Computer On-line Services Wonder Which Way to Go
New venture offers small businesses access to newspapers and market-research reports
PITTSBURGH — ON-LINE services for computers are entering a rocky period.
Competition is about to heat up as Microsoft Corporation introduces a new and potentially popular network service. Analysts predict a price war will break out later this year.
Meanwhile, these companies face a strategic dilemma. They can continue building their own information ponds, adding proprietary services the way a newspaper or magazine adds new features. Or, they can provide access to the ocean of information now available on the worldwide computer network known as the Internet.
The first strategy has created a small but dues-paying clientele. The second offers a huge potential audience but with no guarantees of profit.
''All the business models have to change,'' says Mary Doyle, a senior research analyst with Link Resources Corporation, a New York research firm. ''It's definitely going to be Darwinian survival.''
Today, a New York electronic information service is announcing a new on-line venture that takes the first tack. It is aimed at small-business owners and entrepreneurs and has no plans to offer Internet links, at least initially. ''The point is that business people and people with limited time are not in a position to go cruising and surfing the net one page at a time,'' says Dan Wagner, chief executive officer of the new service, called Profound Inc. ''Our users want to get in and get out.''
So, Profound promises quick access, using a structured searching system, to thousands of newspapers and magazines, market-research reports, and profiles of companies, markets, and countries.
Its parent company, Market Analysis and Information Database Inc., already offers such service to Fortune 500 companies for $10,000 a year. Profound will try to lure the small-business crowd for a monthly subscription fee of $19.95 plus $6.95 for every hour of connect time.
On the other end of the spectrum is Delphi Internet Services Corporation. The Cambridge, Mass., company pioneered the idea of offering users full access to the Internet in a text mode. Now, it is rebuilding itself into a nonproprietary Internet access provider, which will allow many graphical-interface programs to use its gateway.
''The Internet is the future of on-line services,'' says Delphi spokeswoman Nancy Morrisroe. ''On-line services as we know them today are going to change dramatically in the next few years.''
The Big Three on-line services -- CompuServe, America Online, and Prodigy -- are also pushing to expand their links to the Internet. But they disagree on how it will affect their business. An America Online spokeswoman says her Vienna, Va., company is not in competition with the Internet.
CompuServe spokesman Pierce Reid declines to speculate: ''Will we always be in the information-service business?'' he asks. ''My crystal ball is in the shop this week. I can't tell you.'' The Columbus, Ohio, company is already selling Internet network connections to corporate customers.
Microsoft also appears to be taking a halfway approach. It is expected to offer Internet links but is also encouraging information companies to join its proprietary service. Analysts expect it will do well because its monthly service will cost about half that of its competitors. Also, the Redmond, Wash., company will offer the service with its much-awaited upgrade to its popular Windows operating system.
''The wild card is Microsoft,'' says Ms. Doyle of Link Resources. ''There's going to be this price war.''
In a report last November, Forrester Research Inc. predicted that both America Online and Microsoft would surge ahead of the current on-line leader, CompuServe, by 1998. The Cambridge, Mass., research firm forecast America Online would have 2.8 million users by that time, compared with 2.4 million for Microsoft, and 2.3 million for CompuServe.
By then, the on-line services will be in a major battle with the Internet itself, Forrester predicts. The threat? An area of the Internet called the World Wide Web is poised to attract millions more users.
Unlike much of the Internet, which is text-based, the Web is graphical. This makes it not only more pleasing to the eye, it means the service is far more easy to navigate. Users point and click with their computer mouse rather than having to type in obscure commands.
As more people gain access to the Internet via the Web, consumers will have less incentive to use the proprietary on-line services, analysts say. According to Forrester, Web users will surpass the proprietary on-line services for the first time in 1998 and continue growing while the on-line companies shrink. By the year 2000, the research firm forecasts the Web will have 21.9 million users, triple the total of its competitors.
Not all gloomy
Not everyone agrees that the prospects for on-line services will be so gloomy. ''There's a certain value to the organization in the way they package on-line services,'' says Len Strazewski, a technology columnist for Online Access magazine. That's why consumers still buy weekly news magazines even though they're not as current as daily newspapers, he points out.
And the Web itself may take longer to become a powerful force, says Eli Noam, director of Columbia University's Institute for Tele-Information. ''If you want to get to the mass market, there's still probably another generation of user-friendliness'' that the Web needs to create.
If it can't, then consumers may well be relying for years to come on the kind of highly structured services that Mr. Wagner of Profound is setting up.