Ready, Fire, Aim! - Mihail's Public Blog

Senior AOL executives are acknowledging to the New York Times that by spring of 2001, AOL's top management knew that a significant part of the company's advertising revenue was in jeopardy:

But the company did not disclose the danger, they said, because its top executives bet that the company could replace lost revenue with new revenue from companywide corporate advertising deals tied to Time Warner magazines and television networks. After five years of explosive growth in a fast-changing business, Mr. Pittman and other top officers were confident they could keep it up, several senior executives said.

...Several other deals now under new scrutiny were sales of advertising to companies that AOL was simultaneously paying for something else, a habit Mr. Pittman defended at the time as good business. "Maybe we don't have a vendor who is giving us the lowest price," Mr. Pittman once explained to Advertising Age, "but maybe we have a vendor who is giving us the lowest price when you add it to how much they are spending on advertising."

Some of these deals are now under investigation because they created the potential for AOL to overpay in order to get money back as profitable advertising revenue, a practice sometimes known as roundtripping.

Speculation that Google will be next in terms of the pay-for-use trend on the Web, which includes Blogging Network and Zagat a few days ago, in this Wall Street Journal story (subscription required):

New tollgates seem to be popping up everywhere for what was once largely free information and services. It's hard to get a good Internet date anymore without forking out cash. Match.com charges a whopping $25 a month (or $100 a year), yet membership and revenue are skyrocketing. (As an economist would say, love appears inelastic.) Meanwhile, decent free searches of companies' SEC filings are now harder to come by. Many web video clips are no longer free on CNN.com and other sites.

...Earlier this year, the Online Journal asked readers if they would pay for Google, and about half said yes. There was nothing at all scientific about this poll, but we figure Google, as it gets ready to get ready for an initial public offering (it still hasn't officially filed, and has never disclosed financials) must be mulling some sort of fee plan. An article in the London Telegraph focused on Google's news listings as a possible subscription service. That may be a bit premature, though the news services does signal new ways Google might slice and dice its search results and capabilities.

White House's tight grip on news and the news media analyzed in this New York Times story:

Where Mr. Clinton had given 73 news conferences at this point in his presidency — most jointly with foreign leaders and other officials — Mr. Bush has given 36, said Martha Joynt Kumar, a professor at Towson University who tracks the White House communications operation. George Herbert Walker Bush had given 61 in his first 21 months.

"The press has plenty of access," Mr. Fleischer said. "I don't think it's a matter of withholding information — we withhold gossip."

..."I think Ari goes into the briefing with a message that he intends to deliver," said Campbell Brown, an NBC News White House correspondent, "and what questions are asked is almost irrelevant."

[And the exchange is often confrontational.] In the best-known example, Bennett Roth, a reporter for the Houston Chronicle, after asking a question about the president's daughters, was warned by Mr. Fleischer that it had been "noted in the building."

Rafe Needleman column in Business 2.0 on the growing industry in helping combat counterfeiting in products, even documents, and also to identify and target. He quotes the International AntiCounterfeiting Coalition blaming counterfeiting for revenue and product liability losses of $200 billion in the United States alone.

But it can be hard to tell the difference between an official Nike (NKE) sneaker and a knockoff, and there's a growing industry in marking technologies, which covertly verify the authenticity of a product. Several different methods are already in use. An interesting one comes from Isotag: Using technology developed at the Los Alamos National Laboratory about 10 years ago, Isotag manufactures "molecular tags," simple chemical solutions in which a hydrogen molecule is replaced by one of deuterium. These chemicals are embedded or mixed into a product in specific (and very low) concentrations that don't affect it in any way. A low-cost, handheld mass spectrometer can identify whether an item under its eye contains the solution, and in the right concentration. If not, it's a forgery. A lab version of the test can be used as evidence in a court.

The real Mr Big, according to this New York Times story on Ron Galotti,

hacked a singular path through the New York media. As a general in the Condé Nast publishing empire, Mr. Galotti treated ad sales as an all-out war and took on the prerogatives of the publishing life — limousines, parties and celebrity — with stylistic aggression.

While many at Conde Naste think of Galotti's earlier leaving with Tina Brown to start Talk magazine as a betrayal, the CEO Steven Florio and the chairman S.I. Newhouse, Jr also "appreciate his ability to separate money from his clients". So he's back at publisher of GQ but still looks beck at his Talk magazine stint fondly:

"If you look at the whole Talk experience, it was a wonderful thing," he said. "The economy was against us and it didn't work out, but I have no regrets — none."

And Mr. Galotti does not try to outrun his legend as Mr. Big, either. Now married with a young daughter he cannot stop talking about, he said that the character, who has been played by Chris Noth in HBO's "Sex and the City," may come in handy some day.

"My daughter is young and I am 53 years old," Mr. Galotti said. "If she is out on the soccer field when she is 13 or 14 years old, and she can point over at the old guy on the bench and say, `He used to be Mr. Big,' then that will make it O.K."

ESPN is testing the use of video on the home page that's downloaded the night before, using a downloaded application/technology called ESPN Motion, according to this New York Times story: This should be especially attractive for ESPN's primarily young male audience of whom three-quarters connect over high-speed from work or university:

"Now the video will be more integral to the site over all, and not an appendage," said John Skipper, the ESPN executive vice president who looks after the Internet unit.

ESPN has been testing the service with users of its Insider premium service and will introduce it to its free users in the next few weeks.

...ESPN's new approach involves a big compromise: users have to download a small extra program. The download is short and painless, but convincing Internet users to do anything extra can be a struggle. Still, if only 10 percent of ESPN's more than 25 million users download the program, it will have an attractive audience for advertisers. Only a few thousand people look at ESPN's current downloadable clips on the average day.

An increasing trend could have serious implications vis a vis control, responsibility and accountability as more and more contractors take on the job of the military, according to this New York Times story (registration required):

With the war on terror already a year old and the possibility of war against Iraq growing by the day, a modern version of an ancient practice — one as old as warfare itself — is reasserting itself at the Pentagon. Mercenaries, as they were once known, are thriving — only this time they are called private military contractors, and some are even subsidiaries of Fortune 500 companies.

...Motivated as much by profits as politics, these companies — about 35 all told in the United States — need the government's permission to be in business. A few are somewhat familiar names, like Kellogg Brown & Root, a subsidiary of the Halliburton Company that operates for the government in Cuba and Central Asia. Others have more cryptic names, like DynCorp; Vinnell, a subsidiary of TRW; SAIC; ICI of Oregon; and Logicon, a unit of Northrop Grumman. One of the best known, MPRI, boasts of having "more generals per square foot than in the Pentagon."

During the Persian Gulf war in 1991, one of every 50 people on the battlefield was an American civilian under contract; by the time of the peacekeeping effort in Bosnia in 1996, the figure was one in 10. No one knows for sure how big this secretive industry is, but some military experts estimate the global market at $100 billion. As for the public companies that own private military contractors, they say little if anything about them to shareholders.

Good New York Times article on how FedEx was able to realize its weaknesses (that overnight shipping overnight was dependent on the health of the economy, and rivals like UPS were beginning to take it on with overnight delivery) and find a solution: acquisition of related companies which were only rebranded last year under the FedEx name:

By the late 1990's, Frederick W. Smith, FedEx's founder and chairman, was fed up with the unavoidable ups and downs — particularly since U.P.S. had begun expanding into air delivery. If FedEx was going to lose market share to less expensive services, Mr. Smith figured, it should offer them itself. So he embarked on a buying binge, acquiring various types of ground transportation businesses.

"The economics of airplanes are such that we couldn't just keep taking prices down," Mr. Smith said. "We finally realized that if we wanted to grow, we had get into surface transportation."

Wall Street applauds the move. "Even if FedEx's ground delivery product cannibalizes its air delivery, at least it now can keep the revenues in-house," said John L. Barnes 3rd, an analyst at Deutsche Bank.

...FedEx Express, the air delivery unit, still contributed the biggest share — $15.3 billion — to the company's $20.6 billion in revenue in fiscal 2002. FedEx Ground, which delivers small packages to consumers or businesses, accounted for $2.7 billion. FedEx Freight, which consolidates industrial shipments that are too small to fill an entire truck, brought in $2 billion. The remainder came from FedEx Custom Critical's premium-priced delivery of time-sensitive products like medicines, as well as from consulting services and help with customs procedures.

A New York Times story (registration required) on the continuing video-on-demand saga:

If companies can make it work, the projected market for first-run movies alone is about $640 million by 2006, according to Jupiter Research....

"I've seen various business models for V.O.D. and the numbers just don't add up, so no one is doing it in a large-scale way," said Bill Rosenblatt, president of GiantSteps/MediaTechnology Strategies, a New York consulting company.

There are currently four million cable customers who use video on demand, and another three million are expected to sign up by the end of the year, said Joe Boyle, vice president for corporate communications of InDemand, a company that distributes content to cable operators. But there are about 70 million households with cable television in the United States, and analysts estimate that widespread adoption of video on demand by cable companies will take anywhere from 3 to 10 years.

Both Microsoft and AOL Time Warner are getting ready to launch version 8.0 of their services along with bundles with broadband access (with only 15 million broadband subscribers in the country, there's much upside there if subscribers feel there's enough content that warrants its use -- until now that has not been the case). MSN has only 9 million subscribers vs AOL's 35 million worldwide says this New York Times story (registration required).

According to a June report by Forrester Research, MSN retained 43 percent of its subscribers from 2000 to 2001, while 79 percent of AOL's members stayed with the service.

...MSN subscribers will pay monthly fees of $9.95 for a ``bring your own access'' plan -- connecting through another Internet service provider -- $21.95 for a dial-up connection; and between $39.95 and $49.95 for broadband connections, depending on users' location.

AOL will charge monthly fees of $14.95 for bring your own access, $23.90 for dial-up and $54.95 for broadband. AOL spokesman Andrew Weinstein defended the company's higher prices, saying they have not stopped AOL from outpacing MSN's subscriber growth in recent years.

Wow. First the San Francisco Writers Grotto event a few weeks ago. Now Litquake. They kicked of this literary festival extravaganza at the Commonwealth Club on Friday night with a panel on Dystopia/Utopia: Can the Bay Area Uphold a New Generation of Writers?

Moderated by Oscar Villalon, book editor, San Francisco Chronicle, the panel includes authors of diverse opinions and generations, Justin Chin, Herb Gold, Beth Lisick, devorah major, and Peter Plate, as well as James Kass, founder and executive director of Youth Speaks.

And then yesterday as the Blue Angels flew overhead a capacity crowd overflowed at the Public Library's Koret Auditorium, one of the two locations where over 60 writers, poets etc. thrilled the audiences with their back-to-back readings from 12 noon to 6 pm, and then again at night at the Edinburgh Pub. Included were Dave Eggers, Po Bronson, Justin Chin...just brilliant!

A San Francisco Chronicle story on Yahoo's darling child, Google, born in Mountain View in 1998 and now all grown up (it answers 150 million search queries/day) and taking on Yahoo itself, which owns 10% of Google due to its initial partnership to use Google for its search (Google used to be prominently dispplayed on Yahoo as part of a $1.1M advertising deal Google had done with Yahoo).

So Yahoo is in a tight spot -- distancing itself from Google and maybe even outright exile of Google's would mean that Google may have a less successful IPO...well, maybe, which in turn would make Yahoo's 10% interest less valuable.

But keeping Google close to home (Yahoo paid Google $7.2M in 2001 for its search services) as it continues to take on (quite adeptly) all aspects of information online, may mean that Yahoo is not only losing customers to Google, the post-dotcom portal, but also helping it along.

Google is now the second-most-popular search engine in the United States after Microsoft's MSN with 37.4 million unique visitors in August, according to ComScore Media Metrix. Yahoo's search page was third with 36.6 million unique visitors.

...Google's rivals are aggressively trying to persuade Yahoo otherwise. Inktomi, AltaVista, Fast Search & Transfer and LookSmart have all been pitching their technology and would consider landing Yahoo a big prize.

...Complicating Yahoo's predicament is that it can't afford to drop Google completely, analysts said. Some users might become angry, they said, and go elsewhere instead.

"To a certain extent, Yahoo didn't want to bite off its nose to spite its face," said Jeff Fieler, an Internet industry analyst for Bear Stearns who has no financial ties to Yahoo.

The New York Times story (registration required) on Verizon's decision to stop allowing you to add your email address to your listing in the online and print phone directory. I don't think it was an issue of being ahead of its time. It is an issue of 1) lack of marketing; and 2) fear of being spammed on our email addresses in addition to our phones!

The service was introduced in New York two years ago. The company intended to roll it out across its territory but got waylaid by "regulatory issues and the standardization of databases," Ms. Tusing said.

Verizon did not market the e-mail listing service at all, except for a one-page ad inside its white pages, sometimes heralded by a highlight on the cover. A listing sold for $36 annually - a tiny source of revenue.

Demand was practically nil. In the Manhattan white pages, there are only 12 e-mail addresses and 85 Web addresses, Ms. Tusing said, out of 659,749 residential listings.

"We may have been ahead of our time," she said. Personalized listings will be offered again at some point, she said, but she did not know when.

According to this New York Times story (registration required):

consumers can now hang a 63-inch flat-panel plasma television on the wall of the family room. Samsung is shipping what the company says is the largest flat-panel plasma screen available for consumers. The HPM6315 has a very wide screen, but is only three and a half inches deep. It has a resolution of 1366 by 768 pixels and can display 15 million colors.

The latest electronic toy available in time for Christmas is priced at $20,000 and allows people to view the screen properly within a 160-degree angle!

This is so cool. Maybe a little too militaristic a symbol in these trigger-happy days but still very cool to see the Nay's Blue Angels fly by my windows and hear the roar of their engines. They're practicing for this weekend's annual display for Fleet Week, started in 1981 by then-mayor Diane Feinstein according to the San Francisco Chroncile.

The Blue Angels, the U.S. Navy's precision flying team, will take to the Bay Area skies today with practice runs for this weekend's Fleet Week festivities.

There's definitely mixed feelings about the Blue Angels in the Bay Area: There are some who hate the noise and the show of military might; there are others who love the excitement and feel a sense of patriotic pride.

...The six-jet team will practice its stunts over San Francisco and the bay today and Friday. The real deal is scheduled for Saturday and Sunday, with afternoon air shows.

The elite F/A-18 Hornet jets used by the Blue Angels are built to fly at Mach 1.8, or nearly twice the speed of sound. But since sonic booms are outlawed over populated areas, the pilots will slow down to a mere 620 mph. Still, there's no mistaking when they're in town. The roar is loud enough to make windows shake, dogs hide under the bed, and kids cover their ears -- when they look up in awe.

Since I live in one of the tallest buildings on Alamo Square (which is one of the several hills that crown the city of San Francisco, for those of you not familiar with SF), I'm pretty high up. As I sit here and blog, I can see the fighter planes take several passes to fly around my building and can even make out the two pilots on one of the planes.

The sky's pretty grey today and the dark grey of the fighter planes is a surreal contrast against the distant skyline of downtown's skyscrapers including the triangular Transamerica building.

Zagat.com is following the subscription trend starting last Friday according to this Wall Street Journal story (subscription required) last week:

Nonmembers can still search the restaurant database to view addresses for a specific eatery or browse listings in a particular neighborhood. But access to Zagat's survey results -- based on a 30-point scale and including average prices for meals -- will cost $14.95 for a one-year subscription. (Zagat is offering charter membership for $9.95 during the next month.)

...Mr. Zagat said charging for membership services was necessary because it hopes to offer more robust offerings in coming months. For example, reviews will be available for 70 cities by the end of 2002. Subscribers will also receive a monthly e-mail newsletter with tidbits about new restaurants; chef changes and special promotions; access to online reservations; discounts on books; and online dining diaries from fellow subscribers.

As of Friday evening, more than 10,000 people had subscribed to the service, Mr. Zagat said.

Many struggling Internet sites have turned to subscription fees to bolster their business amid a tepid advertising climate. But Mr. Zagat said instead of being an economic drain on their closely held business, the Web site has fueled the company's growth. Online voting has allowed Zagat to process its surveys more efficiently and economically, he said. Also, its reviews reached a wider audience through the Internet. It took more than 20 years to sign up 200,000 voters for its surveys; now there are more than 750,000 voters, he said.

According to this Wall Street Journal story (subscription required) drug companies are now trying a new way to promote sales on college campuses:

Starting next month, the Madison, N.J., maker of the antidepressant Effexor is planning 90-minute forums in campus auditoriums around the country, called "Depression in College: Real World, Real Life, Real Issues." The programs will feature free screenings for depression and speakers, including professors, physicians -- and Cara Kahn, a young star of the MTV reality show "Real World Chicago," who takes Effexor to treat her own depression.

The campaign is one of the biggest marketing efforts ever for an antidepressant on college campuses. Living with the stresses of academic pressure, romantic woes, too much junk food and too little sleep -- and, in many cases, independently of their parents for the first time -- the nation's 15 million college students are an important market for drug companies looking to build antidepressant sales.

Drug companies sold $12.2 billion in antidepressants in the U.S. last year, according to IMS Health, in Fairfield, Conn. It isn't clear what portion of sales were to college students. But some campus health officials estimate as much as 20% of the nation's student population takes antidepressants at some point in their college years.

Do you want to be out and about, maybe hiking or biking, and drinking water from a tube sticking out of your backpack? Well, it seems to be a growing trend according to this Wall Street Journal story (subscription required):

the concept for "hydration backpacks" has been around since at least 1989, when a paramedic competing in a bike race put an IV bag into a sock sewn on his shirt. His idea gave rise in the early '90s to the CamelBak company and its patented "Big Bite" valve, which the company says is still the industry leader. The packs still make up less than 1% of the $4.92 billion-a-year outdoor-retailing industry, but more than 20 players have entered the field lately, all with variations on the theme. With a bigger selection to push, outdoor stores are giving them more attention, and that's spurring sales, according to the Outdoor Industry Association. First-half sales of hydration backpacks rose 80% to $13.7 million from a year earlier.

We took the plunge into hands-free hydration, searching for a lightweight pack suitable for a day of casual play, with room for a sandwich, sweater, keys and maybe a paperback. (All of our finds passed this test.) Looks mattered to a point, but comfort, durability and function mattered more. After all, if you're going to replace your $1 water bottle with a backpack ranging, as ours did, from $34.95 to $69.97, you don't want chafing, leaks or split seams.

An interesting Wall Street Journal story (subscription required) on Microsoft and whether it really is suicide or not to work with Microsoft rather than compete with it, and how some Silicon Valley entrepreneurs are choosing to work with it:

Others in Silicon Valley question whether Microsoft will ever change its elbows-out competitive style, or act with the responsiveness of a company that faces true competition. Mr. Perlman, who most recently started a digital-entertainment company called Moxi Digital Inc., which just merged with Digeo Inc., tells the story of an e-mail he received when he worked at Microsoft after the WebTV purchase.

Mr. Perlman says he wrote a note to Steve Ballmer, then Microsoft's No. 2 man and now its chief executive officer, complaining about technical glitches in Office's Outlook e-mail product. Mr. Perlman had been testing the product because Microsoft wanted WebTV employees to switch to Outlook after Microsoft acquired WebTV, Mr. Perlman recalls.

A manager in the Office group who responded to the note on Mr. Ballmer's behalf was "outraged" at the complaint about Outlook, Mr. Perlman says. The manager wrote back, "My job is not making Outlook reliable. My job is killing Lotus Notes," a competing product sold by IBM, Mr. Perlman says.

Microsoft's Mr. Smith, the company's general counsel, says he's "obviously not familiar with whoever it was in Office who may have said that," adding that he "couldn't disagree more strongly with anybody who characterizes their job in that way." He adds that "there's no way we're going to be successful as a company unless we make our products better."

According to this Wall Street Journal story (subscription required) the flipside of the great 0% deals available on the mostly domestic cars:

The financing deals are accelerating the rate at which cars lose their value as they age. It works like this: Buying a $20,000 car with a $2,000 rebate lowers your out-of-pocket cost to $18,000. But the rebate instantly shrinks the new car's value by the same amount. It also lowers the trade-in price of the previous year's model. The effect then cascades through older versions of the vehicle. As a result, a growing number of people trading in used cars owe more on their existing loan than the vehicle is worth.

Resale values also are being hurt by classic supply and demand: Some people who would have bought a used car in the past are now able to afford new vehicles because of the incentives. Also, many people are returning cars as leases expire, worsening the used-auto surplus. As a result, wholesale prices on used cars fell 6.3% in August compared with a year earlier, says Tom Kontos, vice president at car-auctioneer Adesa Corp.

...Many buyers don't realize how much value their old vehicles have lost until they make a deal on a new car. Jamey Adams, a 32-year-old information-systems consultant who lives in Frederick, Md., last month traded in his two-year-old Ford Explorer toward a new Chrysler Town and Country minivan. He found out that his SUV, with an original sticker price of $28,300, was now worth only $12,000 -- not enough to cover the $15,000 left on his five-year loan. He wound up rolling the leftover $3,000 into his new loan on the minivan.