Technofile Europe

Jobs on Flash, and the coming video codec war

Image via Wikipedia

An interesting rant essay from Steve Jobs appeared on Apple's website today: a detailed defense of Apple's decision not to allow Flash on iPhones and iPads.  

When the iPad launched the critics continued to lambast Apple for not supporting Flash, the technology that powers "75% of video on the web".  This is considered one of the Appleverse's top 3 sins, alongside the lack of multi-tasking and the absence of USB ports.  Speculation has been rife that this is part of a personal war Jobs is waging on his former ally and owner of the Flash standard, Adobe Systems.

Jobs' letter is a competent answer to the critics, though I suspect it will silence few. It's worth a full read here, but for those busy ones among you, he makes the following points: 

• Although ubiquitous, Flash is a proprietary standard, owned and controlled by Adobe.  Jobs admits Apple has many proprietary products, but always promotes open Web standards (like HTML5).  The first part is clearly true -- the public often confuses widespread adoption with 'open'.  Also explains why Adobe is fighting so hard to keep it everywhere.
• The implication that 75% of web video is not available to iPhone/iPad users is not true.  Many of those sites also make video available in H.264, including YouTube and all the major media outlets, but notably not Facebook (?).  I don't feel like I'm missing out on much in the way of Web video on my iPod Touch.
• Flash has reliability and security problems, especially on mobile devices.  Flash has yet to be released for smartphones.  Is that all true?  That would be fair problem...
• Most Flash players use an old software decoder which is inefficient and drains battery life, while most modern devices (including iPhones, etc) use faster H.264 on the chip.  Adobe has been slow to add support for H.264 to Flash.  Possibly true.
• Flash was designed for PCs and mice, using the mouse 'roll-over' as a call to action, whereas the Appleverse is, of course, all about touch.  I think Adobe better come up with a fix for this, seeing as the world is going all-touch very quickly.
• Finally, Jobs doesn't like the fact that Adobe wants developers to use Flash to create games for his devices.  He says that this is because inserting a third-party development tool between the apps and the devices is unnecessary and makes the result less performant and stable.  

The last point is undoubtedly true. In an ideal world all applications would be written in assembly language directly to the chip!  But it's also true that Jobs is forcing a lot of developers to learn how to write directly to his OS, which creates a large development community and significant commercial benefit.  This does not seem pernicious, just savvy.

There is a broader mobile video standards war brewing under the surface.  Less than a year ago Google acquired On2 Technologies, and fueled speculation that it would open-source the video compression technology, which was already widely embedded in third-party devices.  Two weeks ago, this rumour was confirmed and Google jumped right into the middle of the video codec wars.

Google is well-armed for this one: the distribution power of YouTube, Chrome and Android will go up against the rapidly growing army of iPod/iPhone/iPad wielders.  Makes you feel kinda sorry for Adobe doesn't it...?

Related articles by Zemanta

• The Flash fracas between Adobe and Apple (FAQ) (news.cnet.com)
• Adobe Gives up on Flash for iPhone, iPad (wired.com)
• Apple hits back at Adobe in Flash row (telegraph.co.uk)
• Google Confirms Android 2.2 Will Support Flash (mashable.com)
• Apple in shock public attack on Adobe (go.theregister.com)
• The Apple/Adobe Battle Royale (timesunion.com)

iPad puts Google on the backfoot

Image by Getty Images via Daylife

The most interesting debate about the iPad's impact on the tech industry is around the coming clash with Google.  The iPad clearly has the potential to replace at least one of our computer use-cases (eg the laptop in the kitchen/living room).   In the past week, it dawned on me how radical the threat to Google really is. 

Back in the dark days of blogging (over 3 years ago!), I wrote that Google was increasingly about navigation rather than search.  In 2006, 5 of the top 10 Google searches were navigation shortcuts like 'Facebook' or 'Bebo' rather than searches for discoverable information.  Google was fast becoming the gateway to the Web, ie the browser itself.   

Fast-forward to 2009, and by now nearly all top 10 Google searches are not search terms (see right). Google's primary use by consumers is as a navigation aid.  This means that the biggest risk to Google's traffic is people finding other ways to navigate to their favourite content. Google recognised this threat on the iPhone/iPod platform, and responded by launching its own phone and phone OS.  

But the iPad poses an altogether more serious threat -- if a proportion of PC useage migrates to the iPad, and people use apps to navigate directly to their content without passing Google, then the volume of Google searches could be seriously impacted. Joe Mele of Razorfish describes the effect here. 

It's unclear to me how this would impact Google's ability to monetise search -- none of the 'navigation' searches actually carry any Google Ad-Words alongside, so they are not monetised directly.  But the traffic they generate must contribute to Google ad pricing.  Perhaps someone with a better grasp of the Google Economy can enlighten us here?

The second part of Apple's assault on its former ally is the launch of the iAd platform to deliver adverts through apps.  Whereas Google isn't even monetising its Top 10 searches, Apple is offering developers a way to monetise the destination sites themselves, and taking a 40% cut of ad revenue to boot (more than Google takes from its AdSense partners).  

What these ads will look like, how they will be received by consumers, and whether they will be a big business for Apple all remain to be seen.  But it's a clear poke in Google's eye, with no clear way for the search giant to retaliate.  

The only way Google can now prevent Apple from eating into its browser/home page share and related search and ad revenue is to fight Apple on the platform itself.  Thanks to Apple's contrarian approach to vertical integration, we have come full circle: control of the endpoint is important again.  

iPhone vs Android?  I know where I'm putting my money...

Related articles by Zemanta

• Google Preparing An iPad Killer Says CEO Eric Schmidt [Rumor] (inquisitr.com)
• Yep: Google's Hoping iAd Will Get GoogleMob Approved (marketingpilgrim.com)
• Apple Deletes Google Brand from iPhone Search (cultofmac.com)

SEO basics and top tips, from the best

I've been a bit slow in blogging this, but a couple of weeks ago we held the second online marketing workshop sponsored by a group of VCs (Kennet, Accel, Advent, Wellington).  The concept was to get marketing professionals from a cross-section of European growth companies into a room to discuss what works and what doesn't in online marketing. 

Our first workshop last summer was all about search engine marketing (SEM).  This one was all about the more nuanced art of search engine optimisation (SEO). 

The evening revealed some interesting tidbits.  First, less than 30% of traffic and less than 20% of paying customers -- on average across the set of 25 participating companies -- is coming in via SEO.  The magic number being targeted is more like 30-40%.

Second, many Internet companies admit to being essentially underinvested in SEO and still being on the learning curve (unlike in SEM).  It doesn't help that SEO means wildly different things depending on what type of business you are: eCommerce, consumer web services, content publisher, B2B.  The general mood was that there is still a lot of low-hanging fruit, and this field is evolving all the time.

Below I summarise the other take-aways: top 3 SEO basics everyone should be on top of (perhaps obvious to many of you, but not to a neophyte like me); the most interesting specific initiative we heard about; the biggest mistakes; and the biggest unknown:

Top 3 SEO basics:

1. Get your URL structure and top-level domain strategy right.  If you operate in multiple countries with feet on the street, consider using country-specific domains like .co.uk and .fr, rather than declinations of the home domain, eg .com/en or .com/fr.  Make the most of SEO-valuable product categories and names within the URL.
2. Have an ongoing programme for generating links back to your site from high-quality partner sites.  This means building relationships with relevant partners whose sites themselves rank highly. 
3. Develop a content generation and renewal strategy that allows you to get your name (and the most expensive keywords) onto other sites and in context of relevant articles.  Think about articles or content pieces that are re-usable or can be refreshed easily.  That will keep new links coming as your content gets picked up virally.

Most interesting initiative: widget syndication - think about a piece of data or entertainment that your partners would be happy to present on their sites, which links directly back to yours.  The better the partner's own Google score, the more effective.  Here's a great example from Trivago.  

Biggest mistakes:

• Overuse of Flash or Javascript on home page.  Use CSS only so that Google can crawl everything!
• Cheap link-buying programmes.  Buying links en masse is not only worthless but can harm your ranking.
• Microsites.  Building lots of micro-sites on niche topics takes a huge amount of time and in the end rarely generates enough traffic to be worthwhile.  And you don't get the benefit of increasing the ranking score of your home page!

Biggest unknown: how to use social media, especially Facebook and Twitter to drive SEO.  Twitter links are fairly worthless, but reblogs from Twitter can be useful, so don't stop (start?) tweeting just yet.

Thanks to all the marketeers who participated and also to Will Critchlow of Distilled, for showing us some of the cutting edge of SEO (and some inexplicable stuff like this and priceless analysis like this).

Tech market predictions for 2010

Following my mediocre performance with last year's predictions, let's hope that this year will see more action in the market, and hence more of my predictions coming true! 

If last year's theme was the waiting game, I see this year's as the spotty recovery.  There will be some big successes -- major IPOs, spectacular M&A deals -- but they will represent spikes in an otherwise halting market.  Picking the right assets and the right timing will be key for for investors and entrepreneurs alike during 2010 (and probably into 2011).

Here are my punts for the year (in no particular order): 

1. SaaS sales productivity will not recover in line with economic recovery.  The people-based sales model for software is broken and established vendors will see margins suffer, while newcomers with pure or near-pure web-selling models will take market share.
2. Useability design returns to the heart of web applications and services.  We've had a wonderful UI revolution with the iPhone, making most established websites look clunky. New web apps and e-commerce sites will be wildly successful not because they have more features, more data, more widgets, but because they are just easier, faster, smoother to use.  Quite a few established businesses will struggle to re-invent their interfaces and will lose share as a result.
3. The year of Location-Based Services (LBS). Not content with cracking the Wintel duopoly, Google finally kickstarts the LBS market by attacking it from every point in the value chain at once: a new phone and mobile OS (who needs handset makers?), a new sales channel (who needs operators?), its own geo-aware apps (who wants to pay map royalties?) and -- boldly -- its own base of potential LBS advertisers in the form of 100,000 retail outlets receiving Google decals with 2D barcodes this week.  If this doesn't do it for the long-awaited promise of LBS, what will?
4. Cache & Carry. The continuing increase in solid-state memory capacity helps make HD video ubiquitous. With 32GB SD cards now available, consumers will be able to store and move their favourite movies and TV shows at will. Computer manufacturers will start to ditch optical drives. Now if only Apple would open up its devices to external memory cards.... it would be a perfect world!!
5. The scale of the greentech bust will startle investors and entrepreneurs, as it becomes clear that the investment horizon and capital consumption of most ventures are beyond the scope of traditional funds.  As a result, 2010 will start to see the emergence of new types of funding vehicles, perhaps long-dated venture funds (20 years?) or hybrid equity/debt vehicles to better serve this market.
6. Microsoft buys RIM in an admission that its mobile strategy has failed, and that corporate Blackberry users are the last stand in its effort to retain control over the desktop and email.
7. One of the many startups flogging micropayment or mobile payment platforms will finally take off, kickstarting a desperately-needed revolution in the charging model for content.  This has to happen, this year or next.  But it will probably require the distribution power of a large partner, like a Google, a mobile operator or a financial services firm.
8. The much-awaited Apple tablet will be huge and possibly disruptive.  Everyone is projecting features onto this device, borrowing from the iPod below and the MacBook above.  But the real game-changer is the killer feature we don't know about yet.  My hunch?  It could become the perfect home entertainment control system for non-geeks -- imagine the tablet connecting seamlessly to the Web, your iTunes, and your speakers, with streaming music and videos served up by Lala...  Worth dreaming about.
9. Shakeout in music streaming.  As Spotify launches in the US this will be its year of reckoning: the company will either be crushed by the sheer scale of US freeloaders, or its ad-based revenue model will finally get the throughput it needs to be viable.  Look for serious jostling and grandstanding as music majors renegotiate with streaming services and digital distributors like iTunes.
10. Finally, I lamented last year that it was time to fix, really fix videoconferencing, and yet my pleas remained unheeded.  But this demo at CES made me think that -- just maybe! -- 2010 will be the year that a credible alternative emerges.  If Skype & HD TV makers can do this at home, why not the office?  Polycom RIP (and good riddance!). 

Scoring my 2009 predictions

Here it is -- the moment of reckoning for last year's predictions.  Looking back, 2009 feels like the year the world froze, waiting for stimuli to kick in and new policies to emerge from the fog.  Everyone was in a holding pattern, trying to keep the boat from leaking too much.  As a result, the  most frequent verdict on my 2009 predictions is 'sort of true, but not yet'.  

Let's call 2009 the year of lost momentum.  Both positive and negative trends slowed to a trickle... 

Next week I'll try to divine 2010 tech market trends, but in the meantime, here is a summary of my 2009 calls and how they fared:  

1. SaaS vendors who are not already at the inflection point of positive cash-flow will go bust. FALSE. We haven't seen any major players or even mid-sized VC-backed vendors disappear as yet, but don't kid yourself -- it's coming...
2. Outsourcing will come back into favour.  And it will be cheaper & better than ever, thanks to SaaS-style delivery of business apps built on VoiP communications platforms like Intelepeer. TRUE, but hard to prove.  The line between adopting a SaaS app and outsourcing a business process is blurring.  This trend continues.
3. Ad-supported digital media sites will see a massive shake-out – few generic newsletters or blogs will survive.  NOT YET.  Undoubtedly hundreds of thousands of small web sites have died (who noticed?), but even established ones like Salon.com continue to limp along, bleeding cash.  More high-profile disappearances are on the way.  But the most unexpected development in late 2009 was the decision by big media to try to reverse the tide of free content and re-establish payment models.  The shake-out continues. 
4. Social networks will see their values collapse, and many will disappear.  SORTA TRUE?  The monetisation model continues to elude, and most valuations that are bandied about are ephemeral.  Twitter did not get bought, MySpace is struggling, and smaller social networks (and regional plays like Tuenti) are picking off niche audiences. Where to from here?
5. Microsoft will continue to lose share in the browser market [and] will make defensive acquisitions, like Xobni. TRUE/FALSE.  IE's share of browser useage is down perhaps another 10% between 2008 and 2009 (see embedded chart, courtesy TheCounter.com).    But so far the Evil One has been slow to buy its way back into innovation, making only 2 acquisitions in marginal areas (healthcare software, games) vs 16 deals in 2008 (!).   If I were an investor I'd be screaming for a dividend!
6. CPA and creative rich media ads (games, viral video) will outperform other types of online advertising.  Expect consolidation among online ad networks. TRUE. The overall online ad market was flat to stagnant in 2009.  Video ads were one of the few bright spots (according to e-marketer, see table below). Quite a few networks were acquired, though most not for big values.  The exception was Google's acquisition of AdMob.  Hi-Media bought AdLink. Orange acquired Unanimis.  And Fox acquired UTarget, ClickDiario and Directa Network.  Etcetera.,.
7. Consumer appetite for innovation will slow, compounding Apple’s challenge in dealing with a sick Steve Jobs.  [...] don’t be a shareholder while they figure it out. FALSE.  Apple just keeps on cracking, and the market keeps on lovin' it.  If you had bought shares at the time of my prediction, you would have doubled your money by now.  And that's before the release of the eagerly awaited iTablet  iPanel  iSlate or whatever. 
8. A lot of local newspapers and offline magazines will disappear in 2009, which is kind of sad.TRUE.  The Star Tribune, Heartland Newspapers, Philadelphia dailies, Chicago Tribune, Chicago Sun-Times and many other city and community papers closed. Here's a summary. The one bright spot on the media horizon is the continued experimentation with new ways to fund investigative journalism (like the American News Project/HuffPost JV and News21). 
9. Project management tools like Daptiv, and construction industry SaaS vendors like BiW and will thrive as governments pump gazillions into ‘stimulating’ infrastructure projects. NOT YET!  As should have been predictable, stimulus money is crawling through the economy like molasses...
10. The shake-out among European VCs will continue at its glacial pace.  TRUE.  No one has formally shut up shop (do they ever?), but a growing number of funds are slowing or stopping to invest while they wait wait for a window in which to raise a new fund...  

And the one item from my wishlist...

• Somebody fix videoconferencing, puh-lease!  There must be a better way between Skype video and a $150k TelePresence implementation from Cisco.  This would be a great time to go to market with a Polycom killer!  STILL WAITING...

Stay tuned for a gaze into the 2010 crystal ball.

A first conversation about getting beyond SEM

We had a great turnout at Monday's inaugural networking event for online marketeers, which we rather unimaginatively called Beyond SEM.  What struck me was the openness with which the 8 presenting companies shared their good and bad experiences with different online marketing techniques.  With 45 people in rather cramped surroundings, good networking was inevitable!

The most exciting categories of online businesses were represented: fashion eCommerce (Koodos, BuyVIP, Inspirational Stores), mass customisation/ crowdsourcing (Spreadshirt, MOO, Glasses Direct, Crowdstorm), other e-tailing (Warehouse Express, Swoopo, Astley Clarke), ticketing (Seatwave), travel (isango, dealchecker), entertainment (LoveFilm, GameDuell, WeeWorld), online marketplaces (Price Minister), consumer services (MyDeco, moveme.com, RatedPeople, Qype, Zoopla, Wonga), and enterprise SaaS/services companies like KDS, NTRglobal, FRSglobal, TradingPartners, Fizzback, eCourier and ShipServ.

The evening also confirmed our thesis that -- even among B2C Internet companies -- there is a wide range of experience and sophistication with online customer acquisition tools: from managing hundreds of thousands of keywords in SEM campaigns, to experimenting with Facebook widgets, to scalably generating good quality content to drive SEO traffic.

I can't share the slide-decks with you, but here is a sample of the range of methods tried by participants and their variable outcomes:

 

The challenges all these companies face are similar:

• Declining effectiveness of traditional lead gen
• Dependence on Google
• Too much data, not enough proven ROIs
• Proliferation of new media
• So many levers – from keyword pricing to post-click optimisation

I think it's crucial for European marketing professionals to exchange ideas more freely so that we can accelerate learning and avoid re-inventing the wheel as often as possible.  This is particularly important for those companies competing globally, since they face competition from US Internet companies that are often (though not always) ahead of the game.

My original plan was to get some Internet companies over from the US, in order to share practices from both sides of the pond.  That didn't work out this time, but is something we will work on for future events. 

We also learned that it's difficult to combine B2B and B2C in the same event, even if the front-end of customer acquisition (online marketing) is similar.  I have no doubt that our B2B companies learned from the hard-core consumer-focused marketeers, but the lessons going the other way were far fewer.  This may reflect where the B2C companies are in terms of their market lifecycle -- most remain focused mainly on customer acquisition and less on retention and the consumer equivalent of account management.  The exceptions to this were the larger businesses like LoveFilm and Warehouse Express, who have made an impressive science out of nurturing consumer accounts over the long-term.

A big thanks both to the VCs who sponsored the event, opened their portfolios and encouraged their companies to participate (Accel, Advent, Atlas, DFJ Esprit, Wellington) and to the battle-hardened experts who joined the discussion: Robin Klein, William Reeve, Michael Ross and Jamie Jaggard.

What next for this forum?  There was fairly universal agreement that it's worth running something like this on a more regular basis.  The event really only scratched the surface of the many questions raised:

• How do we use widgets and other means to drive profitable traffic from social media?
• How do we 'industrialise' the creation of content that drives SEO traffic so that this activity scales better?
• How do we reduce the time and effort it takes to build an effective, scalable affiliate programme?
• How do we combine offline and online campaigns in a measurable, effective way?
• How do we apply lead gen methods like affiliate networks and social media marketing in a B2B context?
• What is the best way to link email marketing with web analytics to get a 360^o view of the consumer every time he visits?

Over the coming weeks we'll cook up ideas about tackling these questions in more focused events so that we can bring this crew together again.  Do send me your suggestions, ideas, quibbles. And I promise we'll increase the square footage per head to enable more expansive thinking!

What cyberwar?

I've got a real issue with the breathless, paranoid tone of a lot of media coverage lately.  The combination of the 24-hour news cycle and too many news outlets, amplified by P2P communications methods like Twitter, is generating too much panic and too little analysis and reflection. 

I confess I sometimes miss the way we watched news 20 years ago, gathered as a family at 8pm for the one evening news programme, which presented 24 hours of digested, verified, analysed news for our consideration.

We're seeing the exaggerated effects of this play out in spades with coverage of the swine flu, and (especially in US broadcast media) even with the smallest of stories.  Witness the over-the-top reaction of news anchors to Arlen Specter's leaving the Republican Party (best summarised by Jon Stewart here).

In future posts I'd like to explore further some of the negative effects this excessive media hype has on government policy making in particular, and whether anything can be done about it.  In the meantime, thanks to The Economist for exposing one particular story as being the result of a political turf war rather than a real global threat: the recent reports of serious cybersecurity attacks on US infrastructure. 

We all read the news stories about Chinese hackers' breaching the US electricity grid and several national agency computer networks.  There was something faintly hard to believe about the sudden panic.  Now it turns out that this story was leaked, and hyped, by intelligence agencies fighting for control over cybersecurity.  Read the detail here.

It's an appalling abuse of the viral power of today's media, and makes it difficult for any of us to tell real dangers from fiction.  Let's hope that more of the supposedly serious media (like The Economist) improve their record of exposing these stories, preferably before they go into hype-mode.

Learning from the men behind the Obama Web strategy

Last fall I wrote about how Obama's campaign made such good use of web marketing to mobilise  grassroots supporters and spread campaign messages.  His team have continued to press that advantage from the White House, most recently rallying the 13 million people in Obama's email database (and 5 million in social networks) to lobby Congress in favour of the proposed budget bill.

Derrick Harris over on GigaOM yesterday kicked off an analysis of how the Obama technology gurus (Dan Langer and Luke Peterson) harnessed integrated email databases with traditional voter calling efforts to leap ahead of the McCain camp.  What is particularly impressive here is that they did it using off-the-shelf technologies at relatlively low cost and in a way that clearly scaled very very well. 

In Part II of the article out today, details emerge that make this project a poster-child for web marketing best practices, and for what ambitious government IT projects could be if they were run by commercial, web-savvy people and not Pentagon bureaucrats. 

Laptops, open-source databases, cloud computing resources, VoiP, mobile phone applications, and every flavour of SaaS.   This is definitely not the Microsoft generation -- the campaign team used more GoogleDocs / EditGrid spreadsheets than traditional Excel. 

Both the UK and US governments could learn a thing or two from Obama's team about IT procurement for data integration projects...  Let's hope some of it rubs off.

Fun with words

Thanks to Michael Ross, I've discovered a neat web tool: Wordle.  What commercial application it might have is beyond me, but it's fun...  Here's a wordle of this blog:

Here's a wordle of today's Salon.com:

Here's a wordle of The Onion:

OK, nuff time spent... you get the picture ;-)

RIAA comes to its senses, better late than never

The US music industry association, RIAA, has canned its strategy of suing online music pirates, according to the WSJ.  This comes after 5 years of using the services of security firm MediaSentry to document the sharing of music files in order to prosecute the pimply teens behind that nefarious activity.  Some 35,000 lawsuits were filed and many are still ongoing (RIAA says it will continue to pursue any legal action in flight).

MediaSentry is a unit of SafeNet, Inc., the largest provider of security technology to the US government.  SafeNet is a $300m-revenue business that was taken private by software buyout specialist Vector Capital a couple of years ago.  MediaSentry's technology is also used by the Motion Picture Association and eBay, among others, to detect copyright infringements on the Web.

RIAA's change in strategy is an admission of failure.  The same proportion of people aged 13 and over admit to using P2P networks to share music today as did 5 years ago, before RIAA launched its campaign (about 20%, according to a 2008 NPD report).  In fact, 26% of tweens (aged 9-14) use illegal file sharing services.  Perhaps that's the stat that did it -- surely even RIAA realises that suing pre-teen children may have adverse PR effects.

RIAA's focus now is on a so-called 'graduated response' -- getting ISPs and university authorities to warn and eventually fine prolific file sharers.  It's hard to see how that will be more effective. 

Perhaps RIAA is just continuing to 'make work' so that the music studios who finance it don't cut its budget.  How do you justify the existence of an association whose primary public role in recent years has been to chase file sharers, when the publishers are busy lanuching DRM-free download deals with online music vendors?  

The smallest of the Big 4 labels, EMI, led the way, stunning the industry by dropping DRM encryption across its repertoire in April 2007.  The other labels followed with similar, if more limited, initiatives: first Universal, then Warner Music and last November Sony BMG.

RIAA's move is welcome, but if the association wants to extend its life it would do better to invest in coming up with a new system of royalty payments for music that is distributed P2P.  Now that would be useful.

Pic credits: Xboxic, Slate/Cincinatti Post.

Scoring my 2008 predictions

Well, 2008 is over and what a year it has been!  It's time to score the predictions I made a year ago and to start thinking about a new set of predictions of 2009.  As one of our portfolio company CEOs wrote to me today: "2009 should be a hoot!"

Before I get to the hoot, let's see how I did with 2008:

1. A combination of US recession and the waning efficacy of online ads will hit the Internet advertising industry hard.  MOSTLY TRUE, although the final numbers are yet to be released. I suspect the combined slowdown of Q3 and Q4 will lead to a nearly flat year for offline advertising and a lowish growth year for online, with the bulk of the spoils going to performance-based networks like Google and specialised online lead gen companies like Zieltraffic (for financial services) and Internet Media Group (for online education).
2. The Structure of Networks -- social and otherwise -- will migrate to the core of the Web, replacing the Structure of Documents on which it was originally built (HTML and all that).  Someone will figure out that applying the Google PageRank concept to networks of people is even more interesting: if we can identify influencers and how information flows among them, we can really start targeting campaigns. NOT YET REALLY, although the trend is clearly in this direction.  During the current downturn, a lot of investment will go into increasing the efficacy of online advertising.  Facebook founder Mark Zuckerberg understands this clearly, though he hasn't worked out quite how to monetise the idea.
3. 2008 will the year of the Return of the ERP Vendor.  SAP, Oracle and the midmarket vendors will make progress with their own SaaS offerings and will shrink the valuation gap with the pure-play SaaS vendors.  HALF TRUE, the valuation gap has shrunk from 3-4x revenues to 1-2x.  But this has more to do with the general bearishness of the markets than with the success of ERP vendors' SaaS offerings.  Keep an eye on Oracle, who are doing their best to steal some of the Web 2.0 sizzle with new offerings.
4. The Web 2.0 financial bubble -- fuelled by VC cash being round-tripped between startups buying and selling ad space -- will pop as a result of the weaker ad market and the failure of 100s of undifferentiated 'feature' startups to gain traction.  TRUE, here's a list of 10 in particular, but the roster of the dead runs into the 100s with more to come.
5. The mobile web will continue to be stymied by the difficulty of discovering content on mobile devices.  iPhone and other large-screen devices will help commuters surf the old Web, but mobile browsing won't take off until someone invents a new search paradigm that works on mass market mobiles. TRUE.
6. As a result the mobile advertising market will fail to take off... yet again.  TRUE.
7. What on earth is UWB?  Anyone remember? Anyone care?  STILL TRUE.
8. The success of the Nintendo Wii will spark a whole host of new physical interactive video games, providing a boost to vendors of chips to the console companies.  FALSE so far. Wii continues to rock'n'roll, and the imitators are far behind.  But in a bow to the new innovation leader, both Sony and Microsoft are working on motion-sensing controllers for their PS3 and Xbox platforms.  Meanwhile the Wii continues to stoke the creative juices of independent developers -- here are Wired's faves.
9. Social networks will see huge monetisation efforts and some applications and ad networks will make a financial killing.  But their performance will be erratic and useage of networks will be highly volatile as consumers get tired of being poked, zombied and voted HOTorNOT. I think this is TRUE.  Social networks (broadly defined and including YouTube) have failed to live up to their lofty valuations, which were based on unrealistic advertising yields. The advertising bust has blown this issue wide open.
10. Some element of Open Source or "free" distribution models will become part and parcel of every software vendors' go-to-market strategy. Again, NOT QUITE YET.  This will take more time.
11. [Bonus, more of a hope than a prediction]: 2008 will mark the return of the Basic Business Phone, and it will be a runaway bestseller.  Nokia or someone nimbler will launch a high-performance phone that makes phone calls, has a long battery life, global coverage, and a simple, fast interface.  And absolutely nothing more!  I so wish... I'M STILL WAITING!!

That makes it 6/10, which is worse than last year's score of 7/10.  I need to steer clear of technology developments themselves -- those predictions always underestimate how long it takes for innovation to find the right application and to get adopted...  Stay tuned for my shot at 2009.

Is the President talkin' to me?!

As my partner Michael Elias pointed out this morning (and Jeremy Paxman did last night), this guy really knows how to use email:

Max --

I'm about to head to Grant Park to talk to everyone gathered there, but I wanted to write to you first.

We just made history.

And I don't want you to forget how we did it.

You made history every single day during this campaign -- every day you knocked on doors, made a donation, or talked to your family, friends, and neighbors about why you believe it's time for change.

I want to thank all of you who gave your time, talent, and passion to this campaign.

We have a lot of work to do to get our country back on track, and I'll be in touch soon about what comes next.

But I want to be very clear about one thing...

All of this happened because of you.

Thank you,

Barack

Really makes you feel special (even if you have no vote and are not allowed to donate, like me).  It's no secret that Obama killed this election in part through his masterful use of email, SMS, viral videos and and social networking sites to:

1. raise tons of money,
2. get his message out unfiltered, and,
3. generate huge enthusiasm which translated into a record voter turnout.

So what happens when this tech-savvy guy gets into the White House?  Will we continue to get regular email updates from the President?  That would be cool. 

Will he use his direct channel to millions of Americans (and foreigners) to make the case for difficult policy decisions directly to the people?  That could be revolutionary.

This Presidency will be the first truly web-enabled administration.  I'm sure someone will call it Government 2.0 [cringe].  I think both Congress and the media could end up wrong-footed as Obama supplements the traditional political horse-trading process with direct campaigns to the people.  It's going to be very interesting.

Can Obama's use of mobile marketing tilt it?

This year's US presidential campaign is delivering a lot of firsts: the first black candidate into the final stretch, the first race where online videos of full speeches are overshadowing 5-second soundbites on network TV, and the first race where mobile marketing may become a decisive factor.

Obama's use of email and mobile marketing is tied to his very successful effort to bring out the youth vote.  In the knowledge that US elections are swung by a small number of marginal voters, his campain team have brought hundreds of thousands -- perhaps millions -- of new voters onto the electoral rolls through a combination of grassroots registration drives and viral marketing using all the newfangled Web 2.0 Web 1.0 tricks.  (I haven't seen widgets and mashups yet, but effective use of online marketing and social networking).  Obama now has 1.5 million supporters on Facebook (vs McCain's 250k) as can be seen in the extraordinary graph on the right.

Obama isn't the first to use digital media in a campaign; Howard Dean is credited with pioneering use of the Web and online technologies in 2004.  But in terms of scale, the Obama campaign is pushing the limits.  Three million people supposedly received the much-hyped text message announcing Obama's choice for Vice President 10 days ago.  But rumour has it that the same number or more did not receive the SMS they signed up for due to technical glitches.

Even though the VP announcement leaked to the media before the texts went out, the strategy worked a charm, as most people were asleep when CNN got the scoop at 1am, and woke up the next morning to find Obama's text message or email.  As a list-building exercise, the text ploy was brilliant -- millions signed up on Obama's website to receive the text, not only confirming their email addresses but also providing their mobile numbers and zip codes to the Obama campaign.  How much is a cleansed, geo-targetable email/mobile marketing list of several million Americans worth?  If it helps bring out a few hundred thousand additional voters on election day, incalculable.  In a recent post, Om Malik describes some of the ways the campaign could use highly targeted geographical marketing in the coming months.

Team Obama has not been shy in spending money on cutting-edge technology.  They bought CRM tools from RightNow Technologies for managing email responses and its website FAQs.  To manage internal communications and coordination, they are supposedly using a collaboration/wiki platform from Central Desktop.  For the SMS campaign, they gambled on two small companies: technology provider Distributive Networks (16 employees) and venture-backed SMS aggregator SinglePoint.

As the campaign enters its final phase, the Obama camp should think carefully about over-use of these new channels.  Just like corporate marketeers have discovered, it's a fine line between an effective volume of digital communication and an annoying volley of spam that turns consumers off.  Since the VP announcement, the Obama campaign has been bombarding its supporters with daily emails linking to videos of speeches from the Democratic National Convention, and soliciting donations.  They would be wise to cool it a bit to avoid turning existing supporters or independents off before election day. 

Web 2.0 washout

Andrew Orlowski produced an aggressive I-told-you-so article in Tuesday's Register, gleefully declaring the Web 2.0 bubble as burst.   The trigger was a short piece in the FT titled: "Web 2.0 fails to produce cash."

As I have commented before, most of the $1.5bn VCs have thrown at Web 2.0 startups went into cutesy but useless Web services.  Some went into infrastructure and enterprise services, but most of these didn't have defensible technology and were too easy to replicate, over and over (Backbase, Kapow are notable exceptions). 

Even the services that attracted gazillions of users no longer look so valuable.  The value of many kinds of ad space on the Web is dropping, and no one has more excess inventory than user-generated content sites.  That's right, Twitter isn't going to sell for billions of dollars.

The 'good' thing about this popping bubble is that most of the money about to be written off comes from VCs (and only very indirectly from your pension) rather than retail investors, so the overall economic impact should be minimal (on everyone except the VCs). 

The second positive side effect is that some of the key features hyped by Web 2.0, including tagging, sharing, the power of viral networks, mashup applications, instant communications and those ubiquitous lime-green logos are being rapidly subsumed into the general software and services markets.  Every vendor claims to be Web 2.0 compliant and within a year or two every vendor will be.  It's just not that hard.

[Pic credit: Lani Anglin]

The mashable Web comes a step closer

I'm a big fan of the so-called mashable Web, because it implies that this unmanageable ocean of information can be turned into a personalised set of relevant applications.  That's nerd-talk for 'data you can use.' 

We all know how to scour the web for what we want.  We've all learned to reason in Boolean operators, even if we have no idea who Boole was.  The Web is useful, even essential, and so we have adapted our life-style and work-style to suit the Web as it is. 

But soon we will be able to adapt the Web to suit our way of working.  We will mash up the Web into the real-time information units we want, whether you call them personalised channels, or composite applications, or feeds, or 'little helper robots that fetch stuff' .

The crux of this idea is that by combining general data (from the Web) with specific data (internal corporate databases, or personal information), you create a new dataset that is truly relevant. 1+1=3. 

As I've covered before, lots of quirky mashups already exist; they're listed here.  But serious mashups that  are (a) useful to business and (b) programmable by business users, have been far and few between.  At this week's Web 2.0 Expo a number of new mashup technologies are being announced that will bring the mashable Web right onto the desktop.

Kapow Technologies (disclosure: Kennet company) announces two new products at Web 2.0: an on-demand version of its Enterprise Mashup Server, and an Excel connector that allows anyone who works with spreadsheets to pull real-time data from the Web into Excel.  This means business analysts can integrate live data from the Web (eg, competitors' prices, stock quotes, interest rates, airline fares, DHL tracking codes, etc) into their models without any programming.  The unstructured Web meets the structured Excel spreadsheet.  It's a very powerful idea, and the opening shot in what will be the next content revolution on the Web. 

The last two years saw a tsunami of user-generated content and new social networking links wash through the Web, fundamentally changing its character and usefulness to individuals.  In my view, over the next few years we will race to merge unstructured Web content with structured corporate databases to create information flows that are truly relevant to business, real-time and actionable.

No quiero Quaero!

Words fail me to describe the bureaucratic stupidity of this project.  If only it wasn't taxpayer Euros funding this folly... 

Over €200m committed since 2005 and they don't even own their domain name!  Maybe the best play here is to invest in Charlotte, NC-based marketing technology company Quaero, and wait for the Europeans to turn up to bid for the domain.

Cartoon credit: Mike Keefe, 2006-01-23

Mashups go mainstream

We have a happy announcement to make from our US portfolio today.  Kapow Technologies has closed a round of financing with Steamboat Ventures (the VC arm of Walt Disney!) and Morgan Stanley's Strategic Investments Group.  See more detail here. 

The fact that two corporate venture firms led this financing is significant, because it proves that application mashups are now relevant to the enterprise.  What started out as a consumer Web 2.0 concept akin to a DJ mixing tunes into a new hit, has now become strategic.  Companies are using mashup technology to create new applications from data and features available on the wider Web.

I've commented a lot in this blog on the gradual adoption by enterprises of Web 2.0 technologies (Don Hinchcliffe's Enterprise 2.0, etc), but so far most publicized uses have been experimental. In the meantime, some 300 companies have adopted Kapow's Mashup Server, either to integrate legacy applications through their web interfaces, or to mash up internal and online data sources into new, useful applications.  Those companies that tend to be on the cutting edge of new technologies, such as banks (like Morgan Stanley) and the Department of Homeland Security, have been using mashups for some time.

Kapow's online mashup server remains available to anyone on its open community site, openkapow.  It's so easy to program Kapow robots that one of my colleagues is going to make one that pulls portfolio company newsfeeds into our revamped website, due out soon. [There's not getting out of it now Mike :-)]

In the same way that blog, wiki and social network features are finding their way into enterprise applications, mashups are now becoming mainstream.  The ability to pull together all data and the many little applications found on the Web in a standard way effectively turns the Internet into a huge database and a flexible programming platform.  It's not quite the Semantic Web Tim Berners-Lee dreams of because it still relies on humans to decide which sources to mash up, but it takes us one step closer by eliminating the technical barrier to web integration.

My predictions for 2008

A bit late, but nevertheless here they are and -- as promised -- a more 'committing' set of predictions than last year's:

1. A combination of US recession and the waning efficacy of online ads will hit the Internet advertising industry hard, although "hard" is clearly a relative term.  Offline advertising may actually shrink, while online advertising will grow slower, perhaps even low double digits.
2. The Structure of Networks -- social and otherwise -- will migrate to the core of the Web, replacing the Structure of Documents on which it was originally built (HTML and all that).  Someone will figure out that applying the Google PageRank concept to networks of people is even more interesting: if we can identify influencers and how information flows among them, we can really start targeting campaigns.
3. 2008 will the year of the Return of the ERP Vendor.  SAP, Oracle and the midmarket vendors will make progress with their own SaaS offerings and will shrink the valuation gap with the pure-play SaaS vendors.
4. The Web 2.0 financial bubble -- fuelled by VC cash being round-tripped between startups buying and selling ad space -- will pop as a result of the weaker ad market and the failure of 100s of undifferentiated 'feature' startups to gain traction.
5. The mobile web will continue to be stymied by the difficulty of discovering content on mobile devices, Vodafone's new image search engine notwithstanding.  iPhone and other large-screen devices will help commuters surf the old Web, but mobile browsing won't take off until someone invents a new search paradigm that works on mass market mobiles.
6. As a result the mobile advertising market will fail to take off... yet again.  Those networks and technology vendors that were acquired in the past 18 months (Nokia/Enpocket, Microsoft/ScreenTonic, et al) will disappoint their new parents.  And the next generation of mobile advertising companies will have to make do with much less VC funding.
7. What on earth is UWB?  Anyone remember? Anyone care?
8. The success of the Nintendo Wii will spark a whole host of new physical interactive video games, providing a boost to vendors of chips to the console companies.  Perhaps a Wii Lite is in store?  Look to Japan for inspiration: this year's Christmas hit, Guitar Hero, was really a copy of a Konami game popular among Japanese teens in the late 1990s!  So why not portable versions of a DJ game like Beatmania or a competitive coordination game like Super Bishi Bashi? 
9. Social networks will see huge monetisation efforts and some applications and ad networks will make a financial killing.  But their performance will be erratic and useage of networks will be highly volatile as consumers get tired of being poked, zombied and voted HOTorNOT.
10. Some element of Open Source or "free" distribution models will become part and parcel of every software vendors' go-to-market strategy.
11. [Bonus, more of a hope than a prediction]: 2008 will mark the return of the Basic Business Phone, and it will be a runaway bestseller.  Nokia or someone nimbler will launch a high-performance phone that makes phone calls, has a long battery life, global coverage, and a simple, fast interface.  And absolutely nothing more!  I so wish...

Stay tuned.

Scoring my 2007 predictions

Apologies for the long silence, which was mainly due to an extended holiday absence.  Before you feel envious, it was our first multi-stage international trip with:

and we really could use another whole vacation to recover from it...

But back to business: in early 2007 I made 10 tech market predictions, so here's a reckoning to see how I fared.  On reviewing these I realised that many of them were of the slightly cheeky, undoubtedly-true-but-difficult-to-prove variety, so I shall resolve to to be more specific for my 2008 predictions (to follow) to keep it interesting.

Here is a summary of last year's predictions & my grade:

1. Web 2.0 technologies will begin to appear in serious enterprise apps, as vendors incorporate wikis, blogs and RSS feeds into their applications, starting with CRM and other consumer-facing apps.  TRUE, BEGINNING WITH SAAS VENDORS.
2. There will be very few high-value exits of Web 2.0 companies, but probably many more investments, leading to an eventual VC bust (in 2008?) not unlike the dot-com bust of 2001 (but smaller). HALF TRUE, BUST YET TO COME.  But come it will.
3. Actual adoption of Microsoft's new Vista operating system will underwhelm and Microsoft's share price will begin to suffer.  MOSTLY FALSE. Vista sales have not been what Bill expected, but it hasn't affected the share price yet.  MSFT is up about 35% over 12 months and outperformed NASDAQ by 10% or so.
4. We will see the first serious cracks in the indomitable Googleplex -- how many wheels will in fact come off?  Investors beware.... FALSE. But I'm definitely rolling this one forward!
5. Multimedia content for mobile phones (3D games, video, etc) will start to come of age, but more slowly than anticipated.  It will take time to overcome the many usability hurdles. TRUE, STILL TRUE, BUT TOO EASY.
6. Business software for the SME market will get a major boost, as vendors attack the midmarket with new, scaled down applications.  TRUE for both new and old vendors. New SAAS vendors are springing up to make business-level functionality available to SMBs.  Client-server giants like SAP are investing heavily in midmarket offerings.
7. Offshore technology vendors -- not content to do pure services work -- will continue to push into Western markets with their own product sets.  TRUE-ISH: it's still early days for Indian packaged software. The largest firms, like Infosys and i-Flex are still the main examples.
8. Expect to see lots of new applications for small vertical markets.  The combination of SOA and Web 2.0 technologies makes it easy to build apps for the long tail of micro markets. TRUE.  Lower cost of development and delivery has led to an avalanche of niche apps. We've seen everything from employee feedback management software through to environmental data reporting suites.  Great news for users and investors alike, although picking large enough markets will be key for the latter.
9. Consolidation in the WiMAX market will begin as the large chip and equipment vendors jostle for a piece of the infrastructure build-out.  Still too early for actual services of any scale though... TRUE. Cisco launched the first consolidation shot in December with the acquisition of Navini.  Sprint/Clearwire remains the biggest WiMAX network project, and it has been on shaky ground (but seems to be going ahead) . 
10. The line between information services and software functionality will become increasingly blurred, as more managed services effectively bundle both.  VERY TRUE.  The most interesting SaaS businesses we see are those that collect customer and industry data which has value in its own right.  Combining a software and data service can be very profitable and very sticky.

There you have it.  I'll call that a 7/10 caveated with the promise that I'll make meatier, harder predictions for 2008!  Stay tuned....

The Economist: How Not To Innovate

PaidContent has been following the little-noticed story of a very smart enterprise that has opened a window into its internal struggles with a Web 2.0 strategy.  It's a rare insight and makes for fascinating reading.

Basically, earlier this year The Economist magazine gave total freedom to an internal group of employees to spend 6 months brainstorming an entirely new online service using any content from within the Economist group.  The project's failure to produce a business plan or venture provides interesting lessons in how not to run group collaborations, some of which are quite counter-intuitive. 

Most amazingly, the team's shambolic process has been exposed to the public throughout, via the project blog, which was actively covered on Slashdot.  When the project was finally buried a few months ago, the group's leader, Economist CIO Mike Seery, wrote a detailed memo drawing out its lessons and making seven recommendations for future projects of its type.

The paper a seldom seen glimpse into the internal struggle that many companies must be going through in one guise or another.  It also usefully explodes some myths about the correlation between the degree of freedom and openness a working group is given and their capacity to innovate.  Worth a read for any CIO.

Facebooked!

Sometimes you have to do something idiotic to prove yourself right.  After having thoroughly trashed the idea of joining Facebook in a recent post, I let myself be convinced by a trusted friend to try it out after all: 

Facebook is becoming an important application platform and it's important to understand the dynamics behind this.

he said. And rightly so.  Compared to the fragmented world of independent Web 2.0 widgets and mashups, which don't really seem to be getting any critical mass of adoption, Facebook is a veritable hotbed of innovation with an actual, huge market of adopters and real volume of useage. 

OK, so I signed up.  Sure enough, I didn't pay much attention to the process of finding existing friends among my contacts and before I knew it, Facebook spammed everyone in my email address book!  How incredibly obnoxious!  I'm clearly not the only one, as described by Steve O'Hear on ZDNet.

It's bad enough that I'm annoying some real friends with these unsolicited invitations.  What's worse is that I am now getting friend acceptances from people who aren't friends, but who just happen to be in my address book.  What am I supposed to do with my plumber as "friend"?

So there you have it.  Now I'm your friend, I'm everyone's friend.  What an idiot.

P.S. Veteran facebookies among you: what is the etiquette for removing a friend who accepted your email spam but whom you don't really know and don't really want seeing your Facebook details?  Can you just kick them out? 

Max Simpson?

It started with overlays of classifieds and Google Maps.  Then everyone went looking for enterprise-class mashups.  Could these on-the-fly combinations of little apps become a replacement for costly application integration projects?  Then came user-generated content, aka UGC, and an explosion of creativity combining content with the mashup concept.  We liked the music video mashup in particular.

Now, Christine Heron points to a new type of mashup: UGC in the service of business.  The prize for most creative use of the Internet for a marketing campaign most definitely goes to: Simpsonize Me.  Yes -- the character in the top left is me, Simpson-style, adapted directly from my official corporate mugshot.  OK, maybe some people are more Simpsonisable than others.... 

It's a great promotional trick and very obviously made for social networking use and for viral distribution.  What we have is a new generation of media executives combining old media properties with UGC creativity and Web 2.0 tools.  Starring You is another example of the genre. Here's hoping for lots more.

IBM mashup summit this week

It has dawned on IBM that enterprise customers are going to start using Web 2.0 technologies to bypass some of Big Blue's more expensive infrastructure software (EAI anyone?).  In response, IBM is embracing Web 2.0 and looking for ways to extend and reposition its products. 

Apart from adding  collaboration technologies to its server family and playing with mashup tools like QEDWiki, IBM is apparently helping standards bodies smoothe the way for enterprise-grade Web 2.0 apps with agreement on how to implement identity, security, etc in a mashup environment.  I'm not holding my breath on the latter happening anytime soon, but is certainly critical to address these issues before corporates will adopt many of the Web 2.0 innovations.

This week IBM is hosting a mashup summit in California -- there is blogger coverage from Jeff Nolan here, Ross Mayfield here and Snaplogic here.   Presenting companies included Web 2.0 platforms Kapow Technologies, Coghead, and Jackbe, mashups marketplace Strikeiron, and enterprise wiki company Socialtext, as well as what is perhaps the most syndicated Web 2.0 service in the world (apart from Google Maps): Accuweather.

Web 2.0 hype fading at last

I'm just catching with my blogroll after a short holiday, and this post from Peter Rip struck me as a spot-on analysis of the state of Web 2.0. The excitement of hundreds of startups launching their beta sites, the awe of the mega-deals (MySpace, YouTube), and the ongoing debate on whether the VC model is broken because the new startups don't need much capital -- are beginning to fade. Om Malik is calling it "the End of Innocence."

What have we got to show for all the hype? For one, we have thousands of fabulously easy-to-use, addictive web services all doing pretty much the same thing and most waiting for a revenue model (or an acquirer) to materialise. We have a handful of very happy founders and investors, most of them among the privileged class of Sequoia LPs. And we probably have some very frustrated corporate IT managers who are being harrassed for being slow to make their Intranets and corporate applications Web 2.0-like.

Those are all good things, but they don't add up to a technology revolution, a new investment paradigm or much more than a medium-size hill of beans. The great tools that define Web 2.0 -- wikis, blogs, tagging -- are being absorbed into the mainstream. They have made the Web more usable -- by humans mostly, and some annoying Google Earth mashups -- and arguably a better place. Now Web publishing is as easy as Web browsing has been for years.

But the next evolution of the Web is trickier -- how to turn all this great content into a platform for applications? The next generation of applications will live on the Web and use real-time data culled from Web sites and from the databases behind them (the "deep Web"). This requires a maturing of two innovations:

1. Making Web content not just machine-readable but also machine-understandable, e.g., tagging for computers. This is what the Web's founder, Tim Berners-Lee, has been talking about for a decade and what he calls the Semantic Web. Man, this guy is patient! He is currently shepherding one element of this vision, OWL (OWL Web Ontology Language), through the standards bodies.  Others call this the Programmable Web.
2. Finding a way to automatically integrate disparate data sources and application components. RSS feeds are great for public data streams, but the most valuable data (100s of times more than is available as RSS or as HTML) sits in corporate databases behind the Web. A new generation of tools, like Teqlo and Kapow (disclosure: Kennet company), are targeting this integration problem. The Web won't become an application platform until this type of integration ability becomes easy and ubiquitous.

The coming developments may be less exciting than the Web 2.0 bubble, but it will have more impact on both consumers and businesses in the long run. And investing in -- dare we call it this? -- Web 3.0 may require rather more patience.

[Thanks Oliver Widder for the cartoon: http://geekandpoke.typepad.com/geekandpoke/]

Twitter shmitter

This may well end up in the increasingly large box behind my desk labelled Web Services For Which I'm Clearly The Wrong Demographic, but I still feel compelled to react against the avalanche of excitement around social networking service Twitter, which has been burning rubber up the Alexa rankings lately.

For those of you in Internet Siberia, Twitter allows you to post little notes from your mobile phone, a browser or your IM client in answer to the simple question "What are you doing?".  Apparently people want to know.  To make sure your friends don't miss out they can subscribe to your Twitter channel and get IM or SMS updates at all times.

The blogosphere is full of delighted squeals from new subscribers, including Morten Lund and none other than Microsoft renegade Robert Scoble, whose own Twitter channel you can peruse here.  Apparently fans call this "an addictive window into a social stream of consciousness."

Beth Kanter provides a more balanced summary of Twitter coverage, including some complaints about it being annoying, as well as links to new Twitter applications (look here for 76 of them!), which seem to be proliferating faster than Google Maps mashups. 

Perhaps I'm not accurately conveying the value of Twitter... Here is an actual transcript of the public Twitter channel a few minutes ago:

kid_navajas Boards of canada, que bien sonaba.

tlg Leveraging the moment!

mcdinoh Heading to DS-5 & DS-2 for two deinstall tickets.

ajmoris woke up a little late this morning...got to kick it into high gear!

beamadelica I'm still listening to the Bees! Hooked. I might move onto the Byrds next, ho ho.

ev Tshirt I just saw: dolphins are gay sharks

wit At Ritual Coffee, the hand-crafted sign by the register now reads, "Please, no blogging in line."

Maggie Internet, I'm in labor. Do something.

darthvader Finding that dust and fingerprints show up too easily on gloss black. I should have opted for the Solar Yellow or Sedona Mist helmet color.

I'm not making this up.

While I can just about wrap my head around the value of building communities of like-minded folk within MySpace, Facebook and Flickr, I think Twitter as a social network is a dreadful idea. I can just about see its value as an extension to your blogging platform -- but a community?  Twitter reminds me an awful lot of SMS.ac -- do you remember that annoying mobile community service?  If you signed up you were doomed to receiving SMS's from lonely housewives.  I nearly changed my phone number just to get off their list.

I predict a growing backlash against this trend of publishing every detail of our personal lives to the great Web.  There is less and less that is social about these so-called social networks, which seem to be an excuse for communicating without actually creating any real relationships, physical or otherwise.  Will we look back in a few years and regret that so many of our party photos, product reviews, blog comments, personal objectives, "references" from friends, career history and an audit trail of our daily banality are stored in the great public Web archive... FOREVER?!

Mashup services compared

Great write-up on TechCrunch on the different 'mashup' services available on the Web today.  The article compares the recently-launched Yahoo Pipes, with Jeff Nolan's Teqlo, veteran New Yorkers Proto, Dapper and OpenKapow from Kapow Technologies.  All of them allow you to mix and match web-based applications and data to create new mashup applications.  These services mainly differ in what types of data inputs they can handle, and what level of technical skills you need to use them.

But what's really interesting is how the technologies around mashups are starting to mature and complement each other. Dapper and OpenKapow are becoming the means to turn the broader Web into mashable services, while Teqlo and Yahoo Pipes are ways of mashing these services together into widgets or new data feeds.  As Teqlo CEO Jeff Nolan points out: the dirty little secret of today's Web 2.0 is that 99% of websites are still very much 1.0, in other words, they don't publish APIs you can use.  Before the Web really becomes mashable by Teqlo, it needs to be 'activated for use' by OpenKapow. 

Let's see what composite applications can be created by the combination of these tools.

Diatribe on DRM and Steve Jobs

Steve Jobs recently made a headline-grabbing public plea to the entertainment industry to abandon copy protection for multimedia content.  He is urging the industry to give up the search for a workable Digital Rights Management (DRM) solution by making a case that:

• DRM doesn't work and is criminalising millions of people who are ripping CDs they bought legitimately, or downloading content from both legit and dubious sources on the Internet.
• DRM retards the growth of the entertainment industry, as proven by the fact that iTunes music sales are the only growth engine of the music business today.
• 90% of music is sold unprotected anyway in the form of CDs, so what's the difference?

Abolishing DRM sounds like a simple (albeit radical) solution, which appeals to our inner hippie and also casts Jobs in his favourite role: taking the side of "the people" vs the big bad corporations.  But this is quite disingenuous coming from the man who perfected the art of technology lock-in with a string of innovations over the years (iMac + OS X + Life Apps; iPod + iTunes; iPhone closed to third-party apps). [Disclosure: I have an iMac at home and I love it.]

[open sidebar] Jobs' argument reminds me of the debate regarding pharmaceutical patents.  The tempting case is made that developing countries should be allowed to flout existing patents and produce cheap generics for the world's poor.  The ultimate objective is non-controversial.  But this approach kills the profit motive and ultimately the incentive to develop new drugs.  The same objective can be achieved by using direct government (or private -- see the Gates Foundation's efforts) subsidies to buy drugs at market and subsidise them for the poor.  And this approach retains -- even increases -- the incentive for pharmaceutical companies to develop the drugs the poor most need. [close sidebar]

Similarly, quality multimedia content costs money to produce. In the case of music, for example, it costs a lot of money, most of which is spent on artists whose records never recoup their investment.  That is the risk taken by record companies.  Quality content will only be produced if it can make money for its producers.  The more efficient the commercialisation, the higher the economic returns, the more producers will enter the market -- all this is good news for consumers, who get more choice and lower prices.

Free content will quickly become garbage content.  This is already evident in the 95%+ garbage soaking up gigabytes on Google's YouTube server farms. Achieving interoperability of DRM systems is not a technical problem; it is primarily a political one.  The industry has made progress in this regard and it can complete the process. 

If the result is an accepted set of DRM standards and a competitive market for DRM technologies, then most of Steve Jobs' stated goals for the benefit of consumers will be met.  But not perhaps in the time frame he would like: Jobs is in a hurry to boost the music/video market, maybe because he needs to prop up iPod sales in 2008, when analysts predict slowing sales growth.

Consumers value what they pay for and are usually happy to pay for what they value.  $0.99 per song makes a compelling marketing slogan, but it is undoubtedly more efficient (and fair) if I can choose to spend $0.09 to listen to a song once, $0.49 to get it on my iPod, or $1.29 to transfer it to any one of my devices.  Especially if in each case the level of quality is assured.

A functioning DRM system can create huge distribution efficiencies and help grow the premium content market by a factor of ten.  The best way to reach more consumers is to enable device interoperability, microchunking of content and micro-billing.  All these require a set of DRM standards and technologies.  Steve Jobs has a great genius for blending technology, design and useability -- as such he can be a positive driver for interoperable DRM. 

Steve, why don't you call a summit with Steve Ballmer and Bob Iger and Howard Stringer and Sumner Redstone, et al, and make this happen?  This is the way you can free content.

Mashing the REST of the Web

One of the themes coming out of Mashup Camp 3 is the recognition that -- in spite of all the talk about mashup applications -- there are in fact few useable open APIs.  The one common interface on the Web remains ungainly HTML.  I mentioned this earlier in the context of Kapow Technologies (disclosure: Kennet portfolio company) because Kapow's technology effectively bridges that gap.  I'm not a technical person, so I thank to Jeff Nolan of Teqlo for articulating this point much more clearly than I could in his recent blog post here.

We like companies like Teqlo because they are a great front-end consumer of the web services we can create with Kapow's technology (available on the Web at Openkapow).  This is the first critical step toward the creation of enterprise-grade mashup applications.  And in our view, that spells the beginning of the end for monolithic enterprise applications like SAP and Oracle.

Web 2.0 bubble debate in full swing

It started at the end of 2006, with a lively debate in the WSJ between two VCs on whether there is a Web 2.0 investment bubble. Todd Dagres of Spark Capital argues that Web 2.0 is a venture bubble because too much capital is driving up valuations in spite of low entry barriers, and because there are few prospects for exits.  Fellow blogger David Hornik of August Capital makes the counterpoint that while there may be many fundings, not that much capital is being deployed and the fall-out rate among Web 2.0 startups is no different than in other segments of technology.

Venturebeat is tracking what it calls the carnage among Web 2.0 companies that have folded or appear to be failing, like Peerflix.

Michael Arrington of TechCrunch has revived the deadpool of failed companies (very reminiscent of the first bubble's www.fuckedcompany.com), and Web 2.0 startup casualties are clearly mounting.  But he also believes that this is natural churn, and that there is no bubble.  Lower running costs mean that companies can stay alive for longer to seek out the right business models, without draining 10s of millions of dollars of VC.  He sees this as a structural step-change in how technology companies are financed and evolve, which will lead to a net improvement in "liquidity" for this market: companies will be faster to succeed or fail, and they will do both with less capital.

Fred Wilson of Union Square Ventures analyses the capital requirement of Web startups today in comparison to their Web 1.0 predecessors, picking up one of my favourite themes -- capital efficiency.  He acknowledges that initial capital requirements have come down permanently, and that this changes the equation for early-stage VCs.  But long-term success still requires significant investment in sales & marketing and delivery, which means there is an ongoing role for professional investors at all stages of a company's life.  Most of the capital a company needs is consumed in those later stages. 

Finally, Tom Evslin in his blog, Fractals of Change, argues convincingly that all these Web 2.0 startups using the same guerilla marketing tactics have raised the noise level so high that traffic generation is once again difficult.  Getting mentioned in blogs, listed in mashup directories, or setting up a stealth beta programme is now hard too and -- guess what -- requires more financial investment.  Now that everyone knows the same tricks, the game has been raised again.  Once more, the free lunch is elusive...

I'm holding out for the capital markets reception for Web 2.0 companies -- will there be acquirers or an IPO market for the select few?  Whether there was/is an investment bubble will be determined by whether these exit markets materialise.

My tech market predictions for 2007

I haven't done this before, so I won't offer to eat my hat if these don't come true, but here are my Top 10 predicted developments for 2007 (in no particular order):

1. Web 2.0 technologies will begin to appear in serious enterprise apps, as vendors incorporate wikis, blogs and RSS feeds into their applications, starting with CRM and other consumer-facing apps.  This will take some of the steam out of those independent Web 2.0 vendors who are primarily peddling features, not products.
2. There will be very few high-value exits of Web 2.0 companies, but probably many more investments, leading to an eventual VC bust (in 2008?) not unlike the dot-com bust of 2001 (but smaller).
3. Actual adoption of Microsoft's new Vista operating system will underwhelm and Microsoft's hare price will begin to suffer as the market realises that -- as Gartner has put it -- this may be the last ever release of Windows as we know it.  What will be next: componentised Windlets competing with Googlets, Teqlets and Kapow robots?
4. We will see the first serious cracks in the indomitable Googleplex -- how many wheels will in fact come off?  Investors beware....
5. Multimedia content for mobile phones (3D games, video, etc) will start to come of age, but more slowly than anticipated.  It will take some time yet to overcome the many usability hurdles.
6. Business software for the SME market will get a major boost, as vendors attack the midmarket with new, scaled down applications.  To access this huge but historically elusive market, software vendors will develop their Software-as-a-Service (SaaS) offerings, while IT services firms will create BPO offerings from packaged software.
7. Offshore technology vendors -- not content to do pure services work -- will continue to push into Western markets with their own product sets, like Infosys has done with Finacle and i-flex with Flexcube.  These are some of the fastest-growing application businesses in the world, and they are bad news for incumbent vendors with high cost structures (as if the SaaS and Web 2.0 news wasn't bad enough).
8. Expect to see lots of new applications for small vertical markets.  The combination of SOA and Web 2.0 technologies makes it easy to build apps for the long tail of micro markets.
9. Consolidation in the WiMAX market will begin as the large chip and equipment vendors jostle for a piece of the infrastructure build-out.  Still too early for actual services of any scale though...
10. The line between information services and software functionality will become increasingly blurred, as more managed services effectively bundle both.  We see this already with data services vendors adding workflow functionality (like Reed, Lexis et al), and with software vendors adding valuable content to their offerings (as in the conmpliance market, for example, see FRS Global).

There you have it.  I'll do a reckoning in 12 months time.  In the meantime let me know if I've killed any sacred cows...

Google is not really about search anymore

My favourite blog on all dotty things Web 2.0, Mashable, just published a note about the top Google search terms in 2006, which is more intriguing than you might think.  The number one search term for the year?  "Bebo".  Really.

In fact, if you look at the top 10 searches, most of them (certainly 1,2,4,5 and 6) are not really searches at all, but rather navigation shortcuts.  People aren't typing in "bebo" or "wikipedia" because they don't know where to find the site.  They're typing them into Google and clicking on the top result because that's faster than typing "www.wikipedia.org" into the browser's address box.

The top 10 searches on Yahoo, on the other hand, are traditional searches on topics without obvious destination websites: Britney Spears, Paris Hilton, American Idol, etc.  Surfers seem to be associating Yahoo with media and entertainment, which reflects the type of content directory Yahoo has become. 

The fact that Google's role as a navigation start-point now eclipses its role as a search tool seems to have gone unnoticed.  But surely this is significant.  It means that Google is so entrenched as a start page, most competitors -- be it better search engines, or Web 2.0 start pages like Netvibes -- won't make much of a dent in Google's desktop pre-eminence.  What's more -- do we even need an address field in our browser?  Isn't Google really becoming the browser?

Bring on the robots!

Since the beta launch of Openkapow this week, the race is on to create new "robots" that automate the extraction of data or clipping of websites to create new mashup applications.  Swivel describes one such robot (the "Netflix rental history bot") here.  Perhaps more useful (if you're Danish) is the Danish TV schedule bot here - it's certainly the most popular bot so far!

Robots are great because:

1. you can create them entirely through a visual interface (no scripting required), as demonstrated in a screencast here by Dion Hinchcliffe, grand-daddy-of-all-things-Web 2.0; and,
2. you can mash up web content or functions that are NOT available as RSS feeds or Web Services.  In other words you can turn any part of the human-readable web into machine-readable web!

Since the vast majority of the web remains "unwrapped" (in spite of all the Web 2.0 hype), robots effectively expand the mashable universe by an order of magnitude.  A good example is the AllNewMusicRelease robot, which creates an RSS feed of new music releases for consumption in a browser, feed-reader or further mashup.

The iStockPhotoSearch robot creates a search in iStock's photo library specific to one user.  Very handy if you want to promote a particular photographer and just send a link around that pulls together his work.

I like this one: the IMDB robot, which returns information about films by polling the Internet Movie Database - probably my most-used bookmark. What could we combine this with??

Here's an interesting one for nervous stock portfolio owners: an RSS feed of YahooFinance company downgrades.  Or if you're looking to buy, why not a feed of upgrades?

I find this one useful: you type in the name of a Top500 software company and it returns basic financial information.

Dozens of new such web services are beinbg created and posted on Openkapow every day.  The next step will be for creative souls to combine these into more complex composite applications. The enterprise mashup wave continues....

Over the Web photo editing

[Warning: what follows is a shameless plug for a great new web service, and how I stumbled across it]

Since we recently added the first new Bleyleben to the world for some time, my digital SLR is finally getting a proper breaking-in.  I gave up the old analog Nikon reluctantly (and still wonder what to do with the body), but am totally sold on the Nikon D70, especially with the incredibly easy integration between the camera and the Mac's iPhoto software.

But iPhoto's editing capabilities are pathetic.  You can adjust colour and tone and add filters, etc, but there are virtually no cropping or other simple manipulation tools. 

So we shopped around for an alternative, and finally settled on Adobe's dumbed-down version of Photoshop for consumers: Photoshop Elements.  At £50 or so it's not cheap, but certainly better than shelling out £600+ for the professional version...

But even the consumer version comes with a fairly steep learning curve.  We may want to edit a photo a few times a year, so is it really worth learning how to use the software??  (I know, I should have thought of it before buying, but let's just call the £50 a sunk cost).

I should have checked out Photochop. Here you just upload your photos, describe the modifications you want (remove tourists, pimples, out-of-favour relatives; add tan, curves or a Santa hat), and professional editors will make the changes and send the photo back to you (for a fee of course).  You only pay if you like the result. Photochop in fact doesn't edit the pictured themselves - they simply act as an intermediary between consumers and free-lance editors.  Great idea - I wish I'd had it myself.

So, what similar tasks -- infrequent enough to be not worth learning -- could be automated over the web in this way?  Video editing is an obvious one -- our raw honeymoon footage has been sitting in iMovie, untouched, for a year now...

In the techie world, we already have pleny of rent-a-coder services.  And sites like Elance offer generic trading of free-lance services, but starting a project has considerable overhead associated with it, negotiation, etc. How about renting an investment banking analyst occasionally for those heavy modelling jobs, or at least to help make the balance sheet balance? 

Graphic design?  Powerpoint formatting?  Any other ideas?

Kapow accelerates mashup creation

The creation and sharing of mashup applications just got one step easier, with the launch yesterday of Openkapow, an online platform for assembling and exchanging composite applications.  I've written in the past about Kapow Technologies (disclosure: Kennet portfolio company), which has been distributing what is basically a Web 2.0 application assembly platform to enterprises for years.

This is an exciting milestone in the life of Kapow, whose web integration technologies were ahead of their time and quite difficult to position before Tim O'Reilly popularised the term "Web-two-point-oh" in 2003.  Thanks Tim!  (Your recent attempts to trademark the term, however, are decidedly uncool...tsk tsk).

Where was I?  Oh yes, Kapow's technology allows web-savvy users (not necessarily programmers) to pull together any web-accessible content or functionality into a composite application.  This is done entirely through a visual interface, effectively allowing you to browse onto any web site or web interface and pointing and clicking on functionality you want to integrate. 

The end result is a simple (or complex) application that combines two or more functions, like many of the 'mashups' found on the web today.

Kapow's mashup platform has been in use by large corporations in Europe and the US for a number of years. They use it to populate intranets and portals, to integrate legacy applications through the web front-end, and to aggregate external data sources to feed custom internal applications.

Openkapow puts this same functionality on the Web for any business analyst or programmer to build their own mashups.  Without knowledge of Perl or other scripting languages, new applications can be assembled in minutes rather than days.  The resulting applications, or "robots" in Kapow-speak can be traded and integrated into other, more complex applications.  Unlike most of the existing mashup exchanges on the Web, Openkapow is targeted at the business community and aims to become a commercial exchange that allows creators to monetise their work.

In various posts this year I've written about the dearth of enterprise-grade Web 2.0 apps.  Dion Hinchcliffe has done a great job outlining a commercial Web 2.0 ecosystem, describing potential Web 2.0 enterprise apps and even suggesting revenue models for Web 2.0 companies.  But it all remains very theoretical.  Kapow already has enterprise customers using Web 2.0 technologies to integrate industrial-strength applications.  Now Openkapow provides a platform to create and share enterprise mashups on a larger scale.  Let's hope this helps kick Web 2.0 from consumer hype into enterprise reality.

Google does widgets

Google has launched its public widget repository, but it calls them Gadgets.  Here is the press release.  Basically they're distributing little, dynamic, third-party web apps for embedding into any website. 

It's about time too.  Less than a year ago I had a go at building a fairly simple website (not a blog) using one of those all-in-one hosting packages that comes with some basic web design tools.  The objective was somewhat silly and overtly political (don't ask), but after switching design tools twice I effectively gave up.  Doing anything except laying out a standard brochure-ware page, or a family photo sharing site was a major pain, unless you were willing to spend the weekend learning HTML 101.

And dynamic content?  Forget it.  Just getting a countdown clock onto the site consumed the better part of several evenings.  I was aching for widgets but didn't know it.  The explosion of blogs and infinite demand for blog bling changed all that.  Now we can have clocks and countdowns, local weather and traffic reports, mapping applications and alpine web cams, horoscopes, dictionaries, instant messaging clients and games galore.  And for those who can't help but tinker, presumably you can mash up Gadgets like these into ueber-widgets to optimise traffic conditions to Tahoe with your skiing horoscope.

I also like widgets because they combine simple application functionality with live content, which makes them a great example of what I think all applications will eventually become: a combination of data and function.  I will write more on this topic in future posts, but meanwhile think of how enterprise applications become more valuable with content: payroll software that incorporates the latest tax and social security rules; software for managing regulatory compliance that automatically tracks the regulator's changes to forms; or systems management software that is aware of the latest security news and patches.   There is an Enterprise 2.0 angle here.

Gartner blesses Web 2.0 (sort of)

Leapfrog Ventures' Peter Rip points us to a new Gartner report in which the tech analysis firm gives its imprimatur to Web 2.0 technologies, including mashup applications.  By placing them at the peak of its hypecycle Gartner is pointing out the obvious, without necessarily committnig to a lasting trend.  I would do the same.

In his blog Peter highlights the continuing discussion, led by Dion Hinchcliffe, about how Web 2.0 technologies will impact enterprise software infrastructure:

First, dispense with the sociology. Enterprises have two core attributes that do not exist as widely in the public web -- purpose and accountability.   So 'empowerment' and 'collective intelligence'  are not end points.  Nor are 'discovery,' 'networking,' nor 'sharing.'   These are embedded in processes and are methods for creating context to purposeful transactions.  A sales forecast is 'collective intelligence.'  Mining customer comments is a form of 'discovery.'  A internal blog post is more likely to be linked to a product release status than photos of my vacation. Viewed in this context, a lot of what passes for (aspiring) businesses in Web 2.0 are simply features of larger processes in the Enterprise. 

The key insight here is that enterprises are all about processes.  And enterprise software is all about process automation.  For now, my bets are on Web 2.0 technologies appearing in enterprise software as features, rather than displacing existing infrastructure or applications.  I have yet to see a lot of interesting new businesses that are using Web 2.0 technologies or concepts to target enterprise infrastructure effectively (except perhaps for Kapow Technologies :-)).  I would be happy to proven wrong, so please correct me if you know any...

More on Enterprise 2.0

The discussion is now in full swing.  Jeff Nolan of SAP spoke at Tiecon about Web 2.0 in the enterprise and in his blog reiterated his effort to debunk two myths: "the first being that everything has to be free and the second being that a web 2.0 app has to run in a browser."

Dion Hinchcliffe continues to search for Web 2.0 applications in the enterprise and, as promised, is starting to profile relevant companies (beginning with BPM and services marketplaces) here.

In his most recent post, technologist Om Malik basically debunks the traction of Web 2.0 to date and puts all the consumer hype into perspective -- the perspective being that the majority of those experimenting  with Web 2.0 services are Techcrunch-reading geeks, and that their validation means little in the real money world.  The real impact ought to be (and will be) on traditional enterprise apps.  Whether this creates more opportunities for new companies to emerge than the SOA frenzy a few years did remains to be seen.

Google mania (1)?

Surely it's all going to their Googleheads now...?  http://www.google.com/mars/

Ricky Gervais pushing the podcasting boat out?

The FT reported a few days ago that comedian Ricky Gervais is to begin charging for downloads of his popular podcast, in which he, Steve Merchant and Karl Pilkington hang around talking (sometimes) hilarious crap.  This move follows newspapers like The Times, which started charging £6.95/month for read-aloud versions of its paper via podcasts (a great idea in itself).

It will be interesting to see how Ricky Gervais' fanbase reacts -- when it was free they downloaded his podcasts 4.5 million times, making it supposedly the most listened-to podcast yet.  Expect polarised reactions, similar to what we heard when the NY Times started charging for the online version of its newspaper.  But clearly a means of making quality podcasts commercially viable is necessary, and this will likely be a combination of advertising support and subscription fees. 

The second run of Gervais' podcast will be available on Audible.com (the first was sponsored by The Guardian).  It sounds like pricing will be around £4.50 (a month? one-off) and so far a lot of the online debate seems to be grudgingly in favour... 

If nothing else, the three comedians will perhaps be forced to invest a bit more comedic energy in making the shows regularly funny; the trouble with free content is its highly variable quality.

Thoughts?