Check this out! ================================================================= Seidman's Online Insider - Vol. 7, Issue 1 < http://www.onlineinsider.com > ================================================================= 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 . Subscription Information ======================== To subscribe to a text version of this newsletter, send e-mail to: [log in to unmask] For an HTML version of the newsletter, send e-mail to: [log in to unmask] To unsubscribe to either version, send e-mail to: [log in to unmask] No subject line or body text is required for any of the above instructions. If your particular client requires something to be in the subject line or body of the message, it doesn't matter what text you enter. A Web-based version of the newsletter is available at: < http://www.onlineinsider.com > 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 VICUG-L is the Visually Impaired Computer User Group List. To join or leave the list, send a message to [log in to unmask] In the body of the message, simply type "subscribe vicug-l" or "unsubscribe vicug-l" without the quotations. VICUG-L is archived on the World Wide Web at http://maelstrom.stjohns.edu/archives/vicug-l.html