Date: October 28, 1998

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A Final Few Sweets to Top Off a Full-Course NY Internet Feast
Thoughts, Insights & Trends from the Conference Trail,
‘Fall Internet World’ Week - October 4-8, 1998
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Dear Clients, Partners, Friends, and Internet Marketing Soul-Mates:

Following my two previous communiques, “Blue Plate Special” & “Dessert Tray” (yes, my relentless “friend spamming,” as my buddy Steve Larsen likes to say), I thought I’d call this final report “After Dinner Drinks in the Cigar Bar.” But, heavens, we can’t be politically incorrect, now can we? So the sweets thing will have to do. Anyway, it’s a little recap I hope you’ll find of interest....final thoughts and perspectives from a very eventful, rewarding week in the Big Apple....

1) Trends That Deserve Watching
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• Service is where the action is in online commerce....it’s the big opportunity, the real defining point of differentiation in this business. It’s not about bits, bunky!

• Yes, the human element can and must play a critical role....and high-touch will be particularly important for emotional or highly considered purchases.

• It should come as no surprise, then, that relationship management is becoming a recognized function in online businesses, and a highly placed one at that, with its own set of sophisticated tools, platforms, practices, etc.

• Brand will continue to be a driving force in Web commerce. The big guys, of course, have it--then somehow just have to migrate it to the digital world (granted, a feat they often screw up). But, significantly, for the new players--all those ‘brand hopefuls’ out there--*rapid rampup* is becoming the price of entry, and what it takes to win. Smart startups plan for it and fund it up front. Overall marketing/branding spending by Web commerce players continues to accelerate--online and (especially) in traditional media.

• E-commerce is mainstream, with virtually any business now being able to implement it in some fashion. There’s even a whole industry of “commerce service providers,” a new breed of service bureau, readying to handle your every need.

• EC is now in the customer acquisition phase--which isn’t cheap.....but we’re girding for the next phase, customer retention.

• Affiliate programs are everywhere, now a must-have for many--and not even costly anymore: you can now actually “rent” rather than build your own program.

• In this time of collaboration on many different levels, a coming hurdle to watch is how well the ‘marketing’ and ‘technology’ cultures can be meshed together. Some large Web integration players are taking the lead here--such as USWeb (soon to be Reinvent Communications). But, hey, everyone in this business should be asking themselves: what am I doing about it?

• The consolidation rush in the Web development/integration space is maturing, or certainly reaching a plateau at least, as most all the good small- to mid-sized shops have been acquired. Independents with major client lists are now a rarity. Already, USWeb and CKS say their acquisitive days are behind them, as they merge into a giant in this nascent industry. One other shop moving along well in their own roll-up/acquisition strategy, Rare Medium (based in NY), already is looking beyond mere Web shops to “strategic consulting firms,” in a move reflecting the growing customer need for help in planning Web and commerce strategy.

2) Notes & Miscellanea - Companies, Industry Developments, Interesting Happenings
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• Merch.net is a new consortium announced at eRetailing, described as “an alliance of best-of- breed e-commerce applications.” It will provide retailers with educational services highlighting best practices in e-commerce, and will conduct studies to identify trends and innovative solutions. It will publish its research findings in quarterly reports, and is also maintaining a web site with extensive information and industry news and links at http://www.merch.net . Its charter members are BizRate, Impulse!Buy Network, Inktomi, Linkshare Corporation, and Netcentives Inc.

• e*guide is another educational effort by a consortium of companies, led by Clear Commerce (Austin, TX) and Visa--also announced at eRetailing. The initial 136-page guide, produced by members of Clear Commerce’s EC advisory board and written by the e-tailing group, is designed as a strategic, step-by-step workbook to help merchants, financial instititions, commerce service providers, ISPs, portals, and others go online and transact business electronically. It is available free of charge in a print version, or online at http://www.clearcommerce.com/ecguide .

• LinkShare is a kind of a resource on steroids for affiliate programs (they call it a “centralized marketplace”). It offers a way to connect (a) those with products and services (merchants or manufacturers) who are seeking ways to expand their distribution via a “virtual sales force,” with (b) Web sites seeking to earn commissions, click payments, etc (affiliates) by featuring or linking to the merchant’s products/services on their site. The company’s latest software, LinkShare 3.0, is a complete backend system with sophisticated tracking technology and merchandising tools, letting merchants manage their own affiliate program online. The firm says its “LinkShare Network” now numbers more than 15,000 affiliates (sites), and is growing by 300 more per week. Sales generated by the network are increasing more than 15% per month.

• Best giveaway at the eRetailing event: TheSmokeShop.com (a LinkShare merchant, by the way). Their gift at each place for lunch was a packet of two fine cigars, a very nice logo lighter and cutter, and of course a business card. Let’s put it this way, very few were left behind.... (By the way, I got a followup email from these guys, and they have quite a story. Get this: they’re a privately owned, self capitalized, profitable, e-commerce only retailer without a brick-and-mortar background and with seven-figure annual sales. They believe they “have an operating model that will allow us to attack markets, build distribution channels, and become "Best in Breed" in 8 to 12 months at a fraction of the cost of an Amazon.com or CDNow.” And they plan to “roll out two more catalogs in the next 2-6 months in untapped markets.” Hmm, we should watch these guys...)

• Second best giveaway goes to Gift-Ties.com...hey, it’s a half-price deal!! Buy one, get one free--in honor of eRetailing and the launch of their new site, at http://www.gift-ties.com . Only thing I love more than cigars and Web conferences is ties.... Their very classy little folder & offer sheet says they provide gift box, personalized handwritten note, even freedelivery anywhere in the U.S. Scarves for women, too. This half-price deal may only apply to your first purchase--but, hey, this is my idea of Christmas shopping. At this rate of losing money, they could be accepted into the ‘Net Startups Club in no time!

• The "Most Interesting Person I Met Award" goes to Stefanie Reichel, a former Microsoft employee who left high-tech for a time. As a competitive sailor, she had been living in San Francisco and working with an America's Cup team, until recently signing on as VP Business Development for a new commerce startup, Freeshop.com in Seattle. But the most interesting thing about her? She's a former girlfriend of Bill Gates, and was recentlty deposed in one of the court cases against Microsoft. Now, the press is after her again to learn more about--well, whatever they can learn, I guess....

• Best promotional trick at Fall Internet World: easy, this one goes to Centraal (otherwise known as Real Names). They put their name, alternating with tagline/promotional messages, on the marble steps in Javits, the vertical risers...all over the center...so you couldn’t help but notice and read their message as you approached, and as you walked up. Killer idea! And they used some very cool, sort of reflective stick-on letters. I talked to the person at their press event who had the idea--she said Microsoft and Sun both tried to buy up this ad space on the stairs for the next shows, but--ha,ha!--they’d already locked it up. Oh, yeah--power to the little guy! ..... By the way, Centraal’s service is an Internet naming solution called the RealNames System. It’s an addressing system to navigate the Internet using familiar words and everyday language like “Honda CRV” and phrases/campaigns like “New Beetle.” One key marketing effort is aimed at the 600 largest advertisers. Partners to date include search engines LookSmart and Alta Vista. According to Centraal’s CEO, Keith Teare, every query at Alta Vista by November will also be a RealName query. He says his site is likely to be among the top 10 most visited by yearend, up from a 41 ranking currently.

• Andromedia held a large, well run press event the opening morning of Fall Internet World show, announcing that LikeMinds was merging with it, to provide “total ‘Smart e-Marketing’ solutions for e-commerce.” The firms, both based in San Francisco, announced management changes related to the merger, which included naming Tim O’Reilly, LikeMinds chairman and Internet pioneer, to Andromedia’s board. Andromedia proclaimed the marriage of the two firm’s technologies “takes Web visitor behavior and turns it into marketing insights and automated programs that can drive revenue and increase profits.” Just another of many pushing “one-to-one marketing,” Andromedia CEO Kent Godfrey nonetheless had some interesting things to say. He sees the Internet era, by bringing an information framework to the *marketing* function, as holding great promise “to advance their practice to a new level.” He also notes that “even $200-300 ad CPMs are possible with targeting.” The game to be played, he says, is “Who can create the best relationship with the customer?....when a visitor leaves your site, you have to send them off with a passion to return!”

• So what did my friends at Net Perceptions, the Minneapolis-based firm that claims a leadership position for technologies in this growing “Web personalization” market, have to say about the above? Well, as might be expected, I heard they immediately labeled the Andromedia-LikeMinds merger as a marriage of “two of the pygmies of the industry.” With more than 60 Internet customers, which they say is ten times that of their nearest competitor, Net Perceptions has announced even further extensions of its product. At I-World, they introduced three new product releases: NetPerceptions for E-Commerce 4.0, Net Perceptions for Ad Targeting, and Net Perceptions Recommendation Engine 4.0. (Also, they showed off a very fancy new collateral package designed by Yamamoto & Moss.) The following Monday, they announced Net Perceptions for Call Centers, which provides individually tailored information to enable “call center agents to have a greatly increased knowledge of customer purchase histories, preferences, and tastes.” So the growth continues...with a move now underway to much larger space (still in Eden Prairie).

• Another company of interest I heard from in NY was Streamline.com, which presented at the eRetailing event. An early-stage firm funded by SAP, Intel, and GE Capital--and recently another $22 million from Nordstrom--it provides a home shopping and delivery service, but currently only in certain Boston suburbs. Describing itself as a “lifestyle solution for the busy suburban family,” it is now offering only grocery shopping and dry cleaning pickup & delivery via its Web-based service. The company likes grocercies as a good base for e-commerce, because it says it gives them “52 buying opportunities a year” with a typical family. They’re now seeing an average purchase of $100 per week, of 50-60 items.

• Upon my return, however, I learned more about Twin-Cities based OnHand Network...a similar company to Streamline in some ways--but already launched in seven U.S. markets, and using the Internet to deliver a lot more than groceries and dry cleaning. Launched in late 1997, it’s service is “an Internet home-care utility,” which the company claims has a proven track record of saving consumers time and money. It offers “old fashioned, reliable home services and home-products shopping to new-home communities via private online neighborhood networks.” It first serves leading home builders' developments to launch in a market, and then expands to serve nearby homeowners. Among other things, OnHand ( http://www.onhandnetwork.com ) says it’s the only company in the shelter industry delivering Internet-enabled ordering, scheduling, and billing for essential home services such as lawn care and appliance maintenance, and 24-hour on-call technicians. OnHand was even selected as the featured supplier for the “community intranet network” serving the Disney-developed planned community of Celebration, Florida. Founded by Mark Johnson and Mike Ayres, who previously founded and ran an 'INC 500' network services company, OnHand’s primary investor is the New York-based Soros Fund.

P.S. If you missed either of my previous "NY feast" communiques, just email me at grt@gtamarketing.com and I'll send them along. Please also visit my site for continuing updates, news, and resources...and watch for coverage of my next conference, Herring's "NDA" event next week in LaJolla.

yours in branding & marketing online,
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Graeme Thickins, President
GT&A Strategic Marketing Inc.
*Minneapolis *St.Paul *Anywhere
612/944-1672, Fax 612/944-1673
"Branding & Marketing to Win
in the Knowledge Economy(tm)"
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