Internet Overview
By Eric Goldman, Esq.
Cooley Godward LLP, Palo Alto, CA
1. WHAT’S NEW ABOUT THE INTERNET?
- User authentication (for identity, age, geography, etc.) isn’t easy
- No central gatekeeper
- Users are both producers and consumers of information
- Effectively zero marginal reproduction and distribution costs
- Narrow special interest groups can form without geographic critical mass
- No clear borders demarcating the frontier of the network
- Easy to find up-to-date information 24 hours a day
2. INTERNET REVENUE MODELS.
2.1 Overview.
- Attention is the precondition of success
- Diagonal competition—competing in markets where products/services are being given away
- Doin’ deals to do deals—the new-fangled currency of accounting revenues (but not profits), Media Metrix rankings, and user counts.
2.2 Internet Access.
- Ranges from consumer-oriented dial-up accounts to dedicated lines to collocation.
- Companies (like NetZero, GM and Kmart) are giving away Internet access to get control over the interface.
2.3 User-Paid Subscriptions.
- A few notable examples where users pay for services or content (such as Wall Street Journal, Consumer Reports and EverQuest), but many failures.
- Is most content/services susceptible to diagonal competition?
2.4 Advertising/Sponsorships.
- More on this during my co-branding talk.
2.5 E-Commerce.
- Companies are getting desperate. Examples: Onsale; More.com; Beyond.com; Amazon.com.
- Acquiring users has become more expensive: done either through below-cost promotions or by paying big bucks to traffic sources (TV ads, portal deals).
- Back-end technology implementation and operations is not easy: Toys ‘R’ Us took Christmas orders it could not deliver, and sites often advertise goods at a wrong price.
- Checkerboard of regulation: selling insurance, cars, prescription drugs, wine online is not easy!
- Selling IP virtually: there are a wide range of pre- and post-infringement controls.
- Auctions: eBay looks good, but can anyone compete?
2.6 Direct Marketing to Users.
- Many companies now use very sophisticated offerings to obtain user information for direct marketing purposes. Example: MyPoints
- Requires users to trust the site = privacy policy issues
- Will promoting sites permit direct marketing to “their” users?
- What does the law permit? Can email addresses ever be sold? Can children’s information ever be sold?
2.7 Web Design/Development.
- Can be low-margin and per-hour. Can be huge opportunity cost of engineers’ time.
- Ownership/license rights should support leveraging efforts.
2.8 Offline Sales.
- Using online activities to drive offline sales.
3. FAQS OF INTERNET LAWYERS
- Is a clickthrough agreement enforceable?
- How do I register my domain name in every country in the world?
- I’d like to permit user content but I don’t want any liability. What can we do to absolve us of all liability?
- I want to scrape/steal someone’s information using robots
- I want to spam my users in contravention of my privacy policy
4. WHAT MAKES AN INTERNET PRACTICE SO DIFFICULT?
- Doin’ deals in Internet time
- Doin’ deals to do deals
- Every little aspect of the technology matters
- Constant influx of new people to the industry
- Business models have not settled down
- Lack of internal controls (publishing without editors)
- The early cases on an Internet topic are usually wrongly decided
- Congress and the states write stupid laws
- Cut ‘n’ paste drafting tends to propagate bad memes. “But ____ is doing it!!!”
5. DON’T LET IT HAPPEN TO YOU….
- GeoCities, Real Networks, Liberty Financial, ReverseAuction
- Panavision v. Toeppen
- Millennium case
- Pokey.org
6. PERSONAL INTERNET WAR STORIES.
- “I’d like to do a linking deal where I receive a referral fee from an online escrow company.” “I’d like to do a linking deal where I receive a referral fee from an insurance underwriter.”
- “I’m from BARF, and a member of yours has posted a picture of me on your site that violates my copyright.”
- “How does one transfer a block of Class C IP addresses? And what’s the market rate?”
- “A user is auctioning bazookas on our site. What do I do?”
- “I’d like to start a kid’s online talent agency called castingcouch.com.”
- “I’d like to auction dinosaur bones on your site.”
- “There is a kidnapper in your chatrooms who has kidnapped one of your users.”
About the Speaker: Eric Goldman (formerly Eric Schlachter) is an attorney practicing cyberspace law with Cooley Godward LLP, Palo Alto, CA. He also is an adjunct professor of Cyberspace Law at Santa Clara University School of Law. Cooley Godward’s web page is located at http://www.cooley.com, and Eric’s personal home page is located at http://members.theglobe.com/ericgoldman/. Eric can be reached at egoldman@cooley.com.