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November 2005 Archives

November 29, 2005

Water into Wine: Monetizing Open Source via On Demand

A SVW guest column by Greg Gianforte, CEO of RightNow Technologies.

If steel were free...

Imagine a car company that got its steel for free. So, instead of spending its money on costly raw materials, this company could invest in high-value differentiators such as better vehicle design, build-to-order manufacturing, and superb customer service.

Now imagine that this company also offered customers completely care-free car ownership; Its customers would never have to worry about gas or oil changes or insurance, because that would all be taken care of for them. All they'd ever have to do would be to get in and drive.

Obviously, that would be a great deal for the customer. Plus, with its cost-of-materials reduced to zero, the company could operate quite profitably while offering its extremely compelling value proposition.

This, in a nutshell, describes the business model of an on demand software vendor using open source technology. By eliminating the cost of databases, operating systems, and other infrastructure components, open source technology allows an on demand vendor to invest more in development, hosting, and services. And by providing software as a service, the on demand model frees customers from the valueless, budget-sucking burdens of IT ownership.

In other words, on demand software delivery is an extraordinarily effective way to monetize open source.

On Demand Applications
To understand how the "water" of open source is transformed into the "wine" of business value, let's first review the case for on demand applications. Customers are embracing on demand applications because they prefer to spend their money on application functionality (which has lots of value to the business) rather than the ownership of IT infrastructure (which has none). On demand vendors enable customers to achieve this objective by hosting and managing the supporting infrastructure for the application; delivering functionality where and when it's needed via the Web.

The customer doesn't care which operating system or database the on demand vendor is using in the hosting facility, as long as the application is scalable, reliable and secure. So on demand vendors are free to leverage open source solutions such as Linux, MySQL, and Apache to keep their infrastructure costs, and thereby invest more in important value-adds such as multi-version hosting architecture, and implementation support.

RightNow Technologies
RightNow offers a prime example of how this formula works. We've pioneered a wide range of CRM innovations, especially in the way our software automatically learns about customers from their behaviors. We've built a uniquely sophisticated hosting environment that has supported over 1 billion customer interactions on behalf of our clients in the past few years at 99.98% reliability. Plus, our enterprise-class hosting capabilities let customers upgrade when they want to, unlike other on demand vendors that force their customers to upgrade simultaneously.

We allocate significant resources to ensuring the success of our customers through a highly differentiated engagement model, closely tracking the effectiveness of their implementations and pro-actively pinpointing opportunities for improving their ROI. We've also grown revenue for 31 consecutive quarters and have been profitable since we went public.

All of this has been made possible because we decided to use open source; rather than become just another distribution channel for monopolistically priced technologies from Microsoft and Oracle. As operating systems, databases, Web servers, and other infrastructure components become increasingly commoditized, there is simply no good reason to pay through the nose for proprietary solutions that offer no discernible functional advantages over their open source counterparts.

So, while RightNow is not an open source vendor per se, it's hard to name a company that's more effectively taking advantage of the economics of open source.

Every business should strive to maximize the value it delivers to the customer and minimize the cost of doing so. The combination of on demand and open source allows us to do exactly that.

-Greg Gianforte, CEO and Founder
RightNow Technologies
www.rightnow.com

Greg has written several guest columns for SVW, including:

"Software lemmings head for the platform cliff"
"Most startups should avoid venture funding, not pursue it"
You can also purchase his latest book, "Boot Strapping Your Business,"
through the affilate link.

Understanding cultural APIs--the key to successful applications

I'm behind in my emails and other communications, my apologies. The problem with standalone journalism is that there aren't any sick days; the blog always needs feeding.

My cold gave me a chance to think about my tag line for Silicon Valley Watcher: "reporting on the business of Silicon Valley;" and I decided that I prefer: "reporting on the business and culture of innovation."

That's because I realized that I write a lot about the culture of Silicon Valley, too; and about how emerging technologies and applications are changing the nature of work, relationships, language, ideas, creativity, and behavior.

I see that the links between new uses of technology and changes in language/ideas/behavior are getting closer --and faster-acting-- than ever before.

And I plan to write more on that subject, because those cultural changes will shape the business side of new companies.

The new generations of startups are more consumer-oriented than ever before, which means they have to have a decent understanding of the somewhat shape-shifting cultures of their markets. If their products/services don't have the right cultural interface, they will fail.

It should be one of the new rules of the new age: Learn the API of the culture you are targeting --preferably before you start your company (you might be surprised at how many startups have very little knowledge about their potential customers.)

Also, living here it sometimes feels as if we are already living in part of the future. We get to be the canary in the coal mine, possibly able to warn others of what's ahead.

I hope my choice of metaphor is a poor one, and is not reflected in the health of my profession (journalism) and its meeting with the future. :-)

November 28, 2005

A podcast on Silicon Valley culture and other things. . .

By Tom Foremski, Silicon Valley Watcher

I did another podcast with Sam Whitmore, of Media Survey, as we strolled through a nearly deserted Fisherman's Wharf Sunday evening. It's up and ready:

From Media Survey:

* This week we catch up with Silicon Valley Watcher editor Tom Foremski, who tells us about SVW’s growing interest in the culture of the Bay Area, and updates us on the concept of the Rooster Club.

Want to hear the audio? The SWMS Tech Media This Week podcast is now posted (12 minutes, 55 seconds).

Click on this link to listen to the Tech Media This Week podcast right now:
http://slapcast.com/users/SWMS

One of the new rules of the new society (when everyone is a publisher)

By Tom Foremski, Silicon Valley Watcher

Dos&Donts.jpg What is socially acceptable to blog about? That's one of the questions I have pondered when everyone can be a publisher, and when most in my social circle are publishers/bloggers.

And the answer is simple: if you are at a private event, among your friends, then everything is off-the-record you do not publish anything that could embarrass anybody, or republish anything that was said/done unless you have an agreement to do otherwise.

That has to become one of the new rules of our new society: Everything in a social setting is off the record unless agreed otherwise.

Because if a person wanted to broadcast to the world, then they themselves would publish it to the world. For example, if I say something to three people, I only wanted to say it to those three people, not the world.

The exception is a press/promotional/public event or announcement. Otherwise, in social situations, everything said is off the record unless otherwise agreed.

November 25, 2005

Murdoch: says newspapers stripped to the bone--no more cuts

From AFP via Yahoo:

"They have already all stripped all the costs out, now they have to depend on advertising. And that is certainly under threat.. . . Outside New York, it's all monopoly newspapers," Murdoch added. "Some have good work in them, but it tends to be over-written, boring and elitist, not a reflection of the general mood of the public.

"And I think you're going to find their circulations falling more than they have already have."

I have been asking what happens if the old media dies before the new media has the business models to support the quality of journalism that we need in our society. Media is how society thinks, and we have some big issues ahead for which we need a thriving and robust and professional media.

Related: What happens if the old media dies too soon? The urgent need for solid online news media business models
http://www.siliconvalleywatcher.com/mt/archives/2005/11/what_happens_if.php

November 23, 2005

First investments from RSS VC fund

RSS Investors, the $100m VC fund, is about to announce its first investments: RSSI and Attensa. I will have more details next week...

Healthline: The search for pharma online gold

. . .drug makers seeking drug takers

By Tom Foremski, Silicon Valley Watcher

http://www.healthline.com/

Googling for healthcare info can make you sick, says Healthline's CEO West Shell. What he means is that you get millions of pages and you don't know which ones to pick. That's where he hopes Healthline, a recently launched beta health care search engine, can help.

It uses doctors, rather than just servers, to help create a dictionary that translates medical terms into common words, and doctors rank the quality of the medical information the search engine links to.

Healthline also offers "health maps" that graphically represent information, such as treatment and symptoms, that's linked to a specific condition. And it has quite a few other ways to slide through--and understand--a lot of important medical information.

"These days, the patient has to educate themselves about treatment options because the doctor patient load has increased tremendously. And doctors love to have an educated patient that understands their condition," says Mr Shell.

(Healthline has a patent on the process of a doctor "prescribing" online information to a patient.)

Steve Case, the AOL founder now building Revolution, which is intended to be a formidable portfolio of healthcare companies, wanted to acquire Healthline, but Mr Shell says it's way too early to sell. "It feels like it is just 1997, there's still a long way to go."

He's been here before. From his bio:

Prior to joining Healthline [April 2005], West served as CEO and President of Sapias... From 1997 to 2001, as chairman and CEO of Netcentives, West created one of the most powerful e-commerce companies, managing over 50 million consumer relationships. . .West successfully led an IPO and, during his tenure, raised more than $150 million in private and public funds from leading investors and strategic partners. . .

Mr West points out that there is a lot of money coming into the health information sector, and much more in the future. "There is just $300m from pharma's $600m advertising spend going online, and that is projected to grow to more than $2bn within two years."

The drug companies are enthused because they can better target potential drug takers by attaching their marketing messages to the health search query. And adverts on search pages convert much better than a scattershot TV or print magazine ad campaign.

The problem is that there isn't enough inventory of online content to satisfy pharma and other advertisers. Which should be an opportunity for Healthline because it has a fair amount of its own easy-to-understand content created by hundreds of doctors.

Owning your content is a smart thing to do, because you never know when you might run smack dab into a robot.txt file that bars your spider from indexing a web site--and this will begin to happen more and more as content increases in value.

Content owners will start glueing their content to their sites, especially since there is going to be a lot of money to be made from all the pharma gold, plus many others pushing their way into this market.

Content is going to be where the value is, and less so in the index. Because indexes are created by servers and content is created by experts; one is cheap and plentiful and the other is expensive and limited.

About Healthline: http://www.healthline.com/aboutus.jsp

November 21, 2005

Intelligent design: Devilish or Divine?

By Tom Foremski, Silicon Valley Watcher
The religous discussions around intelligent design cropped out during my recent dinner with Irving Wladawsky-Berger, IBM's chief strategist on Linux and all things open-source/industry standard.

I mentioned I had seen that day, a headline that said the Vatican had spoken up against intelligent design, but I did not know on what basis, I hadn't read the article.

We chatted about intelligent design, and the premise that an entity called God, would interfere in the universe in order to create the earth, and mankind. I commented how absurd this is, whether you are religious, believe in God, or not.

In fact, the premise is nothing less than blasphemous. It assumes that God needs to intervene in creation, at various points, to create humanity and the planet's abundance of life.

Intelligent design assumes that God could not get it right the first time: the creation of a universe in which the natural qualities of matter, energy and time result in the emergence of life and ourselves--a perfect manifestation of the original design.

Intervention in the original design could be viewed as devilish rather than divine.

- - -

Thinking Big--the need for a new, more powerful, more energy efficient internet

By Tom Foremski, Silicon Valley Watcher

The best entrepeneurs know that it is important to think big, because big ideas excite and motivate people.

Applying this concept to the internet, I wondered what type of internet business could be started that had the potential to be the largest, and what kind of business would it be?

Would it be a larger Yahoo? Or maybe a mega online retailer combining an Amazon and Ebay?

In fact it is none of the above or any other combination of internet companies that you, or Wall Street can imagine.

The largest potential internet business would have to be the internet itself.

But how could a startup create a competitor to the internet? The capital costs of a new internet would be staggering, let alone the marketing, and all the rest.

Well, let's not get distracted by big investment numbers just yet. Let's consider what would be the most important characteristic of a successful new internet: It would have to be compellingly better and cheaper than the old internet, by several magnitudes preferably. And if we were designing a new internet today, it would look nothing like the patchwork of systems in use today.

The design of a new internet would mandate using the highest cost performance IT architecture available, which means industry standard hardware, open-source software components, and a fair amount of Big Iron--large computer systems to handle large computational problems more efficiently than clustered smaller systems.

And the design of a new internet would require special attention to electric power consumption because energy costs are now a large factor in cost/performance calculations. And those costs will increase as we move further from peak oil production.

Individuals, companies, countries, are all seeking to lessen exposure to energy prices and supplies. Because the consequences of being over-exposed raise costs in a world where competitive leadership is all about being the lowest cost/highest quality producer/provider. Not to mention the disruption to trade and society from wars over energy resources.

We know the internet is very important to our future, and to those in other countries too. It is a shared global platform that will gain, not lessen in importance. And therefore it should be powerful, incredibly reliable, and ubiquitous, and very low in energy consumption.

And such an internet could be built with today's components and technologies and be a boon to all users. It would not require the invention of any exotic technologies.

A new internet would vault digital divides and network the entire world population because the edges of the network could be accessed by inexpensive digital devices: digital phones, simple PCs and notebooks, using processing cycles within the internet.

Building a new internet could become a symbol for a global civilization based on collaboration and understanding. And that is what Google is doing, imho.

November 20, 2005

Simon London, Financial Times management editor is leaving San Francisco Bureau

Simon London, a former colleague of mine, and management writer for the Financial Times is leaving the global business newspaper and is joining McKinsey, the leading management consulting firm that publishes the acclaimed McKinsey Quarterly.

The FT San Francisco bureau has never managed to send anyone back to London, once here, nobody returns: Nick Denton, Roger Taylor, Andrew Heavens, Louise Kehoe, Paul Abrahams, Tom Foremski, Scott Morrison, Simon London.

Remaining in SF bureau: Richard Waters, Chris Nuttall (newly arrived).

The new rules of competition

By Tom Foremski, Silicon Valley Watcher

Your competition is not your competitors, it is someone's grandmother. . . it is the competition for attention and you had better be good at it.

And you had better give back a lot of value in exchange for that attention--remember, you have to beat grandma.

Updated with more comments! The most important rules for today's workforce bar none

By Tom Foremski, Silicon Valley Watcher

My three rules of today's workforce:

--Carry and use your own cell phone/number for business

The workforce now is mobile and temporary even if you have a salaried job. You need to be in control of the center of communications: you.

--Carry and use your own email address even at work

Otherwise your contacts and the relationships you build can be severed when you leave a job, and that is an investment that you have a right to maintain--as does your employer.

--Carry and use your own health insurance

Because otherwise, you will be stuck in a job that makes you sick just to keep the health insurance.

[I've followed these three rules for years...]

From Mitch Ratcliffe: Ratcliffe Blog

http://www.ratcliffeblog.com/archives/2005/11/new_rules_for_2.html

To Tom's rules, I'd add:
Incorporate and work on contract rather than as an employee.

This allows you to negotiate the same kind of stock compensation while allowing you to keep your business costs, even the ones you can't get compensated for at work, on your own taxes while increasing the flexibility you have as a working person.

Carry and use your own hardware, building tech expenses into your compensation.

This prevents lock-in to a job through access to technology. Sure, you may have to work with a less impressive laptop, but you're also forced to think more like the people who really buy computers, software, services and so forth.

Update #2 thanks to Neville Hobson at NevOn, via David Newberger-The Geek Guy Rants

Create a blog and establish your personal presence in the new marketplace
In this new age of global inter-connectivity, linking and influence, a blog is a prerequisite if you want to build your own credibility, be found easily and connect with others. Forget the static website. Forget the fancy brochure. Do a blog. It works - I speak from personal experience.

Join a business network like LinkedIn or OpenBC
However you actively use these or not, they can help establish your individual credibility and provide avenues of contact with others for mutual benefit.

Anybody have any more?

November 18, 2005

USA Today's Kevin Maney's Blog...

...and why SBC etc, will give Skype as much rope as they want

Kevin Maney, USA Today's star tech reporter is now also a blogger. Kevin provided me with a once-in-a-lifetime headline opportunity "Column bites Maney" when he became a blogger following a not very blogeriscious column earlier in the year...

So, please welcome Kevin Maney into the bloggerhood, and read his blog: http://blogs.usatoday.com/maney/

Today, Kevin breaks an embargo regarding a Skype announcement because it is already out there. Not bad reasoning, however, being pre-briefed means you know what is speculation and what is not, therefore...

The item in question states that Radio Shack will be selling Skype branded products. Which is interesting.

But, how long will this free ride last for Skype, Vonage, and the other VOIP telephony plays? I think that Skype and the others will be allowed to spend millions promoting VOIP, and then, once it is a stable market, the pipe owners, SBC and the others will close the door--unless you pay up. Afterall, it makes good sense to wait until the "choke-point" is a big, fat neck.

The nice thing about quality of service and service level agreements, etc, is that you need to look inside the packets, and it means you can start to identify the packets, and it means you can route the packets of your partners to the high speed lines, and let the other packets linger--which is bad if you are in the telephony service business.

So, let Skype, Vonage etc, spend millions to educate the market, then the owners of the last mile to the consumer can produce a higher quality alternative--or you pay another extra fee for "Skype" on your already nickeled-and-dimed telephone/cable/cell/DSL unified bill.

Great ideas do not make for successful startups and VCs need more V....so say survey results

Interesting survey results from Foley & Lardner on startup companies--things we knew but sometimes forget.

Who was surveyed: "The survey, measuring the attitudes and perspectives of top executives, advisors, outside consultants and investors in the emerging technology industry."

Here are my takeaway points:

-There is a lot of capital wanting to invest in startups but there is a lack of good managers.

-60 per cent said quality of management is single most important factor for success: "Overall market dynamics (18 percent), access to funding (10 percent) and quality of the business plan (eight percent) were distant choices."

-Only 3 per cent said intellectual property was the most important aspect of founding a startup.

My take: This means a good, even great idea for a startup is not enough, you need a great team. If all you have is a great idea you don't really have anything of much value. Many startups I meet won't talk about their "great idea" beyond a certain point but you should be free to talk about your great idea because only you can execute on it. Otherwise, anybody can run with it.

-More than 75 per cent said M&A is most likely exit strategy in next few years.

-IPO is unattractive because of high costs in being a public company and all the other related issues.

-It is very difficult to find directors for startups. "A majority (64 percent) cited “management” as the most important factor—over cash compensation (36 percent) and equity incentives (32 percent) —for attracting qualified directors."

My Take: This is exactly why I have been saying that the next generation of emerging companies, the new rules enterprise/venture will be private. Being private also means your competitors cannot benchmark themselves against you.

And, my favorite quote from one of those surveyed:

“VCs should take more V and act less like a bank.”

My take: Too true. In fact, I meet more ex-VCs these days, using their venture knowledge to run their own companies. It is a knowledge capital world now, uppercase V and lowercase c, is how the Vcs should present themselves, and the better ones do. imho.

More here: http://www.foley.com/ecsurvey

Hot or Not? Give ten percent of everything away....Hot!

James Hong, one of the founders of Hot or Not (absolutely brilliant idea) asked me if I could draw attention to a new project, an old idea, but made new.

What this also shows is that the new generation of young Silicon Valley entrepreneurs are not as tight with their money as the old lot of Silicon Valley entrepreneurs, who have given this region a reputation for stinginess while they made out like bandits (John Doerr et al)

Yes, big grants to endow seats of learning in your name are all very well, but it ain't nothing as a percentage of your wealth. Let's see our Valley elite step up to the plate on this scale:

From James's Blog:

"10 Over 100 has launched!

I'd recently been wondering how much I should be giving to charity. What's too much, what's too little? Not belonging to a religion that tells me how much to tithe, it's a big question.

Josh and I started a website called 10 over 100 where we make the promise to give 10% of whatever we make over $100k to charity. So like if I make $150k a year, I would give 10% of $50k, which is $5,000 (pretax, so it really amounts more to being out of pocket maybe $3k)

ANYONE can make the promise no matter how much you make (if you don't make $100k yet, you are promising to start it once you DO make over $100k, and hopefully you will give whatever you can in the meantime). So all you princes and princesses out there, make the promise now!!

The hope is that by creating a rule about how much to give, it will become standard practice and will increase overall giving.. kind of how we have rules for how much to tip in the US. If those rules of social etiquette didn't exist, there would be a lot less tipping going on!"

Do it for Thanksgiving:

http://www.10over100.org/

Heeding the call for finding the new media business models...

By Tom Foremski, Silicon Valley Watcher

My posts over the past few months on the subject of what happens if the old media dies before the new media learns to walk have been picking up a fair amount of interest out.

On Monday, I called for partners to work with SVW to help figure out what the new media will look like.

And I've already got several companies that are very interested in what could very well turn into a historic project. And there are a few other key companies that could very well become involved too, I'm getting quite excited at the possibilities...

Here is my post from this week:

What happens if the old media dies too soon? The urgent need for solid online news media business models

Also, please read the comments, one from Kevin Maney, a newbie blogger from USA Today ;-)

Also:

Editor&Publisher reports:

More Than 1,900 Newspaper Jobs Lost in 2005 Aya Kawano

By E&P Staff

Published: November 17, 2005 1:55 PM ET

NEW YORK It has not been a kind year for the newspaper industry.

With costs rising and circulation on the decline, newspaper companies have responded by trimming a considerable portion of their staffs this year. A review of past news reports offers up a startling number: more than 1,900 jobs have been cut from major and mid-sized newspapers over the past year. That figure does not include cuts at many smaller papers that don't often garner the same headlines.

E&P put together a list:

2005 NEWSPAPER CUTS
TRIBUNE

PAPER DATE # OF CUTS
Newsday 9/1 49
Hartford Courant 10/6 14
Baltimore Sun 11/11 75
Orlando Sentinel 11/16 TBD
LA Times 11/16 85
Morning Call (Allentown, Pa.) 11/16 12
Daily Press (Newport News, Va.) 11/16 8
Chicago Tribune 11/16 ~100

NEW YORK TIMES CO.
PAPER DATE # OF CUTS
NY Times 5/25 125
NEMG 5/25 65
NY Times 9/20 250
NEMG 9/20 160
Regional Media Group 9/20 80

KNIGHT RIDDER
PAPER DATE # OF CUTS
Philadelphia Inquirer 9/20 75
Philadelphia Daily News 9/20 25
San Jose Mercury News 9/23 52

HEARST
PAPER DATE # OF CUTS
SF Chronicle 8/1 120
Houston Chronicle 8/19 125

OTHERS
PAPER DATE # OF CUTS
The (Durham, N.C.) Herald-Sun/Paxton 1/5 81
Seattle Times 1/14 99
Dow Jones Consumer Electronic Publishing 1/26 97
Boston Herald/Herald Media 4/4 35
Green Bay News-Chronicle/Gannett 5/19 14
St. Louis Post-Dispatch/Lee 8/22 130
Birmingham (Ala.) Post-Herald/Scripps 9/22 43
Find this article at:
http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1001524144

November 17, 2005

Moderating at Under the Radar. . .startups face the VCs

By Tom Foremski, Silicon Valley Watcher

I haven't been able to post much because of preparation for moderating at the IDB Under the Radar event. I got to moderate all two tracks of the morning session on enterprise mobile apps and the second session of enterprise RFID (radio chip tags).

What was fascinating was how few companies were able to explain what they do. But, let me backup a second and tell you what the event is about.

The Under the Radar series organized by Debbie Landa and Alison Murdock has become almost an institution. It brings startup companies in front of panels of venture capitalist judges. They get rated on their presentation, their business model, and their strategy.

I've been to several of these Under the Radar events and they are always different. This time around there was a lot more energy in the air, a real feeling the valley is back (again...maybe this time, for sure.)

The overall winner of the event was our old friend Zimbra--the AJAX poster child software company.

And overall, the 32 startups presented and interesting mix. But what continues to puzzle me is how few of the startups can say what they do. At least in less than 30 minutes--which is a problem at Under the Radar, because you only get five minutes (moderators are armed with stun guns to enforce the time limit very strictly:-)

I didn't have to reach under the podium and stun anybody--my lot were very well behaved. A mobile apps company called Soonr won the audience vote but the judges preferred Funambol, an open software middleware stackette for the mobile space.

Soonr, I think, deserved a bit more attention. Because when asked what was their business model, they said we have none. Smirks all around, as you can imagine.

But on later reflection, I think Soonr is on the right track. Yes, they lack a business model but, they are focusing on users And this is precisely the right strategy because if you have users you know you have a useful product. If you don't have a useful product, it doesn't matter how clever your business model is.

- - -

The RFID companies on my second panel were a good contrast to the first lot. Interestingly, most of the senior management of those companies had some connection or background in supply chain management.

And supply chain management is one of the big failures of enterprise software markets...so who is to say that RFID will improve this? But at least the people running thse companies knew what a tough problem it is, and were still working at trying to solve it,

- - -

The Under the Radar event was at the Microsoft Silicon Valley center, which is a couple of stone- throws from Google.

This time, in contrast to past visits over the past few years, the MSFT car park was full, and it was early in the morning and there was bustle about the place. It used to be not very busy at all...

Oh, and I spotted Robert Scoble in the cafeteria, MSFT's second most famous employee!

More under the radar stories later in the day...

PS: I will soon start writing a blog for ZDNet, in addition to here, and lately also AlwaysOn.

November 15, 2005

Out and about in the valley...think tanks, SocialText and Louise Kehoe

By Tom Foremski, Silicon Valley Watcher

I spent most of Monday in the valley. First in Palo Alto with the Society for New Communications Research, a recently formed think tank. Dan Farber of ZDNet, and Tom Abate of the SF Chronicle, and I are among the members. It's looking at the societal implications of these media technologies that we work with.

Jen McClure put the think tank together and is keeping everyone on track--it should be interesting to see what we come up with.

I also managed to briefly catch up with Mike Manuel, the Media Guerrilla, at Voce Communications. Mike was one of my very first blog reads, and I discovered him because he was writing about me :-)

It was over a year ago, June 2004, I had just left the Financial Times was preparing for my blogging debut (which didn't happen until September.) But Mike, being very perceptive, started asking questions on his blog about what I might be up to. He even ran a survey on his blog, asking his readers to vote on which prominent journalist would become the first one to leave their newspaper and become a full time blogger. I thought that this was very perceptive of Mike, he had connected a bunch of dots and connected them in the right way too, very much as a journalist looks for clues.

His survey said that Dan Gillmor would be the first to leave, but his readers chose the wrong horse. It was myself, a full 7 months before Dan, and....where are the others?

Come on in, the water is a bit chilly but it'll warm up, I know it'll get better. where you are (in a crumbling business model) it isn't going to get better...

- - -

After all the thinking in the think tank meeting Jen McClure, Dan Forbush of ProfNet and I took a languid stroll through the clean, dappled-sunny streets of Palo Alto, which felt like a very pleasant village.

It has always struck me as bizarre that just a couple of miles away, on the other side of highway 101 is East Palo Alto, a tough, poor and unpleasant neighborhood where a much faster pace of strolling is encouraged, if you find yourself there.

American metropolitan areas have always surprised me with their stark and abrupt changes in neighborhoods. The demarcation lines between neighborhoods safe and unsafe often is just the width of a city street, as if a fence separated the two communities. In my home town of London, there is usually a several block buffer zone where thing steadily worsen or improve.

- - -

After lunch we stopped in on Ross Mayfield, head of wiki company SocialText. Ross recently received $4m in Series B funding from SAP, Draper Fisher Jurvetson and Omidyar Network.

Ross put some of the money into a new office on the High Street (where Dan Gillmor is renting a cubicle).

I spoke with Ross about the Rooster Club and he is putting together a wiki that we can use to organize the club (more on that v.soon!)

---

Then I stopped into visit with my former FT colleague Louise Kehoe, who recently returned from the UK helping her mom recover from hip surgery. I'm always hoping Louise could join with me in becoming a journalist blogger, I think she would do well.

As usual, we ran through all the industry stuff happening, caught up on moves among our former colleagues at the FT. Obviously, the pushing out of the FT's editor Andrew Gowers was a brief topic of conversation.

It seems as if the writing is on the wall that the FT might become a a non-Pearson company. . .I think Rupert Murdoch might be the best owner, he understands newspaper brands very well, imho.

- - -

I'm heading back into the valley Tuesday for meetings and a reception in advance of the IDB Under the Radar event, whcih I'll be moderating...I hope to see you there!

November 14, 2005

What happens if the old media dies too soon? The urgent need for solid online news media business models

By Tom Foremski, Silicon Valley Watcher

Over the past few months I've been asking what happens if the old media dies before the new media learns to walk.

By which I mean, what happens if we lose much of the old media before the new media business models are formed?

It is Silicon Valley's top companies, such as Google, Yahoo and Ebay, that are devastating the old media business models. But the new media business models have not yet "grown up" to support the quality journalism that we need as a society.

The New York Times, for example, pays about $1.25m a year to have a Baghdad bureau, not to mention the rest of its huge editorial infrastructure. In contrast, online publishing relies heavily on revenues from Google text ads--but Google ads won't pay enough to fund a global network of journalists.

Google's blowout quarter

Google's blowout quarter last month means one thing: the old media is losing advertising dollars faster than we thought.

Those sales are not coming from market share gains against rivals such as Yahoo, since Yahoo also reported a very good quarter due to increased advertising.

And this is just the start of a trend that's likely to accelerate as print advertising sales contracts expire and budgets become free to shift to online advertising.

Swinging to extremes

We know what will happen in a situation like this: We will see a flood of online advertising as the pendulum swings to an extreme, before moving back towards the middle.

Which means that the old media will have its knees chopped from under it. Or perhaps the entire revenue-generating torso will be hacked off.

Media is crucial to big problems

What happens if the old media dies before the new media learns to walk is a crucial question because the media, in all its forms, is the forum in which societies think things through. Media is how the world thinks about important problems and finds solutions.

And this includes Fox news, the blogosphere, and the rest of the entire mediasphere. It might seem a messy way to solve big problems, but that's what the media helps us do. And that requires a professional media corps, not a part-time blogger army. The blogosphere provides checks and balances on the "big" media.

And BTW, it is not blogging that is killing the old media, it is the economics of online advertising versus print. You can pin a rock solid ROI on an online advertising campaign that you could not do with print advertising.

You can track users: who clicked where, and when they did it. You can track the conversion rate in real-time. You cannot do that in print advertising, TV or radio.

Google is a competitor

It is companies such as Google, Yahoo, Craigslist, Ebay, and many other online advertising companies that are killing the old media, not deliberately, but in pursuit of their own business models.

Google is a technology-enabled media company, yet many media web sites carry Google ads on their front page. And Google has a business model that newspapers, and most other content producers, cannot compete against.

Google's costs of operations are so far below that of a newspaper that there is no hope of competing with Google for those ads. So why give up prime online real estate to a competitor? It doesn't make sense and all it says is "I don't know what to do with this space."

It's true that Google does provide welcome revenues to online news sites and other third party content sites. But even those modest amounts might not last. Consider this:

-Revenues from Google.com sites grew 20 per cent in the most recent quarter while revenues from Google's advertising partners grew just 7 per cent.

-Google has introduced "smart pricing" a technology that serves up adverts to partner sites based on how well the third-party content can generate conversions. Poorly converting sites, including the New York Times, might find that they can attract large readership but their Google ads conversion rate is poor compared with Google's search site, and therefore Google will "smart price" the advertisement and charge less for the ad on poorly performing third party web sites, which leads to less revenues to the publisher.

And please remember: ads perform much much better on Google's search and service pages than they do on third-party web sites.

[With smart pricing, conceivably Google could tweak the ad servers to channel more ads through its search sites to make their quarterly numbers...? GOOG does not release quarterly sales forecasts, but, the analyst community does, and GOOG has to pay attention to meet those numbers to avoid volatility.]

-Google has an incentive to channel more high paying ads through its own sites rather than those of its partners and that trend will continue.

It's because it can make more money that way. It is sharing 80 per cent and even 100 per cent of the ad revenues with some selected partners. [It is a large share but why not? It gives Google distribution and reach and it can always grab back the advertising monies when it is ready.]

Big solutions needed

So, if we lose much of the old before much of the new media can take on the roles we need, what then? How will we, as a society, think things through?

We have some pretty big problems ahead to solve. We have the avian flu pandemic looming; we have a growing energy crisis; we have ever larger and more complex problems to solve.

Can the Blogosphere take the place of the old media? Only to a small extent, and that is because quality journalism is difficult to do, it has to be done daily, hourly, minute by minute as big news stories break. And 99.999 per cent of the blogosphere has a day job that is not in media.

Partners needed for historic mission

I am one of the very few journalist bloggers that does not have a day job. In May 2004 I became the first journalist to leave a major newspaper, the Financial Times, to specifically become a full-time journalist blogger, and with a mission to find out and develop the business models for online news and related content.

Over the next few weeks Silicon Valley Watcher will announce partnerships with tech companies, with PR companies, and maybe even with an advertising agency, to help figure out the online business models that can support a robust and healthy online media run by media professionals who make their living completely from online journalism.

Throw away the banner ads

What does it mean to help develop an online business model? It will mean developing a new form of online journalism, in a format that works.

We know what doesn't work: banner ads, skyscraper ads, flashing marketing messages. Those are cultural artifacts, attempts to imprint the old world onto the new. In this online medium, online journalism does not have to look the same but it does need to have the same principles of truth, fairness, and independence.

I have a challenge for our partners: Imagine the space taken up by that banner advert, or a skyscraper ad in a sidebar, and figure out what else could go into that space?

What kind of value, rather than marketing messages, can you create in that space for the community of readers of SVW? What kinds of editorial products might be needed? What is the format of that mix, what does it look like?

Maybe a large tech company could buy that space for a list of headlines related to a story topic, a type of contextual additional content that would help expand a news story to include many more additional points of view.

That creates value to a reader, from a clearly identifiable sponsor/source.

Or, a PR company could provide a list of headlines linking to stories about its clients, related to the content on the page. Client companies of the PR firm could demonstrate their thought leadership on key topics in the news, while the news is happening, rather than the next day or week...

The PR companies could spread the cost of maintaining that banner-sized "window" across their portfolio of clients. It might also help them maybe grab a chunk of the advertising budgets...

Conversely, advertising agencies could do the same, grab for the PR budgets...

A rare chance to shape the look/format of the new media

These are just some of the things that could be done, and the kind of things that focus on value to the community rather than spin.

It's a chance to help define the way online media looks for the next decade or more. What the format will be, what kinds of editorial/business model combinations work best.

And if we figure things out together, then everyone in the online media world wins, because everyone will be able to follow the same format.

It's a chance to grab a place in the history books, to help define the shape, the look-and-feel of a new media. So let me know if you can join us in this noble venture :-)

tom at SiliconValleyWatcher.com.

- - -

Please see:

The most troubling question in media today...

Reverse the Google pay per click model

November 10, 2005

Link Love--an occasional column of tidbits

There's some fine analysis of media's plight over on my good buddy SF Chronicle's Tom Abate's blog: mini media guy-a conversation about new media business models

Bringing home the bacon in a startup

Jason Mandell says his friend Jody Thelander...

recently conducted a survey that uncovers executive compensation among pre-IPO companies, providing in-depth data on base compensation, bonus and equity distribution within biotech, medical device and computer technology areas. More than 20 VC firms and 150 companies participated.

Of interest:

It doesn't pay to be a founder/CEO: non founder CEOs are compensated 10-20% more than founder CEOs. Top dog CEOs can have more comprehensive compensation and more equity than the founder. Seems to suggest founders are not nearly as sophisticated in negotiations as well.
Not much difference between medical devices and biotech; people generally presume that biotech pays better.

The number of companies and VC firms that eagerly responded to the survey was impressive. Thought it would be harder to get the surveys completed. This shows that people are very curious about what is “typical” and seeing if their compensation packages are competitive. This includes VCs as well. Showed at the end of day that vc firms and portfolio companies are aligned in terms of finding out what is competitive

. . .

Canadians know how to innovate says PwC

Waterloo, Ontario is top innovation center outpacing Canadian and US centers, (mostly) so says a new PricewaterhouseCoopers report.

Lots of interesting numbers such as:

investors in local technology firms received a more than seven-fold increase in shareholder value at the time of exit. . .

The report also found that in the past decade more than $1.8 billion has been spent to acquire 19 successful, privately-held technology companies in the region. Furthermore the Waterloo region is responsible for an impressive 10% of all IPOs completed by technology companies on the TSX over the past eight years. The report points out that a portfolio of Waterloo region public technology companies generated an internal rate of return of 26% since 1994, out-performing both the Nasdaq Computer Index and the S&P/TSX Capped Info Tech Index.

Impressive numbers I have to say. Shame about the spam-like title of the report:

Making Magic in Waterloo Region: A Report on the Exceptional Investment and Entrepreneurial Potential of Canada's Hottest High-Tech Location

http://www.pwc.com/ca/makingmagic

. . .

Bruggeman breaks boredom by blogging

I haven't checked this out yet, but if Whitney Burk says it's good, then I say take a look :-)

Being John Bruggeman has begun…
He breaks the boredom of those long, serious software company meetings by
cranking up the volume on “Hustler’s Ambition” by 50 Cent. He’s the guy
wearing jeans and a t-shirt in a room full of suits. His standards are
high. His patience is short. It took him a week on the job at Wind River to
define a whole new sector of the software industry. Ever heard of DSO?

John Bruggeman is a software executive who’s not afraid to tell it like it
is.

And now he’s blogging.
Being John Bruggeman http://johnbruggeman.blogspot.com/Many faces. More opinions.

Add him to your feed list and find out what’s cutting on his edge.

Read it. Laugh out loud. Think about it. Talk back...

whitney burk

Plus more conversation with Irving Wladawsky-Berger coming up...

November 9, 2005

Microsoft abandons PC-centric view but what about Intel?

By Tom Foremski, Silicon Valley Watcher.com

Today's "leaked" Gates and Ozzie memos show that Microsoft finally "gets it" that the world has shifted towards the Big Computer in the Cloud.

Gates' Copernicus-like revelation that we no longer live in a PC-centric world is late but significant for Microsoft. But has MSFT's PC partner Intel realized the world has changed?

The last time I looked, Intel was quite happily promoting its latest and greatest PC microprocessors, vowing to make them ever more powerful and complex.

But with the Big Computer approach, for most tasks, you don't need super-smart PC clients, because the Big Computer can do the processing far faster than the client.

You just need a client that can render video/graphic/audio bits really fast and needs only a little bit of local smarts. And there are plenty of chips out there than can do this, and that don't cost several hundred dollars, as Intel's top of the line PC chips and chipsets.

Yes, there are many professional tasks that require a powerful PC client system, but for most of us, the Big Computer in the Cloud will do just fine once we get ubiquitous broadband--which isn't far away.

Take a look at my recent post-The Coming PC Crunch:

Like a universe that finally feels the pull of its dark matter gravity and starts to pull back towards its singular moment of creation, the massive PC market could be facing the same pull on its further expansion.
The onward rise of the PC microprocessor, more powerful and complex than ever, won't be stopped by Moore's Law. It will much more likely be stopped by the fact that it becomes cheaper, and better to do the processing on a large computer system, rather than on a PC, no matter how fast the PC microprocessor.

The remaking of IBM: A chat with IBM chief strategist Irving Wladawsky-Berger

By Tom Foremski, Silicon Valley Watcher.com

It's always good to catch up with Irving Wladawsky-Berger, one of IBM's chief strategists and architect of its Linux and open standards policies.

I used to cover IBM when I was working at the Financial Times. It is a fascinating company because it has managed to adapt to the changes in the IT industry with an agility that masks its huge size. It is the world's largest computer company, it is also the largest IT services company, the second largest software company, and one of the largest chipmakers.

And it was the first to recognize and capitalize on the broad industry move to IT services, and outsourcing IT systems.

Now, it is signaling a new direction: becoming a vendor of highly automated business processes. Companies that need to add a business process within their industry will one day be able to buy one off the shelf, so to speak. IBM is collecting best practices within each industry, within each business process, and using applications, middleware, and its integration skills, to create ready-to-go business process modules that can be rapidly slotted into a company's operations.

This means faster time to market, lower IT costs, and having the most efficient business process without having to do it all yourself. It's a compelling vision and one that fits perfectly into the New Rules Enterprise idea that I've been describing here on SVW over the past year.

"Companies want to buy a business process, they don't want to buy applications," Irving explains.

This is also the reason why IBM is not in the applications business and has no plans to acquire a big apps company such as SAP, as some of the leading Silicon Valley analysts (Ray Lane) seem to think it should.

"We don't need to be in the apps business because we can get the apps from others. We pull together the right apps, and the other software and hardware components to create automated, highly optimized business process modules."

But to become a business process vendor requires the adoption of many industry standards within many different industries--a long, slow process. "Once we have the standards in place, such as agreement on document formats and many other categories, we will then have the building blocks that we can use to build the business process modules."

Irving said that the health care industry is a chief focus for IBM, and it is offering free access to its current and future patent portfolio to those companies in the health care sector that adopt industry standards. The goal is to create a common standards platform on which many others, including IBM, can innovate and create far more efficient healthcare systems.

"The Internet was based on common standards, it was more of a standards revolution rather than a technology revolution."

But to remake IBM into a business process vendor will require huge amounts of R&D to figure out how things are done today, how business processes can be best optimized, develop the tools to design and implement automated business processes, and many other related issues.

It will be a long haul but Irving says IBM is well equipped for the job. It is acquiring companies that have domain expertise, and it has its former PricewaterhouseCoopers group of 30K business consultants with multi-vertical industry expertise to draw upon, plus the world's largest R&D labs, spending more than $5bn a year on research work.

Please see: SVW--I told IBM they should buy SAP-- Kleiner's Ray Lane says...

Please see: SVW--These are the new dotcoms of the new rules economy...

November 8, 2005

A call for a new Manhattan Project on clean energy--continuing the work of Nobel prize winner Dr Richard Smalley

By Tom Foremski, Silicon Valley Watcher

(My apologies, but I am a little behind on my emails and posts following my Oregon trip...)

When I returned on Monday, I found out that Dr Richard Smalley, the nanotechnology pioneer had died. I found this out by reading Irving Wladawsky-Berger's blog, in which he wrote a long piece about Dr Smalley, a 1996 Nobel prize winner for the shared discovery of a new form of carbon: buckminsterfullerene, better known as buckyballs.

I met Dr Smalley late last year at a large chip conference. He was the lunchtime keynote speaker and on the stage alongside him, sat about 20 distinguished chip industry veterans such as Andy Grove, chairman of Intel. The audience consisted of more than 2000 of the world's top chip experts.

He was talking about energy. He said that the growing need for energy was the number one problem facing humanity. If the energy problem could be solved, by giving everyone the energy they needed, it would solve all the other top ten global problems: hunger, poverty, war, pollution, poor education, lack of clean water...

Dr Smalley impressed me with his eloquence and his directness. He was not afraid to criticize the Bush administration, saying the reelection of the president would not be good for science research.

He called for a new Manhattan project, focused on finding an alternative to oil--which he said was just one month or so away from peak production.

At the press conference

I was sitting with my buddy Mark Osborne, editor of Semiconductor Fabtech, (based in London). Following the speech, Mark and I went to the press conference for Dr Smalley. There were 5 journalists in the room, waiting for him to arrive.

After about ten minutes Dr Smalley walked in and sat on a tall stool. He looked in excellent shape for a man in his early 60s. He looked to be at the top of his form, both physically and intellectually. He sat and answered our questions. The rest of the journalists left after about an hour, leaving just Mark and myself.

We asked more questions, and then more on nanotechnology, and then more on energy. Dr Smalley diligently answered every question, and explained complex issues with patience and thoroughness. And he just sat and talked, and we sat and asked questions. Until finally, we ran out of questions. By that time, it was almost 4pm. Satisfied there were no more questions, Dr Smalley shook our hands and left.

Impressive dedication

Mark and I were amazed at his stamina and his dedication to the subjects of energy and nanotechnology. I learned a tremendous amount about both subjects.

And we were impressed that Dr Smalley did not run out of the room after 20 minutes or so, as is usual in press conferences. He talked until he was satisfied he had exhausted his audience of all questions.

I remember he talked about speaking at conferences on the subject of energy, and how some of the scientists were so inspired by his vision that they would approach him afterwards and ask to become involved in his work.

This was because Dr Smalley had discovered a calling, one to which he devoted a large part of his life. And he communicated that calling through his presence, through his stature as one of the top scientists of our time, and through his passion.

This is what inspired other scientists to approach him and offer their support, and want to join him in his mission. But there was no organization to join, and Dr Smalley said he didn't want to lead one.

I remember thinking that Martin Luther King didn't want to be the leader of his times, he didn't want to be in the front ranks of civil rights marches, facing hails of rocks and men with clubs and dogs.

New leadership

I remember thinking that Dr Smalley had to take on the leadership role directly, because he was the one that raised people's awareness, and communicated his calling to them so strongly that they felt they had to take it up too.

I did not know that he had had a long battle with cancer, and that probably he knew that his battle might be coming to an end. That's why he wanted others to take on the leadership roles.

If you were ever inspired by Dr Smalley's speeches on energy and solving the world's most serious problems, then take any opportunity to carry on his work, in the workplace and in the home place. It is quite probably the most virtuous mission that anybody can become involved in.

- - -

From the Rice University announcement of his death:

"Rick could focus so completely on his goals, and he could inspire his students and his colleagues to a similar focus," said Kathleen Matthews, dean of the Wiess School of Natural Sciences and the Stewart Memorial Professor of Biochemistry. "He had the ability to persuade others with a rare intensity of thought and spirit. He brought both passion and intellect to his work, and he displayed a degree of dedication and engagement that could motivate others to new levels of achievement."

- - -

Please see SVW: Nobel Prize winner Dr Richard Smalley tells SF chip conference of the urgent need for action on energy issues

- - -

Irving's blog:

Energy - the Single Most Important Problem Facing Humanity

November 7, 2005

Coming up: A chat with IBM's chief strategist; more about the Rooster Club; Mossberg and Swisher On Tuesday; and Under the Radar is coming next week...

By Tom Foremski, Silicon Valley Watcher

I just got back from a long drive back from Portland, but I wanted to flag a few things coming up this week:

Irving Wladawsky-Berger, IBM's vice president for technical strategy and innovation is not a large man but his influence on the IT industry is that of a giant.

He grew up in Cuba, is of Hungarian/Jewish parents and is responsible for leading IBM into the open source world of Linux, open standards and a host of other strategic decisions that have helped the world's largest computer company grow during the toughest years the industry has ever seen.

I remember chatting with Irving a couple of years ago, we were sitting in a very stylish office in the very stylish IBM buildings in Somers, New York, (designed by I.M. Pei of Grand Louvre pyramid fame) and we happened to be talking about blogging.

What do you think about all this interest in blogging, Irving asked me. I said it was a mystery to me and that blogging was done by people with too much time on their hands and read by the same type of person. There is nothing to get excited here, I said, adding a dismissing hand gesture. Irving nodded and agreed and we moved onto something else.

How time flies and how time changes attitudes. We are both blogging now, and I can't wait to swap notes with Irving and tell him why I think blogging represents a class of technologies that is the next big thing.

And it has all the hallmarks of the next big thing (NBT), going through the distinct stages of all important NBT technologies:

--born during a downturn

--it becomes ridiculed and scorned

--it becomes grudgingly accepted

--then it is considered blindingly obvious that it is the next big thing. Think of the PC as an example, but there are many others.

Here is Irving's Blog: http://irvingwb.typepad.com/

The Content versus Index wars is a theme I'll explain a bit more in detail later this week. This is something which is just emerging and I'll tell you why life will get tougher for the search crawlers and scrapers of the internet world. Here is a clue: Servers and software are cheap and getting cheaper. Compelling content creation requires. . .

We will be rolling out the Rooster sign up sheets this week to get the ball rolling on creating a northern silicon valley debate club of sorts-a salon of peers rather than podiums. More on that later this week.

Don't miss the Churchill Club's big SF event of the year, Tuesday November 8, Walter Mossberg and Kara Swisher of Wall Street Journal fame