broadstuff

Early last year we did a major piece of work on the economcs of online advertising, and found that - lo and behold - there is not enough advertsing overall (never mind the 6% or so that is online) to support a freeconomic "Web 2.0" business world. The total global Adspend is about $0.5 trillion, of which about 6% - c $30bn - is online today. Given that the overall ICT marketplace is c $3 trillion, and the various media markets are greater than $0.5 trillion, it very quickly became clear that a world of Ad funded free services was going to be a non starter.

This didn't stop a whole heap of people from starting, of course, the logic being that if your service could get there fastest with the mostest then you would scoop up some of that precious Ad revenue, and the devil would certainly take the hindmost.

Except it hasn't worked that way (we told ya....). As the number of pages that wanted Ads has exploded, the (more fixed) amount of revenue has been splashed over more and more pages, bringing down CPM rates across most Ad supported services.

This post today from Quinthar outlines the generic trend (I saw it on Slashdot, the discussion there is quite good too):

TechCrunch reports that Lookery, a company specializing in selling ad inventory on social networks, is barely breaking even despite selling 3 billion ads per month. And rather than raising prices to become profitable, they're actually in the uncomfortable position of lowering prices 40% -- from 12.5 cents to 7.5 CPM. It reminds me of the (often unintentional) joke "We lose money on every transaction, but we make it up in volume!"

All this has made them so gloomy about the prospects of their core business that they're thinking of switching horses mid-stream and resurrecting that Web 1.0 favorite: selling demographic data. I mean, it worked so well the first time, why won't it work now?

So far so predictable*. Readers of this blog will say we've already heard you say that. True...but this I did not know:

Ok, so you might be saying "Sure, social network ads are crap, but Google's ads are solid, right? After all, they're set by the open market!" I thought that too, until recently I learned that rather than that market being open, it in fact is restricted by a series of minimum bids.

Don't believe me? Search for "Flash" and you'll see it has zero ads. In a totally free market, that means you have no competition, and thus should be able to bid as low as you want to get your ad to appear. But when you try to create an AdWord for the "Flash" keyword, you'll see it sets the minimum price at $0.10. So even if the market (me) only wants to pay $0.01, it's priced 10x higher than the market (I) will bear. Which is why there are no ads on the "Flash" keyword.

So Google, which owns upwards of 25%+ of the overall online Adspend market (depending on whose research you use), is possibly artificially keeping prices from plummeting even further - Quinthar draws the obvious conclusion here, if true:

Hopefully, most of Google's ads are competitively priced via the auction. This would suggest that they're priced "correctly" and that we're in for no major shocks to ad revenue (and, due to Google's market share, worldwide ad revenue).

But let's say that some high fraction -- 50%? 70%? -- of Google's ads are in fact not competitively priced, but are just set arbitrarily by Google, such as Flash's $0.10 minimum. In this scenario, Google's revenue is no more protected from price declines than Lookery and it's 40% "going out of business" sale....

....Sound crazy? It's not nearly as crazy as what's already happening in reality: ad arbitrage. It works like this:

You buy a really cheap adword from Google in order to direct a lot of traffic to some site. And then you fill that site with ads with high CPM and CPC (perhaps from other ad networks, it doesn't matter). The result is you buy a click for $0.10, and then turn around and sell it for $1.00. How is that possible? Why isn't everybody doing it?

Everybody was doing it -- in huge quantities -- until Google killed it. How? By raising minimum bids.

That's right, by fiat Google leveraged its near monopoly power and raised prices to stop buyers it didn't like (spammers) from taking advantage of the mysterious imbalance between the price of an AdWord and another network.

Now we can't confirm this thesis right now, and Quinthar goes on with some speculative analysis as to the "why" of all this, but I would like to stick to the general insight from the scenario painted here - that it is possible that a cocktail of Google policy plus it's market share is setting an unrealistic price for ads in the Googleverse, that are not possible to cover elsewhere. If true, there is clearly going to be an arbitrage there, so at some point it will be unsustainable.

One to keep a close eye on methinks.

* there is a counter argument that Lookery is trying to fund a change in strategy via higher volume sales at lower prices...we'll see....

I'll be on the Service Infrastructure panel (thats about the unsexy stuff wot makes the whole 2.0 thang run) at the Wealth of Networks Conference tomorrow. This session covers:

Some technology trends are clear - such as multicore processors, disk sizes and network bandwidths. Others, like the evolution of the Web and Semantic Web, less so - largely because these technologies are evolving within the social context of their use. This panel will enter the dangerous territory of making predictions in order to inform discussion about the future digital economy.

- Is the Semantic Web something on the same scale of the web or a small niche activity?
- When will desktop computers disappear in favour of mobile devices?
- Have clouds replaced the grid forever?

Here are some of our thoughts on this area from previous blog posts:

- On Semantic Webs - Semantic SOA
- Desktop Computers vs Mobile Devices - We have seen the death of "thick clients" forecast before:
- Clouds n Grids - Lean Infrastructures and Rich Mediums

If there are any Broadstuff readers there, be sure to introduce yourself

Yesterday we disagreed with the Patent Blog re its view that the changes in the US patent system was unfair to entrepreneurs - this is typical of the sort of thing possible in the US previously (from TechCrunch UK)

Last week TechCrunch reported that Channel Intelligence (CI), a company based in Florida, had filed a lawsuit for patent infringement in the US against a long list of startups which - get this - offer wish lists for products people may want others to buy for them. However, many of these companies don’t yet know they’ve been sued so their defence response is likely to be slow.

The patent No. 6,917,941, appears to cover the invention of creating a list of things in a database. It was issued in July 2005 (sometime after wish lists were invented on the Internet I believe) and defendants include a long list of startups like On My List, Remember The Milk, WishList and Zlio. Channel Intelligence is not suing Amazon or Ebay, probably because these are large companies which would send Channel Intelligence packing.

A European startup, blablalist - an open-source wish list service - has also been targeted and has had a letter from CI that claims blablalist infringes its US Patent No. 6,917,941.

However, at blablalist’s helm is the eagle-eyed Geert Bevin who has found that the European patent doesn’t seem to have been granted yet. He’s now looking for prior art to stop the patent from being awarded. This could make this lawsuit null and void and protect everyone CI targeted in Europe. Here’s a list of what he has already found, Including ShopSmart in 2000, Kelkoo in 1999, Peapod in 1996 and No Amiga To Waste in 1997!

Mike Butcher over at TCUK notes that the time to challenge such laims is now, and is urging anyone who knows of prior art to:

pile in people, and contact the European Patent Office to stop this patent being issued in Europe.

I'm stunned that there wasn't prior art in the US either, and fortunately the US patent office is now re-looking at these issues so its well worth challenging them. So far Europe has remained fairly free from all this, but clearly the price of freedom is ongoing vigilance!

Update - great discussion on this going on over at /.

Yet again the rumours fly that Google will acquire Digg, this time for c $200m. Many are reporting this today, but I have the same question as Venturebeat - why bother?

If Yahoo and AOL can build their own news aggregator properties, why can’t Google refine its own Google News site — where Digg may or may not be integrated with — or start its own Digg clone rather than buy Digg in the first place? Presumably, Yahoo! Buzz is worth more than Digg if one looks only at traffic numbers. And [AOL] Propeller could very well be headed for success, as well.

However, as the TechCrunch piece notes, Digg’s voting system seems to have fascinated Google. Is Google more interested in Digg’s algorithm than its name?

Google has been quite interested in “social search” for months — broadly defined as the use of social data like you and your friends preferences, to help determine search results. It has more recently been experimenting with letting its search users vote on the quality of rankings, similar to how Digg users vote on stories.

It says quite a lot to me about Google if:

(i) It does no think it can build a digg-alike, whereas AOL and Yahoo could

(ii) Google of all people wants to buy others' algorithms.

It always makes sense to buy smaller, off-centre services from outside - like Jaiku for example - but Digg is essentially a flavour of search and rating, which one would have thought is more core Google. There is an argument that this way they buy customers and going concern lock, stock and barrel - but with their market dominance they would probably get traction as soon as they launched.

We noted when Google bought YouTube that in our view this showed a strategic shift in stance from innovator to incumbent, where the insiders are focussed more on keeping the existing Biz as Usual going, and new new stuff is bought rather than built. More expensive, but lower risk of internal failure, won at the expense of internal capability and confidence however.

This would imply that they remain on that incumbency trajectory.

Update - Google has apparently walked away (assuming the rumour was true) - they must've been reading Broadstuff

Its been quite interesting watching the (internet) technology blogging glitterati having various crises of confidence over the last few weeks, this one by Mr Scoble is the most heartfelt paean to date - to quote:

Tech blogging has become way too controlled by PR agents. You might not realize it, but the top blogs are contacted by PR folks dozens of times per day. This is why you’ll see 15 stories all appear on Techmeme at the same time. All with the same news. Only a few of whom slow down to ask “is this really useful.”

I think this depends on what sort of blog one is - those chasing shiny new things - gadgets, startups etc are going to be wooed by this sort of PR. Those reporting on business happenings will attract a different sort of PR. Those more interested in underlying trends and other more long term impacts, technologies etc are less likely to be interesting to PR.

Scoble then goes on to lament other failures in his eyes of technology blogging as a medium:

Our commenting systems really suck. I didn’t realize just how badly they sucked until I started using FriendFeed. My comments here are gummed up with moderation, with spam filters that only sorta work, that don’t have threading, and have many other problems ranging from needing to be signed into, to not working on mobile devices very well, to requiring you to enter weird numbers or do math just to be able to post a comment.

We focus on the latest, shiny object and don’t follow up. I see a few signs that’s changing, but it’s really hard to stay interested in stuff. I was talking with someone tonight who said Facebook seems to be fading from interest. I say they should go to Israel, like I did, or ask my wife. She’s thrilled with Facebook and keeps checking her wall. Me? Meh, off to the newest shiny thing.

We used to link to each other all the time, telling you when all the other cool bloggers have done something new and useful. Now? The top tier of bloggers that you are probably following are too busy to respond to their own inbound email (I’m not alone in that one) not to mention have time to read feeds from, gasp, other people’s blogs.

There’s simply too much content to read and watch. So, many of you just avoid us all together.

Ethics? I have seen some bloggers not disclose conflicts of interest. I always will, but not everyone you see on TechMeme lives by the highest of rules.

Also, many of us are very pro Apple, yet when I travel around the world I see far fewer Macs than I see when I go to, say, Gnomedex or other technology conferences that have lots of early adopters. So, we start talking about cool stuff that many of our readers don’t have access to.

Finally, I see a lot of blogs that tear down companies, people, or ideas. I remember when the blogs always just were trying to uplift each other and put interesting ideas forward.

Reading this list through, apart from the commenting issue (which is more of a blog platform issue, I expect most blog software will fix this over the next year or so) it is essentially a litany of those issues faced when something moves from being an "amateur" game done for fun, to a "pro" game done for money.

And this is where the unique economics of online media - of which the blogosphere is a large and thus very interesting early ecosystem - start to bite. There are 3 fundamental economic shifts that occur in online media:

(i) Cost of content creation has dropped, so barriers to entry for new writers have dropped - of the 70 million blogs out there, all will be good some of the time, so the days where the "established talent" was protected by access barriers are gone.
(ii) Cost of distribution is 2 orders of magnitude lower than print - so Broadstuff is as easy and cheap to distribute globally as TechCrunch or Scoble, they have few economies of scale.
(iii) Cost of aggregation has reduced as it is automated - Techmeme, Digg etc will pick up a good story from the edge rather than continue to point to the incumbents, so forward momentum needs continual effort

What this means is that the barriers to entry in online media are much lower, and the conditions for sustained advantage are much fewer and shorter in effect - thus the margins in online media are far lower, any surplus will rapidly be competed away.

The other impact of this lowering of entry barriers that the pro-blogger who wishes to monetise faces is that many of the new entrants are subsiding blogging for other benefits. Large numbers of new voices are heard in the space are not doing it directly for income (Broadstuff being a typical example - a niche consultancy now has a media arm in effect). Sarah Lacy notes the core issues well in her post:

What about blogging as a loss-leader for a broader individual media portfolio? It occurs to me that my blog could become a larger part of my business without ever bringing in any direct revenue. Consider the role my blog plays in just building and sustaining an audience of interested readers—or "my brand" to use that over-used word we’re all beaten over the head with these days

And that excludes the legions of enthusiastic amateurs!

This combination of a low friction platform eroding any surplus, plus many of the entrants not caring if they make a surplus at all, puts huge pressure on those who would try to monetise their blogs - as Sarah notes:

Subscriptions are always an option, but typically a very bad one. There is so much solid free content online, it’s hard to get people to pay for a blog—hell, it’s hard to even get people to pay for the Wall Street Journal. In the print world, subscription fees frequently just pay the cost of getting the paper to you.

Advertising is an option, but a much over-subscribed one - there are too many pages chasing too little money. As with so much online media, Zipf's law (the few very rich blogs will get much richer) applies, leaving pennies for the others.

Given that there is little opportunity to increase price per unit, the only other option is to increase unit output and its timing - but as we have pointed out before, you now hit the limits of online "Freeconomics" - as yet, we are unable to increase the rate at which humans can churn out stories, one story at a time, or the hours in the day for them to do it. Reducing length, quality, wages etc have all been tried and found to have limits and its at those limits that many of the maladies Scoble describes exist.

So, big picture where does that leave us - is it potentially the scenario Sarah outlines?

So does the gulf just widen between the amateur bloggers and the larger, professional blogs that lose their sense of community, conversation, and--frequently—satisfaction? Is there a continual churn as A-list bloggers sell to larger companies or just burn out and fade away, only to have a newer hungrier, more rested crop take their place?

Sarah points out that this is not the case for the offset funded and / or smaller blogs, but for the many of larger ones I think it possibly is - in other words they will have to find some form of offset economic reason for existence of their own (eg Digg wooing Google for example). Part of this of course is the inevitable winnowing process as an industry matures - few sectors retain more than 3 players sustainably.

I see the wails of anguish of Mr Scoble et al (and similar yesterday from Loren Feldman) as early indicators of the zenith of the hypeside, and the beginning of the consolidation phase.

This is one of the most interesting articles I've read in months, and the most interesting on the print media since reading Flat Earth News earlier this year. Its a study from journalist Tyler Marshall and the Pew Research Center’s Project for Excellence in Journalism, about in the US print newspaper sector today.

Its a fairly detailed piece and well worth reading, but the outcome is summarised in the article I've linked to on Journalism.org's site - key findings are:

- The majority of newspapers are now suffering cutbacks in staffing, and even more in the amount of news, or newshole, they offer the public. The forces buffeting the industry continue to affect larger metro newspapers to a far greater extent than smaller ones. In some cases, these differences are so stark it seems that larger and smaller newspapers are living two distinctly different experiences. Fully 85% of the dailies surveyed with circulations over 100,000 have cut newsroom staff in the last three years, while only 52% of smaller papers reported cuts. Recent announcements of a further round of newsroom staff reductions at large papers, including the Los Angeles Times, the Chicago Tribune and the Washington Post, indicates these differences may be widening further. Our survey found that more than half of the editors at larger papers and a third at smaller ones expect more cutbacks in the next year. But a weaker-than-expected economic performance during the first half of 2008 and grimmer forecasts for the rest of the year suggest some of those cutbacks have already been implemented and darken these projections even further.

- Papers both large and small have reduced the space, resources and commitment devoted to a range of topics. At the top of that list, nearly two thirds of papers surveyed have cut back on foreign news, over half have trimmed national news and more than a third have reduced business coverage. In effect, America’s newspapers are narrowing their reach and their ambitions and becoming niche reads.

- The culture of the daily newspaper newsroom is also changing. New job demands are drawing a generation of young, versatile, tech-savvy, high-energy staff as financial pressures drive out higher-salaried veteran reporters and editors. Newsroom executives say the infusion of new blood has brought with it a new competitive energy, but they also cite the departure of veteran journalists, along with the talent, wisdom and institutional memory they hold as their single greatest loss. Clearly stretched to describe what is unfolding in their newsrooms, editors use words like, “exciting,” “extraordinary,” “nerve-wracking” and “tumultuous.”

- Newspaper websites are increasingly a source of hope but also of fear. Editors feel torn between the advantages the web offers and the energy it consumes to produce material often of limited or even questionable value. A plurality of editors (48%), for instance, say they are conflicted by the trade-offs between the speed, depth and interactivity of the web and what those benefits are costing in terms of accuracy and journalistic standards. Yet a similar plurality (43%) thinks “web technology offers the potential for greater-than-ever journalism and will be the savior of what we once thought of as newspaper newsrooms.”

This is essentially a description of an industry in the process of creative destruction - this is not the endgame, its the end of the beginning of the process. We have seen this occur before in other industries such as manufacturing in the 1980's and later IT in the 1990's, as their value chains were restructured by new technology and cheap offshore labour.

The endgame will be driven by the fundamental economics of online Media, which are:

(i) Content is now a commodity - if I want say foreign news or tech news I can get it in spades
(ii) Distribution of digital media is 2 orders of magnitude lower than print media - you can't compete with those economics
(iii) Customer attention is increasingly moving online, pulling revenues with it.
(iv) With the end user devices of today it doesn't really lend itself to reflection, but to byte sized consumption - and the interactive nature seems to reinforce this "Continual Partial Attention" model.

In other words, in the value chain, the value of content creation, distribution and consumption are dropping - leaving merely the Aggregation function as a value creation engine - and that is where we believe the Online Media endgame will reside. Aggregation has 3 key functions:

- Finding the relevant media you want,
- Ensuring that what you get is the best quality, and
- Making sense of it

In other words the searching, winnowing and organising that is the core of the editing function. All the world may not be journalists, but they are certainly writing. As Technorati notes, there are 70m blogs in the world and some of them must be good - the trick is to find them. Also, as there is now such a slew of contradictory content, the importance of making sense of it all rises.This we believe is the endgame of the Media - to be excellent aggregators.

And in the convergent comms emerging, the media will be on video, audio, text etc.

I'll reference here an earlier Gapingvoid post on the subject, which I thought was quite perceptive (ie agreed with me ):

Yes, again, it's all about what Clay Shirky said four years ago, in a wonderful interview he did for Gothamist:

"So forget about blogs and bloggers and blogging and focus on this -- the cost and difficulty of publishing absolutely anything, by anyone, into a global medium, just got a whole lot lower. And the effects of that increased pool of potential producers is going to be vast."

I had coffee with Clay a couple of weeks ago. A totally great guy. We didn't talk about blogs much. Nor did we talk much about Twitter or Facebook.

We talked about something conceptually far simpler: Cheap. Easy. Global. Media.

CheapEasyGlobal is the big story. And it's here now. It has arrived. And it's permanent. And there's not a damn thing anyone can do about it, save for a nuclear holocaust.

Some people will do very well by it. Other people will prefer to stay on the sidelines instead, using the internet to yak yak yak endlessly on about what other people are up to, holding the "players" to far higher standards than they will ever attain themselves. These lovely armchair quarterbacks will be swiftly forgotten by history. Same as it ever was.

Restating that in the economic terms of the value chain above:

- Easy - cheaper, easier to use gear makes everyone a potential content producer
- Cheap - lower entry and transaction costs makes content collation and distribution economics a low barrier to entry
- Global - the content, and the audience, can be found everywhere

(By the way, this also implies that as well as every person being a journalist - in - writing, just about every company in every industry will be a media business too )

One can register concern that all this is also driving a dumbing down of the media we once had, and there is some validity in that argument - but the unpleasant truth is that a large number (majority?) of human minds seem to like being dumbed down (cf average TV program ages etc, the rise of Sleb magazines). Ditto it is now possible to consume news that is already pre-slanted to your own predilections without an opposing thought ever seeing the light of day (a move from "Broadsheets" to "Narrowsheets", as Chris Hambly notes in the comments section).

But one suspects it was ever thus, and the "qualities" will thus also emerge in their own right, be they blogs, 'zines, or online newspapers - and these may have to be paid for, as pure Ad driven media usually dives straight for the lowest common demographic (compare the London free papers and the paid for others for example) - though it looks like the rise of the Freesheet is ending, if Kristine Lowe's post is on the money..

What is quite interesting is to think about where paper media will remain - no new media totally replaces the old - at least not immediately - so the real issue will become "where is there still additional value in the printed medium". We see 5 major areas over the next few years:

- where one cannot get easy access to high enough quality online displays (ie some media can go mobile, but much cannot)
- where it is still hard to read long and/or complex tracts easily with todays' devices
- where Advertising economics still favour print
- as a status marker, or a sign of higher value (we can imagine upmarket media for example differentiating itself via being printed - No FT, no comment....)
- where privacy / exclusivity is key - or at least low cost repeatability is the last thing one wants - and has value in its own right that comes from being in print.

But one thing is for sure, if you were building a media empire today from a blank piece of paper, you wouldn't structure it the way most are at present. And for anyone in the industry, its a sanguine exercise to think how you would build a media organ today, note the differences, and note your part in the value chain. Things will not change overnight, but as this study shows, they are changing quite fast.

We've been asked by Chinwag's Sam Michel to spread the word on the Digital Mission to the US:

We're working on a really exciting project with the UK Trade &
Investment agency (part of the UK government), taking UK digital
companies on two trade missions to the US, which we've dubbed Digital
Mission: http://digital-mission.org

There's two Digital Missions planned:

- Digital Mission to Web 2.0 Expo in NYC, 14-20th Sept, 2008
- Digital Mission to SXSW interactive, 13-17 Mar, 2009

They'll provide a bunch of great stuff for the companies going
including, pre-arranged meetings with potential partners, practical
sessions on how to expand into the US market and lots of social stuff,
too.

The closing date for applications to the Digital Mission to NYC is
tomorrow (Wed, 23rd July). Criteria and application details are available here:

http://digital-mission.org/apply

I like the idea of the SXSW one, it would be a great "business justifiable" reason to go.

Very interesting article on the Patent Law blog re changes going on in the US patent system with respect to the software / business model patents - essentially they argue that even Google could be impacted by the changes:

The apparent death of Google’s pioneering PageRank patent under the PTO’s new rule for patentable subject matter may be a cause for celebration among those who are philosophically opposed to property rights in innovation and are eager to confine the patent system’s ambit. It will surely be cause for mourning among those who believe that allowing patents on cutting edge technologies has served the country well for more than two centuries and that a radical departure from the traditional approach would be unwise. And it is likely to generate puzzlement among business people and innovators, who may wonder how agency decisions supposedly premised on the need for ensuring that “that the patent system be directed to protecting technological innovations”[22] have ended up rendering unpatentable innovations in search engine technology, computer modeling, bioinformatics and many other innovations in cutting edge fields related to software and information technology.

I would counter this by arguing that the current regime, or rather that operant over the last 10 years or so, has been abused in the opposite directions - people have been allowed to patent what is essentially prior art merely by arguing it is in a new software medium, and it created a market for patent trolls, corporate patent banking and so on - the activity by the US Patent Office in rescinding much of this is to be applauded in my view.

As with all pendulums, the risk is that it swings too far the other way, but 'tis - in our view anyway - better that it swings, as right now it is far too easy to enclose common knowledge .

Now something I did not know re Google's technology is also alluded to in the article:

Stanford owns the patent, and Google holds a perpetual license on the technology that is exclusive through at least 2011

Now those words Stanford owns, Exclusive and 2011 are very interesting - there is a sense that all this is happening at a time when it is fairly moot for Google anyway, they have potentially far greater risk here. The Search market from 2009 - 2011 will be a very interesting one indeed methinks......

Two interesting new articles indicate a potential new zeitgeist. First, TechCrunch wants a web tablet:

I want a dead simple and dirt cheap touch screen web tablet to surf the web. Nothing fancy like the Dell latitude XT, which costs $2,500. Just a Macbook Air-thin touch screen machine that runs Firefox and possibly Skype on top of a Linux kernel. It doesn’t exist today, and as far as we can tell no one is creating one. So let’s design it, build a few and then open source the specs so anyone can create them.

And another NYT article describing the emerging micro-laptop :

A Silicon Valley start-up called CherryPal says it will challenge the idea that big onboard power is required to allow basic computing functions in the Internet age. On Monday it plans to introduce a $240 desktop PC that is the size of a paperback and uses two watts of power compared with the 100 watts of some desktops.

It wants to take advantage of the trend toward “cloud computing,” in which data is managed and stored in distant servers, not on the actual machine.

Every few years the "extra thin client" play comes along, its been around since PC's were called microcomputers, and the idea was always that the network would be the computer. However this has always - to date anyway - foundered on the eventual realisation that the server/network/cloud is not reliable enough, a point ironically brought home by the simultaneous failure of Amazon's S3 cloud.

The other approach to this micro-PC market is via the beefed up mobile / PDA, and as RWW notes, its now game on between Apple and Nokia.

Now we did a feasibility study of such a multimedia device a few years ago, when everything was quite a bit more expensive - and it was feasible then, so its been curious to me since then that despite all the Convergence conversations, manufacturers have by and large not stepped up to the plate, until very recently.

The reason was probably economic - all our research at the time implied although there was huge latent demand for such devices, what was harder was to work out how it could be particularly profitable as device margins here will be wafer thin, and the incumbents were all making more money doing what they did at the time. However, all those markets are now overcompeted, driving startups and various existing manufacturers into this new arena

In this game, we thought it unlikely the traditional mobile ploy of device + large and long lasting contract would work if it was competing with the PC market's fairly unfettered sales model (except for all the onboard crapware of course, but that may be receding).

Clearly some form of offset funding will very likely emerge at this point of the market, its just hard to predict which.

Update - interesting take by Confused of Calcutta arguing that these devices will have a similar impact to the low cost PC in developing countries. Connection charges are another issue that holds these areas back, however.

An argument in Venturebeat that the latest Facebook revamp is aimed more at Silicon Valley than its users (In essence Facebook is restructuring its UI to look and feel more like current SV darlings such as Twitter and Friendfeed ):

There’s a large school of thought in the Facebook application developer community that believes the majority of Facebook users actually like to do what most MySpace users also do — express themselves. And by that I mean decorate their user profiles with glittery slideshows, quizzes, lists of favorite bands, and plenty of other features that both MySpace and the old Facebook profile offered, that the new Facebook design de-emphasizes. Developer Stanislav Shalunov wrote perhaps the best thought piece on this reality, a month ago. As he puts, it there are two types of users:

Giggly 75% like pokes, quizzes, pic forwarding, fun games, selling friends, glitter on profiles. They express themselves through style and interact with friends using the mouse

Serious 25% like bookmark import, utility apps, discussions. They express themselves with text and pictures containing them and interact with friends using the keyboard. Because you’re reading this, and made it this far, you’re serious. (Giggly users tend to not read much at all, certainly not blobs of text, and quite certainly not my blog)

That’s the thing. Here in Silicon Valley, we’re minimalist snobs about decor. You don’t see many pink flamingoes in the front yards of Palo Alto Eichlers or San Francisco Victorians. I’ve personally deleted every tacky-looking application from my profile page after installing it, just so I could keep my profile looking “clean.”

This article appears at the same time as another one by Andrew Chen, arguing in essence that Web 2.0 startups who aim their service at early adopters are following the wrong path:

The general idea is to go through the typical flow:

1. Get a bunch of early adopters (aka Techcrunch readers) excited about your product
2. They blog, twitter, and promote your product to their friends
3. Eventually this process will reach the mainstream and you'll get the wider market

The issue, as Andrew notes, is that this approach while giving instant plaudits in SV and tech blogs like TechCrunch, may lock your user base firmly to the "TechCrunch 50,000" early adopter readership and almost guarantee it won't have wider appeal:

The major point I will make here is that Techcrunch and related blogs reach an audience of early adopters, but these may not be the earlier adopters that you want. After all, what's the point of launching a music startup on Techcrunch, for example, if your startup is primarily for the teen mass market?....

....if your market is moms, there are cool moms that are likely to try out the new technology. And if your market is Asian immigrants, there are cool members of that group who are trying out new technology.

In Facebook's case this is not quite the issue, as they already have a huge user base - but then they also have an unfeasibly large $15bn valuation that is not in any way attached to current value per user, but far more to "sentiment" about future potential - and that probably is driven more by Silicon Valley whims and fashions.

Ah, the tyranny of the large valuation rears its head yet again

This is not to say that Facebook is doing the wrong thing...the "Dohhh" thing about the consumer web since its inception is that people like to communicate and converse, and that is the killer app in nearly every case. Facebook in its initial inception was a display rather than communication service - it was hard to use it for communication and conversation - so making it better at this is very sensible. And of course this approach increases pageviews, whereas just allowing users to email each other didn't.....