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ELECTRONIC COMMERCE AND ONLINE PUBLISHING

ELECTRONIC COMMERCE AND ONLINE PUBLISHING

Electronic Commerce and Online
Publishing

The Web may have blossomed because of peer-to-peer publishing, but judg-ing from recent product offerings, there is an enormous groundswell of in-terest among both commercial and corporate publishers in the Web. For instance, it was reported that, in less than three months, the Wall Street Journal Interactive Edition attracted 500,000 registered readers on the Web, and that number is growing by some 3,000 readers per
day. Also, the elec-tronic edition has attracted more than thirty advertisers paying to reach this audince.

Initially, growth in the online publishing marketplace was driven by the potential of new interactive technologies and applications. The promise of new interactive publishing
captured the imagination of both content providers and the public. However, from 1993 to 1995 much of online publishing was inhibited by a lack of business purpose. At that
time, the con-tent creation side of online publishing was dominated by techno-savvy individuals who were not experienced at selling and who did not under-stand the business of publishing. In addition, there were publishing compa-nies who took a “Just Get Me on the Web!” approach, failing to define the business purposes driving their online presence.

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As the initial euphoria wore off, publishers realized that simply having a presence on the Web did not guarantee profits. They discovered that offering exciting technology without compelling content is insufficient to capture market share. These firms are learning that the best way to capture con-sumers’ attention is to develop a business model that allows the company to offer unique and valuable information, programming, and services. This content, no matter how it is delivered, must be packaged so that it provides more value than alternative sources of information. The key is to identify what the customer wants
and finds interesting and to avoid being distracted by new technologies. Publishers need to pay more attention to their core competency of packaging and delivering content and
making money online. These are tricky but necessary conditions to successful online publishing.

Many online publishing pioneers have gone up the technology curve and are confronting tough management questions such as how to gain mar-ket share and how to be profitable sooner than later. Some of these firms have invested tens of millions of dollars in people, equipment, and market-ing, and they have not yet turned a profit. Some of the sites employ hun-dreds of people, with millions of dollars in payroll alone. Many early
pioneers invested a huge amount of money into brand building, marketing, and content, but they have not been able to figure out which business model works best for making
money.

Online publishers are developing new business models to charge cus-tomers directly and convince them that such charges are justified. As more and more firms begin to offer online content, they are being forced to adjust to new customer attitudes regarding pricing. Publishers currently finance their businesses by offering advertisers mass markets for delivering their message in return for large advertising fees. The public has
been trained to think that the news, information, and entertainment they receive should be subsidized or nearly free and that advertisers will pay the bill. This ap-proach may not be viable in the online medium when mass markets are re-placed by customers selecting their information and delivery methods.

The early online publishing pioneers are trying to accomplish a difficult feat. Newspaper and magazine publishers, some of the first to stake their claims on the Internet, are tinkering with new advertising models for their fledgling Web sites. In general, mainstream advertisers have been skittish about pumping money into a medium with an audience whose size and habits are nearly impossible to figure out. As a result of relatively low ad revenues, none of the Web publishers have turned a profit. While ad rev-enues are not coming close to covering expenses now, they could grow sub-stantially in coming years as the traffic increases and brand names become established. Brand development is important because every time a user sits in front of a Web browser, she needs to make a decision about where to go. The better the brand, the more likely it is to pop up in the consumer’s mind

Another key issue in online publishing relates to digital copyrights. Effective technological protection mechanisms are vital to ensuring the availability of quality content online. Today, publishers such as Addison--Wesley only offer catalogs or sample selections of works available online. They do not and cannot offer more because in an environment where the culture and technology provide so little protection for the rights of
content producers, there is too great a risk to their intellectual property. The Internet makes it extremely easy to copy, retransmit, and alter works without the permission or the copyright holder. Moreover, the digital world has no in-ternational boundaries, and policing is impossible since the levels of protec-tions and sanctions against infringement vary widely in countries across the globe, which makes the risk even greater.

Online Publishing Strategies

As with any new development, there are generally three strategies for pub-lishing companies to consider:

Early Movers

These are highly skilled independent publishers with ex-isting access to such key capabilities as direct marketing and order fulfill-ment. These publishers have the capacity to derive the highest benefits from new media as their learning curves are much shorter than others, and they already have many of the necessary resources at hand.


Watchers

These are large publishing companies that employ scale-sensitive economics. They are unlikely to view online publishing as a suffi-ciently attractive channel until costs fall and distribution widens. This category includes publishers of unbranded or less distinctive content who cannot attract a sufficiently large initial consumer franchise, as well as fo-cused publishers in categories not easily suited for the online medium.

Testers

These are the majority of publishers that face either attractiveness and/ or skill challenges. Gathered here are many multi category and specialty publishers who are competing successfully in traditional mar-kets, who are uncertain who will win in the
online marketplace, and who neither need nor want to make a choice now. Testers also include branded general publishers with robust consumer franchises and attrac-tive distribution channels already in place. For this group, the online medium appears to
be an alternative.

In general, publishers are educating themselves about the potential op-portunities without committing themselves to anyone position. Those with strong brand images and existing
consumer franchises may choose to post-pone entry until they find viable service providers and distributors. Publishers such as the Wall Street Journal and New York Times are taking part in targeted tests and pilot projects aimed at learning what online
publishing has to offer, building required skills, and exploring the attractiveness of po-tential channels. These tests often include a skill-building program as well as an early warning system so that a company can quickly identify and re-act to changes within the industry or economy.

Content, incentives, service, quality, and price will not be enough to compete in this new environment. Speed of delivery, bundling of products, and diversity of choice also become critical success factors. Publishers will have to innovate constantly and challenge present concepts if this form of commerce is to become widely accepted and popular. Winning in online publishing will entail developing new skills in areas such as tailored adver-tising, order processing and fulfillment, and customer service as well as re-learning the fundamental principles concerning why people subscribe.

Online Publishing Approaches

There are four contrasting content publishing approaches.

• The online archive approach. This is new to the Web, but is a logical extension of the trends in electronic delivery over the past several years.

• The new medium approach. This is more controversial and more difficult to implement, but also more exciting.

• The publishing intermediation approach. This is an online extension of the third-party publisher role off-line.

• The dynamic and just-in-time approach. In this approach, content is assembled in real-time and transmitted in the format best suited to the user’s tastes and preferences.
The Online Archive Approach

The online archive approach (including bibliographic databases and full-text search/retrieval services) is one that appeals to

corporate publishers and, to some extent, commercial publishers (such as academic or journal publishers) who have an existing digital archive that they want to deliver over the Web as well as on paper, CD- ROM, or other media.

The most prevalent example of online archive approach is library cata-logs and bibliographic databases. Most libraries have replaced traditional card catalogs with sophisticated electronic online bibliographic databases offering an incredible range of
functions. At revenues of over $1 billion a year, bibliographic databases represent a sizable chunk of the online data-base market. An example of a bibliographic database is MEDLINE, devel-oped by the National Library of Medicine (NLM), which caters to an increasing number of physicians who rely on online medical databases to keep up to date with the latest developments and literature. The spread of PCs has enabled physicians to directly search databases used only by librar-ians in the past. MEDLINE and other medical databases are available free of charge on the Internet.

The online archive approach is also being used by niche publishers such as Ziff-Davis, which began its venture into electronic publishing in .1985 with a bulletin board system for readers of PC Magazine. That bul-letin board evolved in 1988 to become PC Mag-Net on CompuServe, which quickly grew in popularity. In 1991, Ziff-Davis created the ZD Net subscription service on CompuServe to provide a service supporting online versions of all its publications. Members of the ZD Net/CompuServe edi-tion have access to several features, including the ZD Net University series of comprehensive online “continuing education courses, sophisticated on-line forums with top industry personalities, and a comprehensive database of past articles. In addition to its successful
CompuServe subscription ser-vice, the ZD Net Web Edition (http://www.zdnet.com) logs access by more than 700,000 Internet hosts each month and is reportedly showing a profit.

The New Medium Approach

The new medium approach (including real -time news delivery, personalized news delivery, and edutainment) aims to create new material for the Web-to treat the Web as its own medium, one deserving its own material. This approach will have the most appeal to commercial print publishers, such as magazines, that view the Web as an al-ternative, not a replacement, for print publications. For example, Wired magazine sees very little
crossover in content between its magazine and its HotWired venture. Some writers may write for both media, but separate content streams will be developed for each medium.

This approach currently has some teething problems because of technolog-ical limitations. For instance, the formatting limitations of the Web are frustrat-ing at the moment, but with technological advancements they will soon be forgotten. The
frustrations are more than offset by the excitement of the inter-activity the Web offers; its model is both broadcasting and conversation at the same time. With online publishing there may be a well-known starting point, but with no controlling gatekeeper, the subsequent value-added improvisation from readers makes each online magazine a unique experience.

Even if the technology constraints were overcome, the expectations of the Web are so different from print media that newcontent, written for a Web audience, must be created. It quickly becomes apparent that under this model, the old paradigms do not work. The publisher gives up not only its brand name, but its intellectual content, too-once the information is out there, it is no longer, owned. Faced with that model, all a publisher can
do is “be the first with the most interesting stuff,” an approach that HotWired is taking in its attempt to create a place where readers can see what the world has to say on a minute-byminute basis.

The Publishing Intermediation Approach

The publishing intermedia-tion approach (including online directories) exploits new service opportuni-ties for intermediaries. For example, in the growing market for
educational material such as course packs and other customized books, companies offer-ing material owned by more than one publisher face the daunting task of obtaining permissions. New organizations that specialize in the manage-ment of copyright clearance are emerging as key players.

Online directories are important for several reasons. Companies and consumers interested in conducting electronic commerce often struggle to navigate the Internet to create an electronic marketplace. Once on that sprawling network, they are having trouble finding other companies, prod-ucts, and services. The success of Yahoo’s initial public offering (IPO) un-derscores the importance of online directories. Yahoo (which stands for Yet
Another Hierarchical Officious Oracle) was created in 1994 by David Filo and Jerry Yang, two Stanford, University electrical engineering PhD stu-dents who began DY simply compiling lists of their favorite Web sites. It went on to become one of the most popular means of navigating around the Internet. Yahoo is the first place millions of Internet users go when they try to find their way around the rapidly growing Internet. At
one time, Yahoo was getting about 6 million visitors per day, which made it the second most active Web site next to Netscape’s home page.

Clearly, there will be a demand for intermediation because there will al-ways be a need for a good directory to help people locate goods, services, and products. The future is bright for the publishing intermediaries who of-fer ease of operation, speed, and detailed information.

The Dynamic and Just-in-Time Publishing Approach

Online content is no longer static information. Content can now be created in real-time and transmitted on the fly in the format best suited to the user’s location, tastes, and preferences. More importantly, the content engine recognizes repeat visitors to a site and configures the Web pages to match the individual’s known preferences. For example, a publisher planning to deploy a large product catalog will no longer have to author and
update each individual Web page. Instead, the elements of each page-text, graphics, video, and sound-are stored separately in a database and used to create individual-ized pages on the fly as each user browses the site. The page content can be further customized to reflect which Web browser is being used, the user’s geographic location, and modem speed.

Another way of looking at dynamic publishing is that it is just-in-time publishing. That is, the stories, applets, and content

flow into the computer just as consumers need them, and then self-destruct after usage. A six-story subscription to Sports World might cost 99 cents. Pictures of your favorite ac-tor might go for $1.99. Want to buy a round in a cyber adventure game? How about a quarter? However, there is one question that constrains this vision: How can payments be collected on a product that costs a nickel or dime? So who cares if it costs 15 cents or more to process the transaction? Businesses do, and to satisfy the small-amount transaction market need, “micropayments” are essential.

A number of micropayment schemes are emerging. The world of online entertainment-specifically “pay-for-play” outlets being developed by Sony, Sierra On-Line, and others-could serve as the best model for every-one else [PCW96]. Clearly publishers and developers should be thinking about low-value payments, but it is still too early for most companies to de-ploy. For micro payments to work, transaction costs must be very small (around 10 cents), and they are nowhere near that yet. What is more, the proposed schemes vary widely and many kinks in the micro payment puz-zle have to be worked out.

Comments

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