FRONTLINE Show #1403

Air Date: October 31, 1995

High Stakes in Cyberspace

ANNOUNCER: Why is corporate America spending billions of dollars in cyberspace? Why, to find out everything they can about you?

ROBERT KRULWICH: Somewhere in your computer, you'll know the movies I've seen.

VIRGINIA WELCH: You might be listened to.

ROBERT KRULWICH: You'll know the clothes I bought.

MARGIE WYLIE: They're going to know what you like.

ROBERT KRULWICH: You will know more about me than even the government_

PAUL SAFFO: Big Brother watching over us.

ROBERT KRULWICH: than maybe even my wife.

MARGIE WYLIE: And isn't it a little scary?

ANNOUNCER: Correspondent Robert Krulwich examines "The High Stakes in Cyberspace.''

1st VOICE MAIL SYSTEM: If you know the number of the document you want, please enter that number now.

2nd VOICE MAIL SYSTEM: Please try again.

3rd VOICE MAIL SYSTEM: Chemical Bank's 24-hour touch-tone service_

4th VOICE MAIL SYSTEM: You've reached "Easy Talk''_

ROBERT KRULWICH: You might as well admit it right from the start. You may know absolutely nothing about computers or computer networks or cyberspace_

1st COMPUTER VOICE: Left turn ahead

2nd COMPUTER VOICE: You will be guided step by step_

ROBERT KRULWICH: _but you know that you are surrounded.

HOWARD RHEINGOLD: Computers are getting faster, cheaper, smarter.

FEMALE VOICE: Everybody gets a voice.

ROBERT KRULWICH: There are so many new devices getting smarter and faster and slicker_

CAR COMPUTER: Stay straight_

ROBERT KRULWICH: _and cheaper.pP> STEWART BRAND: A relentless pace of change.

JIM CLARK: Everything is interconnected.

DAVID KLINE: Multiple billions of dollars.

ROBERT KRULWICH: There are so many companies spending billions of dollars to get our attention, that you have to wonder_ what are we getting and what are we giving up as we slip into cyberspace?

PAUL SAFFO:Absolutely everything is up for grabs.

ROBERT KRULWICH: Because like it or not, we are now, all of us, linked to computer networks. For example, everybody's done this, right? You go to your automatic teller machine at the bank, put in your card, do your business. But what you may not realize is when you touch that keypad, you are programming a supercomputer.
Somewhere out there there's a giant computer that sees the I.D. on your card and then responds directly to your commands. So you may know absolutely nothing about computers, but when you go "boop, boop, boop, boop, boop'' you are programming in cyberspace. And you don't notice because these devices are so simple and so friendly they disguise the mind-boggling complexity of what they do.
More and more simple daily tasks are moving quietly into cyberspace, like shopping for groceries or buying gasoline. There are even satellite-controlled navigation systems that make sure you don't get lost.
CAR COMPUTER: Destination ahead.

ROBERT KRULWICH: But most of us only really use new gadgets when they become easy and un-scary and it's always been this way with new machines. Sixty years ago people had to be taught what telephones were for.

1st VOICE ON TELEPHONE: [Telephone company instructional film] Buy 100 shares at the market.

2nd VOICE ON TELEPHONE: Can I get a permanent at 4:00 o'clock?

3rd VOICE ON TELEPHONE: Over George Washington Bridge_

4th VOICE ON TELEPHONE: Connect me with the credit department.

ROBERT KRULWICH: Even dialing had to be explained.

INSTRUCTOR: [Telephone company instructional film] When dialing, notice I brought my finger around until it firmly touched the finger stop. And now I remove my finger. Soon after you dial the number you want, you will hear this tone. That's the ringing signal, an interrupted burring sound.

GREGORY MILLER: Guys, let's get back to Tenadar, okay? The agenda for today is first we're going to sign a business form so we can be an official business.

ROBERT KRULWICH: Some of the businessmen shaping our future can't even remember when we had dial phones. Meet the board of directors of Tenadar, a new computer software company in San Carlos, California. The oldest director is 12.

BRUNO PETERSON: There's this problem with downloading games. We need to lock it so that changes cannot be made.

MIKE NUNAN: Oh, I got an idea.

ROBERT KRULWICH: If your idea of a kid's job is a paper route, you might have trouble keeping up with these guys.

GREGORY MILLER: They're giving us at least five megabytes.

MIKE NUNAN: Five megabytes!

GREGORY MILLER: Five megabytes.

BRUNO PETERSON: Oh, man. Wow! That's a lot.

GREGORY MILLER: Here's one of the games we made. It's called "Dungeon of India.'' Very intensive programming in here.

ROBERT KRULWICH: Gregory Miller is the president of Tenadar. He's 11 years old.

GREGORY MILLER: It's really fun because you can die a lot!

ROBERT KRULWICH: Tenadar's games are distributed worldwide on the Internet. That means kids as far away as Singapore or Bombay or Sydney could be playing them. All they need is a computer, a telephone and a connecting device called a modem.

GREGORY MILLER: L.T. is the vice president. He reports to me.

BRUNO PETERSON: Who do I report to?

ROBERT KRULWICH: The information revolution doesn't intimidate Gregory or his classmates. To them, computers are brilliant and friendly and cool.

JIM CLARK, Chairman, Netscape Communications: [Jim Clark has started two billion-dollar software companies. E-mail address: chairman@netscape.com] In order to learn to program a computer today_ practically any 11- or 12-year-old can do that. All they have to do is get a computer, get a few programming tools, learn a language and suddenly they can start becoming an expert at quite a young age_ at 10_ 10 or 11 years old. It's true. Consequently, by the time they're 20, they're really experts and, you know, they've got 10 years of experience.

TENADAR DIRECTORS: Okay, guys. Thanks. Nice working with you. Yeah. You, too.

ROBERT KRULWICH: Not only are these kids comfortable in a world run by computers, they can't even imagine the future without them.

GREGORY MILLER: It's kind of amazing to think of how people could live without computers.

ROBERT KRULWICH: People have always had high hopes for technology.

ANNOUNCER: [Newsreel] Bringing up baby by push-button_ a grandiose conception, indeed.

ROBERT KRULWICH: High hopes and some pretty bad ideas.

ANNOUNCER: [Newsreel] And the tykes will spend happily antiseptic infancies untouched by human hands. They'll even be tucked into their cribs by remote control.
This is the kitchen of tomorrow, a press-button dream coming true for_

ROBERT KRULWICH: Sometimes you get too much technology for the job.

ANNOUNCER: [Newsreel] What's for dinner? Consult the menus on pictures and dish up something new for a change.

ROBERT KRULWICH: And sometimes they promise more than they can deliver.

ANNOUNCER: [Newsreel] It's the often forecast videophone. At last, a reason for all the primping that usually precedes a woman's phone call.
A look at the future. Looks good, eh?

ROBERT KRULWICH: The promises today sometimes sound more like commands.

ANNOUNCER: [television commercial] Have you ever checked out of a supermarket_ CASHIER: Will that be all today?

CUSTOMER: Yes, it will. Thank you.

ANNOUNCER: _a whole cart at a time? You will. Or gotten a phone call_

MAN USING WRISTPHONE: Hello?

ANNOUNCER: _on your wrist?

CALLER: How was your day?

ANNOUNCER: You will. Or had an assistant_

ROBERT KRULWICH: You might not ask for it, but you're going to get it anyway.

COMPUTER: _the reference material I gathered for you ten o'clock meeting, and I'm still working on_

ANNOUNCER: [television commercial] You will_ you will_ you will_

ROBERT KRULWICH: One day, nearly everything we do will move through cyberspace, but for the moment, most of the traffic travels on the Internet, a complex system of computer networks originally built by the United States Defense Department to survive nuclear attack. You wouldn't call what folks do on the Internet today top secret. Not at all. There's the "Breakfast Cereal Hall of Fame,'' for example, or the guide to the public restrooms of North America. You could always visit Steve's ant farm. If you have a strange obsession, whatever it might be, there's a place for you on the Internet.

DAVID FILO: We have someone's page that's called "Talk to My Cat,'' where you can go to the page and a form comes up. And if you type a phrase there, on the other end, where the server resides, he has some text-to-voice synthesis, so whatever you type is going to be said to the cat.

COMPUTER-SYNTHESIZED VOICE: Roll over.

DAVID FILO: You have this really powerful medium where all these people can publish. The problem is it's just kind of this free-for-all.

JERRY YANG: Massive amounts of content.

DAVID FILO: Anything goes.

JERRY YANG: A lot of web stuffing.

DAVID FILO: Politics.

JERRY YANG: Law.

DAVID FILO: Education.

JERRY YANG: Business.

DAVID FILO: Stranger things_ "Paul's hot tub,'' flowers, food_ the list goes on.

ROBERT KRULWICH: Stanford grad students Jerry Yang and David Filo liked spending hour after hour discovering interesting places on the Internet. Eventually, they started compiling a list of their favorite spots and that is how they stumbled onto a fortune. Their million-dollar idea is called Yahoo.

JERRY YANG: What Yahoo does is make your wasting your time easier. It wants you to get where you want to go to waste time faster so you don't have to spend_ you don't have to waste time wasting time.

ROBERT KRULWICH: You got that? You see, with so many things to do _ thousands and thousands of choices _ the obvious problem is: How do you find anything in here? Well, what David and Jerry have done, essentially, is they have created a directory.
So let's suppose, just for the sake of argument, that I want to find my favorite crater on the moon. So I go to Yahoo and I look up "science,'' because this is a sort of science thing. See? There's "science.'' And under "science'' you see "astronomy,'' because the moon would be astronomical. So, boom, I push "astronomy.'' See the little clock? Tick, tick, tick, tick, tick.
And now I'm on "astronomy'' and we come up with now a whole list of astronomical things in alphabetical order. So I've got clubs, comets, companies, conferences. See, this just keeps working like some kind of telephone book. Oh, look, pictures_ "lunar astrophotographs.'' Which seems about right, so I just click right here.
And there they are, a whole set of pictures of the moon. And here is my crater, right here. Now, I can also scroll down and see some very, very beautiful craters in close-up. And there's more. If I decide that I want to take a photograph of the moon, just like this guy did_ and his name, by the way, is Michael. He's a dentist in Pennsylvania and he has provided a little explanation about his lens and camera, explaining how he did it. So if I want to, I can do it as well as him.
Now, you can get to this point in the computer by using Yahoo, which basically means you use your mind and the alphabet. Or you can know the computer address, which is http://www.netax.com/~[squiggle]mhmyers/moon.tn.html. Or you can do Yahoo, which is free, simple and neat.

DAVID FILO: Our job is to go through all these sites and classify them, organize them in a way so that people can find them.

ROBERT KRULWICH: Well, a lot of businessmen found Jerry and David. Some even offered them more than $1 million for Yahoo. But what makes a list valuable as a business? What makes investors see, well_

MICHAEL MORITZ: Dollar signs!

ROBERT KRULWICH: Michael Moritz is a venture capitalist who thinks Yahoo will be hugely profitable because it is the first really popular directory on the Internet and being first has value.

MICHAEL MORITZ: A six-month market lead in the Internet business today is like having a 10-year lead in the automobile business in 1920.

ROBERT KRULWICH: Excuse me, but these two guys do not remind me of Henry Ford. Yahoo is just a list. So why is it so valuable? Well, Yahoo is a place where people gather on the Internet. It's a crossroads, kind of like Times Square, and you know what you find in Times Square: lots of people down there on the street, and then up above them up here, brilliantly lit, are advertisements trying to catch their eye. But Yahoo, arguably, is better than Times Square. After all, how many of the people down there on Broadway are going to look up at Claudia Schiffer? You see Claudia, right down there, just below me, in the hay? Now, how many people are going to look at Claudia and think, "Oh, I should buy some underpants''? Some people will, but most people? I don't think so.
Or check out the Calvin Klein ad all the way over there. Now, how many people in Times Square are going to see that ad and think, "Oh, I need some clothes''? Calvin is talking to a lot of people who are very unlikely to buy his products. The same thing would be the case with Fuji Film. Now, Fuji is broadcasting to a lot of people who may not be in the market for film.
But now consider Yahoo. Yahoo has, of course, a photography directory. And in here, it says you can look at commercial photographs or photo contests or photo exhibits or photo histories. And there's a nice blank space right alongside here. Perfect for an ad. And the thing is, most of the people who come to this page are likely to be film buyers.

MICHAEL MORITZ: For advertisers who want to appeal to very specific interest groups, we can define those interest groups very clearly on Yahoo. And they could show us all the logs of people who were using Yahoo and there is some fairly eye-opening information there. For example, they could tell us how many engineers at Texas Instruments were logging onto Yahoo during the work day.

ROBERT KRULWICH: Hm. So if I were at Texas Instruments and I was using my Yahoo time to check out, say, a car_ let's suppose I decided I wanted to buy a Buick. I could go to the Buick ad, right here and I_ let's see. I think I'll take a look at the Roadmaster sedan. Now, as soon as I check out the Roadmaster sedan _ there it is _ and decide to read about the car_ Let's suppose I spend, oh, a minute and 40 seconds looking at the car. The people who provide me with this information can watch me watching this ad and they know how long I've been watching. And that information, too, can be very valuable.

TERRY MYERSON, Interse Corporation: [Interse develops Internet sites for corporations. E-mail address: @interse.com] As the user interacts with this, we not only can watch them to see what they're looking at, but how they're moving through your sales cycle. If they're reading your company overview information before they get to product information, what products is the company overview driving them to look at? We can watch_we can watch this happen in real time, if we want. We can watch these consumers move through your information.
If you connect through America Online, America Online knows everything about you_ or Prodigy or CompuServe. Those guys know basically everything. When you register, you're specifying your income, how many children you have, whether you have pets, what kind of home you live in. So those traditional online services know anything and everything about you.

ROBERT KRULWICH: David and Jerry never intended to learn anything about Yahoo's users, but it turns out now that advertising and, eventually, data collection will be the most valuable products they sell.

PAUL SAFFO, Institute for the Future: [Institute for the Future studies technology's effect on society. E-mail address: psaffo@iftf.org] Yahoo is a fabulous example of how innovation occurs. It is truly a couple of guys with a crazy idea and a shoestring budget trying to make something real with no idea where they might end up. It is also an indicator that the information that matters the most in electronic environments is not information, it's meta-information. It's information about information. [Computers outsold T.V. sets for the first time in 1994.]
This revolution is more than unpredictable. We are performing a great, unwitting experiment that is changing our social structures, our governmental structures, our business structures. Everything, absolutely everything, is up for grabs and nothing's going to make any sense at all for a couple of decades. So we may as well sit back and enjoy the ride.

ROBERT KRULWICH: Where the information revolution will lead is so unpredictable because, for the first time, communication is completely two-way.

1st ACTOR: [television commercial] Interactive.

2nd ACTOR: Cool.

3rd ACTOR: I feel like we're family already.

ROBERT KRULWICH: Interactivity _ the ability of the audience to talk back _ is creating businesses that could never have existed before.

G.M. O'CONNELL: I mean, the technology is sexy. And when you walk into a room and you are able to convince the executive vice president of marketing at Neiman Marcus that this little screen that has text scrolling across it is going to change the world, and they'll actually, you know, spend a half hour with you, discussing that, that's kind of a neat experience.

ROBERT KRULWICH: G.M. O'Connell is a founding member of Modem Media. His company designs advertising that the audience can talk back to. When they started eight years ago, the only interactive device widely available was the telephone. [interviewing] What is Ray Charles doing on the wall?

G.M. O'CONNELL: What we wanted to do was to convert Diet Coke drinkers to Diet Pepsi drinkers. We wanted you to call and talk to Ray Charles on the phone.

ROBERT KRULWICH: The Ray Charles?

G.M. O'CONNELL: Interactive media at its best.

RAY CHARLES: Hey, you called the right one, baby. This is Ray and the girls.

UH-HUH GIRLS: Hi! Hi! Hi!

G.M. O'CONNELL: What you did was, you entered in a PIN number so that we knew that you had called.

RAY CHARLES: It's easy.

G.M. O'CONNELL: What we, of course, as marketers in this situation, wanted to be able to do was to start to develop more of a relationship or to know a little bit more about those people who were Diet Coke drinkers and hopefully were becoming Diet Pepsi drinkers. So what we did was we surveyed them.

DIET PEPSI PHONE LINE: First, because you're one in a million, we'd like to know your birth date.

G.M. O'CONNELL: Ray's going to send you a birthday card to make you feel good about the product and hopefully you'll continue to_to buy the product at the store.

ROBERT KRULWICH: So you'd need the address of the person and the age and the birth date of the person.

G.M. O'CONNELL: Exactly. You actually keyed in the birth date on_on this program. You could key it in.

ROBERT KRULWICH: What else did you want to know?

DIET PEPSI PHONE LINE: We'd like to know your favorite thing to do. If you are most interested in music or reading, press one.

ROBERT KRULWICH: Five hundred thousand people called Ray Charles. But how many held on to answer all the questions?

G.M. O'CONNELL: Ninety-eight percent of the people who called_ and it was a four-minute phone call if you stayed on to the bitter end_ ninety-eight percent of them stayed on for the _for the entire phone call.

ROBERT KRULWICH: Why?

G.M. O'CONNELL: There was a reward if you stayed on.

RAY CHARLES: Thanks for helping out. Now let's find out if you won. Hey, girls, do we have a winner?

UH-HUH GIRLS: Uh-uh.

G.M. O'CONNELL: So your chances stink, to begin with. I think the grand prize was actually a home vending machine. It wasn't like we were sending you to Tahiti or you could win a new car.

ROBERT KRULWICH: Who are these people that are spending time commenting to a merchandiser about their beverage on the telephone with Ray Charles? I mean, it just really seems_

G.M. O'CONNELL: It's America.

RAY CHARLES: [singing] Now, that's the right one, baby.

UH-HUH GIRLS: [singing] Bye-bye.

ROBERT KRULWICH: And that brings us to the subject of a beer _ actually, it's not a beer, it's called a "clear malt beverage'' _ called Zima from the Coors company. This is just_ it looks like a glass of water. It has a kind of lemony aftertaste. But if you look closely at the label, it says "You can at zima.com.'' That is an e-mail address, a computer address, on a malt liquor beverage. Why? This is the Zima ad on the Internet, the Zima "home page.''

G.M. O'CONNELL: Zima is a place to go to find out what's sort of going on with the Internet.

ROBERT KRULWICH: A cool place.

G.M. O'CONNELL: A cool place, a place that's going to help you out, a place where you can see some of the best stuff that's happening on the Internet.

ROBERT KRULWICH: You keep saying that word, "Zima, Zima, Zima, Zima'' so later on_

G.M. O'CONNELL: You're here.

ROBERT KRULWICH: Yeah, I'm here.

UH-HUH GIRLS: Uh-huh!

ROBERT KRULWICH: The ad does have lots to do. You can click to a refrigerator stocked full of strange things. You can play games, hear funny sounds, share any happy thoughts you might have about Zima. You can even buy Zima clothing. In fact, you can spend hours playing here without doing anything twice.

G.M. O'CONNELL: If you went through all the content in here, you would have four hours of content.

LESLIE SAVAN, "Village Voice'': [Savan writes about advertising and American culture. No e-mail address.] The pre-programmed responses that you get back that make you feel "interacting'' are simply written by ad people. They are_ it's more ad copy that you're getting back. [Advertisers will spend $350 billion in 1995.]
It is written from an ad agency and yet people who are hacking at their_at their computers over this at night may not quite click onto the idea that they are adding to this ad. It's_i'ts a million people interacting, buzzing back and forth with this ad. They become _ we become _ part of this growing sort of monster ad that's taking over the world.
They're not just getting your name and address. They're getting what you like and don't like about their advertising, so they start to shape the ads to_ to pull you in more, to be_ so that you'll watch them more. This is a process we've already seen constantly. We see it with focus groups, for instance, and all sorts of market research. The advertiser says, "Oh, please tell us how to make this a better ad so we can sell to you better.''

ROBERT KRULWICH: There is an advertisement there there on the very front page that says that if I want to, I can be fortunate enough to join_

G.M. O'CONNELL: Tribe Z.

ROBERT KRULWICH: _Tribe Z.
This is the most important stop, at least to the company, because when you answer the questionnaire to join this club, what you're really doing is telling the company about your Zima-drinking habits.
[reading] "Don't forget to give us your e-mail address and check this box to signify that you are 21 years old.''
So now you know all this about me, what_what is this something that's valuable to you?

G.M. O'CONNELL: It's very_very valuable to the brand to be able to know_to know all of these things in terms of how we can market better to you in the future.

ROBERT KRULWICH: If you're the company that makes this stuff, the more you know about the really interested folks, the ones who are actually drinking or at least inquiring, the more ammunition you have to find more customers.

G.M. O'CONNELL: The more intelligent you can be about how you're approaching the marketplace.

MARC CHUSID, "Comedy Central'': [Marc Chusid has done marketing for MTV and "Comedy Central.'' E-mail address: marcchusid@comcentral.com] That is absolutely brilliant! Why not find out more about your audience when you_ when you've got them connected to your product? [Fifteen-year-olds spend more time using computers than watching T.V.]
The amount of commercials that a person has seen that is 18 now is close to 350,000. This generation right now that is watching television is the first one that has grown up with 50 or 60 channel choices. Therefore, you consider_ you add up all the marketing that's being done on all of these channels, they at this point have seen so many commercials they can tell the difference between good ones and bad ones.

ROBERT KRULWICH: And just how many Zima drinkers have gone to the trouble of finding this ad?

G.M. O'CONNELL: Altogether, we've had over a million different visits onto the_ onto the site.

ROBERT KRULWICH: Yeah, but it could be, like, 50 people visiting 10 times each_ or 10,000 times each.

G.M. O'CONNELL: Well, but wait. We know that and it's more than that. We will have over 100,000 people, we anticipate, by the end of the year who have joined the_ the_

ROBERT KRULWICH: Joined the club?

G.M. O'CONNELL: It's also really about making them feel good about themselves. A lot of that is what we are trying to achieve now, which is basically, "Let's find out what these people are interested in and give it to them.''

ROBERT KRULWICH: Before computers and computer networks and computer links there was the printing press. That technology allowed the same message to be printed over and over and over. It brought the written word to millions_ and millions of dollars to those who owned these giant machines.

PAPER VENDOR: The Washington Post_ only 25 cents!

ROBERT KRULWICH: But now, with computers, there is no need for presses and ink and paper. Today anyone with a computer and a modem can publish their own electronic newspaper. And this new information revolution threatens the huge business empires the printing press created and that's a threat companies like the Washington Post are taking seriously.

EDITOR: How can we display the diaries more effectively?

ROBERT KRULWICH: These Washington Post editors are discussing the stories they plan to cover, but this newspaper will not be thrown on your doorstep. It will be delivered over telephone lines right to your desktop. [interviewing] This is the first on-line Washington Post on its first day.

JASON SEIKEN, Editor, Digital Ink: Yes, it is. It's everything you'll find in the printed Post and a lot, lot more. Because we're not constrained by_ by newspaper, newsprint and ink costs, we can pretty much_ we can go much deeper than_than the daily newspaper is able to.

ROBERT KRULWICH: What do you mean by deeper?

JASON SEIKEN: Well, we can give you everything up to and including your kid's school newspaper on-line.

ROBERT KRULWICH: And, in fact, the Washington Post's Digital Ink service does, like every newspaper, provide you with the day's news and all the regular newspaper sections.
Here's metro, national, international, business, sports. Let's say that I want to go to the entertainment section. All I do is I put the clicker right here and I click and I'm on entertainment. And over here they have killers galore, but I'm not interested in killers. I'm going to go down to the book section, which is called "Books and More.'' So I just click right here. Click. You can join book discussions with people who have read books_ you know, just type in your comments. You can review books yourself and then everybody in the Washington Post world can read your review. And here's a book I'm interested in. It's called Green and I'm going to look up the review. This is the review that appeared in the Post. Now, the reviewer says, "It's a great first line.'' But now here's the really interesting thing. I don't have to take the reviewer's word for it. This system allows me to read the entire first chapter of the book.
So I click to the first chapter. Now, here's the whole thing, kind of like a heavy browse. So now, having read part of the book, if I decide I want to own the book, I can buy it through this system. All I do is turn to the order section and order the book. So look what I've been able to do. I've been able to go to the book review section, check out all kinds of books, read reviews, write reviews, browse, discuss, choose a book, read the first chapter of the book and order the book_ all inside this computer world.

JASON SEIKEN: We think that this is one of the most important parts of our service. It's creating a virtual community. It's not a real community because these people aren't physically in the same room or even in the same city. They could be separated by hundreds of thousands of miles, but it's a virtual community in that everybody is connected by a modem to each other and we think that, perhaps even moreso than providing news, being able to create a community is what is going to make on-line services successful.

ROBERT KRULWICH: But what's really going to make these on-line services profitable is advertising. Now, when you encounter a traditional ad in, say a newspaper and the ad says, "70 percent off,'' that's all it says to you. And you say, "Ooh!'' That's all you say to it. And then the conversation is over. However, as we have seen in the digital environment, when you encounter an ad on a computer, you are ready to talk back to the ad and do business_ instantly.

RICHARD WOLFORD: We're talking about targeted audiences and very specific messages. That should be helpful.

ROBERT KRULWICH: Marketing executives at Riggs Bank meet regularly with the staff of the Washington Post's Digital Ink. Meetings like this are not unusual at newspapers, but with electronic advertising there's a lot more to talk about.

FRED SINGER: Well, do we want to talk results?

TED DUGGAN: We've had several hundred requests in the last three weeks and I started to look at who these people are and where they're coming from. And they are actually taking time to fill out who they are, where they live. And many times, in many cases, they are actually leaving an Internet or Interchange address.

FRED SINGER: So what we need to get from you is some of the key questions you need to understand so that we can build the research as we go.

ROBERT KRULWICH: Right now on-line newspapers don't have a lot of subscribers, so advertisers can't reach lots of readers. Instead they get quality_ detailed information about the people who see their ads.

FRED SINGER: We will give you the number of hits, and we think that's important. But there's a "why'' question. It is, you know, "What are their attitudes toward you?'' We track that off-line. We actually call up our customers.

SUZANNE DUNCAN: The fact that the advertising is integrated into the editorial is really one of the strongest things about Digital Ink and I think that's one of the reasons why people are accessing this information.

TED DUGGAN: I think, ultimately, it is our strength. You're combining the best of both.

FRED SINGER, Digital Ink: [Singer is the head of marketing for Digital Ink. E-mail address: singerf@washpost.com] One of the interesting things about on-line is you can essentially create a reverse direct mail where, rather than having to go out and get the consumer each time, you can eventually train them to come to you. [Over 100 million Americans shop from home every year.] So, for example, if you can build a spot on our service that everyone knows that's the spot where all banking information is and you tell your customers that any time they have questions about where your location is, who the manager is or a customer service complaint, that they can come back to your site, then they're doing the work for you because they're going to find the advertising for you.

ROBERT KRULWICH: Now, wait a second. Is this a good thing? Because some of these on-line services do have the potential of never leaving you alone. Let's think about it. If you linger over an ad or you're typing something in or you choose a product, other merchants are going to be able to see what you have done and they'll say, "Hey, if you liked that, come over here. Let me sell you this.'' I mean, these systems have the potential of selling you more, telling you more, tempting you more. And in the end, they could get very irritating.

DONALD GRAHAM, Publisher, "The Washington Post'': The real impulse of advertisers who want to join us in this enterprise will be to sell more goods and services and they'll try hard to think of ways to use Digital Ink to_to do more business and some of them will be very successful. I don't think that the ability to do transactions electronically is going to fundamentally change the nature of advertising or fundamentally change our relationship with our advertisers but we'll cross_ if it does, we'll cross that bridge when we come to it.

JASON SEIKEN: One of the real joys of working in this industry, one of the joys and the terrors, is that we're really making up the rules as we go along, unlike the newsroom, where everything_ all the rules are chiseled in stone. In the newsroom, everyone knows you don't put ads on page one. Here, do you put ads on page one or not? Do you put ads on the sports page or not? Do you put ads on the baseball page or not? Do you put ads with discussions? With restaurant reviews? None of those rules have been_have been formulated, much less set in stone.

ROBERT KRULWICH: Now, I know that some of you are thinking, "This has nothing to do with me because I don't surf the Internet and I certainly don't subscribe to any digital newspapers. Not in my lifetime. All I do is I just go home, sit down and watch T.V.'' Well, you are not excused from the future, either, because you should know that there are certain companies who are very anxious to make some adjustments to your T.V. This is the future racing towards your T.V. set. It's a new television service called Stargazer.

ANNOUNCER: You are a pioneer on the information and entertainment superhighway.

STARGAZER GUIDE: Hi. Welcome to Stargazer, the world of interactive television. It's totally revolutionary.

ROBERT KRULWICH: Well, that's easy for him to say, but what do the customers think?

PAT GADZIALA: I can't imagine why anybody would turn this down. We love it.

ROBERT KRULWICH: You love it?

PAT GADZIALA: We love it. We don't have cable. We love it.

ROBERT KRULWICH: Meet the Gadzialas of Fairfax, Virginia_ Patricia, Ed and 10-year-old Reid . And guess who is the Stargazer expert.

PAT GADZIALA: We let Reid do it.

REID GADZIALA: They can't. They can't operate it.

PAT GADZIALA: Well, we can, but we let you do it.

ROBERT KRULWICH: Do you believe them when they say they can?

REID GADZIALA: No.

ROBERT KRULWICH: All right.

HARRISON FORD: ["The Fugitive''] You almost got away with it, didn't you?

ROBERT KRULWICH: What Stargazer does is bring the video store right to your living room.

PAT GADZIALA: They said to us that it would be very similar to Blockbuster, buying_ just renting a video at Blockbuster.

STARGAZER GUIDE: We're talking about an exciting new world of entertainment and information right at your fingertips.

ROBERT KRULWICH: Well, okay. There are actually a lot of things to choose from in Stargazer. You have a whole selection of movies here and then there is "T.V. favorites,'' which would be Donahue and Geraldo and stuff. And then they've got a "Kids' Zone'' for kids' programming.

STARGAZER GUIDE: Isn't Stargazer great?

ROBERT KRULWICH: Only with Stargazer you are billed for what you watch, one program at a time. So you can watch WWF Wrestlemania. That costs $1.49. You can watch 60 Minutes: 25 Years. That costs 99 cents. Now, over a month, how much do the Gadzialas spend?

REID GADZIALA: Fifteen or twenty dollars, maybe. Thirty, maybe.

PAT GADZIALA: Probably more like $30.

ROBERT KRULWICH: Does that surprise you? Is that more than you thought you would spend?

PAT GADZIALA: That's about what we were spending at Blockbuster.

ROBERT KRULWICH: And what does that $30 comprise, mostly?

PAT GADZIALA: Movies.

ED GADZIALA: New movies.

ROBERT KRULWICH: But movies are only the beginning.

STARGAZER GUIDE: Soon you'll be able to shop at your favorite stores without leaving home. No crowds, no waiting in line. It's great. And it's all brought to you by Bell Atlantic Video Services.

ROBERT KRULWICH: The telephone company?

STARGAZER GUIDE: I mean, we're making history here.

RAY SMITH, Chairman, Bell Atlantic: You're connected via the telephone wires out to the supercomputer that stores all of the hundreds and hundreds of movies.

ROBERT KRULWICH: Now, let's suppose my aunt Margaret calls. Can I make a phone call or receive a phone call at the same time that I'm getting the movie?

RAY SMITH: Oh, yes. You can watch the movie, as a matter of fact, while you don't listen to Auntie on the telephone. This is the delivery of information and the control of information to individuals in a way that they've never had in the history of the world.

ROBERT KRULWICH: But wait a second. There's a little problem here. The boxes that the phone companies want to put on our T.V.'s, the ones that they're connecting to the giant computers, are very expensive. Even if they sell lots of these boxes, they'll still cost about, oh, $400 per household. Now, am I going to pay that $400? Would anybody pay $400 for the right to pay another hundred bucks per month on stuff? Well, nobody I know. So someone's got to make these boxes free. The phone companies say advertisers will pay and, they say, we will want the ads.

RAY SMITH: That's what the market trial is all about. We're trying to figure out how much people would be willing to have additional ads subsidize some of the things that they do. Today you can watch the movie on Stargazer and you have no ads whatsoever. We will be adding however, the ability to have advertisers, but the customer will choose that.

ROBERT KRULWICH: Why would I choose an ad?

RAY SMITH: Well, because you can say that you can get Jean-Claude van Damme for $2.50 without ads or you can get him with ads for a buck. A number of people will say, "I'll take the ads.''

ROBERT KRULWICH: You get the film for free. All you have to answer is 15 questions about your interest in washing machines. Would you do it?

REID GADZIALA: Yeah.

ROBERT KRULWICH: I'm not asking you. You don't buy washing machines. I'm asking you folks.

PAT GADZIALA: You know, we're only watching movies here. Yeah, sure. For $3.20, yeah. For a $3.29 movie, if they wanted me_ if it was going to take me five minutes to answer 15 questions about washing machines, maybe. Sure. I don't have a problem with that.

RAY SMITH: Advertisers can come in and say that in the two-hour movies, I'll take 20 minutes of advertising that cannot be fast-forwarded or erased, 20 minutes of_

ROBERT KRULWICH: Ah! You mean I can run through the movie fast, but I can't run through the ads?

RAY SMITH: Because, in effect, you're saying, "Rather than paying $2.99 or $3.39, I'm willing to get this for $1.25 and listen to your ads.''

PAT GADZIALA: I just want to use it for pure entertainment. If you want to ask me some questions about some things, that's fine, but I'm not interested to then dial up the 800 number and make a major purchase. I would hope that that's not where this is headed.

ROBERT KRULWICH: The Stargazer system is set up to track the behavior of all its customers, so everything you do is recorded on massive supercomputers. Each one of these black boxes remembers every transaction coming from 30,000 homes.

RAY SMITH: So it's going to be advertising, transactions and entertainment on demand. Great. A marvelous package.

ROBERT KRULWICH: So already you've got a business that I haven't thought about. You're already in the business of "Who's watching?''

RAY SMITH: Oh, absolutely, and so we know who to promote to and we get all sorts of information. We would not use the information if the customer didn't want us to. But most people don't care. They say, "Sure. I'll be glad to.'' Stargazer therefore knows what you are doing.

PAT GADZIALA: We're very much aware of the fact that they know everything that we do, everything that we watch_ intimate with Bell Atlantic, in that regard.

MICHAEL TROIANO, Ogilvy & Mather: [Troiano is head of Ogilvy's interactive marketing group. E-mail address: mtroiano@ogilvy.com] It's a way for me to target not by proxy, not by saying "men 35 to 54 who live in these zip codes,'' but by individuals. I know someone is interested in what I have to sell. They have identified themselves as being interested in it. That's the value. Today the consumer has to self-identify and there may be ways around that. Once we figure out how to do it with the technology, we'll have to address the ethical issue of how much are our consumers comfortable with us finding out?

ROBERT KRULWICH: The privacy question gets a little more complicated because the ads that you will get on these systems will be different from the ads that we get today.

YALE BROWN: You're going to get a customized commercial. You will get a commercial, an advertisement that is geared specifically to who you are, where you are in terms of location, in terms of navigation and maybe things like time of day.

ROBERT KRULWICH: [reading] "Welcome to Intelligent Interactions.'' Yale Brown and Matt Walker were part of the team that created the computer software for Stargazer. Consumers, they decided, were Stargazer's most valuable product. So they've created a new program that sends specific ads to specific customers.

YALE BROWN: People in the 18-to-24 will get one message and then I can send another message to the people who are 24 to 36.

ROBERT KRULWICH: At the same time?

YALE BROWN: At the same time.

ROBERT KRULWICH: So the mass audience gets different advertisements. Different groups get different ads at the same time.

YALE BROWN: At the same time.

ROBERT KRULWICH: And the machine knows who's watching.

YALE BROWN: That's correct.

ROBERT KRULWICH: And the machine sends the right ad to the right people.

YALE BROWN: That's right.

ROBERT KRULWICH: And the advantage of this is that the advertiser gets what?

MATT WALKER: The advertiser is now paying for what is truly valuable and that is an exposure of my ad to you.

RAY SMITH: For doctors, they're going to get Mercedes Benz ads, right? And it's going to be very much more targeted.

ROBERT KRULWICH: You mean if you're a doctor_

RAY SMITH: Right.

ROBERT KRULWICH: _and I'm a physical education instructor at a high school in Glen Oaks, Illinois_

RAY SMITH: Right.

ROBERT KRULWICH: We're both watching the same show_

RAY SMITH: You'll get a different commercial.

ROBERT KRULWICH: Really?

RAY SMITH: Yes. Not only will you be able to get a different commercial and one that would be more adapted to_to your needs, but you're more likely to buy it. Remember, this is interactive. You're going to be able to click on and buy it right there. So the impulse buy in the commercial will change the commercial form, as well. A button will appear with a little icon on the screen. You know, you sort of click on it and it gives you the information about the purchase of whatever it is.

PAT GADZIALA: I don't want that to happen. I would hope that that's not going to be the case. I haven't thought about that, to tell you the truth. We haven't seen it happen with this particular Stargazer setup and it would_it would distress me completely that they would start hitting you, hitting the children with such incredible advertising.

VOICES FROM T.V.: Whoa, whoa. So much for peace and quiet.

MARGIE WYLIE, Digital Media: [Americans receive more than 12 billion catalogues a year. E-mail address: zeke@digmedia.com] The voice that you're going to have_ "Yes. No. Buy. And here's my credit card''_ that's their idea of interactivity. The marketers will tell you that the advantage to the information age is that they're going to know enough about you that you'll never be bothered with the ephemera. You'll never get an L.L. Bean card_ L.L. Bean catalogue if you don't like L.L. Bean. You'll only get what you like. And isn't it a little scary that they're going to know what you like?

ROBERT KRULWICH: If things go the way you're planning, somewhere in your computer you'll know the movies I've seen. Somewhere in your computer you'll know the clothes I bought. Somewhere in your computer you'll know the ads that I've seen and how long I've lingered. You will know more about me than even the government, than maybe even my wife. Shouldn't I be a little frightened to let you have so much information?

RAY SMITH: If you're frightened to have this information in some sort of data base, then you can have it removed. You will have total control of all of the information that comes out of your purchases.

ROBERT KRULWICH: If everybody decides to be really private about their advertising viewing, then you have got nothing here.

MATT WALKER: Exactly.

YALE BROWN: That's true.

ROBERT KRULWICH: So you have to hope that people are going to be "Hmmm'' about their privacy, that they'll let people watch them.

YALE BROWN: Privacy is an issue that has to be handled by the people who are producing the advertisements, who are running the networks and are running the government.

ROBERT KRULWICH: But in the meantime, you'll reach as many as you possibly can, under the circumstances.

MATT WALKER: Sure.

YALE BROWN: That's business on the information highway.

PAUL SAFFO: [American businesses will spend $61 billion on office technology in 1995.] Every new technology, when it first arrives, is held up as the cure for all our ills at the time. The airplane was going to enlighten us and ennoble us and make us realize there were no more boundaries between nations and we'd be better people for it. It took us 40 years before that idea was literally bombed in the ground by the airplanes of World War II. The same thing is happening today. We're saying digital technology is going to cure all of our ills, and it won't. It'll create some problems and it'll solve some other problems.

ROBERT KRULWICH: There's no question that technology has made our lives better. Take air travel. Computers make flying safer and more reliable, more comfortable and less expensive. For the consumer, technology means convenience and efficiency.

RALPH BRUGGMAN: We're currently answering 85 percent of our calls within a 20-second period.

ROBERT KRULWICH: Reservation operators for United Airlines can live in Washington, D.C., or Chicago or Honolulu, but they all work in cyberspace.

RALPH BRUGGMAN: Today when you call an 800 number, instead of reaching one particular office, you could be reaching any of the offices. You have no idea which office you're in.

ROBERT KRULWICH: These agents can each handle 100 calls a day_ faster and with fewer errors. Everything they do is assisted _ and monitored _ by computers. But life in a computer-controlled world can be harsh, even oppressive. For some, the adjustment is too difficult.

VIRGINIA WELCH: Until I started working at United, I didn't realize how invasive it was to have the most minute portion of your day strictly monitored.

ROBERT KRULWICH: Virginia Welch worked as an airlines reservation agent. She found the same technology that's so good for the consumer can be hard on the worker.

VIRGINIA WELCH: My time on the phones was monitored. My time on hold was monitored. My time transferring calls was monitored. My length of time on each call was monitored. My time in the restroom and getting water was monitored. My time visiting other departments was monitored. The time that I left for breaks was monitored. The time that I left for lunches was monitored.

RALPH BRUGGMAN: [reading screen display] Two minutes now, forty-seven seconds, two minutes_ so we have an actual real-time display on what our representatives are doing.

VIRGINIA WELCH: When you walked in the building, you gave away all privacy. The only thing you had was your thoughts and even those you had to carefully check lest they came out your mouth because you might be listened to.

ROBERT KRULWICH: In a virtual office run by computers, there are no doors to close or shades to pull down. Everyone may have enormous power at their fingertips, but that same system controls everything they do and forgets nothing. The only certain thing about computers is that they will become smaller, smarter and more powerful. And more dangerous.

MARK WEISER: You're in the lab.

ROBERT KRULWICH: The personal computer was born here at Xerox's Palo Alto Research Center. Right now they're inventing what may be common technology a decade from now.

MARK WEISER, [E-mail address: weiser@ubiq.com]: I have here some of the little computers of the future that we've been working on. One of them I'm actually wearing. This is the "active badge'' and it beams out an infrared signal and lets people find me all over the building. I also have this little hand-held computer called the TAB. It's very small and easy to use and I can use this to locate people when I need to locate them.

ROBERT KRULWICH: Often, the very fact that you can do something means you probably will, whether you should or not. No one understands the dangers of tomorrow's computers better than the people who make them.

MARK WEISER: Ah, yes. There he is, working away. Hi, Roy. How're you doing?

ROY WANT: Hello, Mark. I'm fine.

ROBERT KRULWICH: But do we need a computer that knows everywhere we go?

MARK WEISER: We're inventing dangerous technology and so we feel we have to tell people that we're doing that. You should know that information can be gathered about you and stored away. And you might want to ask your employer whether they're doing this and ask the how long they're going to keep that information.

ROBERT KRULWICH: There are so many computers in our lives it's impossible to find out how much information about us is floating around in cyberspace.

VIRGINIA WELCH: You don't get something for nothing. And when you give away information about yourself, you've given away a piece of yourself. How much of yourself do you want to give away?

ROBERT KRULWICH: We already give away a lot of information about ourselves without even noticing it, tiny details that someone else can put together.

MARGIE WYLIE, [E-mail address: zeke@digmedia.com]: If you're going to live in a world that's completely interconnected like that, it's almost like a small town, only it's not going to be just your kindly neighbor who's going to know your business, or even the town gossip. It's going to be people that you don't want to know_ you know, you're not going to want to know your business.

P.A. SYSTEM: Produce, you have a call on line 2.

CASHIER: Do you have a Saving Plus?

ROBERT KRULWICH: Yeah, I do.

ROBERT KRULWICH: Even the most innocent daily chores are recorded in cyberspace.

MARGIE WYLIE: When I go to the grocery store and I check out, every item that I have is scanned_ the bar code. The computer tells them what's on the bar code, what's on the item. And then I go and pay with my ATM card and those two are linked together and, right there on the spot, I get coupons. I bought kitty litter, I get a coupon for a different brand of kitty litter and three weeks later I get a coupon for another kind of juice. Take that and multiply it 100 times. That's the price for the information age.

ROBERT KRULWICH: But still, you do get a free box of kitty litter for a small exchange of personal information. The question is, is it worth the bargain? And the other question is, couldn't all this new technology be put to some better use?

HOWARD RHEINGOLD, [E-mail address: future@well.com]: Do we really need to save the trip half a block to the video store and therefore spend billions of dollars for a new infrastructure? Or are there educational and democratic and social uses for this technology that we're really not hearing about because that's not in the big profit picture?

ROBERT KRULWICH: Of course, if you don't like the world of the future, you can always ignore it.

PAUL SAFFO, [E-mail address: psaffo@iftf.org]: It's possible to stop this technology, reverse events, but at extraordinary high social price. People who are annoyed, for example, that their credit card information is bouncing around the planet and is_is abused say, "Well, let's just get rid of credit cards.'' Great. Well, then carry money and, oh, by the way, forget ATM machines. You're now going to have to walk to the bank and stand in line every time you need money. And go a step further. If you don't have credit cards, then that means when you want to buy something on credit, every time you want to buy something on credit, you have to go in and sit down and talk to a banker. If you want to buy an icebox, you go into a bank and get a loan for $300. Today you'd just use your credit card. Those are trade-offs that I think the vast majority of consumers would never accept.

ROBERT KRULWICH: Convenience is what the information age is all about. It is so seductive. So we can sit back and enjoy it, but remember there is a price. The choice is up to us. After all, it is our information.

1st COMPUTER VOICE: Please register your opinion on the following issue by pressing the corresponding_

2nd COMPUTER VOICE:_please try again.

PAUL SAFFO: We really are performing a great, unwitting experiment on ourselves_

1st COMPUTER VOICE:_sorry, your entry was not understood.

PAUL SAFFO: _and it's anyone's guess how it's going to come out.

RAY SMITH: _a new kind of world of delivery of images and pictures.

UH-HUH GIRLS: Uh-Huh!

FRED SINGER: The user is in control.

MARGIE WYLIE: They're telling you that they're empowering you. They want something back from you.

VOICEMAIL SYSTEM: Enter your account number and a password.

PAUL SAFFO: The revolution cannot be stopped.

RAY SMITH: More choice, more control, really competitive prices.

MICHAEL MORITZ: Dollar signs!

HOWARD RHEINGOLD: Let's not lose an opportunity to revitalize democracy on our way to make a buck.

MARGIE WYLIE: There's a big price to be paid in the information age and one of those prices is privacy.

PAUL SAFFO: The long-term implications will be vastly larger than we can possibly imagine today.

GREGORY MILLER: The future's going to be amazing.

VOICEMAIL SYSTEM: Listen carefully

REED HUNDT, Chairman, F.C.C.: [E-mail address: rhundt@fcc.gov] First of all, there is going to be hardware and software that people can purchase and install quite easily that will guarantee them all the privacy that they possibly would want and second, as a last resort you can always pull out the plug.

ANNOUNCER: To learn more about what awaits you in cyberspace, visit FRONTLINE at the PBS home page at the address on your screen. [http://www.pbs.org] You'll find a web site loaded with hyperlinks to some of the leading adventurers and go-getters. Check out some other cyber-thinkers who weren't part of tonight's program and find out from Robert Krulwich what it was really like being way up there in the Jumbotron.

ROBERT KRULWICH: _there I was way up there in the sky overlooking Times Square_

ANNOUNCER: And don't forget to tell us what you think.
Hundreds of you did give us feedback on our recent program, "Waco: The Inside Story.''

JOE DAVIES: Dear FRONTLINE: I was astonished at your conclusion that the FBI had failed miserably. Although this certainly could not be considered a success for the FBI, I got the impression that these FBI agents acted compassionately and professionally in dealing with an armed psychopath who thought nothing of sacrificing the lives of those who had blindly followed him, despite the opportunities afforded him to surrender peacefully.
Joe Davies.

ANNOUNCER: The opposite view came from several viewers and this anonymous fax from Alaska. "Our government arm of law enforcement is out of control. This whole show on Waco was nothing more than a whitewash to protect the BATF and the FBI.''

And another view from western New York.
JEAN KRAYNICK: It was with sick despair that my family and I watched the ATF and the FBI members plan and squabble over how to rid Waco of David Koresh and his followers. We were asking, "Did he murder anybody? Did he rob a bank? Is he a terrorist?'' Americans killed American women and children and then assumed to philosophically theorize about it on camera? Jean Kraynick.

ANNOUNCER: Why don't you talk back to FRONTLINE by fax at (617) 254-0243 or write to Dear FRONTLINE, 125 Western Avenue, Boston, Massachusetts, 02134.

And next time: So who is Rupert Murdoch?

ANDREW NEIL: Ruthless, aggressive, buccaneering_

ANNOUNCER: Just an incredibly successful entrepreneur?

TOM SHALES: One powerful dude.

ANNOUNCER: Or is he the robber baron of the information age?

ROBERT SPITZLER: Rupert has no geographical boundaries now.

ANNOUNCER: Maybe you should know.

MUNGO MacCALLUM: I don't think Rupert believes in government.

ROBERT SPITZLER: A dangerous character. Rupert wants to be king of the world.

ANNOUNCER: Watch "Who's Afraid of Rupert Murdoch?'' on FRONTLINE.

ROBERT KRULWICH: After all, how many of the people down there on Broadway are going to look up at Claudia Schiffer? You see Claudia, right down there, just below me, in the hay? Now, how many people are going to look at Claudia and think, "Oh, I should buy some underpants''? Some people will, but most people? I don't think so.

HIGH STAKES
IN CYBERSPACE

PRODUCED BY
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copyright 1995
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