Archive for ‘Technology’

The FaceFeed Ponzi Scheme

By , 14 August, 2009, 1 Comment

So I’ve been a bit swamped this week with several projects I want to blog about soon. As I result, I missed out on the chance to join the wave of insta-hype surrounding Facebook’s big move to buy FriendFeed. Late to the party as I am, I have a few thoughts.

The conventional wisdom that has formed around the deal is that Facebook is trying to get through FriendFeed some of the ‘live’ features it now lacks and at which insurgent Twitter excels. In particular, as Jason Kincaid points out, FriendFeed shows at the top of a page the most recent items commented on, not just the most recent items posted.

To be honest, I’m not sure this is something I’d want to see on Facebook. Effectively, this would mean turning each comment into its own status update in the News Feed. Given that well over half of the updates in my News Feed are uninteresting or irrelevant (no offense, friends, but the photos of your lunch food are just not ‘news.’), the likelihood that I care what others have to say about them (‘Hey, that’s tasty-looking? Where did you get it?’) are slim-to-none.

The reason it is valuable to Facebook is because it wants to keep enticing corporate and brand users of the site–people who set up a FB to get fans, not friends–and those people are interested in having their updates go viral. Keeping them at the top of fans’ feeds for multiple days, a FriendFeed-style system would certainly help. (In Twitter’s system, every ‘retweet’ or reply to a post is treated as a separate post.)

Even if Twitter is better at this kind of broadcasting than Facebook, neither site has a method in place to monetize the free marketing it’s giving to companies yet. Twitter has no ads; Facebook has tons of them–often really annoying ones promising me services I can’t type on a PG-13 blog– but no profits. There are more users who ignore the ads that ones that click through and advertisers aren’t going to pay much for real estate on a page that delivers poor click-through results.

The promise social networks keep making to the venture capitalist backers is that one day, the profits from advertisers will come, so they should keep investing in growing the user base. The promise social networks make to advertisers, meanwhile, is that one day, an infinitely large user base will make their ad dollars worth it. This deal takes my skepticism to a new level: the VCs have been convinced to let Facebook, a money-loser, spend money to buy FriendFeed, another money-loser, in order to get those future users and future ad dollars that will pay back everyone on the chain.

In other words, social networks promise each audience–VCs and advertisers–future returns based on investment collected from the other group, and pay out returns to neither. Instead, they sustain and rollover those promises over multiple years, increasing the amount of money invested and the number of layers of investment over time. Last I checked, that strategy was called a Ponzi scheme.

Good News that Makes Me a Little Bit Mad

By , 2 August, 2009, 5 Comments

The FCC is investigating Apple’s decision to disable third-party iPhone apps that let users access Google Voice from their phones, and to reject Google’s own application providing the same service. At first, most tech commenters were eager to exonerate Apple by blaming it all on Big Bad AT&T;, who, as a telecom provider, obviously have a competitive reason to block any VOIP technology.

But as the FCC letter to AT&T; points out, AT&T; has no problem letting users access Google Voice over AT&T;’s network when they do it on a BlackBerry. As the FCC’s decision to send a letter to Google too highlights, there are legit fears of Google from Apple’s side as well: Google has its own phone, where it gets to engage in its own application cherry-picking.

Now Apple, who obviously don’t have anything approaching a monopoly on handsets, can’t be accused of monopolization (using market power to eliminate competitors) as Microsoft was a decade ago. AT&T;, if it turns out they were involved, could be accused of using market power over networks/connectivity that way. What Apple would be on the hook for is colluding with AT&T; in a way that bars competition. Even though it’s clear that banning Google Voice bars competition–ie VOIP competing with AT&T;’s network–it’s unclear to me whether that competition threatens Apple directly. Google, broadly, poses a threat to Apple, but this specific feature might not if it improves the appeal of the iPhone. I don’t know enough about the part of antitrust law that covers collusion (as opposed to the section covering monopolization) to know if the colluding company must be enhancing ITS OWN market power/eliminating ITS OWN competition to be guilty. Commenters, please help out?

On the whole, however, I’m glad the FCC is looking into it–that’s what antitrust regulators are for. What upsets me is that the regulators seem disproportionately inclined to take on cases of companies that upset consumers, where it’s clear how the man-on-the-street is negatively affected by the practice at hand. So because most consumers like Google, hate AT&T; and could care less about Apple, this case makes sense to the Feds.

Meanwhile, the Feds do not bite as often at companies who might be violating anti-trust law in a way that restricts the market at either a more abstract, or simply a less consumer-facing way. Consumers love Google and resent/mistrust the big names in paid content, so the Feds have, until this administration, overlooked the fact that behind the screens Google is establishing a sealed monopoly of online data that prices out whole sectors of content creation, whether that means new web-based news organizations or music, or book or film distribution channels, and impairs the monetization capacity of other sectors that might one day move online.

If the laws bar restrictions on competition (which they do), those laws need to be applied indiscriminately to all companies not only because that’s what rule of law means but also because the unchecked power of companies we like now may prevent the creation of companies we would like tomorrow.

MicroHoo > Yahoogle

By , 31 July, 2009, No Comment

I’ve spent much of the week pondering Microsoft and Yahoo’s new search deal. Given that Google’s similar offer to Yahoo! last year was deemed anticompetitive, and that the status quo in search based ads may also be anticompetitive, we should at least consider the possibility that this partnership could be a good thing.

Some background: Yahoo! Search has been tanking for a long time. Since the money is in selling ads alongside the search results (whether keyword buys or bulk display), Yahoo! can’t monetize those search pages if the results are no good. Microsoft had a similar problem for a while (see Windows Live, Fiasco That Was) but it was nothing compared to the bigger threat Google poses to them in the application space—if (when) Google succeeds in moving us all to cloud applications, Microsoft’s real money pot, in office software, is cooked. To Google, cloud apps don’t matter as standalone revenue sources but as part of a massive data-mining operation. So as long as Microsoft and Yahoo! continue to lumber along independently, with both losing to Google in search and Google closing in on Microsoft in applications, Google has nothing to worry about.

Does that change with a deal like this? Yahoo! agrees to give up its search technology and let Microsoft, with its new Bing search engine, power search results on Yahoo! sites. Yahoo! and Microsoft then share the ad revenue on the results, except that Yahoo! gets 88% of it. A lot of pundits balked at the whole premise, but I disagree.

Yahoo! beats Google in one category of sites Google offers consumers as a ploy to gather data—media content. Yahoo!’s portal pages—its news aggregators, finance listings and fantasy sports leagues, for example—are more robust and richly developed—than anything Google has on offer. Yahoo! has all these people (myself included) turning up to check on their fantasy teams, but they can’t keep them there and effectively monetize them because the users don’t stick around to use the search bar. If they can outsource the search to Microsoft, they can keep those folks around and make a neat little business as a portal. Maybe it keeps some small fraction of users off Google who would otherwise flit there from the Yahoo! pages, but not enough to unseat Google. It’s not quite pro-competitive in that sense, but it is pro-innovation because it allows Yahoo! to keep developing a competency in something Google doesn’t do well.

Moreover, it may train Microsoft to finally trust the web. Have a look at the character of the experience provided on a Yahoo-powered-by-Microsoft home page: it’s free content with ads, just like Google pages are, but it’s less Googley in tone. Yahoo’s portal sites differ from Google’s (see above) in that they are more developed, more curated. Microsoft’s search technology differs from Google’s in that it’s less crowd-sourced and more directed. Like Yahoo!, it’s designed for and marketed to people who are sick of navigating the web for themselves, who WANT a little direction and intelligent design. The synergy here makes sense.

If it works, it may open Microsoft’s eyes to a broader business in serving those users, which is where Microsoft’s ultimate salvation has to be. Google still hasn’t convinced Microsoft’s big corporate clients to replace Excel with Google Spreadsheets—what Microsoft needs to offer isn’t a copycat product that also spare and barebones, but something a little more robust and only partially open, what I might call cloud-lite. I have no idea what this would look like, but I think it’s something Microsoft has the best shot of anyone at developing and would be a new addition to the space, an actual innovation.

In other words, what these deal actually does is secure Google’s continued dominance in search, Yahoo!’s in curated content and potentially Microsoft’s in office applications—even in the cloud age. It doesn’t end any monopolies but splits the current market of ALL ONLINE CONTENT into three into which each of these firms can dominate a piece. That at least cuts them all down to a focused size and makes them, perhaps, easier for smaller fry to take on in a focused way.

Still Thinking about Google

By , 27 July, 2009, 1 Comment

According to a new libel ruling from the UK courts, Google can’t be sued/fined for malicious falsehoods that appear on its news and blog pages (like this one). That makes legal sense, since no one employed by Google produces the content on the sites.

But here’s the problem: it’d be awfully hard to sue/fine some of the folk with Google blogs for their output either, since most of them consider what they do to be not-quite-published, and more akin to the kind of speech covered under slander law than the kind of published text covered under libel law. Clearly, the web has erased the most obvious divide between slander and libel, but it doesn’t really erase the qualitative one. A falsehood on my friend’s travelog about her summer in Equador is just not the same as a falsehood from Robert Reich.

Moreover, the underlying logic of libel law is based on private profit. You sue the people who make/write/print the falsehoods and if you win, you take back the profits they earned by spreading the lies.

The problem with private blogs on Google’s server is not only that they don’t aspire or try to uphold fact standards that are libel-proof but also that there’s an imperfect overlap between the person who produces the content (and thus might be morally responsible for it) and the person (AKA Google) who profits from that content (and thus might be fined to avenge a wrong).

The UK ruling thus underscores the argument I have been making about Google all along–they aren’t necessarily in open defiance of the laws, but their existence, their business model demonstrates the gap between the structure of our laws and reality of the internet economy. And try as I might, I can’t think of a way to solve this without in some way cutting Google down to size.

The Problem with WIRED

By , 19 July, 2009, No Comment

The August issue of WIRED has an interesting article on the growing antitrust pressure on Google, a pet cause of mine. It’s well reported, and well-written, as WIRED usually is. It more or less lays out the case against Google that I would make: that the individual markets in which it has x or y share are irrelevant, because Google is building a macro-market by aggregating data over all web content. Then it lays out the most common  counter-argument: that regulators shouldn’t be trying to stop companies the public likes/benefits from to protect the fluidity of the market. I disagree with this counter-argument. Other regulatory provisions–like consumer fraud laws–respond to public opinion, but antitrust laws exist explicitly to protect and promote competition.

What struck me about the WIRED piece, however, was its attempt at neutrality and its muted tone. [If you’re skeptical, go to the library, find a copy, and see for yourself.] WIRED never does that. It has an opinion about ever tech-related debate, usually an opinion that reflects the views of its editor, Chris Anderson, which I’ve discussed before. Elsewhere in the same issue is an article advising readers to embrace illegal downloads as a form of civil disobedience. [I’ve got plenty of free music on my computer that shouldn’t strictly speaking be there, but I’d never be so presumptuous as to pretend it was anything more than miserliness that landed it there.]

The tone of the Google piece suggests to me the major problem with WIRED. It’s a magazine about the modern technology industry written by people who helped create the modern technology industry, by people who moved out to the Valley before it was cool. Their natural instinct is to explain tech companies to the rest of us, and defend those companies from the big bad economy back East. The folks at WIRED still they think they are writing about scrappy endearing startups, even though those companies aren’t scrappy or small anymore.

Yes, this piece is an improvement over a February article that painted the attack on Google as an evil conspiracy of big bad telecom companies. But even where their own reporting suggests there’s a real antitrust case to be made against Google, their personal sympathy for the GOOG prevents them from giving the piece the kind of umph they give to everything else.

It’s all pretty ironic, since as magazine writers who work for Conde Nast, everyone at WIRED is part of the ‘old’ economy. And while they advocate that everyone else give up their content for free and celebrate that Google will own it, their own website is pretty closely protected. That’s why this blog post has no links to the current issue–it’s been mailed to subscribers in print, but it’s not yet available online.

Google Grows Up

By , 11 July, 2009, 2 Comments

It was a big week in Google-land, what with un-beta-ing of Google Apps and the subsequent release of Chrome OS. Obviously, this was Google’s shot across the bow at Microsoft as both companies gear up for a battle to control the cloud. To be honest, I think the cloud will ultimately be controlled by some third player none of us can imagine, just as Google scooped Yahoo! and Microsoft scooped IBM. [See disruptive technology].

Still, in the short term, it’s a big play for Google. What worries me is that as larger and larger shares of our economy move online, cloud computing will allow Google or its unknown successor to dominate multiple markets and do somewhat anticompetitive things with that cross-control. I already have misgivings about its search-ad business; it’s too early to tell whether cloud apps will work the same way.

What amuses me about this whole thing is whiplash it should give to those who apologize for Google’s business practices with claims that Google is “not evil,” or not really a business at all. Firstly, this week shows that Google wants big corporate customers just as much as Microsoft. Secondly, this week shows that their success is manifestly not predicated, as some suggest, on turning big business on its head by getting people to embrace beta as a new standard. Instead, they’ve had to give up this image of being frazzled-but-well-intentioned to get the big fish.

That doesn’t really make up for my worries about their broader business, but at least we can now discuss their tactics without the cuddly rhetoric. Or is that asking too much?

Chris Anderson Practices What He Preaches?

By , 9 July, 2009, 2 Comments

WIRED’s Chris Anderson has a new book out, making his case for the “economics of free.” By this he means “free lunch,” but the core of the book is trying to dress up “free lunch” as “free markets.” In the new economy, all goods will be digitized, and as that happens, they will obtain a cost approaching $0. Therefore, all companies will make their money by providing auxiliary services atop their free goods, for, Anderson believes, production costs also approaching $0. [Ex: sell ads on free content site]

Here’s the problem: if consumers love “free” goods so much, what makes Anderson confident they will be willing to pay $>0 for services. Moreover, even if they were willing to pay for services, wouldn’t that willingness be undermined by the knowledge that, if Anderson is to be believed, the services also cost $0 to make? Never mind that there are serious doubts about the $0-cost-ness of digital production and distribution. [Malcolm Gladwell pretty effectively eviscerates the whole argument in the most recent New Yorker]

I have long rolled my eyes at arguments like Anderson’s. The more seriously you think about what “free” really means, the more you are convinced that it’s inherently anti-market, that the Internet leads us to a kind of decentralized socialism. Some tech-evangelists are upfront about this being their true goal, and even if I disagree with their values, I respect them for honesty. Folks like Anderson infuriate me because they couch their desire for a universe driven by “non-monetary” rewards for work in a vision of a profit-making economy.

Thankfully, Anderson has been revealed in his true colors: chunks of his book have been liberally plagiarized from Wikipedia because apparently, it was just too much of a hassle to cite properly: “he and his publisher ‘couldn’t agree on a footnote policy for Wikipedia entries’ ” Oh, cry me a river.

According to Anderson’s defense, everything is free online because the Internet makes assigning ownership so difficult that property ceases to exist. I personally believe the Internet necessitates a new definition of intellectual property, not an elimination of intellectual property as a category altogether. Without property, you have no philosophical basis for a market economy. So Anderson’s plagiarism and his cavalier response to being exposed suggest he doesn’t really believe in markets at all.

Double Digits

By , 5 July, 2009, No Comment

For a number of reasons—some chronological, some that I can’t disclose—I’ve been thinking about the parallels between the dot-com bubble burst and the credit bubble burst we’re suffering from now. Easy money leading to reduced scrutiny of financial transactions. Eloquent prognostications about the profitability of free web-only content, but little actual profit to show for it. The list goes on.

One important difference stands out, however. In the 1990s, the bubble could be forgiven, perhaps, on the grounds that the technology was new and misunderstood. New media evangelists today don’t have that excuse—the medium isn’t that “new” anymore. That’s why we resort to euphemisms like “Web 2.0” to give it the veneer of newness. Phrases like this really need to be retired.

The aging of new media was brought home to me last week by the ten year anniversary of the first-ever blog, Kausfiles. Mickey Kaus started this as a website, and while folks like Instapundit and Andrew Sullivan probably beat him to using the name “webblog,” it’s pretty clear that blogging is what Kaus was doing from the start. Some of his stylistic features have been widely adopted, like the strikethrough correction and the anonymous editor. Others, like the stream-of-consciousness writing style keep Kausfiles in a class of its own. Kaus has a nice retrospective post chronicling some of his major coups and gaffes that is worth checking out.

There is one thing Kaus doesn’t touch on, but which gets to the heart of what really has changed in these ten years. In 1999, Mickey Kaus was just a guy blogging from his home computer on a personal website; now he’s a paid blogger at Slate which has itself been acquired by the Washington Post. You’d think it was about time to drop the anti-establishmentarian rhetoric.

Me.gov: Blogging the Personal Democracy Forum

By , 30 June, 2009, No Comment

I’ve spent part of the last two days at the annual conference of the Personal Democracy Forum, attending a few panels and talks about how technology is changing politics and where new online media and news models fit into that new political universe. A few selected highlights:

Read More →

Apocalypse 28: Lessons from the film industry

By , 18 June, 2009, No Comment

My friend and indie filmmaker Michael Morgenstern has a blog where he covers, among other things, the shakedown that is taking place in the film industry. It sounds a lot like the one we’re experiencing in journalism–to quote Mike, the challenges are as follow:

“financing its films when the distribution model is defunct, monetizing the Internet where users expect to pay nothing, and conquering the crowd logic of moviegoers and the advertising budgets of the big players.”

In a three part series that you absolutely must read, Mike has laid out how indie film landed in its current quagmire and how he believes it might emerge. Key to his vision are two ideas that have also been touted by new media activists (journalism’s equivalent of indie directors) as models for news. One is micropayments; the other is using a central web portal as the launch and landing pad for non-digital offerings of the most popular content. I have two essential bones to pick with this vision–firstly, that the central web portal for journalism, film and maybe one day music will be Google and there are serious anti-trust issues there, and secondly, that the micropayments system assumes users will set up a digital credit card account accessible at all websites and there are serious privacy issues there. While Mike gets points from this business writer for being more economically savvy than most filmmakers I know, he brushes over both of these issues.

Furthermore, there is a problem in journalism that film doesn’t have–while news consumers will surely benefit from the new opportunities given to small players, news consumers will also lose if the old players are allowed to go under. Serious film aficionados aren’t really worried that there’s a social cost to seeing fewer summer blockbusters from big studios, while they are understandably bullish about the growing capacity of small producers to do high quality storytelling. Not only do the “big boys” in the news industry have good content to offer, the particular kind of good content they have to offer–expensive, investigative reporting–isn’t being replaced by the small producers as the distribution costs drop. That’s because the cost of that reporting isn’t on the distribution side; it’s on the production side, in the form of reporters’ beat expertise, time and travel. Micropayments won’t cover that.

I don’t know enough about film to know if Mike’s vision will work for them. But I know enough about journalism to know it won’t work for us.