If we take our technologies of personalized commerce and predictive business analytics to their ultimate conclusion we won't need marketing or consumers. Brands' products will just show up at your door and it will all be perfect: a perfect fit, perfect timing, perfect style, and perfect price.
Perfectly tuned to you is the ultimate future of a personal customer experience. Your brand will know all about you, and know exactly when you need it, before you knew it — and all with frictionless auto-debit.
Ten years ago in mid 2004 I left the Financial Times and started publishing Silicon Valley Watcher. Silicon Valley was starting to wake from a long downturn from the dotcom deflation and Google's August IPO was a good sign after several years of bad news.
The culture of Silicon Valley was different then. The software engineering community was more radical than today, and far more socially conscious. The open source software movement was very strong among engineers and there was overall an anti-commercial attitude and a respect for protecting an open commons.
It shared much in spirit with the radical English groups from the mid-seventeeth century such as The Diggers, and also with the The Diggers of the 1960s in San Francisco, who ran free stores and served free food from their kitchens.
The business bible of 2004 was The Cluetrain Manifesto and it came directly from that culture. Here's an excerpt:
San Francisco's transformation into a bedroom community for Silicon Valley's business parks is a huge mistake because tech companies should be exposing their people to the city's rich diversity and its incredible culture, a history steeped in more than 150 years of media innovations.
San Francisco historian Gary Kamiya, writing in the San Francisco Chronicle, tells the story of San Francisco's early newspapers (and the passionate duels using the pen and the gun):
The media industry, including digital media companies, is breathtakingly silent on the issue of advertising fraud.
What other industry would sit quietly while being robbed in broad daylight on such a massive scale? As huge as $6 billion to an astounding $16 billion a year is being siphoned away from the media industry through fraudulent advertising methods.
The media industry needs to band together to stop ad fraud today. It should insist that its advertisers, the big brands, sign a pledge not to support ad fraud and only advertise on real media sites.
It's in the advertisers' interests to support a healthy independent media sector staffed by professionals producing quality content on which their ads will perform fabulously. It's a virtuous circle that keeps producing professional quality media.
But what we have instead, is a race to the bottom as quality of media goes down on falling ad revenues and advertising performance plunges.
The huge challenge facing media companies as readers shift to mobile platforms, is far worse than is generally known.
Say Media, an online publisher and advertising network based in San Francisco, last year reported that mobile ads generate just one-fifth the revenue of a desktop ad. It's become even worse.
An industry source with access to massive amounts of advertising data tells me mobile ads are a disaster for media companies. He has seen detailed reports from large publishers and ad networks that show advertising on mobile platforms is generating as little as one-tenth the revenue compared with desktop advertising.
“Every company is a media company,” which is why there is a deluge of content marketing as companies struggle to produce media and build an audience.
A new media publication typically budgets at least two years to develop a solid readership and it will take years more to fully build a trusted relationship. When I interviewed Shelby Bonnie, CEO of CNET’s 10-year old News.com in 2004, he said he likely needed another ten years to fully establish the brand.
How long will it take companies to establish a media brand?
The media industry has been dragged kicking and screaming into the modern world and forced to adopt new media technologies and drastically overhaul its operations.
The successful new media model is a combination of three components: professional media, user generated media, and smart machine media (e.g., automated news aggregation).
Buzzfeed is an example of this trinity: it has top journalists producing original content; it makes great use of social media; and it has a tech platform that leverages the algorithms of distributors such as Facebook and Twitter.
Forbes is another example of a large media company with professional journalists, user generated articles, and a good technology platform.
The BBC recently asked permission to use this story as a case study for an upcoming programme, Silicon Valley Watcher's discovery of the identity of LonelyGirl15.
At the end of the summer of 2006 we had the biggest story in the US: Silicon Valley Watcher discovered the true identity of LonelyGirl15 (above) -- an anonymous 15 year-old video blogger called Bree, that had amassed a staggering number of viewers on Youtube over several months -- but no one knew who she was. The media was obsessed with her and questioning is she is real or fake?
San Francisco is different from Silicon Valley in very important ways: it has always produced great media content — and the city itself is great content — starring in movies, photos, books, and songs. It inspires creativity.
Silicon Valley produces the tools that enable others to create but it itself is not an inspiring or creative place. Its architecture is plain; it’s workers dress plainly; and its ambitions are plain dull— to make lots of money.
The protests over the giant corporate buses that cruise menacingly around San Francisco’s streets is not really about the buses. It’s a culture war: SF culture clashing with corporate culture.
The conformity of Silicon Valley’s corporate culture is polar opposite to the non-conformist traditions of San Francisco.
San Francisco has been at the epicenter of more than just earthquakes, it has a long tradition of being at the forefront of the media industry stretching back to the gold rush.
It’s where massive newspaper fortunes were started by newspaper magnates such as M.H. de Young, and more famously, William Randolph Hearst. Hearst got his start in the newspaper business in 1887 at the San Francisco Examiner, which competed against de Young’s San Francisco Chronicle.
Over at Quartz, Christopher Mims reports that 2013 was a lost year for tech:
2013 was an embarrassment for the entire tech industry and the engine that powers it—Silicon Valley. Innovation was replaced by financial engineering, mergers and acquisitions, and evasion of regulations. Not a single breakthrough product was unveiled—and for reasons outlined below, Google Glass doesn’t count.
Om Malik over at tech news site GigaOM disagrees: Dear Quartz, maybe it’s you that needs new glasses and a map. 2013 was not a lost year for tech — Tech News and Analysis
Headlines like the one above from a Reuters story anger regular tax payers in the US, UK, France and frankly, everywhere. They use legal loopholes and international transactions to weave a complex web of tax avoidance.
I had a great conversation with photographer Charles DiLisio (above), who is a man with a mission: photographing, and tracking down old photos of some of Silicon Valley's most important historical buildings for a project he calls, "Silent Icons of Silicon Valley."
He was recently featured in the San Jose Mercury by veteran columnist Mike Cassidy:
The excitement about "Big Data" in tech circles is very optimistic and many companies are rushing to hire "Data Scientists" to profit from the explosion of hype about the reams of data collected inside their own organizations, and in the world outside.
But having access to Big Data doesn't guarantee that companies, or individuals, will understand or be able to derive much value from it. The very few examples of companies doing that, are very few. And for a good reason – finding insight in all that data is difficult and becomes more difficult the bigger the data sets.
I've recently been asking people a simple question at parties: "What have you bought lately that was marketed to you online that you probably wouldn't have bought anyway, like a favorite brand of jeans, etc.?"
People smile, some of them giggle at the question, but none have managed to give me an answer.
It was great to catch up with Aarti Shah from The Holmes Report, and Matthew Greeley, CEO of BrightIdea. Matt had a great take on 3D printers. He pointed out that when the time between thinking something up, and then physically having it – shrinks towards nothing – as with future 3D printers, our reality becomes less distinguishable from living in a digital reality, the Singularity.
"#SoMe" is video maker Loren Feldman's long, funny, witty, insightful, and beautifully melancholic movie, recalling a time when social media was in its infancy, barely out of diapers but growing fast with the promise of becoming a force of nature, transforming us and our institutions into a future meritocracy, a democracy of transparency and rainbows.
We're still waiting for the rainbows and the rest. And the melancholy ending of #SoMe is a metaphor for what we lost, and maybe never had.
Competition for software engineers is incredibly intense and Silicon Valley firms are pulling out all the stops to recruit and retain top talent. A great software engineer is a very scalable asset.
Every company can offer perks of free food and high salaries but where can an employer get ahead of the pack and offer something no one else can, what is the ultimate perk? How about life extension.
"The very word "secrecy" is repugnant in a free and open society;
and we are as a people inherently and historically opposed to secret societies,
to secret oaths and secret proceedings..."
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"…there is very grave danger that an announced need for increased security will be seized upon those anxious to expand its meaning to the very limits of official censorship and concealment.
That I do not intend to permit to the extent that it is in my control."
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"…that is why our press was protected by the First Amendment-- the only business in America specifically protected by the Constitution
-- not primarily to amuse and entertain,
not to emphasize the trivial and sentimental,
not to simply "give the public what it wants"
--but to inform, to arouse, to reflect,
to state our dangers and our opportunities,
to indicate our crises and our choices, to lead, mold educate
and sometimes even anger public opinion."
There's a saying in journalism, that if you want to get to the truth of a story, "follow the money."
The flow of money says much more about the truth of any action in this world than anything else. Snooping on emails, phone calls, Facebook friend networks, whatever else, pales in comparison to the intelligence gained in knowing the money trail.
One of my high points of the year is attending the SVForum Visionary Awards because it's a chance to spend time with some of Silicon Valley's aristocracy in a relaxed summer party setting that brings out some great stories.
This year's winners represent some of the leading US tech-optimists but are not necessarily Silicon Valley's own. There was a strong showing of Singularitans, including their leader Ray Kurzweil, who recently moved here from Boston, taking a job at Google to be closer to his son who works as a VC.
We will have Big Brother because we can: Surveillance systems both government run and commercial are powerful and cheap, and are getting cheaper and more powerful at an exponential rate.
I was walking along Haight Street and spotted a poster competition for the upcoming Haight Street Fair, June 9, which has always been one of the best San Francisco Street Fairs. For a long time it was organized by the wonderful Pablo Heising, a good friend and one of the neighborhoods best community leaders.
Google Glass has a promissing future -- although not in the markets that Google thinks it's targetting: urban early-tech adopters -- they are a fickle bunch at best.
Where Google Glass will make its mark and find a large and loyal customer base is in helping families and communities deal with the ravages of old age.
My 2013 prediction warned of the continued fall in the value of online content which would lead to the production of ever more content as media companies tried to maintain ad revenues.
You can think of it as a towering tsunami of content, or as a massive bubble of content inflation.
Just as inflation devalues currencies, content inflation is devaluing content.
Ryan McCarthy, Deputy Editor of Reuters.com, and the former Business Editor of the Huffington Post, comes to a similar conclusion.
The superb American Experience documentary series on PBS finally cast its focus on Silicon Valley yesterday evening in an 82 minute program largely focused on the founders of Fairchild Semiconductor and Intel.
The heroes of the story are eight scientists, in mechanical, electrical, metallurgical, and optical engineering, and a chemist.
It's a story that takes place more than half-a-century ago, when the "traitorous eight" left their employer Shockley Semiconductor Laboratory en masse because their boss, William Shockley, had become grossly egotistical and a horror to work with. He sounded like an early version of Steve Jobs, the Apple co-founder.
It was shocking to leave an employer, which is why they were called traitors. In those days loyalty was expected, as were the lifelong careers that companies provided. And it's this "traitorous" culture that continues to grow Silicon Valley, as people continually leave to create new startups.
American Experience also showed the close connection to the US Department of Defense and how military spending was the prime source of money for new ventures for a very long time.
Early this week, Hamish McKenzie attended a memorial for Aaron Swartz, the young activist who committed suicide while being prosecuted for downloading millions of academic papers.
Berin Szoka, the president of the group TechFreedom, offered some words that were uncomfortable for some. Speaking of the Internet activist's alleged crime of downloading millions of academic articles, Szoka stepped out of the night's orthodoxy of holding Swartz up as a hero.
"I cannot condone what Aaron did," Szoka started, about to launch into an argument about how Internet freedom should not be a partisan issue. He was cut off before he could go any further.
Foremski's Take: The future of Aaron Swartz has nothing to do with Aaron Swartz and has everything to do with agendas of digital libertarians and related activists.
Newspapers face uncertain paths to a brighter future.
The Financial Times said it would try to eliminate 35 editorial jobs through voluntary means and add 10 jobs as part of its focus on "digital" and a move away from news to "a networked business."
Lionel Barber, Editor of the Financial Times, announced the changes in an email to staff. He wrote that a trip to Silicon Valley in September had "confirmed the speed of change."
The FT plans to shift resources from the production of the print editions to its online news and services. This will be done by eliminating late editions and greater standardization between newspaper editions for the UK, US, and world.
The job cuts appear to be focused on restructuring production desks but it will depend on who accepts the voluntary redundancies. The FT has about 600 editorial jobs.
...we must stick to the tested practices of good journalism: deep and original reporting based on multiple sources and a sharp eye for the scoop. But we must also recognise that the internet offers new avenues and platforms for the richer delivery and sharing of information.
We are moving from a news business to a networked business.
Mr Barber did not explain what type of "networked business" the FT is planning to build. He stressed the importance of "serving a digital platform first" but also that print "is still a vital source of advertising revenues."
When it comes to making industry predictions I always resolve not to make any, but as you can see, I have trouble keeping my new year's resolutions.
Two year's ago I made the same resolution and failed when I wrote: 2010 Prediction: The Media Tsunami Is Coming...
The media is dead, long live the media. We now have more media, in more formats, in more times of the day and night, from more people -- than at any other time in history. And we will get even more in 2010.
When I talk about media, I mean anything and all things that are published: news stories, magazine articles, TV, radio, video, music, advertising, photos, web pages, and of course social media. All of it, all the media that's fit to print and all that isn't.
The low cost of the tools to make media content is a big driver, more important however, are the media hungry platforms that make it easy to publish anything and distribute it widely. One-click uploading to Youtube, or Facebook, or wherever, it's all very easy to create and publish media. A tsunami of media.
Tsunamis come in waves...
This is shocking and it's a direct result of Google's algorithm changes. Here's a case study of a web site being prepared for launch and how a competitor managed to get it flagged as a scam site -- before it was even launched.
From SEOBook: "A case study in being PRE negatively seo'ed."
It's remarkable how few journalists understand Google's business and how what it does or doesn't do affects massive volumes of commerce around the globe.
If I were running the New York Times I would keep half-a-dozen journalists focused on Google 24/7 because it's that important.
William Blake's "Newton" measuring the world.
Liz Gannes on AllThingsD, yesterday reported that pageviews, unique views, registered users, and many other forms of metrics used to define online popularity are "bullshit metrics."
Analytics company Mixpanel and its investor Andreessen Horowitz are trying to persuade the tech world to be more honest with itself by reporting numbers that are far more informative: Engagement and retention.
... Marc Andreessen and Mixpanel founder Suhail Doshi have decided they want to raise the shame level by calling them "bullshit metrics."
Ryan Holiday, writing for the New York Observer, has discovered something very important about the media industry today:
The widespread belief is that the media has "reach." Trust me, they don't. Not anymore. It's become almost pathetic.
It hit me the other day when I snagged a profile for a client on a well-known website...
Dear God, I realized, my client has more readers than they do. The website needed us to attract an audience for them. They wanted the subject of the piece to send his readers over to them rather than the other way around.
SearchEngineLand has a very good, long look at the recent fake press release announcing Google's $400m acquisition of WiFi company ICOA.
PRWeb distributed the press release and said it slipped through its internal tests for "integrity."
Danny Sullivan explains how PRWeb has become a popular distribution network for a lot of content, some of it shady, and how it ends up on well respected newspaper sites.
Chris Anderson has exited one of the top jobs in publishing - Editor-in-Chief of Wired magazine - to pursue the life of an entrepreneur, making a big bet that 3D printers represent a massive new phase of the industrial revolution.
He spoke at a Wired "Culturazzi" event, at the Marriott Union Square and to sign copies of his latest book: "Makers: The New Industrial Revolution."
As the business models for serious journalism continue to erode where will we get the quality media we need as a society to make important decisions about our future?
I've been warning people: "Special interest groups will gladly pay for the media they want you to read, but you won't pay for the media you need to read."
Software engineers have a saying: GIGO, garbage in, garbage out.
If you start with garbage data you will get a garbage result. That's the future we are heading towards, a future where our media is corrupted with information that serves the goals of special interest groups.
I'm having fun pulling together a Pearltrees documentary from found footage of the recent Outside Lands 2011 music festival. I haven't seen anyone else take this approach but I expect people to do it in the future for various events, even birthday parties because it's really easy.
There's been a perceptible hush in the air around San Francisco as people get busy finalizing their Burning Man preparations. You can see cars and vans being packed, bikes being strapped and roof racks piled high.
Burning Man is very much a San Francisco/Silicon Valley festival. It's a type of Dionysian harvest festival where people bring together tremendous creativity and industry and where there's no commercial payoff at all. There's no commerce and there's no advertising and no sponsorships.
Out of a dusty ancient lake bed where nothing can grow, a city of 50,000 people rises, with buildings and structures several stories tall.
A week later it all goes away, back to the bitter alkali dust that is everyone's souvenir of Burning Man because you keep finding it in every nook and cranny.
Burning Man always seems so unique and so fragile, it always seems that it might fall apart, but it hasn't yet.
A core culture...
Burning Man has been around long enough, since 1986, that it is now core to the experience of the culture of the Bay Area. That's why you should plan to go one day.
But a trip to Burning Man is not about throwing a weekend bag into the back of the car. You have to pack everything in and out. There is only ice and coffee that you can buy in the centre camp. You have to bring everything and take everything back out with you.
Also, the environment is hostile. This is where they should test the mars rover because the extremes of temperature, rain, sand storms, freezing wind -- are harsh. This is not a pleasant experience and it's not for the weekend spa goer. Which is why Burning Man attracts a particular type of person.
The best part of Burning Man is the art in the playa -- a truly vast canvas where people create incredible art. Some of it is giant sculptures such as the one above, "Bliss" a 40 foot tall sculpture of a dancing woman built by artist Marco Cochrane, you can see it on Treasure Island.
It's a good example of the huge ambitions of the artists that come together at Burning Man.
The event is important because it teaches a lot of things: town planning, survival in extreme environments, cooperation with others, how to work in teams, how to be productive, and how to be generous. There is no commerce of any type at Burning Man, the art and other projects rarely have any names attached to them.
The entire experience is unmediated, there is no expectation of any kind, it's a meritocracy of in it's truest sense -- there is no history. Each year Burning Man is reborn again, from the same dust but into a totally new world.
Commerce free... mind free
The commerce-free experience is great because it frees up a lot of your mind that you didn't realize was affected. For example, there are dozens of radio stations, several daily newspapers but there's no advertising. Even brand names on the sides of rental vans are blacked out. There is nothing that is "sponsored by Intel" or any visible brands at all. As far as you can see.
It was painful leaving Black Rock City and moving beyond the range of the Burning Man radio stations and having to switch to commercial radio, even PBS. It was so hard having to listen to all those commercials.
Even reading a magazine with adverts was difficult for many days. I realized how much I'm flooded with commercial messages, repeatedly, constantly. It felt very good to be away from all that commerce chatter because it freed up some of my internal dialogue.
That's a great benefit of Burning Man: living for a week in a place where there is no commerce at all. A commerce-free experience -- where else can you get that? Nowhere. Everywhere you go in the world, even remote territories, someone is trying to sell you something -- but not at Burning Man. That's a priceless experience.
All the work that people do to build Black Rock City is donated, there is no commercial intent. To see an entire city functioning, productive, and so innovative -- without any commercial payoff or intent is truly extraordinary. What type of blueprint could it provide for our cities today? [IBM with its Smart Cities program should study Black Rock City.]
Plus, Burning Man can be a great place for networking. Eric Schmidt got his job at Google because he hung out with Larry and Sergey there one year.
Last weekend I was at the Outside Lands 2011 music festival in Golden Gate Park. It was a great event with three days of music from four stages. And San Francisco's relentless grey summer fog lifted for two days -- it was a very happy crowd.
Discovering new music all in one place is a great way to spend three days and there was lots of music that was new to me.
Something is always killing something else in the world of tech headline writers. Apple iPhone is killing something or being killed; and Google+ is killing something or being killed; or...
(Portrait of Marshall McLuhan by Yousuf Karsh. Copyright the Estate of Yousuf Karsh.)
You may have noticed that the media loves to cover the media -- it's a narcissism that is not unique to the profession but certainly more visible because of its ready means of expression.
It's partly media's fascination with itself, that there is a lot of media this week about Marshall McLuhan: the philosopher prince of the media world. It's the 100 year anniversary of his birth, July 21.
Last week I wrote about the Oriella survey of journalists that found that the majority do not use social media or blogs for verifying and sourcing stories.
No one is asking journalists to throw away the tried and true ways of researching and verifying stories but to add new skills that will improve their reporting. Those new skills include curation and the use of media technologies to tell stories in ways that haven't been told.
When our distant ancestors discovered cooking it spurred an evolutionary step forward. Our brains grew larger and our stomachs shrank, and we were better able to walk upright.
Cooking food made a big impact because eating raw food is hard work. If you look at other primates they spend much of their life eating.
In 2008 scientists in the UK tried an experiment with humans, putting them in a zoo and feeding them as much raw food as they wanted: berries, fruits, vegetables, etc. To fulfill their daily energy requirements required eating more than 10 pounds of raw fruits and vegetables -- it was taking them most of their day to get through chewing this much food and most were unable to finish their daily ration.
By the end of the two week experiment it was clear that raw foods alone cannot fuel a modern human. All the test subjects lost lots of weight and they couldn't finish all of their food even though they would eat well into the night... some would have likely died if they had stayed on this diet.
Here is a guest article by Partice Lamothe - CEO of Pearltrees (Pearltrees is a consulting client of SVW.) This is a lightly edited version of "La troisième frontière du Web" that appeared in the magazine OWNI - Digital Journalism - March 2010. The article argues that the founding pricinciples of the Internet are only now being implemented and that the next frontier is in organizing, or curating, the Internet.
One indication of this transition is the proliferation of attempts to explain the changes that are occurring. Functional explanations emphasize the real time web, collaborative systems and location-based services. Technical explanations argue that the interconnectivity of data is the most significant current development. They consider the web's new frontiers to be closely related to the semantic web or the "web of things".
Although these explanations are both pertinent and intriguing, none of them offers an analytical matrix for assessing the developments that are now underway. Some ideas are too specific.
A simple wireless connection can bring the power of multiple supercomputers to a simple cell phone using cloud computing, the most powerful collection of technologies produced so far.
Yet the concept of cloud computing isn't well recognized even among some of our foremost technology leaders.
Take for example, Eric Schmidt, CEO of Google and Jared Cohen, Director of Google Ideas. They recently co-published a long article The Digital Disruption, in Foreign Affairs magazine, the flagship publication of the Council on Foreign Relations.
They also spoke at the organization's CEO Speaker series. Here is part of a report by Anne Nelson writing for PBS Mediashift:
"I'm extraordinarily excited about the scale of the mobile revolution," Schmidt said. "... There are four to five billion mobile phones of one kind or another and we are approaching a billion smart phones."
Schmidt added that the effect of Moore's Law will be to transform smart phones into the world's dominant communications platform in the near future.
The implications of the mobile revolution, he said, "are just beginning to be understood. But remember that these devices are more powerful than supercomputers were a few years ago, and we are putting them in the hands of people who've never had anything like it before."
In the article and the talk, Mr Schmidt focuses on the power of the smart phone, and that it has the capabilities of a supercomputer from a few years ago. That might be true of some smart phones, but not of the "four to five billion mobile phones of one kind or another" that are out there.
It's extraordinary that Mr Schmidt and Mr Cohen made no mention of cloud computing. Because with cloud computing, those four to five billion mobile phones can have the power of a supercomputer from today -- not from several years ago.
I recently spoke with Ram Menon, Executive VP of Worldwide Marketing at Tibco Software. He travels a lot in India, and other developing economies such as Brazil.
"It's incredible how many people can now afford a simple cell phone. And it's incredible what you can do with simple text messaging. Farmers can get real-time pricing information on their crops, and much more. There's even a whole grass roots industry around powering cell phones, such as ways to convert a bicycle into a cell phone charging station. In remote places where there is no electric power, people can still use their mobile phones."
With a simple text message system you can bring the power of a supercomputer to the cheapest and simplest mobile phones via cloud computing. For many important applications there is no need to place supercomputing power in the device itself.
Simple cell phones can act as smart phones today, thanks to the cloud. That's an amazing technological advance.
It's strange that Messers Schmidt and Cohen have failed to notice this technology, and what it can do -- especially since they work at Google, which operates the largest cloud computing platform.
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There are more posts like this in my book: In My Humble Opinion
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Please see the following Saturday Posts:
[Here is a draft of an article for the fifth anniversary of the Society for New Communications Research (SNCR) - a Palo Alto, California based think tank. I'm a founding fellow of SNCR.]
It's easy to forget that we are still in the very early stages of the Internet -- a basket of technologies that continues to evolve and affect nearly every aspect of our business and personal lives.
The first phase of the Internet emerged into the commercial space only in the mid-1990s, from military applications at first and then university research uses.
In this first phase of the commercial Internet, the development of web browsers meant that we could now publish a page of content: text, photos, video, to any computer screen regardless of the platform. It didn't matter what the operating system was, or the type of computer: mainframe, minicomputer or pocket computer -- as long as it can run a web browser we can publish a web page to it from anywhere.
That was a significant achievement because you used to have to be on the same network, for example AOL, or CompuServe to be able to publish the same content to other users. There was no cross-platform communications, even email was difficult. I remember it took years for gateways to be developed that could send email between CompuServe and MCI Mail - two popular email networks.
It took government funding and support for industry standard protocols to be able to achieve what we call the Internet. And once the rivalries between the competing self-contained networks could be bypassed, the Internet took off like a rocket.
The Internet's potential effect on business was extraordinary. In the mid to late 1990s, stock market investors built a massive "dotcom" bubble. A company only had to announce that they would launch a web site to have a massive spike in its market value.
Those days seem ridiculous in hindsight but only because we did not yet have the means to truly transform business operations, at least not yet. But the investors were correct in their prediction that there was a truly disruptive force at work and that those companies that were forging ahead would have significant advantages.
In those heady, early days, large corporations were faced with threats that the "dotcom" companies would "eat their lunch." Many companies panicked and launched expensive Internet operations without thinking things through; many companies were frozen in indecision and did nothing.
The dotcom dotbomb soon arrived and established businesses breathed a collective sigh of relief: their lunch was intact and most dotcoms disappeared overnight. A recession gripped the entire tech sector for several years as the excesses of those early years played themselves out.
Recessions, however, are excellent nurseries, it's where innovation emerges. And the early 2000s is where blogging started to emerge, and thats when the first social networks such as Friendster and MySpace appeared. And it is where the roots of what we now call social media emerged.
There is much written about, and spoken about, and tweeted about social media, social networks, social CRM ... "social" with everything. But the "social" part is a red herring because what emerged in the early 2000s was the second phase of the Internet.
The first phase allowed us to publish content to any computer screen. The second phase of the Internet is where any computer screen can publish back.
We now have a two-way Internet.
If you thought Internet 1.0 was impressive then look out because now we have a two-way Internet, and this time, the new "dotcoms" will be far more challenging to established businesses, they will eat lunch, breakfast, and anything else of value. It is an Internet on steroids.
For example, we now have a printing press in our pockets that can potentially reach tens of millions and soon billions of people. It's no wonder that Rupert Murdoch is pissed. You used to have to be a media mogul, buying ink by the barrel to have the potential reach an audience that anyone with a smart phone, or desktop computer can now reach.
The Internet is a powerful media technology, it's a publishing technology. And it has become very easy to use thanks to sophisticated development tools and services that anyone can use.
- You used to have to be a computer expert to set up and publish a web site, now anyone can do it in less than ten minutes.
- You used to have to build a large audience in order for your content to be seen now you can post something to Facebook or Twitter and your network of friends or contacts will republish it and potentially reach huge audiences.
The Internet has become a two-way medium.
What does this mean?
It means that "social" media is just one application of this next stage of the Internet. It means that every company, every person is potentially a media company and has to learn how to use this two-way Internet.
Every company, even if it makes diapers or ball bearings is also a media company because it publishes to its potential customers, employees, neighbors, etc. And it also has to learn how to listen and engage with those communities as they publish back.
Businesses that figure out how to use the two-way Internet will prosper and the ones that don't, won't.
New types of applications will emerge such as personalized advertising that is location based; and a whole host of other applications that have yet to be imagined.
- A two-way Internet means that anything and everything can become connected.
- A two-way Internet means that there is a huge amount of data to be mined that can provide businesses with incredible insights into their markets.
- A two-way Internet can provide businesses with real-time responses to changing market conditions.
- A two-way Internet will unleash a tremendous amount of innovation in the forms of applications, new media formats, and new societies/communities.
A two-way Internet will also transform the way we consume and interact with media. The media is dying but long live the media because we now have more forms of media, in more formats than at any time in our human history.
How will that affect us? Media is how society "thinks" it is how countries develop policies, it is how we figure out solutions to important problems such as the economy, the environment, education, elderly care, energy and those are just the problems that begin with "e."
What are the new cultures being formed? What will the cultural changes mean to business?
A business that doesn't understand its changing culture won't be in business for long.
It is these types of issues that SNCR was formed to research and to try and understand.
We have plenty of technology and technologies in our world but so what? It's how these technologies are used, how they are applied, how they affect and effect our society that SNCR seeks to understand and to share with others.
We now live in a two-way Internet and that's an immense field of study and it is one that will continually surprise us with its near infinite permutations.
For journalists, for professional communicators of all kinds, these are troubled times but also extremely exciting times. At no other time in our professional lives will we see such huge changes in our jobs, our lives, our communities.
We don't know the answers, we know some of them but there are so many more to discover.
We all can take part in figuring out what those answers are. Those answers might keep changing or they might become the new rules for the next phase of the Internet. We don't know yet, we don't even know all the questions but it's sure exciting finding out.
And that's why SNCR has managed to attract some of the best people working in this area, eager and curious about the future and what it might look like.
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If you liked "The Two-Way Internet" there are similar posts in my book: "In My Humble Opinion"
Everyone knows that Steve Jobs has banned porn and any sexual content from the iPad but is this a wise move?
I just started reading Nick Bilton's book "I live in the future & here's how it works" and the first chapter is about his investigation of the porn industry to see if there are any lessons to be applied to the media industry.
Every time a new technology has been introduced, way back to the printing press, sexual content has helped drive that technology and develop thriving business models that others have been able to adopt and prosper with.
Throughout the history of new media, from vernacular speech to movable type, to photography, to paperback books, to videotape, to cable and pay-TV, to "900" phone lines, to the French Minitel, to the Internet, to CD-ROMs and laser discs, pornography has shown technology the way. "Great art is always flanked by its dark sisters, blasphemy and pornography."(5) The same is true of the more mundane arts we call media. Where there is the Gutenberg Bible, there is also Rabelais; where the U.S. mails, dirty postcards; where the three-volume hardback novel, paperback pulp fiction; where HBO, Midnight Blue; where CompuServe, the Plain Brown Wrapper library.(6)
Pornography,(7) far from being an evil that the First Amendment must endure, is a positive good that encourages experimentation with new media. The First Amendment thus has not only intellectual, moral, political, and artistic value,(8) but practical and economic value as well. It urges consenting adults, uninhibited by censorship, to look for novel ways to use the new media and novel ways to make money out of the new uses. Therefore, while it may be politically impossible and socially unwise to encourage computer pornography, legislators should at least leave it alone and let the medium follow where pornography leads.
I see this issue as one of the most important issues facing not just the Internet but society in general.
We still haven't solved the problem of how to finance quality media.
It's the Gordian knot of our times, whoever solves it will be rich, but whoever solves it solves it for all of us, because we can all take advantage of it.
We live in a world of ubiquitous computing -- there are ever more computing devices everywhere.
We will soon live in a world of ubiquitous video cameras. You probably have one staring at you right now just inches away from your face -- the camera in your laptop or desktop.
There are video cameras on street corners, business premises, highways. The Brits have the most video cameras per head of population but other countries are catching up. The CCTV technology is cheap to install and operate.
Consumer video cameras are cheap and getting cheaper and better quality. A Flip HD camera from Cisco is under $200 and there are consumer HD video cameras for under $100. HD video is found in smart phones, such as the iPhone 4. Soon, every phone will have a high quality video camera, and not just phones.
The circuitry and the mechanism for a HD video camera is tiny. It can be fitted into ever smaller formats, such as pens: Brookstone sells a video spy pen for $99.95, and there are cheaper versions available elsewhere.
As computers become more ubiquitous so will video cameras. It won't be long before there are video cameras all around and in places where we aren't used to having them.
It won't be long before we have always-on video cameras operating in all our social spaces.
Imagine living in a world where nearly every conversation, every meeting, every step you take in the physical world is recorded and archived in the cloud.
If you knew that every conversation with your kids, with your parents, with your friends -- was possibly being recorded and stored -- would you think twice, maybe thrice about what you had to say?
The Facebook effect...
We have become used to the possibility that all our online conversations and interactions are recorded and stored somewhere. We are much more guarded about what we say or do online.
But we think of our offline conversations and interactions as mostly personal and private. We don't exhibit the same cautious behavior offline as we do online.
If I meet a friend walking down the street and stop to chat for a few minutes -- I'm pretty sure that that conversation and meeting isn't recorded.
That won't be true in the near future. And it won't be because of government "Big Brother" surveillance. It will be because of personal surveillance devices that people will carry out of choice for personal protection.
It will be as if there is always a "fly on the wall" watching and recording everything.
People will carry what I call a "personal fly" -- a personal security device containing a tiny video camera fitted into a pendant or broach, embedded in clothing, earrings, or in eye glasses.
If you are attacked it will have video and audio records of that event.
Why will people carry a personal fly? Because they can, and because the technology will be cheap enough and good enough to be used as a very effective personal security device.
A personal fly...
A personal fly will be able to wirelessly record many hours of video and audio onto a flash memory chip; some "flies" will use the cell phone in your pocket to send continuous video and audio data to a cloud-based storage service.
If you were mugged, your personal fly would record the event and police could use its images and audio to track down the mugger.
- A criminal could try to destroy the flash card storing that video -- but since some personal fly devices send their data into the cloud, a criminal could never be sure that destroying the chip covered their tracks.
Thus, all people wearing a personal fly would be protected as if they were all storing their data off-corpus.
- A personal fly might even be equipped with a panic button alerting the police, and local public surveillance cameras to retain their video footage to track escaping assailants.
- Children will be a prime market. Parents will use these inexpensive personal security devices to protect their kids. It might even be considered neglectful if parents didn't protect their children with such devices.
- Adults will wear a personal fly throughout the day for protection. At the end of the day, or week, the video collected could be erased, or not, depending on what settings you keep
-Telcos will market them as part of the many wireless applications and services they provide.
- Manufacturers will produce different types of personal fly, in different disguises, and with an array of capabilities.
I have no doubt that these types of personal security devices will prevent many attacks and other types of criminal acts.
(BTW, I'm working with potential partners on manufacturing this concept -- let me know if you'd like to chat.)
The social fly...
What interests me is how such personal security devices (PSDs) will affect our behavior in our social spaces. What will be the new manners?
- Will it be rude to wear a personal security device at a dinner party?
- WIll it be rude to ask someone to turn off their PSD?
- How can you know if someone's PSD is on or off? (You can't know for sure...)
- Will it be rude to archive all your recordings?
- Will it be illegal to use a PSD in situations without informing all persons in the vicinity, similar to getting consent to record telephone conversations?
- Will we need new laws?
- Will people getting together, have to sync up their personal archive settings and come to some kind of agreement over recording their conversation -- before any conversation takes place?
- How will we behave in our social spaces knowing that everything we say is being recorded and possibly archived for many years?
- How will kids grow up with such personal surveillance systems? Parents will likely want to peek into how they do in the classroom, their conversations with friends, etc.
The number of personal attacks is rare but people's fear of them is much larger, and that will drive the sales of these devices.
Surely, it will have a chilling effect on our society and our behavior...
The threat here is not from "Big Brother" but from each other; we will constantly be aware of a shadow haunting all our interactions, recording everything we see, hear and say. We will always be on guard, second guessing ourselves in all our social interactions
Surveillance by Big Brother is less scary than surveillance by each other, by people you know and know you.
- Say goodbye to casual drinking or anything at casual at parties.
- The opportunities for mischief by disgruntled friends and lovers are immense.
- The question of trust between friends and family members will be tested to the extreme.
- Living in an ambient surveillance world policed by the people around you is going to be challenging.
These things can't be good. But they will happen because they can.
Welcome to your future.
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[If you like this post you might like some of my other posts, collected in my new book - In My Humble Opinion: Notes from a Silicon Valley Watcher - available in paper or electron.]
It's interesting that blogging started off in the San Francisco area because here, there is a long tradition of new forms of writing. I've long been fascinated with the literature of the Beatniks -- a word coined by San Francisco columnist Herb Caen in 1958.
Here are a few of my prior posts exploring the Beatnik to blogger connection.
For a long while I've felt a strong connection between the culture of the Beat generation and the Blogging generation. Both celebrate a raw and passionate expression, and a use of language that is both novel and designed to snag the reader's social sensibilities.
Both communities found themselves at the forefront of major changes in their societies. And both took advantage of a lapse in the controls that societies usually place on publishing outsider ideas.
In October 1955 Allen Ginsberg performed his "Howl" poem for the first time in public at the "6poets at 6 Gallery" in San Francisco.
The performance was in a dilapidated storefront on Fillmore Street in San Francisco. Yet this small event had a huge effect on the entire country. It eventually led to a show trial on obscenity charges and propelled a small writers colony, dubbed "Beatniks" by San Francisco columnist Herb Caen, into media superstars.
This period of the late 1950s was a tumultuous one because of the escalating Cold War. Although the Beatnik writers had begun developing their ideas and their works in the late 1940s, it was now that their seed fell on fertile ground. Their message of rebellion and a world gone mad was now easily understood and the mechanisms of mass media enabled it wide distribution.
The Beatniks were mostly white middle and upper class kids and completely out of odds with the confined culture that limited nearly all forms of artistic expression. It's a familiar story to us today, of youth in rebellion, but there is much more about the 1950s that is familiar too.
The Second World War had created a massive government propaganda machine with help from newspapers, radio, TV and Hollywood. This seemed necessary during a time of war but it kept on going after the end of the war, and it created a belief that there was a permanent state of war - the Cold War. It's similar to our "unending" state of war against terrorism.
The writers of the Beat generation were initially apolitical, amoral, and hedonistic. That was all you needed to be a rebel in those days. They found they could shakeup society simply through their hedonism, their joy in the creation of literature; and the overall exploration of the edges of our mortal experience.
In the mid 1950s there was a thaw in the Cold war and this helped thaw American society and helped it discover the Beat Generation.
This thaw showed itself in events such as the Hungarian uprising in 1956, which led to liberal reforms in neighboring countries and a general cultural and artistic renaissance.
1956 is the time when my parents managed to escape Poland. There was a slight raising of the Iron Curtain that divided Europe. For the first time Poles were allowed to visit Western countries. My parents queued up for three days, (not to buy an iPhone) to get onto the first organized vacation trips to Vienna, Austria.
They were part of a group of 60 tourists. And once they were in Vienna, they and their friends snuck away in the middle of the night and took a train to Salzburg where they turned themselves in as political refugees.
They were housed in one of the refugee camps still in place from the war. Six months later I was born in that refugee camp and six months later we left for London, where I lived until I moved to the US in 1984.
This period of my parents' escape from Poland and the Beat Generation's newly found success came during a time when there was a global lifting of the normal restraints on politics and the arts.
By the mid-1950s McCarthyism had run its course and the Beatniks found themselves in the vanguard of a new culture, and become a new intelligentsia that felt able to challenge the rules of the day and win. That challenge came in the form of an authentic literature that still holds its power.
Today [March 2006] blogging challenges the rules of today -- is it journalism? Is it rubbish? Is it a new literature? Is it all those things?
I used to think blogging might be a subset of literature, a cousin to journalism. Now, I think of it as a superset of all other forms of writing because all other forms of writing can fit into its format.
We are entering another period of big changes, just as in the late 1950s, and blogging is the most revolutionary and most exciting literature to emerge since the Beat Generation, imho.
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I get to meet the son of Neal Cassady, the most fascinating character of the Beat Generation...
It's a warm Wednesday evening in North Beach, San Francisco, and it is Neal Cassady's 80th birthday, and the remnants of the Beat generation, including Neal Cassady's son John are inside a small storefront.
The event also marked the opening of the Beat Museum. I've lately become very interested in the Beat generation, the mostly East Coast/New York intellectuals that came to San Francisco in the 1950s and were chosen by the media to represent the rebellious youth of those times.
"The members of the Beat Generation were new bohemian libertines, who engaged in a spontaneous, sometimes messy, creativity. The beat writers produced a body of written work controversial both for its advocacy of non-conformity and for its non-conforming style..."
The Beat Generation influence has lasted a long time, reflected in the Hippie and Punk cultures, and I see its influence in blogging too.
The Beat Generation created a literature that was passionate, raw and emotional. Blogging can be like that too.
I've become interested in Neal Cassady who was somewhat of a mysterious character because his writings are rare. Yet Neal Cassady became a very important muse for many, influencing the writings of many of the Beat Generation such as Jack Kerouac, Michael McClure, Allen Ginsberg, Lawrence Ferlinghetti and in later generations Ken Kesey, Tom Wolfe, Hunter S. Thompson and many more. Yet Neal Cassady did not write much himself.
What makes him even more interesting is that Neal Cassady was not of their world -- the privileged, well educated, middle class world of the Beat Generation's intellectuals. He was a working class kid, or rather a skid row kid.
When he was six he came under the care of his alcoholic father, a part-time barber, and lived with him in Denver's skid row. These were depression times and brutal to families living on the edge. He learned the survival skills of a hobo, train hopping, etc.
I had just finished reading a book by Neal Cassady, called the "The First Third" so it was great thrill to chat with his son John.
John Cassady looks to be in his mid-50s, white hair, lots of energy, and he talks a mile a second. I asked him about the book. "That was something we found in the corner of his closet, very little of his writing survived. But I'll tell you what happened to his writings...I don't think this story has been published yet."
Brilliant. A potential scoop.
John tells me that most of his father's written work was lost when he parked his car for two weeks at a friend's place then took off for two or so weeks of carousing -- in the very same North Beach neighborhood that we are standing. When he returned to pick up his car it was gone. And so was nearly all of his father's literary work.
Wow. I wondered if they might still exist in some garage, attic or in the trunk of some car in a junkyard.
John Cassady went on to tell me about how the term "Beatniks" was hated by his father and his friends.
John adds, "The bongo playing, dressed in black, and beret wearing Beatnik was a complete invention of the media. The closest they got to bongos was one time at a rent party just around the corner from here. ...[A rent party charged a modest admission to help the hosts pay their rent]. Jack (Kerouac) was handed some bongos and he noticed the skins needed tightening so he went to the kitchen and lit the gas burner to heat and tighten the skins. He was distracted and he burnt right through the skins."
More stories followed and then Wavy Gravy showed up and held court, telling more stories as people passed a jug of red wine around... Neal Cassady would be very pleased.
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Evelyn Rodriguez, a blogger friend at Crossroads Dispatches, found a fascinating essay about writing authored by Jack Kerouac. In it you can see some of the connection between Beatnik and Blogger.
Here is an extract of Jack Kerouac's writing advice from "Essentials of Spontaneous Prose." It's worth reading the essay in full.
PROCEDURE Time being of the essence in the purity of speech, sketching language is undisturbed flow from the mind of personal secret idea-words, blowing (as per jazz musician) on subject of image.
METHOD No periods separating sentence-structures already arbitrarily riddled by false colons and timid usually needless commas-but the vigorous space dash separating rhetorical breathing (as jazz musician drawing breath between outblown phrases)--"measured pauses which are the essentials of our speech"--"divisions of the sounds we hear"-"time and how to note it down." (William Carlos Williams)
SCOPING Not "selectivity' of expression but following free deviation (association) of mind into limitless blow-on-subject seas of thought, swimming in sea of English with no discipline other than rhythms of rhetorical exhalation and expostulated statement, like a fist coming down on a table with each complete utterance, bang! (the space dash)-Blow as deep as you want-write as deeply, fish as far down as you want, satisfy yourself first, then reader cannot fail to receive telepathic shock and meaning-excitement by same laws operating in his own human mind.
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There are more posts like this in my new book:
California has by far the largest number of tech workers. According to TechAmerica Foundation's Cyberstates 2010 report, it has 993,000 tech workers, and its largest center is Silicon Valley.
But it's not just Silicon Valley that impresses me. If you fly north along the West Coast starting at San Diego, take a look at what you'll be flying over:
- San Diego, with its large communications, biotechnology and pharmaceutical companies. This is where Qualcomm is based, the world leader in mobile communications technologies.
- Orange County has a very large number of electronics companies. This is where Broadcom, one of the largest chip companies is based.
- Hollywood with its massive entertainment businesses, all incredibly creative and innovative (3-D movies, animation, etc).
- Santa Monica, where the entertainment industry and technology combine to produce leading online media ventures. This is where Yahoo, AOL, and many others have large centers.
- Silicon Valley and San Francisco, with its huge number of tech, biotech, clean tech companies.
- Portland, Oregon, a rapidly expanding tech community anchored by Intel, which is larger here than its HQ in Silicon Valley.
- Seattle, Washington, with Microsoft and all the other tech companies and aerospace.
- Vancouver, British Columbia, and its large software and graphics technology companies.
From San Diego to Vancouver, you'll be flying along a narrow corridor 1400 miles long, packed with some of the world's most innovative and creative communities.
I can't think of any other region anywhere in the world that is crammed with so many incredibly successful companies, generating so many ground-breaking technologies, decade after decade...
But that's not all...
This West Coast Corridor of innovation, is sitting on top of one of the most unstable fault lines in the world. It's the western edge of the North American Plate, part of the Ring of Fire, where 90% of the world's earthquakes occur, and where 75% of all volcanoes are found.
It's one of the most disruptive geological zones on the planet.
Is there a connection between living in an area of such abundant innovation and where physical reality is disrupted so often?
I've always believed that innovation must contain a strong disruptive element otherwise it's not really innovation.
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Backstage Pass- Tom Foremski says disruptive tech linked to fault lines - Sky's Blog
If you liked this post you can find another just like it next Saturday at 4pm PDT, and also in my new book:
I don't pay much attention to games. I used to play games as a kid, and I used to play Halo as an adult. But that was years ago.
Today there are games everywhere, Farmville on Facebook, games at fast food places, games based on watching TV shows. I've managed to avoid all those too.
But I'm probably in the minority. Because games have become one of the most lucrative commercial endeavors, which means lots of people are playing. And game culture is having an effect on our broader culture -- especially the game culture of earning points.
Kevin Kelly points to a fascinating talk by Jesse Schell, a games designer. In "Design outside the box" Mr Schell starts by explaining out how much money is made by very simple games, such as Farmville and Club Penguin.
But its the latter part of his talk that is even more interesting, when he predicts how games will be embedded into our reality. With the use of wireless sensors, a lot of real world game play is possible.
- people will be rewarded with points by their insurance companies for walking.
- kids will get points for doing well at their music lessons.
- people will use public transport to earn points that are redeemable through tax credits; and so on...
Kevin Kelly notes:
On second viewing I realized that Schell had also outlined a version of an attention economy -- where points are distributed for paying attention -- to ads, or other activities, or other people. Some aspect of his vision seems pretty inevitable.
Foremski's Take: I agree with Kevin Kelly and Jesse Schell that the intrusion of games into our society is inevitable. But It's a scary future.
I can imagine people doing all sorts of weird things because some advertiser pays them points, for say, shouting out their name at noon: "JACK IN THE BOX!" and monitors it via a cell phone, and its GPS location, for extra points in an urban area. And there will be even weirder, crazier stuff going on, as games becoming ever more embedded into our reality.
Foursquare already gives us a tiny glimpse of a world where games are embedded into reality -- its a form of what could be called a 'reverse virtual reality.'
And 'points' are a perfect example of a reverse virtual reality (RVR), they are a virtual currency with real benefits.
The opportunities for abuse, in constructing points based RVR game play, are huge. Yes, people will be encouraged into healthier behaviors but they will also be taken advantage of by their willingness to do things for points.
We won't need to fear subtle mind control by governments, or a Big Brother, people will do and say all manner of things, not because they love their Dear Leader, but because they earn points.
- Monitoring of behavior, and the scoring of points, will be carried out by cheap sensors networked together through the ever spreading wireless communications layer that will soon be ubiquitous, even in remote rural areas.
- Collation and redemption of points will be in online worlds where even more points can be earned, by taking part in immersive experiences that strengthen brand association and loyalty. Scary, very scary.
- And of course, the tax man will take his share. How, I'm not sure, but there will be a way. And since government will benefit, it benefits the government to regulate it and encourage it.
But what if you don't want to participate in the brave new RVR world?
Of course, you won't have to, there's nothing that says that you must, no laws can compel you, in fact, there will be laws that protect you from discrimination through having to have RVR points, in housing, employment, and education.
However, we are social animals, we are very social animals. Monkey see, monkey do. Peer pressure will compel us into RVR game play to an enormous degree. Decrees against RVR game play will find few takers.
And as the real world becomes ever more tied to the virtual world, outcasts from this RVR society, like outcasts have always done, will once again form communes in the woods and remote areas of the world. Will you be one of them?
I'd like to think I'll be one of them, but then I'd have to walk away from all those points I've accumulated over so many years...
Take a look at the video - it's really worth it.
"I'm not sure if we think about society, or that society thinks us," that's what I heard Malcolm Muggeridge say, when I was about 10 years old.
Malcolm Muggeridge was a British journalist and philosopher and I often saw him on British TV when I was growing up, talking about serious subjects.
That quote has stuck with me because it says something about us, it says that we are part of a society, and that we are a part of its messages. And society's messages and its thinking is done through media.
Today, we have more media, in more forms, at anytime of the day -- than at anytime in our history. Wow. What's that going to do to us?
These are extraordinary times and I'm thankful for being here right now because we won't see changes on such a scale ever again in our lifetimes.
(BTW I'm counting social media as Media - it's all about publishing.)
Our media helps us to make decisions about important things: presidents, global warming, health, ecology, morality, and washing powder.
We live in societies because we are social by nature. We respond to each other and we influence each other.
Today we can influence each other more easily than ever before because our media is digital, it can reach anything that has a screen. And nearly anything with a screen can also be published from -- we have a two way media.
Media is influential
Do you sometimes wonder about the "echo chamber" aspect of Techmeme, where it seems everyone is obsessed with the same stories, the same thinking? Well, that's because they all read the same things and they all take part in the same media.
Media influences people, and people use media to influence other people.
The more exposed you are to the media the more likely you are to be influenced by it. That was the great insight of Noam Chomsky, professor of linguistics at MIT. He said that intellectuals were more prone to propaganda because they read more, they were exposed to more media than others.
Now that we have more media than ever before, the likelihood is that we will all be prone to being more influenced than ever before.
And who is interested in doing the influencing? Antonio Gramsci, the Italian philosopher said it was the government. He coined the term cultural hegemony to describe the activities of state governments in the 1920s and 1930s.
You can see this most easily during political campaigns, where choosing the right word, the right phrase, is done with great care because it can make or break campaigns. But it goes on all the time -- governments seek to exercise their influence at all times.
Today the concept of cultural hegemony includes corporations, many of whom have greater power than state governments.
Fragmenting the echo-chamber
With the fragmentation of media we might find an escape from the echo-chambers and the influence of society's special interest groups. It could lead to a new flowering of culture, original thinking, unique ideas, and philosophies.
That's what seems to happen when you have a revolution, when the cultural hegemony is overthrown. You see it in the English revolution, which led to an explosion of new thinking and beliefs, with the Diggers, the Shakers, the Puritans, etc. You had new communities, some believed in free-love, some in castration, some in communal sharing of resources.
You see the flowering of the arts after the Russian Revolution, the Spanish Revolution, and Hungarian Revolution... It sometimes seems that the fragmentation of media could be revolutionary and smash the cultural hegemony of our times.
Or it might not. Fragmentation of media is no protection if the messages are all the same, which is what they seem to be. The new media world might lead to closer control and tighter influence on our thinking. It might lead to narrow thinking and expression simply because everything digital can be tracked, measured, and logged.
The best way to stop being influenced by media is to cut yourself off from all media.
But that's very difficult. In today's always-on world we are obliged keep checking into the media every few minutes: emails, Twitter, SMS, headlines, Facebook, etc. These are all avenues of influence.
There's probably no escape.
Which means that we either get our thinking right, and we prosper, and enter a new golden age of humanity, thanks to our media.
Or we don't, and we end up with one massive echo chamber of crap and a tightly controlled society, thanks to our media.
We seem to be heading into challenging times.
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Please see other Saturday Posts:
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You need video services! Creation, Distribution, Attention. Contact Aron Pruiett at SF Media Collective- 415 533 4487 - Here is a demo reel.
Silicon Valley Watcher Consulting services - call Tom at 415 336 7547
Last week my Saturday Post was about how Internet based technologies have been used to create applications and services that devalue existing business models. It's a hugely disruptive process. [The Internet Devalues Everything It Touches, Anything That Can Be Digitized]
This trend is occurring because it can occur -- because if you have the ability to significantly improve a service at a dramatically lower cost, then there will be startups that will attempt to disrupt the business models of existing companies.
One of the best examples of how the Internet can devalue business models is Craigslist and its effect on the classified ads business.
[Here are some ideas I've been thinking about over the past few years, I welcome your feedback and contributions.]
Ever since I first heard about the Internet and then saw its incredible development and application across industries, I've been on the look out for the economic effects of this powerful platform technology. The specific economic influence I've been looking for is a strong deflationary trend. That's when we will know when the Internet has truly begun to reach its potential.
Let me explain why.
Can you charge for news? Can you charge for social media? Two questions that show how the economics of the online world are affecting media and PR.
I've long said that the same media technologies transforming the business model for journalism are transforming the business model for PR. Yet this relationship wasn't as evident in PR for several years because the old business model was still working. The difference between the two industries has been in the timing of the disruptive trends affecting them.
Last year I spoke with Todd Defren, owner of Shift Communications. He said that social media was the tip of the spear in terms of winning new business. However, he said that it takes a lot of work and that clients often aren't willing to pay for the extra work.
I come across lots of people joining Facebook for the first time, or joining Twitter. Some, should have joined a while ago because their profession needs to know about such things. And you can only know by doing, not by reading. But at least they eventually join.
I know many people, young and old, that are passionately determined never to join any social network. They are often adamant. I admire their stance but I don't understand it.
This is a chance to take part in a social experiment that is totally unique. Facebook, Twitter, MySpace, Friendfeed, etc, are part of a unique global experiment that involves tens of millions of people in ways that we have never experienced each other. Tell me that's not interesting, or fascinating. Tell me that's not a reason to get out of bed. It's all fresh footprints in the snow.
Things are very interesting in media and PR communications these days. Things are changing so fast and we are all learning so fast. The changes happening in our industries are unprecedented, we have no frame of reference except our old ways.
For much of my 25 years in Silicon Valley I've been reporting on innovation and what people have been doing in software, IT systems, chips, etc. These days, the innovation isn't so much in technology, but in media communications.
These days I spend a lot of time talking with reporters about the changes in media and PR. There is a tremendous amount of innovation happening in media communications: Twitter, Friendfeed, Facebook, etc, represent just a tip of an iceberg, a tip that barely existed a year ago, what will be there next year?
And that's what's great about all of this innovation in media communications, that we are in the midst of it, and that we get to help create the future. We get to make the mistakes, and we get to discover and create things that no one has ever done before. It's like making fresh footprints in the snow. It's not often that we get to do that.
It seems as if it doesn't matter how old you are, kids or grownups and beyond, everyone is complaining they are having trouble focusing on tasks, and that they are constantly distracted.
I remember when MTV launched in 1981. The music videos were a big hit at the time, they were imaginative and innovative -- it was very compelling content. But there were concerns that the fast edits, combined with the seductive imagery of the music world, would shorten the attention span of viewers, especially kids. There was talk of an "MTV attention span" syndrome.
However, today I know people that would kill to have the breadth of an MTV attention span. In this world where worlds of compelling content are just a click away, it's like being in a garden of Eden and feasting on every type of fruit, a cornucopia of amazing content and knowledge. And it is all available in any format you want, at anytime, and in anyplace.
The death rattle of the newspaper industry makes it seem as if media is dying, yet there is more media being created today than at any other time in human history.
Plus, there is more compelling content today than at any other time. And it has never been easier to find because our social networks constantly tip us off on Twitter, Facebook, Friendfeed, email, sms, blogs, phone, and when we get together to talk. We are all sharing (and creating) massive amounts of compelling content, all the time.
The problem with compelling content is that it's compelling. That's why we now all seem to have the attention span of a gnat.
I've been thinking about this question for a while: In a world of compelling content what do you do? How do you deal with the distraction of its easy reach and abundance?
I have a suggestion. I'd love to hear yours, please send to tom(at)foremski.com or leave a comment.
CES in Las Vegas was made more tolerable because of the good company of fellow journalist blogger Paul Mooney. One late night we were discussing the media industry, an occasional favorite topic of mine.
We were discussing how the economic situation was going to accelerate the broad disruptive trend within the media industry.
Less advertising would lead to a faster rate of job losses, and lower revenues for most, if not all media companies, and that also includes many newer media companies, Gawker Media for example. Simply put, it's not a good time to be in media--mainstream or newstream.
More recently, the Wall Street Journal cut 25 newsroom jobs.
Here is part of a memo to staff from Robert Thomson, Managing Editor of the Wall Street Journal:
It is obvious to you all that we are in the midst of an unprecedented economic downturn. We are also in the midst of an unprecedented increase in our readership, in print and online, but a precipitous decline in print advertising revenue has forced a close examination of our structures and of our costs.
It points to a curious anomaly within news organizations, that readership is often rising but revenues are falling.
And the reason is that advertising is less expensive online but news creation costs remain the same. The cost of being in the news business isn't being covered by online advertising revenues.
Media companies such as Google and Yahoo can sell online advertising at low rates and cover their costs but Wall Street Journal and other news organizations cannot survive without shrinking their productive resources, which can create a downward spiral of less content, and less revenue.
When journalists lose their jobs it's tough because they also lose their publishing platform. They lose their byline, they disappear from public view, and that makes it more difficult finding a job. And even when better economic times return, the majority of journalism jobs won't ever return.
In Las Vegas, Paul Mooney and I were thinking that we are in a better position than many of our colleagues in the media because we don't have far to fall. As long as we can keep the lights on, and maintain an Internet connection, we can still keep publishing during bad times, and worsening times. If you lose your job at a news organization you lose your public persona--a journalist that isn't publishing isn't.
We joked that we represent a new type of media: cockroach media. Paul is from New York where cockroaches can be formidable in their ability to survive the harshest environments. He says, "I've given cockroaches some of my best hits and they still manage to crawl away."
Cockroach media will survive this economic downturn a lot better than old and new media companies. And cockroach media should do well once the inevitable upturn comes around.
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I don't like chain letters but I like the tone of this chain: Writing 25 random things about yourself and then "tagging" 25 others to invite them to do the same. I got tagged this morning . . .
(If you read this consider yourself tagged :-) send me a link and I'll add the first 25 to the bottom of this post, I'd love to find out more about my readers. Don't be shy.)
1: I was born in Salzburg, Austria, left after 6 months.
2: My parents are Polish.
3: My parents wanted to emigrate to Canada but couldn't because I was under 2 years old.
4: I had whooping cough as a baby. There is a saying that to cure it you have to cross over a body of water, in this case the English Channel seemed to do the trick.
5: I really miss not living with my kids.
6: I like Hugo Boss suits.
7: I think of myself as semi-literate.
8: I like to notice irony and believe "ironic design" proves the hand of the supreme being more than "intelligent design." Because there is someone/something paying attention, moment to moment, and trying to mess with us. Intelligent design is more about "set it and forget it."
9: I'm an atheist.
10: I'd like reason and logic to make a comeback, I'd like to see a new enlightenment.
11: I try not to think too much, instead, allow myself the space to think.
12: I keep a pen and a slim moleskine notebook always on hand - it's my hipster PDA - it's instant on, high definition, stylus input, sharable, and 100% recyclable.
13: I prefer offline to online.
14: I've never had a wine cooler and want to keep it that way.
15: I don't know how to small talk.
16: I am afraid of karaoke. I can't carry a tune even if it were super-glued to me.
17: I like thinking on my toes.
18: I like "and" rather than "or." The world is not black or white it is black and white and more.
19: I like to have my cake and eat it.
20: The more I write the more authentic I become.
21: I like Manhattans.
22: I like Manhattan.
23: I like road trips.
24: I'm intensely interested in the future of media.
25: I prefer conversation more than going to the movies.
The global economic crisis doesn't seem to be showing any rays of light, which is quite worrying. But at least there is some good green news from the economic slowdown:
- Factories around the world have scaled back production and are not polluting air and groundwater as much as before.
- We have fewer trucks and ships polluting the atmosphere.
- We have a much smaller carbon footprint worldwide because there is far less use of fossil fuels in manufacture and transportation.
- We are buying fewer replacements for goods we own and making them last longer, lightening the load on landfills.
- We are using less of the earth's limited resources in manufacturing goods and providing various services.
- Fewer of us are traveling to jobs which reduces carbon footprint and pollution.
- Less pollution improves people's health and saves lives.
- More importantly: We are more likely to develop and adopt technologies that are more cost efficient, which means saving resources and energy. And this is where Silicon Valley's companies have a key role, developing disruptive technologies that replace the more wasteful processes that are currently used in many industries. It will lead to the creation of new rules enterprises--businesses that are greener and more profitable.
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I continue to be amazed at all the economic experts that come up with bailout packages of one kind or another. It seems clear to me that none of them, including our chief regulator, Alan Greenspan, have a good grasp of how the economy functions. Mr Greenspan's recent visit to Washington was astounding, he admitted that there was a serious flaw in his understanding of financial markets! For forty years he and his staff "regulated" the US economy based on faulty assumptions!
Since no one really knows how things work the best thing to do is to let the economy correct itself without too much interference.
That means we write down the inflated assets, and take the bitter pills, and let the economy unwind its huge leverage, and then we can clearly see where the economic stimulus packages can be applied. Trying to fix things based on assumptions can only make things worse, imho.
Here is an essay Thrift is the Future: Interventions will only Prolong the Credit Crisis by David Roche:
DK Matai, chairman of the ATCA Open has written a terrific essay about how global shipping has come to a halt because of the lack of letters of credit.
Just five months ago it cost about $234,000 to rent a 170,000 tonne Capesize bulk carrier. That priced has collapsed 98 per cent to less than $5,000!
That means that globalization has come to a screeching halt. Read more:
The Global Shipping Halt: Is The Great Unwind Disrupting The Freight Market?
By DK Matai
Freight shipping prices for transporting dry raw materials have collapsed in November 2008. The Great Unwind is like a Tsunami that is engulfing and halting the shipping world at an accelerating rate. The Baltic Dry Index sounds like a weather report, but what it really does is track the price of shipping bulk cargo -- such as coal, iron ore, cotton and grain. Recently, the Baltic Dry Index has fallen through the floor. It has slumped by nearly 95% over the past five months. In real dollar terms, at the peak of the market in June, a 170,000-tonne Capesize bulk carrier cost USD 233,988 to rent. Recently, it was available for USD 4,793 - that is a crash of 98% and is below the cost of paying for crew, insurance, maintenance and lubricants. Why?
1. Of the USD 13.6 trillion of goods and materials traded worldwide per annum, 90% rely on letters of credit or related forms of financing and guarantees such as trade credit insurance. International shipping works on "letters of credit." These financial guarantees are issued to buyers of bulk cargo by their banks. This system has greased the wheels of global trade for the last 400 years by transferring payments internationally from buyer to seller once shipments have been delivered. With the collapse of the credit market - and banks now sitting on their hands, refusing to lend - the fast-moving wheels of global shipping have come close to halt.
2. There is a collapsing demand for credit driven expensive product purchases like cars and as a consequence, the transport of associated raw materials and sub-assemblies. Auto sales are falling in double digit percentages across most of the G7, ie, the US, Japan, Germany, UK, France, Italy and Canada. The pace of car sales growth is slowing down across most of the remaining G20 nations as well, including China and India.
This is a massive disruption in the freight market with asymmetric consequences for world trade, which poses systemic risk for many nation states. Liquidity has to return because if there is insufficient money to provide standard finance, world trade is being sharply cut back and economic growth is not only stalling but likely to implode. If cargo trade stops, a whole lot of supply chain disruptions start. For example, if the iron ore does not go to the refinery, there is no plate steel. If the plate steel does not get shipped, there is nothing to fabricate into components. If there are no components, there is nothing to assemble in the factory. If the factory closes the assembly line, there are no finished goods. If there are no finished goods, there is nothing to restock the shelves of the shops. If there is nothing in the shops, the consumers cannot buy. If the consumers cannot buy, there can be no sales!
On a more sobering note, if bulk shippers cannot buy cargoes, then a lot of US and world grain could end up rotting in warehouses while big portions of the world go hungry. For example, the Saudis are the biggest importers of food in the Middle East. They probably have the money to pay cash for their food shipments and may not therefore need letters of credit. But for the approximately 2.7 billion people in the world who spend 80% of their income on food, a disruption in the global shipping trade could mean the difference between quiet poverty and going hungry day-in, day-out. That will not last for long before there is social disorder on a massive scale.
The Baltic Exchange based in London is the world's leading maritime marketplace. Their dry index, a measure of shipping costs across different ship sizes, hit a record high of 11,793 points in May but has since fallen by 93% to 815 points last week. The UN Conference on Trade and Development (UNCTAD) has said that the financial crisis had begun to affect international trade, noting sharp falls to key shipping indices. Much lower shipping costs mean national markets are more contestable by foreigners, which should limit the ability of domestic firms to raise prices and therefore this should reduce the possibility of inflation. We can safely conclude that the majority of The Great Unwind's forces moving through the markets now seem to be deflationary, and not inflationary.
The ravaged worldwide demand for cargo ships is due to the chronic global financial crisis affecting credit availability, an unprecedented synchronised economic downturn across most of the major national economies in the world caused by massive demand destruction, and the resultant collapse in commodity prices. At the same time, container rates in the Asia-Europe routes have plummeted by around 75% this year and a price war between companies seems to be driving rates lower and lower, destroying the profitability of container shipping and placing huge stresses on companies struggling to meet their commitments. A significant component of the dramatic decline in shipping indices has been due to the difficulty in arranging trade finance during the credit crunch. Demand has been slashed because the global credit squeeze has made it very difficult for buyers to attract funding. At the same time, perceived counter-party risk in the physical markets has slowed trading to a trickle, exacerbating the freight slide. Many big players involved in the shipping of dry commodities and goods cargo are unwilling to trade with some parties fearful of their financial footing. There are big chains of owners of the chartered ships in the supply chain, so if someone goes bankrupt half way through the chain, it has a knock-on domino effect for everybody else. Another problem is that there are quite a significant number of players walking away from cargoes at present. So anyone who has taken cargoes to hedge the vessels they have chartered is now finding themselves with the ship without the cargo to carry.
ArcelorMittal, the world's biggest steelmaker, on November 5th said its global output will decline by more than 30 percent. Cia Vale do Rio Doce, the world's biggest iron-ore producer, said last month that it will cut production.The fall in demand for many raw materials, which began at the beginning of June, first squeezed the profit margins of producers since they faced fixed high raw material costs and falling prices for their finished products. This was followed shortly by a squeeze of freight costs as they tried to pass the pressure from the profit margins to the freight market. One could be forgiven for not noticing what the world has experienced in recent years by way of an unprecedented growth in shipping and shipbuilding, fuelled by cheap imports from Asia and the seemingly unstoppable rise of economies such as China and India with their insatiable demand for raw materials. For some time charter rates went through the roof and reached a zenith in May/June this year and demand for new ships out-stripped supply. A different picture is now emerging. Companies are starting to struggle with too many ships chasing ever decreasing rates.
This slump not only means a fall in revenues but also less revenues to service debts. In turn, the current 'credit crunch' means extreme difficulties for struggling shipping companies seeking to raise capital. UNCTAD revealed in its annual maritime transport review that the world's merchant fleet had expanded to a record 1.12 billion deadweight tons, with the order book for new vessels reaching a peak of 10,053 ships in 2008. However, from mid-2008, companies were cancelling new ships on order, even when they were losing their 10% deposit in tens of millions of dollars. Mitsui OSK Lines (MOL), Japan's largest bulk shipping company is said to be considering laying-up and even scrapping vessels as revenues collapse. MOL may mothball some of its largest vessels. The company is considering scrapping seven of its Capesize dry bulk ships from its fleet of a 100 vessels. This suggests that MOL may be getting ready for a protracted down turn lasting several years. Reports are already filtering through of companies seeking sheltered waters to lay up their giant vessels to weather the financial storm. Just as in the days following the oil crisis in 1973, we could see the same happening with the great lumbering bulkers and container vessels, which now seem less and less attractive as they ply the waters with their great bellies less than full. In the space of less than half a year we have seen the shipping world ride the crest of a massive globalisation expansionary wave and then plunge into a financial storm that could sweep most vessels off our oceans, and with them, companies who cannot weather the crisis caused by The Great Unwind.
We welcome your thoughts, observations and views. To reflect further on this, please respond within Facebook's ATCA Open discussion board.
Chairman, ATCA Open
DK Matai, chairman of the ATCA Open writes an interesting essay on how this financial crisis will play out in the following article titled: The Four Scenarios: Debt Deflation, Hyperinflation, Quadrillion Play and Muddle Through.
The "Four Scenarios" brings to mind the "Four Horsemen" as a metaphor for describing these extraordinary times.
It's an interesting essay. I love the imagery of scenario #3 and that is my pick because governments think they have control but they do not and thus will continually put markets out of balance. And the road to hell is paved with good intentions.
IMHO, the thing to do is to let it all play itself out, since no one can understand the complexity of today's global markets.
[BTW, the third horseman rides a black horse and represents famine and carries a scale. Scarcity and judgement?!]
The Four Scenarios: Debt Deflation, Hyperinflation, Quadrillion Play and Muddle Through.
By DK Matai
From the vantage point of November 15th, 2008, whilst the Washington, DC, summit is underway amongst the leaders of the G20 nations, it would appear that there are four distinct global economic scenarios that may unfold towards the tail end of this year, 2009 and 2010:
Scenario 1: Debt Deflation
Most product, service and asset prices keep falling and the vicious circle of deleveraging causes many businesses, factories and support sectors to shut down. This in turn causes rising and out of control unemployment and falling living standards quarter-in, quarter-out with a severe and ongoing headache for some governments to provide stimulus in the face of declining revenues. This is a similar scenario to the US in the 1930s post the 1929 Wall Street crash.
Scenario 2: Hyperinflation
Some governments print money to try to stave off a recession / depression and end up stoking large scale inflation in a similar way to the Weimar Republic in Germany around 1923 post the first world war's conclusion in 1919. Hyperinflation is the flip side of currency collapse, which then leads to multiple domestic and trans-national black swans.
Scenario 3: Quadrillion Play
The invisible one Quadrillion dollar derivatives equation underpinning the hundred trillion dollar plus debt pyramid manifest as "Eight Bubbles" (Ref: ATCA briefings) continues to experience trillion dollar black holes in which capital on the balance sheet vaporises without warning, month-in month-out. Governments via central banks try to hyper inflate and levitate the system by pumping trillions of dollars of liquidity into the system. The net impact is manifest via two opposite north and south directional vectors -- hyperinflation and deflation. The two vectors collide continuously to create several vortices as the markets change direction nearly every day exhibiting high volatility. The consequence of being caught up in the resultant eddy currents of those vortices is that some asset classes levitate and give the impression of rising, albeit temporarily, and other asset classes fall or simply cease to exist as their underlying asset-base vaporises within the gravitational pull of the nascent financial black holes.
Scenario 4: Muddle Through
Given that fiscal stimulus is one component of GDP over which there is direct policy control, the muddle through is another possible scenario. However, government spending is always far too slow and occurs at some point in the future so we can expect a lunge towards cutting taxes or offering tax holidays, which is the high velocity component. The massive public sector borrowing requirement may have an adverse impact by way of currency devaluation. There is some probability that the governments' massive stimulus packages and central banks' interventions, after a while of uncertainty in the minds of people, act as a partial, deferred offset to the ongoing global financial system deleverage. Then markets may revive, although some of the eight bubbles are only partially deflated. Life goes on in a new muddled way as new and larger bubbles are created. Politicians stop panicking and get re-elected and a new bigger set of bubbles prepare themselves for collapse a few years later, say, 2015 or 2020. This is similar to the scenario post the dotcom and 9/11 crashes in 2000-2001 and the muddle through which occurred until 2007 on the back of extremely low interest rates, credit card, car and housing loans and the other eight bubbles. There is, however, one caveat. Countries without reserve currencies -- of which there are really only two -- and in particular those with with large financial sectors given the base of their GDP, can practically prime the pump only in a very limited way and in doing so risk moving from a banking crisis via a currency crisis on to sovereign default. That would mean expectations from fiscal stimulus are far too high, and not all countries would be able to muddle through.
Take a look at this study. OK, it is a small sample size, but ask yourself: do you search the Internet based on brand? Do you believe that GOOG has the best search results?
It seems that some people do...and maybe it is more than some.
I believe that GOOG has the best results, that's why I use it. But I don't know for sure. GOOG doesn't publish its algorithm so I don't know if it is making the best choices for me, I trust in the brand.
The study showed that when a searcher was given an identical result set across Google, Yahoo, Windows Live Search and an in house search engine, Google and Yahoo came out as more relevant. Why? Because of the brand of the search engine. Despite the results pages being identical in content and presentation, participants indicated that Yahoo! and Google outperformed MSN Live Search and the in-house search engine.
If this is the case, that we are influenced by brand more than we are willing to admit, then the search market is wide open to some of the biggest brands in the mediasphere: Apple, Virgin, Coca-Cola, Gucci etc. Why not?
I remember that it used to be quite common to switch to the newest, hottest search engine. Infoseek, Excite, Hotbot, AltaVista, etc. Loyalty was easily compromised, new search was always just a click away.
GOOG has done very well in brand management. But, I have no way of telling that Google is better. There is no objective way to measure search engine performance. There are only subjective studies out there.
Search has become a commodity. There is no right answer to any single search query, multiple answers can be produced. Why not a Hugo Boss slant or an Apple slant to my search results?
So, how will GOOG stay ahead?
I have an answer...
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Please see: Part 1: Is Apple About To Launch Apple Search?
The business of the Long Tail is the concept that there is money to be made in services and products with a potential market of just a few people.
We can see Internet companies exploiting such micro-markets everywhere, well before the concept was popularized by Chris Anderson, editor of Wired magazine in October 2004.
We see it in Amazon and Ebay, they host the many millions of small markets that are interested in obscure books or collectabilia.
We see it in Google, which monetizes interest in the most obscure parts of its index. We see it in MySpace and Facebook, which seek to monetize markets that can consist of many thousands of "friends" but are mostly groups of just a few dozen people.
The trick to success is to have as many Long Tail markets as possible. Each micro-market generates micro-profits therefore the more the better.
Selling free content...
If you can get that Long Tail content for free, that's the best kind because producing content is expensive. For example, Flickr, a Yahoo company, hosts people's photos for free. In exchange for free hosting it sells advertising around the photos.
Users come back to visit their photos, and they also share them with friends, and sometimes complete strangers are attracted to the photos too. That's a lot of free traffic and you can make money from traffic.
YouTube hosts people's videos for free and in exchange it sells advertising around that content. Again, as in the Flickr example, users created the content, and brought traffic to that content, and YouTube monetized that traffic.
Not a bad business model and one copied many times over: user generated content comes with its own viral marketing, which equals free monetizable traffic. And user generated content can sometimes catch much larger viral traffic, such as LonelyGirl15, or a skateboarding dog.
Facebook viral marketing tools built-in...
MySpace and Facebook are examples of trying to grab even larger amounts of user generated content. On Facebook I can upload my videos, photos, blog posts, movie tastes, etc.
It also provides me with viral marketing tools through my news feed which automatically informs my friends of what I've done, "Tom uploaded photos, Tom wrote a blog post," etc.) I didn't have to email, or text, or twitter anyone at all, Facebook did it all automatically.
Again, it is the same type of business model: user generated content of all types, aided by automatic viral marketing tools, creates more monetizable traffic.
This is the business of the Long Tail, making money from tiny markets. And this has been the business of the Internet in one form or another, for two decades.
How much can be made from the traffic to my YouTube videos? Not much. How much money can be made from traffic to my Flickr photos? Not much. But aggregate many millions of such tiny long tail markets and you can make billions in revenues and hundreds of millions in profits.
Profits from free content...
It's not a bad business: you get the content created for free, and you get the traffic for free. It is like having a shop with many customers buying products you obtained for free. Your cost is the store rent and cashiers to take the money.
Another cost is the warehouse space. In the online world the warehouse is your data storage systems, which is far, far cheaper than physical warehouse space. Hosting digital content such as photos, blog posts, video, digital books, etc is extremely inexpensive. That is why Google, Amazon, MySpace, etc, are profitable - their costs of doing business are less than their revenues.
As long as user generated content keeps flooding in, it brings its own traffic, and that fuels the business.
-As long as people keep creating new online content, Google will index it (and store a copy) and make money from the traffic that seeks that content.
-As long as people create content for free, and upload videos to YouTube, or photos to Flickr, the same business dynamics apply. As user generated content increases, it leads to more traffic, which leads to more profits.
The burden of free...
What would happen if user generated content decreased? Clearly, it would lead to less traffic and lower profits.
What could lead to a decrease in the amount of user generated content?
Consider this scenario:
The cost of hosting the massive amount of long tail content, all the photos, video, etc is very small. As the amount of this content increases, the hosting costs rise.
As long as traffic also rises, the costs of business remain in balance with the rise in revenue.
But traffic growth is limited. There is a limited number of people in the world, there is a limited number of hours in a day. There are fundamental limits to the rate of growth of traffic.
But the amount of content collected by Google, Flickr, or YouTube, for example, grows much faster, and there is ever more of it that has to be stored and hosted. There is a legacy mountain of content and it's becoming a mountain range.
That means expanding your data storage systems, that means more power needed to drive those systems, it means administering the storage systems, which is people intensive, the data has to be made secure, the data has to be backed up. These are the exponential rising business costs of Long Tail economics.
As the number of long tail micro-markets increases, the less profitable each one becomes. This is because each long tail micro-market competes with an increasing number of other long tail micro markets.
More of any product or service means less revenue for that product or service. A current example: more housing on the market means a lower price for housing. Same thing applies in any market.
There is no way that increases in Internet traffic can keep pace with the growing number of long tail micro-markets.
The costs of hosting long tail micro-markets will continue to increase until they exceed the profits that can be made from them.
I was recently speaking with David Scott, CEO of 3PAR data storage systems, and he pointed out why 3PAR stays away from certain markets.
I might view a photo of my grandma, and that might be once a year or less. Yet that data still has to be hosted, secured, managed, and backed up. What is the business case for that photo? The cost of keeping that photo and others like it, will continually force companies to cut their storage costs and that will lead to them to storing the data themselves on cheap disk drives.
High traffic from skateboarding puppies, or Brittany Spears photos can subsidize hosting Mr Scott's grandma photos but that is only true for now.
At some point, businesses will be chocking on the costs of supporting the Long Tail of data that makes up their micro-markets. The costs of the Long Tail will twist tighter around the neck of profitability. What happens then?
Dump the grandma photos...
Companies have a fiduciary duty to their shareholders to maximize profits. They will have to dump the data, dump the grandma photos.
That means dumping the many links that users created to their content. The idea of permalinks, links that will remain rooted forever in the concrete of the Internet will become a fallacy.
Even though the online companies make no guarantee in their terms of service that users' content will be always available there is an implicit guarantee that user content will be always be there. When that implicit contract is broken users will be less willing to spend all that time uploading and tagging their content.
They'll be less willing to tell their friends about it, to post links to it, etc, because there is no guarantee it will be there next year or beyond.
That's the scenario that will dry up the flood of user generated content to online firms. And that is the great flaw in the business of the Long Tail.
Businesses making money from the economics of the Long Tail will be dragged under by mounting costs of maintaining Long Tail micro-markets.
Maybe this should be the title of my upcoming book: "The Unbearable Burden of the Long Tail - How Internet Commerce Will have to hack-off the Long Tail to Survive."
[Saturday Post is the name of a series of essays. This is the first in that series.]
Please also see: