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COMMERCIAL SERVICES OR THE WEB? ONLINE EXPERTS SAY MARKETERS SHOULD GO DIRECTLY TO THE INTERNET

By Published on .

Marketers are being dragged into the tug-of-war between commercial online services and the Internet.

Once positioned as points of order in the chaotic universe of the Internet, commercial services such as America Online, Prodigy, CompuServe and the upcoming Microsoft Network are now being painted in a darker role.

Netscape Communications Corp. Chairman-CEO Jim Clark set the tone of New Media Expo in Los Angeles last week by taking several shots at commercial services during his unscripted keynote speech. Mr. Clark, whose company markets popular software that allows users to browse the Internet's World Wide Web, said commercial online services stand as unnecessary middlemen between information providers and consumers.

"The Internet is an open-access medium, meaning there's no intermediary between the supplier of the content and the user," Mr. Clark said. "This is in contrast to the commercial online services, [which] take a fairly large piece of the action for the content that users get."

Commercial online services typically get a cut of between 5% and 20% of sales generated by information providers. But marketers "generally don't want an intermediary. They don't want to pay a toll," he said. Mr. Clark stopped short of saying commercial services will be forced out of business or that Microsoft Corp.'s planned service won't succeed.

All of the commercial online services have been rushing to provide Web access. CompuServe last week took a big step forward by acquiring Internet access provider Spry for a breathtaking $100 million in cash and stock (see related story on Page 20).

CompuServe and AOL will join Prodigy in offering Web browsers in the coming months. Delphi Internet Services Corp. has licensed Netscape's technology for a new Web-focused interface that will be unveiled later this year. And Microsoft will integrate Internet access into its service at its launch.

But, Mr. Clark said, "Even mighty Microsoft will not be able to achieve the kind of revenues they'd like from the Microsoft Network because they are an intermediary."

And while consumers will continue to use commercial services for reasons including Internet access, several executives said those services shouldn't count on significant advertiser support. They said it makes more sense for marketers to bypass commercial services and set up storefronts directly on the Web.

"For advertisers, I would take a strong position that the Internet is the place to be," said Bruce Judson, general manager of new media at Time Inc., whose magazines have presences on various commercial services and the Web. "Because it's not a proprietary environment, you can do whatever you want without involving any gatekeepers."

The role of magazines-or "high-traffic editorial sites"-will be "in part to aggregate consumers for marketers," Mr. Judson said. "A central question for marketers is, `Once I put myself on the Web, how do I tell consumers I'm there?"'

There are other questions, the stickiest being the lack of transactional security on the Internet. Even Mr. Clark admitted the Internet is in a "brochure phase," allowing marketers to distribute information but not to sell their products and services.

"Security is at the core of what's needed in order for the Internet to be successful," he said.

But Rick Boyce, ad director of the popular Web site HotWired, said even without full security marketers are moving from "soft corporate sells" on the Internet to more aggressive promotional and sales approaches. New HotWired advertiser Cathay Pacific Airways, for example, is running a promotion that offers free trips to Hong Kong.

Limited bandwidth and slow access speeds are additional Internet drawbacks, said Robert May, president-CEO of Ikonic Interactive.

"The Internet is great for text, pretty good for graphics, not so good for voice and terrible for video," he said.

J Sandom, president-CEO of Einstein & Sandom, New York, the new-media division of D'Arcy, Masius, Benton & Bowles, came to the defense of commercial services.

"You have a better sense of who you're targeting-the demographic and psychographic profile of the end user. If you want to sell product today, you shouldn't ignore the commercial services."

Bo Wandell, VP-sales for Spry, said CompuServe's acquisition of Spry underscores that commercial services are carving out a role for themselves that taps the Internet's potential. But he, too, addressed the issue of commercial services as intermediaries, saying the appeal of the Web for marketers is "they're only one click away from the customer. They don't have to go through any other navigation."

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