September 12, 2000
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Exchange the freewheeling web for a Hub. Musings on Metcalfe's law.

Robert Metcalfe, a founder of 3Com posited the theorem in the frenzied fin de siecle period at century's end that any kind of network (be it telecommunications, computer, electrical etc) will increase in value exponentially as each additional node or user comes online within that network.

IAPHC Member-at-large Richard Lunde has written: "A network of 5,000 printers is 25 times more valuable than a network of 1,000 printers. A network of 10,000 printers is 100 times more valuable than a network of 1,000 printers. The larger the network, the greater the value for everyone participating."

ABA Journal columnist David Hirsch offered Hirsch's Theory of Internet Reality (R=IT2) in the September 2000 issue of that magazine. The theory says that reality equals information times the speed of its transfer squared. By transfer he means how soon, how many times and to how many people information is sent.

"The formula means that the faster and more often information is transferred, the closer it comes to being accepted as true....the formula applies to all information. With the Internet becoming the fastest medium of information transfer, it is determining reality.....This is how the Internet differs from the printing press, radio and television. It is communication on steroids -low cost of entry and high interactivity."

In some ways the development of TMN has mirrored this new Reality Network. TMN is now read on five continents, perhaps on a computer screen, perhaps from a hard copy printout. No one can say how many virtual bounces each issue takes, being passed from hand to hand across unseen networks. And a differentiating criteria of TMN has been a willingness to not merely report the news but to think about it outloud via cyberspace. And therein lies its value according to YOU genteel reader, and many of your peers. As the information in TMN is whipped around the globe through your several networks, its reality is indeed 'communication on steroids.'

To each first time reader of TMN we say welcome, and then we also urge you to contact this writer as to how you can support the publication of TMN by the IAPHC through your membership in the IAPHC. Join our Knowledge Network. And feel the power of our value.

From Cross Overs to Cross Media

Dateline Minneapolis 11 September: "The technology web site designed by Bolger Concept to Print for the St. Paul Companies received an award of excellence from the Insurance Marketing Communications Association."

Dateline Chicago 11 September: "Red Rover Digital, a newly formed subsidiary of R.R. Donnelley & Sons ... announced it will develop content strategy and provide an editorial platform for Paperhub (www.paperhub.com), an online marketplace of information and commerce for the paper industry.

As all long time TMN readers know, we have been urging, ad nauseum, graphic arts professionals to embrace the potential of re-purposing content for other media.

The above two referenced dateline items offer current testimony of two old line printers grappling with the challenge. And a challenge it is.

Dateline Boston 11 September: From TrendWatch Fast Fact # 90 -- "More than 1/3 of publishers see cross media as a challenge compared to 20% who see it as a way to make more money....Clients are increasingly looking for one stop shopping - Web, print and more in one design house. Publishers are increasingly required to cross publish as well. And everyone has to do all this with the same staff, budgets and resources while not becoming a castaway. Effectively understanding and implementing cross media development is becoming a key way to keep from getting booted off the island....."

Consider this point gentle reader -- the good folks at TrendWatch, and especially our good friend Craig Kevghas, encourage us to re-publish blurbs from Fast Facts.

Coupled with the other datelined items of only yesterday, and then merged into your own versions of Metcalfe's Law of exponential network re-publication of this TMN, then teamed with Hirsch's Theory of Internet Reality, and we can postulate that somewhere in the world today, a reader begins to think that cross media must not be ignored.

If McLuhan was still writing, he might opine: The Medium of the Internet is the Message.

The Hub is the Crux of the Matter: after TunaBowl 2

A public speaker we know would growl at this juncture: "Come back now!" Come back and note the above blurb mentioning Red Rover Digital developing content strategy for paperhub.com

Who are those guys at Paperhub.com? In fact, what is all the talk about online exchanges and hubs?

The Internet Capital Group (ICG) has just increased its stake in PaperExchange.com from 20% to 83%. ICG common stock was used to purchase a huge chunk of PaperExchange.com from existing shareholders including Robert Kraft who owns a US football team called the New England Patriots who lost to the NY Jets in TunaBowl 2 on Monday night September 11. PaperExchange is trying to become more 'neutral' as an online exchange compared to ForestExpress.com which is bankrolled by GeorgiaPacific, International Paper and Weyerhaueser, or PaperX.com. PaperExchange.com says it has 7,000 registered members in 80 countries.

Why?

The word 'hub' is the term du jour used to describe the online exchanges that are spreading like wildfire. Dan Rybeck, managing director of ASI Associates says there are 750 vertical markets with exchanges in place, and the transaction value of these online exchanges is estimated at $2.2 trillion in 2003 with exponential growth to $7.4 trillion forecast by 2004.

Why? Metcalfe's Law. That's why!

Mr. Rybeck writes in the 11 September Minneapolis StarTribune: "....neutral exchanges copy the structure of a stock or commodity exchange, where the Web site is the buyer-seller meeting point. Neutral hubs are typically associated with industry segments that have many buyers and sellers looking to meet demand in a bid-ask format." Mr. Rybeck then goes on to offer PaperExchange.com as an example of a Vertical hub, an exchange aimed at one industry - yours and mine, the wondrously fragmented, ma and pa printing biz.

Fresh from getting a grip on the hub/exchange model, it was with some fascination or even consternation that we read the following item in the October 2000 issue of Worth magazine:

"Freestanding business-to-business exchanges will not survive," flatly predicts Jeffrey Skilling, president and COO of Enron Corp., the Houston based company that's been transforming itself from an energy company into the largest online trading community in the world with total transactions worth more than $109 billion since it opened its virtual doors last November. While independent exchanges are proliferating in every business category from printing to automotive goods, Skilling says that most are mere 'bulletin boards' that won't make it because they can't guarantee that buyers will actually get delivery of products and that sellers will actually get paid. Instead, Skilling forecasts that in the long term, the only successful online trading exchanges will be those with the resources to step in and fulfill delivery of any transaction that falls through. "We are at the beginning of a gigantic change in the worldwide trading of trillions of dollars of business goods online," says Skilling. "But to make it work, online exchange needs to combine clicks with bricks."

Sounds like surf's up in the Banzai Pipeline of change and exchange. Grab your board, it will be a helluva ride.

Of course the skeptic in us has to ask this question -- since every printed job is essentially a custom manufactured job and can be screwed up 1,001 ingenious ways, how exactly would an online trading exchange be able to step in to guarantee delivery of a printing job?

Whatever happened to the term "Vaporware?"

An interesting pre-release announcement was made at Seybold San Francisco on August 29. IKON Office Solutions has been pretty quiet in the print for pay segment in recent months. At Seybold SF, IKON announced the availability of its Digital Express 2000 e-service which is an ASP (Application Service Provider) for the graphic arts marketplace, intended to offer print service providers a scalable, convenient way to 'e-enable' their businesses. The ASP form of Digital Express will not be available until January 2001. IKON has hooked up with some good infrastructure names so it will be really intriguing to see what it finally reveals next year.

Industry Tidbits and other Blurbs

September 1: Spicers Paper Inc, based in Sante Fe Springs CA has continued its expansion program with the acquisition of Minnesota Paper Co. Spicers now has ten distribution facilities in the western region of the US in addition to merchanting businesses in Australia, New Zealand, Malayasia, Singapore and Hong Kong. Not to mention the irrepressible David Christie.

September 7: Lehman Brothers issued a research note suggesting that the imaging sector will fare better than photography in the digital age. New markets opened up by the digital dawn will outweigh the negative pull on margins. Interestingly, the firm thinks that digital is a more disruptive technology for traditional photography companies. "We believe the growth provided by digital photography will not be enough to offset the negative impact on margins from the cannibalization of film and lower margins in digital."

September 8: Eastman Kodak said that Sharp will be the original equipment manufacturer for lower end digital cameras to be sold in North America under the Kodak brand name. The new line will mostly be used for sending digital images via electronic mail or for posting on web sites. Kodak says lower end cameras are those priced under $200.

September 7: Print brokers are still another market segment needing to figure out a way to business on the 'Net. If that is your line of endeavour you may wish to go to www.print-broker.com/equotesonline_index.html

September 7: QuebecorWorld said it had signed a 10 year pact with Editora Abril S.A. to print 83 million magazines per year including VEJA, the Brazilian equivalent of TIME. The primary driver of the deal was the ability to deliver the magazines faster to subscribers and newsstands in Brazil.

September 12: Collabria, Inc announced that it had licensed the Pageflex Mpower product for use in the Collabria PrintCommerce service. One of our favorite

E-vangelizer's is Robert Hu, VP of Strategic Marketing for Collabria who said: "Mpower provides unique tools to automatically personalize marketing materials, partnering with Pageflex enables Collabria to offer a 'best-of-breed' variable data application to our growing community of PrintCommerce users."

As was mentioned in a recent issue of TMN, personalized, variable data imprinting is the "killer app" for digital presses. Our colleagues at the Print On Demand Initiative (PODi) provided a killer example from Hanson Graphics, a digital print shop in Memphis, TN, which achieved a 10-13% response rate and a dealer margin of $27,000 for every 1000 mailers in a project done for the Carolina Ford Dealership Direct Mail Program.

September 12: Danka Business Systems announced that it would now be able to sell several new hardware accessories for the Heidelberg Digimaster 9110 Imaging System, including the Heidelberg Inserter and Perfect Binder, and the ImageDirect 665 Production Scanner. We recall that the first 'market' price quote we saw for the 9110 was in fellow newsletter writer Larry Hunt's

High Speed Copy News this past April: A list price of $256,400 and a promotional discount of $68,900. As more and more conventional printers move into digital imaging, they would be well advised to connect with Larry who has been the guru in the field for more than 2 decades.

And from the October 2000 issue of Worth magazine: "Imagine being able to order any book ever written --including your own brilliant opus that has been gathering dust in the depths of your computer. John Feldcamp, cofounder and CEO of the digital publishing service Xlibris, is busy creating vast data banks for unpublished authors who want to make their books available through Amazon.com or Barnes & Noble.com 'Since most writers use computers, original content is actually being written in bits,' Feldcamp explains, 'and that means content is infinitely fluid and able to be processed.' Feldcamp has made deals with distributors like Baker & Taylor that have print-on-demand facilities for digital books. Even retailer Barnes & Noble is considering putting printers in its stores. In the next few years, customers will be able to browse a database of authors and titles, request a book, and have it bound in the time it takes to drink a cup of coffee. 'Nobody cares anymore if a book is sitting on a shelf somewhere, ' says Feldcamp. 'And the beauty of the virtual warehouse is that it will be infinitely large.'"

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