timone NetMarketing
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Marketing nei new media e nelle tecnologie elettroniche

No. 35 – June 30, 1999


This is a "numberless issue". From readers' comments, I've learnt that there are three trends. Some people are interested in comments, not data. Others read this newsletter mainly because of data and statistics. And some (thank you) are interested in both. This issue will be interesting (or so I hope) for the people that prefer non-quantitative comments and information.. I'm working on some research information that I shall publish as soon as I finish analyzing it - so I must ask the readers looking for data to be patient for another while.


loghino.gif (1071 byte) 1. Editorial: The war of the portals


The war has been on for quite a while – worldwide, and also in Italy, where now it's been officially declared. Some of the comments that follow are mainly about the situation in one country; but I hope they are meaningful also for people living elsewhere, because the same sort of thing seems to be going on in several places.

On June 16, in a convention at the Bocconi university in Milan, there was a moment of rather funny embarrassment. Five or six different companies had carefully prepared presentations in which they said "we are the biggest portal in Italy". After the first two had made that statement, the others were obviously confused. Some were quite aggressive: "that's not true, we are the biggest and the best". Others, more wisely, said "well, let the market decide... but this is what we are doing". And some were very quiet – not ready to reveal their plans.

A lady sitting by my side, who knows the net quite well, whispered "what's this, everybody doing everything?" That's a pretty good summary. But I think the issue is worth a few more comments.

First of all.... what is a "portal" really, and why are so many people so busy trying to be one? Literally, it's a big door. Lots of people around the world are trying to be what America Online is to 15 million Americans. The doorway to the net. Is there enough money, in a tiny internet market such as Italy, to make the investment worthwhile? Of course not. But sooner or later, in one way or another, the market will grow; and several large groups are trying to gain control of the territory. The more people they can get to use their portal, the more traffic they will be able to "own" – and sell.

There are several contenders in Italy (as elsewhere) and they come from different origins. Some are publishers, some are technology-based. They are all trying to "converge" into what will soon be a very crowded place. Repubblica, a leading national newspaper, already has the strongest online edition; they are merging that with several local newspapers they own, their Espresso newsmagazine, a search engine and several other services; their plans include an online bookstore. RCS, a publishing group including Corriere della Sera (Italy's leading newspaper), the leading sports newspaper, the Rizzoli publishing house, etcetera, has not been doing a great job online but now announces aggressive plans. Il Sole 24 Ore, Italy's leading financial newspaper, has a historically strong website and plans to make it stronger (not only in business, stock exchange and economics). Virgilio, a search engine, has been busy for quite a while turning itself into a general portal. Another major search engine, Arianna, is owned by a large ISP, Italia Online; though I'm not sure where that operation will be placed in the current maze of mergers and acquisitions, it's likely to be another contender in the "portal" competition. Microsoft, in spite of its late entry in the internet arena, is using its software leverage to try to control internet traffic worldwide – and has announced that it intends to do the same on a local scale in Italy (as well as, I guess, in several other countries). RAI, the huge government-owned television company, is announcing very ambitious plans on the internet – though their first efforts seem rather clumsy. Its main opponent, the Fininvest group, so far has been keeping its main operations separate; its Mediaset television company and its three main channels are re-vamping their online presence, and so is the Mondadori publishing house (that has bought Volftp, the last remnant of the defunct Video On Line empire and already a fairly strong portal on its own); but I'd be rather surprised if this group didn't try to merge its several identities, somehow, into some sort of huge portal. Lycos and Yahoo opened in Italy last year; Altavista is working indirectly through Telia in Sweden but has an Italian homepage and a local broker to seek advertising revenue. Omnitel, a big mobile phone company, has announced a somewhat peculiar plan to use cellular phones as the main access tool for the net. Telecom, the now privatized telephone company (recently bought by the Olivetti group in the biggest stock buy-out in Italy's history) is being quiet about its online plans; but it also owns Tin, Italy's largest ISP, with about 50 percent of the market – it would be very surprising indeed if it stayed out of the game. Other providers are also trying to be "portals" in one way or another. AOL-Netscape may be round the corner. And there will be more contenders...

There is an obvious question. With so many people trying to be the portal, how can they all succeed? The obvious answer is that they can't. Nobody can predict the outcome of the war, but several players will fall short of their objectives.

What's important, I think, is not who wins the portal war but what shape the internet will take. The net has never been, and probably will never be, a unified system based on one approach. The multitude of nets and ways of using them will continue to multiply. But in the endless turbulence there seem to be two basic tendencies. One is centralization, that tends to bring the internet back to the traditional structure of broadcast media. I don't know if it will prevail, but it will probably be one of the structures of the system. Portals (especially the large, generic, good-for-all kind) obviously follow this approach. Portals, however, can come in all shapes and sizes. They can be large or small, generalized or specialized. So even in that area the picture can be quite fuzzy.

The other trend, that was dominant in the origins of the internet and now seems less visible, puts the choices in the hands of individual users. Newcomers to the net may, for a while, fail to understand that option. But over time more and more people discover that they can find, or create, their own ways of exploring – their own networks of relationships

The two approaches are likely to co-exist and co-evolve. That may not be a problem. I've never felt any need of a portal, but one day I might find it convenient to use one if I'm just looking for a weather report or the state of traffic (as long as by doing so I am not exposing myself to a deluge of spamming). But I'd be rather uncomfortable if too many users considered that as their only approach to the internet. By doing so, they would be the victims. Poorer in resources, knowledge, ideas, relationships, choices – and therefore money as well.

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loghino.gif (1071 byte) 2. Search engines are in trouble


Search engines are being bought and sold for very large amounts of money. Because they are, or could become, "portals". Not because they are working well.

The problem of information overload wasn't born with the electronic networks. It's been with us, and seriously discussed, for a long time before the remotest origins of the internet. But the direct access offered by the net (especially by the world wide web) is making it painfully obvious. I'm reading more and more reports about the plight of search engines. For instance, there was an interesting article in the June issue of Scientific American, signed by an IBM working group called Clever Project.

The problem is serious, and it's getting worse. There are hundreds of millions of "pages" on the world wide web. According to a study by NEC Research Institute in Princeton, New Jersey, the most comprehensive search engine on the internet covers no more than 16 percent of the available content; last year a similar study bt NEC had that index at 34 percent. In 1998 it was estimated that there were 300 million pages on the world wide web; now they are supposed to be over 800 million. According to Clever Project, a million is added every day. A "page" can be a few lines or several hundred words. It's totally impossible for any combination of human minds to check all this material. The process must be, totally or partially, automated. Even so, it's extremely difficult. "Heuristic" systems classify content by frequency of use of a given word. That often misfires. For instance, the article says, Tom Wolfe's The Kandy-Kolored Tangerine-Flake Streamline Baby would be classified as highly relevant for the word hernia, because it's repeated dozens of times at the beginning – while of course that is not what the book is about. Conversely, a word may be considered so obvious as to be omitted in an article or a homepage, and thus that source could be left out of the "relevant" list. There are IBM documents and homepages that don't include the word computer. The situation is not improved by tricksters putting "hidden" text in their HTML pages for the sole purpose of gaining a high relevance ranking in some chosen category.

Synonyms are a problem. A keyword such as automobile would find an unmanageable quantity of information (in English and other languages) while leaving out a lot of useful stuff containing car or other definitions. The word aircraft is found in a million web pages and of course things get worse if we include airplane or other definitions in several languages. Even "boolean" combinations and "smart search" devices can often misfire.

In my own humble experience, I'm mystified by the keywords with which people find things on this site. This is not only apparent from the statistical reports, but confirmed by the mail I receive. More often than not, people "stumble" into something while they were looking for something completely different. And personal references (word-of-mouth or links) regularly outnumber search engines in frequency of leading people to a specific text or subject.

The Clever Project team is working on several alternatives to try to cope with these problems. For instance they are using linguists to find better ways of defining synonyms (but they admit that's a very difficult task even in one language – and of course with a multitude of languages the problem multiplies).

They are developing interesting projects, such as "mining communities". Of course such communities have always existed in the net, but it may be useful to find a way of cataloguing them, encouraging cross-pollination and helping people to identify the appropriate groups for their specific interests.

They are also working on a "hyperlink" concept. That's a rather complex notion, but essentially it means identifying nodes or points of reference that are particularly "authoritative" on a given subject. There is a problem here that seems to have escaped the attention of the Clever Project team (as of most other groups working on similar concepts): cultural bias. I don't think there is a serious risk of a deliberate "orwellian" plan to condition information, because sooner or later it would be exposed. But nobody is immune from cultural prejudice and mainstream opinion (as well as the private inclinations of people choosing or "ranking" the links) would inevitably influence such a system.

With commendable candor the Clever Project team admits that this is only a beginning, there are many more factors to be analyzed and the problem is extremely complicated – also because things keep changing, often in unpredictable ways.

Which will be the solutions? I don't know. But I think we need more than one. There are over 800 search engines worldwide and I don't expect the number to decrease. The most desirable development, I think, would be increasing diversity and specialization. In any case, I can't imagine that any technical solution will ever be able to replace personal curiosity and the thin but strong thread of human interaction.

No matter how good generalized services can become, there will always be "added value" in finding what is less obvious, less easily reachable. If any person, organization or company wants to gain an advantage, that will often come from finding information, contacts, relationships and threads that are not easily available to everyone else.

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loghino.gif (1071 byte) 3. The value of trust

Trust has a bigger role in our lives than we realize. When we walk into an icecream parlor, we don't ask for a heath certificate. When we ask an unknown person, in an unknown place, to give us directions, we expect to be told the truth – and surprisingly often we find good help. We generally have a fairly clear idea (though sometimes we are quite wrong) about people or organizations we trust – or we don't. But on the net it's a bit different; the territory is somewhat unfamiliar.

It's quite surprising, really, how people trust other people they've never met. Quite often there is great sincerity in e-mail; people are more open that they would be in a personal meeting. They feel comfortable because they are in control: they can switch off, break the connection, get out of the environment by a touch of the keyboard or the click of a mouse. (The most successful article I ever wrote was about this subject: Soul and body – over two years after it was published I'm still getting mail from all over the world).

Things are a bit different, of course, when there is a transaction: financial or otherwise. We are dealing with someone that maybe at the other end of the world or next door – and the difference isn't immediately perceivable. We aren't quite sure where we are and we don't feel totally comfortable with the environment. Our defenses are up.

If trust is important in any human relationship, it's more so on the net. Of course we can have a base of trust if people already know about us: established brands are stronger on the net, as everywhere else – in the beginning. But, even more that in other relationships, trust is built gradually; and lost easily. It's not enough to have "initial" trust. We must keep it and build it over time. How? By living up to expectations; keeping our promises – and not making promises that we can't keep. That's not as easy as it sounds.

A company is generally well aware of its environment; it knows which points need to be kept under control to satisfy the needs, and meet the expectations, of its customers. Online factors multiply and problems may pop up where we lest expect them. Our customers don't have (and often we don't, either) a clear perception of all the multiple technical problems, and human errors, that can interfere with the process. If anything goes wrong, or doesn't work as smoothly as it's expected to, who is to be blamed? The company that puts its signature to a website or any other online activity.

The risks are everywhere and it's practically impossible to foresee them all. How can we solve this problem? As far as I can see, there is only one way; the one I tend to repeat ad nauseam. Test and try, gain experience, encourage dialogue. Grow gradually; feel the ground and learn before you expand too far. In a recent convention, I met Lucio Carli, who runs the online business of his family's company ( Fratelli Carli has been selling olive oil and other products by mail order for 90 years, and in the last three years also online). He was delighted about an e-mail complaint he had just received from one of his customers. What made him so happy? The customer had identified a small mistake, of which the company was not aware; and so he would be able to fix it before it became a big problem.

Is it worthwhile to enter such a minefield? To explore a territory full of unexpected risks, while the online market is not yet big enough to be a threat for our usual way of doing business? I think it is. Because we can learn a lot; and build on experience. Gaining the trust of online customers will put us ahead of the game and give us a competitive advantage that will become more and more valuable over time. But this isn't something that can be improvised or solved with a one-shot standardized solution. It takes time, patience and dedication.


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loghino.gif (1071 byte) 4. The value of relationships

I've heard and read countless explanations of why Amazon is the biggest success in "e-commerce". Including some analysts that are perplexed about the fact that this company hasn't yet made a profit, or have reservations about the value of its stock. Whichever way we look at it, Amazon is a remarkably successful company. It started as a very small enterprise in 1994. Now it has a catalog of 4.7 million books, ten million customers in 160 countries and quarterly sales in excess of 100 million dollars. Not surprisingly, it's using its customer base to expand into other product categories.

I've been one of their customers for several years and I think I know which is the key to their success. Customer care. They value relationships – and prove it with facts. I commented two years ago on the quality of their service. Recent experience confirms the same behavior. In spite of their growth, their level of customer care hasn't decreased.

I could report much less satisfactory experiences with several other online suppliers; adding many more examples to a few that I mentioned in February. But I'd rather quote, once again, one of my favorite writers: Gerry McGovern. In his article on Customer service (June 21, 1999) he said:

There's more to e-commerce than you think. The internet has been sold as this wonderful commerce medium where you can sell to a worldwide audience at greatly reduced costs. Sounds too good to be true? It is. Many people vastly over-rate the internet as a commerce medium while at the same time vastly under-rating the costs of carrying out commerce in an online environment. You don't become "e-commerce enabled" by slapping up a website and getting yourself a secure server. Just because you're on the web doesn't mean that you are now miraculously a global business, that suddenly – as if magically – all the problems associated with selling into a foreign marketplace – or even your local marketplace – have disappeared. Get real.
An 11 country study by Consumers International – a group of 245 consumer watchdogs – stated that, "although buying items over the internet can benefit the consumer by offering convenience and choice, there are still many obstacles that need to be overcome before consumers can shop online with complete trust."
The study found that eight percent of the products that the study team bought never arrived. Only 53 percent of websites had policies on returning goods and only 32 percent provided information on how to complain if something went wrong.
According to another June published survey, this time by Net Effect, 67 percent of potential purchases on the internet are abandoned because of lack of real-time online customer support. Only 5.75 percent of people who visit ecommerce websites place an order. The study also found that consumers are particularly worried about product delivery, returns and product specification information.
Yet another June published study by the Federal Trade Commission of 200 websites from 18 countries, found that only 26 percent of websites had information on their returns policy, with only 9 percent listing their cancellation terms. "If people do not feel safe and secure with e-commerce, they won't use the internet and all of those rosy predictions on internet use won't happen," secretary of Commerce William Daley said in a statement.
There's more to selling than sales, as anyone who has ever successfully built a business knows. I therefore find it surprising how normally sensible people lose their senses when it comes to e-commerce. They talk in animated terms about how great and open the opportunity is and how they'll reduce costs by a factor of 100.
Yes, the opportunity is great and open. However, every entrepreneur and their dog sees the opportunity and is chasing it with utmost vigour. It's a dog eat dog world online, you know. Please, the internet is not the new alchemy. Costs are costs. What is happening with the internet, and during much of the history of IT, is that costs are being displaced, not replaced. IT, in certain areas reduced costs, but it also, because of automation, resulted in a reduction in brand loyalty. Thus, marketing costs to new consumers increased.
The internet is doing the same. Companies are now spending millions upon millions to build and maintain their brands in a very crowded online environment. They may require less staff to run their websites, but these staff are demanding huge salaries and are very difficult to find. Automation is not everything it's cracked up to be, either. As the Net Effect study found, many people still like to communicate with other people before they make a purchase.
Unless ecommerce gets real, customer service will be its Achilles heel.

I've quoted this article extensively because it leads clearly to a basic point: customer service and customer relations are crucial to success in online business. And that's only one part of the picture. All relationship (including those with suppliers, intermediaries, etcetera – on all sides of a company's environment) need to be managed effectively and treated with care. Technology alone cant' do it. There is always the need of a human touch.

And there's an added advantage. A good management of relationships can lead each company (or organization, or person) to single out, or create, a net of its own. That's not a "niche", but a full-scale market.


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loghino.gif (1071 byte) 5. The value of communities


In the last five or six years, as the attention focused more and more on "large numbers", the value of online communities appeared to be almost forgotten. It's been coming back in the last couple of years, especially after John Hagel and Arthur Armstrong published Net Gain and the idea started spreading that "it takes a village to make a mall" and that "the feel-good idea of online communities as a wonderful thing for humanity is actually a wonderful thing for business."

There's a lot said (but not much done) about "relationship marketing" and the commercial value of communities. But I think this subject is worth a few comments; and we should not forget what was learnt in many years of experience with communities in the net.

Of course there are lots of ways in which online communities have been organized, and they've been around for over twenty years. Mailing lists, newsgroups, BBSs, community networks, MUDs, etc. And of course a web platform can be used for all sorts of communities, large and small.

There's a pretty obvious fact, that I think we should remember. Communities are as old as the world. No human society is conceivable without communities. They criss-cross (each one of us belongs to several different communities) but each has its own identity. They can exist for few days or hours, just the time of an occasional shared experience; or they can go on for centuries or millennia. They can be loose and spontaneous, or strongly organized with a firm and ritualized culture. They can be totally undisciplined and spontaneous, or hierarchic and centralized. Of course what we find online is exactly the same.

We all manage, every day, a variety of communities, though we may not even be aware that we are doing so. I'd like to stop for a moment and define what I mean by "manage". Many people understand it as a top-down concept, where a "manager" is in charge of people at lower levels in an organization. But the concept can be quite different. I know several ,people in high-ranking positions who tell me that the most taxing part of their job is managing the organization levels above them. Careful students of human relations explain that friendship (or love) needs to be managed – nurtured with attention and care – if we want it to express its full potential. I am deliberately using "emotional" words, such as love and care, because that's what's needed in all communities – and even more so online, where physical presence is missing.

I'm not going to attempt any "classification" of online communities, because it would be either simplistic (and therefore inadequate) or too complex. Also because there's no limit to imagination; anyone can come up with a totally new way of setting up a community, and often that is the best solution. But let me try to define a few general criteria that I hope can be useful.

  • There are two "extreme" views. Some people think that a community will be inevitably destroyed or warped if any commercial interested is allowed to intervene. Others seem to believe that communities can exist for the sole purpose of serving a commercial interest (of course "fidelity programs" or "clubs" that do no more than offer a reward for brand loyalty or frequent use of a product or service are promotional tools, not communities). I think both are wrong; and I believe the right way is not something "half way" between the two extremes but a completely different notion. We need to understand that a community can benefit from the support of a commercial interest (that may bring some other benefits in addition to money) without losing its identity; and that, on the other hand, forcing a community to become a mere promotional tool may indeed kill it – or sterilize it to the point of making it useless.
  • We can enter an existing community or create a new one. In both cases, we need to be respectful – and listen. The people that most enrich a community are those with strong personalities and independent views. The more we try to force a community to follow our style and opinions, the less valuable it will be.
  • A community must be free. All participants must have equal rights, all opinions must be accepted (including those that we find uncomfortable); and we must leave room for the unexpected. But that does not mean total anarchy. The lessons learnt in newsgroups, mailing lists etc. (definition of policy and topic, style of moderation) can be usefully applied, I think, to most online communities. And we should not forget the good old principles of netiquette.

When we step into a community (or set up a new one) we should not think immediately, or predominantly, abut selling. A community is not a shelf in a store or a bundle of "special offers". It's a very valuable source of information; it can help us to test ideas, types of service, even new products. It can build relationships and trust. It's no joke that a strong and lively community can turn into a bunch of pretty bright people working for us without being paid. But nothing is ever completely "free". They must be getting something in exchange for their efforts. Knowledge, experience, information. And I think it's a good idea to reward people specifically when they make a useful contribution. I don't want to limit anyone's imagination, but I think such rewards should be personal and relevant. Not routine; not just another t-shirt or leftover cd-rom – or the nth mouse mat.

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List of links

For the convenience of readers that print the text before they read it, here is a list of the links.

La Repubblica (newspaper) http://www.repubblica.it
L'Espresso (publishing group) http://www.espressoedit.it
RCS (publishing group) http://www.rcs.it
Il Sole 24 Ore (publishing group) http://www.ilsole24ore.it
Virgilio (search engine) http://www.virgilio.it
Arianna (search engine) http://arianna.iol.it
IOL (Italia Online ISP) http://www.iol.it
RAI (State-owned television) http://www.rai.it
Mediaset (commercial television) http://www.mediasetonline.com
Mondadori (publishing group) http://mondadori.com
Volftp (FTP service) http://volftp.mondadori.com
Omnitel http://www.omnitel.it
Telecom Italia http://www.telecomitalia.it
TIN (Telecom Italia Network) http://www.tin.it
Clever Project http://www.almaden.ibm.com/cs/k53/clever.html
Soul and body http://gandalf.it/knots/knot08.htm
Fratelli Carli http://www.oliocarli.it
Amazon http://www.amazon.com
Amazon in Europe http://www.amazon.com.uk and http://www.amazon.de
Customer service http://www.nua.ie/newthinking/archives/newthinking327/
High tech – high touch http://gandalf.it/netmark/netmar32.htm#heading02
Thisnet, thatnet... "Mynet" http://gandalf.it/netmark/netmar12.htm#heading04
Are we forgetting Netiquette? http://gandalf.it/knots/knot17.htm


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