Copyright © 2003 John Zipperer unless indicated otherwise.
(08/20/03) Love it or hate it, America Online is a bellwether Internet business. First the butt of 'Net snobs, now it's being scorned by the "old media" types it swallowed. No doubt AOL's hubris has come back to haunt it, but there's no sin in learning from one's mistakes. What can the AOL side of the fractured AOL Time Warner marriage do to stop its fall, rebuild its market-leading position, and lay the groundwork for future growth?
AOL's problems are well-known: a stagnant or falling membership, inadequate service, members suffering spam onslaughts, failure to deliver on promises of synergy with Time Warner's "old media" properties, failure to convert users to its own broadband service, and such. Though you don't get more than 25 million subscribers without doing some very important things right, America Online needs to do a lot more to be healthy again.
Sue, sue, sue: AOL's strength has been its ease of use, but if members have to battle hundreds of spam messages to get to their e-mail, then AOL loses that edge. Recently, AOL has fought back in the form of multi-million-dollar lawsuits against spammers. This is not an area where AOL can be a follower and hope that other industry players or the government will solve the problem for it. Just as Microsoft Outlook gets targeted so often because of its ubiquity, AOL gets targeted because it is the biggest. If it wants to stay that way, it has to make spam a top priority, because it is a top priority for users.
Become the king of broadband: One of the first companies to pull many users onto home broadband use via cable modem service was Road Runner, which had a nice deal with Time Warner cable systems. AOL Time Warner should have had a headstart, then, in converting dialup subscribers to high-speed cable modems, but instead it's been in a nightmare of losing subscribers to other broadband companies. (Even DSL, that broadband also-ran, has been making a comeback, as we reported last issue.) AOL's then-COO, Robert Pittman, once told an audience at the Internet World trade shows that broadband was the key to running home networks and to delivering the higher-value media that online services desired. But AOL Broadband has to be faster, cheaper, and simpler to use than its competition. If it isn't, then AOL doesn't have much of a future, broadband or otherwise.
Continue to push instant messaging: AOL's once market-leading Web browser, Netscape, long ago lost the browser wars. But the company has long been a leader in instant messaging, expanding it from its paid subscription service into a widespread free service available to everyone. "Available" is the key word; interoperability with competing IM services has been a bone of contention. AOL should continue to open up the service where necessary (as with Apple's chat features), it should continue to work to make it compatible with corporate needs, and it should continue to develop the promotional links it places on the free chat browser. And, finally, it should be ahead of people's expectations on audio and video chatting.
Dump Netscape: Internet World -- and this writer in particular -- has long been a fan of the Netscape Web browser and its e-mail and chat functions. But even we are unable to deny that it simply has fallen behind and remains buggy and slow. AOL shouldn't even bother with this anymore. Dominance is with Microsoft Internet Explorer. Revolutionary changes are with products like Apple's Safari browser or ManyOne's Universal Browser. AOL's browser future is with one of them.
Decentralize: If AOL is to remain a part of AOL Time Warner (regardless of whether it's reflected in the name), it should learn from another international media giant, Germany's Bertelsmann (itself a one-time AOL Europe investor): Decentralize your operations. Let each unit do what it does best and only direct from the center what has to be directed from there. The benefits the online service gets from being part of AOL Time Warner should be in terms of access to high-quality media content and cross promotion. Forget about those embarrassing corporate culture fights and attempts to "transform" other sections of the company.
Even after subtracting all of AOL's mistakes, the company's accomplishments over the past decade are important. It helped create, popularize, and legitimize Internet business for tens of millions of people. Most of AOL's problems, therefore, are not problems with its central mission, offerings, or approach to its customers; they are problems of business management. Luckily, there's plenty of talent and energy left in the company to regain lost ground by first tackling these five things.
(08/06/03) The debate over Internet taxation is back, spurred in part by crises in state budgets and initiatives overseas. The EU has begun to tax online commerce, which will affect U.S. companies such as America Online and eBay that sell to Europeans. "Some of the opposition to this measure appears to be driven by the fear that it could serve as a precedent for taxing e-commerce within the U.S.," EU spokesman Jonathan Todd told the Washington Post. So if death and taxes are indeed both inevitable, the question becomes just how inevitable are Internet taxes in the United States? Are they imminent?
Virginia governor Mark Warner has reiterated his support for taxing Net business, and he's unlikely to be a lone voice at a time when states are searching for revenue to deal with unprecedented deficits. California's alone is estimated at upwards of $38 billion. When you're that far in the hole, you're either laying off police officers and teachers or you're taxing anything that moves. E-commerce looks like a fat target. Two professors at the University of Tennessee provide estimates as to the sales and local taxes lost through e-commerce putting them at a whopping $13.3 billion in 2001, growing to $45.2 billion in 2006.
Should the free-pass tax-wise for e-commerce expire? In 1999, researchers Austan Goolsbee of the University of Chicago and Jonathan Zittrain of Harvard Law School argued that though the costs of bypassing Internet taxation were low, the cost of compliance would also likely be low and the benefits of giving Net commerce a free pass in the interests of developing it further were likely to decrease over time. Their conclusion at the time reflected the fact that political compromises are not always harmful things. In this case, they suggested that a moratorium on enforcing sales taxes online was a good idea in the short term, as the medium matured. At the end of the 1990s, the Internet Tax Freedom Act put a temporary moratorium on new taxes designed for the Internet. Efforts to extend or abandon this approach have been argued about ever since, from politically expedient arguments from pandering politicians to tax abolitionists like Citizens for a Sound Economy).
Honest defenders of the Internet-needs-nurturing argument have always known that at some point, the Net would no longer need nurturing. But we are not there yet. The success of eBay and Amazon are encouraging, but there is still too much development required of e-commerce technologies to declare online commerce mature.
But that time will come sooner rather than later, and we'll have to anticipate it.
(07/16/03) In the mid-1990s, when the Internet was just being popularized as a venue for organizations to conduct business, it was still common to refer to its "Wild West" attributes. Companies trying to do e-business of any type are likely wondering if the Western motif might not still be appropriate, considering the recent reports of security threats. We've seen 1,000 computers hijacked to retransmit pornography, we've seen yet another virus attack that caused headaches around the globe, and we've seen spam become a national issue. Time to pack it in? No; it's time to accept the Net for what it is, adapt to it where needed, and make it adapt to us the rest of the time.
Perhaps what companies need to do most is to educate their own employees about the important role they play in the success or dismal failure of their companies' Internet security plans. That's the idea behind the aptly named Human Firewall Council, an industry consortium that conducted a survey of companies earlier this year to gauge their security management efforts. Almost 80 percent of more than 1,000 companies that responded scored a "D" or worse nearly half of them got an "F" grade.
Looks like many companies have packed it in, judging from that survey. (You can take the online survey yourself to see how your company scores.) Is it that bad? The reality is that companies are moving rather well toward accepting the need to see the Internet as a two-way threat to their businesses, in the sense that dangers can come into their organizations through human and automated use of the Net, and valued private information can flow out of their businesses much the same way. Considering that their spending is constrained these days by that danged economy, they are accomplishing a lot. They'll need to do more.
If you're sick about hearing how the financial services industry was one of the first to recognize how cyber security was a critical issue for them to address, you won't appreciate this paragraph. But it's true, and that industry is also at the forefront of security-proofing its entire employee base. Chris Leach, CTO for technology risk at Bank One, tells Internet Business that his company holds twice-yearly technology fairs for employees. "One of the things we do there, other than the typical booth thing, is we actually show what a hacker does and can do. That raises immediate awareness and people go 'ooh' and 'aah,'" he laughs. "We have articles that are put out in our publication that goes to all [staff]. As you log onto our network, the first thing that's displayed is a security banner, and we change it from time to time to keep it fresh. So there's that constant reminder. At the end of the day, we do place a lot of accountability on employees."
That's the right approach. The pervasive Internet requires pervasive training and education. So wherever you are in the structure of your organization, Internet security is critical to your performance and to your organization's success online. "From the top, my boss and his boss always felt that we needed to do things in a secure fashion," says Leach. "So when you get that kind of support, it makes it easier when you're talking to a business [colleague] -- it's very simple because they've heard it from their boss."
(07/02/03) With a couple of recent high-profile actions, the entertainment industry this past week appeared to be getting the upper hand in its long-running attempt to reign in illegal copying and distribution of recorded music and film. Though people have considered this an isolated problem endemic to the music and film industries, observers in government, business, and other organizations are becoming aware that, in terms of the portability and reproducibility of their important digital media, they are more like entertainment companies than they thought.
That's because, when it comes to digital media, the entertainment industry is the canary in a coal mine. In what it views as a life or death struggle, the music recording industry and the filmed-entertainment industry have been battling piracy of their products for years, often to public derision for overreaching. But when Universal Pictures caught a New Jersey man who had copied and then distributed on the Internet a copy of "The Hulk," it was a sign that technology might help businesses just as technology has helped pirates. The offender was traced thanks to a digital "tag" that had been inserted in the movie.
Now, the Recording Industry Association of America has announced that it is compiling a database of people who illegally download music in the U.S. and would initiate legal action within a few months. In what was already somewhat of a popular revolt against the music industry, this is sure to create further backlash. One group, which calls itself Boycott RIAA, argues that the industry makes distorted claims about the Internet's effect on its business model.
Hopefully, that's not a public-relations nightmare you have to worry about in your business. But you have another worry if you share digital assets documents, video, audio, etc. within your company and with outside partners and consultants. What if that material is shared with competitors or customers before it's ready? Even if you think you can keep an iron lid on materials within your organization, are you confident about what happens when a consultant or partner has it? After all, "The Hulk" was copied by a friend of a friend of someone at a Universal Pictures advertising agency who received an advance copy of the film.
Luckily, there are answers that make the Internet a safe or at least safer platform for business of all kinds. A big difference between your corporate digital information assets and Universal's film is that your assets are likely to be "live" documents for a longer period of their useful life, as people add comments, make changes, update tables, etc., while "The Hulk" and other such products are live during production, but their full value to the company, audiences, and pirates comes when they're "frozen" in their final form for commercial distribution. So protecting your materials while they change hands is key.
One approach is to separate the content and the usage rights. That's the route taken by SealedMedia, for example, whose product lets users trade files and track, grant, and revoke rights to all or part of it. "If you look at most of the problems with e-mail, it's because I accidentally sent it to the wrong person. With sealing, if you send it to the wrong person, they can't open it," says Alan Cornwell, CEO of SealedMedia.
Tracking and prevention are the keys, whether the solution comes from SealedMedia, Microsoft, Authentica, or elsewhere. And with compelling reasons to pay attention to your digital asset distribution over the Internet, ranging from HIPAA requirements to basic business security, you may find yourself siding with Hollywood moguls for the first time in your life.
(06/18/03) When a liberal New York senator (no, not her) and the conservative Christian Coalition team up to take on the problem of spam, you assume there is a broad consensus for action. But that action will ultimately be ineffectual if this unlikely band of Internet crusaders continues to pursue misguided ideas such as no-spam lists.
The attempt by Sen. Charles Schumer to include a national no-spam-list in his anti-spam bill has garnered attention because it is a readily understood concept to Americans who already know about no-call lists. If we can protect people from unsolicited commercial phone calls, then why can't we use the same tactic to protect consumers and enterprises from unsolicited commercial e-mail?
The problem is real enough. You've likely heard all the statistics already. Anywhere from 40 to 50 percent of all e-mail is spam, about 20 percent of which is adult-oriented. And as much as one-quarter of all spam is image spam, in which images are used in the e-mail message to get around keyword filtering techniques. That's bad enough for businesses, which have to worry about legal liability for employees receiving offensive material or about security threats from spam-borne viruses. But businesses also have to ensure that legitimate commercial e-mail is not caught up in the justifiable rage over grandma getting graphic Viagra offers.
On the enterprise user side, of course, controlling unwanted e-mail is handled with increasingly sophisticated filtering technologies from companies such as SurfControl, Microsoft, Brightmail, or Computer Associates.
Therefore, the Net is becoming smarter to handle spam, but of course the bad spammers keep coming. The problem with bad spammers is, of course, that they are bad. If they followed laws and ethics and were afraid of punishment, they wouldn't be sending millions of AOL families e-mail that was more suited to Penthouse. A do-not-spam list to them is therefore either something to continue to ignore or as ePrivacy Group's Ray Everett-Church has noted it's the ultimate prize for them to hack and access. It would give them a handy list of e-mail addresses of people who don't get much spam and are therefore likely to be even more impacted by the rare salacious e-mail promotion popping up in their in-box. Worse than no response, it would give us a false sense of having dealt with annoying spammers.
Though some would say such
offenders are best dealt with by a thick board upside the head, we're
sure there are more-legitimate solutions than a do-not-spam list as
envisioned by Schumer or separately by his Senate colleague from Minnesota,
Sen. Mark Dayton.