I see that Prodigy, the IBM-Sears joint venture in information-highway construction, is still not profitable. This despite the fact that, with some two million users, it has the largest customer base of any online service.
This despite the fact that it has a revenue stream most other online services don't have--it carries paid advertising.
This despite the fact that they couldn't have spent much on that interface.
Still, I'm not surprised. Prodigy could be a case study in not understanding a market. This is just my opinion, but_.
Remember that censorship flap a couple of years back? The gist of it was, Prodigy management decided it didn't like the content of some of the messages being sent among users on its service and kicked some users off. And stirred up a hornet's nest in the process.
Now, you can argue about whether online services have the right--or the responsibility--to control the content of messages among users on the service. You can raise the issue of pornography or of national security. You can posit a need to keep commercial messages off a medium intended for noncommercial communications.
You can try to defend Prodigy's position, but I don't think you can defend the company's handling of the matter. Prodigy was apparently totally blindsided by the vehement reaction of its users. Does that matter? After all, Prodigy does have two million users; the censorship brouhaha couldn't have hurt it too badly. I think it does matter. I think it demonstrates Prodigy management's misunderstanding of its audience and of the nature of its business.
Then there's the advertising.
Prodigy was designed to tie two kinds of material together: material that you select to read and material that some third party has paid to have presented to you--that is, ads. You select the first, and you get the second, on the same screen, like it or not.
Now, that's not a new idea. It's how magazines work. Magazines are physical bundles of editorial material and advertising. You can't buy just the editorial part of the magazine. This is part of an odd economic model, in which you, the reader, don't pay what it costs to produce and distribute the editorial material. Your reading of that material is subsidized by the advertisers. Personally, I think the magazine model has a lot of advantages, given the limitations of the print medium, but would this model hold up in a medium where you can freely choose, and pay for, only what you really want to read?
Prodigy attempted to extend the magazine model to electronic publishing. This strikes me as a fundamental error. In the short term, it may be possible to force awkward bundles of information on people (ads and edit mixed on one screen), but it runs counter to the nature of the medium. One of the primary reasons for storing information electronically is so that you can access it in the way that is appropriate for you. Any system--or service--that works against this logic is inherently crippled. And in the long run, crippled systems and services don't compete well with healthy ones.
Does any of this explain Prodigy's current unprofitability? Probably not. But I think it does call into question the service's long-run viability.
Michael Swaine
editor-at-large
Copyright © 1994, Dr. Dobb's Journal