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To: Dragonfly who wrote (461)	4/18/1998 9:25:00 PM
From: Superhawk	Read Replies (2) \| Respond to of 5853

You said you recognize the potential for lots of software sales over the Internet, but don't understand how any company will gain a proprietary (or competitive) advantage. This was in response to an earlier post about a private company called Digital River which claims to offer the world's largest online database of software products. A synopsis of Digital River's business plan, as I understand it, is that they have "partnered" with more than 1,200 software publishers and online dealers to deliver products over the 'net. They claim to have 12 patents pending which cover digital delivery, encryption systems, and commerce (payments). The fact that they have signed up more than 1,200 customers to deliver more than 100,000 products probably gives them a tremendous head start on competitors. The partnering agreements and patented delivery/payment systems should also provide significant barriers to entry. Tech Squared (TSQD) controls about 28% and Fujitsu Limited of Japan owns 19% of Digital River's common stock, thus one can take a position in DR by purchasing TSQD.

To: Dragonfly who wrote (461)	4/24/1998 11:05:00 PM
From: Javelyn Bjoli	Respond to of 5853

Dragonfly, Which space are you wondering about someone getting a proprietary advantage in? Software creation, software delivery (over the Internet), or some other space? Let's take delivery, since the creation side already has MSFT. What kind of advantages can a company have, when all they do is charge you money to download (& unencrypt) something? Let's see, how about server latency & bandwidth, which affect download time? Customer support for when something goes wrong? A refund policy? Innovations in per-use fees for software "rental/leasing"? A brand name that customers know & trust, and keep coming back to, rather than going through the hassle of manually checking prices at 200 vendors? (Note: a "supervendor" that auto-checked the 200 vendors would quickly put 197 of them out of business.) A large advertiser base that lets them give ALL software away? What gives any company an edge? In the large picture, it is 10% innovation, 90% execution. Efficiency wins. Ultimately, a product is valued at something like (flat labor rate x # human hours to create) + (uniqueness) - (subsidy & diffusion of cost). If the last two parts go to zero, the most efficient company will be closest to the tangential cost "limit" and will win on price. But, how long will it be until the software industry has no value creation? Perhaps the concern should be: How long until every conceivable human need for software has been filled, ie nobody is making or buying upgrades of anything? It cannot happen until all human knowledge has been captured onto an infinite bandwidth network. Personally I'm betting my stock market money on companies that take advantage of free bandwidth. Not the server hardware companies like LU, because there is only so fast people can increase spending from $1B/year to $2B/year on boxes. Not the end-user hardware companies like GTW, because their price asymptote is zero. In the short term, I mean companies like USWB, IFMX, etc. that are just beginning to build the bridge across the widening server-client chasm. Long term the winner(s) will be large-scale information aggregators such as YHOO & AOL. AMZN, NTKI, etc, will continue on a path towards temporary monopoly until people realize they are just selling information (in 500MB chunks) and get rid of the need for physical media distribution.