Monday, December 20, 2010

A New Year's Resolution for Google: Buy MySpace, Stat!

This post was also published in VentureBeat.

For all the money Google has thrown at MySpace over the years, the search giant of Mountain View might as well have bought the troubled social network. For years, News Corp. CEO liked to brag that Google paid him more in its landmark $900 million search deal than he paid to buy MySpace in the first place.

Oh, sure, no one’s bragging now. News Corp. executives are openly talking about dumping MySpace, and Google only recently renewed its advertising agreement with MySpace, after months of delay, in a deal that smacked of throwing good money after bad.

But that’s a sunk cost, as economists like to say, and chump change for Google’s multibillion-dollar money machine. What Google really needs is a convincing social strategy to get Wall Street and Silicon Valley’s collected punditocracy off its back. MySpace is for sale. And Google should jump at the chance to buy it.

The stratospheric success of Facebook in 2010 has put Google on edge. Five hundred million-plus users, $2 billion in advertising revenue forecast for next year, the gaming and e-commerce platform of the future, and one out of five pageviews. Can you blame Google for flailing at finding a strategy to compete with Mark Zuckerberg’s social juggernaut?

The reality is that Google will have as much success replicating Facebook as Microsoft has had replicating Google with Bing. Google’s engineers keep thinking it can use standards to win against a proprietary platform, a strategy that Sun Microsystems — remember them? — employed against then-nemesis Microsoft when Googel CEO Eric Schmidt worked there. Ranging from OpenSocial, a widget platform, to XAuth, a content-sharing protocol, all of these “standards” have failed to stop Facebook and its magnetic attraction for users, developers, and advertisers.

The dealmakers of Mountain View, meanwhile, have acquired a grab-bag of companies like Slide and Jambool with the hopes that their key talent somehow understands social Web apps better than Google’s famously cosseted and out-of-touch nerdocracy.

The apparent fruit of these efforts — a toolbar-like add-on to existing Google sites called either Emerald City or +1 — does not seem like a viable strategy either. There is no there there: a social network requires somewhere to be social.

The right strategy for competing with Facebook is not to take Facebook head-on. Facebook is great for sharing links, photos, and events with people you do know. With recent upgrades to photos and groups, it’s getting even better at that.

But there is still a huge opportunity for communicating with people you don’t know, something Facebook is weak at by design. It doesn’t take much observation to see that people love to gather together around common interests, particularly around media properties like bands, TV shows, and movies. It can’t hurt that those also happen to be major advertising categories.

During former Facebook COO Owen Van Natta’s painfully brief stint at MySpace, he actually put a viable strategy in place. His experience at Project Playlist, a music-sharing startup, showed that users were very interested in sharing their tastes with friends and strangers. At MySpace he soon put in place a playlist system using MySpace’s legal music content. Acquiring iLike’s recommendation system promised to accelerate that, and a redesign would make it all look great.

However, the corporate overlords at Fox were only interested in maximizing revenue rather than adjusting and growing the business, and Van Natta was out. Only after further revenue declines did his concept of “social entertainment” actually ship. At the time MySpace still had more revenue than Facebook; it still has roughly as many unique users as Twitter — a persistent object of Google’s acquisition interest, despite its unproven revenue strategy.

So what would Google do with MySpace? It already has some fantastic properties that it can tie into the site. Vevo, the music site spawned from YouTube, is fast becoming the premier destination for music videos on the Web, the MTV of the social generation. That and the rest of YouTube ties in perfectly with MySpace’s music core. Like MySpace Music, it’s also a joint venture with the music labels. YouTube videos, already ubiquitous in MySpace user profiles, could spread throughout the network.

Though Google’s Orkut social network, a Friendster clone, is fading, it still has pockets of strength like Brazil. Those users can be migrated into MySpace to create an international beachhead. Google News can feed into the MySpace homepage.

MySpace has a reputation for bad design, but its new design is remarkably good. Those cats in Hollywood actually know how to do mass-market fun, something Googlers just can’t grok, and even Facebook can't match with its boring, tightly controlled brand Pages.

Sure, there’s a downside — the institutional pain of integrating disparate cultures and creaky technology. But both Google and MySpace need a radical shakeup to succeed in social, and an acquisition could be the galvanizing event that forces change on ossified organizations. And fear is a powerful motivator. Google and MySpace can grow irrelevant separately, or challenge Facebook together. Eric, Rupert, there’s never a bad time to make new friends.

Wednesday, December 08, 2010

Introducing PostPost and a New Way to Finance Startups

Yesterday we launched PostPost, a realtime Facebook newspaper that I created over the past few months. The launch was covered in Time, CNN, Mashable, and other news sources. PostPost lays out all of the interesting links, videos and photos that your friends have posted to their Facebook profiles, in the familiar format of modern news sites like the Huffington Post. Since it is the Post of posts, we called it PostPost.

Previous attempts at this type of solution relied on strangers choosing what is interesting like Digg, an algorithmic solution like Google News, and editorial solutions like the Huffington Post and Drudge Report. Facebook’s underlying platform lets PostPost display what your friends have found interesting, a truly personalized news experience.

Does this sound like a company or a feature? Can’t someone else create something like this in a couple months? In fact, we can ask this about a lot of the “startups” that we read about every day.

I wrote the first version of PostPost in the midst of selling Transpond, a social marketing platform company that I had founded, to Webtrends, a period of "merger stasis" when not much gets done since decisions are deferred. PostPost was an experiment in technology, in that it is a 100% clientside. I first wrote it in Python on Google App Engine, then in PHP since Google App Engine would be expensive if the app popped, and then chucked that and rewrote the whole thing in just JavaScript on the browser so that there would be no server and it would scale infinitely and in real time direct to Facebook.

Once I finished the first version of PostPost and showed it to a few friends, we were all pretty enamored with it. It is addictive. And then we realized that it was potentially valuable. It’s the next Digg! The next Huffington Post! The standard course of action here is to raise money, hire ad sales people, do deals, and create a company around it.

In the midst of writing PostPost, Flipboard and launched with very different approaches. Both have servers that have choked and offer news that is significantly delayed. Flipboard is well funded by KP and targeting the iPad only, and provides an innovative user interface for pad-based browsing. Techrunch is raving that VC's were dying to invest in, but I found it to be pretty lacking since its server based architecture updates your news once a day - to be frank, if I want to read 24 hour old news, I'll go buy the paper version of the New York Times.

I completely understand how Techcrunch, super angels, and feature startups are all highly invested in creating "companies" out of features. However, I did not want to participate. I had just been through this whole process, was now at Webtrends and committed to helping drive social and mobile there. From a technology perspective, PostPost was boring – we wrote the entire shipping version in less than 120 manhours, and that included the two server side versions that were tossed, and there isn’t even a big data server to scale and optimize. There are some more fun features to add, like sorting by Like velocity and mobile versions, but all in all the product was fully baked in short order, and was competitive with much larger organizations due to its unique technical architecture.

In the midst of this, I showed it to friends of mine at TigerLogic (Nasdaq:TIGR), where I serve on the advisory board. Among its products, TigerLogic has an innovative search product called Yolink that searches within a set of links for your search terms and surfaces the relevant paragraphs. And we had a joint epiphany: PostPost was the perfect use case for Yolink, since with Yolink search users could search within all of the posted links from all of the disparate data sources. A deal was quickly consummated for TigerLogic to pay to add design polish and finalize the product and for us to share downstream revenue, and PostPost is now being launched by TigerLogic.

I think that this type of outcome will become more and more common in Silicon Valley and elsewhere as more and more of these types of “feature companies” launch and search for alternative means of financing beyond seed financing. It is that rare situation where everybody wins: Entrepreneurs get a share of downstream revenue and don’t have to be attached to a project for four years. Corporations get access to innovative products that add new revenue streams and promote and cross-sell their existing products. Investors can focus on the bigger opportunities. And we can all stop pretending that features are companies.

Saturday, December 04, 2010

Why Google Needs the Video Digital-Rights Technology behind Netflix

This post was also published in VentureBeat.

Google announced yesterday that it’s purchased Widevine, a video digital rights management company mostly known as the technology behind Netflix’s video protection. Widevine gives video sites the tools to license, encrypt, and distribute videos to a variety of device platforms.

So why does Google suddenly need a credible DRM solution? It’s all about gaining the trust of the networks. Bear with me, and I’ll explain.

People have been saying for years that hordes of consumers would soon unplug their cable boxes and rely exclusively on streaming video. In the last few weeks we’ve seen signs that might actually happen. Cable subscriber numbers have dropped two quarters in a row, accentuating that last quarter’s first-ever drop in subscriber numbers was no fluke. And organizations like HBO have made the leap to online streaming and may soon charge direct subscription fees that skip cable providers once the price is right, thereby maintaining their growth in response to cable’s TV’s demise.

As Hulu and Netflix have figured out, people are more than willing to pay an $8 monthly fee for access to good television content, and they’re even happier to not pay their cable companies $60-$100 per month. The networks were only getting $1 of that cable bill per subscriber, so they are now increasingly happy to cut the cable companies out and put more per subscriber in their pockets. From this context, it’s no surprise that Comcast is buying NBC in order to secure its valuable television and cable television programming like Bravo and USA Network.

In the midst of this accelerating transition to streaming television, Google has been struggling to promote its streaming products such as YouTube and Android/GoogleTV as preferred viewing platforms. There has not been much uptake after striking deals to stream content like older CBS shows on YouTube, and the networks quickly blocked GoogleTV from running their content soon after its launch.

Owning Widevine’s technology will enable Google to negotiate content deals from a position of trust, rather than as the owner of YouTube. It can tell networks, “Hey, it’s the same technology that Netflix is using, and you signed a deal with them!”

A “YouTube Plus” akin to Hulu Plus, with trusted DRM that offers network television and movies under a well-known brand will finally give Google a counterweight to the iPhone/AppleTV and iTunes hegemony. People say that YouTube isn’t a place for premium content, but the YouTube music-video spinoff Vevo, which has emerged as the “Hulu of music,” has proved them wrong.

Friday, December 03, 2010

Groupon is Google’s $6 billion Facebook Hedge

This post was also published in VentureBeat.

Why is Google willing to spend over $6 billion for Groupon? The local advertising market is massive — yellow pages ads still bring in more revenue than Google’s annual revenue. Local has been an extremely difficult market for online ad solutions to capture. Consider how a yoga studio in Cleveland can advertise. With Google AdWords, the yoga studio can target people searching for the keyword “yoga”, but this is an expensive, nationally bid-up keyword, and not a word the people search every day. Adsense provides a bit more context, and the ad could be placed in websites that talk about yoga, but there aren’t that many people looking at pages like that to click on the ad. Google Maps lets the yoga studio ad coupons to its location, but it has not had much uptake. The incredibly large local ad market has remained primarily elusive to Google, to the point where it considered purchasing Yelp for a large sum even though it did not have that much local ad revenue.

Facebook’s Growth is Fueled By Local Ads

By contrast, Facebook has had tremendous success in the local advertising market. Facebook was the first platform to provide cheap and effective geographic, interest, and age targeting. So the yoga studio in Cleveland can now target college-educated women aged 25-35 who live in Cleveland and have listed yoga as an interest. In a few short years, these local, highly targeted ads have grown Facebook’s ad revenue to over a billion dollars a year from zero. What is amazing about Facebook’s local advertising success is that these local ads are being purchased self-service by businesses, a beautifully scalable model in a business dominated by direct sales organizations. Facebook is soon expected to allow its ads to be displayed on third-party sites like AdSense currently does. These highly-targeted local ads can be placed everywhere you go on the web.

Enter Groupon, the new Valpak

What makes Groupon special is not its much talked about tipping point where a deal does not happen unless a certain number of people sign up. Due to Groupon’s broad traction, virtually every single one of its deals gets sufficient signup to convert. Groupon was the first company to use the tried-and-proven sales technique of the yellow pages and Valpak to target local advertisers — direct, door-to-door salespeople who sign up local services and retailers. Groupon has quickly built a direct salesforce that has signed up local businesses across the country.

While detractors of the Groupon model point out that the net of a Groupon campaign often results in a loss to the local business, they are not considering that all advertising at the outset is typically a loss to a local business. A local TV ad, local newspaper ad, or Valpak coupon also costs money that could be considered a loss and typically does not produce immediate positive cash-flow relative to the ad investment. The value of a Groupon promotion produces cash over time with new repeat customers and should be viewed as a customer acquisition cost, which typically must be amortized over time. In addition, Groupon is also launching a service with 10% discounts that is much more in line with typical couponing systems.

Will Groupon Salvage Google’s Local Ad Hopes?

As a way for Google to quickly enter the nascent online local ads market, Groupon is definitely a better acquisition target than Yelp. Coupons are simple and understandable to local businesses, do not have the baggage of negative reviews like Yelp, and have a very high conversion rate. There are no other advertising companies that can match the rumored multibillion-dollar acquisition price, so Groupon is there for Google’s taking. The challenge for Google as it attempts to maintain its revenue growth is that the Groupon model is not a direct self-serve ad business like Facebook’s or that of Google AdSense. Google’s next step will be to attempt to transition its businesses to doing self-serve ads. The reality here is that Google has to spend $5 billion, whereas Facebook could achieve Groupon scale within a few months by adding a self-service deal a day per geographic region to the right rail of its homepage or directly within a user’s homepage feed with about 2 weeks of coding.

Friday, November 12, 2010

You've Got Mail! How Facebook Can Avoid Becoming the Next AOL

This post was also published in VentureBeat.

What’s the difference between Facebook and the AOL of old? On Monday, Facebook is expected to announce that they are adding true email functionality, and users will be able to send emails to addresses, as well as use software clients like Outlook and Thunderbird to read and send emails. With the introduction of email, Facebook has now completely replicated the features of AOL’s 1990s-era desktop client. Both offer messaging, profiles, profile names, chat, pictures, groups, games, and news, and thrived on the simple promise of connecting you with your friends.

So, Just How Similar are They?

AOL, the fabled “walled garden” of mediocrity, was hugely popular before the broad popularity of the wild, unkempt Internet intervened. AOL offered everything a user could want in a nice, consistent interface, and email accounts persist to this day. Facebook has long offered simple messaging between users on its website, and has become a popular way for users, especially younger ones, to send messages to each other as casual acquaintances change jobs and email addresses over the years.

There was a time when TV and billboard ads showcased AOL keywords for brands, just as Facebook page URLs are showcased today. And Facebook extracts significant revenues from brands for premium advertising. Placement on the AOL homepage cost a huge sum, just like prime placement on Facebook does. Setting up a brand page on AOL cost a large monthly stipend. And while a brand can set up a basic presence for free on Facebook, the social network mandates minimum ad buys in order to offer promotions.

Your Mom is on It

Facebook is a nice, safe Internet alternative where developers, users, and brands all have to play nice or get punted. There is no porn, spam, or hate groups. That, too, was AOL’s value proposition: a clean, well-lighted place online. Since Facebook opened up to all users in 2006, AOL’s army of moms has been migrating to Facebook in droves — and friending their kids.

Mass-Market Mediocrity

With 500 million users and a something-for-everyone menu of features, can Facebook escape the mediocrity of Web portals like AOL and Yahoo, whose addresses are as tired as addresses? Uninspired features like Facebook Groups and Facebook Places don’t bode well for the site.

Yet Facebook has made a very significant, brilliant shift from its “homepage to the world” predecessors: allowing other sites to connect. With the introduction earlier this year of the Facebook Open Graph and Social Plugins, any website can augment itself with Facebook’s social features, and it is expected that sites will be soon be able to include Facebook’s highly targeted and lucrative ads.

Perhaps email addresses will end up looking as lame as in a few years. But Facebook has far more going for it than its website. By spreading its roots throughout the open Web, Facebook won’t have to worry about the state of its own garden.

Monday, November 08, 2010

The iPhone App is the Flash Homepage of 2010

This post was also published in VentureBeat.

In the late 1990s, it was common for companies to spend $50,000 to $150,000 for a Flash homepage that looked like a beautiful brochure. However, they soon learned that Flash was cumbersome, slow to load, expensive o build, and hard to update, and moved on to HTML. Now only specialized, high-end sites are Flash only.

The exact same thing has replayed itself on the iPhone. Companies have paid $50,000, $100,000, and more for an iPhone app. Now they have to keep the iPhone app in sync with their regular web site, and have to add additional native apps, each at a high price point, due to the hypergrowth of Android, and newly viable platforms like Windows Phone 7.

Businesses are moving on to HTML5

Banks and airlines, commonly known as technology laggards, are well ahead of the rest of the industry when it comes to mobile access to their systems. Banks and airlines are deploying highly functional, HTML5 mobile optimized websites that offer a high level of functionality relative to their full-fledged websites and existing iPhone apps. What is it that banks and airlines have figured out that Silicon Valley startups with their focus on native Apps have not figured out?

Compare the banks and airline mobile experience to that of the top digital agencies, many of which are still obsessed with Flash home pages and have sites that render incorrectly if at all on mobile handsets. This was first pointed out in a hilarious post by Nick Jones in August with screenshots of the top digital agencies, most of which do not render at all on a mobile browser, and then followed up. AdAge followed up with an article in September about the World’s Worst Agency Websites for iPhone and iPads,.

Even at my company Webtrends, with a powerful mobile analytics solution, and recently acquired mobile apps technology, our website renders well on a mobile phone but we are still in the process of optimizing the content so that it easier to navigate.

The native vs. HTML5 battle is irrelevant to businesses

The digerati in Silicon Valley have been arguing ad infinitum about the merits of native vs. HTML mobile apps. Businesses have now picked a winner, given the prohibitive cost of multiple native apps, and the features of an average business app which can be amply supported with mobile HTML5 browsers, which even include GPS.

Carol Steinberg, SVP of E-Commerce for NBC summed it perfectly: “We’re really keen on ROI and making sure what we’re investing in the mobile platform is a worthwhile and good investment. I am just starting to feel that HTML5 will be able to give us the functions we need on our m-commerce site versus app development for the iPhone and Android, which means three platforms we have to maintain and upgrade.” Even Bob Muglia, Microsoft’s President of Servers and Tools, recently stated that “HTML is the only true cross-platform solution for everything, including (Apple’s) iOS platform”.

There will always be a place for native apps — particularly in communications, gaming, graphics intensive applications — and for the interim they’re an efficient mechanism to process payments until phones are updated with better payment systems. Some businesses may still continue to deploy native apps on one or two platforms that have some additional features. An increasingly popular and almost indistinguishable method of creating a content-oriented app is to wrap a native shell around a browser showing a HTML5 mobile optimized site using technologies like PhoneGap.

Overall native apps have run their course. They get lost in the app store and are hard to find, requiring businesses to post “Available on the App Store” icons on their homepages, where they could just as easily post a “SMS this site to your phone”. Even with over 6 billion apps downloaded, research has shown that most of these are ignored or disposed, and users are only running on average 4-6 apps each, most of which use very native features like communications and the camera.Important apps like maps and Facebook are considered core to the device and are even built in to feature phones nowadays.

Friday, October 15, 2010

How Microsoft Might Win the Mobile-Phone Battle after All

This post was also published in VentureBeat.

While there is broad consensus that Microsoft has actually delivered a decent phone OS with Windows Phone 7, pundits are universally panning Windows Phone 7’s future due to the market traction of iPhone and Android, Palm’s HP reset for WebOS, and the reawakening of Nokia and RIM. Mobile is clearly a huge trend that is displacing desktop computing, and people so soon forget that when Microsoft feels its turf is threatened, it is a fierce competitor.

Remember the Xbox

In the late 1990’s, there was a huge race to the living room, with combatants such as Sony making a play to be the digital center of the home. Microsoft felt enormously threatened by this trend, and decided to enter the gaming console business that was dominated by the Sony Playstation. Pundits laughed and claimed that Microsoft would fail enormously in this effort.

However, Microsoft was in it for the long haul and willing to invest enormous amounts of money to ensure success. Six years later, Microsoft lost over a billion dollars on its Xbox initiative. 10 years later, Microsoft is still losing $172 million a year on its Xbox division, but the Xbox 360 is outselling the Playstation 3 and Microsoft sells more games per console than Nintendo. Xbox is profitable when including Microsoft’s game sales, and it is one of the three top consoles in the world, and the favorite amongst many gamers with exclusive titles such as Halo.

The Xbox achieved its success with three factors: user experience, market development dollars, and exacting hardware standards. Microsoft is addressing all three of these categories with its Windows 7 strategy.

Windows Phone 7 offers a better user experience

Microsoft invested a ton of time and money into making the Xbox gaming experience better than the Playstation 2. It took Sony years to catch up with its Playstation 3. Glance at a Windows Phone 7, and tiled out in a beautiful inteface you can see the weather, the time of your next meeting, and your favorite team’s score. Glance at an iPhone and you will see a bunch of icons to click. The iPhone can’t show what’s actually going on in those apps because it doesn’t have real multitasking and its user paradigm is almost four years old from the days when the phones had less memory and processing power. Glance at an Android phone and you will see a bunch of icons to click and perhaps a few widgets that show information but chew up a ton of valuable screen real estate.

In addition, items on Windows Phone 7 elegantly flow and move across the screen, since all of the phones have OpenGL graphics and advanced signal processing features which enable Microsoft to leverage the best-of-breed speech-recognition technology it acquired with TellMe to drastically improve user-phone interaction.

Android was built to mimic the iPhone. Windows Phone 7 was built to beat them both, and it shows. Sometimes a lot of time and money creates feature creep debacles like Windows Vista. Fortunately for Microsoft, a lot of time and money also sometimes creates design wonders like Windows Phone 7.

Microsoft is willing and able to buy content

Much like Microsoft spent over a billion dollars to get Xbox going, Microsoft has allocated a reported $500 million in market-development money to accelerate its platform. That’s a lot of money, and the reality is that they don’t actually have to pay off that many app developers to get a decent apps ecosystem going on Windows Phone 7.

Most users only actually use a handful of apps, and that those apps are pretty predictable, such as Facebook, OpenTable, and Shazzam. The vast majority of apps other than games could easily be made in HTML. If you want to check the flight status of your upcoming flight do you go the App Store and download the United Airlines app or do you just go to and use their nice mobile-optimized website? Apps had their day, but are increasingly being relegated to use only for multimedia and gaming. A lot of apps are simply wrappers around HTML5 sites that will be very easy to port to Windows Phone 7, especially when you get a nice check from Microsoft for doing it and leads to dev shops in China to do the porting work.

As well, phones are rapidly becoming a gaming platform, and Microsoft will use Windows Phone 7 as their competitive offering to Sony’s PSP and Nintendo’s DS. If there is particularly hot upcoming game, Microsoft will likely pay for exclusive deployment to Windows Phone 7 just like they did with Halo on Xbox.

Windows Phone 7 devices are consistent and well-made

Microsoft spent a lot of time with its chip manufacturer, IBM, and its manufacturing partner, Flextronics, to ensure that the Xbox provided a best-of-breed, integrated experience, and it has a lot of experience certifying that Windows licensees provide compatible PC hardware. In order to avoid the fragmentation that handset manufacturers are engaging in with Android, Microsoft is imposing exacting hardware and software standards and testing labs to ensure that Windows Phone 7 handsets are consistent and do not deviate in user experience. Windows Phone 7 will potentially offer a consistency across handsets similar to the iPhone.

A three-phone future?

Android’s rise over the past year has proven that consumers are willing to purchase smartphones that are comparable to iPhones, and Windows Phone 7 is decidedly better than an Android device. RIM and Nokia have never had to reinvent themselves in the onslaught of competition which is why they have been thrashing for years trying to respond to the iPhone.

Microsoft spent the 1990s responding to the Internet threat with Internet Explorer, the 2000s crucifying the Sony PlayStation with the Xbox, and they will spend the next decade taking on the iPhone and Android to produce a competitive Windows phone. Given Windows Phone 7’s stellar user interface and voice recognition features, Microsoft’s allocation of massive amounts of money to purchase apps, and the tight control Microsoft has exerted on its hardware partners, Windows Phone 7’s has a very strong chance of catching up with iPhone and Android in a couple of years.

If you still want to count it out, ask your average teenager how they feel about the Xbox.

Friday, July 30, 2010

It's Collaboration Software that's Dead, not Email

This post was the source of a CRM Magazine article.

Facebook COO Sheryl Sandberg caused quite a stir by stating that email was becoming obsolete. Sandberg drew her conclusion from data on the communication behavior of teenagers, who predominately use SMS and social networking, and extrapolating that this generation will never use email. This is no surprise, since Email has evolved into a communication tool used primarily for business, and teenagers are not in the workforce yet. In ten years when these teenagers have jobs need to coordinate a project between say a web design firm, a hosting company, internal IT staff, and their boss and organizational stakeholders, what are they going to do, text them all?

Sandberg is right that Email is pretty much dead for social communication. When you want to ask a friend what they are doing tonight, you text. When you want to ask a colleague what they are doing for lunch, you chat. To ping a friend you haven't talked to in a while, you post on their wall. When you want to contact an old friend and ask them what's up, you have to send them a Facebook message because you have no idea what their email address is anymore. Even newsletters and special deal emails are going the way of Twitter and Facebook newsfeeds now, although flash sales sites such as Gilt have gone retro email in order to be "exclusive". Net net, your email inbox is not the center of your social life anymore like it was 10 years ago, and the extent of your social email is emails from grandma that start with "Dear" and Evites from folks who haven't figured out how to make Facebook invitations yet.

Various companies have brought to market numerous attempts to replace email as the primary vehicle of workplace communication. There is no quicker way to make a group of people in a conference room grimace than to announce you are going to use Basecamp, Central Desktop, or their kin to manage a project. These services constantly spam your inbox every time someone adds a comma to a document, use numerous different logins as each project is owned by different vendors or partners. Even worse, these tools are slow, arduous, and have user interfaces that look completely primitive, although a few years ago they were considered the height of AJAX user interface design. And to top it off, these project management services get out of date very quickly because people inevitably start emailing each other rather than updating the project online, especially when executives with blackberries are in the project loop and near the end of a project when there is typically a frenzy of activity. Wikis such as Sharepoint and Jive Software definitely will continue to have a place as a storehouse of institutional knowledge, but they are also quickly outpaced by email when it comes to near-real time collaboration.

Email is still the center of work life and will continue to be so for a long time. It is ubiquitous and binds everyone from employees, executives, customers, partners, and vendors together into a cohesive whole. Emails can be sent to diverse groups across projects and organizations. Email is easily sliced, diced, and forwarded. And nowadays Email can handle large attachments, and is used as the notification vehicle for services like YouSentIt for extremely large attachments. Email definitely has its downfalls. It's not secure. If someone isn't on an initial email thread it is impossible to get them added to all the replies and subsequent forwards. People are constantly searching through their emails to find old exchanges and attachments.

Google is the only larger player that has been innovating in enhancing email, in addition to startups like Xobni and Gist. Gmail's search capabilities and threaded conversations, which will finally have the option of being turned off, definitely set the bar for finding emails and figuring out what is going on in various email exchanges about a project. While Google Wave was widely panned, it was a definite attempt to make collaboration look more like email than to replace email completely. As more and more people use web interfaces to manage their email, it is very likely that these email web interfaces will gradually present more and more collaboration, search and management features. From a work perspective, Email is here to stay. But Sandberg is right, don't send out an email asking someone if they want to meet up for a drink tonight!

Wednesday, June 23, 2010

Adobe Finally Ships the Real Flash for Phones

This post was also published in VentureBeat.

When my company Transpond added support for Nokia smartphones, we were excited that we would be able to deliver Flash videos in apps deployed to Nokia handsets. Instead, we were shocked to learn that there were no Flash video players that worked on the devices, even though the handsets supposedly supported Flash. We talked with Nokia. They couldn’t find one. Then we called our friends at Adobe. The only one they could recommend was JW Player, which didn't work on Nokia's Flash-enabled phones. Between Nokia and Adobe, we could not get a way to play Flash Video (FLV) files on a Nokia/Symbian handset.

Flash Lite is not Flash

We discovered Adobe’s dirty secret: while Adobe’s asserts that 80% of videos on the web are viewed in Flash, virtually no online videos other than YouTube are viewable on shipping, Flash-enabled mobile device since they use a limited version of Flash called Flash Lite. And since most mobile devices include a native YouTube player, they didn't need Flash to play YouTube. In essence, no one was watching any Flash videos on any smartphone, and Adobe’s entire Apple gambit about Flash video was a PR ploy.

When tested playing Flash videos on Flash Lite 3 devices, they found that they could not watch video on many popular Flash video sites including,,, imeem, Metacafe, and Vimeo. ( The reason for this is that the latest version of Flash Lite only supports a subset of the four year old Flash 8 (, which has since been replaced by Flash 9 and then Flash 10. Most websites and Flash video players are implemented with Flash 9 or Flash 10 and will not run an Flash 8. It is like trying to run a Mac OS X application on an old PowerBook. The reason the mobile version of Flash was so limited was that mobile devices did not have to the processing power to handle the full, modern version of Flash.

New Mobile Devices Now have the Real Flash

Adobe is now shipping the full Flash 10.1 for Android with the introduction of new, more powerful Android devices such as the HTC Evo 4G that employ the powerful Snapdragon 1ghz processor. Now that smartphones have much more processing power, Android 2.2 will run the same Flash that runs on a PC, and will therefore run all of the Flash content on the web. As always, there are some exceptions: Flash developers are obsessed with “hover” events that only work when a mouse hovers over an element which does not work on a mobile device where a user can't hover, and many Flash implementations are not built to resize themselves to a screen's limit and target 1024x768 sized screens, which will require a lot of scrolling by the user.

For Most Apps, Flash Does in Fact Suck

Flash on mobile devices does in fact suck, even on devices with the new, more powerful processors. Loading a massive Flash site on a PC is bad enough, let alone a mobile device, and blinking Flash ads suck up a ton of processor power that is better used to render a web page’s content and scroll through the page. For most non-game mobile apps, and even regular websites, both developers and users are much better off with HTML5, as evidenced by the slew of HTML5 announcements from even the staunchest former Flash supporters. If an App is going to be very sophisticated and interact extensively with features like the phone's camera, a handcoded, native App for each target platform is the ideal solution.

Flash Games will Actually be a Differentiator

However, in the gaming segment, Flash support on mobile devices will prove to be very useful. There are a ton of existing Flash games that will never get ported to the iPhone/iPad, and many Flash game developers will continue to produce fun Flash games, since they do not have the skillset or inclination to learn how to program in the iPhone’s complicated Objective C language. In addition, it will take quite some time for all of the video players on the web to get upgraded to HTML5.

Now that the Flash on new smartphones will be the real Flash rather than Flash Lite, devices that support Flash will have quite an edge over Apple when it comes to games and video. Support for more apps and video really didn’t matter when competitor's phones weren’t competitive with the iPhone, but now Android devices are outselling iPhones, and the new generation of Android devices such as the HTC EVO 4G and Droid X are arguably just as good if not better than an iPhone. Flash support will actually be a differentiator, particularly in the lucrative 15-35 male market that is very game and video focused. Despite all of the recent acrimony, Apple may very well reverse course once it ships more powerful iPhones that can support the full Flash. Apple has a long history of emphatically stating that it will not support something and then changing it's mind. Steve Jobs' rants about Intel and Microsoft went far beyond his recent Adobe vitriol, and soon after Macs switched from PowerPCs to Intel processors and Microsoft invested in Apple.

Wednesday, June 09, 2010

iPhone Now as Fragmented as Android

This post was also published in VentureBeat.

At Transpond, when we were building apps on the iPhone and Android platforms last year, all of our engineers were enamored with the iPhone and annoyed with the pesky Android devices.

The iPhone environment was remarkably consistent. There was a single 480×320 screen resolution and API consistency across iPhone, iPhone 3G, and iPhone 3GS. Even though the original iPhone doesn’t have GPS, it provided an approximation based on cell towers, and our customers like CBS and NBC are more interested in syndicating video and engaging users, so we did not need the 3D graphics of the newer generation iPhones. All in all, the iPhone platform presented a clean, wonderful experience for our engineers where they could write one piece of code and it would run beautifully on all of the iPhone and iPod Touch devices.

Android, by comparison, was a disaster. Every Android device had a different screen resolution. Every hardware feature had to be checked, since every Android device had different hardware configurations. Android was a huge, fragmented environment where the engineers had to constantly test for different things. What’s the screen size? Is there a camera? Is it running proprietary extensions that would conflict with the app? Compared to the iPhone, supporting Android was a huge pain from development to quality assurance to production.

This all changed in the first half of 2010. The engineers at Google, with backgrounds in Java and UNIX, recognized this problem and came up with a solution: the Nexus One. A lot of people thought that the Nexus One was Google’s entry into the handset market. This was actually far from the truth. The Nexus One is the equivalent of the Java Reference Implementation or UNIX POSIX and X/Open: a baseline of what handset manufacturers would have to support in order to create a real Android handset. If a developer wrote an app that ran well on the Nexus One, but it did not run well on a Motorola Droid or HTC EVO, the problem was clearly with Motorola or HTC, not with Android. In addition, Google obsoleted the 1.5/1.6 generation of handsets. So a developer could now target the Nexus One, adjust for various screen resolutions, test for hardware features such as a camera, and feel confident that their app would run on Android 2.0/2.1/2.2 devices. If a problem arose, it was a problem for Motorola or HTC to fix in their next patch, not for the developer or Android.

Apple, on the other hand, took the pristine iPhone OS platform and has added a ton of changes in the past two months. The iPad introduced a new screen resolution and did not include a camera. The iPhone 4 added yet another screen resolution and a front-facing camera. iOS programmers now have to make their apps run on three different resolutions and check for hardware features like cameras. While the variations are not as extensive as in Android, iOS has almost all of the same permutations. Especially from a programmer’s perspective, since programmers do not check for device type, they check for feature. For example a programmer is not writing “if iPhone or iPhone 3G or iPhone 3GS or iPhone 4 then there is a camera”, they are writing “if there is a camera”.

Apple’s form factor and feature disparity had to happen at one point or another. Although Apple presents a limited product line, market requirements between phones, music players, and tablets is fragmented and has inherently resulted in fragmented features. However, it is incredibly bad timing for iPhone programming to become as complicated as Android programming when compounded with Apple’s onerous App Store policies, Android outselling the iPhone in Q1, and forcing developers to program in an obscure language such as Objective C.

Wednesday, June 02, 2010

Why Worry about AT&T’s New Rates? Your Phone Bill will Soon be $60

This post was also published in VentureBeat.

Mobile plans are ridiculously confusing. Voice, text messages, and Web surfing — it’s all data, right? Yet carriers make consumers guess — the minutes they’ll spend talking, the number of text messages they’ll send, and worst of all, the amount of data they’ll use in a month in order to avoid steep surcharges.

The only thing that’s sure: It’ll cost you. Mobile phone plans for typical usage of 800 minutes of talk time, 100 text messages, and 2 gigabytes of data typically run between $150 and $200.

When Apple and AT&T introduced iPhone plans, people complained about the expense. The one silver lining: They were unlimited. Now Ma Bell, by introducing new, capped plans, will have new iPhone customers once again play the guessing game. It’s a game only a regulated utility could love.

In the fiercely competitive world of Internet service providers, flat-rate pricing won out. Consumers loved it: They could budget against it. Here’s the good news: AT&T is mounting a last stand against a flat-rate wireless future. With new gadgets, and new wirelss technology, your phone bill will soon be a flat $60 a month, tops.

Wireless carriers would like you to think voice and data are different. They’re not. When you talk into your mobile phone, your voice is digitized in real time and transmitted as a data signal. Apps that use your phone’s data connection to transmit voice, such as Skype and Google Voice, do the exact same thing. The only difference is that you are not paying for “minutes of talk” with those voice-over-Internet apps. You only pay for data, and voice calls do not actually use that much data. The industry standard for a voice call is 64 kilobits per second. Compression cuts that in half. So 800 minutes of talk time amounts to less than 200 megabytes of data. In that context, Apple’s rejection of a Google Voice app for the iPhone suddenly makes a lot of sense, since Google Voice gives you a phone number and the ability to send and receive text messages, all over a data connection.

Every once in a while, new products present such glaring price disparities with legacy products that everyone realizes what something is really worth. Such a seminal moment occurred in 1996, when AOL moved to a $19.99 monthly flat rate for dial-up Internet access and killed off its remaining pay-by-the-hour competition. It happened again in 2002, when Rhapsody offered unlimited music streaming for $20 a month.

A similar watershed moment is happening in the mobile data market as faster wireless networks are getting lit up across the United States. The hot new devices are mobile hotspots like the MiFi or Overdrive, which connect to third- or fourth-generation wireless networks and rebroadcast their Internet connections as Wi-Fi signals, which almost any device can connect to. Verizon and AT&T are shipping 3G mobile hotspots with 5GB/mo. — the equivalent of 20,000 minutes of talk time, remember — for $60 a month. Sprint is shipping a 4G mobile hotspot with unlimited, high-speed 4G data for $60 a month.

That’s down considerably from slower 2G data services road warriors used to hook up their laptops, which ranged from $80 to $100 a month. Unlike cell-phone voice and data plans, which always seem to be creeping up in price, mobile hotspot plans are getting faster, cheaper, and delivering more bandwidth.

The digerati are starting to do the math. A few weeks ago, I had a meeting with Jen Herman, an old-time mobile entrepreneur who is now at Zynga, who turned me on to a new trend: coupling an iPod Touch running Skype or an unlocked Android handset running Google Voice with a small MiFi hotspot. Some people keep it in a purse or backpack, while others just velcro it to the back of the handset. The handset uses the hotspot’s Wi-Fi connection, which in turn communicates via 3G or 4G to the carrier. This geeky setup offers everything you’d get from a $200/mo. smartphone plan and more: voice, text, mobile data, and a connection you can share with your laptop, iPad, and any other gadget you might carry.

Right now, mobile hotspots are the province of the technically savvy. But the writing’s on the wall. Sprint’s aggressive 4G pricing will force AT&T and Verizon to match. And $60 a month is just the beginning, as competition drives prices down. The best part: We won’t just save money when the wireless guessing game comes to an end. We’ll save time. And we can spend that time coming up with clever new things to do on the network.

Thursday, May 20, 2010

Google TV is Sony’s Last Stand Against the Apple Juggernaut

This post was also published in VentureBeat.

Everyone’s buzzing about Google’s new TV platform. But the real battle in your living room is Apple vs. Sony.

Over the past few years, Apple has muscled its way past Sony as the top purveyor of premium, high margin consumer electronics products. Sony has long had a deep culture of NIH (Not Invented Here) ranging from Betamax in the 1980s to the Memory Stick in the 2000s. But the iPod replaced Sony’s Walkman, the iPhone replaced Sony Ericsson handsets, and the resurgent MacBook and iPad have leapt past Sony’s Vaio PCs.

Apple’s unique blend of software, hardware, content relationships and rich developer ecosystem has eviscerated Sony’s core markets. The television set, Sony’s last bastion of premium consumer electronics, is already undergoing a relentless assault by Samsung. Now it’s facing a rumored Apple TV upgrade.

Upcoming: Apple TV

Apple’s much maligned Apple TV mini set-top box has long been due for an upgrade. Even Apple executives call the product a “hobby”. The next step for Apple is to start producing actual TVs. A lot of people who live in small apartments or dorms already use 24″ and 27″ iMacs as their primary TV viewing device. This trend has been widely rumored in late 2009 and early 2010 (although I think I was the first to publicly blog about it back in August 2008).

Apple doesn’t actually produce parts like its own display panels. The 27″ iMac screen is manufactured by LG, for example. Display panels, even large ones, are commodities. Instead, Apple specializes in beautiful packaging, excellent integration of hardware/software, and a seamless user experience.

Imagine a stylish, aluminum TV with a lighted Apple logo that comes in sizes ranging from 37″ to 60″. It automatically connects to the Internet and streams all of your iTunes video and audio content. It is CableCARD compatible so you can still get HBO until they finally decide to let you stream it direct. It has an iPod Touch based remote app that lets you easily find content and control the TV. It can easily install apps such as weather, sports, and games just like an iPhone, so your family can play Monopoly together.

Do apps on TVs even make sense?

The TV is the last frontier in Silicon Valley’s relentless drive to computerize every screen. With the price of fully Internet-enabling a screen at below $300, everything that people see and touch is being turned into a computer: mobile phones, billboards, price displays, and with the iPad even magazines, books, and newspapers.

Some say that running apps on a TV is silly. The same people said that running apps on a phone was silly. TVs that can run content apps make a lot of sense when coupled with the trend towards unplugging from cable and streaming all content from the Internet. Apps like Netflix, Amazon Video on Demand, and YouTube are incredibly useful when integrated into a TV. Add to that pulling up the weather, sports scores, horoscopes, and games and all of a sudden apps on TVs make a ton of sense. Most modern TVs already include an integrated computer with chipsets from Intel and Broadcom that run the Linux operating system in order to control onscreen guides and decode digital media signals in real time. So the incremental cost is not that high to add a full fledged platform like Android to a TV.

Many newer high-end TVs already include app frameworks, such as Yahoo Connected TV and Flash Lite. Content companies are likely to only support apps on a few platforms, so Sony needs to partner with a platform that will offer content companies scale, reach, and developer infrastructure. Pictured below, for example, is a CBS app Transpond has delivered running on a Yahoo Connected TV.

Sony’s Google TV bet

Stylish, high-end TVs is the last consumer electronics frontier for Apple to dominate, and it will make apps as much of a differentiator on TVs as they were on smartphones. In order to survive, existing TV manufacturers like Sony need an open platform with an apps ecosystem, and will flock to Google’s Android TV platform just like existing smartphone manufacturers had to flock to Google’s Android phone platform.

Google, with partners like Intel, Logitech and Sony, is launching a smart-TV platform that fully computerizes TV screens, replacing cable boxes as well as integrating an Android-based app store. Apple has been successful in consumer electronics because it created both well designed products and iTunes — an end-to-end user experience around discovering, purchasing and enjoying music, TV, movies, and apps.

If Google TV is going to be a successful consumer electronics product, Intel, Sony, Google, and Logitech will need to deliver both a great Android-based consumer electronics product and a compelling end-to-end user experience that supercedes the functionality of cable boxes and delivers the broadest and best consumer media consumption experience.

Sunday, May 16, 2010

With Social Game Market in Flux, what Zynga Needs is Farmville 2

This post was also published in VentureBeat.

There’s been a lot of chatter over the past few weeks about the long-term viability of social game developers. Facebook essentially shut down the viral channels social games were using to fuel their growth and is now attempting to force game developers to use Facebook’s own virtual currency, the very expensive Facebook Credits. While social game developers like Zynga are contemplating moving games to their own destination sites and launching full fledged mobile versions, they in fact have a much bigger challenge that needs to be addressed: their games have got to get a lot better.

Social Games are Now a Hits-Based Business

While there’s a tendency to think of social gaming as an extension to the casual gaming market, they are, in fact, a major growth market that is quickly becoming a high stakes, hit-based business. Social gaming is now generating over $1 billion a year in revenue and attracting major gaming players such as Electronic Arts. Now that free social viral channels are no longer available to promote a game, it costs quite a bit of money to launch a successful social game.

Zynga’s launch of its new title Treasure Isle was relatively successful, but this launch did not leverage viral channels and must have been enormously expensive to promote. Without viral channels, the only avenues for promotion are Facebook Social Ads (where Zynga is reportedly already spending a third of its revenue), and cross-game promotion, where a click in Farmville to promote Treasure Isle has the opportunity cost of a missed click for an offer or virtual good purchase. Even after this significant investment, Treasure Isle did not become a huge hit like Farmville. It ended up with the same metrics (daily active users, monthly active users, and % daily active users/monthly active users) as other Zynga titles such as CafĂ© World.

Now that the cost of promoting a social game has become extremely high, development will transition from the scattershot, let’s-see-what-goes viral approach in the early days of the market. New game titles are shifting to a much more calibrated approach with fewer titles that have a higher level of investment in order to hedge the promotion costs. EA Playfish has publicly stated that its revenue target for individual social games is as high as $1 billion, just like successful console game franchises. There is going to be a lot of upfront thought, development, and promotion for individual titles with that level of revenue target.

Social Games are Going to be Much Higher Quality

Even within Zynga’s short lifetime, its level of investment and the quality of its games has increased significantly. Mafia Wars is made of text and images. Farmville is a scrolling 2D graphics game that requires an order of magnitude more effort to develop. So what’s next? Emerging gaming platforms go through the three phases of game infrastructure: text, 2D graphics, and 3D graphics. A small team can create a text game and even a 2D game. By the time games get to 3D graphics, though, they’re extremely expensive to create.

In the past year there have been two huge developments for web browser based gaming: Flash 10 support for 3D gaming, and HTML5 support for 3D gaming via WebGL engines such as GLGE and Copperlicht. Very soon, web browser based casual gaming is going to go 3D. And although the Farmville audience is not interested in first person shooters, who doesn’t want their farm to look photorealistic, watch things grow and move as if they were cartoons, and see how different elements in the game interact with each other with a high level of realism? Similar casual games for the iPhone 3G, with its OpenGL graphics, look far better than the current stock of games in Facebook. Flash 10 and WebGL have now made it so that browser-based games will look as good as iPhone games and casual games like MapleStory that have a lot of the same game mechanics as social games and currently require web browser plugins. In addition, Facebook is improving its platform by streamlining its APIs away from its proprietary FBML, so very soon Facebook social games will look like the 3D casual games that currently require a browser plugin, such as this screenshot of MapleStory.

3D gaming is inherently a hits-based model. The cost of a great 3D console game is increasingly expensive, estimated as high as $60 million, with the average at $28 million. Fortunately, 3D social gaming can be done iteratively, but the costs are still very high. On the low end, it will take a team of 3-4 engineers six months to develop a title, with another six months of iteration, totaling a little over $1 million, before any promotion cost. On the high end, titles like Farmville that need Facebook, website, and mobile versions require teams of up to 100 people and already cost $20+ million/yr to develop and deliver. After the transition to 3D social gaming, these high-end social games will start to reach the development cost of console games.

The Competition is Coming

Zynga is clearly the leader in this new gaming platform and was the first to master the art of social obligation in a game – a friend helped you out on your farm, so now you need to help them out. However, every new gaming platform has a clear initial leader that blazes the trail for other game companies. Farmville is to Facebook as Super Mario Bros is to Nintendo and Halo is to Xbox. Eventually others catch up, and now companies like RockYou and EA/Playfish are starting to have results as good as Zynga’s new titles.

Well known franchise properties like Madden NFL and Civ have announced support for the Facebook platform. No doubt Disney/Marvel is right behind them. These games will get consumer name recognition, a ton of upfront investment, and great name-brand advertisers and offers. Some of these games will be released completely for free just to drive purchases of their console equivalents.

The Shift to Franchises

Zynga has great things going for it: two well known titles that can become franchises — Mafia Wars and Farmville. Zynga has figured out how to attract and retain the elusive 35-50 female demographic. And Zynga has figured out how to maximize casual gaming revenue via offers and virtual goods purchases. However, it is now competing against companies with massive gaming franchises that have all acquired companies with the talent to do exactly what Zynga is doing. Adding Zynga Live, its own destination site, is a great step in Zynga’s move to determine its own fate, but the company’s future is nevertheless contingent on the quality of its games, not its ability to leverage the Facebook platform. Historically, it’s been incredibly difficult to create a new game franchise. Rather than try to replicate Farmville and Mafia Wars into a bunch of similar titles like everyone else is doing, it’s time to double down an the franchise and make a Farmville 2 that looks a lot better and re-engages the existing audience that has gotten bored and moved on. Hey, Call of Duty Modern Warfare 2 pulled in $1 billion, and pretty much everyone who saw Iron Man is going to see Iron Man 2. Welcome to the big leagues.

Monday, April 19, 2010

Why Google can’t Out-Open Facebook with XAuth

This post was also published in VentureBeat.

XAuth, Google’s attempt to head off Facebook’s domination of online content sharing, is fraught with problems. It appears to be built with good intentions, allowing smaller social services to persist in a Facebook- and Twitter-dominated world. But unlike OAuth, the standard many of those services use today to link publishers’ websites to their services and which allows any website to work directly with any identity provider, XAuth actually stands in between the two and directs traffic. And that spells trouble. I should know. I’ve tried what they’re doing before.

I was the CTO of Sun Microsystem’s Liberty Alliance, where we invented the concept of federated identity, and am the inventor on the patent that covers federated identity. We first attempted to do the exact same thing –stand in between the websites and the identity providers in order to provide a seamless interaction.But no one wanted a single third party in that position — least of all privacy advocates. Instead, we delivered a specification that is very similar to how OAuth works today. Trying to evolve OAuth so that it becomes a service that intermediates direct relationships is a nonstarter.

The thesis of XAuth is that there are too many login and sharing services for a publisher to choose from, and that XAuth would only show the ones that are relevant to a user. This is the same principle as Google’s OpenSocial platform for developing social applications. OpenSocial’s creators posited that there were too many social networks for developers to choose from, so Google would provide a single open API that would access multiple social networks. We all know how that played out – there is only one social network that matters anymore.

The point of logging in and sharing is to share with friends. If people are all on one social network, why do they need to choose from a list of 20 providers to share? Most publishers offer logging in and sharing via Facebook and Twitter, which are both very easy to implement, and they get to service the vast majority of their customers.

I believe it is no coincidence that XAuth is launching right before Facebook’s F8 conference, its annual gathering for developers. The aim of XAuth is not to make it easier for users to login and share information, but to curb the inroads that Facebook is making into Google’s core advertising business. Facebook’s $500 million in estimated annual revenue is still small compared to Google’s $23 billion. But Facebook has steadily progressed over the past year, passing Google first in terms of minutes spent online, and recently in terms of unique visits.

Why should Google be so worried about Facebook? It really boils down to an obvious truth. Facebook is about people, and Google is about the algorithm. And who uses computers? People. And the algorithm doesn’t even work anymore. Search for “futon” and take a look at all of the results that have been gamed by advertisers. Who can tell you what a futon is the most comfortable? Not Google.

By spreading Facebook features into websites, Facebook will learn who is using which sites and what content is popular for which types of people. Websites will increase registrations, increase pageviews, increase sales, and most importantly be able to display much more highly targeted ads. The ads that Facebook displays next to profiles are way more targeted than the ads that Google thinks someone might like based on the content of a page.

To better understand the urgency of XAuth, I’ve included a table laying out current and upcoming Facebook features that publishers will love to integrate into their sites and that will displace some of Google’s most lucrative features. The people at Google are not stupid, and they wil
l have to pull more tricks out of their hat than just XAuth.

Current/Future Facebook Feature
Replaced Google Feature
Benefit to Publisher
Benefit to Facebook
Facebook ConnectGoogle Friend ConnectIncreased registrations and logins.Learn which sites are popular and how they are visited.
Facebook SearchGoogle Site SearchReturns what products and content is popular within a social network, increasing pageviews and sales.Learn what products and search terms are popular.
Facebook LikeGoogle BuzzPosts content to newsfeeds drawing traffic from friends.Learn in real time what content is popular and viral.
Facebook Banner AdsGoogle DoubleClickHigher CPMs since social and profile targeting are better than content or behavioral targeting.Google’s banner ad revenue.
Facebook Text AdsGoogle AdSenseHigher CPMs since social and profile targeting are better than content targeting.Google’s text ad revenue.

Can the algorithm evolve to beat the people? If it doesn’t, Google could face a Facebook-dominated world. Here’s an illustration of what one popular publisher, the Huffington Post, might look like after Facebook takes over. It’s Google’s worst nightmare.

Thursday, April 15, 2010

TV 2.0: Hulu’s Flatlining, and the Networks are Ready to Innovate

This post was also published in VentureBeat, where there is feedback from the founders of TiVo and Brightcove.

Hulu — a joint venture of NBC Universal, News Corp., and Disney — has had a good thing going. The ad-sponsored video site carries numerous TV shows through agreements with the broadcast networks. And for the past year, it’s made good money selling ad space on network shows and luring in viewers with its quality streaming. But that’s all about to change.

The Hulu value proposition as a destination for premium online video was always doubtful given that Hulu is owned by content companies that stream the same content from their own websites. Sure, there was a window of time there when it was very difficult to stream good quality video with a modern player, but that window is long gone. The networks now all offer excellent streaming high-definition 1080p players (although some properties such as could definitely benefit from a phone call to Brightcove or Ooyala for a player and streaming upgrade). On top of that, with Comcast’s acquisition of NBC, the content itself is now owned by the folks delivering the pipe.

CBS never allowed Hulu to syndicate its content, in a very prescient decision on its way to becoming a top 5 video destination. Viacom recently pulled its popular “Daily Show” and “Colbert Report” shows off of Hulu, really letting the air out of the balloon.

Hulu sells ads on the video it streams, meaning that Hulu’s ad sales team competes with the networks’ own ad sales teams. Hulu’s sales pitch to the networks was, “let us compete with you on your new content and we will help you monetize your older assets”. But Hulu hasn’t been able to monetize the older TV shows it runs. Pull up any TV show over two years old on Hulu, and all of the ads are public service announcements. (Although Google, ever the expert on remnant ad inventory, bought up all of this inventory for a pittance over the Christmas holiday season to play precursors to its Super Bowl ad.) So the Hulu trade off is not working. Yes, it’s profitable, and yes, the number of streams served is growing, but the number of unique users has been flat for almost a year.

If Hulu is not going to be the solution for premium content owners, what is?

The TV networks always complain when they are not in control of when and how a viewer watches their content. They complained about VCRs, and then DVRs, both times because users could skip the commercials. It took a long time for DVRs to finally make the networks money. Nielsen had to start tracking who was watching time delayed commercials, and advertisers had to agree to include these views if they occurred within three days. Video streaming, on the other hand, forces users to sit through commercials. The trouble is, there was no system in place to track the number of views, making it hard for network TV’s ad sales teams to pitch the inventory to advertisers.

The good news is, in January of this year, Nielsen announced that it would start combining TV and online viewing of shows into a single rating. With Nielsen’s move, the networks have an independent auditor that can verify that viewers are watching a particular show. This presents an opportunity to integrate Internet distribution into their existing business model, which they have not been able to do even with on demand video on cable. So from here, we’re going to see some real evolution taking place in TV. It’ll no longer be something simply ported into the online world. Instead, we’ll see the networks fully move online and develop new business models for broadcasting to an internet-based audience.

Following is a prediction of five steps we’ll see these networks take in the coming months:

(1) Allow content to be streamed online at the same time as or within an hour of when it is broadcast over the air. For three days these streams are counted by Nielsen just as if a viewer watched the show live or on a DVR.

(2) If the video is played in fullscreen mode, show all the same commercials as in the broadcast version, just like a DVR, but also force the viewer to watch the commercials. If the video is played within a browser window, use shorter, online-style, 15 second commercials, and place sponsored engagement features such as quizzes and polls below the video player.

(3) After three days, replace the commercials with different commercials that are sold outside of the upfronts. This presents an opportunity to sell popular “season catchup” packages and other such products, so the online ad sales teams continue to have a unique product to sell.

(4) Allow the network’s streaming players to be embedded on any site, so that a thousand Hulus like Boxee, Windows Media Center, AppleTV and can blossom and help increase ad views for a small cut of the revenue. Since the network’s commercials are now being propagated, companies like Boxee can be harnessed as part of the syndication solution.

(5) And the thorniest issue: affiliate stations. It used to be that if you wanted to watch CSI in San Francisco, you could only see it on KPIX, CBS’ local affiliate. Now you can wait a few days and see CSI online from The local affiliates will need to be cut in on the Internet action, and they will also need to adapt to changing times. With cable, satellite, and now Internet streaming, there is no real compelling reason to have the same content broadcast over the air. In fact, it is a disincentive — Disney makes far more money per subscriber from cable systems on ESPN than on ABC, since they are simultaneously broadcasting the ABC content for free. Network affiliates are now differentiated by local ad sales and local programming, not last-mile content distribution. Although it will require some infrastructural changes for both the networks and the affiliates, the networks can extend their ad platform so affiliates can place ads for viewers within their geographic areas that stream shows. In addition, broadcast affiliates should be able to stream the shows from their own websites with additional, local engagement features surrounding the show.

This model I’ve outlined above will enable the networks to sell ads over the air, on cable, via DVR and online at the same time and have them all measured by Nielsen in a single rating number. Affiliates are included in the model since they can also distribute their ads to their local markets. Online ad sales teams can sell additional ads after the initial viewership period. And all the content is embeddable and monetizable across the web. The unique aspect of web content is that it is easy to create engagement — and particularly social engagement — around that content, which accelerates content uptake.

Wednesday, February 17, 2010

The Evolution of 1:1 Marketing - Facebook Pages and the CPF Model

Facebook Pages were only introduced last May and have grown massively... for example Lady Gaga's Facebook Page has nearly 5,000,000 fans, one of the Top 10 pages on Facebook. Transpond has created several Apps for the Lady Gaga fan page such as song cards and the amount of user engagement in newsfeed posts, comments, likes, etc. is mind-blowing.

Last week I was in Katoomba, Australia (you probably haven't heard of it and that is the point here) and River Deep, Mountain High, the outfit that was taking us climbing and abseiling in the Blue Mountains was running a Facebook promotion. If you get 10 of your friends to Fan their Facebook page, River Deep, Mountain High will give you a coupon for $350 AUD, roughly $300 US. That is a $30 CPF, or cost per fan. In 1:1 marketing terms, a fan is the rough equivalent of someone who has opted into an email list, and a CPF is the equivalent of cost per email to acquire relevant mailing lists.

Now why would a small business pay $30 for a CPF? When someone is a fan of your business, not only do all their friends get notified that they now like your business, but you can send them newsfeed posts that show up on their Facebook home page, just like when one of their friends posts a status update. But there is a contract here: it is very easy to "hide" messages from a Fan page or to "unfan" the page. So your messages need to be short, relevant, and actionable, such as:

This small San Francisco gym is posting a message for free that its fans found relevant. In the past, they would have had to send an email for this that would need to be formatted nicely, delivered via a costly service such as VerticalResponse or ExactTarget, and subsequently ignored by the majority of receivers that rarely open vendor emails let alone personal email.

Transpond is introducing "Fan Required", a new feature that requires a Facebook user to become a fan of a fan page in order to use an interactive feature such as watching a new music video or clicking through on a coupon. In the past, marketers have often asked for an email address in order to access exclusive content. This new Transpond feature will incentivizing users to join the evolved version of the mailing list, the Facebook fan, and they can now be messaged on their Facebook home page instead of via email.