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State of the Art: CD-ROM Marketing

Three start-ups that are exploring opportunities in CD-ROM marketing are featured in this short article.

Now that more and more new personal computers are being sold with CD-ROM players, hungry marketers are starting to experiment with CD-ROMs as a method of distribution. The idea: because CD-ROMs store so much information, they can be used to contain multimedia catalogs, featuring everything from sound to video clips about products. Or, for software applications, CD-ROMs can contain demos of a variety of products, along with "locked" versions of the programs themselves. After placing an order, a customer will get a password to "unlock" the full version of the software.

That's the theory. In practice, the whole area of sales via CD-ROM is still in the very early stages, and results so far have been less than dramatic. But the long-term possibilities of multimedia marketing remain strong enough that experiments will probably continue, says Mary Modahl of Forrester Research, in Cambridge, Mass., and start-ups are cropping up to explore different aspects of CD-ROM marketing. Some samples:

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Los Gatos, Calif.

Two-year-old KidSoft is in the business of helping parents pick out educational software both they and their kids will like. The company offers software demos on a CD issued quarterly, along with a quarterly magazine; both are named Club KidSoft. The aim: to build a brand identity for KidSoft using both traditional and new distribution methods. Parents can subscribe to the CD for $19.95 a year, to the magazine for $9.95 a year, or to both for $29.95. KidSoft sells some of the software by issuing "unlocking" passwords for software already on the disk; other packages the company supplies via mail order. Cofounder Richard Devine projects the club will have 100,000 members by year-end.

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Magellan Systems
Calgary, Alberta, Canada

Magellan Systems founders Scott Dow and Dave Rosenvall have picked an ambitious project: going head-to-head with Apple and EDS in a new, unproven market. Their start-up's first product, the Merchant, a CD-ROM containing electronic catalogs from mail-order vendors such as Lillian Vernon, was distributed to 100,000 owners of Macintosh CD-ROM players starting in March. (En Passant, a similar product put together by Apple, EDS, and Redgate Communications, was launched last December.) Next month Magellan plans to come out with the first version of the Merchant that will operate on both Windows and Macintosh platforms. Magellan charges a fee for companies to be on its disk and also takes a commission on sales ordered through the catalogs. Dow expects 1994 sales of $3 million to $4 million for the company, which was founded last year.

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Interactive Catalog

Interactive Catalog is a brand-new company off to a fast start. In June, the first month of its official launch, the company announced a deal with Egghead Software to distribute free copies of its first CD-ROM product, due out in October. InfoWorld magazine has also agreed to distribute that CD-ROM, and Microsoft will be one of the sponsors of the disk. CEO Craig Danuloff says the company is aiming for a different twist on multimedia catalogs: "We built this to help people buy things, not to help someone sell things." The first product will be a buyer's guide to the multimedia market itself. According to Danuloff, the disk will contain product information for thousands of products, such as CD-ROM hardware, software, and titles, as well as articles licensed from computer magazines and advertising. Interactive plans to sell its CD-ROM as well as license its catalog software.

-- Martha E. Mangelsdorf

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