Friday, November 30. 2007
We wrote before that in our opinion, the Future of Mobile is no longer with the traditional mobile players. Google will now be bidding for spectrum. Add that to their Android open mobile interface and Apple proving you can build a mobile phone for web use, this will we suspect drive some major behaviour changes over 2008.
Verizon has already altered course, we suspect most of the rest will do so - though some (those without hybrid networks) are strategically very exposed.
We already know that regardless of which bidders ultimately win the auction, consumers will be the real winners either way. This is because the eventual winner of a key portion of this spectrum will be required to give its customers the right to download any application they want on their mobile device, and the right to use any device they want on the network (assuming the C Block reserve price of $4.6 billion is met in the auction). That's meaningful progress in our ongoing efforts to help transform the relatively closed wireless world to be more like the open realm of the Internet.
Its the start of a "Microsoft De Facto standard" play rather than a pure open play, but the Mobile industry has desperately needed even this level of rationaisation, so its still Good News for Users !!
There is a story in African folklore about how to catch a Baboon. You make a tunnel in a termite mound, such that a Baboon can just get its hand down. You carve a slightly larger chamber at the end of it, just big enough for the Baboon to make a fist. You then roll seeds down the tunnel into the chamber. The Baboon reaches down, grabs the seeds in its fist, but can't then remove the balled fist with seeds in because the tunnel is too narrow. You then approach said Baboon with a knobkerrie (a club), and the Baboon, instead of just letting go of the seeds, withdrawing its hand and running off, greedily hangs on to its "gain" and thus can't get its hand out and gets knocked on the head - a life-terminating experience.
True or not, the story is told in Africa as a metaphor for holding onto one short term thing but getting clonked by a far bigger long term thing.
Facebook, in its desperation to hang on to the "100-year revolution" (and $15bn valuation) that is Beacon, runs the risk of being in this mindset. As we noted a few days ago, a tipping point in opinion was measurably reached, and they clearly have had to climb down from the original premise to avoid PR disaster and user desertion (and save their bacon) for now.
However, the climbdown is as small as Facebook think they can get away with. Ars Technica has a good run of the changes to the changes in real time (update - and covered even better in NYT Bits here)
In essence, instead of having a flash-in-the pan pop-down popup that you have to catch and fill in to not spam your friends, you now have a slightly more persistent popup that you have to fill in to spam your friends. If you don't, it hangs around and adds friction to your experience until you fill it in. The problem with this is that its fine for the single case, but a pain in the **rse to do for every purchase from every retailer.
Not only that, but - as we understand it - even if you sign up once and never go near Facebook again in your life, your PC carries on "phoning home" every time you buy something, so you add to Facebooks' database of user behaviour unless you stop it doing so every time.
Also, if you look at how the opt-out is structured, it is very clearly designed to make opting into Beacon easy, and opting out less so. It is almost as if they were designed for people to just go for the simple option and opt in, to make the irritation go away - like those mobile phone buttons that are cleverly positioned launch the web browser when your fingers slip.
In other words, the Facefist is still tightly gripped around the seeds of user purchase data.
The risk is that the large club of User Disenchantment looms ever closer, as this is adding friction to the user experience, and users are not that dumb....but this interview with one of the Facebook guys shows they are still not really "getting" what they are being told! Brad Stone of the NYT talked to Chamath Palihapitiya, vice president of product marketing and operations at Facebook - here are some transcripts:
Q. Why not give people a universal opt-out of the Beacon service?
Words fail us......this is just such blatant dissembling I initially thought they were taking the p*ss...but no:
Q. But some people are asking for a single opt-out.
Thats 50,000 "pundits" and counting...which is not as small as you may think - in any SocNet only a few % are really active, so 50,000 is probably a far larger % of "active" Facebookers than the .1% of its 50 million user base would suggest - and we suspect there is a bigger silent majority emerging as this stuff hits home.
And we all know this is not what Users want - every time opinion is tested, Users want easy and convenient control of their privacy* . The test of whether users will go with Facebook here is very simple. Do you feel OK with Beacon, even now?. If not, what are you going to do about it? We suspect the answer to the former is ummm, No and the answer to the latter is a slow drift away.
The big risk for Facebook is thus not the the banging by these noisy revolting users, but the whimper as the silent majority desert Facebook and move elsewhere.
The reason this whole episode is so interesting to us is not about Facebook per se (though they are an iconic arrogant outfit and great fun to watch) by the way, its that it is a real-time negotiation for the limits of privacy in the next phase of the internet - and as Howard Lindzon noted, Facebook's need to monetize rapidly is forcing the debate along at quite a clip, and in full public gaze.
The line up in the debate is also crystallizing - Online Marketeers, Social Net owners, staked VC's and a small set of (dependent?) Bloggers are promoting it and pooh-poohing the doubters, while noisy users, most independent Social Media experts, an increasing list of Regulatory agencies and a large contingent of bolshie bloggers are against it.
Our take - at the end of the day, if the user doesn't like it they will walk away - and they don't, and they will. The wisdom of the crowds will call this one. Our bet is that Facebook will be on mass auto opt-out be end December.
3-2 Odds again - any takers?
* Even a certain Social Network founder doesn't like his privacy being exposed!
Thursday, November 29. 2007
From the Christmas is coming Dept:
So Facebook is looking at recanting on the Beacon Opt-Out policy, it would seem.
We offered 3-2 odds this would happen before December, and David Weinberger counterbid 100-1 against. In the UK it is traditional to buy a drink for the winning party in such friendly wagers
Therefore, if they recant in the next 24 hours David has to buy me a drink, but if not the reverse applies.
Besides, it is the right thing to do. Opt In is the Good Guy play.
Now, we realise that by recanting, Facebook risks its $15bn valuation for the moment, but that (since they kicked our blog off Facebook) is not our problem.
However, if they could see their way to sorting this out in the next 24 hours then we would be greatful - it would save the £5.00 odd for the drink (plus the airfare as we are UK based), which would be very helpful
Read/Write Web raises the hoary question about Long Tail economics in media, specifically blogging:
It is often forgotten that money is to be made by leveraging the collective long tail, however, making money while being part of the long tail is very difficult. Specifically, in the blogosphere, the vast majority of blogs have very few readers. It is not realistic to expect these blogs to make money. As the enthusiasm and the incentive in the long tail begin to wear off, what would be the impact on the businesses that depend on them? Likely, the impact is going to be large.
OK, here goes - I recall David Hornik wrote a very good article on all this about 2 years ago (Yup, its Ecclesiastes Law in action):
I have come to the conclusion that there are essentially two general classes of technology the will benefit economically from the Long Tail -- aggregators and filterers. And while both aggregators and filterers rely upon the increasing volume and diversity of content to assure their value in the ecosystem, that growth of content will not have a material impact upon the value of any one piece of content floating somewhere in the Tail. The value will all inure to the benefit of the aggregators and filterers. So who are the aggregators and filterers?
So, how does the Long Tailed Blogger earn a crust in this world? I think the Read/Write guys underplay 3 major things in their hypothesis:
(i) The Long Tail is not a recent phenomenon, Inventory Theory has had it for at least 100 years - what is different is that the 'Net has reduced Filtering costs to near zero, and also Aggregating / Stock holding costs by at least 2 orders of magnitude. Put simply, this means that a whole new range of content creation - including blogging - moves from uneconomic to marginal, even profitable.
(ii) By definition, if this content is then found, the value in the long tail is increased, as that found content starts to increase its market share. This may be new money, it may be substitution from the "fat head", but it is new value created. Read/Write Web itself is an example of this.
(iii) How does u makes ur money? Quite a few niche blogs are making money in other ways - showcasing capability to market other services (consultancy in our case, for example) is a typical offset blog business model. Other blogs are there to reduce cost, rather than gain revenue.
In our view, one of the main shoes yet to drop here is that online advertising has not yet managed to monetize the time / attention it already occupies. Don't want to go into the why, but consider this example - we are a small UK technology strategy blog, c 200,000 impressions pm. A year ago we had 2,000. Costs of production are now almost entirely time based. We currently make no money except for influencing potential clients. But, as a magazine publishing friend has pointed out, that's the equivalent circulation attention of a small niche publication that in "dead tree world" would make a useful living. At some point the money will follow the attention - it has to - in fact the history of all new media is that the money follows the audiences, but there is a time lag.
We may not make money - new ecosystems are always littered with casualties of business experiments - but the big picture is blogs = time, time = money, and better aggregation and filtering pushes attention into the long tail.
Wednesday, November 28. 2007
I've been wanting to blog about the Other Silicon Valley for a few days after reading about the Obscene Losses in the porn industry, but flash of the dirty mac to Adriana Lukas for the title inspiration.
The story is about the end of the well known (but seldom mentioned) fact that the porn industry is often an early indicator of where the 'Web is going. Well, we have been getting interested (in a strictly strategic-new-media-direction-sense of course) on the impact of all the You-Tube like pornsites such as YouPorn, where enthusiastic amateurs have been contributing user-degenerate content with some enthusiasm - and more importantly, for free.
(And the level of, ummmm - personal information - revealed makes even the most debauched Facebook fratboy (and/or girl) positively bashful in comparison)
And not just the video dept - the gentle art of Machinema has also been perverted to the Pornside, so the PS3 crowd are also horning in on the act.
But of more interest, its apparently ripping the guts out of the Web 1.0 "Subscription Based" Porn industry - apparently we prefer to see people like us rocking and rolling (for free), rather than the credit card enhanced silicon shakes of the pros.
And therein lies the rub...to quote the Portfolio.com article linked above:
Much like the TV networks, movie studios, and record labels on the other side of town, porn companies are also engaged in a frantic attempt to diversify their offerings, filleting their films into smaller pieces that can be easily sold via an ever-shifting variety of digital distribution channels. From the pay-by-the-minute model on video-on-demand sites such as Adult Entertainment Broadcast Network and Hotmovies.com, to the four- to six-minute clips edited for mobile devices, the industry is looking to take the 90-minute sex videos from its old business strategy and carve them into bite-size moneymakers.
Now what is very interesting to me is that maybe for the first time, Porn is behind the curve - most non-porn media has been Ad supported for a long time. so is actually in a better position vis a vis free new media plays.
We await with interest the first IPTV porn plays, as an attempt to capture new subscription revenues.
( By the way, the analytics tell me that Porn, Facebook, PS3 and IPTV are the most frequent combo searches leading to this blog, so this post is a honey trap for all you dirty buggers who typed that in )
Tuesday, November 27. 2007
Yes, for once the agreement of the major players to all do something in concert is a Good Thing. The BBC, iTV and Channel 4 are going to pool their archives, to launch a single on-demand service. Its here on the BBC
The three broadcasters currently offer their own separate on-demand services.
Now we just have to work out the Rights and Rights of it..................
.....said Marie Antoinette, and so too thought many current top management teams in Planet Mobile. It was also the motto of 617 "Dambusters" squadron in World War 2. And the cracks in Planet Mobile's dam walls have been showing awhile, but the first real bomb was dropped by Google a few weeks back with project Android (see our coverage here - the Future of Mobile is not in the hands of Planet Mobile anymore
Well, the first breach in the wall has been Verizon, who today announced that (quoting the NYT "Bits blog"):
Verizon Wireless has stunned the wireless world by announcing that by sometime next year it will open its network to “any apps, any device.”
So, will this open up a flood of new open plays from Planet Mobile*? We would expect that at least one player in each main market will try this in the next year or so (and we would hypothesize it will not be the iPhone prime contractors).
One of the drivers of this is the increasing realisation that 90%+ of revenues remains voice/sms, and the phones used in this space are a low cost commodity - so why go for an expensive subsidy bribe and the need for long term customer lock in when you can get them to buy their own phones and you sell em transport.
Another is the realisation that the traditional Planet Mobile handset players were caught napping by iPhone, and that the handset part of the market is going to be broken wide open in short order - so why not let people connect anything to the network...Kindle anyone?
And of course which operator is going to attract all the new application developers working on Android?
Looks like rather than Apres Moi les Deluge, the top brass of the mobile Telcos need to prepare for La Revolution today - we are in for an interesting ride....
Postscript - GigaOm among others thinks it could also be a play to placate the FCC in advance of the 700 MHz spectrum auctions as well
*...except we've been here before with Planet Mobile. Every year, next year will be the Great Year...till next year. Still, this time the economic forces lining up are far larger, so movement is far more likely
It is always good to read a Nick Carr post over morning coffee, especially one you can take issue with . Nick has written here (and in more detail here) about how Google utilises Complementary goods to drive its own demand:
Complements are, to put it simply, any products or services that tend be consumed together. Think hot dogs and mustard, or houses and mortgages. For Google, literally everything that happens on the Internet is a complement to its main business. The more things that people and companies do online, the more ads they see and the more money Google makes. In addition, as Internet activity increases, Google collects more data on consumers’ needs and behavior and can tailor its ads more precisely, strengthening its competitive advantage and further increasing its income.
And thus Google is motivated to reduce the costs of the complements and therefore increase the demand:
It’s this natural drive to reduce the cost of complements that, more than anything else, explains Google’s strategy. Nearly everything the company does, including building big data centers, buying optical fiber, promoting free Wi-Fi access, fighting copyright restrictions, supporting open source software, and giving away Web services and data, is aimed at reducing the cost and expanding the scope of Internet use. To borrow a well-worn phrase, Google wants information to be free - and that is why Google strikes fear into so many different kinds of companies.
There are two main issues one can take with this approach:
Firstly, this is just another Fox and Rabbits ecosystem model - the problem for the GoogleFox is when all the rabbits are eaten (ie the price of information being near-zero drives information providers out the market). Can this happen - possibly, the total global Adspend (about $0.5 trillion) is not nearly enough to fund all services which today are paid for via subscriptions of various types, even if it were all online (only c 13% though rising at present). Google's own strategy appears to be to corrall rabbits - ie own or control access to a lot of todays' existing content - but we suspect even Google cannot Bunker-Hunt the whole Information market.
Secondly, the virtuous Googlenomic circle only works while they have search hegemony (see our note last year). Once there is search competition, then value can be added via premium complementaries as a differentiator, and the competition for Adbids sees profit in Ads slip away.
Competition is therefore something that interests Google exceedingly - they like it so much, they buy it up ...Sez Nick:
Many of the most innovative and successful of Google’s new services are, in fact, ones it has acquired rather than created. Those include the hugely popular video-sharing service YouTube, the Weblog publisher Blogger, the virtual globe Google Earth, the online word processor Writely (renamed Google Docs), the wiki developer JotSpot, the news syndication service Feedburner, and the Internet phone service GrandCentral. When it comes to innovation, Google is starting to look less like a sower than a harvester, less like an inventor than an exploiter.
With the purchase of Doubleclick its moving from Exploiter to Monopoly though.....anyway, Nick concludes his longer piece with:
There is another great success factor not mentioned though - market dominance. Question is - is this an industry where competition can grow naturally, or does the law of increasing returns mean that Google will keep first place unless it does something extraordinarily stupid (or stops buying all the promising small New Search companies). We rather suspect the latter is the case, given the small and waning share of any serious competition, in which event a more careful examination from an anti-trust standpoint is advisable.
(Don't get me wrong...I'm a Googlefan...its just that power corrupts, and absolute power....)
Having had a weekend to digest the GGG (Giant Global Graph), which is effectively the Semantic Web meets the Social Network.
I just can't use the term Graph dammit
We think our initial analysis is on track - ie by reducing the solution set for the Semantic Web to just those of the data fields in a social network, it allows the rest of the Semantic web benefits to potentially apply to the reduced case. Now whether SW technologies like OWL etc are still necessary in this reduced case vs good old XML et al is unclear to me. (In fact, if one could apply a Reduced Set of the Semantic web, using today's stack it would be very helpful for getting it up and running)
The other benefit from the GGG is if the m2m functionality can be applied - if XML transaction messages can be operated by automated functions, for example - then the power of the system could be hugely magnified and the economics improved.
For example, imagine if the function of aggregating the demand for something from collation through to ordering could be automated in a m2m world. My systems work out what I need (repeat purchases like groceries to choose a mundane but interesting example), aggregate demand with many others and then negotiate with the agents front ending say Amazon.
However, it pretty much needs to apply in an open world to maximise its impact. Some argue that Google could implement this, and they are right - but they will play Wintel to the GGG's "Linux" concept of being an open system.
Is this the desired state? We avoid Facebook's AOL play to succumb to a Wintel play - where is the Mosaic play, the Linux play here? The big, big lesson of Web 1.0 is that Open liberates people, thus grows fast
The question thus becomes - given such huge hegemonies in this space, how do we ensure the GGG stays Open?
One way is to help with all the concerns emerging around privacy. Berners Lee notes that:
"It is about letting it be connected to data from peer sites," he writes. "It is about letting it be joined to data from other applications. It is about getting excited about connections, rather than nervous."
To get excited, first I want trust, then I want some guarantees to stop me being nervous about my identity, about privacy and about security.
(An off the wall thought...the more I look at the GGG, the more I think an open social net designed under these principles would be quite similar to a VRM system)
Monday, November 26. 2007
Heard on the BBC this morning that the Great and Good of the UK Broadband industry are starting to discuss how the country will get fast internet. This is a Good Idea, as anyone who has been to countries like Korea can testify. (Addendum - Here's the Text edition)
BT is planning 24 Mbit/sec services, Virgin claims it can squeeze 50 Mbit/sec out of ntl's cables...but we really are looking for a plan to get to 100 Mbit/sec by 2010 to be competitive in a global world.
Ofcom also needs to step up to the plate here....they've allowed a comfortable mobile oligarchy to remain ensconced for a decade, and its probably now also a good time to gently prod the Telco community to get moving again, the crises of the early noughties are over. Its probably in the Telcos best long term interest too.
One of the issues is that the UK's old copper network was never designed with 100 Mbit/sec services in mind....mind you, at the rate of price increase for copper, maybe they could afford a FTTH program paid for by selling the copper to China
Or maybe they'll have to, what with the rag n' bone men already pinching garden gates and church roofing to flog to the Chinese, it could be the midnight copper heists next.....
Update...nope, not yet it would seem....
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