broadstuff

Liz Gannes on the US experience of Winter Olympic Web TV

NBC knew at the outset of the games it would be losing money on broadcasting them due to licensing costs but still took an extremely cautious approach to making events accessible online, rather than experimenting with the web to goose revenue. To its credit, the network finally opened up a couple of high-profile events toward the end of the Olympics for live streaming, allowing access to users without requiring them to authenticate themselves as paying cable subscribers. But I found it incredibly frustrating that given the major advances in live-streaming video and video advertising since the Beijing Olympics (see my sub req’d story on GigaOM Pro about adaptive bitrate streaming), NBC ratcheted down its content so tightly — offering an estimated 400 hours of live video coverage compared to 2,200 two years ago.

There are two interesting subtexts here:

Firstly, the US stuff was in the same timezone, ideal for the established Web TV "watch later" model to function. In the UK it was on late at night so we were watching it live on conventional TV during the usual "catch up" time late at night. Web TV still can't compete with "real" TV for this, it was a no-brainer to be up a 2.30am watching the BBC

Secondly, there was far more going on at any one time than a few standard TV network channels could cover. This is where Web TV should really complement broadcast TV. The high profile event shown live on Web TV was the Ice Hockey game, with 500,000 streams - but long term I can't really see the point of trying to compete head to head on the main events, as that is not where Web TV economics really work except as a way of goosing revenue (as Liz puts it )

But to me, the really amazing lesson of the Winter Olympics has been how exciting the Curling has been. Partly its been the very close matches, but as the Huffington Post points out, it may also be because so many of the players are so cute

Today Facebook patented its NewsFeed (I read on RWW). The patent says that they are the patent holders for:

A method for displaying a news feed in a social network environment is described. The method includes generating news items regarding activities associated with a user of a social network environment and attaching an informational link associated with at least one of the activities, to at least one of the news items, as well as limiting access to the news items to a predetermined set of viewers and assigning an order to the news items. The method further may further include displaying the news items in the assigned order to at least one viewing user of the predetermined set of viewers and dynamically limiting the number of news items displayed.

I cannot believe that there is no prior art here! The Facebook Fanboi Nick O'Neill piously believes that:

It appears that this patent surrounds implicit actions. This means status updates, which is what Twitter is based on, are not part of this patent. Instead, this is about stories about the actions of a user's friends. While still significant, the implications for competing social networks may be less substantial.

Pull the other one, Nick. Based on Facebook's well documented benign and gentle past (for US readers - that's irony ) they are not likely to use this for commercial advantage? The main problem is that the patent system in the US is increasingly compromised, but we have covered this ad nausea before.

But I think this is becoming a real issue now, and there may be worse to come in my opinion. The problem the system has is that it is part subsidised by the state and probably costs far more to operate than it costs applicants, so its creaking. And what concerns me even more is the Vulture Capitalists are circling, this article by Nathan Myrhvold in the March Edition of HBR is quite scary- its basically a defence of his company, Intellectual Ventures', wish to Bunker Hunt the Patent market:

My company, Intellectual Ventures, is misunderstood. We have been reviled as a patent troll—a renegade outfit that buys up patents and then uses them to hold up innocent companies. What we’re really trying to do is create a capital market for inventions akin to the venture capital market that supports start-ups and the private equity market that revitalizes inefficient companies. Our goal is to make applied research a profitable activity that attracts vastly more private investment than it does today so that the number of inventions generated soars.

The basic idea is that there is a VC type market for "Invention Capital":

....a full-fledged invention capital system could solve many of the problems that have long plagued both inventors and the consumers of inventions: inadequate funding for applied research, an inefficient market for connecting companies with the inventions they need and for monetizing inventions, a balkanization of the inventors and inventions required to tackle big problems, and an enforcement and arbitration system that simultaneously permits too much infringement and relies too heavily on lawsuits to determine price.

Anyway, the argument is that the Government based patent system is not fit for purpose (true) and the solution is thus to privatise it (probably false, in our view - or at least not without a lot more safeguards than I suspect Mr Myrvold would want).

Another interpretation is that they have seen how big business has managed to buy up DNA IPR which by rights are global Common Stock, and are reselling this at vast profit to its original providers by the simple trick of legal enforcement based on having the money. In medieval England this was known as the Enclosure system, where rich Barons enclosed common peasant land and forced the peasants to pay for using it. One would also feel more re-assured IV were "doing it for us" if they didn't currently use "idea generation" sessions where their lawyers float round writing stuff down to run off and patent.

But one can see how these things will take root simply because they will get the money from backers to do them given the vast profit potential, as the existing creaking system will have few backers and defenders, and there is little financial/lobbying/ethical resource available to "Do The Right Thing".

So there is a strong argument that it behooves the Tech industry to fix the patent system, as what may replace it could be infinitely worse. One non-Myrhvoldian approach could be to wholesale import the European system, which is not yet as broken - but that would require the US to get over the Not Invented Here syndrome.

My slides from Mashupevent's Location Based Service Session last night - these are the notes, they are based on client research we did about a year ago.:

Predictability - of a sort

Location based Services is one of those cyclical hypes, coming round every 10 years or so. Like all overhyped areas, it comes complete with way overoptimistic market projections. The last time round, in the WAP fuelled dotcom atmosphere, $20bn was typical of the froth. 5 years alter, a few millions was more like the truth.

This time round, $13bn are the sorts of numbers thrown about. Suffice to say that we believe these numbers too are way overstated. However, it does give us predictability of a sort, in that the peak of each hype wave is 60% of the last one, which allows us to predict that the peak of the next LBS hype cycle will be c $7bn in 2018

Four Squares

So what is the size of the market? The honest answer is it is too early to tell (a scenario based approach is better, which is our approach of course ). The two key determinants are penetration and Average Revenue Per User.

Penetration can vary between "only smartphone users" (bottom of the chart) and a set of scenarios that imagines location aware consumer devices, cars, etc etc - and if you add low cost "Internet of Things" devices it can be immense

ARPU can vary between "Free" - is location services are given away as part of something else, and directly "paid for" - the horizontal axis - and depending on your assumption here that gives you a number to multiply by your no. of users, and you get a market size.

Update (forgot to add): One also has to be very careful about who gets this new money. The owners of the real estate - the device and the LBS info transport networks (eg operators) - have real market power here and will absorb a lot of any surplus.

We built a number of scenarios for our client, and its worth looking at the two key ones - ie there will be a large number of users for services which are low cost to use, ie are typically funded in some other way (ie the "market" as such will never see the value). Ad funding - the beloved "Ad push discount to find a cool restaurant for your friends" business case - will be a small, and "difficult to get right" part of this in our view, mainly because it is invasive of the very limited real estate on the smartphone.

Another viable market will be niche services that deliver real value to a group of people, and they will pay for these. This will be a market of smaller numbers of users but far higher ARPU.

In our view the $13bn market projections is of the "Pangloss" school of forecasting - assuming the best of all possible outcomes in the best of all possible worlds, and our scenarios tended to give an order of magnitude lower set of answers.

I'm OK, You're.....

This slide segments the most likely strategies that consumer based mobile services will adopt, and looks at the likelihood of success. We covered this area in more detail in the post over here, and the potential privacy issues over here

There's always someone looking at you....

We believe that privacy and intelligent usage of people's digital footprint will be critical - as Google Buzz found out, do this wrong and even the most respected player will be torpedoed below the waterline. The slide mentions two amusing "hacks" that illustrate the privacy issues with LBS

- Robmyhouse.com - shows what you can do to mashup location data for helpful services - for burglars . We covered this in more detail over here

- The Invasion of the Foursquare Bot Snatchers - fun hacks of Foursquare to show what a malicious approach could do - we covered this in more detail here

Other issues that were covered in the Q&A (not on slides)

- Biggest B2B markets? In our view, Logistics (Transport, Scheduling, empty truck ride clearing etc) is the major market.

- Why do people use Foursquare, Gowalla etc? First Gen LBS like Dopple failed, 2nd Gen are more "game" like as that has been shown to be more "sticky" for a user, increases the potential of selling virtual goods, and is more likely to get them to divulge personal data

Somebody asked me afterwards why we are so "down" on LBS. I replied that the problem is not us, its the hype cycle around the industry that is driving it to an artificial overvaluation (hey, even a $2bn industry by 2015 is still good) - and everyone is colluding in this. For example, we were interviewed by one of the MSM's (fairly well known) tech journalists on this topic last year, and gave our fairy rational prognosis - as above. The piece when it eventually appeared was totally upbeat and didn't even mention our views as a counter-story. This, if I may say so, is a total dis-service to all those who work in a sector. Big it up by all means, but you are on a hiding to nothing if you don't understand the limits to growth.

Interesting article from Salesforce.com's Marc Benioff about why Enterprise Social media software is so cr*p. The headline we used - "Lotus Notes was conceived before Mark Zuckerberg" - is a quote and says it all really, but he makes some other points:

We need to transform the business conversation the same way Facebook has changed the consumer conversation. Market shifts happen in real time, deals are won and lost in real time, and data changes in real time. Yet the software we use to run our enterprises is in anything but real time. We need tools that work smarter, make better use of new technology (like the mobile devices in everyone’s hands), and fully leverage the opportunities of the Internet.

We actually did quite a bit of work on the benefits of real time services in business about 2 years ago, and the issue is this - most businesses do not operate in true real time, and in fact most of the software back-end infrastructure works quickly enough most of the time - but the presentation layers to the users are just cr*p compared to modern consumer software.

But this is due to a different dynamic - when you are giving away free services to users, the User Experience is absolutely critical to takeup - which is why consumer Web 2.0 companies obsess about this. Enterprise software economics are based on getting through client ticklists, and user delight is seldom a criteria for this.

So - when user delight becomes a key differentiator in company software selection, Lotus Notes will finally be thrown out.

The court case against Google's YouTube / Google Video subsidiary is very interesting. A summary here from the NYT:

Three Google executives were convicted of violating Italian privacy laws on Wednesday, the first case to hold the company’s executives criminally responsible for the content posted on its system.

The verdict, though subject to appeal, could have sweeping implications worldwide for Internet freedom: It suggests that Google is not simply a tool for its users, as it contends, but is effectively no different from any other media company, like newspapers or television, that provides content and could be regulated.

Now as you can imagine, there has been a vociferous outcry in some quarters that this is a crime against the Internet, and in others that this is Big Media attempting to strangle the poor innocents through legal hands around their jugulars.

But its simpler than that - it is a question of "when do you become a publisher" - in short:

Google maintains that the ruling contradicted a European Union directive on electronic commerce that gives service providers safe harbor from liability for the content they host.

But prosecutors argued that because Google handled user data — and used content to generate advertising revenue — it was a content provider, not a service provider, and therefore broke Italian privacy law.

Clearly, searching a large number of other sites and aggregating results (Google Search) is not being a publisher. But once you are holding a large amount of content in your own databases (YouTube, Google Video), and are clearly running a for-profit service that's business model is attracting customers by aggregating and advertising against it, it is not hugely different to any other publisher.

Google Argues:

Common sense dictates that only the person who films and uploads a video to a hosting platform could take the steps necessary to protect the privacy and obtain the consent of the people they are filming.

But imagine if a cinema argued that showing illegal movies was not it's problem as it was merely a hosting plaftorm. One man's publisher is another man's platform and as Web models come closer to looking like "real life" models..... so the question really is - should the Web based publisher be treated differently under law to ones that have come before?

One of the reasons that Web based media has done so well is precisely that they have not yet been put under the same constraints as older media, and while some old shibboleths like IP and Rights need reforming, a levelling of the playing field is also long overdue.

Worrying message for the Future of Web Porn - Apple is pulling the Adult apps out (theough a rumour surfaced that they may let some back in) back in, while Walmart is pulling them out of Vudu:

An email is currently being sent out by Vudu letting its After Dark (the adult portion of its service run with adult publication AVN) partners that the section will be discontinued in the “coming days.” Find the full email at the bottom of this post.

Vudu has the distinction of being the only major streaming service with an adult section which includes hundreds of titles (including many in HD) from the leading porn studios.

What with all the free sites like YouPorn, its hard to see where a moneymaking model for Web Mass - Videoporn is.

In theory - in theory - if there is no money in the market then eventually new content will disappear and the market collapse. Will this happen for Porn - probably not, because this seems to be the one area of user generated content where the cult of the amateur still has a large part (as it were).

Poor old Google - first the bad Buzz, now the EC is after them for search gerrymandering. But the story we like most is a classic of privacy hypocrisy - as we have noted before, the leaders of the various social networks try every stratagem they can imagine to get you to give up your privacy, but have totally the opposite view of privacy for themselves.

So it is with some delight we record that Eric Schmidt, Google CEO, recently (in)famous for saying

"If you have something that you don't want anyone to know, maybe you shouldn't be doing it in the first place."

....is desperately trying to ensure we don't know something he did in the first place, and is pursuing his ex-mistress and her pesky website via the heavy mob - Gawker:

Now the site has been removed from Google's Blogspot, where it was hosted.

Bohner removed the site after threats from Schmidt's lawyers this weekend, according to a source close to the situation.

"When a billionaire threatens you, you get in line," this person said.

It made for a frightening weekend for Bohner, and no wonder: Not only is the former CNBC and Forbes journalist trying to come to terms with her sobriety and past addiction, she doesn't appear to be swimming in the money it would take to mount a plausible legal challenge to a powerful and well-connected tech executive worth $4 billion.

So what's the lesson here, apart from the well known issue of the law too often being on the side of the deep pockets?

Simple, for all you social media-ites - when it comes to matters of giving up online privacy, going for open-ness and transparency and all the Kool-Aid 2.0 - don't lap up what the big dogs say, watch what they do instead.

And just in case you thought that you can always find the dirt by searching on Google, turns out part of the reason the EC is after Google is that others are alleging that Google buries websites it doesn't want you to see.

This is the sort of headline every service must dread*, and for the much battered Google Buzz it comes from a near unimpeachable source - Social Media doyenne Charlene Li of Altimeter who saw that what her 4th Grade daughter was chatting to friends about was public on Google Buzz:

But what was most disturbing was looking at her friends’ conversations and realizing that some of them were chatting with complete strangers, and in some cases, sharing personal information like emails. Absolutely terrifying as these are 4th graders who have no clue.

I quickly turned off Google Buzz, (but I didn’t totally disable it, more on that below), dashed off an email to the parents of the friends she had been chatting with inside of Buzz (again, all in public, with their real names), and then finally took a long hard look at the situation.

She found, for example, that “iorgyinbathrooms” was following her child. Also, that Google is less than careful with the age of GMail users:

... I discovered that buried in Google’s terms of service somewhere is that children under the age of 13 are not allowed to have Gmail accounts. But unlike Facebook, which requires that people enter their birthdates when setting up accounts, Google makes no such attempt to educate people signing up for Gmail that such a provision is in place. As a result, while Google is absolved of responsibility because of the TOS, it could and should do a better job of complying with the Child Online Privacy Protection Act (COPPA).

This follows hot on the heels of Buzz being accused of all sorts of adult privacy errors including re-installing abusive ex husbands as stalkers, but as an issue this one trumps everything to date - and not even the Silicon Valley A List Apologistas that have defended Buzz to date will dare bat this one away.

Yet again, as we wrote in our piece about Buzz being a slow motion train wreck, it has been the total inability of a young, male, (probably largely) childless techie elite to imagine what the average user's life and concerns look like, and Google's systemic inability to rein them in that has led to this unnecessary situation (you would have thought that the hoo-ha last weekend would have sent alarm bells ringing on this sort of issue).

*Strictly speaking it was "New Google Buzz Privacy Nightmare: Scumbags Can Follow Your Kids!" from SAI which then pointed to Charlene's article. I merely translated it for a UK Sun-reading audience

Yes, it is true - Social Media is less trusted as a source of product recommendation, says Edelman's latest trust barometer. Why is this, I hear you cry - well, BBH labs obfuscates it in it's article ""Will Social Media Eat Itself":

In difficult times, we are drawn to authority: we want there to be expert opinions and definitive answers.

As the network expands, connections weaken: It is perhaps inevitable that the bigger our networks get, the less absolute trust we have in the individuals within them.

As social media adopts the behaviours of old media, it loses credibility: We’ve pay per tweet, but the influx of blunt commercial messages into Social Media does seem to be impacting trust.

Genuinely useful and relevant uses of the social graph have been slow to emerge: Some of the developments we’ve collectively been most enthused by seem to have stalled in development.

They offer some solutions to the predicament, but these seem to be much on the line of "how to skew the medium to make people unable to avoid the marketing message" - you will be marketed to, and trust us while we do it dammit

I would argue that they are avoiding the fundamental problem - social media is not trusted as much now because the people driving it and using it are not as trustworthy as they were.

The combination of:

- Perversion of social media from a communication to a commercial medium (the massive rise of flacking on Twitter for example)

- Widespread abuse of people's privacy and information (From Beacon to Buzz - nuff said?)

Its the classic case of marketeering, like tourism, destroying what gives it succour. The solution is obvious - to make social media trusted again, eradicate the untrustworthy people on it. But that includes most marketeers.....

The issue is not so much social media eating itself, but marketeers not realising that then sh*tting in one's own pool is a dumb idea. But so long as a social media system is seen as a flogger's free-for-all, then the tragedy of the (marketing) commons will be prevalent.

Update - Tom Ewing points out the latest survey show trust in all media falling - but this doesn't reconcile with stuff we have from a few years back showing that other media had by and large fallen already. Will have to dig more......

There is an interesting article in the San Francisco Chronicle today about Google's strategic mis-steps:

The recent privacy backlash over Google Buzz, the company's new social-networking service, is the latest in a series of launch fumbles that some argue reveal troubling blind spots within the Internet giant.

The huge amount of cash generated by the Mountain View company's search business has enabled it to hop from product to product, moving into mobile, software, social networking, broadband and other areas.

But in the process, it's overlooking predictable consumer concerns, like privacy worries, the need for prompt customer service, or the importance of intuitive products, industry observers say.

"Google is clearly looking like a company that is doing a lot of things, few of them well," said Rob Enderle, principal analyst with the Enderle Group. "They have this attitude that if you're getting it for free, you should be happy with what you get."

Putting my strategist's hat on, and looking at Google through the lens of the venerable old Boston Consulting Group matrix, you can see what Google is trying to do.

Cash Cow - The Search-Ad business is Google's Cash Cow, and at the moment makes all the profit Google earns - they have a very large (dominant) market share, but over time it is a slowing market (relative to the rapid growth of technology sectors and under increasing competitive pressure). They are thus doing what every company is advised to do in this position, ie to invest their surplus in faster growing industries and so keep up the pace. To this end their rate of acquisition has been phenomenal, not least because - by and large - their ability to launch their own successful products has so far been pretty lacklustre (Buzz is just the most recent to join the list)

Question Marks - most of Google's acquisitions tend to be in the Question Mark camp - small market shares but in rapidly growing markets. No doubt the strategic thinking is that the Google infrastructure will be able to rapidly ramp up the growth of these small companies. In the pst, Google has been quite good at this, and refined the offerings before finally launching - problem is that by and large it hasn't worked more recently, and many of the acquisitions have withered, finding themselves becoming...

Dogs - these are plays that lose market share and/or the sector declines. Google places some bets early so the sector fizzles out, which is fine - low cost option plays are a creditable achievement. The problem is when too many Google acquisitions look like Jaiku - it was a decent competitor to Twitter but died as Twitter exploded, forcing Google into some far more high cost/high risk plays (such as Buzz) later in the day. Chrome could be a dog - the browser market is mature, they have a low market share - if the current consumer Ad campaign doesn't massively increase market share then its likely to be another failure.

Stars - the aim of all the acquisitions is clearly to become Stars, those businesses that surpass the old business and launch Google into new areas. GMail / Google Docs and YouTube are the current successes - but none of them make any money, in fact YouTube would be spectacularly bankrupt if it wasn't for massive subsidies. And Stars have to make money eventually - very large services that lose money are a millstone around any company, and may well attract regulatory attention for being anticompetitive. So right now, these ain't real Stars, given their unprofitability they are more like black holes. So Google has to engineer something more here.

But this, as the SF Chronicle implies, is something that Google is increasingly struggling to achieve, especially in the realm of social media services:

Observers say there are two things in particular that Google isn't paying adequate attention to in its rush to deliver the next new thing: privacy and complexity.

.....


Both blind spots are byproducts of the engineering-centric culture of Google, several analysts said. Their typical hires can puzzle out eye-crossing brain teasers the company famously issues in job interviews but can't always predict how real people will react to their services.

Google "doesn't always recognize or anticipate some of the human problems, the people problems, the customer service, the concerns over privacy," Sterling said. "They tested Buzz internally and everyone liked it, so they just had no idea it would cause the fear it did."

In other words Google may well have the wrong sort of company culture - if not the wrong sort of people - for these new services. This is not uncommon, often it's the company "DNA" - the skills, economic priorities and culture among other things - that prevent successful companies in one phase of the industry moving on to the next. Google will hardly be the first large corporate not to follow the next turn of its industry.

Perhaps Android is the success waiting to happen, but its early days and - with the best will in the world - Google's DNA is not in the business of flogging mobile handsets (nor is its infrastructure) either.

So, what next if one is a Google? If the past is any guide to the future, Google will now settle down to be a a Search / Ad behemoth - a new Microsoft or IBM or AT&T, dominating its space increasingly via legal muscle and scale economics rather than great innovation. It will use its market power to drive into ancillary markets as Microsoft did with browsers. But the very culture that drives it to success in its traditional areas may well militate against its success in new sectors. Historically, companies that have succeeded in building new businesses have had to create totally new cultures, in one of a number of ways:

- Independent Business / Spinoffs - businessesses given a lot of independence to find their own way.
- Joint Ventures - infusion of DNA with others' hopefully dilutes the business culture enough
- Tough Times - companies under severe pressure can change culture sufficiently to break out into new industries. Nokia is a prime example, moving from rubber to mobile phones.
- "Re-Invention" - a business sets out to re-invent itself without prodding - very rare, 3M with its race towards employee-sourced innovation and Toyota with its approach to JIT are the only large successful ones that come immediately to mind.

Google is not in tough times, so that is a hard act to imagine. Independent business units and Joint Ventures are currently near anathema to their culture and business models, so those are probably not going to happen anytime soon (though in my view, if anything is crying out for a joint venture it's the Android project). 3M may well be a model Google could study as it has no shortage of smart people.

In fact, if 'twere me, rather than acquiring a lot of the companies they do, I would look more at taking a stake in them but leaving them at arms length to grow into their own space.