The Kindle Incident

For readers who may not know this, Amazon unveiled an interesting electronic reader called the Kindle, allowing people who bought it to legally purchase electronic copies of books. Along the way, Amazon also opened up a program allowing small publishers to publish books directly into their marketplace.

However, it appears that Amazon’s own quality control seemed to fail when it came to establishing ownership of the intellectual property uploaded to its site when two titles by George Orwell, Nineteen Eighty Four and Animal Farm, were uploaded and sold by a rogue bookaneer.

Subsequently discovering that it had sold e-books for which the publisher did not have rights, Amazon issued refunds to its customers and removed the books from the user’s device. Where it gets a little gray in terms of what they did is that, along with the removal of the books, they also removed any annotation users already had made, thus erasing content that was created ON the device if not FOR the device. The New York Times story on the deletion listed the following:

Justin Gawronski, a 17-year-old from the Detroit area, was reading “1984” on his Kindle for a summer assignment and lost all his notes and annotations when the file vanished. “They didn’t just take a book back, they stole my work,” he said.

Beyond the irony of Amazon throwing a book like Nineteen Eighty Four down the memory hole (a large incinerator in that book), Amazon’s action raise troubling questions as to the ability of online providers to remove content they have not created. I leave it to legal scholar to assess whether Amazon could actually be considered to have infringed on the intellectual property rights of people whose annotations were removed along with the books.

Amazon was justified in protecting the copyright holders for the infringing books but where it went wrong is when it over-reached by deleting content that was created by its customers. In that particular case, one could argue that Amazon was responsible for censorship. The company will need to change its systems and policies to ensure that it does not impede the customer’s experience. While it currently has only removed a couple of titles along with annotations, the company should ensure that it keep annotations separate so that any further title removal does not destroy user generated content. An extra nice move would be if the company were to replace the titles with their legal equivalent. The common should also be a lot more thorough in verifying intellectual property claims before offering titles, especially since they control every piece of the delivery chain from the intellectual property holder to the reader.

AT&T and 4chan.org

In a somewhat related incident, AT&T had a recent run-in with one of the most influential (and that does not necessarily mean good) entity on the internet: the 4chan.org community. 4chan is primarily and image and discussion board and word started to spread that AT&T customers had lost accesses to its images over the weekend. After a substantial amount of noise in several online forums, AT&T claimed that it had blocked the site because it was suffering from a denial of service attack from it.

What is interesting here is that AT&T acted without prior notice and blocked a site without providing any information upfront as to the reason for blocking the site. While AT&T stopped blocking the site as the result of a concerted effort by its fans, the founder of 4chan hit the nail on the head when he said (emphasis is mine):

In the end, this wasn’t a sinister act of censorship, but rather a bit of a mistake and a poorly executed, disproportionate response on AT&T’s part. Whoever pulled the trigger on blackholing the site probably didn’t anticipate [nor intend] the consequences of doing so. We’re glad to see this short-lived debacle has prompted renewed interest and debate over net neutrality and internet censorship—two very important issues that don’t get nearly enough attention—so perhaps this was all just a blessing in disguise.

Net Neutrality is the basic idea that any broadband provider should offer access to the internet without any limitations as to what kind of content can be accessed and here we have an example of an ISP selectively blocking a site. While the AT&T example is only the most recent one to come to light, it appears that this is a phenomenon that could become more common as internet service providers decide what kind of content takes too much bandwidth or for other reasons.

In the past, such censorship would have meant that a provider censoring access were to be considered as a publisher. In 1995, with Stratton Oakmont vs. Prodigy, the supreme court of the United States held that online services which were removing content from their online forums could be considered as publishers and therefore held liable for any content they gave users access to. Since then, Lobbyists in the telecom industry have ensured that such decision would no longer be applicable by getting the US Congress to amend the US code and reverse the Supreme Court decision.

The Urge to kill(switch)

About a year ago, a storm arose around rumors that Apple’s iPhone devices were sporting code that could disable applications running on them. The existence of such code, also known as a kill switch, was later confirmed by Steve Jobs:

Jobs confirmed that iPhones routinely check an Apple Web site that could, in theory, trigger the removal of the undesirable software from the devices.

He told the paper that Apple needed the capability in case it inadvertently allowed a malicious program to be distributed to iPhones through the App Store.

Once again, we see here a company with the best of intentions (protecting people from malicious programs) with its finger on a button that could be very scary if misuse. It is worth noting that Apple is not uniquely in this position as Google fessed up to having similar code embedded in Android-based phones:

Google may discover a product that violates the developer distribution agreement … in such an instance, Google retains the right to remotely remove those applications from your device at its sole discretion

And while one may think that such devices are limited to high end cell phones catering to a limited community, it appears that such devices are now becoming more common in children computers, cheap laptops, and even cars. And while many will claim that the solution to this is to open up source code, the Mozilla foundation itself has admitted to the appearance of such kill switch in the popular Firefox browser.

So kill switches are there for the best of intentions but how does one define those?

Apple and the App Store

The same kind of issue arises out of the treatment of applications to enter the Apple Application Store. A month doesn’t seem to pass by without another example of a developer seeing Apple remove his/her programs from their store.

The latest example is that of a developer who apparently committed the crime of offering an application that allowed iPhone users to use Google Voice, a Voice over IP program. And apparently, similar applications were subsequently removed from the Apple App Store.

While no official word has been given as to whether the fact that application were potentially representing a threat to the business model of Apple’s exclusive partners in the telecom industry, it doesn’t seem to be too much of a stretch to think so.

Can such intention be considered in the best interest of the end user? or in the best interest of the device manufacturer? And can such intention be changed retroactively, leveraging the presence of an existing kill switch?

Questions about the future?

In a previous entry, I’ve argued that we were moving to an economy where goods tended to be rented rather than bought. Embedded in what I was trying to communicate there was the question around what ownership actually means.

If an external party can control when or how you can use a device or decide on what you can or cannot see, or select what programs you can install on it, are you still owning it?

And while today’s corporate interventions are based on the best of intentions, what about tomorrow’s? or the next day’s? Will those intentions still sync up with yours?

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title A Dark Cloud. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Traditionally, the model or rent vs. own has been one that most consumers and companies have mostly considered when it came to real estate (and traditionally, people have looked at renting real estate as more normal than owning, with the possible exception of the last couple of decades, during which real estate ownership appeared more attractive). But today, that concept seems to be increasingly extending to other arenas.

Netflix

For example, Netflix has build a very solid model around renting movies over the Internet. True enough, many people will mention that rental of media dates back to the early days of the video store and were a substantial component in the rise of companies like Blockbuster (born Blockbuster Video). True also that said companies have been falling on hard times lately. But the substantial difference between what Netflix offers and the traditional rental model is focused on convenience: one could argue that Netflix’s original business model was largely centered around the distribution of physical media (the DVDs themselves) but I would argue that the true success of Netflix will be due largely to its digital distribution model, allowing for instant distribution of movies and TV shows with the click of a few buttons. The instant (and the emphasis here needs to be put on instant) access to a large media collection can easily call into question the concept of owning similar content in a physical form: What is the advantage of having a physical copy of a movie sitting on your shelf, collecting dust most of the time, when the same movie is available at the touch of a remote control button from the Internet?

However, the challenge in such concept is that once someone stops paying Netflix, the access to said collection disappears. An owned movie is paid for upfront and can be watched time and time again by a consumer but a rented one can only be watched as long as one keeps paying the owner renting party.

Apple

With Apple’s recent move to sell music tracks without any digital rights management features on it, one could safely assume that Apple is not in the rental business. Apple’s move was largely a response to Amazon’s own marketing around selling DRM-Free music but it is interesting to note that, while the restrictions on music went away, the same was not true of similar restrictions around music videos, movies, and TV shows. The lock-in that appears here is similar to that which exist with Netflix in that if you decide to end your relationship with Apple, the media you bought will stop working. Under such restricted mode, can one really assume that he/she owns the media he/she purchased?

Similarly, Apple is renting out, in partnership with telecommunication vendors like AT&T, an ingenious device called the iPhone. The reason I would call it a rental model is that use of the device is limited by the partners to people who have paid the initial fee and continue to pay a fee to the telecommunication provider on a regular basis. It is a model that exists for most phone providers, as devices tend to be tied to a specific vendor. Once again, people will highlight that it is possible to get rid of that lock-in with software but I will counter that doing so is a violation of the contract terms of the device, voiding warranty and your agreement with Apple. To claim otherwise would be similar to saying that everyone has access to as much money as they want, as long as they are willing to rob banks. (In the interest of disclosure, I should highlight here that I own an iPhone which is not connected to the “authorized provider”.)

Going a little further, Apple gets to lock-in who can and cannot play on an iPhone, only allowing developers who submit themselves to Apple’s whim and offering what is sometimes only temporary access to the userbase as release of every update to a product still has to go through Apple’s review. In other words, Apple gives developers temporary access to the iPhone user base, an access it can choose to revoke at any time.

The Amazon Kindle

All this conversation bring us to Amazon and a couple of its products, starting with the Kindle, which serves as the incentive for writing this lenghthy post. The Kindle, much like the iPhone is a pretty impressive device, bringing several technologies (always on device, e-ink) out of the labs and into more mainstream consumption. And like the iPhone, it has both fans and detractors. And once again, the Kindle offers an interesting kind of lock-in, allowing you to read titles purchased on the kindle (or through the iPhone kindle software) but allowing you access for only as long as you keep a relationship with Amazon. Where the model moves to rental is around magazines and newspapers: you may purchase subscriptions but, should your Kindle be completely full as a result of your subscription, you may loose access to the back issues you “own”.

But Amazon’s move to a rental model is not just around the kindle device. On the consumer end, Amazon now play in the same spaces as Apple and Netflix, renting out or selling digital versions of movies, TV shows, and music.

Renting at the Enterprise Level

In other example of the evolving trend moving from the consumer to the enterprise space, Amazon is now renting itself, or rather portions of its own operating capacity, to anyone willing to pay a fee. Its infrastructure (storage, computing, and databases ) are all available to organizations who are willing to put their application on top of Amazon’s own servers. Amazon offers similar solutions for payment services, and goes as far as providing space in their warehouses along with complete pick, pack and ship capabilities.

The infrastructure component is part of a trend in which enterprise vendors are now providing data center capabilities on a per data transaction costing model. For many Chief Technical or Chief Information Officer, it changes the basic questions around data center from a “Build vs. Buy” to “Build vs. Buy vs. Rent”.

In the process, it also changes the dynamics of how a business can be built as a substantial portion of a company’s activities can now be outsourced to outside players (I’ll go into more details around the enterprise related issues in my next post)

Is it all bad?

If you read this far, you might assume that, by this point, I’m going to claim that this is all about the over-reach of DRM and that it is all a horrible thing.

I’m not.

What I am trying to highlight here is that the experience around internet driven goods is changing. As connectivity speeds increase, the ability to access any movie/TV show/video/ music clip/ books / magazines / etc is going to have a substantial impact on our relationship to said goods (in a fashion similar to the type of relationship kids now have to music, assuming that music on the Internet ought to be free of restrictions, while at the same time assuming that mobile phone ringtones are something one ought to pay for).

The change in our relationship to media forces us to reassess the value of the physical good. In the case of our household, we have made a leap of faith, assuming that the content of certain DVDs will always be available online from one rental provider or another. The reason for that approach is that the experience of watching such thing on our TV using an internet connected video player is not diminished by the lack of a physical medium. Living in a more constrained space (in Manhattan, space is always at a premium), the physicality of a DVD box is actually an impediment to the experience of the medium. As a result, the internet connectivity, and the rental model, appears to make much more sense than the physical ownership of DVD boxes.

In the same way, the value of a CD collection is in what’s on the CD rather than the plastic container it’s in. Much of the value of the physical container of music has decreased: in the past, LPs were designed and the wraping of the LP was almost has important to the experience as the music itself. However, as CDs reduced the size of the cases, and music production companies spend less time on designing custom boxes, physical CDs became more of a commodity, with the music on them being the only thing that truly distinguished one CD from another.

But what about books, magazines, and newspapers?

To a large extent, I would venture that the relationship we have with magazines or newspapers is different from that of a book. When I first saw the Kindle, I was not attracted to it because I could read books on it but rather because I might be able to subscribe to newspapers or magazines. The clear line falls in the arena of experience: with a few exceptions, magazines and newspapers are read and then discarded. The ephemeral nature of that experience archetype seems to make such relationship a prime candidate for digitization: Once again, the convenience of something like a Kindle seems to trump the experience of having to fold a newspaper in a crowded subway or the guilt associated with recycling large amount of newsprint or magazines on a regular basis: because the intrisic value of newspapers or magazines is as conveyors of temporal information that now appears to be archivable and retrieveable online, the need for ownership of that data appears to be lowered.

Books, on the other hand, are a different issue. Reference books may lend themselves to a good digitizable model (O’Reilly, for example, has had success with its Safari offering, as have encyclopedias like Brittanica and the OED) but fiction books may be in a different class. The book as object may be falling into the same class as those ancient LPs, being designed as a full object rather than just its content and rental of such good (though people will mention that books have been something you can borrow from a library for a long time) may take longer to break through as the advantage of reading such a book on a Kindle is not necessarily higher than that of a physical good. I may be romantic in my thinking, attaching to books not only the content and the packaging but its experience in a greater space, as each book I own has, in itself, a number of memories attached, in the form of sand from a beach where it was read, or wrinkles from being carried on a trip or fold marking and writings from a particular era. In those rare cases, the books serve as containers for more than the stories they held when first presented on a bookshelf or through the online presentation they had: they are containers of a full experience and that, at this point, is not yet something that any digital device (whether it is a kindle or other) has yet been able to reproduce.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Is Ownership Passé?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Televisions: Connected and Flat

It’s been 15 years since the Internet revolution started to take hold and about 3 since video on the Internet has become a more viable option. With the rise of devices connecting portions of the Internet video space to your television (for example, allowing to buy movies or TV shows from the iTunes store or download video streams from Netflix), we’re seeing more ways to connect the Internet to television without requiring a computer. I suspect this trend will only continue and expect this year to mark a turning point with some of the first ethernet-enabled televisions appearing. This type of connection will be available first from Samsung and LG, who have already built such connectivity into their BluRay players so I would expect them to port those capabilities to TV sets shortly.

The other improvements in the TV space will include the introduction of more OLED screens on the high end, providing a third option in the flat screen space ( LCD and Plasma being the other two.)

The economy will pressure many of the companies in the space to drop their margins on televisions and I wouldn’t be surprised if flat screens start dropping under $500 by year end. This will force some of the last CRTs off the market, leaving Plasma as the cheap choice, LCD as the average one, and OLED as the high end one.

BluRay: Losing to Downloads

2009 ought to have been a good year for BluRay. Having killed its main competitor in the next generation physical disk format (HD-DVD), BluRay appeared to have the field open to itself.

But through both blunders on the part of people in the media and consumer electronics space, BluRay has succeeded at painting itself in a corner: having priced disks at a premium, executives have to justify the advantage. The approach they took was that BluRay was a higher video and audio quality experience than regular DVD. But this has represented a major hurdle for them as most consumers are fairly happy with the quality they are getting from their existing DVDs.

The other issue is that the war for a next generation format was not about a physical medium, as they had expected. Sure, Sony and Toshiba tried hard to make it about that, because royalties on selling rights to such formats can go in the billions of dollars over several years, but truth be told, the market bypassed physical as a medium almost half a decade ago.

With the rise of the iPod, people have grown more comfortable with the idea that they could buy a media asset (a song, a TV show, or a movie) electronically without having to deal with the piece of plastic that carries it. The revolution started with music because those files were smaller but, as bandwith availability increases, the amount of time required to download a TV show or movie is dropping. Along with the availability of streaming video, this has changed the level of expectations when it comes to media consumption in such a way that, increasingly, people want access to their media without having to deal with a physical component to carry it (one could argue that the on-demand shows provided first in hotel rooms in the 90s and on most cable boxes in the last few years fall in the same space.)

So downloads are going to be the thing that undoes BluRay. As a result, I expect Sony to start touting downloadable media more heavily than BluRay in its PS3 marketing. I also expect most BluRay players to offer some way to access internet media either through direct partnerships with the providers (Netflix, for example) or through the creation of an open format content providers could leverage.

Mobile Phones: Smart is in but so is Simple

The recent success of the iPhone has gotten every phone providers to focus on developing more smarts for their phones, essentially turning them into multi-use devices. This trend is hardly new (I’ve owned a smartphone since around 2000, starting with the first Treo) but its acceptance by the general public is.

What I expect to happen in the space this year is a continued drop in prices as new contenders enter the space. Palm will make a play at the space with a new net-centric phone and operating system that will come with a under $100 price-tag to follow the recent success of their Centro offering. This will, in turn, force Windows-mobile and Google Android-based phones to come down to the same price range, with some of them even being offered by carriers for free with 2 years contracts. Apple, on the other hand, will keep its $199 price tag and may offer a software upgrade that would turn on video recording on the iPhone. RIMM, with its Blackberry offering, will continue to be the darling of the business world but most of its efforts in the consumer space will be rebuffed.

Meanwhile, on the other end of the spectrum, we might see the rise of phones that have a single feature: making phone calls. Those phones will be marketed to two different segments of the market: elderly people, who barely use computers and want something that has as little complexity as possible and the first grade set, with some level of parental control being available on the devices.

Computers: Smaller, Cheaper, and More Wireless

Netbooks started making the news last year. Sporting a web-browser and generally less power than traditional computers, PC makers have discovered that there is a large audience for such devices. This is a problem with chip makers like Intel and AMD who have relied on Moore’s Law to get faster and beefier processors out the door at heavier costs to consumer. The problem they are faced with today is that most processors are good enough for what people want to do (ie. read email, go on the web, and maybe edit a few documents). So I expect netbooks to be the only real growth sector for PC makers. This represents quite a challenge as margins on such devices are low and the business model around them is a volume one.

The market is now fragmenting into 4 segments:

• Netbooks, which are probably good enough for most people.
• Powerhouse machines, which are used primarily by computer gamers.
• Office machines, which will demand more security features (eg. Lenovo)
• Luxury machines, which are more in line with the fashion space than the electronics one (eg. Apple MacBooks)

I expect a slowdown in the number of machines sold in the computer games market and a flattening in the office market. This leaves netbooks as the growth area and I would put a question mark on the luxury machine market as I’m not sure it could see more growth if the economic climate continues turning sour.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2009 Predictions: Hardware. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

How we got there?

Microsoft is not really a new player in the syndication space. With the release of Internet Explorer 4.0, in 1997, the Redmond giant introduced CDF, a format to push content and software to the operating system. With the craze around push deflating, CDF was pushed in the background.

While such efforts were not that successful, RSS moved stealthily towards the mainstream. As a plucky little standard, it is starting to dominate how a lot of notification is being done. So Microsoft decided, wisely, to join the RSS bandwagon.

However, old habits die hard and just embracing a standard is not enough. So Microsoft decided to extend the standard with some “enhancements” they created (known as Simple List Extensions). The fact that they are extending the standard is not something I have a problem with, even though it sounds like the old “embrace and extend” approach they took to HTML. However, what I have a problem with is what they decided to tackle.

Lists and RSS

The new proposed specification allows the ability to create lists. Yes, lists are a good idea if you want to use RSS for something other than distributing content. However, it’s a problem that’s already been solved, and one that has pained much of the RSS community. Let me explain.

In early 2000, when RSS was still in its infancy (version 0.92), a debate erupted on several mailing lists as to how RSS should evolve. The two sides to the debate were as follows:

• On one side were the hard core geeks, who believed that RSS should be reformulated as an RDF specification, tying it into the Semantic Web. Realize that, at the time, the concepts behind this were faily revolutionary: machine intelligence, etc…
• On the other side were the hard core hackers, who believed that the beauty of RSS would lie in its simplicity, and that its adoption would go along the same course as HTML if it were kept simple.

This ended up with two different formats: RSS 1.0 (which met the requirement of RDF integration) and RSS 2.0 (which met the requirement of simplicity).

Well, the irony is that it turned out both sides were correct: On the one hand, plugging RSS into a more formal structure, using things like namespaces and an orderly model could allow it to do more; on the other hand, keeping it simple allowed it to thrive.

Fast forward to today. RSS 2.0 is widely adopted, thanks to its simplicity. And Microsoft is announcing the use of extensions to create lists. RSS 1.0 also enjoys wide support (though nowhere near as wide as RSS 2.0) and supports lists natively. See the humor here: by endorsing RSS 2.0 and creating extra extensions, Microsoft has essentially added a feature that existed in RSS 1.0.

But wait! It gets better. The proponent for the RSS 2.0 specification was Dave Winer, who wrote the RSS 2.0 specifications and maintained it for a fair amount of time after that. However, Dave is pushing a new list and outline format called OPML and is pushing it as the next format he wants people to try out.

So we now have three different ways to create lists. And that’s not even considering the fact that you could use the Microformat concept and had a rel="list" to an HTML element and end up with another format.So Microsoft gets an A for embracing RSS, another A for using namespaces (instead of creating a new version of RSS) and releasing their extension under a Creative Commons license, but gets an F for poor research in terms of introducing a new format. There were a number of other useful things they could have introduced as part of this effort but just generating lists is attempting to reinvent the wheel without really providing any added value.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Microsoft Loves RSS. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

In the United States, cable television has what is called a tiered structure. That means that channels are grouped in packages that are then sold as a whole. The most basic service includes the regular “free” networks (for people who have low or no reception), the next package above that generally offers an extended set that includes CNN, ESPN and a bunch of other channels. Then, on the third tier, you can buy more expensive channels like HBO or Showtime, which are not supported by advertising.

If you were to draw a parallel to the online world, you would have Internet access being the basic package, then a pre-paid package which would offer access to a certain number of sites (similar to what AOL is starting to do by pulling Time and Entertainment Weekly behind its own service), and then would pay extra for a few one-off sites that may warrant it.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Paid Content on a tiered structure. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

On a related matter, the blog world is now abuzz with a description of the Internet as an agreement. While the document provides an interesting set of concepts that are sound from a purely technical standpoint (yes, the underlying standards of the Internet are based on an agreement), it does not cover the variety of choices of what is on the Internet. If the goal is to say “hey, the Internet is just an agreement to tie networks together” then World of Ends succeeds. But the contention that this makes a difference does not really matter much in today’s world. What world of ends does NOT address is what is ”

on

the Internet” and therein lies the usefulness of a conversation.

So the problem arises from the fact that we keep coming up with new definitions of the Internet that end up referring or reiterating the initial one. However, we seem to do little to figure out the next step. Companies, government, and individuals co-exist on the Internet. Each of those can be considered an entity. Each of those entities makes statements. Each of those statements is either provable or not. And if it is not provable, each of those statements can be assessed as trusted or not (my basic assumption being that a provable statement can only be trusted if it is true). The question remains as to how we can parse those statements quickly (can machines do a better job than we do individually? can smart mobs do a better job than the individual?) and judge their trust-worthiness.

Chris is right: marketers are not necessarily bad. The question is how do we make the difference between the ones we can trust and the ones we can’t?

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Blog, Internet, and Marketing. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

His pointing out the fact that changes in behavior show that most people will steal music and movie content on the Internet is largely due to the fact that there are no clear alternatives. Attempts to offer a crippled service like the new Napster or Pressplay are not enough (After all, if I pay for a service, why does the stuff I downloaded expire). Give us an all you can eat legal buffet at a price point that does not gouge us and we will come. Or start paying the artists and your case will be stronger when you tell us that we are starving them.

Right now, many people pay for cable TV. Basic price gives you some access but other channels (like HBO) cost extra. However, people can still record shows and movies once they paid. Why can’t the same be true of music? And why do I have to follow the path the media industry is setting to get my content (for example, why do I have to go to a movie theater to see a first run movie? Why can’t I get access to it either on DVD, pay-per-view or online download on the same day? Yes, this would completely change your business model (couldn’t sell as much soda, advertising, and tickets at the movie theater) but it might be what the customer wants.

A possible way to change this would be to keep charging the same price for movie theater (and enhance the movie experience by getting rid of those commercials before the movie), offer the DVD for premium rental only at an initial point (for example, I could get today’s release from the corner store for $25, hence avoiding the ticket line and watching the movie on MY schedule (if I want to see the movie at 7:30pm or 8pm or 7:54pm, I currently have to find a theater that matches my needs). In the same fashion, I could open up a video on demand feed either on my TV and/or computer and watch the movie at my leisure for a 24 hour period.

Just a few random thoughts (and I just came up with those off the top of my head so there might be others out there): Start thinking of how your business will evolve or suffer the same fate as the dinosaurs.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Memo to Media Execs. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Here’s a crazy thought, why doesn’t the company break it all down into an access division (probably going to Road-Runner) and a content division (probably going to AOL). Using charge-backs, they would trade money back and forth and Road-Runner could keep focusing on access (inheriting a lower speed dial-up system in the process) and focus on converting dial-up users to broadband, while AOL would focus on developing content and tools (the AOL software) that would run on both system.

Obviously Road-Runner has figured out how to sell access and AOL is good at building software that is easy to use for the average computer user. Let AOL get rid of the access layer (the client already does TCP/IP) and focus on improvements to IM, mail, and content and let Road-Runner focus on selling access and you have a pretty powerful combo.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Lack of synergy. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

When I left Internet.com in 1996 and went to Earthweb, I was in charge of building Earthweb’s properties into something competitive with Internet.com. At the time, there were already a few players in the news market and I decided that Earthweb’s best positioning was to stay focused on the developer community instead of trying to do just Internet related stuff. Many people (including a lot of people on this list) have asked me what I thought of this announcement. So here it is.

Two roads converge

In a way, today’s announcement was one that didn’t surprise me much. Over the years, I’ve stayed in touch with people at both companies and, as time went on, I came to realize that both properties should be integrated. Before Earthweb’s IPO, such discussions were held both at Earthweb and at Internet.com and there seems to seem some differing views on the subject. However, I had always been nagged by the feeling that the two properties (the developer.com network and the internet.com network) would be a perfect fit.

With today’s announcement, I think that both companies benefit. For starters, Internet.com has clearly established itself as a leader in offering content to the internet community. With this acquisition, Internet.com solidifies its reach to the developer community. That’s a great thing for Internet.com and I think that those properties will fit very well within the network and that Internet.com will leverage its existing properties to maximize return on the assets they have acquired. As a result, I’d like to congratulate Alan Meckler and a very smart move.

On the Earthweb side, I am happy to hear that the company is focusing on a particular area in which it has established a strong leadership. The acquisition of Dice.com allowed Earthweb to get into the job placement market and establish one of the preeminent IT-related job boards on the market. This could position the company for a possible acquisition by a monster.com or hotjobs.com in that it is now more aligned with their business. If run successfully, the new Earthweb could be a very nice acquisition play.

Notable though, was that ITKnowledge, the fee-based service that Earthweb developed was not part of this acquisition. Jack Hidary has said that the company will be getting out of that business and I believe that he’s seeking a buyer for this service. The bottom line, though, is that Earthweb will manage to lower its costs as it will get rid of some of the overhead required to build new content. While it has built some strong properties, the company was too much of a niche player to successfully run the content unit to profitability. As a result, it’s a smart move on their part to get out of that business.

The most fascinating thing is that Earthweb is no longer the company that went public in that, apart from some of founders, nothing is left in terms of the model and assets the company went on.

All and all, this is a great win for Internet.com, as it secures its preeminent position in the content arena and allows it to expand into new markets. I am not, however, familiar enough with the job board business model to comment on Earthweb’s future potential but I am glad to see that the company’s management has made some very tough decisions and is working on focusing in a particular arena.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Internet.com Acquires Earthweb’s content. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Hybrid World Lives!

Many of you may remember the February 10th issue about Hybrid Computing. While talking with Birger Steen, CEO of Scandinavia Online, I discovered that the concept is not that far off the market. It is his contention that WAP-enabled phones are largely a pain in the back when it comes to interface. Having to key in every letter on the small phone keyboard is far from the easiest thing in the world. As a result, Scandinavia Online has developed a set of services that allows users of their portal jump on their site and configure their WAP view on the web. From his point of view, this is the best service he can offer now to wireless users.

The point was reiterated by a few people around the conference that told me that going to the web to configure a cell phone was the best way to deal with the small screen interface problem encountered by most WAP phones. Anne Rasmussen, of WAPportal.net demonstrated how their company plans to offer a similar service in a hosted fashion for corporate sites and others. The word around Scandinavia is that if you want to find the best way to configure a WAP phone, you have to go to the web via a computer to do so.

M-Commerce Huge … but not for Etailers

Another significant trend is the rise of M-commerce. In Finland, and to a lesser extent Denmark, Norway and Sweden, people can already use their WAP phones to buy from vending machines. The vending machine has a telephone number on it. You dial that number and a credit is added to the machine, to be billed on your phone bill. With the introduction of security in the new WAP standards, a few people were talking about how in the future the question “will it be cash, check, credit card, or phone?” may not sound silly.

What they envision is that WAP phones could become the new credit card.

A recent survey found that in Scandinavian countries, 82% of the people would go back to get their cell phone if they forgot it before leaving home, while only 64% would do the same thing if they forgot their wallet. The basic concept is one that may be foreign to those of us who live in the United States and revolves largely around the fact that GSM phones are equipped with a small identification chip called a SIM card. You can take the chip out of one phone and put it in another and you don’t have to worry about changing phone number or contact info.

Because of the emergence of such a way to do billing, some of the speakers at the conference predicted that the long run path for mobile phone operators would be to merge with financial institutions as their services will increasingly resemble those of credit card companies.

However, few people were optimistic about the prospects of etailers when it comes to mobile phones. “When I’m in a store buying something, I’m not going to go up on the web to check if it’s available at a web store,” told me one attendant. “I want to get it now and not wait a few days for it to show up in the mail.”

As a result, the promise of m-commerce is good for software vendors (who will sell packages that allow operators to set themselves up as currency clearinghouse) and mobile phone operators (who could become the next big financial force) but unfortunately, current etailers will not fare as well.

Content is King… in a Wireless Republic

The promise of advertising supported content on wireless phone has been hailed by some as a new way to support content sites. Unfortunately, few content providers will survive in the wireless space as demand for those services does not seem to meet expectations. Talking with people from the Scandinavian arm of large American companies who have tried to go the wireless route as a distribution channel, I discovered that there was not much demand for those services. “Sure, people do check the price of their stock on the phones but they still call our voice line to place their order,” said one executive from an online trading company.

As a general rule, the demand for content seems to be limited to a few areas: entertainment (bars, clubs, and restaurants locators), financial (stock prices) and sport-related (latest scores). However, many of the people involved in those areas told me that they were still looking for a proper business model. The locators are looking at a coupon-like scheme, whereas bars can offer a special coupon and people can go to a bar and show the phone coupon to get a rebate on drinks (“It appears that beer is the hot wireless app” quipped one panelist). Financial services and sports services are currently looking at possible subscription based models or at deals with operators whereas they would share a portion of the revenue they are generating for the operators.

CN U RD THS

On the other hand, communication in the hot wireless app. SMS has clearly become the hot app when it comes to wireless service across Scandinavia and across Europe. Because operators are charging lower rates for data services than they are for voice traffic, short messaging has become the quickest way for people to get in touch. A new lingo is starting to pop up around SMS as people are trying to economize the number of keystroke they type (SMS messages are limited to 160 characters). As a result, the headline for this section would translate from CN U RD THS to Can you read this?

Convergence in the Making

I also talked to a bartender who told me that the previous night a woman was in the bar looking for some of her friends and asked him if he could change the TV channel to a particular teletext page (in a lot of European countries, TV channel use the extra bandwidth to carry data. As a result, while watching the BBCyou could switch to the BBC teletext channel and read the latest news, etc… on there). The channel this woman was using allowed her to converse with several of her friends in a TV-based chat room by using her phone and an SMS gateway. True convergence in my book but the problem here is where revenues for an online operator are. Unfortunately, the only operators who will make money on this will be the phone operators who are racking up extra data minutes of usages.

Smaller, Faster, Cheaper

The good news, from a user’s point of view, though, is that those services are coming in a smaller package. A lot of the phones I saw over there would put our American phones to shame. On average, European phones are now weighing about 2.78 ounces (79 g.), a form factor of 3.9 X 1.75 X .6 inches (101.5 X 44.5 X 17 mm.), and a battery life that allows for either 150 hours of standby time or 4 hours of talk time. Of course, they come equipped with voice recognition (so you can have the number dial based on a name you give to it), predictive text input (a new set of tools for SMS which allows the phone to predict what word you’re going to type based on your input), and are WAP ready. The most interesting thing is that they usually are priced under $200 which makes me feel that we’re overpaying in the US.

The future is now?

The new thing around that space, though, is not a smaller phone or a better way to do e-commerce but a new set of services around higher speeds of access. The first step in that direction is GPRS, which offers about 20kb per second and has been rolled out around Europe. This is seen as a way to distribute such services as music and better news on the phones. However, the real discussion is centering on UMTS which promises wireless throughputs of 2Mb per second or more. Portions of the UMTS spectrum have already been allocated in the United Kingdom, Germany, France, Spain, Norway and Finland, with the rest of Europe moving quickly on allocating this space. UMTS proponents envision the use of wireless video conferencing and a better Internet experience to result from this new development.

Euro Fighting

One of the big challenge in terms of doing business in Europe is location. Because most of the European countries are too small to create an actual market for digital services, European operators usually have to provides sites in multiple languages, and support multiple currencies. As a result, European etailers tend to be in favor of the Euro, which would make their lives a little easier. However, as the currency is slowly deflating in the currency market, opposition to the Euro is growing across Europe. On September 26, Denmark is holding a vote on whether to join the Eurozone or not and this election is seen across Europe as a big test for the Euro’s power.

The reason it the Danish election is so important in Europe is that if the Danish vote fails, England’s upcoming vote will probably do so too. As a result, there is a lot of concern across Europe about this election. Many etailers I met in Copenhagen told me that they were trying to organize themselves to push for adoption and work across borders when it comes to those election. Danes I talked to told me that British conservative politicians (who are opposed to joining the Eurozone) had been lobbying in Denmark. This is a race that etailers both in Europe and the United States should pay attention to as it will most probably dictate the viability of the Euro as a currency and, if the Euro succeeds, could mean less headaches to all of us.

Going beyond Economic matters, support or lack thereof could mean either an acceleration or a slowdown for eEurope, a new initiative by the European Union to become a force in the information age by normalizing rules related to e-commerce across the difference members of the EU and offering incentives to companies that want to bring net services to the EU marketplace. Among the initiative supported under eEurope are net access in public schools and public centers, lower access costs for businesses and individuals, agreement on common specifications for a smart card infrastructure, financial support for emerging tech companies and a number of social support and government services becoming available to all via the Internet.

All and all, what eEurope would mean is that countries would work in the EU government to set up rules about the Internet. I do not need to tell anyone reading this that it would be better for those of us in the industry as we would not have to lobby several governments in order to get the proper support for our industry.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title From Scandinavia With Love. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Yes, L.A. is starting to feel that it has now has to open war on a second front as its leading industry is starting to get threatened by the Internet. The noise is nowhere near as strong as the one you can hear about music but as bandwidth continues to increase, so does the risk of movies becoming widely exchangeable on the Internet. Napster-like tools Gnutella, Freenet and Scour Exchange are the new contenders to the title. Coupled with a new compression format called DivX (not the failed DVD format but a new codec), this spells disaster for the movie industry. So let’s look at this challenge and see what can be done to face it.

For starters, expect the movie industry to sue. It’s already happening and it will end up in failure. Witness the recent case over napster. Sure the music industry won the right to eventually shut down napster but it hasn’t yet managed to shut down similar services. As a result, lawsuits against distribution of digital media have become the equivalent of a giant game of whack-a-mole: take down one company and a slew of others will pop up.

Actually, the lawsuits are only furthering the problem as they bring increased publicity to the subjects and potential users start flooding the new services in increased numbers. Napster, Gnutella, and Freenet were relatively fringe movements until the Napster trial propelled them to the front page, increasing each of those services member base an thus increasing the amount of pirated content available. Confirming the principles of Metcalfe’s Law, the value of those networks increases exponentially for every new user that is in the network and is added to the network. Hence, lawsuits are only making matters worse.

The music industry may be trying to avoid the issue but it will not go away. In the case of the movie industry, it gets worth. In the current world, copies of recent movies are relatively difficult to come by in most places. If you are in a city center like New York (where I live), you can get videos of recent releases on the street, taped by people who sneaked into the movie theater with a video camera. Generally, the video and sound quality of those second-hand productions is less than stellar and they are not worth the $5 they retail for.

However, I’ve noticed that a new phenomenon is starting to spring up: people making digital copies of movies with digital video cameras. What surprised me more than anything on this particular matter was that some of the copies I’ve seen are not made off cameras pulled into a movie theater but off actually production reels. I was recently visiting a hacker friend of mine who recently showed me a complete copy of “The Art of War”, a new movie starring Wesley Snipes which is not going into wide release until… next week! When I asked him how he had acquired it, he told me that it was available for download on IRC a couple of weeks earlier. He then went on to explain to me the nomenclature for some of those files:

• wp usually means workprint, or an exact copy from studio original production reels, as was the case of this movie.
• a screener is a movie that was taped in a movie theater with a video camera.

Generally, the files are available in a variety of formats but there has been an increase in the use of DivX, a new format that makes fairly compact high quality video files (on average, a 2 hours MPEG-encoded movie takes about 1 Gb of space, while the same movie in asf will run about 500 Mb. DivX film can offer the same quality as MPEG for about 1/10th of the size (about 100 Mb per movie).

Of course, 100 Mb is not something that you’re going to download with a regular modem but on a cable modem or DSL line, it is something you might consider. After all, if you can get a movie in less than a half-hour for free a few weeks before it is released in the movie theater, it becomes a very tempting prospect.

Coupled with the increasing distribution of P2P tools, this format makes movie pirating the next big Internet trend.

So how should the movie industry deal with this? Here are a few way to deal with it.

First, continuing the crackdown with lawsuits against companies will not work. How about starting to work with those companies in terms of identifying potential problem area. If a new film pops up, alert the service immediately instead of suing them.

However, if you are dealing with services like Gnutella and Freenet, you are not dealing with companies. In order to alleviate some of that, spread the wealth: start packaging complete clips of the film in some ad packages and flood the networks with them. In a way, this can become an extended 5–10 minutes trailer. DirectTV already does that to some extent with their pay-per-view channels: you get the first 5 minutes of a movie for free but have to pay if you want to continue watching.

The other thing to do is to cater to the fan base: seek out their input. Listen to them and see what they would want. Maybe they do want to see the movies directly off the Internet. Offer that as a potential option. Maybe a high speed website with ticketed access to the site (let’s say $5–10 for a first run movie). That might alleviate part of the user base, which will only watch the movie once anyway.

Then start cutting deals with large ISP. In the case of AOL, it seems that WB could start offering an extra “channel” for an extra fee. Think of it as a premium cable channel. Imagine offering a movie of the month package as part of AOL Extra, a new service that would include high-speed access and offer a new movie on demand every month. Look at experiments like Intertainer, which intends to become a premium service for Internet cable subscribers.

But dealing with the problem online only does not solve it completely. Provide incentives to go to the theater, as you have done in the past with DVDs. Back in the 30s and 40s, movie theaters use to offer cartoons (where do you think all that Looney Tunes came from) and news reels, all of which created the movie experience. Nowadays, going to the movies feels more like going to a place with a very big TV: you end up with the same boring concession stand and the same theater-seats in pretty much every movie theater.

However, if you see pictures of movie premieres back in the pre-war era, you are treated to lavish (and almost outrageous) movie houses that were as carefully crafted as regular theaters. Back then, the industry was trying to create an experience. Now, it’s “here’s your ticket, the theater is this way, thanks for coming”: as a movie watcher, you feel like cattle, and the magic is gone.

Some of the bigger theaters are starting to get the idea, though. For example, one theater here in New York had displays of “Titanic” artifacts, when the movie by the same name came out. How about having some props displays go along with a new release? However, those would not be accessible until after you paid your ticket.

Other possibilities include giveaways (when “The Matrix” came out, they were giving away comic books that included some extra back story) or contests (if you keep your ticket, you will be entered in a raffle to win a free trip to Hollywood or some of the props from the movie!). The winning ticket would have two codes: the first one would be the number of the ticket. The second one would be a random list of numbers and letters. Once a week, you would publish the winning number on your site. People would check out the website (and see more ads for your movies) and if someone had the winning number, they would have to enter the second key from their ticket to confirm that they have the winning ticket. At that point, they would have to enter some contact info and details on how to claim their prize. You would contact them to verify that they really are holding the ticket.

Cut out the product ads before the movie. I don’t mind seeing movie trailers when I go to the movie theater (after all, they help me form an opinion as to what I want to see next) but do I really want to see ads for cars? Does anyone? They may be a great source of revenue for the movie theater but to be frank with you, the only impression they make on me is that they are wasting my time. Maybe you can replace those 5 minutes of ads with a “making of [include upcoming movie here]” featurette. This won’t cost you much more as you are already creating those segments for DVD and premium cable channels anyway.

Those may seem like silly ideas (but who knows, they may work), but they could become a starting point for new concepts.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Fear and Loathing in Los Angeles. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

I’ve been looking at the press coverage and it seems that some of the coverage does not work out. For starters, Boo.com’s failure is not an example of why B2C E-commerce will fail, it’s an example of why Boo failed itself. Nor is it a failure of E-commerce in Europe.

Now that the company is buried, I’d like to take a look at what went right and what went wrong with the company and go into more details as to what we should learn from that failure. I will try to summarize what I learned over the 6 months I spent there but I may be off a little here and there since it’s been a while since I’ve left the company.

Boo was the first company to launch from the ground up in multiple countries from day one. This represented a set of challenges that were previously unadressed, ranging from technology challenges to more traditional issues in generating a global brand. While I was working for Boo, I was in charge of developing the back-end fulfillment system, a platform that allowed us to handle multiple currencies, multiple languages, on the fly tax calculation, and integration with multiple fulfillment partners. Let me go into more details on what this means.

Multiple currencies

If you want to trade globally, you can’t only offer US dollars. As a result, you need to figure out a way to handle multiple currencies ranging from dollars to pounds to liras to francs, to deutshmarks, to kroners, etc… If you are planning on doing this well, you have to peg your prices to a particular value. However, you have to realize that prices are not the same in every country and what may seem expensive in the US can be seen as cheap in other countries. This is where you have to make a decision as to whether you want to set a fixed price in the local currency or set a more dynamic price that is affected by currency exchanges and other fluctuations. It’s a fascinating problem in and of itself but it’s one that we discovered to be a big pain to deal with.

In the end, Boo built a system which allowed us to set a different price for each country or set a single price for all countries and have that price be translated in the proper currency based on a set exchange rate. It was a bit of a kludge but it worked and, to this day, I haven’t seen an Ecommerce shop with a similar system.

LESSON:

When dealing across multiple countries, decide early on how you want to set up your pricing scheme, it will save you headaches down the road.

Multiple languages

First of all, forget translation software packages. They are still relatively immature and there is (at this point anyway) little hope that they will mature much beyond their current point in the near future. If you’ve taken any linguistics course, you know that grammatical rules can hardly be standardized for several languages. For example, something as simple as a verb can become a whole new set of problems. In English, there is a relatively small set of basic rules. The verb “to want” breaks down into “I want, you want, he wants, we want, you want, they want”. Notice that there are only two basic variations here. In French, the same verb “vouloir” breaks down as follows: “Je veux, tu veux, il veut, nous voulons, vous voulez, ils veulent.” In this case, there are 5 different variations. In spanish, it’s six… and so on. Take that problem and try to automate it and you are building a system that is bound to fail. The way we worked around it at Boo was to create a system where the copy was translated by hand by people who were fluent in the language.

Unfortunately, another problem cropped up: British English and American English are EXTREMELY different. Considering that the assumption was that one version of each language was sufficient, problems cropped up and some of the perfectly normal British english stuff ended up being very offensive in the US. THAT was a major problem.

LESSON:

One language per country can be a dangerous road, check with the locals before making anything available to the general public.

On the fly tax calculation

This one almost killed me. In the US, it’s relatively easy to deal with taxation. For the most part, the only taxes you have to pay are for states in which you have a physical presence. Where it gets tricky is when your servers are located in one area and your offices are in another. Technically, that is two locations.

In the case of Boo, it got worse. For example, a sale to France was taxed three ways. Why? Quite simply because the company had offices in Paris, its servers were located in London, UK and its distribution center was in Cologne, Germany. However, the interesting part of the problem was that we were making a sale but not delivering a good in the UK, delivering a good but not making a sale in Germany, and making a sale and delivering a good in France. This was just one example. Multiply that by the number of countries the company was doing business in and it soon got VERY complicated. Add to that the fact that certain goods were coming from China or Taiwan and the picture got so clouded that we had to bring in tax attorneys to help us on the details.

LESSON:

Hard to believe, but accountants and tax attorneys should be part of your development cycle if you are developing global Ecommerce apps.

Integration with multiple fulfillment partners

The main issue here was dealing with different file formats for DeutschePost (the European fulfillment company) and UPS (the company that did fulfillment for the US). What we ended up doing was create an EDI link to those guys (DeutschePost was not web-enabled yet) and create a set of filters for each of them. A simple answer to a simple problem but this little answer cost about 150 man months of work as the content had to be migrated from the old (untagged) setup to the new one. Because the original database was originally set up wrong, we had to totally reorganize the schema and refit the content into it.

LESSON:

Plan early, think of all that can go wrong, and then plan it again. Usually, spending more time on specs saves you from many headaches down the road.

Where’s the plan?

When I joined the company in August, the launch was behind schedule by three months and we had ten weeks to the Christmas season. The first thing I asked to see what the project plan. It didn’t exist. People were working on bits and pieces of the project without communicating with other people they were affecting. Within a week, we put together a MS-project chart and things started to move properly.

LESSON:

An e-commerce project without a development plan will always be “this close” to launch but will never launch.

Front end is technology

One of the biggest failures at Boo was to assume that the front end was not a technology issue. Up through launch and beyond, the front end team was first reporting to business development and then to marketing. This was a capital mistake that I kept fighting over. A web site front-end is interface design, it’s not a marketing exercise. It should include people who are versed in this and not just people who know about pretty colors. Ultimately, I think this was one of the big failure factor in the company.

LESSON:

No matter how good your backend systems are, the users will only remember your front end. Fail there and you will fail, period.

There are many other reasons for which Boo failed (I’d rather not go into them but I can say that the press is on the mark on a lot of their accusations) but ultimately, there were a lot of really smart and really good people there who worked very hard to put together what, to my mind, was an amazing back-end operation. Lack of communications to and from the top was definitely a problem as well as a lack of understanding of Internet time (the redesign of the site I heard about on the day after launch has not yet happened and probably never will now). In the end, though, Boo’s failure was not that unexpected to anyone who had worked for or with the company. Boo.com did not fail as an Ecommerce company, it failed as a company, period. The thing that took it down were not Ecommerce related as much as they were just plain business. Yes, I’m a bit saddened by the fact the company went downhill but I already knew this was going to be the outcome back in January when I left.

Ultimately, Boo is a typical example of a lesson that many VCs are pushing these days: Management makes or break a company.

Let’s hope we all take that lesson, remember it, and let Boo stand as old mistakes we will never make either again (for those of us who made them) or at all (for those who haven’t).

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Boo.com Goes Bust. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Internet comes of age

A significant line in the AOL press release:

When complete, America Online’s shareholders will own approximately 55% and Time Warner’s shareholders will own approximately 45% of the new company. The stock will be traded under the symbol AOL on the New York Stock Exchange.

This essentially means that this is not quite a merger of equals but one where AOL shareholders will make more out of the deal than Time-Warner’s. It also means that Internet players are now taken very seriously, possibly supplanting traditional companies.

A major landscape change

Beyond the massive headline also comes a major landscape change. For starters, AOL Time-Warner will now be massive enough to compete with Microsoft. Microsoft currently stands at about $587 billion in market capitalization and AOL Time Warner will have a bit over that in terms of capitalization.

Furthermore, the new company has major holdings in every media field: TV, Radio, Music, Books, Movies, Online. This means that this is the emergence of the first completely cross-media company in the world.

Previously, companies had dominance in either online or offline spaces but not in both areas at the same time.

This also means that Yahoo!, Excite@Home, MSN, and other players on the portal space have to react very quickly. They might need to be able to offer access as well as content production and content delivery. Over the next year or so, expect one or two of those to essentially fold.

This deal also heralds the emergence of the click and brick business model. Much like many years ago, online players were talking about brick and mortar shops not having an online strategy, it has now become increasingly apparent that online companies need to look to the offline world.

Last but not least, it makes it possible to have Internet companies acquire or merge with non-Internet companies. Now that Time Warner has led the way, it will not look as bad if K-Mart were to merge with Amazon.com, or Doubleclick were to buy a large .bam advertising agency like Ogilvy, for example.

The old Chinese curse always said may you live in interesting times. Our times are definitely interesting. Whether AOL and Time-Warner manage to accomplish this merger is still up for debate (big mergers are very difficult and often fail to produce the value they herald) but it is now obvious that we are moving into a brave new world, where the smaller players might have to find a new way to fight the new giants created from such mergers.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title AOL, Time-Warner to Merge. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

For years people have claimed that “content is king.” If so, there are many things that go into the king’s proper care. Since 1992, I’ve been working on profitable online content models, and, while a few failed, eventually struck gold with iWORLD (now internet.com) in 1996. In the process, I’ve learned what works and what doesn’t. Here they are for your use.

Hire Zealots

The first rule — and hardest –is building a great staff. People who believe in what you’re doing make for the best workers.
If people believe in the basic idea, they’ll work harder to make sure that it succeeds. This is why zealots make for the best workers. They want the thing to succeed above anything else, even if it means putting in 20 hours days from time to time.

Create a Good Environment

On a content site, intellectual capital is the most important thing, so your most valuable asset is people (no, this isn’t just an empty phrase). As a result, you need to create a fun working environment. Allow flexible hours and atmosphere– as long as the work gets done!
When it comes down to it, the office should be a place workers don’t really want to quit. Foster creativity and try to encourage making the office a more pleasant place to work in. The more pleasant it is, the longer your employees will stay. The longer they stay, the more they’ll get used to the company. The more they get used to the company, the least they’ll want to leave.

Watch the Bottom Line

Many content sites fail because they spend too much money. This is a business. Find the lowest costs everywhere and instill this discipline in everyone working with you. A few dollars saved here and there add up to a lot.
However, do not be a pinch penny when it comes to your employees. Make sure that those who go above and beyond the call of duty get rewarded for it. While the wild parties thrown by companies on Silicon Alley and Silicon Valley only last one night, the bonuses you put in employees pockets get more recognition (and usually end up costing you less).

Automate

As part of your fiscal consciousness, always try to automate. This will allow you to use your staff to its fullest instead of forcing them to do repetitive menial tasks.

Nowadays, with tools like Active Server Pages, Cold Fusion, PHP or Story Server, you can easily create web interfaces that allow you to dynamically generate your pages from the web itself. Instead of trying to create every single page by hand, make sure you templatize.

Quality AND Quantity

People scoffed when Alan Meckler said we had acquired more sites than anyone in the world. We had the last laugh. Smart consolidation of content created higher traffic that we could spread across our other properties. For every site we acquired we would look at two things: the value of the content as an add-on to our offerings and the traffic numbers. Often, after acquisition the original creator created content for us while we sold advertising as part of a network package.

Interestingly, this strategy seems to have become more popular nowadays, with everyone wanting to become a portal. While we didn’t call it “portal,” Internet.com really became the first vertical portal about the net on the net.

Grassroots Marketing is Important

Many people were surprised at how much time we spent in newsgroups, on mailing lists and on talking to people who linked to our sites. This allowed us to develop a strong presence on the Internet at a very low cost. We treated every partner, from large corporations to one-man operations, in the same way and in turn got a lot of loyalty.

Partner, Partner, Partner

Money follows from traffic, and the way to get traffic is through partnering. We considered anything that would bring even a single extra user as beneficial. However, don’t spend too much time on contracts minutiae: they’ll lengthen the partnership process and you’ll miss certain opportunities.

Be There First or Don’t Jump

By the time the two largest players have been established in one arena, there is little room for anyone else. Know your field inside out and jump on new opportunities. Some may fail, but jumping in early means you won’t miss out on potentially huge rewards. If an area fails (a six-month reevaluation cycle works), pull out.

Community Matters

Creating newsgroups and email lists related to your site get readers to come back again and again. Develop a sense of community around your site and you will see your traffic constantly increasing.

Trust YOUR Instincts

Lists like this are great but don’t tell the whole story. Only you know how your site should be built. Don’t take anything for granted, dare defying common conceptions and change often. After all, the commercial Internet is still in its inception.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Succesful Web Content. You can follow him on twitter here or receive his weekly newsletter by subscribing here.