MARCH 29, 1999:
MICHAEL WOLFF KEYNOTE SPEECH
WEB BUSINESS MODELS: AMAZING SUCCESSES, AMAZING FAILURES
Speakers: Michael Wolff (Burn Rate), Chris Clark (CGI Group), Carey Earle (Barn Door Consulting), Jim Seymour (PC Magazine), Patrick Spain (Hoovers), Tish Williams (Upside Media)
"An exciting thing is happening in America. For the first time in our history, millions of people are being linked up by a communications medium that is tax-free, toll free, and almost legislation-free. It is not controlled or administered by private monopolies and -- owing to its fantastic growth -- is virtually free of government restraint." -- Jason's Authentic Dictionary of CB Slang
At an interactive conference, it is not uncommon to hear utopian rhetoric from people who are drunk on the euphoria of new technology. It's reasonable to expect, then, that cynical author Michael Wolff would provide the festival with a healthy corrective to the sort of rosy overoptimism displayed in the quote above. Wolff's new book Burn Rate recounts the story of the author's precipitous rise to the dizzying heights of Web success (at one point his attorney estimates that he's worth $100 million) and his equally speedy plunge into financial oblivion. Burn Rate is an insider's look at the ongoing insanity of the Internet business. It is also a chance for Wolff to settle scores with "the blowhards and the gasbags and the egobastards" of the industry, and so, apparently, was his trip to Austin. Getting Mr. Wolff to deliver the keynote speech at a conference on interactive media was sort of like asking a jilted lover to give the toast at your wedding. Wolff certainly did dispel any lingering overoptimism at the conference. He dispelled any plain old optimism, for that matter. In fact, he advised that "the next time someone tells you they're 'building new communities,' say 'oh, fuck you.'" Wolff went on to say he was glad to be out of a business where success is merely failure that's been tortuously redefined -- "a business that's full of shit." He said that the seeming promise of e-commerce is just "another flash in the Internet pan." Content-based sites are also doomed, because "[online] advertising doesn't really work." And then on to interactive media itself. "The Internet was proclaimed a media business by people who know nothing about media," said Wolff. "New media is to media as military music is to music," because "the Internet doesn't, can't convey emotion. It's dead below the neck, which is fitting since it was created by technologists." Wolff's manner was subdued and thoughtful throughout. At times he seemed to be in a daze; he had to pause frequently, as if to get a grip on his rage and bitterness and steel himself for another barrage of spleen. The auditorium responded with nervous chuckles at first, then with stunned silence, and then with sporadic catcalls and obscene gestures. But that was okay, because according to him, the audience itself was doomed. Wolff predicted that "the Internet will go away as a discrete idea." It will become just another means of distribution; we will all return to our respective fields, and "we won't be sitting here together anymore."
That afternoon, Mr. Wolff appeared on a discussion panel, which had been changed at the last minute from "Amazing Web Failures" to "Web Business Models: Amazing Successes, Amazing Failures." The room was packed. I couldn't wait to see the sparks fly. I fervently hoped that someone would say, "We're building a Web community." (Someone did, and Mr. Wolff didn't rise to the bait.) But all that followed was a typical workshop session, full of hints on how to (and how not to) conduct business on the Web. The panelists were frequently interrupted by eager interjections from conferencees who'd achieved a modicum of success online, and by others who were still eager to hop on the Internet gravy train. Wolff himself was more a bemused contrarian than a bomb-throwing nihilist, and he playfully drew laughter from everyone with the very predictability of his gloomy forecasts. -- Chris Baker
Speakers: Janelle Brown (Salon Magazine.com), Harry Knowles (Aint-it-Cool-News.com), John Styn (Prehensile.com), and Nikol Lohr (Disgruntled Housewife.com)
Success is a loaded word when you're talking about webzines. First you have to consider what, in fact, success is. If it means making money, then most webzines probably aren't successful. If, on the other hand, success is being able to do what you want when you want, then you'd be hard pressed to find anything better. Anyway, if you're doing what you love to do, you're gonna make the cash eventually. At least that's what the five panelists on "The Secrets of Successful Webzines" kept alluding to. And frankly, there's no secret in that. Nevertheless, there is one thing these panelists seem to have had up their sleeves before their respective sites grew "successful," and that is controversy. Get someone or some company pissed off enough and, presto, you get thousands more hits and much more notoriety, which is something advertisers like. A lot. So as far as secrets go, here's the shakedown: First you have to have the inclination and the gusto to create a zine -- in other words, be able to rant continuously about whatever comes to mind because a) there is no justice in the world, or b) you're neurotic. Second, you have to get a cease and desist letter from someone like Sony Corporation (Knowles) or prosecutor Kenneth Starr (Salon) or Fruit of the Loom (Styn). And third, you have to love doing it. Patrick Henry, eat your heart out. -- Sam Martin
Speakers: George Hunt (TNV Communications), Content Love Knowles (Goddess Consulting), Christophe Pettus (Blowfish), John Styn (LustMonkey)
Odd that the room wasn't packed for this panel -- how rude of everyone not to stop by and at least say hello in person to the folks whose sites we so often frequent. Or have you not admitted that to yourself yet? At least you didn't miss any smutty talk -- unless you think money is very, very naughty. Just like with everyone else in the Internet business, the most fascinating issue discussed was how the money is made. How exactly can those panty shots click the zipper down on viewers' wallets? Babalon's dominatrix Content Knowles gave us exactly what we deserved with straight talk on the proper balance between free peeks and paid perks for her site's virtual members. She estimated that 500 porn site visitors equals one actual buyer, "so we got smart and stopped using the word 'free' in our ID's, because you're not looking for people who want free stuff." George Hunt, who started Thursday Night Videos, an online outlet for fetish videos, bemoaned the porn "gold rush" on the Internet that created something akin to a "huge party where everyone is talking so loud, no one is heard." In response, he said, TNV went pastel-soft and became a seductive oasis in the din.
Most of the panelists admitted they now spend less time enjoying the sexual fantasies on their sites and more time checking ad clicks and branding effectiveness, tracking viewers with cookies, and utilizing the "civilian" reseller force. They also stay away from the real sleaze of the business -- sites that prevent you from leaving with constant pop-up windows, or ones that create credit card snafus and threaten to credit your Visa account naming the "Anal Intruder" device you requested. Christophe Pettus of Blowfish, an e-commerce site for sexual tools, helped transition the discussion from finances to politics with the official quote of the day on the subject of impending federal trade regulation: "I wish the video lobby was as strong as the gun lobby because there'd be whole states where you couldn't get elected unless you said you whacked off to adult videos." If nothing else, voter turnout would improve. -- Louisa C. Brinsmade
Speakers: Tim Barber (Circumstance Design), Mike Bielinski (NVision Design Inc.), Doug Scott (Hollywood Stock Exchange), Jason Schneck (Harmonix)
Ultimately, the participants at this discussion on the usefulness of games to draw hits to a company's Web site ended in a split decision. From the left corner, panelist Doug Scott came out swinging with the idea that his company's game, the Hollywood Stock Exchange (which trades virtual movie stocks and star bonds), works effectively as "a retention tool" to keep players coming back. But what happens when the Web site itself is not a game? Let's say for a company like Saks Fifth Avenue? In that case, Tim Barber of Circumstance Design bluntly counters the possibility: "Games really can't attract traffic to a Web site." Instead, Barber advocates good old-fashioned marketing, widespread public relations, and advertising to increase click-through. Of course, somewhere in between these oppositional approaches lies a middle ground, a place where panelist Mike Bielinski (Nvision Design Inc.) weighs in his own strategy. "The game is a vehicle for advertising," says Bielinski. "It is not a product." And yet this thing that is "not a product" works as a dynamic selling tool for millions of dollars of advertising a year on the Net. So how does one reconcile this conundrum? Bielinski offers a partial solution. In order to qualify a game as successfully attracting traffic, he says, "you have to create a mechanism that will go beyond your Web site and draw people back to it." In other words, if the game isn't fun, the advertising message embedded within it won't gain widespread exposure. -- Marcel Meyer
Speakers: Alex Sheshunoff (E-the-People), R.U. Sirius (author), Ray Thomas (RTMark), Stefan Wray (Electronic Disturbance Theatre)
"Hacktivism" -- a word combining "hacker" and "activism" -- is an interesting term if you're into the lineage of the word "hacker," which was originally defined as "digital explorer," but evolved into having a pejorative connotation associated with unwanted computer intrusions. Given the range of meanings implied within the word's definition, "hacktivism" could have a range of meanings, from constructive technology-based activism to sinister monkey-wrenching "cracktivism." This panel did a pretty good job representing the whole playing field, though the most impressive presentation was ®˘ark's (http://www.RTMark.com) video explaining the group's subversive corporate detournément in the mad-avenue style of the slickest corporations. Says Rae Thomas, "Corporations are becoming the governing force that overrules everything." Corporations, she says, are given the rights of individuals but lack the same accountability. They actually can't be responsible, because they're just machines of economic enterprise. ®˘ark creates a context in which visitors to the site can create and fund projects of corporate subversion: The company's core is a database of unfulfilled projects. According to Thomas, the goal of ®˘ark is to "disperse some of the power in corporate hands and return autonomy to individuals. We're not pitching a single political position, but a single goal."
Sheshunoff is more of a traditional activist who has moved online, seeing a promise that the Internet will facilitate democratic process by giving more people a voice. He had PR concerns about acts of civil disobedience, noting that online activists should focus on acts that will change the opinions of soccer moms. Wray, one of the activists responsible for the strong ongoing Internet presence of the Zapatistas-favored "acts of cyber-resistance" that were more intrusive, and he criticized powerful entities like the Rand Corporation and the Defense Department for demonizing such acts with terms like "cyberterrorism" and "infowar." Sterling's presentation began with a kind of refutation. He had a review copy of a Rand Corporation book edited by David Ronfeldt called The Zapatista "Social Netwar" in Mexico. He said that guys like Ronfeldt and his collaborator, John Arquilla, are part of a think tank called The Highlands Group that understands hacktivists better than hacktivists understand them. The terms "infowar" and "cyberterrorism" are malarkey not because they demonize leftists but because America will be the great infowar power.
Perhaps the panel can be best characterized by this exchange, which occured toward the end of the discussion:
Sheshunoff: Why can't hacktivists be more upfront about their intentions?
-- Jon Lebkowsky
Speakers: Eben Miller, William Wiemenn, Rex Staples, Griffin Davis
In a town whose current boom is frequently attributed to one particular dorms-to-riches story -- greetings, Mr. Dell -- it only seems appropriate for SXSW to spotlight another: CollegeStudent.com. Four UT students with "dreams, Top Ramen, and a couple of bucks" decided to tap into their tightly focused, highly wired club (89% of all collegiates use the Net at least once a week) and are now sitting on top of a rocket.
The company is focused on creating local Web communities for college campuses, each built around a template to help students deal: apartment hunting, textbook swaps, event guides, even forums based on UT's "slam tables" for anonymous critiquing of professors.
TV newsguy Walt Macaborski led an engaging discussion into how CollegeStudent.com's staff has grown the company from its 1996 genesis, spending long nights devising a business model, finding good hires, courting investors, planning for 50% growth each succeeding quarter, partnering with existing college marketing networks, and dealing with the Web's sudden shift from advertising toward e-commerce revenues.
President Eben Miller pegged at least one key to successful fundraising: "Be as conservative [with business projections] as possible, then live up to those expectations." Since getting their first investment round of California cash just one year ago, the company now has sites (and local reps) for over 200 schools, and is on target to have over 1,000 by the end of the year.
Only time will tell if CollegeStudent.com will survive the rough-and-tumble market to polish off the Web-publishing grail (IPO and, say, positive earnings). For now, though, they're passing every test. -- Lax Gani
Speakers:Paula Batson (a2b music), Michael Robertson (MP3.com), Mark Mooradian (Jupiter Communications), Adam Powell (Greenrocket Internet Strategies), Carl Steadman (Industry Standard)
It's not often you see a hockey game break out at a technical conference, but that's exactly what happened at the MP3 panel. When The Austin Chronicle broke the MP3 story almost two years ago (Vol.16, No.48, "Digital Audio From the Cyber-Underground"), we told you there would be trouble down the road. This panel marked some of the first local shots fired in what promises to be a long and bitter war.
Some parts of this panel reminded me of Usenet, where long flame wars are commonplace with nothing much ever being resolved. Both sides came under attack and both sides answered back defensively, but there was little doubt as to where the majority of attendees stood in this fight. Unfortunately, the relentless attacks on major labels for trying to control digital audio made it all but impossible for the uninitiated to learn much about this buzzworthy new Net technology.
Representing the major-label interests was Paula Batson of AT&T's a2b digital music group. a2b is one of several formats competing to dominate the Next Big Thing -- direct distribution of CD-quality music on the Web. Along with LiquidAudio, a2b is a proprietary format that has been adopted by major labels. The majors are hoping they can fight off the MP3 "threat" by trying to force acceptance of one of the closed platform technologies. This would allow them to dominate the online music world much the same way they currently dominate the CD market, thus assuring that not only will they reap the benefits but also that artists themselves will get paid royalties for the reproduction of their original work.
On the other side, Michael Robertson, founder of MP3.com, defended the open format MP3 system. Though originally the province of hackers and pirates, MP3 has become the dominant form for distributing near-CD-quality music on the Web. Because it is open format, anyone can produce and distribute their own MP3's without investing in specialized equipment or absorbing huge distribution costs. It also means anyone can easily make a copy of an MP3, feeding a frenzy of bootleg paranoia among the major labels.
It remains to be seen how it will all play out, but it appears highly unlikely the major labels will be able to gain universal acceptance for a closed distribution system. The most exciting thing about Web-distributed music is that it allows Joe Blow and the No Names to have the same kind of world-wide distribution as Michael Jackson. Not only that, but where the gloved one only gets a nickel or so out of every dollar spent, Joe Blow stands to make 50 cents or better. Stay tuned for more coverage from the front. -- John Avignone
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