Silicon Valley Watcher - conversations and observations at the intersection of technology and media

Indian entrepreneurs are everywhere in Silicon Valley. And a new report on the Bay Area Indian community measures the ties between Silicon Valley and India.

Here are some facts from the report, “Global Reach,” by the Bay Area Council Economic Institute:

- Indian entrepreneurs helped found many Silicon Valley companies such as Sun Microsystems, Tibco Software, Brocade, Cerent and Hotmail.

- As a measure of its success, the median income in the Bay Area’s Indian community is more than $107,000.

- 75% of adults have at least a bachelors degree.

- 70% are in management or professional positions.

- More than 40 Bay Area venture firms have Indian leadership and/or activity in India.

Silicon Valley/Bay Area has very close ties to India:

- Visa has issued more than 30 million debit cards and 32 million credit cards to Indian consumers.

- India hosts Symantec’s largest engineering si.te outside the US, and works on more than 80% of its products.

- India accounts for one third of Adobe’s global engineering workforce.

- Hewlett Packard is the largest player in India’s IT market.

- Levi Strauss has 450 exclusive outlets in 80 Indian cities.

- Cisco second global headquarters is in Bangalore.

The report states: "The combination of Bay Area innovation and capital with India’s engineering talent, it finds, can be a formidable one in global markets."

The report says that there are issues such as immigration reform:

"An Indian with an advanced degree can wait as long as five years before his or her application for a green card (permanent residence) is even considered. This makes no sense when opportunities in India are beckoning and other countries are aggressively competing for the same talent."

Please see: BayAreaEconomy.org

I'm looking forward to the black-tie event of the year for Silicon Valley: The Tech Awards - celebrating technology that helps humanity.

You can watch it live at 6.45pm this evening: The Tech Awards 2009 | NBC Bay Area

There are five categories: environment, economic development, education, equality, and health.

The prize of $50,000 cash, is a little on the stingy side in my view, but significant because the recipients are usually in the developing world. (The gala costs way more than $250,000 but it also acts as a fund raiser for the Tech Museum of Innovation.)

Also, Al Gore will be there receiving the James C. Morgan Global Humanitarian Award.

However, these winners look far more interesting:
(From The Tech Museum Awards - Technology Benefiting Humanity | Press Room)

The Tech Awards Laureates 2009:

Intel Environment Award

Dr. Joseph Adelegan, Cows to Kilowatts (Nigeria): Slaughterhouse waste is one of the most significant sources of water pollution and greenhouse gases emissions in most developing economies. The anaerobic fixed film reactor used in the Cows to Kilowatts project decontaminates the waste stream from slaughterhouses and turns this organic waste into methane that can be used to generate electricity or as inexpensive cooking gas.http://www.un.org/esa/sustdev/publications/africa_casestudies/kilowatts.pdf

GRUPEDSAC (Grupo para Promover la Educaci�n y el Desarrollo Sustentable), Eco-techniques Toolkits for Self-Sufficiency (Mexico): Poor quality of life in rural Mexico includes loss of soil fertility, lack of access to clean water, adequate shelter, nutrition, and health resources. Customizable Eco-techniques Toolkits for Self-Sufficiency combine old and new sustainable technologies-from cisterns to solar ovens-to fit the needs of each community. http://www.grupedsac.org/

Sean White, Electronic Field Guide (USA): Plant species are disappearing at an alarming rate; mobile identification and classification of plant species may aid in conservation and cataloguing. The Electronic Field Guide uses photos to identify leaves with mobile, hand-held and augmented reality visualization of information. http://herbarium.cs.columbia.edu


BD Biosciences Economic Development Award

Alternative Energy Development Corp. (AEDC), Alternative Energy for Empowerment (South Africa): Fuel cell use largely avoids the lead-acid waste of solar or wind installation batteries. Inexpensive, zinc-air fuel cells can be used in poor communities lacking access to grid power. Fuel cell anodes can be removed manually in about 15 minutes and zinc oxide waste recycled as fertilizer. www.aedc.co.za

Solar Ear (Botswana, Brazil): Standard Western hearing aids cost an average of $750, with battery costs typically $1 per week. Solar Ear, an inexpensive hearing aid, suited to local conditions and manufactured by deaf workers who train one-another, costs $100 and is paired with a solar recharging unit for the batteries. www.solarear.com.br

Driptech (India): Hundreds of millions of people in the developing world face water shortages in crop production; drip irrigation delivers precisely the right amount of water and not more. Driptech's unique laser technology drills holes in one main line, thereby reducing the number of parts and the cost of a drip irrigation system. www.driptechnologies.com


Microsoft Education Award

Akshaya Patra Foundation, School Meals Program (India):
High quality, nutrient rich meals are key to the education process in poverty stricken areas. The School Meals Program uses integrated and adapted high-performance kitchen technology and food delivery systems to serve millions of Indian children a nutritious daily meal. http://www.akshayapatra.org/

GeoGebra (International): Dynamic Mathematics for Everyone is a free, open-source software to display and practice geometry and mathematics that will help achieve rapid diffusion of information and quicker comprehension. GeoGebra created web-based, open-source software to visualize and practice geometric-based mathematics. http://www.geogebra.org/

The Khan Academy (International): High school students around the world need informal, clear explanations that can be reviewed at a leisurely pace to supplement their formal learning. The Khan Academy created hundreds of free educational videos in math, statistics, physics, and finance using drawing software. The "blackboard" style videos are accessible via the internet and hosted on YouTube.http://www.khanacademy.org/


Katherine M. Swanson Equality Award

World of Good Development Organization (International): Handicraft workers around the world are generally paid per piece, often at low hourly rates. World of Good Development Organization's Fair Wage Guide Software provides localized pricing evaluation of handmade goods to improve wages of informal workers. The free web-based platform encourages ethical trade by comparing wages worldwide. http://www.fairtradecalculator.com/index.php

kiwanja.net (International): kiwanja.net's FrontlineSMS allows for SMS technology to be used by hundreds of NGOs worldwide, for activities as diverse as election monitoring and dissemination of agricultural prices. This free software for non-governmental organizations (NGOs) deploys two-way SMS messaging and provides easy-to-use communications infrastructure for outreach in rural and urban areas. http://www.frontlinesms.com/

SuryaHurricane: Electrification for the Landless (Bangladesh): Providing mobile solar lighting can alleviate health problems due to smoke and CO2 emissions while establishing social enterprises. Retrofitting existing kerosene hurricane lanterns with CFL or LED lights can provide lighting for transient settlers in flood and hurricane-prone areas. SuryaHurricane also establishes infrastructure for women establishes women-oriented infrastructure for recharging lantern batteries using boats equipped with PV modules. http://www.shidhulai.org/afftechnology.html


Nokia Health Award

mPedigree (Ghana): Counterfeit drugs are ubiquitous in the developing world; up to 80 percent of drugs in pharmacies are fakes with little or no active ingredients. Pharmaceutical manufacturers label packages with an alphanumeric code, which is later confirmed when consumers send free text queries in to the mPedigree database. This low-cost, instant method for reducing drug counterfeiting is expanding from Ghana to Nigeria, Rwanda, and India. http://www.mpedigree.net

PATH, Ultra Rice (India, Brazil, Colombia): More than a billion people in developing nations suffer from dietary deficiencies in crucial micronutrients, including iron, zinc, folic acid, and vitamin A. Ultra Rice is an affordable, nutrient-fortified additive to standard rice, tailored to satisfy deficiencies common in the region where it is distributed. http://www.path.org/projects/ultra_rice.php

Village Reach, Management Information System for Vaccine (Mozambique): Poor countries bear the greatest burden of infectious diseases, and have the least infrastructure for public health programs. Village Reach worked closely with the Mozambique Ministry of Health to implement supply chain logistics management systems, utilizing portable USB drives to automatically update and share information to improve the delivery of vaccines, drugs and critical medical supplies to rural clinics.http://www.villagereach.org/

Death might be too strong a word but this is definitely a watershed moment. Techmeme, which used to rely completely on Gabe Rivera's secret algorithm to pick tech news and blog posts, now has six editors.

This is significant because Techmeme shows that human aided algorithms are more effective than just software and server. Techmeme is a microcosm of the rest of the search-enabled world of services, from news aggregators to basic search.

If Techmeme can't be Techmeme just by using its algorithms, and now needs lots of editors, then that means much larger news aggregators and search companies will likely have to add human editors too.

Here is Gabe Rivera announcing the additional editors:

Ever since we first plugged human editors into the automation behind Techmeme, we've been improving how we work to make the human/machine combo more and more effective. While technological innovations have contributed to these improvements, smarter and more continuous human editing has played a critical role as well.

Over the past few months three more editors have joined Techmeme's editorial team. They are (with links to their Twitter profiles) Rich DeMuro, formerly of CNET and various TV news outlets, Lidija Davis of The Drill Down podcast, formerly of ReadWriteWeb, and Mahendra Palsule, writer for MakeUseOf.com and a former IT project manager. At this point we're now staffed 24 hours a day most weekdays.

We've created a list on Techmeme's Twitter profile to let you follow the whole team, which also includes Megan McCarthy, Omer Horvitz, and myself.

Six editors at Techmeme. Wow. That's got to signal a huge loss of faith in search algorithms. But I think Gabe is doing the right thing.

Also, Techmeme has Atul. He is a one-man Techmeme. He sends great article links to Techeme all day long. If you want to know what is in tomorrow's Techmeme just subscribe to @atul on Twitter -- he is tireless and usually spot-on.

Gabe didn't have choice bringing in human editors because there has been a big drop in the number of sites linking to each other's news stories.

For a long time you could see items on Techmeme that had no links to them at all. They were chosen by hand. Without sufficient numbers of links Techmeme's algorithm doesn't work.

What does this mean for other search engines, what does this mean for Google PageRank which lies at the heart of Google's search algorithm?

Surely, this is GOOG's Achilles' Heel!?

And surely this is a very signifiant watershed moment. I've always said that humans bring value but most geeks believe in the superiority of the algorithm. Things have changed. This is a very big change.

{The Demise Of Linking ... And Its Effect On Google Pagerank]

New Media Increasingly Looks Like Old Media Says Techmeme Founder

I popped into the TEDxSF conference yesterday at the Academy of Sciences in Golden Gate Park and really enjoyed the presentations.

I've never been to the Big TED conference but I've seen many videos and this was just like it.

Conference is probably not the right word to describe TEDxSF it is more like attending a series of theatrical performances.

And each TED presentation seems to exist within a TED template:

- Pretty much everyone has a slide-show presentation to aid their 20 minute performance.

-Most are monologues.

- There is always an emotional moment or hook.

- A TED presentation will always seek to inspire

- It will encourage the audience to think beyond their boundaries.

-It will make copious use of terms such as: powerful, community, culture, creativity, innovation, engage, passion, transcend, think big, connect, connections, educate, universe...

- Each presentation have a funny glitch with the slides

- Humility and self-deprecating humor is essential.

- High ideals and big ideas are essential

- A call for change

- Ending with a potential standing ovation moment...

There is so much similarity in the TED presentations that sometimes it seems as if each one is an unconscious parody of itself.

But please don't misunderstand me, I love everything about TED, the people it attracts, and the incredible distribution of groundbreaking ideas that it enables. [It's yet another feather in the already very feathery hat of Chris Anderson.]

Less geek and more chic

I enjoyed all the presentations and I loved the music and comedy presentations too, they really helped to break things up.

I also liked being in a largely non-geek crowd. A couple of superstar angel investors were there, Stewart Alsop, and Jeff Clavier. And I ran into Jim Daly and Bruce Lowry. It was really refreshing not to be among the regular tech/media/PR crowd.

An explosion of TEDs

TEDxSF is an independently organized event following the TED format:

TEDx is a new program that enables local communities such as schools, businesses, libraries, neighborhoods or just groups of friends to organize, design and host their own independent, TED-like events.

There are a lot of local TEDx events coming up all over the world - 353! [Find one near you.]

The local TEDx events are less exclusive than Big TED and less elitist. You apply for an invitation and you are asked to write about your wishes for a better world. If you fit into any of these job categories you stand a better chance of an invitation: artist/designer/creator; industry leader; making a living by thinking big; professor; VC, lawyer, press, inventor, social entrepreneur, technologist, other.

You can apply to TEDxSF here: TEDxSF.

The next TEDx . . .

I'm looking forward to the next one in April and I am also looking forward to the TEDx events evolving, and maybe striking out a little on their own and developing their own local personalities.

I loved sitting back and watching the performances and I joked with one of the organizers, Jeanne Alford, "It's great, it's just like watching TED videos!" And it was.

I'm sitting there for hours, with others, in the dark, just watching...I would prefer to interact, debate, discuss, share -- in real-time, in real life, with real people.

If I'm just watching, then I can do that online. I'd rather not have the equivalent of an online experience when I'm out and about. I want a shared experience, and I want to share my experiences, and I want to experience others.

The Big TED has pioneered a great format but I'm sure it's not the only way to tell inspiring stories, there must be other ways to bring people together as participants, and maybe even as activists, too.

It would be great for TEDx events to experiment with different formats. I'd love to see the 'x' stand for experimental... as well as exciting, sexy, exuberant, existential, extrovert, exultive, and always extraordinary... But not exclusive. It would be great if it were a little bit more inclusive, a little more "Bill" than TED, a little more grounded.

But I have no idea if that's even possible. There is a very long list of rules that control every aspect of a TEDx event. But surely the point is not to clone Big TED, surely the point is not to have a homogeneous, franchised TED spreading throughout the world. The Golden Arches of TED?

I'd love to see the little TEDxs experiment, create, and explore, then bring the best back into Big TED. That would be amazing.

I'd like to congratulate to the organizing committee: Jeanne Alford, Heather Mason, Christine McCaull, Taylor Milsal, Suzie Katz, Mike Marquez, Peter Pham, Sumit Guha, Michael Levit, and Jason Johnson, and everyone that helped out - you did a superb job!

I'm looking forward to the next one and please let me know if I can help in any way.

- - -

This is my favorite TED video. It is from 2008. Brain researcher Jill Bolte Taylor's incredible experience of a massive stroke.

A new research study from the Society for New Communications Research (SNCR) has found that senior executives are affected by social media and that the influence on online communities on business decisions has grown over the past three years.

The research was conducted by Don Bulmer from SAP and Vanessa DiMauro.

Some of the key findings:

- Professional decision-making is becoming more social - enter the era of Social Media Peer Groups (SMPG)

• Traditional influence cycles are being disrupted by Social Media as decision makers utilize social networks to inform and validate decisions
• Professionals want to be collaborative in the decision-cycle but not be marketed or sold to online; however online marketing is a preferred activity by companies.
  

- Professional networks are emerging as decision-support tools

• Decision-makers are broadening reach to gather information especially among active users

- Professionals trust online information almost as much as information gotten from in-person

• Information obtained from offline networks still have highest levels of trust with slight advantage over online (offline: 92% - combined strongly/somewhat trust; online: 83% combined strongly/somewhat trust)

- Reliance on web-based professional networks and online communities has increased significantly over the past 3 years

• Three quarters of respondents rely on professional networks to support business decisions
• Reliance has increased for essentially all respondents over the past three years

- Social Media use patterns are not pre-determined by age or organizational affiliation

• Younger (20-35) and older professionals (55+) are more active users of social tools than middle aged professionals.
• There are more people collaborating outside their company wall than within their organizational intranet

Foremski's Take:

These are interesting findings particularly the level of trust that decision makers have towards their online communities, it is much higher than for other types of online information.

Also, the finding that age is NOT a factor in social media use is very interesting. There is a myth that younger people are heavier users or have mastered social media to a greater extent. This shows that age is not a factor and it should lead to broader adoption of social media for decision support.

There is more information here on Don Bulmer's blog: Everyday Influence: SNCR Research Reveals Social Media's Impact on Business and Decision Making

[I'm a Founding Fellow of SNCR - a Palo Alto based think tank focused on research into emerging media technologies.]

- - -

The methodology for this study involved a mixed methods approach supported by quantitative data gathered via online survey of 356 professionals to understand their perceptions and experiences with social media in support of their decision-making. Select interviews of 12 professionals were also conducted using a semi-structured interview guide as part of the second phase of the study.
Key demographics of the research include:

• Close to a quarter (23%) of respondents identified themselves as CEO of their organization; 50% as "Director" (24%) "Manager" (24%)
• Company size ranged from less than 100 to over 50,000 full-time employees
• Age was well distributed with the greatest proportion in the 36-45 range
• 25 countries were represented, with 58% of respondents living in the US
• All respondents were either the decision makers or influenced the decision process within their company or business unit

"Real-time" has become a huge buzzword in web developer communities this year and it's reflected in a spate of new conferences and product announcements.

Yesterday, I caught up with Tibco Software (a former long-time sponsor and currently an advertiser on SVW) because it has been in the business of providing real-time computing technologies for two decades.

Its real-time technologies have been powering Wall Street trading desks and huge financial systems for years, and are also being used by some of the world's largest corporations within a variety of industries.

While the web developer world has seemingly just woken up to the importance of real-time, Tibco is talking about a world beyond real-time computing.

But what's next after real-time? It's literally 'what is next?' It's the use of predictive analytics to anticipate business events and then to respond in real-time with a custom business process.

It means being able to pick one customer event out of tens of millions of daily events and respond immediately with a targeted business process.

For example: a bank customer using an ATM is offered custom loans; a casino that tracks customer losses and offers free tickets to a dinner show to cheer them up; a cell phone company that responds to multiple dropped calls with free minutes.

"Companies need to move beyond real-time and start using predictive, rules-based business processes. This is what I call Enterprise 3.0," says Vivek Ranadivé, CEO of Tibco.

In an Enterprise 3.0 world you cannot use an IT infrastructure that is centered on a database. It would be too slow for the software to track events and then have to go back and forth to the database in order to process and respond to business events. This is the type of IT world dominated by Oracle with its database software and applications.

In an Enterprise 3.0 environment, the software applications run in memory so that they are very fast and are able to work in real-time, applying business processes based on predictive analytics.

"People don't realize that companies such as Amazon are already event-driven. Vodaphone deals with more than 1 billion events a day," says Mr Ranadivé.

"If you have a little bit of knowledge about the future, if you know how your customers will behave, you then have the ability to improve services, and you have opportunities to up-sell and cross-sell."

He believes that this approach to business computing will happen because it is the best way companies can use IT as a competitive weapon.

Everyone has the same servers and IT equipment and ERP applications. Competitive distinction, and innovation, will be expressed through the predictive rules and business processes developed within companies.

Not for sale...

Tibco is in an unusual position in that there are very few software companies of its size that haven't already been acquired by a larger company.

Recently there were reports that the German software giant SAP might be interested in buying Tibco. And companies such as Oracle have been making lots of software acquisitions.

"We're not looking to be acquired by an Oracle," says Mr Ranadivé. "We believe we have the opportunity to become the next Oracle."

Once the current "real-time" fad runs its course in the web developer communities, predicting what's next is easy -- it's literally "predicting what comes next" -- predictive business computing technologies.

And as large enterprises increasingly deploy predictive IT systems, Tibco looks to be well positioned, in the right place at the right time, and should be able to profit handsomely from these trends.

Patrice Lamothe is the CEO of PearlTrees, an unique social bookmarking service that uses the visual metaphor of "pearls" with each containing a web page. And like all visual metaphors it is best to see it rather than read a description. Here is a quick video and a sample image:

"PearlTrees is a way for people to map the Internet by collecting related web pages. Although each tree is organized subjectively it becomes connected to other trees, and over time it will represent a human map of the Internet," says Mr Lamothe.

He says that social bookmarking, through services such as Delicious, has failed. "If you add up all the users of social bookmarking services it might be 10 million, which is very small."

Social bookmarking has failed, he says, because tagging links is not a good way to organize the web. "You pick a tag but that tag doesn't say much, it is better to visually show the relationship between similar web content."

The company has several thousand users in France and will formally announce the service in the US around February.

Mr Lamothe says that a high percentage of users are women, and many users aren't geeks. These groups likely would never be Delicious users yet they are active in creating PearlTrees and thus are helping to map the web.

PearlTrees has an excellent user interface and is designed to allow people to learn its features through what Mr Lamothe describes as "social play." Some pearls have different colors, some have a small black pearl next to them, etc. The meaning of these things is discovered through clicking on the pearls and exploring.

PearlTrees have all the social sharing capabilities you'd expect: Facebook, Twitter, blogs, etc.

The simplicity of the design and concept is intriguing because it allows for potentially unique collections of web sites, and for some novel uses. I want to try it for publishing a blog post and showing the research that went into a story. Or to curate a subject such as the ongoing Rupert Murdoch battle with Google. Or maybe crowd-source a news story...

There are lots of permutations of PearlTrees that can be created because each "pearl" can contain other PearlTrees seemingly ad infinitum "we don't yet know what the limit is," says Mr Lamothe.

An upcoming feature will interface PearlTrees with Twitter to create pearls of recommended links from your network. This would help transform the ephemeral nature of Twitter into a permanent record.

Revenue could come from several sources. All trees are currently public and a future option might be to charge people for creating private trees. "Creating public trees is contributing to the community but private trees don't, so we might charge for that service."

For now, Mr Lamothe wants more users, so that there are more PearlTrees available for new users, and then he will choose an appropriate monetization strategy.

Try it for yourself. The service is in "open alpha" and open to anyone: http://www.pearltrees.com/

The accepted wisdom among the Digerati has been that Rupert Murdoch's News Corp, and the entire newspaper industry, would be in deep trouble if they barred Google from indexing their content.

I dealt with one aspect of this thinking last week. [The dirty little secret about search engine traffic]

There is a second aspect. It is Google that would be in trouble and not the newspapers.

Let me explain:

- The value of Google search traffic to the newspapers is low. Its loss wouldn't make much difference to the newspapers' already poor online revenues.

- The damage to Google would be much greater. If it is locked out from being able to index a large part of the Internet, it would be very bad for business. It would create a crisis of confidence in Google.

If something like that happened, it would strike at its very core, its mission: "To index all the world's information."

Google users would question "what else is missing?"

GOOG's index is its Achilles' heel. It will do everything it needs to do to protect its ability to index content.

It doesn't care if the content is free or not, as Google's Josh Cohen recently told SearchEngineLand: "...people will say ... 'I have to make this content free or Google won't index it,' and that's not the case."

I ask again, who has the most to lose if News Corp and other large publishers block Google?

Newspaper online revenues won't be much affected at all.

But for Google its reputation as having the best index would be seriously harmed. It would have a large hole in its index.

And that hole would be made up of missing content - new content - the most valuable thing for search engines. People search for new content. That's what brings them back to Google.

Google has far more to lose than the newspaper publishers from being blocked.

And that's why it will do whatever it needs to do in order to preserve its index, including possibly paying for access.

Rupert Murdoch may very well have found the weak spot in Google's business.

- - -

Please see part one of MediaWatch Analysis:

Murdoch Will Negotiate Payment For Access To Basket Of Content With GOOG et al

Rupert Murdoch and his senior execs at News Corp, and Wall Street Journal have been getting a lot of publicity this year for their complaints against Google and news aggregators.

Google has borne much of the brunt of the complaints even though Yahoo News is three times larger (source: Danny Sullivan at SearchEngineLand).

Foremski's Take:

But why have Mr Murdoch and others at News Corp. spent so much time criticizing Google when there is a simple solution: post a robot.txt file that tells Google and others not to search and index their content?

Because criticizing Google results in a lot more publicity. Because Mr Murdoch has another goal: he is most probably laying the groundwork to negotiate a deal with Google, Yahoo, Microsoft, and others, where they will pay to index News Corp content and also content from other publishers allied with News Corp.

Take a look at these points:

- By collecting a package of other publishers, Mr Murdoch can avoid the problem caused by what I call "first mover disadvantage" in that the first publishers with paywalls, risk losing audience to rivals that wait to build their paywalls. That's a much larger business risk than the traffic lost from blocking Google. That's a risk all news publishers face not just News Corp. Better to be in a collective.

- Mr Murdoch is emerging as a champion for other news publishers in his criticism of Google. That's an excellent opportunity to become the rallying point for the newspaper industry as a whole and to recruit publishers into a common basket of content.

- Mr Murdoch and his top executives are masters at using the media to manipulate others to get what they want -- in this case Google is the target.

- Why would competitors join with Mr Murdoch? A better question is why wouldn't they? They would all still compete on writing the news first, that wouldn't change in either scenario. The advantage would be better revenues from subscriptions using a collective approach. Mr Murdoch and his allies could offer packages consisting of local, regional, national and even foreign publications for one monthly fee. No need for micropayments by readers -- the payments could be divided up within the group transparently, the readers pay one fee.

- Would readers pay for content? They already do. Revenue from subscribers has already overtaken revenue from advertising at many publications. In its most recent financial quarter the New York Times said revenues from readers overtook advertising revenues for the first time -- a watershed moment. That's a trend that still has a ways to go and will be helped by new ways to collect subscriptions for online content.

- Would GOOG et al, pay for access to index content? Yes, GOOG already pays for content from the AP and for TV shows to show on YouTube.

- Google would pay because search engines need novelty. They need to index new content. Otherwise why do people use a search engine? To find what they already know is there, or to look for new content? It's mostly the latter.

- If users know that a search engine is blocked from new content then that is a very negative psychological strike against it -- what else doesn't it have? Google, and others need to maintain an impression that they "index all the world's content." Index is their prime goal, rather than to serve up free content.

Josh Cohen at Google News made this very point "there is still a lot of those discussions that take place where people will say ... 'I have to make this content free or Google won't index it,' and that's not the case."

- Google is open to working with publishers in a variety of ways. Danny Sullivan at SearchEngineLand interviewed Josh Cohen at Google News. He said that Google already has a large number of different programs to offer publishers and will work on custom programs too.

Here are a couple more quotes from Google's Josh Cohen:

"We want to be in a situation where the best content wins, not the best SEOed site."

"You can allow us to crawl content and show a preview to the user and label it as a subscription."

Mr Murdoch and his allies will be able to have their cake and eat it in the sense that they can have Google index their content, and also have a paywall.

Plus, they have many business levers to pull in that they can continue to make some content free; to place less content behind a paywall; and to optimize their landing pages for Google and other traffic to make for better ad conversions (as Jonathan Mendez points out in SVW comments).

And potentially get a payment from Google and other search engines in addition to everything else.

This will be one of the ways the media industry halts the decline in its fortunes. Overall, the media industry will need to adopt what I call a "Heinz 57" business model, with multiple revenue streams, there won't be just one or two magic bullets.

The challenge for publishers will be in managing multiple sources of revenue. But that's an opportunity for startups to offer the admin tools, and help aggregate the revenues streams for large publishers.

- - -

Please see:

Analysis On Murdoch And Switching Off GOOG: The Dirty Little Secret About Search Engine Traffic...

WSJ Chief: There Are Two Types: Creators And Aggregators - Creators Carry The Burden Of Costs

Google Is Really Bad At Monetizing Content Yet CEO Schmidt Lectures Newspapers

I've occasionally been writing about an effect that the Internet causes, an effect of devaluation. The Internet devalues everything it touches, if it can be made digital.

Happy Birthday Dear Internet . . . The Internet Devalues Everything It Touches

A Saturday Post: The Internet Devalues Everything It Touches, Anything That Can Be Digitized

In those articles I use the word "devalue" in its monetary sense but it can also be used in its broader definition, in reference to the cultural and societal sense of "values."

It's a controversial position because it seems as if I am critiquing the Internet and ignoring the tremendous amount of value that the Internet has enabled. But that's not the case, I'm merely pointing out a few things about the nature of the Internet and what it enables.

It's good to see others noticing this effect too. Especially when it is one of my favorite authors, the extraordinary writer Cormac McCarthy.

Mr McCarthy is not very interested in self-publicity and rarely gives interviews. But John Jurgensen at the Wall Street Journal managed to get some time with Mr McCarthy using the occasion of the upcoming release of "The Road," a movie based on his book of the same name.

Cormac McCarthy on The Road - WSJ.com

In the interview Mr McCarthy talks about technology and the future. He says:

Well, I don't know what of our culture is going to survive, or if we survive. If you look at the Greek plays, they're really good. And there's just a handful of them. Well, how good would they be if there were 2,500 of them? But that's the future looking back at us. Anything you can think of, there's going to be millions of them. Just the sheer number of things will devalue them. I don't care whether it's art, literature, poetry or drama, whatever. The sheer volume of it will wash it out. I mean, if you had thousands of Greek plays to read, would they be that good? I don't think so.

. . . This is just entry level to what's coming. Just the appalling volume of artifacts will erase all meaning that they could ever possibly have.

"The appalling volume of artifacts..."

What a brilliant way to describe the horror of the bounty that the Internet enables.

The rest of the interview is excellent too.

Cormac McCarthy on The Road - WSJ.com

By Matt Grimshaw, Editorial Director of the Semiconductor Technical Journal Future Fab International.

According to the latest round of Q3 financial results we should all be partying like Rockstars because the recession is officially over, profits are back and Elvis has been found alive and well working in a Walmart in St Louis.

Everyone in the supply chain is posting record (relatively speaking) sales and I'm sure lots of C-Level Executives will be enjoying a big fat bonus come Christmas to celebrate while continuing to lay off staff.

Hell, even Ford has made a profit - there is a Santa Claus!

There should however be a declaimer attached to the squashy feelings of joy, for it's now time to rebuild and I suspect that it's not going to be easy. Short term will not be a problem, there are so many out of work engineers it's a buyers market. However, what about the mid to long term?

The Semiconductor industry as a whole may have shot itself in the foot in it's now ubiquitous habit of hiring and firing... for is has inadvertently posted a big advert saying "Come on; JOIN the chip industry - where you are a merely number on a balance sheet!" Of course, in the final reckoning everybody's just a paycheck when it comes to corporate accounting - but if you think about it from another perspective this trend in the industry is alarming.

If you are a schoolkid and you're looking at setting up a career in some kind of tech sector. You look around at the various industries and see that Internet start ups are certainly doing well although they suffer high rates of start up failure. It's an acceptable gamble as you might be one of the sacred two hundred at the next Google.

The internet is still a relatively young business segment (the chip industry's been around for more than 40 years) that has massive growth potential through mobile and the proliferation of new ideas.

Staring at a computer screen all day isn't for everyone though so how about the tech manufacturing disciplines?

Well, LED, Medical Devices and the Photo-Voltaic sectors all seem pretty safe bets, all making money, all poised for massive growth with bright futures ahead of them. So what about the chip sector? Surely the driving force behind all this technology is a good bet?

Nothing but nothing works today without come kind of computer chip doing the thinking/measuring/timing/observing, so surely that's a good field to be in? Well, it's not when you know that the Chip industry sheds tens of thousands of jobs every time there is an economic blip.

For such is the pricing volatility in the industry that if the economy even coughs in the wrong tone of voice, many companies go into anaphylactic shock and lay off staff faster then a quarterback lays off the ball on a 4th down play...

Oh, and when it turns around again, you might get re-hired, but this time as a contractor so they don't have to give you healthcare or any assurances of work from month to month. Nice.

Engineers have become expendable assets to companies these days, and I actually find it distasteful that some in the industry feel it's OK to treat the front line troops in such a manner. It may well turn into a case of 'you don't know what you've got 'till it's gone' with the Engineering community.

Almost all the engineers I know would jump out of the chip business in a heartbeat if they got an offer somewhere else, and that's really a sad state of affairs.

If I were in school I'd not be tempted to jump into the chip industry, even if you dangled a solid gold carrot in front of my nose. There's easier money to be made elsewhere.

The chip industry could find itself facing a brain drain. I've heard and seen many presentations that in the not too distant future there's going to be a shortage of engineering talent in the chip industry.

If that happens it will have a profound effect on every other industry, as without the chips to run the servers, there is no internet. Without the chips to run your phone... of course I'm being extreme, but I'm sure you get the picture.

I was looking at a survey of small businesses and whether they would cancel their healthcare plans if public healthcare were available.

VerticalResponse, which offers surveys and email marketing services, polled 831 small US businesses about the effect of public healthcare on their business.

Theron Kabrich the CEO of The San Francisco Art Exchange, was one of the small businesses surveyed. He made an interesting comment and it is one that is very applicable to Silicon Valley.

"A public offering of healthcare unburdens small businesses and entrepreneurs alike, as it allows them to focus on core parts of their business such as innovations and new products. It also removes an unfair competitive advantage for small businesses when trying to attract the best employees, and levels the playing field."

Will Silicon Valley startups cut their current healthcare plans? They might.

High healthcare costs are a large burden for Silicon Valley startups. The availability of public healthcare should lead to lower costs for startup companies and make more capital available for investment in development.

VCs might demand a provision that their startups not offer healthcare plans. Would this harm recruitment?

Probably not because startups have fairly young staff and the attraction is not getting a safe job with benefits, but a chance to build a valuable business.

It'll be interesting to see how the availability of public healthcare affects Silicon Valley businesses.

- - -

The VerticalResponse survey found that one quarter wouldn't cancel their healthcare policies.

There were considerable disparities between different sized businesses. Of those with less than 10 employees, 72% offered no healthcare compared with 24% of businesses with 11 to 100 staff that offered no healthcare.

Here are some more findings:

- 40.9% of businesses with 11-100 employees wouldn't cancel their employer-provided coverage if there was a public offering and the largest portion of businesses with 1-10 employees also wouldn't.

- Of all small businesses an average of 16% of businesses would cancel their employer-provided coverage if there was a public offering.

- 71.8% of businesses with 1-10 employees do not offer healthcare to employees--versus the 69.4% of businesses with 11-100 employees who do offer healthcare to employees.

Niki Scevak, a serial entrepreneur, is good at analyzing mergers and often has insightful things to say that others often miss. [Please see: "Twitter's $100m Investment Will Make It Tough On Staff Recruitment" ]

He's not a fan of Google's $750m acquisition of AdMob, the mobile ad network because:

- Few people will use mobile phones to research and search for products to buy because the form factor is limited.

- Sites get about 10% of traffic from mobile search compared compared with about 30% from desktop search. [This is actually on the low side it can easily be 60% or more for many sites.]

- Mobile ads will never be as impressive or immersive as they are on desktop/laptops because of the limited form factor. This won't improve.

And:

AdMob is an ad network. They currently get 40% of the revenue because it is a nascent industry (their net revenue is about $25-30m). That will pretty quickly move to 10-20% cut as the industry scales. We saw it in search advertising (Overture) and display advertising (AdSense). The economics will get worse for the business.

- He estimates AdMob generating about $10m/month on about 10bn ad impressions which works out to a measly $1 CPM.

So color me skeptical for Google paying 30x net revenue for an ad network operating in a poor advertising medium. The Youtube acquisition was a million times better than this one.

Well said.

I would probably quibble about some of Mr Scevak's math and be a bit more generous in some of his estimates. Either way it would still add up to a very large premium Google has paid for the AdMob business.

The fact remains that Google has yet to show that any of its acquisitions have proven their value. And this is yet another one to add to the list.

I think it would be more strategic for Google to look at diversifying from its reliance on Internet advertising. For example, MSFT has many business lines, Google does not.

Google needs an open Internet to succeed long term. What better way to guarantee unobstructed access than to own a telco? How about AT&T?

That's what I call a strategic acquisition. AT&T brings in $31bn a quarter and has a billing relationship with tens of millions of households and businesses. The market values [GOOG] higher than [T].

Can you imagine a combined GOOG and AT&T platform? You could drive lots of new Internet services and ads in a myriad ways.

- - -

Please see:

Bronte Media: Google's Strategic AdMob Mistep

MSFT Earnings Report: It Would Take GOOG More Than 3 Years To Catch Up

Zachary Seward, writing at Nieman Journalism Lab reports that PR companies are using online ads to try and deal with bad press.

One example is the New Zealand Seafood Industry Council, which didn't like a New York Times article about a type of fish called hoki. [An Unlikely Star Among Seafood Causes a Row - NYTimes.com]

The council responded by buying Google Ads linked to keywords: 'new zealand hoki' and 'hoki new york times.'

The ads linked to a page that purports to set the record straight about hoki fishing and includes emails exchanged with Times science editor Laura Chang.

That was itself a feat of public-relations genius: Because the council's hoki page was originally a straightforward description of the fish and its uses, the Times had linked to it in the third paragraph of the article (at right), and 78,000 people clicked though, according to Sarah Crysell, a spokeswoman for the council. Taking advantage of that incoming traffic, the group transformed its hoki page into a rebuttal of the Times story.

I'm sure there will be others using this technique. But it's not as good as my idea for a "Right to Respond" box that could be present next to the actual story.

Companies could pay to respond to a specific story. All publications running a similar story or syndicating that story could also publish the "Right to Respond" button or link and thus its content would be automatically updated across ALL news stories carrying a Right to Respond link.

It would also provide newspaper sites with additional income rather than going to Google and and it would also act as showing the news site is "trusted" and legitimate.

- Companies would pay to use this service, individuals would have free access to make corrections.

- Web site owners/publishers/bloggers, etc would not be forced to provide a Right to Respond link next to their content. But if they did, it would show that they are a respectable and responsible site.

- The New York Times and other large publishers should offer a Right to Respond link next to every story because of their reach and influence and potential to harm reputations. It's the fair thing to do.

- Search engines should offer a right to respond link next to each search result they publish -- even if a right to respond link isn't found on the original web page of a search result.

- There is almost no monetary cost to offering a Right to Respond link, it does not cost a web site owner anything extra in servers or bandwidth.

- Publishers would be paid for offering a Right to Respond service from the fees charged to companies. Each time the page is loaded could earn the publisher a micro-payment, something that could be easily tracked by the Right to Respond widget sitting on the publisher's server.

That payment could be further qualified by the influence of a web site. The New York Times gets more money for running a Right to Respond link than less influential sites-- even if traffic volumes for both are the same.

- Only the content publishers get paid to carry a Right to Respond link and not search engines. It is the originator and not the aggregator that collects the payment.

Would some sites publish nasty things about companies or people simply to collect Right to Respond payments? They could, but constantly publishing critical and negative content would undermine their credibility, their influence, and their traffic.

- Competitors could use the Right to Respond link to publish their side of the story.

Please see:

The Right to Respond Should be a Fundamental Right of the Internet

Intel today launched a portable $1500 e-book reader designed to help people with a broad array of vision problems including dyslexia.

The Intel Reader features a camera with built-in text-to voice software for reading out loud any text placed under the device. [About the Intel Reader]

The form factor of the Intel Reader is similar to that of Mobile Internet Devices which offer similar size screens, an Atom microprocessor, a camera, and wireless connectivity for about $500. The Intel Reader does not have any wireless connectivity yet costs 3 times more.

I attended a briefing on the device yesterday and Intel said it did a lot of research into usability. It has also partnered with organizations that are active in helping the visually-impaired such as Lighthouse International.

Here is a video by Ken Kaplan demonstrating the Intel Reader.

The product comes out of a relatively new Intel business group focused on developing healthcare related products and technologies. The goal is to aid people to deal with health and aging issues in their homes.

The potential market size for the Intel Reader is 55m people just in the US. Next week it is being launched in the UK and Intel says it will be easy to produce versions for other languages.

Foremski's Take: Intel is usually a technology evangelist for entire product sectors because it makes the chips, chipsets, and flash memory that are used to create a huge number of digital devices, PCs, mobile devices, smart phones, and servers.

Yet in this case, it is developing and selling products rather than seeking to seed markets and let other companies deal with product development, marketing, and all the other aspects of selling products to consumers.

Intel has bad track record in producing consumer products. It has tried several times and pulled out. It used to sell MP3 players, kids toys, and it announced it would sell large screen TVs before pulling out later. [Commentary: Intel gears up in consumer electronics push - CNET News - January 2001]

Intel's work in healthcare is commendable but puzzling why it wants to be in a business that isn't about making chips. It would seem it could achieve just as much by developing reference designs and licensing its technologies to others with specialist experience in manufacturing, design, distribution, and after-sales support.

(I am a member of the "Intel Insiders" advisory group.)

- - -

Please see: Intel introduces a digital book reader that reads aloud to the blind | VentureBeat

Every time Rupert Murdoch complains about Google and says he will cut off access, a mass of Twitterati, Digerati, and Diggerati think the old newspaper tycoon has lost his marbles and doesn't "get it."

Surely, they chorus, all that traffic that Google sends to the Wall Street Journal is the equivalent of sending a fire hose of cash straight into his pocket. Why would he want to turn off such a lucrative spigot?!

The answer is that he wouldn't, if that were indeed the case. The ugly truth is that Google traffic is hard to monetize. It's not the bonanza that people think it is.

Google traffic is low quality, it is people who stumbled upon the article. Usually, about one-half is new to the site, it had never been there before. The other half already knows who you are. For well established brands this offers incremental value.

More importantly, Google traffic doesn't help the newspaper advertisers much because they are trying to buy a specific sector, a specific readership. For example, the Wall Street Journal advertisers are very business and stock trade oriented. For other newspapers, the advertisers want that particular local metro. Having random readers brought in by Google from all around the world, doesn't do much for the advertisers or the newspapers.

Yes, you can sell those extra pageviews to your newspaper advertisers but they get to see the metrics too, and it doesn't take them long to figure out that much of the Google traffic isn't the traffic they want. That, in turn, lowers the amount of money they will pay for pageviews. Google traffic thus lowers the value of all the pageviews that a newspaper pulls in.

Mr Murdoch knows his businesses. He can run the numbers and see if the revenue from subscriptions will outpace relatively weak revenues from Google traffic.

He can selectively use Google and other search engines, and aggregators to pull in traffic to "free" content then shut it off. He has lots of levers to pull in terms of figuring out an optimum for running his business.

In contrast, Google doesn't have any levers to pull. It relies heavily on access to new content. After all, why use a search engine to find what you already know?

Novelty is extremely important to Google. Yet its only answer to content producers has been "we bring you lots of traffic." The dirty little secret is that that traffic is very difficult to monetize, it has a low value. Even Google has trouble monetizing its Google News traffic.

Google is very much at the mercy of all of the Internet's content producers and whether they let it in, or leave it outside.

UPDATE: It seems my analysis was spot on. The Daily Telegraph November 13: Jonathan Miller, News Corp's chief digital officer, said:

“The traffic which comes in from Google brings a consumer who more often than not read one article and then leaves the site. That is the least valuable of traffic to us… the economic impact [of not having content indexed by Google] is not as great as you might think. You can survive without it.”

- - -

Please see:

Rupert Murdoch to remove News Corp's content from Google ‘in months’

News Corp Wants To “Lead” The Media Industry To Its Own Demise

WSJ Chief: There Are Two Types: Creators And Aggregators - Creators Carry The Burden Of Costs

"Google Devalues Everything It Touches" - Wall Street Journal Chief

FutureWatch: The End Of The News Aggregators And The Future Of News

Adtribution Might Be A Solution For Murdoch, A.P, Et Al, Versus The News Aggregators And Bloggers

- - -
Recent coverage:

Murdoch may block Google searches

Google may lose WSJ, News Corp sites

Has Rupert Murdoch Finally Lost His Mind?

Now it's Murdoch vs. the World as He Threatens to Sue the BBC | BNET Media Blog | BNET

I recently had a chance to catch up with one of my favorite Silicon Valley serial entrepreneurs Gauruv Dhillon. I first met Mr Dhillon when I was at the FT and he was CEO of Informatica, one of the top software companies in Silicon Valley.

These days he is founder, chairman, and CEO of SnapLogic, a startup that has built a technology platform that creates data "connectors" between different systems. For example, you could take Twitter data and run it through your business intelligence system, or connect your security system data with your HR system.

There are millions of permutations in connecting different systems and today that figure continues to rise as new APIs are published and as new web applications are developed that integrated multiple flows of data.

If you have the right connector, or "snaps" as the company calls them, you can connect any system and any application.

"When I started Informatica in 1992 we were on the cusp of the client server revolution. Today I feel the same tingle of excitement because there is another software epoch beginning," says Mr Dhillon.

"Whenever there is disruption in a market there is the opportunity to succeed provided you are on the right side," says Mr Dhillon.

He doesn't like to use the term "cloud computing" because it is over used. "It seems cloud computing jumped the shark very quickly and now it is applied very broadly. I prefer to use the term that Marc Andreessen uses "business computing."

Marc Andreessen, one of SIlicon Valley's top VCs and Internet pioneers, is one of the investors in SnapLogic, which last month raised $2.3m for its Series A.

Flying upside down . . .

Mr Dhillon has never been one to follow fashionable trends. "You need to have a true north to guide your business. In Silicon Valley we like to fly upside down sometimes and that's why you need a compass to move your business beyond what's fashionable."

The timing for SnapLogic seems to be very good. There is an explosion of web based application development, and there are huge numbers of legacy IT systems, and integration continues to be an expensive business -- about $10bn a year.

SnapLogic believes that it can make integration a lot easier, quicker, and cheaper -- especially if it can convince developers and consultants to create "snaps" and then sell them through its recently launched "SnapStore," which shares the revenues, with 70% going to the developer.

SnapLogic's revenues also come from licensing its snap building technology for use internally or as a hosted service.

One key challenge will be to convince developers and consultants to create snaps for sale. They already have much of the technology and it would be a simple port to the SnapLogic platform but they make a good living in custom integration projects. Why should they make available the tools of their trade?

"Developers and consultants will create snaps because they will earn a good income and it will also likely lead to new clients that discover them through our SnapStore."

That's the carrot. The stick is that if they don't create snaps for their particular area of expertise, others might do it instead and that will threaten their business.

It'll be interesting to see if SnapLogic can succeed in helping to disrupt the lucrative systems integration business.

Electronic Arts, the Silicon Valley based video game company, yesterday said it plans to cut about 1500 workers or 17% of its total staff.

UPDATE: Adobe is cutting 680 jobs: Adobe To Cut 9 Percent Of Workforce

The job losses will add to already high levels of unemployment in the region. And they come at a very bad time - right before the holiday season. This will spread anxiety among all Silicon Valley workers, even at healthy firms -- EA and Adobe aren't in trouble.

Tamara Carleton, writing at New Geography reports "A slow job recovery in Silicon Valley."

Over the last year, California lost 732,700 jobs, the worst hit of all U.S. states, according to the U.S. Bureau of Labor Statistics.

The job situation in Silicon Valley has not rebounded as quickly as hoped. The area’s jobless rate is nearly double what it was a year ago, according to the state’s Employment Development Department. Nearly three times as many people are actively looking for work, versus during the dot-com bust, when the jobless rate peaked at 9.2 percent in early 2003. The recent number of unemployed is 110,900, representing an 87 percent increase from the prior year, according to the EDD.

The technology industry has continued to take a beating in the past six months. Cisco cut 700 local jobs in July, and Lockheed Martin slashed nearly 500 local jobs in August, based on state filings. Most recently in October, Sun Microsystems Inc. announced that it would eliminate up to 3,000 jobs across all sites, or 10 percent of its worldwide work force through the new year, due to the takeover by Oracle Corp.

While there are local business leaders such as Eric Schmidt, CEO of Google saying that the economy is improving, it might not mean much for Silicon Valley.

Tamara Carleton points out:

Job growth in the Valley has not been creating net jobs for over a decade...overall employment has actually dropped by 6 percent over the last 12 years, according to data from the U.S. Bureau of Labor Statistics.

These are very discouraging statistics especially since the past 12 years includes the boom years of the dotcom expansion.

The sobering fact is that a tech led recovery will likely be a slow jobs recovery. If you add into the mix other trends that are impacting the workforce such as greater outsourcing; more use of independent contractors; and greater productivity from investments in new business processes, a jobs recovery could become even slower.

Zynga, one of the largest virtual goods and gaming companies, promised it would stop running scam ads after Mike Arrington at Techcrunch called it out, amongst others, last Sunday. Then Zynga did it again.

On Saturday Mike Arrington noticed the ads were back, but he had to use someone else's computer because the ads weren't showing on his connection.

Deliberate blocking?

Mark Pincus, CEO of Zynga says no, it was "offer provider, doubleding, told us this was the result of their failure to remove an optimization queue which was still showing these ads to 10% of pageviews. i want to be clear that zynga had no control over the pages being shown and never filtered them from michael or anyone's view. "

You would think that this week of all weeks Mr Pincus would use a belt and braces to make sure no scam ads filtered through unnoticed.

It didn't take Mike Arrington long to find the ads so how come Zynga didn't see them?

Dean Takahashi at VentureBeat noted:

Shukla, who was replaced as CEO last week at Offerpal, told us in an interview that her tools allow publishers to review every single offer in the system and remove those that the publisher doesn’t think are proper. Super Rewards also has the same kind of offer removal feature. But those systems evidently haven’t been implemented...

Zynga's credibility is fast evaporating. It's quickly accumulating an unpleasant reputation; especially since Techcrunch posted a video of CEO Mark Pincus admitting "I Did Every Horrible Thing In The Book Just To Get Revenues".

There are 230,000 Google references to Zynga plus "scam" out of 1.44m just for Zynga. That's 1 in 6 references .

How will this effect Zynga's A-list investors? There must be considerable concern about being in the public eye.

It's a top tier A-list take a look:

Bing Gordon
Kleiner Perkins Caufield & Byers

Fred Wilson
Union Square Ventures

Reid Hoffman
Chairman, LinkedIn

Peter Thiel

Managing Partner Clarium Capital

Bob Pittman and Andy Russell

The Pilot Group

Brad Feld
Foundry Group

Sandy Miller
Institutional Venture Partners

Rich Levandov
Avalon Ventures

Maybe we can hear from some of them this week.

For example, New York city's top VC, Fred Wilson has a very popular blog A VC - Musings of a VC in NYC.

But like the New York Times' recent failure to notice the scandal in the world of virtual goods, Mr Wilson's blog hasn't noticed it yet either.

It's a great story. You'd think the East Coast media would be all over this story of a Silicon Valley bubble fueled by scams...

- - -

Please see: NYTimes Article On Virtual Goods Misses Huge Controversy

Guest Post by Sue Lebeck, Program Director of the "Silicon Valley Letters to Washington" initiative from the Silicon Valley Innovation Society.

We are facing an interesting time here in Silicon Valley, and in the entrepreneurial community at large. Just as innovation has been re-confirmed as a critical element of our national success, our once potent "innovation engine" is sputtering and may soon stall.

Our nation, and the world at large, faces an unprecedented array of challenges today. These challenges come in all flavors -- economic, social and environmental. New solutions to old problems are needed now, more than ever. As President Obama recently declared and we believe, we must "innovate our way out of this recession."

Moreover, we must innovate our way out of the constraints of our outmoded ways - whether in the fields of healthcare, finance, transportation, construction, manufacturing, energy, water, or the information systems that control them - the systems which drive our economy need to evolve. But first, the innovation-related structures which drive or impede that process need themselves to evolve.

"Innovation engine" is a potent metaphor for our innovation-driving structures. It reminds us of what is needed, and it underscores what is often missing in our innovation environment today. An engine needs fuel and air to run. The "fuel", if you will, is money: first, "seed" capital for an entrepreneur to investigate a solution; then "venture" capital to launch and grow a company; and finally a "liquidity event", such as an Initial Public Offering (IPO) of stock or an acquisition by another company, that frees the entrepreneur to repeat the cycle. All three types of funding have contracted significantly. Early-stage companies, more than ever, are choking. Many others are DOA.

Equally important to the operation of our engine is "air", the environment in which innovation operates. Laws and regulations, including tax policy, accounting rules and intellectual property rights are critical to support an innovation-friendly environment. Government policies have not kept up with the realities of innovating in a global economy; often they actively, if unintentionally, work against our ability to compete.

The Silicon Valley Innovation Leaders group, an informal collaborative convened through the Silicon Valley Innovation Institute (SVII)in late Spring of 2009, decided to launch an initiative to address the critical issues faced by the entrepreneurial innovation community. We've dubbed this initiative "Silicon Valley Letters to Washington".

This all-volunteer initiative was executed this autumn. Three working sessions over the space of two months produced a collaboratively written letter, viewable in detail at www.svletterstowashington.org. Its authors and contributors seek to share with our policy leaders the financial and environmental reality currently experienced by Silicon Valley entrepreneurs and, we imagine, entrepreneurs everywhere. We are outreaching to those in Washington who direct innovation policy, with a focus on the offices which manage Science and Technology and related policy.

Many additional issues are on our minds, but we wish to focus on these structural fundamentals. Our goal is not to speak just for ourselves, nor for any particular field of innovation, but for entrepreneurial innovators everywhere. Our hope: to engage in a dialogue that will inform and influence future innovation-related policy. For details on this letter, its recommendations, its authors and its audience, go to www.svletterstowashington.org. We hope you will review our point of view. Then, if you are an advocate of innovative entrepreneurship, we hope you will add your name to our cause.

Because, at the risk of being cliché, an innovation engine is a terrible thing to waste.

I recently met with Ijad Madisch, the founder and CEO of ResearchGate - an online community of more than 180,000 scientists sharing research results, helping each other with research problems, and networking within and beyond their fields of study.

Mr Madisch is a doctor specializing in virology. He grew up in Germany from Syrian parents. He lives in Boston.

Here are some notes from our meeting.

- ResearchGate was inspired by FaceBook. Mr Madisch noticed that one of his friends listed his research in his profile and that eventually led to another scientist being able to offer helpful information for his research project.

- The goal is to help scientists help each other with research and to prevent duplication of research projects. This can speed up the overall process.

- The site is growing at more than 1,000 new members every day.

- Members are rated on the quality of their comments and contributions.

- ResearchGate wants to encourage scientists to write up their research even if it failed. There is a lot of valuable information in creating a large database of scientific research even if it didn't fulfill expectations. 90% of research is not published. A searchable journal of failed research would be very valuable for designing future research projects.

- ResearchGate offers access to seven databases of scientific research. It also publishes the research papers of scientists. Research periodicals are very expensive but scientists are allowed to publish their research results on their personal sites -- ResearchGate profiles act as the personal sites for scientists. Otherwise you have to pay $35 per research paper.

- Some universities are using ResearchGate for private networks. This is a potential revenue source.

- Other revenue sources are an "Amazon" for lab equipment with user ratings and reviews. And job postings. It will never sell user data.

- ResearchGate plans to offer collaboration tools for scientists.

- The largest research sector is biomedical. Next is computer science.

- Future plans include online scientific conferences; a peer reviewed online journal; and more that cannot be discussed just yet.

- The company is angel funded. It has a development team in Boston and in Berlin.

- Mr Madisch's visit to Silicon Valley was to meet with potential partners such as a video streaming company, and others.

Ribbit, the SIlicon Valley based subsidiary of BT, the UK telecom giant, this morning launched its Ribbit Mobile service which offers a suite of products ranging from control over phone lines to transcription of voice mail--all managed from a web browser.

Users can make free phone calls over the Ribbit network; they can switch calls to other numbers in mid-call; they can create a "clone" of their phone through a web browser; they can have voicemail messages transcribed, and many other services.

The cost for the premium service is $30 per month. Although Ribbit calls this a "consumer" service it is really designed for the mobile business person, a "road warrior." There is a free, and a $10 a month version with certain limitations.

Ribbit is a platform...

Last week I met with Ribbit CEO Ted Griggs, Don Thorson CMO, and Crick Waters EVP Strategy and Business Development.

It might seem that Ribbit is a developer of telephony applications such as Ribbit Mobile but that's not the case. Ribbit enables applications like Ribbit Mobile.

It has built a technology platform that merges voice and data telecommunications networks over the Internet using a software switch approach. Developers use its APIs to create a wide diversity of telephony services and to integrate them into other applications.

"Ribbit Mobile is a complex service, but yes, a third-party developer could have created it," said Crick Waters, EVP Strategy and Business Development.

A Silicon Valley phone company...

Ribbit likes to call itself "Silicon Valley's first phone company." I have written about the company several times and recognized its potential to disrupt the larger Telco companies.

When it was acquired by BT last year, I was disappointed. I wrote:

It is disheartening if we, as journalists, pick up interesting companies to write about only to see them being acquired by the very companies they are supposed to be disrupting.

Ted Griggs, CEO, said: "The BT acquisition enables us to scale our technology across a large telecoms network. And BT's international business connections become very beneficial in helping us to enter new markets -- it would have taken us much longer if we were to try and do this ourselves."

The acquisition of Ribbit was masterminded by BT's JP Rangaswami, managing director of innovation and strategy.

I met with Mr Rangaswami in July, during a visit to London, and I was impressed with his understanding of how Ribbit's technology could be used to move BT into new markets. I was also impressed by his strategy of moving BT into many types of innovative services, recognizing the business potential in becoming a platform for thousands of third-party developers rather than trying to own the applications.

Google Voice and other competitors...

While there are competing services to Ribbit Mobile such as Google Voice, there isn't any competition in terms of the combined telecoms platform that Ribbit and BT can provide.

This is something that Google will have to address, not just for Google Voice but also for other services. Google will have to partner or acquire a large telecoms platform otherwise it can be blocked in its future ambitions.

Showing developers the money

The key test for Ribbit will come from its ability to attract developers.

Don Thorson, CMO, has come up with an unique way to reward developers. "We will offer the applications for free and then split the revenues with developers based on how much usage they get per month per user."

This is a much better model than for iPhone or Android developers. Apple likes to point to the more than 85,000 iPhone apps but this is not a sustainable business model if just a tiny fraction of developers are making money. The winning platform will be the one on which developers can make money.

Plus, Ribbit developers get access to BT's billing systems and BT's existing relationship with millions of households and businesses.

Clone your phone...

There is another aspect to Ribbit that is very interesting, it allows you to "clone" your phone. A web based version of your phone is available from any computer device. If you were to lose your phone you would still be able to access it from any web browser.

This potentially provides an end-run around all the phone wars and takes BT beyond the phone and beyond the confines of its own network. Android or iPhone, it doesn't matter in Ribbit's world.

Ribbit becomes the point of the spear for BT's new business ambitions while at the same time allowing third-party developers to share in the action.

It's a potent business strategy and one that I don't see at any other telco. It'll be interesting to see how competitors will react. In the meantime, Ribbit and BT have a head start.

- - -
Please see additional coverage:

Ribbit challenges Google Voice with Ribbit Mobile | VentureBeat

Ribbit Mobile’s Launch Shows BT’s Strategy Isn’t Just All Talk

Ribbit Mobile Launches to Challenge Google Voice, VoxOx

Last Thursday I was on a panel discussing embargoes. (There will eventually be video of the event.) The moderator was Sam Whitmore, and I was sitting next to Dylan Tweeney from Wired, on my right was Damon Darlin from the New York Times, and Mark Glaser from MediaShift on my far right.

Unfortunately Mike Arrington from TechCrunch couldn't make it, which is a shame because plenty of PR people have told me TechCrunch regularly breaks embargoes and it would have been good to have heard his side of the story.

Dave Needle from InternetNews.com wrote a very good reound-up of what was said: This tech news is not embargoed - InternetNews:The Blog - David Needle

Here is an extract:

While Tweney continues to selectively agree to embargoes (as does InternetNews.com), he said he recently "punished" a PR firm by refusing to communicate with them for six weeks after a competitor was allowed to publish an embargoed story ahead of everyone else. He said the PR firm's excuse was that the vendor, a handset manufacturer, had leaked the news to a blog directly without the PR firm knowing.

The New York Times Darlin said embargoes are generally used as a tool by PR firms to co-opt the media. That said, Darlin said the Times often accept embargoes because they ensure reporters don't miss a story and they have more time to do a thorough job.

That thoroughness is limited. Once you've agreed to an embargo, you can't share that news ahead of time with the analysts and competitors you might otherwise call for comment. Vendors will sometimes provide a list of analysts that have been pre-briefed on their news.

While many took shots at the embargo process and the games PR folk sometimes play, Chris Preimesberger, an editor at eWeek, said embargoes help him get his job done.

"They give me the background information and the time to do the piece right," said Preimesberger, during a follow up Q&A session. He estimates 75 to 80 percent of the stories eWeek does are facilitated by the embargo process, the rest are breaking news.

"I have no problem with the process and don't feel like I'm being manipulated," said Preimesberger.

My proposal that holding a press conference, real or virtual, so that everyone gets the news at the same time seemed to have a fair amount of support as an alternative to embargoes. But overall, I didn't think that we made much progress in creating any new rules around embargoes.

However, I was surprised that there is such a lot of interest in this subject. Embargoes have been around since year dot and we all have our way of working with them, selectively of course. They are not going away, that's certain.

But I think it could and should lead to media outlets rethinking their editorial policy. Do we have to be first with with news? If a dozen other publications also have the news what is our value-add?

There is more to be gained from developing an unique editorial stance than there is from pressing the publish button a few minutes earlier than anyone else..

The panel discussion sparked a few blog posts. Mike Yamamoto, the founding editor of CNET's News.com wrote an interesting post. The absurdity of embargoes

What was especially interesting was his stories about the use of embargoes when he worked in the Washington D.C. bureau of the Los Angeles Times. Government agencies routinely placed embargo notices on their news releases. It's a practice that companies and PR firms have attempted to use too.

For some reason, many companies and government agencies seem to think that simply receiving so-called embargoed material automatically means you have agreed to it--even if you never knew the information existed, let alone had consented to any restrictions, before it landed in your inbox or mailroom unsolicited.

It would be the equivalent of my mass-emailing a contract to sell my house for $10 million, then holding its recipients to the provisions of the "agreement." When they rightly tell me to go pound salt, I would cry foul and claim that they broke the rules.

Mr Yamamoto rightly points out:

Because News.com did not agree to embargoes, therefore, their restrictions did not apply to us. It's impossible to "break" a contract you never agreed to.

Lastly, I feel it is up to the PR industry to police this issue. If they are working with a journalist or organization that routinely breaks their word, then they should not disclose embargoed information the next time.

Forty years ago today, October 29, 1969 marks the birth of the Internet.

The first command typed in was "lo" which crashed the entire Internet - all two machines. Internet Reaches 40th Birthday Milestone

Undergraduate Charley Kline was given the simple job of logging on remotely from UCLA to the SRI machine; his one command was "login".
The first attempt, however, proved too much for the "interface message processor" or IMP for short - the system crashed as young Charley reached the letter "g".

... 12 years on, only 213 computers being linked up to the network.

The Guardian is collecting stories for its "A people's history of the internet."

To mark the 40th anniversary of the first stirrings of the internet we asked you to tell us your experiences of life online. Hundreds of you responded, and here we present an interactive documentary of your stories and videos, alongside our own research and interviews with key figures (About this project)

Foremski's Take: The Internet is the most significant collection of communications technologies ever created. It enables huge numbers of new types of businesses and services, many of them replacing pre-Internet businesses.

Anything, any service, business, that can be digitized is open to disruption because of the Internet. The Internet devalues everything it touches.

I define "devalues" in a monetary sense, dollars and cents because clearly it creates tremendous amounts of value. But that value often cannot be quantified or measured, or recovered, in a financial sense. For example, look at the transition to online journalism -- it creates tremendous amounts of value because huge numbers of people read online journalism but we don't have (yet?) a good way to recover the value of that work in dollars.

Journalism is not the only sector being disrupted in this way because of the Internet.

The challenge for Internet based businesses is to figure out how they can transform the value that they create into dollars and cents and then hang onto it.

The challenge is that competitors can continually undercut each other because the costs of providing Internet based services are relatively low and it is difficult to lock up customers. Switching costs are very small for customers.

It helps if you are government regulated. The Telcos, for example are able to make use of VOIP and other advances in communications technologies to reduce their costs of doing business yet they are still able to raise the price of their services. Being a government regulated industry helps them keep competition away.

But if you are in the music industry, movie industry, journalism, software services, cloud computing, if you are a software engineer, if you are a web designer, if you design logos -- if you do any kind of digital work you are exposed to a huge amount of competition, you are exposed to the lowest cost provider in your sector -- thanks to the Internet.

It's interesting that countries spend billions of dollars to protect their living standards by limiting immigration because they know that low-cost labor hurts the living standards of their citizens. Yet there are no controls on exporting jobs via the Internet.

That will change or at least there will be efforts made to change this and other aspects of Internet use, because of the disruptive effects that it enables.

I believe the Internet will eventually enable a new golden age but getting there will be very messy.

These are interesting times. Happy birthday Internet.

---
Please see:

A Saturday Post: The Internet Devalues Everything It Touches, Anything That Can Be Digitized - SiliconValleyWatcher

Google launched it's much anticipated music service today, partnering with Lala, Pandora, Rhapsody, imeem and MySpace, to provide music streaming services on Google search pages.

Searchers will be able to hear songs for free for the first play but must pay a fee for subsequent plays. LaLa charges ten cents per song for a lifetime streaming license.

The Los Angeles Times reports:

Google itself isn't paying record companies for the rights to play millions of songs on its search page; its partners are. Those include Lala, Pandora,imeem, MySpace Music and Rhapsody, a subscription service from Real Networks. All have licensing agreements with record labels to stream or sample millions of songs online.

..."We're not in the music business per se," said R.J. Pittman, Google's director of product for the music search project. "We don't license the music nor sell the music directly on Google. We are merely a music search feature."

Experian Hitwise, which tracks Internet traffic, says that music is a popular search term. Hitwise analyst Heather Dougherty writes:

- Out of the top 1000 search terms that took place on Google last week, 6% were music-related (includes bands, music services and content).
- Last week, Google sent 1.48% of their total visits to the Music category and of those visits, 95% of the downstream traffic to Music websites were returning visitors (that had visited Google in the past 30 days).
- Google was the top referral website to the Music category accounting for nearly 30% of the total traffic to the category last week, 5x more than 2nd ranked Yahoo! Search and 6.3x more than MySpace.
- Last week, 15% of the clicks from the search term portfolio of Music that includes the names of over 900 band & artist names resulted in a visit to a Google property, especially YouTube.

US music sites are bracing for the US introduction of Spotify, a very popular European based streaming music service. Spotify could launch before Christmas.

Most of the cafes in my San Francisco neighborhood have people staring into their laptops, they are like libraries with piped music. Yet for hundreds of years cafes used to be centers of debate and interaction.

Some of the first newspapers grew out of the newsletters associated with cafes.

Today there is little conversation in cafes and when I do chat with friends or business contacts, I feel self-conscious, I feel I'm disturbing the screen focused concentration of other patrons.

It's largely because many cafes are being used as cheap office space. Our modern workforce is rapidly turning into independent "consultants" and contractors performing digital work. But cafes weren't designed for such uses.

If they are to be used as an office space why not have an area set up as a meeting room that could be rented by the hour? Or small booths for meetings? Why not have a fax and a printer available?

These days cafes seem caught in a limbo, they are neither good office spaces or good at fulfilling their traditional neighborhood roles.

But things could be changing. Some cafe owners are discouraging the laptop crowd by turning off the Wi-Fi and blocking power outlets.

Margaret Rosas pointed me to a Santa Cruz cafe whose owner has done just that and caused a local controversy.

Alan Hawrylyshen posted the owner's (Manthri Srinath) reasons for the change:

Our perspective after doing this a quarter-century, is that we operate coffeehouses with a view to creating a space for community to gather. We have only accidentally become a "WiFi cafe", by virtue of the fact that we haven't done anything to dispel the notion that we are. Now that we are doing so, it is understandable that some of our clients are surprised and upset. For this, I apologize.

Internet use results in a disconnect between the user and ones' physical surroundings, similar to watching television. No moral judgement here. I do it too. In a coffeehouse however, this results in rooms full of solitary people with no connection to the space or the people around them and has the unfortunate effect of crowding out any other sort of activity. Which of course is how we come to the misconception that we are a "WiFi cafe".

... we have also come to the realization that the use of our space, "the Commons" if you will, is something of a zero-sum proposition. We can either have rooms full of laptop users or rooms half-full of folks having a cup of coffee with a friend. Not both.

We have chosen to return to our roots as a coffeehouse where folks can come to converse with friends, read books, hold meetings and religious studies, listen to live music and generally have an experience that transcends Explorer or - if you're a bit more savvy - Firefox. We regretfully realize that this means that people who "must" have Internet access will be unable to use our space, at least for now, unless they bring in wireless cards or tethering capability. Of course, on the flip side, it's been nice to see a new clientele who want something different from a coffeehouse.

... I'm sure there are ways for us to solve everyone's connectivity issues, but this really is not our charter. There are many things we could do to make money. Selling umbrellas and offering/charging for WiFi access are two of them. We're in neither business.

We're old-style coffeehouse operators who came to this pass by accident. We were pioneers in offering WiFi when hardly anyone knew what it was, and we will be pioneers in moving beyond it. We're comfortable in that space. It's largely been why we operate the busiest cafes in town.

You can read the full post and discussion here: Geek Friendly Cafe - Santa Cruz Geeks | Google Groups

It's refreshing to see this type of thing. And its good to see a cafe owner bringing back discussion and debate to cafes, although it's ironic that the subject is his cafe. Maybe this will encourage other cafes to follow or even become more specialized.

Some cafes could focus on offering great wifi and office-like facilities. Others would be more traditional. Others more like restaurants and bars.

I can see myself working in one cafe, strolling over to another one for lunch, maybe a late-afternoon meeting with friends at another, then catching an early evening lecture or performance at another cafe.

Each one would be set up for such activities instead of each cafe trying to become a hybrid space that doesn't fully satisfy either type of customer.

Since there are so many cafes these days, creating differentiation would be a prudent survival strategy.

- - -
Please see:

Wallace Baine: Free Wi-Fi and the 'tragedy of the commons" - Santa Cruz Sentinel

Marshall Kirkpatrick at ReadWriteWeb writes about Eric Schmidt's predictions about the future of the Internet, delivered at a Gartner conference.

I'm rarely impressed by Mr Schmidt's predictions or analysis of Internet trends. Even though he is CEO of Google, his position seems to fail to provide him with much insightful to say about the future Internet.

Take a look: Google's Eric Schmidt on What the Web Will Look Like in 5 Years

• - Five years from now the internet will be dominated by Chinese-language content.
• - Today's teenagers are the model of how the web will work in five years - they jump from app to app to app seamlessly.
• - Five years is a factor of ten in Moore's Law, meaning that computers will be capable of far more by that time than they are today.
• - Within five years there will be broadband well above 100MB in performance - and distribution distinctions between TV, radio and the web will go away.
• - ...content will move towards more video.
• - Real Time information is just as valuable as all the other information, we want it included in our search results."
• - There are many companies beyond Twitter and Facebook doing real time.
• - "We can index real-time info now - but how do we rank it?"
• - people will listen more to other people than to traditional sources. Learning how to rank that "is the great challenge of the age." Schmidt believes Google can solve that problem.
• - Real Time information is just as valuable as all the other information, we want it included in our search results."

Chinese language will dominate the web?

So what? It won't dominate in my world or yours.

Teenagers are the model, they move seamlessly from app to app? I move seamlessly from app to app. So do you. I'm fed up with received wisdom about the digital savviness of teenagers. I've got teenagers, and I know their friends. They are as plugged in as you and I. They are better at some things, they are clueless about other things.

There is less of a generational gap than many people without teenagers think. It is an experiential gap. You have to be exposed to the digital world in order to know it.

Five years is a factor of ten in Moore's Law. The math doesn't look right. Computing power doubles roughly every two years. But so what? What are we going to be doing with that extra computing power?

Distribution distinctions between the web, radio and TV will go away. OMG. Is this the best he can do? I haven't had cable TV for a couple of years, I watch TV through my laptop connected to the TV, I listen to radio podcasts over DSL. I'm no different from tens of millions of people who have already noticed that distribution distinctions have gone away.

People will listen more to other people than to traditional sources. They always have listened to other people given the chance, now social networks make it easier to share recommendations. Learning how to rank this information is a problem? There's no problem here, people know how to rank their friends and their social network sources. It's a personal ranking that is far more relevant, far more targeted than any algorithm Google could come up with.

Real time information is just as valuable as all the other information. Another valuable insight from a company whose mission has always been to "index all the world's information."

The quality of Mr Schmidt's predictions are stunningly disappointing especially since he is sitting on top of a company that is privy to massive amounts of web usage data from every part of the world. Not to mention the tens of thousands of engineers working on new projects.

Megan Taylor over at PBS' MediaShift writes about the challenges of getting programmers and journalists to work together.

MediaShift . Can Programmers, Journalists Get Along in One Newsroom? | PBS

"there's no reason why a programmer can't do journalism," said Rich Gordon, director of digital innovation at Northwestern's Medill School of Journalism. "They just need an understanding of the mission and culture of journalism and journalists."

Mr Gordon thinks that in terms of personalities, i.e programmers being introverted and anti-social, they can be similar to journalists.

But even with similar personalities, it's not easy to get programmers to think like journalists, or to get used to the chaotic environment of a newsroom.

Aron Pilhofer, editor of interactive newsroom technologies at the New York Times, has assembled a team of mostly programmers to do journalism.
..."It's not a normal corporate-y type of environment," Pilhofer said. "It's very loosey-goosey, collaborative, hectic, disorganized. It takes time to get used to that environment, and not everyone is comfortable in that environment.

Others say problems arise because of miscommunication.

Matthew Waite, news technologist at the St. Petersburg Times, weighed in on how programmers and journalists communicate, and how that communication can be improved. He said ill-will between journalists and programmers arises from miscommunication.
"I've seen a lot of cases where some piece of code did exactly what the requirements document specified, but it didn't do what anyone wanted," Waite said.

Foremski's Take: I've written on this topic many times and I think it is easier to teach journalists to become programmers. They then become "media engineers" rather than software engineers.

Today's development tools are very powerful and they make building complex software applications easier than ever before.

Every journalist should know some html, CSS, JavaScript, etc. They don't need to be proficient but they should know how all these media technologies work. Some journalists can go much further and I think we will see that happening more because there is a real need. If I were a journalism student I'd be loading up on programming courses because I'd greatly improve my chances of getting a job -- every newsroom needs strong media engineering capabilities.

Teaching a programmer journalism skills is challenging primarily because programmers have already chosen their profession. If they had wanted to be journalists they would have become journalists.

But teaching a journalist programming skills would be a lot easier and far more effective because you have to have a strong understanding of media -- that comes first. That's what a media engineer would provide, media first, engineer second.

And a media architect would be similar to a systems architect, they would design the information/publishing architecture of an organization. And by the way, today every company has to be a media company to a degree, every large company needs media engineers and media architects on staff.

- - -

Please see:

Move Over Software Engineers It's The Era Of Media Engineers

Journalism Schools Wake Up To Need For Media Engineers

Microsoft is facing many challenges but it is still an incredible cash machine. Revenue for its first fiscal quarter, which included deferred revenues of $1.47 billion was $14.39 billion, a slight decline of 4 per cent compared with the year ago period. Operating income was $4.48 billion.

Many industry pundits like to compare Microsoft with Google. GOOG reported revenues of $5.94 billion and operating income of $2.07 billion in its most recent quarter.

At a rate of revenue growth of seven per cent per quarter, a rather generous growth rate, it would take it more than 3 years to reach Microsoft's current quarterly revenue. There is a lot that can happen over the next few years in terms of Microsoft's competitive position against Google.

Microsoft can patiently build up its search services and other areas where it lags Google. And it will continue to generate large revenues from its business software -- a tiny market for Google.

Can GOOG continue to grow its search business to nearly $13 billion per quarter? What other businesses does it have that could generate comparable rates of growth and revenues? None.

Microsoft has many different business groups that have the potential for growth and it is building up its Internet business groups to better compete with Google. MSFT is a much more diversified business than GOOG.

While it is fashionable to talk about the demise of Microsoft and its poor competitive position against Google, the fact is that it's still going to be around for a long time and it will continue to be a potent, cash-rich competitor for many years.

Foremski's Take: Google will need to make some acquisitions to generate revenues and give it the heft that Microsoft already has. It needs to have a more diverse business base. Google has only one main business - text ads next to a search box or on a 3rd party web site.

What type of acquisition could help it be more competitive against Microsoft? What about a telco acquisition?

How about AT&T [T]? Its third quarter revenues were $30.9 billion. Its market capitalization is about $150 billion compared with GOOG at $175 billion.

AT&T would give Google a powerful position in terms of the net neutrality debate, and also in wireless markets, providing it with a key position with respect to both Android and iPhone phones.

And it would give Google a direct billing relationship with a huge number of US households. There are a ton of services it could introduce and without dealing with the telcos and their walled gardens.

Google's ability to build large server farms would further boost the types of on-demand services that it could market to consumers, and more importantly, to business users.

AT&T would be a big pill to swallow but strategically, it makes a lot of sense, imho.

Hat tip to Danny Sullivan for pointing out the above panel at Web 2.0 Summit, which featured Robert Thomson, Wall Street Journal chief, and Marrissa Mayer head of search products at Google, plus Martin Nisenholtz, The New York Times Company, and Eric Hippeau from the Huffington Post, moderated by John Battelle. Title: "Whither Journalism."

YouTube - Web 2.0 Summit 09: "Discussion: Whither Journalism?"

The reason this discussion is interesting is because Mr Thomson is a close confidant of Rupert Murdoch, the head of News Corp and one of the leaders in trying to create new business models for online journalism. One of those ways is to create a paywall - to charge for content.

This has been criticized by many online pundits who believe content should be free and that Mr Murdoch, and others that want to charge for content won't succeed.

This is a ridiculous argument because it doesn't address the issue of how content is created and the costs in creating content. An army of citizen journalists won't be able to fill the gap caused by fewer professional journalists. We have to figure out a way to pay for professional journalism.

At the beginning of the discussion Mr Thomson gets to the point right away, when he makes the distinction between content creators and content aggregators and point out that the cost burden is being shouldered by the content creators.

Many people, like Danny Sullivan, like to point out that the Wall Street Journal, and others that complain about Google stealing their content, want the traffic that Google sends their way.

But Mr Thomson challenged Ms Mayer's view that Google is all about sending traffic to other sites. He said if that is true, why isn't the font size larger on the link to the original source? Double figure (font size) would be good, he said to laughter.

Google, and other aggregators, take the headline and first paragraph of a story, the two most important elements of a news story and try to monetize that content.

The value of the traffic Google sends is not that great, believe it or not. As a publisher I get to see my server stats, etc, and so I know first hand the value of traffic from Google, or even Techmeme, is not much.

I can appreciate the frustration that Mr Thomson feels when he sees others trying to profit from the work of his journalists.

Producing original content is very expensive. Trawling web sites and taking the headline and top paragraph of a story is dirt cheap. The difference between costs for content creators and content aggregators is very large indeed.

The Huffington Post gets a ton of content for free. The New York Times has more people moderating its comments than The Huff Post has journalists on its masthead. Yet the Huff Post couldn't exist without the content creators. Clearly there is a large mismatch here.

The tragedy is that on either side of the equation there isn't enough money to pay for the content creation.

Even if Google News and The Huff Post and all the other news aggregators gave every dollar and cent they make from other people's content to the content creators it would be unlikely that it would cover the costs of the news creators.

For example, The New York Times is laying off another 100 newsroom jobs and its most recent financial quarter showed a 29 per cent fall in revenues with print and online ad revenues continuing to plunge.

The tug of war between creators and aggregators is some degree, a red herring. We need to develop a "value recovery mechanism" for online journalism.

This is the most important problem we have related to the Internet, it is much more important than net neutrality. It is the Gordian knot of the Internet - if one person solves it we all benefit.

- - -

I was reading an interview with Bay Area philanthropist Tad Taube. He is asked what other things would he like to fund...

"There is one thing that I've been thinking about a lot, but I'm not quite sure how to do it yet. One of my principal concerns is the preservation of freedom in the United States. Now, in order to have a free country, it's necessary to have a free press. A free press is a press that is ready, willing, and able to present all the different points of view that bear on an issue. If people are not informed in an impartial and unbiased manner, if there is only one point of view that they ever hear, how can they possibly make a decision that was in the best interest of their country or their civilization?

What I would like to explore are ways to distribute and influence the body politic with much more balanced reporting. So how do you create that? I'm not sure yet. It won't be easy. It will take a lot of people--this is another area ripe for philanthropic collaboration, I would say--working together to bring balance back into the media, particularly in its political coverage. I'm sure there is more balance in terms of basic news: political turmoil in the Congo or a fire in downtown Boston, or reporting on a sporting event. But coverage of politics, economics--of ideology, of ideas--is badly unbalanced. And, ultimately, we live off of our ideology. "

Interview with Tad Taube - Interviews - Philanthropy Magazine - Philanthropy Roundtable

Please also see:

Dear WSJ: To Avoid Google Disease, Please Put A Condom On Your Content

"Google Devalues Everything It Touches" - Wall Street Journal Chief

Non-Profit News Funding - We Need A Sustainable Business Model Not Handouts

We need a Google AdSense on steroids: The Grand Challenge of Internet 2.0 - SiliconValleyWatcher