for 10
million subscribers by year end and he said no, but vowed that MSN
would add more net accounts than AOL would in 2000.

I love to see this sort of spirit.  I definitely want to see AOL
have some competition.  But, I bet Yusuf a pizza MSN wouldn't add
more subscribers than AOL in 2000.  MSN does plan on aggressive
marketing.  The deal with Radio Shack will be visible in stores
this quarter, and deals with Best Buy, etc., have gained some
visibility for MSN (especially here in California, where people
seem to be okay with stealing, as long as it is legal and Microsoft
is the victim).  On top of that, Mehdi says there will be serious
marketing dollars thrown at promoting MSN.

Add in the Internet Appliance devices that will be out later this
year in the $100 range and Microsoft could gain some traction.  But
it won't add more subs than AOL for a couple of reasons.

Primarily, believe it or not, AOL has better software than MSN.
For all the talk of adding value to what you can do to content, MSN
has to understand there is more to it than that (and by the way,I
think MSN does understand this, it is just a timing thing).

The integrated AOL is better than MSN if for no other reason than
that it offers 5 screen names (7 with AOL 5.0) and parental
controls.  Until MSN matches those two features, AOL will continue
to grow faster than MSN.  I know too many people who have AOL
simply because of the ease of giving each family member an account.


So even if MSN spendS more on marketing in the next 6 months than
AOL --which Mehdi claims MSN will do -- I think I'll get a free
pizza.  I hope I'm wrong, and I hope early in the first quarter MSN
launches a new MSN with a shell that allows for multiple accounts
with parental controls.  Once MSN does that, it will have a shot.
Until then, I'm betting against it.


Free ISP Morphs to Free Broadband
=================================

I've received a lot of e-mail asking me what I think about the free
broadband access services that are popping up.  I could probably
write 800 words on this, but it has been years since I've gone to
the Loudon Wainwright III file and he summed up my thoughts on free
broadband access well over 25 years ago:

Courtesy of http://php.indiana.edu/~jbmorris/LYRICS/dead.skunk

"Dead Skunk" - Loudon Wainwright III
words and music by Loudon Wainwright III
transcriber unknown

available on:
original 45, Columbia 4-45726, 1972
reissue 45, Columbia 13-33269
Loudon Wainwright's Album III, Columbia, 1973
Dr. Demento Presents the Greatest Novelty Records of All Time, Vol.
4: the 1970's, Rhino LP/cassette 823, 1985
and numerous other comedy compilations

Crossin' the highway late last night,
He shoulda looked left and he shoulda looked right,
He didn't see the station wagon, car,
The skunk got squashed and there you are!

(Chorus)
You got yer
Dead skunk in the middle of the road,
Dead skunk in the middle of the road,
Dead skunk in the middle of the road,
Stinkin' to high heaven!

Take a whiff on me that ain't no rose!
Roll up yer window and hold yer nose,
You don't have to look and you don't have to see,
'Cause you can feel it in your olfactory,

(Repeat Chorus)

Yeah you got yer dead cat and you got yer dead dog,
On a moonlight night you got yer dead toad frog
Got yer dead rabbit and yer dead raccoon,
The blood and the guts they're gonna make you swoon!

You got yer dead skunk, in the middle,
Dead skunk in the middle of the road.
Dead skunk in the middle of the road,
Stinkin' to high heaven.

C'mon stink!
(Fiddle break)

You got it,
It's dead, it's in the middle,
Dead skunk in the middle!
Dead skunk in the middle of the road,
Stinkin' to high heaven!

All over the road, technicolor man!

Oh, you got pollution.
It's dead, it's in the middle,
And it's stinkin' to high, high heaven!

(Fiddle fadeout)

See you in a couple of weeks!  By the way, check out the community
site at:
http://communities.msn.com/SOI to post your thoughts on AOL/Time
Warner, free ISP (broadband and otherwise), DSL/Cable horror
stories and more.  Again, that's: http://communities.msn.com/SOI .


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Disclaimer
==========

The views expressed herein are exclusively those of the author and
do not represent the views of any other person or any organization
with which the author may be associated. The information herein is
not intended as tax, legal or investment advice.

The information is provided for general interest and is not
intended to be relied upon in connection with making investment
decisions and does not constitute a recommendation or a
solicitation of an offer to buy or sell any security.





Just an email away.......
Justin

Net-Tamer V 1.12 Beta - Test Drive


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