Friday, October 26, 2012

Zynga is Vastly Undervalued

This post was also published on CNET and VentureBeat.

Zynga's stock has been in a freefall since its initial public offering, and the tech pundits and press have been looking on with schadenfreude as it continues to drop. Zynga is now worth essentially nothing: Its market capitalization of $1.82 billion is roughly equal to the value of its cash and real estate holdings, even with this week's announcements of real money gambling and a $200 million stock buyback.

How can a company that brings in $1.2 billion a year, and recently cut costs in order to achieve profitability, be worth nothing?

It doesn't make sense. Here's why Zynga is undervalued -- provided it does the right thing next.

Zynga is sitting on three widely known and popular potential gaming franchises: Farmville, Poker, and With Friends. Each of these titles is well-known, has broad distribution, and an audience at least willing to check out a new iteration on the franchise. For instance, Farmville 2 just garnered 50 million users shortly after its launch. And each of Zynga's potential franchises targets a different audience: Farmville for middle-aged women, Poker for middle-aged men, and With Friends for the lucrative under-30 market.

What Zynga needs to do is expand its franchise strategy.

The gaming industry, much like Hollywood, is all about franchises. It is easy to churn out another Spider-Man movie or Call of Duty title, because there is already an audience for the content, which is a huge part of the hurdle in terms of success. Once you have a guaranteed audience, you can focus on the content.

Rovio, the makers of the Angry Birds franchise, is worth a reported $9 billion. Angry Birds is a great, fun, casual game that has successfully implemented distribution onto emerging smartphone mobile platforms, but in many ways Angry Birds is simply the Tetris of this generation of computing. In effect, Angry Birds is a single-player, traditional game that doesn't leverage the social graph, multiuser gaming, and advanced graphics. It barely even takes advantage of touch screens.

Still, it's hugely profitable because Rovio has truly turned Angry Birds into a game franchise. Rovio has leveraged every possible gaming channel from iPhone to Android to even the Google Chrome App Store, added Star Wars editions, and signed cross-industry deals for everything from stuffed toys and lunch boxes to theme parks. Before it came up with Angry Birds, Rovio had 51 failed titles. It is now promoting Bad Piggies, a new title that is actually a spinoff of its Angry Birds franchise.

Franchises are not necessarily a guaranteed result, as titles can run over budget and fail at the box office. However, from a business perspective, it is a lot better to get a 50 percent head start than to start fresh and roll the dice with new content.

It is easy to see Zynga as a pure-play social gaming company that is struggling to shift into mobile, while social gaming becomes increasingly difficult to monetize. Yes, social channels have dried up after Facebook's shift to Timeline stymied potentially viral news feed user acquisition (aka spam). And indeed the Zynga game playbook has gotten tired now that Facebook is no longer a new platform and expectations of game mechanics have matured.

But in reality, Zynga sits on three potential franchises, each of which could be huge.

Right now, Zynga's most popular titles are stuck in their existing channels. Farmville and Poker are only available for Facebook users. With Friends games are only available on mobile. Each of these titles could easily go cross-channel, to Wii, Xbox and PlayStation. Why not play Zynga Poker on Xbox Live?

Building deep, franchise-driven titles for multiple platforms takes time and investment. However, it is a proven monetization model.

In addition, Zynga's announcement this week of real-money gambling is also potentially lucrative, especially in context of its ability to deliver the gambling audience of its Zynga Poker gaming franchise.

The technology industry, particularly its intersection with Wall Street, can be very herdlike, and it is hard to shift the herd perspective on companies like Zynga that are in flux. Still, a herd mentality can be an opportunity for clever investors to make a bet against the crowd.

In the midst of writing this article, I was having dinner with a hedge fund manager in London, who usually invests in things like mines. He had just bought Zynga for his personal portfolio, despite the fact that Piper Jaffray, Credit Suisse, and BMO Capital all downgraded the stock. The pure hedge fund perspective is to bet against the market, especially when the market is not acting on fundamentals.

And while this hedge fund guy usually invests in physical mines, even he has noticed that Zynga is sitting on a potential gold mine -- one that is definitely worth a whole lot more than nothing.

Tuesday, September 18, 2012

Tuesday, September 04, 2012

You Say Google+ is a Ghost Land? Time to Revisit That One

This post was also published on CNET.

The company has taken repeated hits in the press, but Google+ is fast becoming a social business for small businesses.

Compared with Facebook or Twitter, Google+ can seem like a veritable ghost land. I'm finding few posts from friends or interesting people on the service. And it's not just anecdotal observations of there being slim pickings. A recent report by RJMetrics found weak user engagement with the social network. And yet Google+ claims to have an ever-growing number of users. So how has it managed to pull off that neat feat?

The not-so-apparent fact is that Google has aggressively integrated its social network throughout its properties, thus driving users to unwittingly use Google+. This is particularly true of Google+'s pages for small businesses, also known as Google+ Local.

For instance, when users search for a small business, Google automatically showcases that business on the right side of the page, as part of its Knowledge Graph initiative, which provides aggregated "answers" in addition to search results.

Clicking on the very prominent knowledge graph result for a local business takes users directly that business' Google+ page.

Pundits opine about how Google is becoming a content company with its various acquisitions. However, Google could, in fact, simply be attempting to juice its local listings. And there's no shortage of material it can tap into.

Google is integrating local business reviews from its $125 million Zagat purchase, and will likely soon integrate additional content from its recent $23 million acquisition of Frommers. A $148 million investment is chump change to Google on its road to better capture the small business market. Consider that at one point in time, Google wanted to pay a reported $6 billion to acquire Groupon to address the same market.

Rather than becoming a content company, Google is taking a different tack by providing a service to its customers. In fact, Google has long provided services to small business advertisers. Providing them with a landing page that allows users to subscribe and be reached, social network style is an obvious next step that meets both the needs of advertisers and users.

Review sites like Yelp are built on the back of a user searching Google for a local business and then clicking on a Yelp search result. In that interaction, Yelp gets most of a user's attention. In the new model, with the Google+ result to the right, the Google+ page for a business gets most of a user's attention. When Google tried to include Yelp review excerpts in Google Places, Yelp lobbied the FTC to prohibit Google from including its content. While Yelp is unhappy, it could be said that Google is much more advertiser-friendly than Yelp, considering the number of small businesses that are unhappy with Yelp's aggressive sales tactics.

Google's acquisition of social-marketing company Wildfire isn't a nefarious attempt to infiltrate Facebook marketing. Instead, view it as an additional step in its strategy of connecting small businesses with users. Wildfire's self-service promotions platform is widely used by small businesses to deliver sweepstakes, coupons, and other marketing promotions. On top of that, Facebook's Timeline update has significantly reduced promotional opportunities on Facebook business pages, incentivizing businesses to look at alternative profile pages that can offer similar features.

Google+ has rapidly become the business social network, differentiating itself from LinkedIn as a promotional and communication network rather than a public directory of employees. (Google just announced Google+ features for medium to large businesses.) Google+ is already a great place for small businesses to create an online presence that gets a lot of traffic and provides users with context such as reviews and location. It will likely soon let users opt-in to a business' "circles," then allow businesses to shoot promotional material straight to a user's Google+ inbox, also known as Gmail. Now that's a winning small business strategy.

Thursday, August 23, 2012

Bigger Ads, Bigger Bucks? Facebook feels Wall Street Heat

This post was written with Paul Sloan and published on CNET.

With Facebook's stock now half of its IPO price, Mark Zuckerberg and company are testing more ways to make money from advertising. And they can do a lot more.

See that image above? That's a plain old giant banner ad grabbed from my Facebook page. It appeared after I logged out. Facebook actually calls them "Logged Out" ads. It rolled them out in February when it was trying to show Madison Avenue it was serious about brand advertising in advance of its IPO.

A social ad? Sort of, I guess. It wants me to "like" it to get an insurance quote. But make no mistake: While Facebook can come up with whatever terminology it wants, this is the sort of ad that Mark Zuckerberg has long shunned -- the kind that splashes across the page the way one would expect to see on Yahoo, not Facebook.

And yet there it is. Which leads to the question of Facebook's cratering stock price, and the pressure Zuckerberg must feel from his more business-minded colleagues to do more to rev up the money machine. Zuckerberg has long modeled himself after tech titans like Steve Jobs and Jeff Bezos, founder-CEOs who steadfastly ignored the harsh judgments of Wall Street in pursuit of their long term visions and, ultimately, incredible financial success. But Facebook is up against a tsunami-like wave of pessimism following what has been calculated to be the worst performing IPO of the last decade.

The stock now trades around $19 a share, or half its IPO price. Facebook also got dealt a PR blow with the disclosure this week that board member Peter Thiel, the company's first outside investor, has cashed out the bulk of his holdings -- not a big vote of confidence as the din of criticism about Facebook management gets louder. And while Zuckerberg is still sitting atop the world with his billions, many employees are stuck with stock options priced far higher than where Facebook now trades. The high-minded refusal of their CEO to chase the easy money notwithstanding, they might prefer a little short-term thinking.

A 'gigantic amount of money'

No one expects Zuckerberg to veer dramatically from his strategy, which, in brief, boils down to two key components: On the one hand, the company wants to persuade Madison Avenue of the value of Facebook as a new kind of social advertising medium. At the same time, it needs to solve the $64,000 question facing all ad-driven social media sites and amp up its efforts on mobile. Facebook's story is strong: 955 million monthly users, more than half of them coming back daily; $922 million in revenue from advertising in the last quarter. But Wall Street isn't in the mood for a "story." That's so 1999. It wants proof, in the form of higher revenue and profit growth, especially considering that Facebook, despite the plummet in its share price, still carries a price-to-earnings ratio that dwarfs those of Apple, Google and LinkedIn.

If you think about the above ad, this Wall Street problem might actually be a simple problem to solve. Why stop at splashy ads on the logout page? Why not the home page? Facebook could expand beyond those tiny ads on the right side of your screen that force advertisers to use static graphics with separate text.

People cry that such ads will ruin the user experience, but would they really? Every other site on the Web uses them. Facebook's could be well targeted, and it could make a lot of money sprinkling them across Facebook and stealing ad dollars now going elsewhere. Heck, with its traffic, Facebook could theoretically soak up the entire display market. Surely there's an acceptable look somewhere between the Facebook of today and the messy MySpace of yesteryear. In fact, given all the additional features to Facebook over the past few years -- including Facebook Ticker and Facebook Chat -- even Facebook no longer looks likes Facebook. Google+, like it or not, is now the clean alternative to Facebook's clutter.

How easy would it be to turn Facebook's huge reach into a cash machine? Here's what Marc Andreessen, a venture capitalist and Facebook board member, told Charlie Rose in February 2009:

Facebook is deliberately not taking a lot of the kind of normal brand advertising that a lot of Web sites will take. ...Facebook has made a strategic decision to not take a lot of that business in favor of building its own sort of more organic business model and it's still in the process of doing that and if they crack the code on that which I think that we will, then I think it will be very successful and will be very large. The fallback position is to just take normal advertising. And if Facebook just turned on the spigot for normal advertising today, it'd be doing over a billion dollars in revenue. So it's much more a matter of long-term strategy.

Then Rose follows up: "So if you want to make a lot of money instantly, you could." To which Andreessen replies, "Yeah, oh, very easily. It could sell out the homepage and it would start making just a gigantic amount of money."

Just reading that I can hear the throngs of Facebook employees and investors screaming, 'Do it! Turn on the spigot!'

In the long run, Zuckerberg might very well be right: The types of social ads that Facebook is pushing, such as Sponsored Stories, which appear in your news feed and are less ad-like, could prove really effective. Big, splashy display ads are hardly great performers, after all. But we're not talking a long-term strategy that would replace Zuckerberg's current direction. We're talking triage in the face of a slipping stock that could color everyone's impression of Facebook -- including ad buyers who might start to look at Facebook as a damaged company.

Testing new mobile ads

Then there's Facebook's mobile challenge. Facebook is under constant attack for not moving faster to squeeze money out of its growing mobile user base. In the latest quarter, mobile monthly users climbed 67 percent from the prior year to 543 million. Facebook has been careful about how it spreads ads on mobile phones. In March, it began rolling out Sponsored Stories for smartphones, where companies can create "stories" that show up in News Feeds of a brand's fans and their friends.

The early signs are that this is going well, albeit slowly. A study by AdParlor found these ads to be far more effective than desktop ads, and during Facebook's second quarter conference call, Zuckerberg said that as of late June, Sponsored Stories were bringing in about $1 million a day, with half of that from mobile. That would give Facebook about $182 million in mobile revenue a year.

Enough? Apparently not. Earlier this month, Facebook rolled out its first mobile ad units that aren't tied to a user's social connections on Facebook. The company is letting developers buy ads in mobile News Feeds as a way to help them drive more people to their apps, which sure sounds like a strategy designed to boost Facebook's mobile revenue rather than improve the user experience. Tap on the ad, and it takes you to the Android or iOS App Store purchase page.

While Facebook says it's only testing these ad units with a limited number of partners, it certainly shows a willingness to try ads that have nothing to do with whether or not you "liked" something. In fact, these ads are no different than ones that marketers buy from mobile ad networks like Tapjoy. Similarly, Facebook last week started a test in which brands can pay to have their "sponsored" posts show up in Web and mobile News Feeds of Facebook users who have no connection to them -- something that, until recently, would have been hard to imagine Zuckerberg signing off on.

"Marketers have been told for years is that Facebook is about community," says Jed Williams, a senior analyst with BIA Kelsey, a research firm focused on interactive media. "Suddenly all that changes if you can drop an ad anywhere." (A Facebook spokesperson described this latest effort as a "small test.")

Facebook, of course, has many big advertising opportunities that it could be working toward expanding. In June, the company launched an ad exchange, called Facebook Exchange, to let advertisers better target users on Facebook by tracking what else they do across the Web. And there is plenty of speculation that Facebook will create its own third-party ad network that, through Facebook Connect, would tap into your social connections to sell targeted ads across the Web.

In the end this may come down to a question of Mark Zuckerberg convincing Mark Zuckerberg to rethink his principles and bend to the sometimes brutal demands that accompany life as a publicly traded company. And if that happens, Facebook stock may get a much-needed jolt.

Thursday, June 21, 2012

Hey, Windows 8 Doesn't Suck

This post was also published on CNET and VentureBeat.

For months now, various pundits have been deriding the upcoming Windows 8 as the next Vista. People have made mocking videos showing older people thoroughly confused by Windows 8's Metro tile interface. Indeed, the Windows 8 Metro interface is radically different than the traditional Windows desktop. It's a touch interface.

Yet the same pundits that slammed Windows 8 on the desktop are now lauding Microsoft Surface, the Windows 8-powered touch tablet that Microsoft announced Monday. Since the Windows 8 Metro software hasn't changed, what exactly is so different? After all, Microsoft is demonstrating the exact same interface on touch-enabled hardware. And all of a sudden, Windows 8 is making sense.

It's not at all crazy to assume that soon all notebook and desktop screens will be touch enabled. Haven't you sometimes just wanted to reach out and touch your MacBook Air or desktop screen, just like you do on your smartphone or tablet?

Microsoft, it turns out, is slightly ahead of the curve here. To avoid consumer confusion, the company should seriously consider making Windows 8 Metro work slightly differently when it is not being used with a touch-enabled device or let people automatically bypass it on the Windows desktop. Why force a touch interface on non-touch computers? Microsoft has been adjusting Windows 8 based on feedback during the beta period; it recently reversed its decision to not support Flash in the Metro IE10 browser.

Discovering the secret to well-designed products

Apple certainly led the way in bringing well-designed, easy-to-use products to the market, and now others are beginning to get a clue. It's actually not that complicated. Hire reputable industrial designers, then listen to them. And then test the resulting products extensively and fix whatever annoys people. This same process has been applied to cars, kitchen appliances, and other consumer categories at companies run by MBAs, not Steve Jobs.

In the Ultrabook category, Microsoft OEMs, such as Samsung and Acer, are delivering beautiful MacBook Air-like computers. With Microsoft's Surface stake in the ground, it will not be surprising if those Microsoft frenemies start delivering beautiful tablets as well. It is hard to compete with Apple's soup-to-nuts approach and Microsoft has had to lead the way, much like Google led the way with the Google Nexus phone, and was soon outshined by Samsung's popular Galaxy S II.

One mode for consumption, another for creation

One of the biggest pundit dings on Windows 8 is that it has two modes: the Metro tiled interface and the traditional Windows desktop mode. However, we need to recognize that personal computers are undergoing a fundamental shift in how we use them.

When personal computers first came out, they were essentially creation tools. There was no communication, no multimedia, nothing to load from disks. Back then, users edited a document or edited a database. There were steps along the way to the Internet, of course, but now the personal computer has become a device for communicating and reading, watching or playing stuff, whether movies or music or articles such as this one.

It is quite reasonable that at this point users need two separate interfaces: one for consumption and another for creation. For multifunctional machines, it is actually not odd to overlay one model on top of the other. When you want to consume content on the Microsoft Surface, you use it as a tablet. When you want to create content, switch it to the Windows desktop mode and use its innovative keyboard. Microsoft ran two user interfaces in one with Windows on top of DOS, and pundits trashed this strategy as well, but after a few years Microsoft was very successful with Windows 95 and brought all of its users along for the ride.

Apple currently provides two interfaces as well with the mobile/touch version iOS vs. the desktop version, and former Apple President Jean-Louis Gassee points out that the two Apple user interfaces are converging in terms of design.

Microsoft has innovated in a touch-based, creation interface with its experimental Microsoft Surface tabletop, which has an interface reminiscent of the interface Tom Cruise uses in the 2002 sci-fi movie Minority Report. It would not be surprising if in a couple of years Microsoft ships a Windows 9 that adds touch to the creation mode, and professional workers will be touching their screens just as much as they do at home while reading the news on a tablet.

Tuesday, May 22, 2012

What’s Next for Mobile Now That Adaptive Web Design Has Failed?

This post was also published in VentureBeat.

This article was written for business readers. Due to an outcry from the responsive design community, I added the word "web" to the term "adaptive design" to avoid confusion with progressive enhancement, and updated the text to read that Facebook uses "a precursor to" responsive design, even though very techie trades like RWW say that Facebook uses responsive design. Obviously, the outcry has more to do with the content than the terminology, but it's always good to be pedantic. Read on!

Analysts commenting on Facebook’s IPO have highlighted a major issue in mobile computing: that it’s incredibly difficult to monetize on mobile devices. Like many other engineering-led cultures, Facebook has embraced adaptive web design, a precursor to also known as responsive design, where essentially the same code can render itself down from a desktop browser to a tablet to a diminutive mobile screen.

Adaptive web design is an elegant solution to the thorny technical problem of having to deliver a content experience on multiple devices. And engineers love more than anything to apply the same hammer to multiple nails.

Unfortunately, users do not agree. Desktop web browsers, tablets, and mobile devices are fundamentally different and are used in very different ways. Across our properties at CBS Interactive, we have experimented with a variety of adaptive and direct designs and are learning the hard way that a one-size-fits-all solution delivers a subpar user experience.

Turn those mobile pages

The app has defined the mobile form factor. Users expect to see menus with only a few relevant options that do not require scrolling, titlebars with back buttons, and do not mind paging through content as long as it loads fast. In contrast, when a full size web page is adapted down to a mobile form factor, it forces a lot of vertical scrolling – even if some components are removed and others are made smaller.

Narrowing a mobile experience down to the essentials of what a user wants while mobile is critical. Tight menus and quick page loads compel users to turn more pages, which is essential in the small mobile form factor that has limited ads. Some ad units on mobile are worth more on mobile than desktop — for example, someone reading a product review on a mobile device in a store is likely contemplating buying that product.

Content publishers can learn a lot from airlines and banks, which are usually technology lagards. The mobile sites of United Airlines and Wells Fargo are tight, focused, and substantially different from their websites.

Tablets are for swiping

The tablet is essentially a magazine form factor, and users have been trained by numerous popular apps ranging from iBook to the New York Times to Flipboard that they should swipe right to left to page through content an a tablet. Users are perfectly happy to swipe through an article that is split into several pages, since this is what they did with magazines.

Rather than adapting a web page down to the tablet form factor and requiring users to scroll vertically, publishers should embrace swiping. Users are not perturbed at all to see a full page interstitial ad stuck into the mix while paging through content, making the tablet extremely monetizable.

Swiping is very difficult to code for mobile web. Fortunately, there are turnkey solutions such as Pressly and OnSwipe that make it easy for simple sites to create swipeable tablet editions. Extensions to jQuery Mobile and Sencha Touch make it easy for programmers to add swiping features to their mobile HTML.

Let websites be websites

Website design is proven, monetizaton techniques work well, and users expect sites to function the way they currently function. There is no pressing need to substantially change how they work.

The trend of “iPadification” of websites is more about adding simplicity and whitespace rather than a complete restructuring of how a website should work. Some types of services, such as Twitter, provide a tablet-like experience on their website. Twitter’s website offers a clean design with white, rounded content areas and no dynamic menus. Users are comfortable scrolling vertically on tablets to see streams, so the same design works well for desktop web and tablet.

It is painful for engineers to have to support three different use cases for three different form factors. However, particularly for content sites, the effort bears worthwhile fruit in terms of mobile monetization.

Tuesday, May 01, 2012

Big Data May be Hot, but Little Data is What Matters

This post was also published on CNET.

Big Data is in vogue, with a glut of startups and numerous large installations appearing in corporations. At CBS Interactive, we process almost one billion events a day that flow from our Web and application servers over message queues to a cluster of 80 twelve core Hadoop nodes that then feed a Teradata data warehouse.

Processing and analyzing such a large volume of data helps us ask important questions: Which pages on which properties are most profitable? Who goes where across our various sites? What types of content generates the greatest number of advertising conversions?

But here's the thing: Most of our conversations with product and business managers are spent discussing what I like to call "little data."

Little data constitutes the nuts and bolts metrics of running a business. For a Web property, that means getting a handle on issues such as the bounce rate, SEO session starts, social session starts, funnels of how users flow through a property, and page views per session. Too many people lose sight of these simple but critical metrics.

Monitoring and actively managing a Web property to these "little" metrics creates significant lift in page views and conversions, and that helps revenue. Even something as simple as actively managing the hoops you make people jump through to register for your site and the sorts of emails you send when they do builds and grows a loyal following.

One of the most critical metrics we are tracking comes from the gaming world: the ratio of daily active users to monthly active users (DAU to MAU). When the ratio is low, say around 0.03, it means that your unique users are coming only once a month, and you're essentially running a fly-by tourist site. When the ratio is high, such as Facebook's estimated 0.60, it means that a majority of your users are using your site on a daily basis and that your property is a key part of their online lives. (I can't share the DAU to MAU for our sites, as they're confidential.)

Taking control of little data

There are a variety of inexpensive little data tools that are easy to implement. SimplyMeasured is excellent at managing social traction -- i.e., how much impact your site is making on various social networks. KISSMetrics is world class at managing "conversion funnels," the path a user follows through a site before "converting" to a sale. Google Analytics, which is free, does a great job of managing metrics such as bounce rate and SEO session starts, measures of how "sticky" your site is and how well you're doing at attracting new external visitors. Implementing such easy-to-use tools encourages product and business managers to actively manage their sites with "little data" metrics in mind.

Managing a site by the numbers shouldn't be taken to the extreme, however. Sites need to look good and say something relevant to readers; they shouldn't just be optimized within an inch of their lives to drive revenue. We don't, for instance, want to make look like GoDaddy, which is -- understandably enough -- completely optimized to drive revenue.

Growing up to big data

Once the use of little data becomes pervasive in an organization, big data can then begin to help decision making, since a culture of data-driven decisions is ingrained. Moving beyond just simple web metrics, big data can provide an integrated view of a business by integrating financial metrics, answering questions you hadn't even thought of when initially setting up a site, and deciphering trends across disparate sets of data.

Big data is hard to do, and can be very expensive and time consuming. Integrating revenue and cost data in order to manage end-to-end business models is a complicated and time consuming task. Some organizations decide to outsource to companies like Omniture and Webtrends (where I used to be a GM), which can help figure out how to tag and manage the process, in addition to storing the vast amounts of data required for meaningful analysis.

If your organization has enough volume and the technical competence to do your own implementation, keep in mind that it's easy to get lost in the process of building out big data infrastructure and lose sight of the fact that, in the end, big data needs to be usable. This might sound straightforward, but in practice it can be anything but. It requires highly skilled data scientists and strategists that understand business problems and can distill the data into simple, actionable metrics.

In effect, the magic of big data is turning it into little data.

Wednesday, April 18, 2012

How Expanding Twitter's Pledge Could End the Patent Wars

This post was also published on CNET and VentureBeat.

Twitter's momentous announcement yesterday that it would only use its patent portfolio defensively was received with wide acclaim by the tech world. With two small changes, Twitter's Innovator's Patent Agreement (IPA) could actually completely change the landscape of software patents.

1. Share patents defensively with any other company that signs the IPA

Allow any company that is a signatory to the IPA to use each other's patents defensively. To qualify, a company would have to have at least 10 patents to contribute and no active patent litigation. The minimum of a 10-patent contribution creates a virtuous circle that incents even startups to innovate with patents, as they will get an umbrella of patent shielding from all other companies that have signed the IPA.

With this small change, Twitter could spur a wide following of companies that follow suit, as they will all mutually benefit from joining the IPA. While there are no guarantees that will avoid all patent claims and trolls, the combined patents of all of the signatories would provide numerous claims that could undermine predatory patents.

Currently, companies can only obtain broad patent coverage by paying defensive patent rollup companies like RPX Corporation. While RPX has a broad array of excellent patents that can undermine many patent claims, RPX is expensive and only accessible to larger corporations.

2. Make the IPA patents perpetually defensive

The software equivalent of hammers and nails are patented today, and developers can't make anything that doesn't violate numerous patents. When I left Sun Microsystems in 2003 and started a company, I had to violate my own patents to do what at that point had become widespread methods of building Web applications.

Fortunately, Sun, like Twitter, only used patents defensively. However, it is a case in point that such patent promises can be transitory. Since its acquisition by Oracle, the Sun patents are being used to sue Google for its use of a proprietary Java virtual machine in

The IPA provides an encumbrance to prevent future assignees from using the patents offensively, but the language seems weak and lacks real teeth. This could be solved by automatically reverting the patent to the original author or a nonprofit holding company.

This commentary has absolutely no reflection on CBS Corporation's stance on use of patents and is focused on patent strategy for startups.

Tuesday, April 17, 2012

How RIM Could Save Itself: With a “Super Feature Phone”

This post was also published on CNET and VentureBeat.

Research In Motion is reportedly attempting to sell itself after rejecting the former co-CEO's plan to open up its network to carriers. But for some reason it is not pursuing the creation of a lucrative category between smart phones and feature phones -- the super feature phone.

Less than a smartphone, but far more than a feature phone

What are you left with if you take a smartphone and remove the ability to install apps? It's far more functional than a feature phone, with built in apps for e-mail, Facebook, and a camera. But it's definitely not a smartphone like an iPhone or
Android device. RIM's range of devices are fully capable, with integrated apps and cameras, but suffer from a paucity of apps other than an attempt to integrate Android apps.

The key to the super feature phone is the ability to use cheap data plans in the $10-per-month range, rather than the more expensive full data plans required by smartphones. Not everyone needs a smartphone with a data plan. RIM should focus its devices on the feature phone segment, especially for armies of corporate workers that need access to email but not much else. RIM can easily compete with the players in this space, including Samsung's Bada and Marvell's Kinoma.

RIM should also ensure that the carriers do not sabotage a super feature phone plan by forcing a full data plan, like they did to the ill-fated Microsoft Kin and instead leverage the BlackBerry network.

A lucrative mobile device management future

RIM has always held a core competence in integrating corporate Microsoft Exchange e-mail and calendar servers in sync with its devices. RIM has attempted to expand into the integration of
Google Android and Apple iOS devices with Microsoft Exchange with its Fusion product line, but those devices can now integrate out of the box with corporate e-mail and calendar systems.

Many corporations are implementing bring your own device programs where their employees can use off-the-shelf devices to access corporate resources. This shift has presented an opportunity for new mobile device management software (MDM) that ensure that corporate data can be wiped from lost handsets and terminated employees' devices.

RIM should acquire a few of these MDM vendors, including Airwatch, MobileIron, and Zenprise and roll up this space. Although RIM's stock has been hammered, it is still worth $7 billion and can afford to overpay for growing startups. This will enable it to have new, desirable products to sell through its enterprise direct sales force and channel partners.

Have some marketing fun -- BlackBerrys are better sometimes!

BlackBerrys may not equal an
iPhone, but it is a heck of a lot faster to type out a text message or call someone with a BlackBerry. There is a lot of potential for fun ads that show off that comparison with people in awkward situations that need to contact a friend quickly while their friends are still fumbling with touch screens. BlackBerrys could even become cool again.

Let's face it: Apple and Android are never going to provide cheap devices that don't require a data plan, and this is a huge opportunity for RIM.

Friday, March 23, 2012

2012: The Year of the App-ocalypse?

This post was also published on CNET and VentureBeat.

The Mayans were right about one thing. There is a looming extinction event this year -- of apps that fail to capture a mass audience.

In the past week, two high-profile mobile apps were effectively shut down and acquired -- Hipster by Aol and Oink by Google. Both had big PR buildups, rave reviews from the tech press, and strong usage from the digerati.

What they did not get was traction beyond that, and the teams went on to be acqui-hired. Even apps that seemed to define new categories, such as GroupMe for group chat and Foursquare for check-in, have failed to gain popularity with the general public. GroupMe sold to Skype and Foursquare is shifting from the check-in model to the reviews/discovery space dominated by Yelp. Highlight, the latest digerati darling, drained batteries and fizzled at South by Southwest.

Why do even well-funded apps with successful founders fail -- as happened to Peter Pham with Color, Kevin Rose with Oink, and many others? The reality is that even if you are a proven entrepreneur, consumer anything is hard -- be it Web sites, movies, books, music or toys. Consumers are fickle and have a ton of entertainment options; predicting what they want is incredibly challenging.

On the face of it, well-funded apps like Color and Oink should have had an easy time achieving app stardom. But in today's world, independents have as much chance of taking off as pedigreed players. Having a large Twitter following and getting written up in tech blogs gives you only a small leg up -- not a huge leap over the competition.

At CBS Interactive, we offer a bunch of apps, including very popular ones like 60 Minutes and CNET. Our apps are an additional channel for branded, popular content, and even we sometimes struggle to get traction.

Making an app successful is a two-part problem. The first part is getting people to install the app. You do that by promoting it on your Web site, advertising your app, and promoting installs on Android via offer networks such as Tapjoy. (Disclosure: I am on the advisory board of Tapjoy). It's also critical to nail the initial user experience so that the app gets good reviews.

But achieving a decent number of downloads is just the beginning. Apps need to be relevant in consumers' lives so that users return regularly. They need fresh content, useful features, and reminders for users in the form of notifications and emails. The vast majority of apps, especially games, see their usage plummet not long after download.

The iPhone and Android home screens have space for only 16 icons, and many of those spots are already taken by core features such as the phone, messaging, and map icons. Ask random, non-techie friends to pull out their phones, and chances are that their home screens will be populated by ComScore top 50 properties such as Yelp and The Huffington Post. Actually, I always ask techies pitching me an awesome new app to show me their phones, and usually they don't have anything other than ComScore 50 properties either.

So are apps over? Of course not. But the initial scrum is over, and apps are now just another form of entertainment vying for consumers' fickle attention. And just like other mass media, they area subject to a power law where a few apps get almost all of the attention.

Wednesday, February 22, 2012

Under the Hood: HTML5 or Native? A Guide

This post was also published on CNET and VentureBeat.

Taking your site mobile is a technology minefield. Here's how we're doing it at CBS Interactive.

The mobile technology landscape is incredibly confusing. There are numerous choices, ranging from new HTML5 technologies, native app development methods, and all sorts of content management systems.
At CBS Interactive, we have numerous mobile solutions, including native apps for, CNET, and "60 Minutes," along with mobile-optimized Web sites for GameFaqs and global properties like ZDnet.

At first blush, it seems problematic that various properties have picked completely different architectures for mobile delivery. A technologist's initial inclination is to have everyone run a consistent architecture across all of our properties. Yet it actually makes sense to run a variety of architectures to support mobile delivery.

The biggest issue to address is the ongoing tension between HTML5 and native. Most of the debate between the two is focused on different technical features that very quickly delve into minutia. However, the actual decision between the two should be made based on the type of traffic a site has.

Where's the traffic coming from?

If the majority of a site's traffic is side door traffic from Google, Facebook, and Twitter, the site should embrace mobile web and HTML5. Since most of the site's users are arriving via links, the content must quickly load in the
mobile browser. Such sites include music lyrics sites such as our site MetroLyrics and other types of information look up sites.

If a majority of a site's traffic is direct but intermittent traffic--meaning users come directly to the site, but only once in a while--the site should implement HTML5 mobile Web. These types of sites are "tourist sites" that are not visited regularly by people and therefore users are very unlikely to download an app. Such sites include corporate websites such as my company's homepage.

If the majority of a site's traffic is direct traffic where people are regularly going straight to the site's home page from a bookmark or typing in the URL, the site should use native apps. Such sites include, CNET Reviews, and other types of highly branded destination sites.

Sites with direct traffic that is intermittent--meaning people drop by every now and then--should still use HTML5 rather than native. For sites with a lot of direct traffic, native apps also provide useful additional features such as push notifications and offline storage, which are not relevant to sites with intermittent or side door traffic.

Sites that have an even mix of direct and side door traffic should also implement both native apps and an HTML 5 mobile view. A word of caution, however: there is always an inclination to heavily promote your native app to everyone going to your mobile Web site by forcing users to click through a native app promotion. This is a way to piss people off. Most of those visitors are clicking on a link in Google or Facebook and expect to see the content. They don't want to download your app.

What can you spend?

Once you determine whether to build an HTML5 mobile Web site or a native app, the next big question is how much you are willing to spend. Really, there are only two choices: complete and cheap or custom and expensive.

Sites should generally start with a turnkey and cheap solution. For turnkey mobile Web HTML5, vendors like Pressly and Mobify will take your content and make it sport a sexy, Flipboard-stye tablet interface. Wordpress includes mobile plugins that work great on
iPhone and
Android. Be sure to add a "view full site" option so that your users can opt out of the mobile experience and access functionality that the turnkey HTML5 solutions do not yet support.

To deliver turnkey native apps, services like MobileRoadie will consume your content, social feeds, and more and let you style good iPhone and Android native apps, with iPad soon to come. The apps are gorgeous and responsive and provide extensive options.

For the sites that need to support both mobile web and native apps, it is likely that the turnkey vendors will soon begin to support both distribution channels, and one vendor will be able to deliver best-of-breed solutions for both mobile HTML5 and native apps. For now, however, I suggest using a different vendor for each.

Once you have a baseline mobile presence, you can consider adding a custom experience that will support numerous features and user interface enhancements. Unfortunately, custom means expensive, both for HTML5 and native apps.

There are numerous systems integrators such as that deliver elegant, iPhone, iPad and Android native apps. Be aware that these integrators are going to need to be able to integrate with your registration, user profile, and content systems and that will likely require engineering and IT work. Some integrators such as FreeRange360 have an underlying platform that makes this type of customization relatively straightforward.

While HTML5 has come a long way, it is still not up to par with the native app experience. Some publishers, such as the Financial Times and Playboy, have come close to native app functionality by investing heavily in HTML5 in order to bypass Apple's 30 percent app store subscription fee. However, there are no turnkey JavaScript libraries that provide functionality such as efficient swiping and offline reading.
That said, it is relatively straightforward to efficiently deliver an excellent mobile Web experience. Libraries like jQuery mobile and Sencha mobile provide excellent HTML5 iPhone-style user interface controls, and it is easy enough in modern web frameworks such as PHP and Ruby to detect what type of device is requesting content and delivering a customized page for particular screen sizes, known as the "if viewport then" technique. It is tedious and cumbersome work, but can be done, and provides an excellent level of control and flexibility.

For properties that contain primarily text and images, you could consider a hybrid HTML5-native approach, where a mobile-optimized HTML5 site is wrapped with a native wrapper like PhoneGap. While this sounds like an ideal solution, consider that this approach is quite nascent, and that it takes quite a bit of work to make HTML5 work and look like a native app.

In summary, when discussing your mobile strategy, use the type of traffic your site has to determine whether to use HTML5 mobile Web or native apps, and then use your level of budget to decide whether to go turnkey or custom. And have some fun with your apps and please let me now what's worked for you.

Friday, February 10, 2012

How Sites Like MegaUpload Make Millions from Pirated Video

This post was also published on CNET and VentureBeat.

For the scope of this article, I am leaving all of the commentary on SOPA, PIPA, ACTA, and such aside for others much more well-versed than I to discuss.

A lot of people have been asking me the same question lately: Just how do sites like MegaUpload--recently taken down by an international collection of law enforcement--make hundreds of millions of dollars a year and fund lottery-winner style lifestyles that include mansions and private jets?

It's actually pretty straightforward. These sites use the same techniques as legitimate Web sites: search, social media, ad networks, and online payment processors.

Sites that feature links to illegal videos optimize for the keyword "links," and users that seek such videos have learned to search for "links." Generally, providers of legal content are not trying to land in searches for links; they are trying to land in searches for the word "videos." So searching Google for a popular TV show such as NCIS followed by the words "free links" returns sites that feature links to pirated copies of the TV show.

Clicking on one of these Google links, such as, returns a well-designed Web page featuring advertising from the likes of American Express and Hertz via retargeting ad networks such as Chango.

The page also features links to the latest NCIS episodes that are illegally hosted on download sites. Each link has a rating so that visitors will know when a file is no longer available due to a DCMA takedown. As there are numerous links available on numerous download sites, there is generally always an illegal copy available for viewing. It's technically legal to link to illegally hosted copyrighted content, so these types of sites are seemingly doing nothing wrong.

Like many profit-oriented Web sites, clicking on one of these links actually takes you to a secondary page so that the site can generate an additional page view.

Clicking on a link sends the user to file-sharing sites such as that allow streaming video of hosted files, including retargeted ad networks ads from advertisers such as Virgin America.

After watching a set amount of video, users are incentivized to pay to watch more using their credit cards, processed by payment networks such as Skrill. You're also offered the option to earn points towards viewing videos by accepting "offers," such as a Netflix trial subscription.

If this all looks familiar and resembles so many media sites you come across, they've succeded. That's the intention.

Thursday, February 02, 2012

Forget $100B! Facebook could soon be worth $200B

This post was also published on CNET and VentureBeat.

For all the naysaying about Facebook, that it's a flash in the pan and such, there are very few that say that "social" is going away.

Facebook has defined the social era of computing--and the companies that defined the previous eras of computing each command market values of $200 billion or more.

Facebook should get there, too.

IBM kicked off the mainframe era of computing and to this day is the leader in big enterprise computers and services. Microsoft was an early leader in personal computer software and now dominates microprocessor based desktops and servers. And after joining the scrum at the tail end of the dotcom boom of the 1990s, Google emerged as the leader of the Internet era of computing, amassing huge market share and most of Internet advertising's profits.

Coincidentally, those three companies--each of which dominated an era of computing--are now each worth roughly $200 billion.

While many still think of Apple as a computer company, it's not. It's reinvented itself as the leader of the mobile era of computing. Three quarters of Apple's revenues are now from the
iPhone, iPad, and
iPod, and it is in the process of re-creating the
Mac as a mobile computer with the MacBook Air. Apple, as the leader of the mobile era of computing, is now valued at an astounding $400 billion plus.

Given the history of IBM, Microsoft, Google, and Apple, that each respectively led the mainframe/minicomputer, personal computer, Internet, and mobile eras of computing, it is not that much of a stretch that Facebook, as the company that defines the social era of computing, will be right up there with them. Each of these eras have produced prodigious revenue and earnings, and as Facebook's S1 filing shows, social is already well on its way to stellar revenue and earnings--making the bulk of its money the way Google does, through advertising.

The leaders of each era have managed to lock in a generation of users ranging from business datacenters, PC operating systems and applications, and the portal by which people search. Facebook's social graph will be just as persistent. While other niche social networks will emerge, most of us aren't going to switch.

Of course, Facebook's current revenue and earnings does not justify such a valuation, but Facebook is still young and doubtless will figure out plenty of ways to make more money, including selling valuable new ad units such as sponsored stories against its increasing number of mobile users. So long as it it continues on its existing trajectory, the leader of the social era of computing will join others in the $200 billion club.

Or--dare I suggest?--the $400 billion club.

Friday, January 13, 2012

Why Google is Ditching Search

This post was also published on CNET and VentureBeat.

There has been a huge maelstrom about Google integrating Google+ into its search links. And it all misses the point.

Twitter and others are complaining that Google is throwing its massive 65% plus market share weight around and quashing smaller competitors. The reason Twitter and others are so threatened is that the pattern of shared links within Google+ provides a decent enough indicator as to what links are interesting. What's important is what's trending, and algorithms can get a sense of that with just a subset of everything that's getting shared on the Web.

The most interesting aspect of Google's move, however, is its tacit acknowledgement that its stalwart search links are largely irrelevant and might as well be replaced with social results. Google search results are essentially gamed results produced by search optimizers.

In other words, the search results that we supposedly value so highly are themselves paid placements, just like Google's keyword ads. It's just that in the case of search results, link owners have paid for SEO (search-engine optimization) to get Google's attention instead of paying for SEM (search engine marketing) to make Google give their links prominence. Either way, though, searches are mostly just producing ads by any other name.

In addition, Google's famed PageRank algorithm carries less and less weight these days, since fresh news and results inherently don't have as many inbound links as older content.
(If it helps, you can think of PageRank as a kind of paleo-social search--just one that moves way too slowly for the modern Web.)

As I've written in the past, Google well knows that its search results suck, and over the past few years, it has started to short-circuit those results by putting more and more direct "answers" at the top search pages. That, of course, makes the search results themselves less and less important.

As the screenshot to the right (click for a larger version) shows, ads and answers have started to push Google's quintessential search results below the fold into the netherworld of the Web. As it turns out, in many cases the actual "answers" to searches for airline flights or products are actually much more monetizable than ads.

At last year's D conference, Google chairman Eric Schmidt presaged the shift from links to answers, stating that "we're trying to move from answers that are link-based to answers that are algorithmically based, where we can actually compute the right answer." More and more, Google is simply going to answer your questions. Last month, it acquired predictive search company Clever Sense to accelerate this transition. New mobile search engines such as Apple's Siri also dispense with search links entirely and simply return a single answer.

So why not replace increasingly gamed and lame search links with socially curated links? The search results were increasingly irrelevant anyway.