EWorld delivers interactive services, shopping, software

During the last year, online services emerged as a major growth area in the new media/interactive services business. Eager to explore the potential for delivering interactive services to personal computer users via online services, hundreds of publishers, information providers, media conglomerates, cable operators, computer companies and investors are forging alliances with online service providers such as CompuServe, Prodigy, America Online (AOL), Genie, Delphi and The Well.

Network subscriber ranks are swelling as well. There are an estimated 4 million subscribers to online services in the United States, with this total expected to exceed 5.5 million by year’s end.

The subscriber base of America Online, the third largest and the fastest growing service, increased 145 percent just in the past year.

EWORLD ANGLES FOR PROFESSIONALS

Adding fuel to this fire, Apple Computer earlier this month announced its plans to deliver EWorld, a global online service that has been in development at Apple for more than three years and is based on core technologies Apple licensed from AOL in December 1992.

The company says initially — the launch is expected in the spring — it will aim the service at professionals by offering publications, information and forums specific to their fields. Eventually, Apple plans to develop EWorld to serve international, home, educational and children’s markets.

Apple says it will create a version of EWorld for Windows and the Newton devices, but has not yet committed to a delivery date. Mail capabilities for Newton will be available at launch, according to Apple.

Apple says international English language versions of the service will be distributed later this year as well, with Japanese, German and French versions to follow.

INTERFACE MIMICS REAL WORLD

In an attempt to distinguish EWorld from other online services, Apple is focusing on developing EWorld’s ease of use for non-technical users (read consumers) and on targeting its content for specific markets.

The EWorld interface is modeled on a geographical metaphor, not dissimilar to General Magic’s MagicCap interface for its Telescript technology. (For more on General Magic, see Vol. 2, No. 10/11, p. 13.) The opening screen features an illustrated representation of an electronic neighborhood. Each of the buildings in the neighborhood represents a specific area of the online service: a library for research; a newsstand for news and sports publications; a business and professional plaza for business information and services; an arts and leisure pavilion for entertainment and hobbies; a computer center for computer assistance and software; a marketplace for shopping; and a post office for electronic communications and online events.

Beyond the opening interface, screens are color-coded and make consistent use of icons to indicate the area in use. A pull-down menu that sequentially lists areas that have been visited during a session is intended to help users navigate through the system. As with other online services, “go to” and keyword options can be selected at any time.

At the launch, Apple says more than 100 publishers and information providers will supply branded services that are tailored to business community interests. These organizations include the Boston Computer Society (BCS); BMUG, a Macintosh users’ group based in Berkeley, CA; Dow Jones Business Information Services; Grolier Electronic Publishing, Inc.; Infoworld; Macworld; Regis McKenna; Reuters America; Tribune Media Services; USA Today Information Center; WordPerfect Corp.; and ZiffNet/Mac, a computer-oriented online service.

AppleLink, EWorld merge. Some of EWorld’s first business customers will be subscribers of AppleLink, Apple’s nine-year-old online service that caters primarily to computer professionals interested in news from and about Apple. Apple says it will phase the profitable AppleLink business as well as its 60,000 subscribers into EWorld during the first 18 months of operation.

Lower rates. AppleLink subscribers should be cheered by this move if for no other reason than that it will greatly lower their rates. EWorld is available for $8.95 a month, which buys two hours of free connect time on weekends and evenings, with each additional non-prime-time hour costing $4.95.

Usage during primetime hours (weekdays from 6 AM to 6 PM) carries a $2.95 surcharge. (AppleLink, on average, costs its subscribers about $70 a month.)

Apple says certain third-party information providers will charge additional fees for premium services available on their forums. Users can send an unlimited number of messages per month. While pricing structures for online services are about as complex as protocols for retrieving data off the Internet, Apple’s service works out to be roughly comparable to other online services (but more expensive than AOL, which charges $9.95 for five hours of prime-time or non-prime-time monthly usage).

AN APPLE SPIN ON AOL TECHNOLOGY

EWorld is built on top of America Online technology, which Apple licensed from AOL for what we can only speculate to be a stunning sum of money. (Whatever the figure, it was hefty enough to convince Steve Case, president of AOL, to issue a public statement welcoming his newest competitor into the online services fray.)

According to Jean Villaneuva, VP of corporate communications at America Online, AOL retains ownership of the technology that AOL is providing to develop EWorld, and in addition to the flat licensing fee, the Vienna, VA-based online service will receive royalties based on usage of EWorld for Macintosh, NewtonMail (the communications service it developed for Newton devices) and other client platforms.

From our perspective this is a clear win for AOL. If EWorld, as Apple hopes, captures a significant portion of the growing consumer online subscriber base, AOL benefits financially from its royalty agreement with Apple. If EWorld fades away, AOL still walks away with cash, which it can then use to advance its own service.

A platform for publishers. Apple says EWorld will be different from AOL in a number of ways. For starters, Apple plans to deliver EWorld on a global basis. In addition, the company says it plans to add a number of significant features to the service, including the user interface design (previously discussed) and the publishing tools (enhanced versions of those available on AppleLink).

EWorld Press, as the publishing program for EWorld is called, offers content providers simplified tools for creating and maintaining online publications. Unlike AOL, EWorld software enables publishers to preserve the look of their print publications in network versions. Additionally, publishers can edit or change online articles without the assistance of a network administrator.

Free market research. EWorld Press participants will be supplied with statistical information on how their area was used, and, to a lesser extent, by whom. “The standard [monthly] reports we’ll give to publishers will let them know how many people have accessed their publication, and some demographic information,” says Richard Gingras, group manager of worldwide services for AOS. “On a periodic basis, we will do more detailed reporting which will cover specific areas of use.”

Gingras says he envisions this as a free service to publishers. However, AOS is likely to charge advertisers, retailers and marketers for access to similar statistics in their information areas, he says.

Learning from AOL’s mistakes. Apple and AOL are also working to improve several operational aspects of the AOL-based service, improvements that AOL plans to integrate as well. One of AOL’s major problems is that it is overwhelmed by all the increased traffic on its service. As a result, subscribers are sometimes denied access to the service. (This is typically in the evenings and on weekends when online services receive the greatest use.) Waiting times on customer service calls have been known to exceed an hour.

In an attempt to avoid such problems, EWorld communication links are separate from the host, which is run by Apple in northern California, and are easier to upgrade, according to Peter Friedman, director and general manager of Apple Online Services (AOS), the division responsible for EWorld. He says these improvements should help alleviate some of the ramping problems experienced by AOL over the last year. In addition, Friedman says Apple’s phased approach to entering new markets will allow the system to expand more transparently.

EWORLD VS. AOL: WHAT DIFFERENCE?

Despite Apple’s attempts to distinguish EWorld from other online services, at launch it will bear a strong resemblance to America Online. And, in fact, it may be difficult to discern any difference between the content on EWorld and any other commercial network.

Missed Internet opportunity? One area where Apple had a golden opportunity to break new ground is in the implementation of an elegant and easy-to-use interface for the Internet, the massive, ad hoc amalgam of international networks. The Internet, which at last count was host to some 15–20 million users and growing exponentially, is an unimaginably rich source of information, but one that is nearly impossible for average humans to navigate. Offering easy-to-use access to this network — an obvious area of expertise for Apple — would provide subscribers with an extremely valuable reference and information source that is unavailable anywhere else. In short, it would have given Apple a significant advantage in the ever-more-crowded online service market.

At rollout, Apple is promising a basic Internet gateway only. By summer, the company says it hopes to make available a Gopher-like interface for the Internet, according to Gingras. (Internet mail access has become standard on most online services, and access to WAIS databases is available or will be available shortly on some services.) Eventually, AOS plans to develop a more sophisticated Internet interface.

An intelligent network. Future versions of EWorld will also incorporate intelligent search capabilities, according to Gingras. Initially, he says, select online offerings will be imbued with AppleSearch text retrieval capabilities.

AppleSearch is a sophisticated text retrieval engine that enables text searches in the user’s own words. The technology allows user-defined electronic search agents, called “reporters,” to make scheduled searches for information, such as sports scores and stock quotes, and automatically send results from the server where the data reside on the user’s computer. Gingras says this is “Apple technology that will become more pervasive over time.”

In addition to experimenting with AppleSearch technologies, Apple says it is evaluating a number of “intelligent” technologies, including General Magic’s Telescript.

“We will have intelligent agents over time, whether or not we use Telescript,” says Friedman. “A lot of these decisions will be decided based on feedback we get. We can put our energy in any direction we like to develop certain capabilities faster.”

LOOKING FOR STEADY REVENUE

Apple’s move into consumer online services is a quest for a steady revenue stream and a new business model that promises future growth. The company’s core business in personal computers — still the major source of its $8 billion in annual revenues — is sliding, and it desperately needs a new source of revenue to offset the loss.

While future profit margins for online services may have enticed Apple into the business, startup costs are often high, with payoffs several years away. It was a realization of these economics that led Apple to license AOL’s technologies, among the most elegant on the market in terms of ease of use, rather than start from scratch on the design. “If I had $100 million, I would have taken four years and built the system myself,” says Friedman. “But the margins aren’t there.”

Bundled with millions of Macs. In addition, Apple is hoping its startup costs will be lower than they are for most online businesses because it can take advantage of its existing sales channels in order to market and distribute the service. Apple plans to bundle EWorld with almost every new Macintosh and Newton, according to Apple CEO Michael Spindler at a press briefing during Macworld. This represents about 4 million devices annually — not a bad market in which to launch a service.

Friedman says it may be as late as spring 1995 before all Macintoshes and Newtons are bundled with EWorld services because he wants to ensure that the content for market segments is developed before EWorld is released to certain markets.

Profits in five years? Friedman says EWorld is self-funded from profits of AppleLink and money from cost-cutting measures in Apple’s hardware business. Within less than five years, he says, he expects EWorld to be a profitable business with “millions of subscribers.” With even half a million subscribers, Apple’s annual revenue from the $8.95 flat-rate subscription fees alone would top $53 million.

A NEW CHANNEL FOR APPLE TECHNOLOGY

Apple has ambitious plans to marry several of its ongoing efforts in the areas of interactive shopping and services to the EWorld service as well.

Online dispatch. Perhaps most notably, Apple will use EWorld to sell and distribute software online. Apple says this service might be based on Software Dispatch, a program running since November, which offers demonstrations, trial versions and information on more than 75 Apple products via CD-ROM. Instead of dialing a toll-free number to place an order, as is required with the CD-ROM version of Software Dispatch, EWorld users will be able to purchase and download products online. No timeline for such services has been set yet, according to Friedman.

Eventually sales of Apple hardware may be offered online as well. Friedman says the decision to pursue such distribution strategies is to be determined by the individual hardware business units within Apple.

While this new distribution model may not please many Apple value-added resellers (VARs), sales and distribution of software online is a natural fit. Not only will users have the added convenience of instant product delivery without having to leave their homes or offices, but Apple is saved shipping to third-party distributors and some sales and marketing costs.

Apple is also looking into placing on the EWorld service a version of En Passant, an interactive home shopping pilot test on CD-ROM. The test is being conducted among 30,000 Macintosh computer owners in conjunction with EDS and Redgate Communications (see Vol. 3, No. 7, p. 33, for details). En Passant, which began on a trial basis in December, features 21 catalogs from retailers, including LL Bean, Land’s End, Williams Sonoma, Tiffany & Co. and Pottery Barn.

COMPETITION MEANS SUBSCRIBER CHOICE

The Apple brand identity and smart marketing moves will get Apple into the game. In the long run, however, AOS must deliver on its promises of content tailored to specific markets, graceful Internet access, intelligent searching capabilities and compelling interactive shopping and other services in order to keep consumers bucking up monthly subscription fees.

“People have to find value in what’s being offered to be willing to pay for it,” Friedman says. “We really have to succeed or fail based on the value we provide.”

The risk inherent in subscription-based services is that if consumers don’t like what’s on — or in the case of the increasingly competitive online services market, can find other better or less expensive services — they can simply turn the service off and take their spending dollars elsewhere.

Amy Johns