Who Owns the Customer

How multimedia "gateways" develop will define, for years to come, many industries' ability to create - and destroy - value Interactive multimedia is contagious. The trajectory and timing of its development will transform not only technology providers, but an increasingly broad range of other industries as well, including retailing, advertising, and financial services. The key agents of this transformation will be so-called "gateway businesses" - the suppliers, like CompuServe or Prodigy or America Online, of navigation assistance to end users seeking to locate resources available through the electronic network. Although standalone gateways today are largely limited to computers, they will soon be widely available on other platforms such as TVs, set-top boxes, portable access devices, and even screen-based telephones. At present, these gateways represent a fairly small revenue stream - less than US$800 million in 1994. Most of that revenue is concentrated in the United States, with a few notable exceptions such as the Minitel network in France. Nonetheless, the choices that the managers of these businesses make today will deeply enhance - or erode - the opportunities that managers of other businesses will have to create value in the future. Today a gateway is often tightly bundled with another business. The dial tone you hear when you pick up a phone and the number you enter on a telephone key pad represent elements of a simple but powerful gateway to the telephone network. Similarly, the on-screen program guides starting to appear on cable networks represent a gateway to the universe of cable. Over time, as the diversity of electronic networks and the resources they offer grow exponentially, so will the navigational value of a gateway service. The much-vaunted 500 channels on a full-service broadband network, for instance, would be useless without effective navigation assistance - and that is only one among the many networks that are likely to be available. Providers of all kinds recognize this opportunity and are maneuvering to become the gateway of choice for end users. Some - such as telephone and cable companies - assume that gateways will be tightly bundled with the networks themselves. Others - such as Microsoft and Delphi - are working to build standalone gateways that will operate across many networks. Both groups are eagerly pitching their gateways to multifarious content and service providers in an effort to expand the resources that their gateway can supply - and, if possible, to offer things not available elsewhere. A question of outcomes How will all this evolve? Many different outcomes are both possible and plausible. The potential revenue of the retail gateway service business in the United States in the year 2000, for example, could be anywhere from zero (if these services become tightly bundled with the communications network), to as much as $13 billion (if independent gateways succeed in capturing subscribers and delivering advertising to them). Moreover, the roles that such a service might play also vary widely. It could become no more than an interesting packaged software business or a "loss leader" to generate traffic on communications networks. But it could equally well become a critical distribution bottleneck through which content providers must pass to reach their audience - and through which advertisers must pass to deliver their messages. The challenge for senior managers, therefore, is to understand the range of possible outcomes and assess the implications of each one for their particular business. This challenge applies not only to companies that aspire to become gateways themselves, but also to those that are being courted by the gateways. Traditional media companies, such as magazine and newspaper publishers, are already being approached to adapt their content for specific gateways; so are retailers and banks. The choices these companies make in the next 12 to 18 months will have a profound effect on their own futures - as well as on how gateway businesses will themselves evolve. …