Volume IV, No. XXXIII
For the Week of August 14, 2000
This Week's Clue: Hurray for Mr. Potter!
Problems with the Personalized Spam War
Problems with Net Radio
Bluematter Lacks Graymatter
Mr. Potter of "It's a Wonderful Life" is one of the most misunderstood characters in movie history. What would have happened to the Bedford Falls Bank if he hadn't been there to save it? When hard times hit he wasn't selling, he was buying - setting a floor price on which the future could be based, ending the panic.
The panic in etailing that began in March is looking for some Mr. Potters. Mergers aimed at making one-and-one equal one don't set a floor price. Most failed etailers are worth more dead than alive, and they're worth nearly nothing dead .
Larger companies are smart to take this opportunity to fill-out their lines , but that doesn't set a floor on prices, either.
My candidate for Mr. Potter in this panic is Paul Allen. Like Mr. Potter (played in the movie by the great Lionel Barrymore) Allen plays hardball. He joined Liberty Media in buying rights to $190 million in Priceline last week at its present price of $23.75 per share. The rights run to August 2002. This is the same Paul Allen who in June filed to sell $79.4 million in Priceline shares at a time the stock was hovering around $10 . On August 4 Priceline was priced at about $24 per share . He pushes the price down then negotiates an option to buy a ton of the same stock at its present price -- that's what you call cold.
Who else might play Mr. Potter? Right now the ranks are thin. Jim Clark said in April he'd play that role for Healtheon WebMD , but last Sunday "New York Times" writer Gretchen Morgenson reported that he hasn't been following through on his promised buys. Clark told Morgenson the law was keeping him from buying as much stock as quickly as planned but regulators contradicted that story. (Healtheon WebMD later sent out a press release backing Clark's version of events . Still, "Crowing about a planned purchase of stock and leaving shareholders in the dark about its status is just plain lame," she wrote, and I agree with her.
The "real" Mr. Potter, of course, was J.P. Morgan, who twice (in 1895 and 1907) kept the U.S. economy from collapsing - first through the issue of a gold-backed bond, later by bullying his fellow New York bankers into line on the government's behalf. For someone to play the role of Mr. Potter, in other words, they must have a sterling reputation in the markets. Masayoshi Son has been hammered by the falling value of his Internet portfolio and is in no position to step-in. The TV networks have been badly burned by their Internet investments and are equally reluctant. John Doerr is another Potter candidate, so watch where he puts his money in the next few months.
Remember what makes Mr. Potter valuable. He has liquid capital, he takes a long view, and his risk is necessary before your risk becomes worthwhile.
Someone has to stand below the falling knife before the knife will stop falling. Someone big has to decide "this is a bargain" and back that feeling with money before prices will start rising again. These are the kinds of deals you look for before saying "the coast is clear." When Mr. Potter isn't selling, when Mr. Potter is buying, picking up some bargains, only then is it safe for the rest of us to get back into the etailing market.
So your Clue is to watch Paul Allen and others with liquid money. Watch what they buy because they're anointing survivors. Watch what they pay because they're setting the price. You can go forward confidently from there.
You can now hear your weekly Clues online at KenRadio. I'll be spending a few minutes each week there, and hope you'll find the time to spend it with me.
I write daily for ClickZ, and weekly at Andover.News. I write monthly for NetMarketing, Boardwatch, and Intellectual Capital. I've been in Advertising Age and the Chicago Tribune . Once every other month I'm in CLEC Magazine. Twice each month I'm at OneChannel.Net and I've recently joined the staff at ISPWorld. You can always buy my book . Subscription instructions are at the bottom of each issue.
An unknown hacker has unmasked, shamed, and delivered a complete criminal investigation on a spammer which raises all sorts of interesting questions.
There's no doubt Rodona Garst deserved what she got. She flouted the law as well as Netiquette for years. She's in a world of trouble, and her example will no doubt have a chilling impact on other spammers. (Although judging from my inbox, that hasn't happened yet.)
But there are also questions here involving vigilantism, about privacy, about the capability to infiltrate computers and publicize their contents. Would these tactics be OK against someone running a porn site? Would they be OK against a doctor performing abortions? Would they be OK against a programmer creating a Napster clone?
Who will decide against whom such tactics will be deployed? In this case it was reportedly someone whose domain was forged by the spammer - the actions were those of a crime victim. Direct action by crime victims has a long history in song, story and film. But is this going to be an isolated incident, or do we all have reason to fear from this?
I think we do have reason to fear. Extremism in the defense of liberty is a vice because in extremism there is no liberty. But until governments understand the Net and come into conformity with its norms, the public's ability to engage in such actions will remain their primary defense.
I'm back on the air, giving Clues and opinions on KenRadio, and I was wondering why such streams aren't a better business.
Martin Wolf of MSNBC offered some decent answers . The business is fragmented, the rules imposed on station owners are highly restrictive, and you're pretty much locked-into listening at your desk, which is not a true radio experience. (Sort of makes you wonder how Mark Cuban got $6.6 billion out of Yahoo, doesn't it?)
The real problem is that the Internet doesn't excuse you the marketing costs associated with creating and building an audience. This is extremely difficult when every real-world radio station (which does pay these costs) can go online against you. The key to me lies in pioneering new formats, and frankly radio about technology could use a good kick in the wazoo, which means I'm pleased and intrigued working with Ken and sidekick Andy Abramson. It may be a bumpy flight, but a pleasant time is guaranteed to all.
The recording industry has launched its "answer" to the "Napster problem" in the form of a site called Bluematter that sells licensed digital music.
Bluematter is the creature of Intertrust , which has drawn substantial capital by claiming to have a solution to the digital rights management problem. As IBM learned with its Cryptolope technology , however, technology isn't the problem here.
Early reviews of the Intertrust solution aren't good , but the problem is the business model. How do you create an offer on secured digital files that buyers will find compelling? There are many examples of such compelling offers in the software business. You can buy shareware software or get ads on it. There's a real good Clue here if music publishers will only get their heads out of their wazoos long enough to listen to it.
Clued-in is Register.com for suing Verio over spamming the whois. Most registrars are simply blocking access to the database, allowing the owners of sites to hide from public view.
Clueless is Intel, for shutting off its online support forums in favor of e-mailed answers to specific questions . The forums may have had problems, but they're still a more cost-effective customer service solution.