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1996 - 97 REVIEW AND OUTLOOK

Internet Ups and Downs

December 30, 1996|MICHELLE V. RAFTER

1996 was a year of remarkable growth and equally remarkable hype in the Internet business, but the inevitable shakeout had already begun. Look for many more casualties in 1997 even as the industry continues to boom.

R.I.P.

Internet projects or companies that died in 1996

* WOW family online service. CompuServe ditched the user-friendly online network after signing up only 102,000 customers in eight months. America's No. 2 online company is now shifting emphasis to the Internet and eschewing the masses for business computer users.

* iGuide: News Corp. and MCI scrapped ambitious plans to start an online network, launched the scaled-down iGuide Web-zine in its place--then scrapped much of that too. Only entertainment fare from News Corp. holdings Fox News and TV Guide remains.

* IBM InfoSage personal news service. Big Blue spent many months and many millions creating a twice-daily news service that delivered headlines to subscribers' e-mailboxes, only to junk it because it competed with IBM customers. Its demise surely had something to do with the umpteen other players in the personalized news business.

* marketplaceMCI online mall. The multi-merchant online mall was one of the first and biggest on the Internet, but MCI killed it last summer when shoppers didn't bite. MCI also scrapped Music Now, a year-old venture that attempted to sell music through an 800 number.

* McKinley Group Web search engine. Inexperienced management and deficit spending forced the Sausalito, Calif., company's sale to Excite in June, the first consolidation in the overcrowded Web directory field and probably not the last.

* Freemark Communications free e-mail. Underfunded and undone by a well-heeled rival, the advertising-supported free e-mail service called it quits on Dec. 1. In the year it was around, Freemark struck deals with more than 50 advertisers but only signed up 50,000 customers.

* VirtualCity magazine. The quarterly cyberspace culture magazine started by a few former Ziff-Davis editors and partly funded and distributed by Newsweek never made it past its fourth issue.

* Clickshare micropayments. The e-commerce pioneer developed software that allowed people to use "microtransactions" to pay for information online, but it ground to a halt after management squabbles caused investors to balk, employees to walk.

* Microsoft Bob and Microsoft Network. Bob, the idiot-proof organizer and e-mail service, made a splashy entrance at the 1995 Consumer Electronics Show, then did a fast fade. MSN, launched as an AOL-killer proprietary online network in August 1995, now lives on the Web.

Hot Prospects

Internet companies to watch in 1997

* Microsoft and Netscape Internet software. The holy war over dominance of the nation's computer desktops continues. One of the most interesting new fronts: software that would blend a PC's operating system and Web browser. Microsoft calls its version Active Desktop; Netscape's is Constellation.

* America Online online network. The country's No. 1 online service took the flat-rate plunge Dec. 1 and cut prices to $19.95 a month for unlimited access. The heavy use that's resulted is already giving AOL--and subscribers--major headaches. It remains to be seen whether the company can translate more customers paying less per month into bigger profits.

* Tuneup.com interactive tech center. Subscribers pay $3.95 a month to log on to the PC service center's Web site for virus sweeps and updates on certain software and drivers, and pay extra for premium services such as file backups. The Palo Alto start-up has partner deals with Ziff-Davis, GTE, Hewlett-Packard and others.

* WebTV Networks Internet TV terminals. The Palo Alto company and partners Sony and Philips pushed the equipment and service that make the TV Internet-capable hard this Christmas, but many analysts say the public's love affair with the Internet in their living rooms will be brief. Not good news for the raft of competitors working on their own Internet appliances.

* CyberCash online payment methods. A front-runner in online payments, the Reston, Va., company gives away "virtual wallets" for credit card transactions, introduced CyberCoin micropayments and is expected to announce a line of electronic checks. Ultimately, CyberCash wants to offer private-label services to banks.

* Juno Online Services free e-mail. Funded by Wall Street powerhouse D.E. Shaw, the ad-supported free e-mail service has signed up 1 million subscribers and dozens of advertisers. Juno outlasted its first major competitor (see related list) but others lurk, and the jury's out on whether Americans will want an e-mail-only Internet connection.

* FireFly collaborative filtering. The Cambridge, Mass., company uses sophisticated database and filtering software to let people swap likes and dislikes, then use the information to buy stuff or pick Web sites. The spinoff of MIT's vaunted Media Lab is a market leader and has deals with Yahoo, Rolling Stone and others.

* Marimba Internet broadcast technology. Another "push" technology company, this one selling a suite of Java-based software that lets Web sites broadcast information or software over the Internet or company intranet. Started by some of the same Sun employees who invented Java and backed by Kleiner Perkins Caufield & Byers, the hot Silicon Valley venture firm.

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