Date: October 17, 1998

******************************************************************
View From the Mountaintop - "The Wall Street Journal Tech Summit"
Notes from Two Sessions, October 5, 1998
(and a one-on-one interview following)
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1) "From Startup to Internet Business: Finding the Formula for Success"
-Tim Koogle, President & CEO, Yahoo!

2) "Commerce & Communications: What's Ahead for Business on the Internet" -
A panel moderated by Richard Shaffer, Technologic Partners:
-William Harris, CEO, Intuit
-John Jordan, Dir/EC Research, Ernst & Young
-Mark Kvamme, CEO, CKS Group
-Karl Salnoske, GM/E-Commerce, IBM

Tim Koogle, Yahoo!
------------------------
- "Here's our 'elevator speech': We want Yahoo to be the only place anyone would have to go to connect to anybody or anything on the Internet."
- "We're a Global, Comprehensive, Branded Network"....40 million users strong and growing....offering content services, merchant services, communications services.
- Some key industry stats Tim cited, 1998 vs 2002 (worldwide):
  - Web users: going from 98M to 320M
  - Web advertising: going from $1.7B to $7.5B
  - Web commerce: going from $32B to $425B
- Some surprise numbers (and you thought this online thing was just in its infancy!):
  - "There are now more people on Yahoo than live in the 10 largest U.S. cities."
  - "And more people are on 'Yahoo Finance' than read the Wall Street Journal."
- Tim also touched on their evolving brand strategy:
  - "We're wrapping the Yahoo brand around several types of goods sold online...
    for example, with 'Yahoo Autos', 'Yahoo Travel', and 'Yahoo Store'--where we
    can host any merchant's online presence."
- What it takes to win: "In an information industry business, brand, content, and distribution matter."
- Some numbers he noted (this just two days prior to their strong 3Q earnings report): as of 2Q, their gross margins were 22%, they've been cashflow positive for four quarters, and have $400M in cash with no debt.
- What does Tim say he's contributed? "Five things: a focus on the customer, not just technology....a focus on having a *business*, not just a company.....having a strategy & team that don't have to change....building a profit mentality....and the belief that 'cash is more important than your mother'."
- "We're clear on what we do: we aggregate content....and there's huge value in that.....we stimulate the takeup of content."
- "About 25% of revenues are now from our 'premier merchant programs'--which is only through three quarters, however--the rest being from advertising."

The "Commerce & Communications" Panel
----------------------------------------------------

Q: What about "shopping bots" vs building a brand?
-IBM: "Our studies show the majority on the Web today rank convenience first, followed by richness of info....price is a distant fifth or sixth."
-CKS: "We find one-click buying to be very popular, for convenience....price is not critical, but it must be a value."

Q: Is buying online really convenient?
-Intuit: "No, not yet."
-E&Y: "There's a distinction between shopping and buying...there's a lot of the former happening right now."
-CKS: "The first experience is critical--if it's good, you're hooked! You see the explicit benefit."

Q: What about privacy?
-Intuit: If it's customer data, we will get implicit permission on how the data can be used."
-E&Y: "The established ad community doesn't get it--it's about 'permission marketing'."
-CKS: "You have to use the proper 'tonality' in your approach....regarding how you go about collecting data from the customer."

Q: Are we now going from *should* I advertise on the Web, to *how* do I advertise on the Web?
-CKS: "We still believe traditional media is the best way to promote a Web site. Amazon was primarily launched via print ads in the NY Times book magazine." [note: he knows--CKS helped 'em do it!]
-CKS: "With the Web, we're now getting to the point where we can tell clients: we can deliver a specific ROI on your advertising! But there are no consistent, standard tags yet."

Q: What are the next, fastest growing markets for e-commerce?
-IBM: "Business-to-business, where people are already connected to the Web. New intermediaries are coming in...'communities'...bringing buyers and sellers together."

Q: What products are appropriate to the Web?
-CKS: "Those that require an 'emotional' experience may not be transacted on the Web, but they most certainly can be researched."
-Intuit: "There's a huge play for *brand* in financial services. It's more important on the Web than in the real world.....'trusted relationships'."
-E&Y: "Brand is important, but word-of-mouth may be more so. Interestingly, we find on the Web that people will trust total strangers for some things, and brands for others."
-IBM: "Companies getting out there first are finding customers they otherwise would never get."
-CKS: "In the PC category, I like IBM's new site: pc.ibm.com.....it lists all their various models, with a range of current prices available for each, from different resellers! I just bought a ThinkPad there." [You simply click on the price and vendor you most prefer.]

Q: What about middlemen--are they still there?
-CKS: "Sure--Amazon is. They're a 'disinter*re*mediated' company! And there are more kinds of new middlemen coming out."
-IBM: "A big brand name isn't required--just knowledge of the industry."
-E&Y: "The biggest category now is the self-employed. What are they--consumer or business?"
-CKS: "We still need a human voice...there's still 'high-touch' in considered purchases."

****************************************************
One-on-One Interview With Mark Kvamme, CEO of CKS Group
****************************************************

Immediately after the above panel session concluded, I'd arranged to ask Mark a few questions, particularly focusing on things marketing and advertising people would want to know. So, we headed out from the press desk, found a quite spot and sat down for 15 or 20 minutes, chatting about a number of things.

Q: So what's the latest with CKS?
"Well, we've been getting a lot of 'traditional' wins of late, which I'm really excited about." [We talked about how important traditional media has been to Internet successes like Amazon--which Mark knows something about--and how we're now seeing similar aggressive pushes by other firms, such as Beyond.com, whose new CEO just happens to be Amazon's ex-VP Mktg.]

Q: And what about Web assignments of late?
"We're doing a big one: Disney's new portal site (with InfoSeek)....Go! Network (www.go.com)....that's one of the hottest things happening with us right now, going live soon. And that IBM site I mentioned, where I just bought a ThinkPad? (www.pc.ibm.com) Well, we did that, too! Been up for a few months. You should try it!."

Q: Mark, give me your perspective on your announced intent to merge with USWeb, into the newly named 'Reinvent Communications'.
"Well, it just made sense. Hey, let's face it, it's about the Internet. And it lets us both scale. Together, we'll soon be 1800 employees, and on a run-rate of more than $200 million in revenues."

Q: How do you describe CKS--do you still use the term 'interactive agency'?
"Oh, sure."

Q: And what's your opinion of traditional agencies?
"Well, some of them 'get it'. Others, well.... But it's really a changing world--really now a world of partnering and 'coopetition'."

Q: How would you advise marketing people today to prepare for the future? What kinds of people will you be looking for?
"We need more 'center-brained' people. People who can help bridge the right-brain/left-brain, marketing and technology cultures. That's the key."

Q: And how are you developing such people, how do you find them?
"You know, we haven't really had a formal training program, but we should. USWeb has a great education program [via their USWeb Learning group, recently spun out], and I like what they're doing."

Q: You have more creatives than technologists, and USWeb the opposite--so is that a good matchup?
"Yes, we have a group of 60 very strong technologists, in what we call our CKS Enterprise group in Silicon Valley. But the total split in the new organization will actually be very close to 50-50, so that's good."

Q: So what's the word--when will the merger close?
"End of November is our target. Our 'integration team' [headed by one his technology managers in the Valley] is quite positive about how things are going."

Q: Mark, CKS and USWeb have always been the pioneers--out there taking the arrows. Now, the big challenge for the new Reinvent Communications, which the marketplace will be watching closely, is this so-called merging of the marketing and technology cultures. How will that happen?
"Well, it will be led by those 'center-brain people' I talked about! And it *will* happen. The reason? There is significant encouragement from our clients--they're *begging* for it."

Q: Thanks, Mark, and good luck. Maybe I'll visit you in Cupertino soon.
"Do that--I'll give you the tour."

Our interview had gone as far as it could, anyway, since others were fidgeting about waiting to meet Mark...including a guy from Leo Burnett in Chicago, one of those great 'traditional' agencies. He apologized for jumping in and introduced himself with a business card. "Hey," says Mark, "I didn't know Leo Burnett had a 'Technology Group'!" And so it goes in the wild and wooly world of adland....

that's all folks (till the next email)!
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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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http://www.gtamarketing.com
...A Resource for Online Marketers & 'Net Startups,
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